<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.
--------
Post-Effective Amendment No. 26 X
--------
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 26
--------
DELAWARE GROUP EQUITY FUNDS IV
(formerly Delaware Group Equity Funds IV, 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) 255-1255
--------------
Eric E. Miller, Esquire, 1818 Market Street, Philadelphia, PA 19103
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: December 17, 1999
-----------------
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
_X_ on December 17, 1999 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
If appropriate:
___ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 26 to Registration File No. 33-442 includes
the following:
1. Facing Page
2. Contents Page
3. Part A - Prospectuses
4. Part B - Statement of Additional Information
5. Part C - Other Information
6. Signatures
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware DelCap Fund
Class A * Class B * Class C
Prospectus
December 17, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of contents
Fund profile page
Delaware DelCap Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
2
<PAGE>
Profile: Delaware DelCap Fund
What are the Fund's goals?
Delaware DelCap Fund seeks long-term capital growth. Although the Fund will
strive to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in common stocks of medium-size companies. These are
generally considered to be stocks with market capitalizations between $2 billion
and $10 billion. We may also invest in securities that are convertible into
common stock. In selecting stocks for the portfolio, we typically look for
companies that have established themselves within their industry, but still have
growth potential.
We use a bottom-up approach to select stocks, evaluating individual companies
rather than trends in the economy or the investment markets. Researching each
company, its products, services, competitors and management team helps us to
select stocks of companies that we think will provide high and consistent
earnings growth with a reasonable level of risk.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund will be affected by declines in stock
prices, which could be caused by a drop in the stock market or poor
performance from particular companies or industries. In addition, Delaware
DelCap Fund invests in medium-size or small companies. These companies may
involve greater risk due to their size, narrow product lines and limited
financial resources. For a more complete discussion of risk, please turn to
page ___.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
medium-size, growth-oriented companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
3
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Class A shares have varied over
the past ten calendar years as well as the average annual returns of all shares
for one-, five-, and ten-year or lifetime periods, if applicable. The Fund's
past performance does not necessarily indicate how it will perform in the
future.
[bar chart]
Year-by-year total return (Class A)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
33.90% -3.52% 42.33% 1.88% 11.87% -5.32% 29.78% 13.77% 14.04% 17.72%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund's Class A had a calendar year-to-date return of 11.18% as of
September 30, 1999. During the periods illustrated in this bar chart, Class A's
highest quarterly return was 24.69% for the quarter ended December 31,
1998 and its lowest quarterly return was - 18.51% for the quarter ended
September 30, 1990.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns shown in the table on page 3 do include the
sales charge.
Average annual returns for the period ending 12/31/98
<TABLE>
<CAPTION>
CLASS A B (if redeemed)* C (if redeemed)* Russell
(Inception (Inception (Inception Midcap Growth
10/3/68) 9/6/94) 11/29/95) Index
<S> <C> <C> <C> <C>
1 year 10.96% 12.01% 15.95% 17.86%
5 years 12.08% N/A N/A 17.34%
10 years or
Lifetime ** 14.00% 15.40% 14.60% 17.30%
</TABLE>
The Fund's returns above are compared to the performance of the Russell Midcap
Growth Index. You should remember that unlike the Fund, the Index is unmanaged
and doesn't include the costs of operating a mutual fund, such as the costs of
buying, selling and holding the securities.
*]If shares were not redeemed, the returns for Class B would be 16.92% and
15.66%, respectively, for the one-year and lifetime periods. Returns for Class
C would be 16.94% and 14.60%, respectively, for the one-year and lifetime
periods. **Lifetime returns are shown if the Fund or Class existed for less than
10 years. Russell Midcap Growth Index returns are for 10 years. Russell
Midcap Growth Index returns for Class B and Class C lifetime periods were
20.92% and 18.75%, respectively. Maximum sales charges are included in the
Fund returns shown in the table above.
4
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
CLASS A B C
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as 5.75% none none
a percentage of offering price
- -------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none(1) 5%(2) 1%(3)
percentage of original purchase price or redemption
price, whichever is lower
- -------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none none none
dividends
- -------------------------------------------------------------------------------------------
Redemption fees none none none
- -------------------------------------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets.
- -------------------------------------------------------------------------------------------
Management fees 0.74% 0.74% 0.74%
- -------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
- -------------------------------------------------------------------------------------------
Other expenses 0.33% 0.33% 0.33%
- -------------------------------------------------------------------------------------------
Total operating expenses 1.37% 2.07% 2.07%
- -------------------------------------------------------------------------------------------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(4) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
CLASS(5) A B B C C
(if redeemed) (if redeemed)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
1 year $706 $210 $710 $210 $310
- ----------------------------------------------------------------------------------------------------
3 years $984 $649 $1,049 $649 $649
- ----------------------------------------------------------------------------------------------------
5 years $1,282 $1,114 $1,314 $1,114 $1,114
- ----------------------------------------------------------------------------------------------------
10 years $2,127 $2,221 $2,221 $2,400 $2,400
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the Prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
(5) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
5
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we believe are
the best investments for the Fund. Following are descriptions of how the
portfolio management team pursues the Fund's investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify companies of medium market capitalization that offer
above-average opportunities for long-term capital growth because they are poised
to provide high and consistent earnings growth. Medium-size companies are
generally considered to be those with market capitalizations between $2 billion
and $10 billion.
Companies in the early stages of their development often offer the greatest
opportunities for rising share prices. However, the smallest companies generally
involve the most risk because they may have very limited resources, less
management experience and narrower product lines. We believe that medium-size
companies can provide many of the growth opportunities of small companies, but
with less risk. Medium-size companies may be more established in their industry
and have greater financial resources. Yet, they may still have the flexibility
and growth potential of a smaller company.
We use a bottom-up approach to stock selection, carefully evaluating the
characteristics of individual companies. We rely heavily on our own research in
selecting companies for the portfolio. That research might include one-on-one
meetings with executives, company competitors, industry experts and customers.
Our first step in identifying promising companies is to pinpoint stocks that
exhibit one or more of the following characteristics:
[X] A history of high earnings-per-share growth;
[X] Expectations for future earnings growth that are either high or
accelerating;
[X] A price to earnings ratio that is low relative to other stocks - indicating
that the stock might be undervalued;
[X] A discounted cash flow that is high relative to other stocks; or
[X] A special situation that has caused the stock to fall out of favor, but
which we believe creates potential for even greater long-term price
appreciation.
Once we have narrowed our search to companies with these characteristics, we
then conduct even more thorough hands-on research, evaluating a wide variety of
factors, including:
[X] The financial strength of the company;
[X] The expertise of its management;
[X] The growth potential of the company within its industry; and
[X] The growth potential of the industry.
Our goal is to select companies that are likely to perform well over an extended
time frame.
In order to reduce the inherent risks of equity investing, we maintain a
diversified portfolio, typically holding a mix of different stocks, representing
a wide array of industries.
Delaware DelCap Fund's investment objective - to seek long-term capital growth
- - is non-fundamental. This means that the Board of Trustees may change the
objective without obtaining shareholder approval. If the objective were changed,
we would notify shareholders before the change in the objective became
effective.
6
<PAGE>
The securities we typically invest in
Stocks generally offer investors the potential for capital appreciation, and
may pay dividends as well.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Common stocks: Securities that represent shares of Generally, we invest 85% to 100% of net assets in common stock
Stockholders participate in the with an emphasis on ownership in a corporation.
medium-size companies. corporation's profits and losses,
proportionate to the number of shares they own.
- ------------------------------------------------------------------------------------------------------------------------------------
American Depositary Receipts: ADRs are issued by a U.S. We may hold ADRs when we believe they offer greater appreciation
bank and represent the bank's holdings of a stated number potential than U.S. securities.
of shares of a foreign corporation. An ADR entitles the
holder to all dividends and capital gains earned by the
underlying foreign shares. ADRs are bought and sold the
same as U.S. securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such Typically, we use as a short-term investment for the Fund's cash
repurchase agreements as the Fund, and a seller of position. In order to enter into these repurchase agreements, the Fund
securities in which the seller agrees to buy the securities must have collateral of at least 102% of the repurchase price. The
back within a specified time at the same price the buyer Fund will only enter into repurchase agreements in which the
paid for them, plus an amount equal to an agreed upon collateral is comprised of U.S. government securities.
interest rate. Repurchase agreements are often viewed as
equivalent to cash.
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities whose We may invest in privately placed securities that are eligible for
resale is restricted under securities law. resale only among certain institutional buyers without registration,
including Rule 144A Securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Options and Futures: Options represent a right to buy or If we have stocks that appreciated in price, we may want to protect
sell a security or group of securities at an agreed upon those gains when we anticipate adverse conditions. We might use
price at a future date. The purchaser of an option may or options or futures to neutralize the effect of any price declines,
may not choose to go through with the transaction. without selling the security. We might also use options or futures
to gain exposure to a particular market segment without purchasing
Writing a covered call option on a security obligates the individual securities in that segment. We might use this approach if
owner of the security to sell it at an agreed upon price on we had excess cash that we wanted to invest quickly.
an agreed upon date (usually no more than nine months in the
future.) The owner of the security receives a premium We might use covered call options if we believe that doing so would
payment from the purchaser of the call, but if the security help the Fund to meet its investment objective.
appreciates to a price greater than the agreed upon selling
price, the fund would lose out on those gains. Use of these strategies can increase the operating costs of the Fund
and can lead to loss of principal.
Futures contracts are agreements for the purchase or sale of
securities at a specified price, on a specified date. Unlike
an option, a futures contract must be executed unless it is
sold before the settlement date.
Options and futures are generally considered to be
derivative securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready We may invest up to 10% of net assets in illiquid securities.
market, and cannot be easily sold within seven days at
approximately the price that a fund has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities, including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions on these securities as well as those
7
<PAGE>
listed in the table above. You can find additional information about the
investments in the Fund's portfolio in the annual or semi-annual shareholder
report.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and institutional
investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. The Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary
investments in bonds, cash or cash equivalents. These investments may not be
consistent with the Fund's investment objective.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover may be greater than
100%. A turnover rate of 100% would occur if the Fund sold and replaced
securities valued at 100% of its net assets within one year. High turnover can
result in increased transaction costs and tax liability for the Fund.
8
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Fund. Please see the Statement of Additional
Information for further discussion of these risks and other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on stocks we
securities in a certain market -- like the stock or bond believe can appreciate over an extended time frame regardless of
market -- will decline in value because of factors such as interim market fluctuations. We do not try to predict overall stock
economic conditions, future expectations or investor market movements and though we may hold securities for any amount of
confidence. time, we typically do not trade for short-term purposes.
We may hold a substantial part of the Fund's assets in cash or cash
equivalents as a temporary, defensive strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the value of We limit the amount of the Fund's assets invested in any one and in
securities in a particular industry or industry the value of any individual security. We also follow a rigorous selection process
an individual stock or bond will decline because of changing before choosing securities and continuously monitor them while they
expectations for the performance of that industry or for the remain in the portfolio.
individual company issuing the stock.
- ------------------------------------------------------------------------------------------------------------------------------------
Small company risk is the risk that prices of smaller Though the Fund may invest in small companies, our focus is on
companies may be more volatile than larger companies because medium-size companies. We believe medium-size companies, in general,
of limited financial resources or dependence on narrow are more stable than smaller companies and involve less risk due to
product lines. their larger size, greater experience and more extensive financial
resources. In addition, the Fund maintains a well-diversified
portfolio, selects stocks carefully and monitors them continuously.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities will decrease We analyze each company's financial situation and its cash flow to
in value if interest rates rise. The risk is generally determine the company's ability to finance future expansion and
associated with bonds; however, because smaller companies operations. The potential effect that rising interest rates might have
often borrow money to finance their operations, they may be on a stock is taken into consideration before the stock is purchased.
adversely affected by rising interest rates.
- ------------------------------------------------------------------------------------------------------------------------------------
Futures and options risk is the possibility that a fund We will not use futures and options for speculative reasons. We
may experience a loss if it employs an options or futures may use options and futures to protect gains in the portfolio
strategy related to a security or a market index and that without actually selling a security. We may also use options and
security or index moves in the opposite direction from what futures to quickly invest excess cash so that the portfolio is
the manager anticipated. Futures and options also involve generally fully invested.
additional expenses, which could reduce any benefit or
increase any loss that a fund gains from using the
strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign securities may be We typically invest only a small portion of the Fund's portfolio in
adversely affected by political instability, changes in foreign corporations indirectly through American Depositary Receipts.
currency exchange rates, foreign economic conditions or When we do purchase ADRs, they are generally denominated in U.S.
inadequate regulatory and accounting standards. dollars and traded on a U.S. exchange.
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price
that a fund has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager was paid 0.74% as a
percentage of average daily net assets for the last fiscal year.
Portfolio managers
Gerald S. Frey has primary responsibility for making day-to-day investment
decisions for the Fund. In making investment decisions for the Fund, Mr. Frey
regularly consults with Marshall T. Basset, John A. Heffern, Jeffrey W. Hynoski,
Steven T. Lampe and Lori P. Wachs.
Gerald S. Frey, Vice President/Senior Portfolio Manager, has 22 years'
experience in the money management business . He holds a BA in Economics from
Bloomsburg University and attended Wilkes College and New York University. Prior
to joining Delaware Investments in 1996, he was a Senior Director with Morgan
Grenfell Capital Management in New York. Mr. Frey has been Senior Portfolio
Manager for the Fund since March 1997 and was co-manager from June 1996 to
March 1997.
Marshall T. Bassett, Vice President/Portfolio Manager, holds a bachelor's
degree and an MBA from Duke University. Mr. Bassett joined Delaware Investments
in 1997, he served as Vice President in Morgan Stanley Asset Management's
Emerging Growth Group, where he analyzed small growth companies and as a trust
officer at Sovran Bank and Trust Company.
John A. Heffern, Vice President/Portfolio Manager, 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 and
a Principal and Senior Regional Bank Analyst at Alex. Brown & Sons.
Jeffrey W. Hynoski, Vice President/Portfolio Manager, joined Delaware
Investments in 1998. Previously he served as a Vice President at Bessemer Trust
Company in the mid and large capitalization growth group. 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 from
Pace University.
Steven T. Lampe, Vice President/Portfolio Manager, earned a bachelor's degree
and an MBA at the University of Pennsylvania's Wharton School. He joined
Delaware Investments in 1995 and provides analytical services for small and
mid-capitalization stocks. He previously served as a manager at Price
Waterhouse. Mr. Lampe is a Certified Public Accountant.
Lori P. Wachs, Vice President/Portfolio Manager, joined Delaware Investments
in 1992 from Goldman Sachs, where she was an equity analyst for two years. She
is a graduate of the University of Pennsylvania's Wharton School, where she
majored in Finance and Oriental Studies.
11
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Board of Trustees
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 8 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
NASD Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients,
analyzing their financial objectives and recommending appropriate funds or
other investments. Financial advisers are compensated for their services,
generally through sales commissions, and through 12b-1 and/or service fees
deducted from the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders
have specific voting rights, including the right to elect trustees. Material
changes in the terms of a fund's management contract must be approved by a
shareholder vote, and funds seeking to change fundamental investment objectives
or policies must also seek shareholder approval.
12
<PAGE>
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you pay when
you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than 0.30%
of average daily net assets, which is lower than the 12b-1 fee for Class B
and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.
Class A sales charges
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Amount of Sales charge as % Sales charge as % of Dealer's commission as %
purchase of offering price amount invested of offering price
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Less than $50,000 5.75% 6.10% 5.00%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
$50,000 but 4.75% 5.00% 4.00%
- --------------------------------------------------------------------------------------------------------------------
under $100,000
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
$100,000 but 3.75% 3.90% 3.00%
- --------------------------------------------------------------------------------------------------------------------
under $250,000
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
$250,000 but 2.50% 2.60% 2.00%
- --------------------------------------------------------------------------------------------------------------------
under $500,000
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
$500,000 but 2.00% 2.04% 1.60%
- --------------------------------------------------------------------------------------------------------------------
under $1 million
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
- --------------------------------------------------------------------------------
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year and 0.50% if
you redeem them within the second year.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Amount of Sales charge as % Sales charge as % of Dealer's commission as %
purchase of offering price amount invested of offering price
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
$1 million up to $5 none none 1.00%
million
- --------------------------------------------------------------------------------------------------------------------
Next $20 million none none 0.50%
Up to $25 million
- --------------------------------------------------------------------------------------------------------------------
Amount over $25 million none none 0.25%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge if you redeem your shares within six years after you buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth year,
and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, they are
subject to annual 12b-1 fees no greater than 1% of average daily net assets,
of which 0.25% are service fees paid to the distributor, dealers or others
for providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and any
dividends paid on these shares are lower than dividends on Class A shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%.
Conversion may occur as late as three months after the eighth anniversary of
purchase, during which time Class B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge of 1% if you redeem your shares within 12 months after you buy
them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee which may not be greater
than 1% of average daily net assets, of which 0.25% are service fees paid to
the distributor, dealers or others for providing services and maintaining
shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and pay
lower dividends than Class A shares.
14
<PAGE>
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any one
time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
15
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Program How it works Share class
A B C
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Letter of Intent Through a Letter of Intent you X Although the Letter of Intent and Rights
agree to invest a certain amount of Accumulation do not apply to the
in Delaware Investment Funds purchase of Class B and C shares, you can
(except money market funds with combine your purchase of Class A shares
no sales charge) over a 13-month with your purchase of B and C shares to
period to qualify for reduced fulfill your Letter of Intent or qualify
front-end sales charges. for Rights of Accumulation.
- --------------------------------------------------------------------------------
Rights of Accumulation You can combine your holdings or X
purchases of all funds in the
Delaware Investments family
(except money market funds with
no sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end
sales charges.
- ------------------------------------------------------------------------------------------------------------------------------------
Reinvestment of Up to 12 months after you redeem For Class For Class B, Not
redeemed shares shares, you can reinvest the A, you will your account will be available.
proceeds with no additional sales not have to credited with the
charge. pay an contingent deferred
additional sales charge you
front-end previously paid on
sales the amount you are
charge. reinvesting. Your
schedule for
contingent deferred
sales charges and
conversion to Class
A will not start
over again; it will
pick up from the
point at which you
redeemed your shares.
- ------------------------------------------------------------------------------------------------------------------------------------
SIMPLE IRA, SEP IRA, These investment plans may X There is no reduction in sales charges
SARSEP, Prototype qualify for reduced sales charges for Class B or Class C shares for group
Profit Sharing, by combining the purchases of all purchases by retirement plans.
Pension, 401(k), members of the group. Members of
SIMPLE 401(k), these groups may also qualify to
403(b)(7), and 457 purchase shares without a
Retirement Plans front-end sales charge and a
waiver of any contingent deferred
sales charges.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service, or through our web site, www.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.
17
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of
regular trading of the New York Stock Exchange each business day that the
Exchange is open. We calculate this value by adding the market value of all the
securities and assets in the Fund's portfolio, deducting all liabilities, and
dividing the resulting number by the number of shares outstanding. The result is
the net asset value per share. We price securities and other assets for which
market quotations are available at their market value. We price fixed-income
securities on the basis of valuations provided to us by an independent pricing
service that uses methods approved by the Board of Trustees. Any fixed-income
securities that have a maturity of less than 60 days we price at amortized cost.
For all other securities, we use methods approved by the Board of
Trustees that are designed to price securities at their fair market value.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
18
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, a bank wire fee may be deducted from
your proceeds. Bank information must be on file
before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawareinvestments.com. For more information about
how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
19
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined
on the business day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares, not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs and Roth IRAs, Uniform Gift to Minors Act
accounts or accounts with automatic investing plans and $500 for Education
IRAs) for three or more consecutive months, you will have until the end of the
current calendar quarter to raise the balance to the minimum. If your account is
not at the minimum by the required time, you will be charged a $9 fee for that
quarter and each quarter after that until your account reaches the minimum
balance. If your account does not reach the minimum balance, your Fund may
redeem your account after 60 days' written notice to you.
20
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly or quarterly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for the same class of shares
in other funds, your new shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased. The holding period for the
CDSC will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You don't
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's Prospectus and read it carefully before buying shares through an
exchange.
21
<PAGE>
About your account (continued)
Special services (continued)
MoneyLine(SM) On Demand Service
Through our MoneyLine(SM) On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans.
MoneyLine has a minimum transfer of $25 and a maximum transfer of $50,000,
except for purchases into IRAs. Delaware Investments does not charge a fee
for this service; however, your bank may assess one.
MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains, unless you tell us otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
22
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
There can be no assurance that these steps will be sufficient to avoid any
adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Fund invests. The
portfolio managers and investment professionals of the Fund consider Year
2000 compliance (including, but not limited to, any or all of the following:
impact on business, cost of compliance plan review and contingency planning, and
vendor compliance) in the securities selection and investment process. However,
there can be no guarantee that, even with their due diligence efforts, they will
be able to predict the affect of Year 2000 on any company or the
performance of its securities.
Investments by fund of funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds. From time to time, the Fund may experience
large investments or redemptions due to allocations or rebalancings by
Foundation Funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management.
For example, the Fund may be required to sell securities or invest cash at times
when it would not otherwise do so. These transactions could also have tax
consequences if sales of securities result in gains, and could also increase
transaction costs or portfolio turnover. The manager will monitor transactions
by Foundation Funds and will attempt to minimize any adverse effects on both the
Fund and Foundation Funds as a result of these transactions.
23
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware DelCap Fund Class A
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 9/30
----------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $22.470 $30.450 $30.740 $28.870 $25.570
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss(2) (0.204) (0.237) (0.234) (0.208) (0.166)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 8.014 (1.873) 3.534 5.618 5.296
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 7.810 (2.110) 3.300 5.410 5.130
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (3.930) (5.870) (3.590) (3.540) (1.830)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (3.930) (5.870) (3.590) (3.540) (1.830)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.350 $22.470 $30.450 $30.740 $28.870
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total return(3) 38.64% (8.28%) 12.44% 21.09% 22.04%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $649,052 $566,734 $770,207 $923,248 $888,571
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.37% 1.40% 1.36% 1.35% 1.37%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (0.83%) (0.92%) (0.86%) (0.74%) (0.67%)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 114% 115% 105% 72% 51%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) 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 and does not reflect the impact of a sales charge.
24
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Delaware DelCap Fund Class B
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended 9/30
-------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $21.680 $29.750 $30.300 $28.680 $25.560
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss(2) (0.367) (0.408) (0.418) (0.400) (0.340)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 7.677 (1.792) 3.458 5.560 5.290
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 7.310 (2.200) 3.040 5.160 4.950
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (3.930) (5.870) (3.590) (3.540) (1.830)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (3.930) (5.870) (3.590) (3.540) (1.830)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $25.060 $21.680 $29.750 $30.300 $28.680
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Total return(3) 37.67% (8.92%) 11.64% 20.27% 21.34%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $26,941 $18,470 $20,706 $13,239 $2,710
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.07% 2.10% 2.06% 2.05% 2.07%
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (1.53%) (1.62%) (1.56%) (1.44%) (1.37%)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 114% 115% 105% 72% 51%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Delaware DelCap Fund Class C
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
Period
Year Ended 9/30 11/29/95(1)
------------------------------- through
1999 1998 1997 9/30/96
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $21.950 $30.050 $30.570 $28.880
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Net investment loss(2) (0.369) (0.411) (0.421) (0.359)
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 7.789 (1.819) 3.491 5.589
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 7.420 (2.230) 3.070 5.230
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (3.930) (5.870) (3.590) (3.540)
- --------------------------------------------------------------------------------------------------------------------
Total distributions (3.930) (5.870) (3.590) (3.540)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $25.440 $21.950 $30.050 $30.570
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Total return(3) 37.65% (8.89%) 11.64% 20.38%
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $5,945 $3,576 $3,385 $1,947
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 2.07% 2.10% 2.06% 2.05%
- --------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (1.53%) (1.62%) (1.56%) (1.44%)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover 114% 115% 105% 72%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
How to read the financial highlights
Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned from
the Fund's investments; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less distributions-Distributions from net realized gain on
investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial
highlights table, we include applicable fee waivers, exclude front-end and
contingent deferred sales charges, and assume the shareholder has reinvested all
dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's
portfolio, less any liabilities, that are attributable to that class of the
fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment loss to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover rate has bought and sold half of the value
of its total investment portfolio during the stated period.
26
<PAGE>
[begin glossary]
How to use this glossary
The glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Currency exchange rates
The price at which one country's currency can be converted into another's. This
exchange rate varies almost daily according to a wide range of political,
economic and other factors.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
27
<PAGE>
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pay dividends at a fixed
rate and are sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
28
<PAGE>
Russell Midcap Growth Index
The Russell Midcap Growth Index; an unmanaged market-weighted total return
index that measures the performance of U.S. companies having higher
price-to-book ratios and higher forecasted growth values.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return varies from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
29
<PAGE>
Delaware DelCap Fund
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
Prospectus. If you want a free copy of the Statement of Additional
Information, the annual or semi-annual report, or if you have any questions
about investing in the Fund, you can write to us at 1818 Market Street,
Philadelphia, PA 19103, or call toll-free 800.523.1918. You may also obtain
additional information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions
and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4413
- --------------------------------------------------------------------------------
Delaware DelCap Fund Symbols CUSIP NASDAQ
- --------------------------------------------------------------------------------
Class A 245906102 DFCIX
- --------------------------------------------------------------------------------
Class B 245906300 DFBIX
- --------------------------------------------------------------------------------
Class C 245906409 DEEVX
- --------------------------------------------------------------------------------
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 12/99
30
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware DelCap Fund
Institutional Class
Prospectus
December 17, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of contents
Fund profile page
Delaware DelCap Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Exchanges
Dividends, distributions and taxes
Certain management considerations
Financial highlights page
2
<PAGE>
Profile: Delaware DelCap Fund
What are the Fund's goals?
Delaware DelCap Fund seeks long-term capital growth. Although the Fund will
strive to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in common stocks of medium-size companies. These are
generally considered to be stocks with market capitalizations between $2 billion
and $10 billion. We may also invest in securities that are convertible into
common stock. In selecting stocks for the portfolio, we typically look for
companies that have established themselves within their industry, but still have
growth potential.
We use a bottom-up approach to select stocks, evaluating individual companies
rather than trends in the economy or the investment markets. Researching each
company, its products, services, competitors and management team helps us to
select stocks of companies that we think will provide high and consistent
earnings growth with a reasonable level of risk.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund will be affected by declines in stock
prices, which could be caused by a drop in the stock market or poor
performance from particular companies or industries. In addition, Delaware
DelCap Fund invests in medium-size or small companies. These companies may
involve greater risk due to their size, narrow product lines and limited
financial resources. For a more complete discussion of risk, please turn to
page 7.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
medium-size, growth-oriented companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
3
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Institutional Class shares have
varied over the past ten calendar years as well as the average annual returns
for one-, five-, and ten-year periods. Delaware DelCap Fund's Institutional
Class commenced operations on November 9, 1992. Return information for the Class
prior to that date is calculated by taking the performance of Delaware DelCap
Fund A Class and eliminating all sales charges that apply to Class A shares.
However, for those periods, Class A 12b-1 payments were not eliminated, and
performance would have been affected if this adjustment had been made. The
Fund's past performance does not necessarily indicate how it will perform in the
future.
[bar chart]
<TABLE>
<CAPTION>
Year-by-year total return (Institutional Class)
- ------------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
33.90% -3.52% 42.33% 1.92% 12.20% -5.03% 30.19% 14.08% 14.39% 18.09%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund's Institutional Class had a calendar year-to-date return of 11.45%
as of September 30, 1999. During the periods illustrated in this bar chart,
Institutional Class' highest quarterly return was 24.80% for the quarter ended
December 31, 1998 and its lowest quarterly return was 18.51% for the quarter
ended September 30, 1990.
Average annual return as of 12/31/98
Institutional Russell Midcap
Class Growth Index
1 year 18.09% 17.86%
5 years 13.76% 17.34%
10 years 14.89% 17.30%
The Fund's returns above are compared to the performance of the Russell
Midcap Growth Index. You should remember that unlike the Fund, the Index is
unmanaged and doesn't include the costs of operating a mutual fund, such as
the costs of buying, selling and holding the securities.
4
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
----------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or redemption
price, whichever is lower
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
----------------------------------------------------------------
Redemption fees none
----------------------------------------------------------------
Exchange fees(1) none
----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets.
----------------------------------------------------------------
Management fees 0.74%
----------------------------------------------------------------
Distribution and service (12b-1) fees none
----------------------------------------------------------------
Other expenses 0.33%
----------------------------------------------------------------
Total operating expenses 1.07%
----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(2) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
---------------------------
1 year $109
---------------------------
3 years $340
---------------------------
5 years $590
---------------------------
10 years $1,306
---------------------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the Fund's
total operating expenses remain unchanged in each of the periods we show.
5
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we believe are
the best investments for the Fund. Following are descriptions of how the
portfolio management team pursues the Fund's investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify companies of medium market capitalization that offer
above-average opportunities for long-term capital growth because they are poised
to provide high and consistent earnings growth. Medium-size companies are
generally considered to be those with market capitalizations between $2 billion
and $10 billion.
Companies in the early stages of their development often offer the greatest
opportunities for rising share prices. However, the smallest companies generally
involve the most risk because they may have very limited resources, less
management experience and narrower product lines. We believe that medium-size
companies can provide many of the growth opportunities of small companies, but
with less risk. Medium-size companies may be more established in their industry
and have greater financial resources. Yet, they may still have the flexibility
and growth potential of a smaller company.
We use a bottom-up approach to stock selection, carefully evaluating the
characteristics of individual companies. We rely heavily on our own research in
selecting companies for the portfolio. That research might include one-on-one
meetings with executives, company competitors, industry experts and customers.
Our first step in identifying promising companies is to pinpoint stocks that
exhibit one or more of the following characteristics:
[X] A history of high earnings-per-share growth;
[X] Expectations for future earnings growth that are either high or
accelerating;
[X] A price to earnings ratio that is low relative to other stocks - indicating
that the stock might be undervalued;
[X] A discounted cash flow that is high relative to other stocks; or
[X] A special situation that has caused the stock to fall out of favor, but
which we believe creates potential for even greater long-term price
appreciation.
Once we have narrowed our search to companies with these characteristics, we
then conduct even more thorough hands-on research, evaluating a wide variety of
factors, including:
[X] The financial strength of the company;
[X] The expertise of its management;
[X] The growth potential of the company within its industry; and
[X] The growth potential of the industry.
Our goal is to select companies that are likely to perform well over an extended
time frame.
In order to reduce the inherent risks of equity investing, we maintain a
diversified portfolio, typically holding a mix of different stocks, representing
a wide array of industries.
Delaware DelCap Fund's investment objective - to seek long-term capital growth
- - is non-fundamental. This means that the Board of Trustees may change the
objective without obtaining shareholder approval. If the objective were changed,
we would notify shareholders before the change in the objective became
effective.
6
<PAGE>
The securities we typically invest in
Stocks generally offer investors the potential for capital appreciation and may
pay dividends as well.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of Generally, we invest 85% to 100% of net assets in common stock
ownership in a corporation. Stockholders participate in the with an emphasis on medium-size companies.
corporation's profits and losses, proportionate to the
number of shares they own.
- -----------------------------------------------------------------------------------------------------------------------------------
American Depositary Receipts: ADRs are issued by a U.S. We may hold ADRs when we believe they offer greater appreciation
bank and represent the bank's holdings of a stated number potential than U.S. securities.
of shares of a foreign corporation. An ADR entitles the
holder to all dividends and capital gains earned by the
underlying foreign shares. ADRs are bought and sold the
same as U.S. securities.
- -----------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such Typically, we use repurchase agreements as a short-term investment
as the Fund, and a seller of securities in which the seller for the Fund's cash position. In order to enter into these
agrees to buy the securities back within a specified time repurchase agreements, the Fund must have collateral of at least
at the same price the buyer paid for them, plus an amount 102% of the repurchase price. The Fund will only enter into
equal to an agreed upon interest rate. Repurchase repurchase agreements in which the collateral is comprised of U.S.
agreements are often viewed as equivalent to cash. government securities.
- -----------------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities whose We may invest in privately placed securities that are eligible for
resale is restricted under securities law. resale only among certain institutional buyers without registration,
including Rule 144A Securities.
- -----------------------------------------------------------------------------------------------------------------------------------
Options and Futures: Options represent a right to buy or If we have stocks that appreciated in price, we may want to protect
sell a security or group of securities at an agreed upon those gains when we anticipate adverse conditions. We might use
price at a future date. The purchaser of an option may or options or futures to neutralize the effect of any price declines,
may not choose to go through with the transaction. without selling the security. We might also use options or futures
to gain exposure to a particular market segment without purchasing
Writing a covered call option on a security obligates the individual securities in that segment. We might use this approach
owner of the security to sell it at an agreed upon if we had excess cash that we wanted to invest quickly.
price on an agreed upon date (usually no more than nine
months in the future.) The owner of the security receives a We might use covered call options if we believe that doing so
premium payment from the purchaser of the call, but if the would help the Fund to meet its investment objective.
security appreciates to a price greater than the agreed upon
selling price, the fund would lose out on those gains.
Use of these strategies can increase the operating costs of the Fund
Futures contracts are agreements for the purchase or sale and can lead to loss of principal.
of securities at a specified price, on a specified date.
Unlike an option, a futures contract must be executed unless
it is sold before the settlement date.
Options and futures are generally considered to be derivative
securities.
- -----------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready We may invest up to 10% of net assets in illiquid securities.
market, and cannot be easily sold within seven days at
approximately the price that a fund has valued them.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
The Fund may also invest in other securities, including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions on these securities as well as those
listed in the table above. You can find additional information about the
investments in the Fund's portfolio in the annual or semi-annual shareholder
report.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and institutional
investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. The Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary
investments in bonds, cash or cash equivalents. These investments may not be
consistent with the Fund's investment objective.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover may be greater than
100%. A turnover rate of 100% would occur if the Fund sold and replaced
securities valued at 100% of its net assets within one year. High turnover can
result in increased transaction costs and tax liability for the Fund.
8
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Fund. Please see the Statement of Additional
Information for further discussion of these risks and the other risks not
discussed here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we
of the securities in a certain market -- like believe can appreciate over an extended time frame regardless of the
stock or bond market -- will decline in interim market fluctuations. We do not try to predict overall
value because of factors such as economic stock market movements and though we may hold securities for any
conditions, future expectations or investor amount of time, we typically do not trade for short-term purposes.
confidence.
We may hold a substantial part of the Fund's assets in cash
or cash equivalents as a temporary, defensive strategy.
- ---------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of the Fund's assets invested in any one
value of securities in a particular industry or industry and in any individual security. We also follow a rigorous
the value of an individual stock or bond will selection process before choosing securities and continuously
decline because of changing expectations for monitor them while they remain in the portfolio.
the performance of that industry or for the
individual company issuing the stock.
- ---------------------------------------------------------------------------------------------------------------------
Small company risk is the risk that prices of Though the Fund may invest in small companies, our focus is on
smaller companies may be more volatile than medium-size companies. We believe medium-size companies, in
larger companies because of limited financial general, are more stable than smaller companies and involve less
resources or dependence on narrow product lines. risk due to their larger size, greater experience and more
extensive financial resources. In addition, the Fund maintains a
well-diversified portfolio, selects stocks carefully and monitors
them continuously.
- ---------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities We analyze each company's financial situation and its cash flow to
will decrease in value if interest rates rise. determine the company's ability to finance future expansion and
The risk is generally associated with bonds; operations. The potential effect that rising interest rates might
however, because smaller companies often borrow have on a stock is taken into consideration before the stock is
money to finance their operations, they may be purchased.
adversely affected by rising interest rates.
- ---------------------------------------------------------------------------------------------------------------------
Futures and options risk is the possibility We will not use futures and options for speculative reasons. We
that a fund may experience a loss if it may use options and futures to protect gains in the portfolio
employs an options or futures strategy related without actually selling a security. We may also use options and
to a security or a market index and that futures to quickly invest excess cash so that the portfolio is
security or index moves in the opposite generally fully invested.
direction from what the manager anticipated.
Futures and options also involve
additional expenses, which could reduce any
benefit or increase any loss that
a fund gains from using the strategy.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Foreign risk is the risk that foreign We typically invest only a small portion of the Fund's portfolio
securities may be adversely affected by in foreign corporations indirectly through American Depositary
political instability, changes in currency Receipts. When we do purchase ADRs, they are generally
exchange rates, foreign economic conditions or denominated in U.S. dollars and traded on a U.S. exchange.
inadequate regulatory and accounting standards.
- ---------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold within seven
days at approximately the price that a
fund has valued them.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager was paid 0.74% as
a percentage of average daily net assets for the last fiscal year.
Portfolio managers
Gerald S. Frey has primary responsibility for making day-to-day investment
decisions for the Fund. In making investment decisions for the Fund, Mr. Frey
regularly consults with Marshall T. Basset, John A. Heffern, Jeffrey W. Hynoski,
Steven T. Lampe and Lori P. Wachs.
Gerald S. Frey, Vice President/Senior Portfolio Manager, has 22 years'
experience in the money management business. He holds a BA in Economics
from Bloomsburg University and attended Wilkes College and New York University.
Prior to joining Delaware Investments in 1996, he was a Senior Director with
Morgan Grenfell Capital Management in New York. Mr. Frey has been senior
portfolio manager for the Fund since March 1997 and was co-manager from June
1996 to March 1997.
Marshall T. Bassett, Vice President/Portfolio Manager, holds a bachelor's
degree and an MBA from Duke University. Mr. Bassett joined Delaware
Investments in 1997, he served as Vice President in Morgan Stanley Asset
Management's Emerging Growth Group, where he analyzed small growth companies
and as a trust officer at Sovran Bank and Trust Company.
John A. Heffern, Vice President/Portfolio Manager, 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 and a Principal and Senior Regional Bank Analyst at Alex. Brown & Sons.
Jeffrey W. Hynoski, Vice President/Portfolio Manager, joined Delaware
Investments in 1998. Previously he served as a Vice President at Bessemer Trust
Company in the mid and large capitalization growth group. 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 from
Pace University.
Steven T. Lampe, Vice President/Portfolio Manager, earned a bachelor's degree
and an MBA at the University of Pennsylvania's Wharton School. He joined
Delaware Investments in 1995 and provides analytical services for small and
mid-capitalization stocks. He previously served as a manager at Price
Waterhouse. Mr. Lampe is a Certified Public Accountant.
Lori P. Wachs, Vice President/Portfolio Manager, joined Delaware
Investments in 1992 from Goldman Sachs, where she was an equity analyst for two
years. She is a graduate of the University of Pennsylvania's Wharton School,
where she majored in Finance and Oriental Studies.
11
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
<TABLE>
<CAPTION>
<S> <C> <C>
Board of Trustees
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 8 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
NASD Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
12
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the following:
o retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans;
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts;
o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee;
and
o registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if
the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
13
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
14
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of
regular trading of the New York Stock Exchange each business day that the
Exchange is open. We calculate this value by adding the market value of all the
securities and assets in the Fund's portfolio, deducting all liabilities, and
dividing the resulting number by the number of shares outstanding. The result is
the net asset value per share. We price securities and other assets for which
market quotations are available at their market value. We price fixed-income
securities on the basis of valuations provided to us by an independent pricing
service that uses methods approved by the Board of Trustees. Any
investments that have a maturity of less than 60 days we price at amortized
cost. For all other securities, we use methods approved by the Board
of Trustees that are designed to price securities at their fair market value.
15
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also fax
your written request to 215-255-8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
16
<PAGE>
About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. You may have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, your Fund
may redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from this Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
17
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
There can be no assurance that these steps will be sufficient to avoid any
adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Fund invests. The
portfolio managers and investment professionals of the Fund consider Year
2000 compliance (including, but not limited to, any or all of the following:
impact on business, cost of compliance plan review and contingency planning, and
vendor compliance) in the securities selection and investment process. However,
there can be no guarantee that, even with their due diligence efforts, they will
be able to predict the affect of Year 2000 on any company or the performance of
its securities.
Investments by fund of funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds. From time to time, the Fund may experience
large investments or redemptions due to allocations or rebalancings by
Foundation Funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management.
For example, the Fund may be required to sell securities or invest cash at times
when it would not otherwise do so. These transactions could also have tax
consequences if sales of securities result in gains, and could also increase
transaction costs or portfolio turnover. The manager will monitor transactions
by Foundation Funds and will attempt to minimize any adverse effects on both the
Fund and Foundation Funds as a result of these transactions.
18
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800-523-1918.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Delaware DelCap Fund Institutional Class
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended 9/30
------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.070 $31.010 $31.160 $29.130 $25.710
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
- --------------------------------------------------------------------------------------------------------------------------------
Net investment loss(1) (0.131) (0.160) (0.152) (0.123) (0.091)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 8.251 (1.910) 3.592 5.693 5.341
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 8.120 (2.070) 3.440 5.570 5.250
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain on investments (3.930) (5.870) (3.590) (3.540) (1.830)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (3.930) (5.870) (3.590) (3.540) (1.830)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $27.260 $23.070 $31.010 $31.160 $29.130
- --------------------------------------------------------------------------------------------------------------------------------
Total return(2) 39.08% (7.99%) 12.75% 21.44% 22.45%
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $19,645 $95,200 $131,319 $178,197 $129,378
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 1.07% 1.10% 1.06% 1.05% 1.07%
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (0.53%) (0.62%) (0.56%) (0.44%) (0.37%)
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 114% 115% 105% 72% 51%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The average shares outstanding method has been applied for per share
information.
(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.
19
<PAGE>
How to read the financial highlights
Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned
rom a fund's investments; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less distributions-Distributions from realized gain on
investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial
highlights table, we include applicable fee waivers and assume the shareholder
has reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's
portfolio, less any liabilities, that are attributable to that class of the
fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment loss to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover rate has bought and sold half of the value
of its total investment portfolio during the stated period.
20
<PAGE>
[begin glossary]
How to use this glossary
The glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Currency exchange rates
The price at which one country's currency can be converted into another's. This
exchange rate varies almost daily according to a wide range of political,
economic and other factors.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
21
<PAGE>
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pay dividends at a fixed
rate and are sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Russell Midcap Growth Index
The Russell Midcap Growth Index; an unmanaged market-weighted total return
index that measures the performance of U.S. companies having higher
price-to-book ratios and higher forecasted growth values.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
22
<PAGE>
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
23
<PAGE>
[back cover]
Delaware DelCap Fund
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
Prospectus. If you want a free copy of the Statement of Additional
Information, the annual or semi-annual report, or if you have any questions
about investing in the Fund, you can write to us at 1818 Market Street,
Philadelphia, PA 19103-3682, or call toll-free 800.523.1918. You may also obtain
additional information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
Investment Company Act file number: 811-4413
- -----------------------------------------------------------------------------
Delaware DelCap Fund Symbols CUSIP NASDAQ
- -----------------------------------------------------------------------------
Institutional Class 245906201 DFDIX
- -----------------------------------------------------------------------------
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-___ [--] PP 12/99
<PAGE>
DELAWARE
INVESTMENTS
---------------------
Philadelphia * London
Delaware Diversified Growth Fund
(Formerly Capital Appreciation Fund)
Class A * Class B* Class C
Prospectus
December 17, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
1
<PAGE>
Table of contents
Fund profile page
Delaware Diversified Growth Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares Retirement plans
How to redeem shares Account minimums
Special services
Exchanges
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
Glossary page
2
<PAGE>
Profile: Delaware Diversified Growth Fund
- -----------------------------------------
What are the Fund's goals?
Delaware Diversified Growth Fund seeks capital appreciation. Although the Fund
will strive to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in common stocks of large-sized companies. We look for
companies that we believe have growth potential that significantly exceeds the
average anticipated growth rate of companies in the S&P 500, a commonly quoted
stock index. We generally consider large-sized companies to be companies that
have at least $3 billion in market capitalization, though we may invest in
companies with a smaller market capitalization.
In evaluating companies, we use a two-fold approach. First, we rank a broad
universe of companies using what is known as a quantitative model. We then do
additional qualitative research on the companies that appear most promising. A
quantitative approach generally utilizes a computer program to evaluate a large
number of stocks based on a variety of pre-selected characteristics for the
stocks. We combine that with additional hands-on research that might evaluate
such factors as the quality of the company's management, new product lines, the
outlook for the industry and competitive pressures they might be facing. We seek
to identify companies that are highly ranked by our quantitative screening and
also look promising from a qualitative perspective.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund will be affected by declines in stock prices,
which can be caused by a decline in the stock market or poor performance from
specific companies that can result from negative earnings reports or dividend
reductions. For a more complete discussion of risk, please turn to page 10.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
large-sized companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
3
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Class A shares have varied over
the past two calendar years, as well as the average annual returns of these
shares for the past year and lifetime period. The Fund's past performance is
not necessarily an indication of how it will perform in the future. The returns
reflect voluntary expense caps and a waiver of 12b-1 fees. The returns would be
lower without the voluntary caps and 12b-1 fee waiver.
[bar chart]
Year-by-year total return (Class A)
- -------------- -----------
1997 1998
- -------------- -----------
17.53% 10.10%
- -------------- -----------
The Fund`s Class A had a calendar year-to-date return of 0.88% as of September
30, 1999. During the periods illustrated in this bar chart, Class A's highest
quarterly return was 14.51% for the quarter ended December 31, 1998 and its
lowest quarterly return was 11.95% for the quarter ended September 30, 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns shown in the table below do include the sales charge.
Average annual returns for periods ending 12/31/98
- -----------------------------------------------------------------
CLASS A S&P 500 Composite Stock
Index
- -----------------------------------------------------------------
1 year 3.77% 28.60%
- -----------------------------------------------------------------
Lifetime (inception
(12/2/96) 9.23% 28.36%
- -----------------------------------------------------------------
The Fund's returns above are compared to the performance of the S&P 500
Composite Stock Index. You should remember that unlike the Fund, the Index is
unmanaged and doesn't include the costs of operating a mutual fund, such as the
costs of buying, selling and holding the securities.
4
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------- ------------ ---------- ------
CLASS A B C
- ------------------------------------------------------------- ------------ ---------- ------
<S> <C>
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price 5.75% none none
- ------------------------------------------------------------- ------------ ---------- ------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
Redemption price, whichever is lower none(1) 5%(2) 1%(3)
- ------------------------------------------------------------- ------------ ---------- ------
Maximum sales charge (load) imposed on
Reinvested dividends none none none
- ------------------------------------------------------------- ------------ ---------- ------
Redemption fees none none none
- ------------------------------------------------------------- ------------ ---------- ------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
- ----------------------------------------- ---------- ---------- --------------
Management fees 0.65% 0.65% 0.65%
- ----------------------------------------- ---------- ---------- --------------
Distribution and service (12b-1) fees(4) 0.30% 1.00% 1.00%
- ----------------------------------------- ---------- ---------- --------------
Other expenses(5) 0.27% 0.27% 0.27%
- ----------------------------------------- ---------- ---------- --------------
Total operating expenses(5) 1.22% 1.92% 1.92%
- ----------------------------------------- ---------- ---------- --------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(6) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
-------------- ---------- ---------- --------------------- ---------- -------------------
CLASS(7) A B B (if redeemed) C C (if redeemed)
-------------- ---------- ---------- --------------------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
1 year $692 $195 $695 $295 $ 94
-------------- ---------- ---------- --------------------- ---------- -------------------
3 years $940 $603 $ 903 $603 $293
-------------- ---------- ---------- --------------------- ---------- -------------------
5 years $1,207 $1,037 $1,237 $1,037 $509
-------------- ---------- ---------- --------------------- ---------- -------------------
10 years $1,967 $2,061 $2,061 $2,243 $1,131
-------------- ---------- ---------- --------------------- ---------- -------------------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the Prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Class A shares are subject to a 12b-1 fee of 0.30% of average daily net
assets and Class B and C shares are each subject to a 12b-1 fee of 1.00% of
average daily net assets. The distributor has agreed to waive these 12b-1
fees through May 31, 2000.
5
<PAGE>
(5) The investment manager has agreed to waive fees and pay expenses
through May 31, 2000, in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees, extraordinary expenses and
12b-1 fees) from exceeding 0.75% of average daily net assets. The
following table shows the Fund's expenses including the investment
manager's and distributor's voluntary expense caps.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Fund operating expenses including voluntary expense caps in effect until May 31, 2000
-------------------------------------------------- --------------- ---------------- --------------------
<S> <C> <C> <C> <C>
CLASS A B C
-------------------------------------------------- --------------- ---------------- --------------------
Management fees 0.48% 0.48% 0.48%
-------------------------------------------------- --------------- ---------------- --------------------
Distribution and service (12b-1) fees 0.00% 0.00% 0.00%
-------------------------------------------------- --------------- ---------------- --------------------
Other expenses 0.27% 0.27% 0.27%
-------------------------------------------------- --------------- ---------------- --------------------
Total operating expenses 0.75% 0.75% 0.75%
-------------------------------------------------- --------------- ---------------- --------------------
</TABLE>
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense caps described in
footnotes (4) and (5).
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
6
<PAGE>
How we manage the Fund
Our investment strategies
We evaluate individual companies and analyze economic and market conditions,
seeking to identify the securities that we believe are the best investments
for the Fund. Following is a description of how the portfolio manager pursues
the Fund's investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
For Delaware Diversified Growth Fund, we strive to identify stocks of
large-sized companies that appear to have greater growth potential than the
average of the companies in the S&P 500. We typically evaluate a company in
relation to the overall stock market as represented by the S&P 500.
In striving to identify such companies, we combine two distinct investment
strategies. We first conduct a quantitative analysis and then a qualitative
analysis. Our quantitative analysis uses a computer program to rank a broad
universe of companies based on a number of pre-determined factors including:
o higher expected earnings growth;
o improving earning estimates; or
o stronger balance sheet.
These characteristics are generally considered growth characteristics and
suggest that the company could experience capital appreciation because it may
grow faster than the overall market. Our computer program also compares each
individual company against others in its industry. To do this, we evaluate other
characteristics such as a lower price to earnings ratio, and lower price to
cashflow. These are considered "value" characteristics which suggest that the
company is undervalued relative to similar companies and could experience price
appreciation if that value is recognized.
This quantitative computer analysis creates a ranking of all companies in our
universe. This ranking attempts to identify mispriced securities in relation to
their underlying business fundamentals based on the criteria we set.
We then move on to the second phase of our analysis--qualitative assessment. We
conduct hands on research to evaluate other aspects of a company including the
quality of management, the outlook for its industry, new product lines and
competitive pressures. In making the final selection of companies for Delaware
Diversified Growth Fund, we rely on the findings of both our quantitative and
qualitative analysis; however, we weight the portfolio more towards securities
that are highly ranked by our quantitative model.
Delaware Diversified Growth Fund's investment objective - to seek capital
appreciation - is non-fundamental. This means that the Board of Trustees may
change the objective without obtaining shareholder approval. If the objective
were changed, we would notify shareholders before the change in the objective
became effective.
7
<PAGE>
The securities we typically invest in
Stocks generally offer investors the potential for capital appreciation, and
may pay dividends as well.
<TABLE>
<CAPTION>
- ------------------------------------------------------------- ----------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------- ----------------------------------------------------------------------
<S> <C> <C>
Common stocks: Securities that represent shares of Generally, we invest 85% to 100% of net assets in common stock.
ownership in a corporation. Stockholders participate in the We will generally invest in companies of at least $3 billion in
corporation's profits and losses, proportionate to the market capitalization, but may also invest in smaller companies.
number of shares they own.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Foreign Stocks and Depositary Receipts: Foreign stocks are We may invest up to 20% of the Fund's net assets in foreign
those issued by a company that is located in a foreign companies directly or indirectly through American, Global or
country, has the majority of its assets in a foreign European Depositary Receipts. We would typically hold Depositary
company or generates the majority of its operating income Receipts when we believe they offer greater appreciation potential
in a foreign country. Depositary receipts are issued by a than U.S. securities. Investing directly in international securities
U.S. or foreign bank and represent the bank's holdings of is not typically a significant component of our strategy.
a stated number of shares of a foreign corporation.
A Depositary Receipt entitles the holder to all dividends
and capital gains earned by the underlying foreign shares.
ADRs are bought and sold the same as U.S. securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such Typically, we use repurchase agreements as a short-term investment
as the Fund, and a seller of securities in which the seller for the Fund's cash position. In order to enter into these
agrees to buy the securities back within a specified time repurchase agreements, the Fund must have collateral of at least
at the same price the buyer paid for them, plus an amount 102% of the repurchase price. The Fund will only enter into
equal to an agreed upon interest rate. Repurchase repurchase agreements in which the collateral is comprised of U.S.
agreements are often viewed as equivalent to cash. government securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Restricted securities: Privately placed securities whose We may invest in privately placed securities that are eligible for
resale is restricted under securities law. resale only among certain institutional buyers without registration,
including Rule 144A Securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Options and Futures: Options represent a right to buy or If we have stocks that have unrealized gains because of past
sell a security or a group of securities at an agreed upon appreciation, we may want to protect those gains when we anticipate
price at a future date. The purchaser of an option may or adverse conditions. We might use options or futures to neutralize
may not choose to go through with the transaction. the effect of any price declines, without selling the security. We
may also use options and futures to quickly invest excess cash so
Futures contracts are agreements for the purchase or sale that the portfolio is generally fully invested.
of a security or a group of securities at a specified
price, on a specified date. Unlike an option, a futures
contract must be executed unless it is sold before the
Use of these strategies can increase the operating
costs of the Fund settlement date. and can lead to loss
of principal.
Options and futures are generally considered to be
derivative securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready We may invest up to 15% of net assets in illiquid securities.
market, and cannot be easily sold within seven days at
approximately the price that a fund has valued them.
- ------------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities, including preferred stock, real
estate investment trusts, warrants and either equity or debt securities that are
convertible into stocks. Please see the Statement of Additional Information for
additional descriptions on these securities as well as those listed in the table
above. You can find additional information about the investments in the Fund's
portfolio in the annual or semi-annual shareholder report.
8
<PAGE>
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and institutional
investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. The Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary
investments in bonds, cash or cash equivalents. These investments may not be
consistent with the Fund's investment objective.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover may be greater than
100%. A turnover rate of 100% would occur if the Fund sold and replaced
securities valued at 100% of its net assets within one year. High turnover can
result in increased transaction costs and tax liability for the Fund.
9
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Fund. Please see the Statement of Additional
Information for further discussion of these risks and other risks not discussed
here.
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------- --------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we
of the securities in a certain market -- like believe can appreciate over an extended time frame regardless of
the stock or bond market -- will decline in interim market fluctuations. We do not try to predict overall
value because of factors such as economic stock market movements and though we may hold securities for any
conditions, future expectations or investor amount of time, we typically do not trade for short-term purposes.
confidence.
We may hold a substantial part of the Fund's assets in cash
or securities that are considered equivalent to cash
as a temporary, defensive strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of the Fund's assets invested in any one
value of securities in a particular industry or industry and in any individual security. We also follow
the value of an individual stock or bond will a rigorous selection process before choosing securities and
decline because of changing expectations for continuously monitor them while they remain in the portfolio.
the performance of that industry or for the
individual company issuing the stock.
- ------------------------------------------------- --------------------------------------------------------------------
Futures and options risk is the possibility We will not use futures and options for speculative reasons. We
that a fund may experience a loss if it may use options and futures to protect gains in the portfolio
employs an options or futures strategy related without actually selling a security. We may also use options and
to a security or a market index and that futures to quickly invest excess cash so that the portfolio is
security or index moves in the opposite generally fully invested.
direction from what the manager anticipated.
Futures and options also involve additional
expenses, which could reduce any benefit or
increase any loss that a fund gains from
using the strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Foreign risk is the risk that foreign Investing in foreign securities is not a significant part of our
securities may be adversely affected by strategy. We may not invest more than 20% of net assets in direct
political instability, changes in currency and indirect holdings of foreign securities.
exchange rates, foreign economic conditions or
inadequate regulatory and accounting standards.
- ------------------------------------------------- --------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold within seven
days at approximately the price that a fund
has valued them.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
10
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager was paid 0.48% as a
percentage of average daily net assets for the last fiscal year, after giving
effect to voluntary waivers by the manager.
Portfolio managers
J. Paul Dokas, Vice President/Senior Portfolio Manager, is primarily
responsible for making investment decisions for the Fund. He is responsible for
producing quantitative research used to develop new global investment services,
refine existing services, and make asset-allocation decisions. He joined
Delaware Investments in 1997. He previously was director of trust investment
management at Bell Atlantic Corporation. He earned a bachelors degree at Loyola
College in Baltimore and an MBA degree at the University of Maryland. He is a
chartered financial analyst. In making investment decisions for the Fund, Mr.
Dokas is assisted by Robert E. Ginsberg.
Robert E. Ginsberg, Assistant Vice President/Equity Analyst, graduated magna
cum laude from the Wharton School of Business at the University of Pennsylvania
with a degree in Economics with a concentration in Finance. Prior to joining
Delaware Investments in September of 1997, he was a Consultant at Andersen
Consulting working primarily with financial services companies. At Delaware
Investments, Mr. Ginsberg handles diverse analytical responsibilities involving
large capitalization stocks. He is a CFA Level III candidate.
11
<PAGE>
Who's who?
This shows the various organizations involved with managing, administering, and
servicing the Delaware Investments funds.
<TABLE>
<CAPTION>
Board of Trustees
<S> <C> <C>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 12 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
NASD Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients,
analyzing their financial objectives and recommending appropriate funds or
other investments. Financial advisers are compensated for their services,
generally through sales commissions, and through 12b-1 and/or service fees
deducted from the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders
have specific voting rights, including the right to elect trustees. Material
changes in the terms of a fund's management contract must be approved by a
shareholder vote, and funds seeking to change fundamental investment objectives
or policies must also seek shareholder approval.
12
<PAGE>
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you pay
when you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class A shares are also subject to an annual
12b-1 fee no greater than 0.30% of average daily net assets, which is lower
than the 12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.
Class A Sales Charges
<TABLE>
<CAPTION>
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
Amount of purchase Sales charge Sales charge as % of amount Dealer's commission as %
as % invested Of offering price
of offering price
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
$50,000 but under $100,000
4.75% 5.00% 4.00%
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
$100,000 but under $250,000
3.75% 3.90% 3.00%
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
$250,000 but under $500,000
2.50% 2.60% 2.00%
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
$500,000 but under $1 million
2.00% 2.04% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year and 0.50% if
you redeem them within the second year.
<TABLE>
<CAPTION>
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
Amount of purchase Sales charge as % Sales charge as % Dealer's commission as %
of offering price of amount invested of offering price
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
<S> <C> <C>
$1,000,000 up to $5 million none none 1.00%
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
next $20 million
up to $25 million none none 0.50%
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
amount over $25 million none none 0.25%
- ---------------------------------- -------------------------------- -------------------------------- -------------------------------
</TABLE>
13
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge if you redeem your shares within six years after you
buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during
the third and fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, absent
12b-1 fee waivers, they are subject to annual 12b-1 fees no greater than 1%
of average daily net assets, of which 0.25% are service fees paid to the
distributor, dealers or others for providing services and maintaining
accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and
any dividends paid on these shares are lower than dividends on Class A
shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%, which
is currently being waived. Conversion may occur as late as three months
after the eighth anniversary of purchase, during which time Class B's
higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge of 1% if you redeem your shares within 12 months
after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class C shares are subject to an annual 12b-1 fee
which may not be greater than 1% of average daily net assets, of which
0.25% are service fees paid to the distributor, dealers or others for
providing services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and
pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any
one time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
14
<PAGE>
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ---------------------------- --------------------------------------- -----------------------------------------------------------
Program How it works Share class
A B C
- ---------------------------- --------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of Intent and Rights
agree to invest a certain amount of Accumulation do not apply to the
in Delaware Investment Funds purchase of Class B and C shares, you can
(except money market funds with combine your purchase of Class A shares
no sales charge) over a 13-month with your purchase of B and C shares to
period to qualify for reduced fulfill your Letter of Intent or qualify
front-end sales charges. for Rights of Accumulation.
- ---------------------------- --------------------------------------- ---------------
Rights of Accumulation You can combine your holdings or X
purchases of all funds in the
Delaware Investments family (except
money market funds with no sales
charge) as well as the holdings and
purchases of your spouse and children
under 21 to qualify for reduced
front-end sales charges.
- ---------------------------- --------------------------------------- --------------- -------------------------- ----------------
Reinvestment of Up to 12 months after you redeem For Class For Class B, Not
redeemed shares shares, you can reinvest the A, you will your account will be available.
proceeds with no additional sales not have to credited with the
charge. pay an contingent deferred
additional sales charge you
front-end previously paid on
sales the amount you are
charge. reinvesting. Your
schedule for
contingent deferred
sales charges and
conversion to Class
A will not start
over again; it will
pick up from the
point at which you
redeemed your shares.
- ---------------------------- --------------------------------------- --------------- -------------------------------------------
SIMPLE IRA, SEP IRA, These investment plans may X There is no reduction in sales charges
SARSEP, Prototype qualify for reduced sales charges for Class B or Class C shares for group
Profit Sharing, by combining the purchases of all purchases by retirement plans.
Pension, 401(k), members of the group. Members of
SIMPLE 401(k), these groups may also qualify to
403(b)(7), and 457 purchase shares without a
Retirement Plans front-end sales charge and a
waiver of any contingent deferred
sales charges.
- ---------------------------- --------------------------------------- --------------- -------------------------------------------
</TABLE>
15
<PAGE>
How to buy shares
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service. For more information about how to sign up for this service, call our
Shareholder Service Center at 800.523.1918.
16
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of
regular trading of the New York Stock Exchange each business day that the
Exchange is open. We calculate this value by adding the market value of all the
securities and assets in the Fund's portfolio, deducting all liabilities, and
dividing the resulting number by the number of shares outstanding. The result is
the net asset value per share. We price securities and other assets for which
market quotations are available at their market value. We price fixed-income
securities on the basis of valuations provided to us by an independent pricing
service that uses methods approved by the Board of Trustees. Any fixed-income
securities that have a maturity of less than 60 days we price at amortized cost.
For all other securities , we use methods approved by the Board of Trustees
that are designed to price securities at their fair market value.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
17
<PAGE>
How to redeem shares
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, a bank wire fee may be deducted from
your proceeds. Bank information must be on file before you request a wire
redemption.
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service. For
more information about how to sign up for this service, call our Shareholder
Service Center at 800.523.1918.
18
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares, not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs and Roth IRAs, Uniform Gift to Minors Act
accounts or accounts with automatic investing plans and $500 for Education
IRAs) for three or more consecutive months, you will have until the end of the
current calendar quarter to raise the balance to the minimum. If your account is
not at the minimum by the required time, you will be charged a $9 fee for that
quarter and each quarter after that until your account reaches the minimum
balance. If your account does not reach the minimum balance, your Fund may
redeem your account after 60 days' written notice to you.
19
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly or quarterly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for the same class of shares
in other funds, your new shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased. The holding period for the
CDSC will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You don't
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's Prospectus and read it carefully before buying shares through an
exchange.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
20
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
There can be no assurance that these steps will be sufficient to avoid any
adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Fund invests. The
portfolio managers and investment professionals of the Fund consider Year 2000
compliance (including, but not limited to, any or all of the following: impact
on business, cost of compliance plan review and contingency planning, and vendor
compliance) in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the effect of Year 2000 on any company or the performance of its
securities.
Investments by fund of funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds. From time to time, the Fund may experience
large investments or redemptions due to allocations or rebalancings by
Foundation Funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management.
For example, the Fund may be required to sell securities or invest cash at times
when it would not otherwise do so. These transactions could also have tax
consequences if sales of securities result in gains, and could also increase
transaction costs or portfolio turnover. The manager will monitor transactions
by Foundation Funds and will attempt to minimize any adverse effects on both the
Fund and Foundation Funds as a result of these transactions.
21
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
Financial highlights for Class B and Class C shares are not shown because these
shares have not commenced operations of the close of fiscal year.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------ -------------------------------------------------
Delaware Diversified Growth Fund Class A
- ------------------------------------------------------------------------------ -------------------------------------------------
Period
Year Ended 9/30 Year Ended 9/30 12/2/96(1)
1999 1998 through
9/30/97
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.990 $10.160 $8.500
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Income (loss) from investment operations:
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Net investment income 0.0362 0.0822 0.067
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Net realized and unrealized gain (loss) on investments 1.354 (0.755) 1.601
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Total from investment operations 1.390 (0.673) 1.668
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Less dividends and distributions:
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Dividends from net investment income (0.080) (0.076) (0.008)
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Distributions from net realized gain on investments --- (0.421) ---
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Total dividends and distributions (0.080) (0.497) (0.008)
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Net asset value, end of period $10.300 $8.990 $10.160
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Total return(3) 15.52% (6.91%) 19.64%
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Net assets, end of period (000 omitted) $10 $12 $8
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Ratio of expenses to average net assets 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Ratio of expenses to average net assets prior to expense limitation and
expenses paid indirectly 1.28% 2.28% 1.70%
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Ratio of net investment income to average net assets 0.36% 0.83% 0.91%
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Ratio of net investment income (loss) to average net assets prior to expense
limitation and expenses paid indirectly (0.17%) (0.70%) (0.03%)
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
Portfolio turnover 120% 163% 84%
- ------------------------------------------------------------------------------ ----------------- ---------------- --------------
</TABLE>
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Computed based on the average shares outstanding method.
(3) 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, expense waivers by the manager and distributor and does not
reflect the impact of a sales charge.
22
<PAGE>
How to read the financial highlights
Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned from
a fund's investments; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less distributions-Distributions from net realized gain on
investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of a fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income (loss) to average net assets We determine this
ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover rate has bought and sold half of the value
of its total investment portfolio during the stated period.
23
<PAGE>
How to use this glossary
The glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Currency exchange rates
The price at which one country's currency can be converted into another's. This
exchange rate varies almost daily according to a wide range of political,
economic and other factors.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
24
<PAGE>
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pay dividends at a fixed
rate and are sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
S&P 500 Composite Stock Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
25
<PAGE>
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return varies from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
26
<PAGE>
Delaware Diversified Growth Fund
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
Prospectus. If you want a free copy of the Statement of Additional
Information, the annual or semi-annual report, or if you have any questions
about investing in the Fund, you can write to us at 1818 Market Street,
Philadelphia, PA 19103, or call toll-free 800.523.1918. You may also obtain
additional information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4413
- ------------------------------------------------------------
Diversified Growth Fund Symbols CUSIP
- ------------------------------------------------------------
Class A 24610A109
- ------------------------------------------------------------
DELAWARE
INVESTMENTS
---------------------
Philadelphia * London
P-002 [--] PP 12/99
27
<PAGE>
DELAWARE
INVESTMENTS
Philadelphia * London
Delaware Diversified Growth Fund
(Formerly Capital Appreciation Fund)
Institutional Class
Prospectus
December 17, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of contents
Fund profile page
Delaware Diversified Growth Fund
How we manage the Fund page
Our investment strategies The securities
we typically invest in The risks of
investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Exchanges
Dividends, distributions and taxes
Certain management considerations
Financial highlights page
Glossary page
<PAGE>
Profile: Delaware Diversified Growth Fund
What are the Fund's goals?
Delaware Diversified Growth Fund seeks capital appreciation. Although the Fund
will strive to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in common stocks of large-sized companies. We look for
companies that we believe have growth potential that significantly exceeds the
average anticipated growth rate of companies in the S&P 500, a commonly quoted
stock index. We generally consider large-sized companies to be companies that
have at least $3 billion in market capitalization, though we may invest in
companies with a smaller market capitalization.
In evaluating companies, we use a two-fold approach. First, we rank a broad
universe of companies using what is known as a quantitative model. We then do
additional qualitative research on the companies that appear most promising. A
quantitative approach generally utilizes a computer program to evaluate a large
number of stocks based on a variety of pre-selected characteristics for the
stocks. We combine that with additional hands-on research that might evaluate
such factors as the quality of the company's management, new product lines, the
outlook for the industry and competitive pressures they might be facing. We seek
to identify companies that are highly ranked by our quantitative screening and
also look promising from a qualitative perspective.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The value of your investment in the Fund
will increase and decrease according to changes in the value of the securities
in the Fund's portfolio. This Fund will be affected by declines in stock prices,
which can be caused by a decline in the stock market or poor performance from
specific companies that can result from negative earnings reports or dividend
reductions. For a more complete discussion of risk, please turn to page ___.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
large-sized companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Institutional Class have varied
over the past two calendar years, as well as the average annual returns of these
shares for the past year and lifetime period. The Fund's past performance is not
necessarily an indication of how it will perform in the future. The returns
reflect voluntary expense caps. The returns would be lower without the voluntary
caps.
[bar chart]
Year-by-year total return (Institutional Class)
- -------------- ----------
1997 1998
- -------------- ----------
17.53% 10.10%
- -------------- ----------
The Fund`s Institutional Class had a calendar year-to-date return of 0.88% as of
September 30, 1999. During the periods illustrated in this bar chart, the Class'
highest quarterly return was 14.51% for the quarter ended December 31, 1998 and
its lowest quarterly return was 11.95% for the quarter ended September 30, 1998.
Average annual returns for periods ending 12/31/98
- ---------------------------------------------------------------
Institutional S&P 500 Composite
Class Stock Index
- ---------------------------------------------------------------
- ---------------------------------------------------------------
1 year 10.10% 28.60%
- ---------------------------------------------------------------
Lifetime (inception
(12/2/96) 12.39% 28.36%
- ---------------------------------------------------------------
The Fund's returns above are compared to the performance of the S&P 500
Composite Stock Index. You should remember that unlike the Fund, the Index is
unmanaged and doesn't include the costs of operating a mutual fund, such as the
costs of buying, selling and holding the securities.
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- -------------------------------------------------------------- ------------
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price none
- -------------------------------------------------------------- ------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
- -------------------------------------------------------------- ------------
Maximum sales charge (load) imposed on
Reinvested dividends none
- -------------------------------------------------------------- ------------
Redemption fees none
- -------------------------------------------------------------- ------------
Exchange Fees(1) none
- -------------------------------------------------------------- ------------
Annual fund operating expenses are deducted from the Fund's assets.
- -------------------------------------------------------- -----------
Management fees 0.65%
- -------------------------------------------------------- -----------
Distribution and service (12b-1) fees none
- -------------------------------------------------------- -----------
Other expenses 0.27%
- -------------------------------------------------------- -----------
Total operating expenses(2) 0.92%
- -------------------------------------------------------- -----------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. (3)This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
------------ -----------
1 year $99
------------ -----------
3 years $312
------------ -----------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange
your shares into a fund that has a front-end sales charge.
(2) The investment manager has agreed to waive fees and pay expenses
through May 31, 2000, in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees, extraordinary expenses
and 12b-1 fees) from exceeding 0.75% of average daily net assets. The
following table shows the Fund's expenses including the investment
manager's voluntary expense cap.
--------------------------------------------------------------------------
Fund operating expenses including voluntary expense caps in effect until
May 31, 2000
------------------------------------------------------------ -------------
Management fees 0.48%
------------------------------------------------------------ -------------
Distribution and service (12b-1) fees None
------------------------------------------------------------ -------------
Other expenses 0.27%
------------------------------------------------------------ -------------
Total operating expenses 0.75%
------------------------------------------------------------ -------------
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. This example does not reflect the voluntary expense cap
described in footnote 3.
<PAGE>
How we manage the Fund
Our investment strategies
We evaluate individual companies and analyze economic and market conditions,
seeking to identify the securities that we believe are the best investments for
the Fund. Following is a description of how the portfolio manager pursues the
Fund's investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
For Delaware Diversified Growth Fund, we strive to identify stocks of
large-sized companies that appear to have greater growth potential than the
average of the companies in the S&P 500. We typically evaluate a company in
relation to the overall stock market as represented by the S&P 500.
In striving to identify such companies, we combine two distinct investment
strategies. We first conduct a quantitative analysis and then a qualitative
analysis. Our quantitative analysis uses a computer program to rank a broad
universe of companies based on a number of pre-determined factors including:
o higher expected earnings growth;
o improving earning estimates; or
o stronger balance sheet.
These characteristics are generally considered growth characteristics and
suggest that the company could experience capital appreciation because it may
grow faster than the overall market. Our computer program also compares each
individual company against others in its industry. To do this, we evaluate other
characteristics such as a lower price to earnings ratio, and lower price to
cashflow. These are considered "value" characteristics which suggest that the
company is undervalued relative to similar companies and could experience price
appreciation if that value is recognized.
This quantitative computer analysis creates a ranking of all companies in our
universe. This ranking attempts to identify mispriced securities in relation to
their underlying business fundamentals based on the criteria we set.
We then move on to the second phase of our analysis--qualitative assessment. We
conduct hands on research to evaluate other aspects of a company including the
quality of management, the outlook for its industry, new product lines and
competitive pressures. In making the final selection of companies for Delaware
Diversified Growth Fund we rely on the findings of both our quantitative and
qualitative analysis; however, we weight the portfolio more towards securities
that are highly ranked by our quantitative model.
Delaware Diversified Growth Fund's investment objective - to seek capital
appreciation - is non-fundamental. This means that the Board of Trustees may
change the objective without obtaining shareholder approval. If the objective
were changed, we would notify shareholders before the change in the objective
became effective.
<PAGE>
The securities we typically invest in
Stocks generally offer investors the potential for capital appreciation, and may
pay dividends as well.
<TABLE>
<CAPTION>
- ------------------------------------------------------------- ----------------------------------------------------------------------
Securities How we use them
<S> <C>
- ------------------------------------------------------------- ----------------------------------------------------------------------
Common stocks: Securities that represent shares of Generally, we invest 85% to 100% of net assets in common stock.
ownership in a corporation. Stockholders participate in the We will generally invest in companies of at least $3 billion in
corporation's profits and losses, proportionate to the market capitalization, but may also invest in smaller companies.
number of shares they own.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Foreign Stocks and Depositary Receipts: Foreign stocks are We may invest up to 20% of the Fund's net assets in foreign
those issued by a company that is located in a foreign companies directly or indirectly through American, Global or
country, has the majority of its assets in a foreign European Depositary Receipts. We would typically hold Depositary
company or generates the majority of its operating income Receipts when we believe they offer greater appreciation potential
in a foreign country. Depositary receipts are issued by a than U.S. securities. Investing directly in international securities
U.S. or foreign bank holdings of a stated number of is not typically a significant component of our strategy.
and represent the bank's shares of a foreign corporation.
A Depositary Receipt entitles the holder to all dividends
and capital gains earned by the underlying foreign shares.
ADRs are bought and sold the same as U.S. securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such Typically, we use repurchase agreements as a short-term investment
as the Fund, and a seller of securities in which the seller for the Fund's cash position. In order to enter into these
agrees to buy the securities back within a specified time repurchase agreements, the Fund must have collateral of at least
at the same price the buyer paid for them, plus an amount 102% of the repurchase price. The Fund will only enter into
equal to an agreed upon interest rate. Repurchase repurchase agreements in which the collateral is comprised of U.S.
agreements are often viewed as equivalent to cash. government securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Restricted securities: Privately placed securities whose We may invest in privately placed securities that are eligible for
resale is restricted under securities law. resale only among certain institutional buyers without registration,
including Rule 144A Securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Options and Futures: Options represent a right to buy or If we have stocks that have unrealized gains because of past
sell a security or a group of securities at an agreed upon appreciation, we may want to protect those gains when we anticipate
price at a future date. The purchaser of an option may or adverse conditions. We might use options or futures to neutralize
may not choose to go through with the transaction. the effect of any price declines, without selling the security. We
may also use options and futures to quickly invest excess cash so
Futures contracts are agreements for the purchase or sale that the portfolio is generally fully invested.
of a security or a group of securities at a specified
price, on a specified date. Unlike an option, a futures
contract must be executed unless it is sold before the Use of these strategies can increase the operating costs of the Fund
settlement date. and can lead to loss of principal.
Options and futures are generally considered to be
derivative securities.
- ------------------------------------------------------------- ----------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready We may invest up to 15% of net assets in illiquid securities.
market, and cannot be easily sold within seven days at
approximately the price that a fund has valued them.
- ------------------------------------------------------------- ----------------------------------------------------------------------
</TABLE>
<PAGE>
The Fund may also invest in other securities, including preferred stock, real
estate investment trusts, warrants and either equity or debt securities that are
convertible into stocks. Please see the Statement of Additional Information for
additional descriptions on these securities as well as those listed in the table
above. You can find additional information about the investments in the Fund's
portfolio in the annual or semi-annual shareholder report.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and institutional
investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. The Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
Temporary defensive positions
In response to unfavorable market conditions, the Fund may make temporary
investments in bonds, cash or cash equivalents. These investments may not be
consistent with the Fund's investment objective.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover may be greater than
100%. A turnover rate of 100% would occur if the Fund sold and replaced
securities valued at 100% of its net assets within one year. High turnover can
result in increased transaction costs and tax liability for the Fund.
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Fund. Please see the Statement of Additional
Information for further discussion of these risks and other risks not discussed
here.
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------- --------------------------------------------------------------------
<S> <C>
- ------------------------------------------------- --------------------------------------------------------------------
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we
of the securities in a certain market -- like believe can appreciate over an extended time frame regardless of
the stock or bond market -- will decline in interim market fluctuations. We do not try to predict overall
value because of factors such as economic stock market movements and though we may hold securities for any
conditions, future expectations or investor amount of time, we typically do not trade for short-term purposes.
confidence.
We may hold a substantial part of the Fund's assets in cash or
securities that are considered equivalent to cash as a temporary,
defensive strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of the Fund's assets invested in any one
value of securities in a particular industry or industry and in any individual security. We also follow a rigorous
the value of an individual stock or bond will selection process before choosing securities and continuously
decline because of changing expectations for monitor them while they remain in the portfolio.
the performance of that industry or for the
individual company issuing the stock.
- ------------------------------------------------- --------------------------------------------------------------------
Futures and options risk is the possibility We will not use futures and options for speculative reasons. We
that a fund may experience a loss if it may use options and futures to protect gains in the portfolio
employs an options or futures strategy related without actually selling a security. We may also use options and
to a security or a market index and that futures to quickly invest excess cash so that the portfolio is
security or index moves in the opposite generally fully invested.
direction from what the manager anticipated.
Futures and options also involve additional
expenses, which could reduce any benefit or
increase any loss that a fund gains from
using the strategy.
- ------------------------------------------------- --------------------------------------------------------------------
Foreign risk is the risk that foreign Investing in foreign securities is not a significant part of our
securities may be adversely affected by strategy. We may not invest more than 20% of net assets in direct
political instability, changes in currency and indirect holdings of foreign securities.
exchange rates, foreign economic conditions or
inadequate regulatory and accounting standards.
- ------------------------------------------------- --------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold within seven
days at approximately the price that a
fund has valued them.
- ------------------------------------------------- --------------------------------------------------------------------
</TABLE>
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager was paid 0.48% as a
percentage of average daily net assets for the last fiscal year, after giving
effect to voluntary waivers by the manager.
Portfolio managers
J. Paul Dokas, Vice President/Senior Portfolio Manager, is primarily responsible
for making investment decisions for the Fund. He is responsible for producing
quantitative research used to develop new global investment services, refine
existing services, and make asset-allocation decisions. He joined Delaware
Investments in 1997. He previously was director of trust investment management
at Bell Atlantic Corporation. He earned a bachelors degree at Loyola College in
Baltimore and an MBA degree at the University of Maryland. He is a chartered
financial analyst. In making investment decisions for the Fund, Mr. Dokas is
assisted by Robert E. Ginsberg.
Robert E. Ginsberg, Assistant Vice President/Equity Analyst, graduated magna cum
laude from the Wharton School of Business at the University of Pennsylvania with
a degree in Economics with a concentration in Finance. Prior to joining Delaware
Investments in September of 1997, he was a Consultant at Andersen Consulting
working primarily with financial services companies. At Delaware Investments,
Mr. Ginsberg handles diverse analytical responsibilities involving large
capitalization stocks. He is a CFA Level III candidate.
<PAGE>
Who's who?
This shows the various organizations involved with managing, administering, and
servicing the Delaware Investments funds.
Board of Trustees
<TABLE>
<S> <C> <C> <C>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 10 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Shareholders
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders
have specific voting rights, including the right to elect trustees. Material
changes in the terms of a fund's management contract must be approved by a
shareholder vote, and funds seeking to change fundamental investment objectives
or policies must also seek shareholder approval.
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the following:
o retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans;
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts;
o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee; and
o registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if
the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
<PAGE>
How to buy shares
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on a
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in each Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income securities
that have a maturity of less than 60 days we price at amortized cost. For all
other securities, we use methods approved by the Board of Trustees that are
designed to price securities at their fair market value.
<PAGE>
How to redeem shares
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
<PAGE>
About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. You may have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, your Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use. There
can be no assurance that these steps will be sufficient to avoid any adverse
impact on the business of the Fund. The Year 2000 Problem may also adversely
affect the issuers of securities in which the Fund invests. The portfolio
managers and investment professionals of the Fund consider Year 2000 compliance
(including, but not limited to, any or all of the following: impact on business,
cost of compliance plan review and contingency planning, and vendor compliance)
in the securities selection and investment process. However, there can be no
guarantee that, even with their due diligence efforts, they will be able to
predict the effect of Year 2000 on any company or the performance of its
securities.
Investments by fund of funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds. From time to time, the Fund may experience
large investments or redemptions due to allocations or rebalancings by
Foundation Funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management.
For example, the Fund may be required to sell securities or invest cash at times
when it would not otherwise do so. These transactions could also have tax
consequences if sales of securities result in gains, and could also increase
transaction costs or portfolio turnover. The manager will monitor transactions
by Foundation Funds and will attempt to minimize any adverse effects on both the
Fund and Foundation Funds as a result of these transactions.
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------- ----------------------------------------
Delaware Diversified Growth Fund Institutional Class
- ------------------------------------------------------------------------------- ----------------------------------------
Period
Year Ended Year Ended 12/2/96(1)
9/30 9/30 through
1999 1998 9/30/97
- ------------------------------------------------------------------------------- ------------- ------------ -------------
<S> <C> <C> <C>
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Net asset value, beginning of period $8.990 $10.160 $8.500
- ------------------------------------------------------------------------------- ------------- ------------ -------------
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Income (loss) from investment operations:
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Net investment income 0.036(2) 0.082(2) 0.067
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Net realized and unrealized gain (loss) on investments 1.354 (0.755) 1.601
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Total from investment operations 1.390 (0.673) 1.668
- ------------------------------------------------------------------------------- ------------- ------------ -------------
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Less dividends and distributions:
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Dividends from net investment income (0.080) (0.076) (0.008)
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Distributions from net realized gain on investments --- (0.421) ---
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Total dividends and distributions (0.080) (0.497) (0.008)
- ------------------------------------------------------------------------------- ------------- ------------ -------------
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Net asset value, end of period $10.300 $8.990 $10.160
- ------------------------------------------------------------------------------- ------------- ------------ -------------
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Total return(3) 15.52% (6.91%) 19.64%
- ------------------------------------------------------------------------------- ------------- ------------ -------------
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Net assets, end of period (000 omitted) $10,886 $2,227 $2,393
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Ratio of expenses to average net assets 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Ratio of expenses to average net assets prior to expense limitation and
expenses paid indirectly 0.98% 1.98% 1.40%
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Ratio of net investment income to average net assets 0.36% 0.83% 0.91%
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Ratio of net investment income (loss) to average net assets prior to expense
limitation and expenses paid indirectly 0.13% (0.40%) 0.27%
- ------------------------------------------------------------------------------- ------------- ------------ -------------
Portfolio turnover 120% 163% 84%
- ------------------------------------------------------------------------------- ------------- ------------ -------------
</TABLE>
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Computed based on the average shares outstanding method.
(3) 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 and an expense waiver by the manager.
<PAGE>
How to read the financial highlights
Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned from a
fund's investments; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less distributions-Distributions from net realized gain on
investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers and assume the shareholder has
reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of a fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income (loss) to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover rate has bought and sold half of the value
of its total investment portfolio during the stated period.
<PAGE>
Glossary
How to use this glossary
The glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Currency exchange rates
The price at which one country's currency can be converted into another's. This
exchange rate varies almost daily according to a wide range of political,
economic and other factors.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
<PAGE>
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pay dividends at a fixed rate
and are sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
S&P 500 Composite Stock Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
<PAGE>
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return varies from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
<PAGE>
Delaware Diversified Growth Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
Prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
Investment Company Act file number: 811-4413
- -----------------------------------------------------------------------------
Diversified Growth Fund Symbols CUSIP
- -----------------------------------------------------------------------------
Institutional Class 24610A406
- -----------------------------------------------------------------------------
DELAWARE
INVESTMENTS
Philadelphia * London
P-002 [--] PP 12/99
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 17, 1999
DELAWARE GROUP EQUITY FUNDS IV
DELWARE DELCAP FUND
DELAWARE DIVERSIFIED GROWTH FUND
(formerly Capital Appreciation Fund)
1818 Market Street
Philadelphia, PA 19103
For more information about the Institutional Classes: 800-510-4015
For Prospectus, Performance and Information on Existing Accounts of
Class A Shares, Class B Shares and Class C Shares: Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
Delaware Group Equity Funds IV ("Equity Funds IV") is a
professionally-managed mutual fund of the series type which currently offers two
series of shares: Delaware DelCap Fund series ("DelCap Fund") and Delaware
Diversified Growth Fund ("Diversified Growth Fund"). Each Fund is referred to
individually as the "Fund" and collectively as the "Funds."
Each Fund offers Class A Shares, Class B Shares and Class C Shares
(together referred to as the "Fund Classes"). Each Fund also offers an
Institutional Class (the "Institutional Class"). All references to "shares" in
this Part B refer to all Classes of shares of Equity Funds IV, except where
noted.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectuses for
the Fund Classes dated December 17, 1999 and the current Prospectuses for the
Institutional Classes dated December 17, 1999, as they may be amended from
time to time. Part B should be read in conjunction with the respective Class'
Prospectus. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into each Class' Prospectus. Prospectuses relating to
the Fund Classes and Prospectuses relating to the Institutional Classes may be
obtained by writing or calling your investment dealer or by contacting the
Funds' national distributor, Delaware Distributors, L.P. (the "Distributor"), at
the above address or by calling the above phone numbers. Each Fund's financial
statements, the notes relating thereto, the financial highlights and the report
of independent auditors are incorporated by reference from the Annual Reports
into this Part B. The Annual Reports will accompany any request for Part B. The
Annual Reports can be obtained, without charge, by calling 800-523-1918.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
TABLE OF CONTENTS
- ---------------------------------------------------------------------------------------------------
Page Page
- ---------------------------------------------------------------------------------------------------
<S> <C>
Cover Page Distributions and Taxes
- ---------------------------------------------------------------------------------------------------
Investment Policies Investment Management Agreement
- ---------------------------------------------------------------------------------------------------
Performance Information Officers and Trustees
- ---------------------------------------------------------------------------------------------------
Trading Practices and Brokerage General Information
- ---------------------------------------------------------------------------------------------------
Purchasing Shares Financial Statements
- ---------------------------------------------------------------------------------------------------
Investment Plans Appendix A
- ---------------------------------------------------------------------------------------------------
Determining Offering Price and Net Asset Value Appendix B
- ---------------------------------------------------------------------------------------------------
Redemption and Exchange
- ---------------------------------------------------------------------------------------------------
</TABLE>
-1-
<PAGE>
INVESTMENT POLICIES
Investment Restrictions
Fundamental Restrictions - Each Fund has adopted the following restrictions
which cannot be changed without approval by the holders of a "majority" of a
Fund's outstanding shares, which is a vote by the holders of the lesser of a)
67% or more of the voting securities present in person or by proxy at a meeting,
if the holders of more than 50% of the outstanding voting securities are present
or represented by proxy; or b) more than 50% of the outstanding voting
securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities.
Each Fund shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the Investment Company Act of 1940 ("1940 Act"), any rule or
order thereunder, or U.S. Securities and Exchange Commission ("SEC") staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does not
limit the Fund from investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in tax-exempt securities or
certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Funds
may engage in transactions involving the acquisition, disposition or resale of
its portfolio securities, under circumstances where it may be considered to be
an underwriter under the Securities Act of 1933 (the "1933 Act").
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent the Funds from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Funds from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent a Fund
from purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker/dealers or institutional investors and investing in loans,
including assignments and participation interests.
Non-fundamental Restrictions - In addition to the fundamental policies and
investment restrictions described above, and the various general investment
policies described in the prospectus, each Fund will be subject to the following
investment restrictions, which are considered non-fundamental and may be changed
by the Board of Trustees without shareholder approval.
1. The Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, the Fund may not operate as a "fund of funds"
which invests primarily in the shares of other investment companies as permitted
by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
-2-
<PAGE>
2. The Fund may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued the
investment.
The following are additional non-fundamental investment restrictions:
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.
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, trustee or security holder who is a trustee or officer of Equity Funds
IV or of its investment manager if or so long as the trustees and officers of
Equity Funds IV and of its investment manager together own beneficially more
than 5% of any class of securities of such issuer.
-3-
<PAGE>
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.
Diversified Growth 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).
2. Make loans, except to the extent that purchases of debt obligations
or other securities (including repurchase agreements), in accordance with
Diversified Growth Fund's investment objective and policies, are considered
loans and except that Diversified Growth 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 Diversified
Growth 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 Diversified Growth Fund may acquire restricted or not readily marketable
securities under circumstances where, if such securities are sold, Diversified
Growth 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 Diversified Growth 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
-4-
<PAGE>
redemptions. Diversified Growth 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 Diversified Growth 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%, Diversified Growth 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%. Diversified Growth
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 Diversified Growth Fund has an outstanding borrowing.
9. Buy or sell commodities or commodity contracts, except that
Diversified Growth Fund may engage into futures and related option transactions.
10. Invest in companies for the purpose of exercising control or
management.
11. Invest in interests in oil, gas or other mineral exploration or
development programs.
12. Invest in securities of other investment companies, except that
Diversified Growth 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.
13. Purchase or retain securities of a company which has an officer or
trustee who is an officer or trustee of Equity Funds IV, or an officer, trustee
or partner of the Manager if, to the knowledge of Diversified Growth 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.
14. 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 Diversified Growth Fund's investment in the securities of real estate
investment trusts.
15. Invest in warrants valued at lower of cost or market exceeding 5%
of Diversified Growth Fund's net assets. Included in that amount, but not to
exceed 2% of Diversified Growth Fund's net assets, may be warrants not listed on
the New York Stock Exchange or American Stock Exchange.
16. Write or purchase puts, calls or combinations thereof, except that
Diversified Growth 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. Diversified Growth
Fund may sell put options previously purchased and enter into closing
transactions with respect to covered call and put options. In addition,
Diversified Growth Fund may write call options and purchase put options on stock
indices and enter into closing transactions with respect to such options.
17. Invest more than 15% of Diversified Growth Fund's total assets in
repurchase agreements maturing in more than seven days and other illiquid
assets.
Although not a fundamental investment restriction, Diversified Growth
Fund currently does not invest its assets in real estate limited partnerships.
-5-
<PAGE>
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.
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
Trustees, 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
Diversified Growth 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, a 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
-6-
<PAGE>
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, a Fund will realize a short-term
capital gain in the amount of the premium on the option, less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
a Fund will realize a gain or loss from the sale of the underlying security
equal to the difference between the cost of the underlying security, and the
proceeds of the sale of the security plus the amount of the premium on the
option, less the commission paid.
The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.
A Fund will write call options only on a covered basis, which means
that the Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, a Fund would be required to continue to hold a security which it might
otherwise wish to sell, or deliver a security it would want to hold. Options
written by a Fund will normally have expiration dates between one and nine
months from the date written. The exercise price of a call option may be below,
equal to or above the current market value of the underlying security at the
time the option is written.
B. Purchasing Put Options--Each Fund may invest up to 2% of its total
assets in the purchase of put options. 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.
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
-7-
<PAGE>
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 Diversified Growth 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.
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.
-8-
<PAGE>
Depositary Receipts
Each Fund may make foreign investments through the purchase and sale of
sponsored or unsponsored American Depositary Receipts ("ADRs"), and Diversified
Growth 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.
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 trustees
of Equity Funds IV know that a material event will occur affecting an investment
loan, they must either terminate the loan in order to vote the proxy or enter
into an alternative arrangement with the borrower to enable the trustees to vote
the proxy.
The major risk to which a Fund would be exposed on a portfolio loan
transaction is the risk that the borrower would go bankrupt at a time when the
value of the security goes up. Therefore, the Funds will only enter into loan
arrangements after a review of all pertinent facts by the Manager, under the
supervision of the Board of Trustees, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Restricted and Illiquid Securities
Each 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 a Fund. DelCap Fund may
invest no more than 10% of the value of its net assets in illiquid securities
and Diversified Growth Fund may invest no more than 15% of the value of its net
assets in illiquid securities.
-9-
<PAGE>
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 a Fund's limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (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, a
Fund's holdings of illiquid securities exceed a Fund's limit on investments in
such securities, the Manager will determine what action to take to ensure that
the Fund continues to adhere to such limitation.
Small to Medium-Sized Companies
DelCap 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.
Non-Traditional Equity Securities
Diversified Growth 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.
Diversified Growth 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, 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.
-10-
<PAGE>
Investment Company Securities
Any investments that Diversified Growth 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.
When-Issued and Delayed Delivery Securities
Diversified Growth 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.
REITs
Diversified Growth 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.
Foreign Currency Transactions
Although Diversified Growth 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.
-11-
<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
Diversified Growth 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.
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,"
-12-
<PAGE>
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.
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.
-13-
<PAGE>
Concentration
In applying a Fund's fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
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.
-14-
<PAGE>
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.
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:
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
-15-
<PAGE>
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 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
-16-
<PAGE>
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.
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Fund, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Fund's income available for distribution to you, and may cause some
or all of a Fund's previously distributed income to be classified as a return of
capital.
PERFORMANCE INFORMATION
From time to time, each Fund may state 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.
-17-
<PAGE>
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 the Classes, as shown below, is the average annual
total return quotations through September 30, 1999. 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 paid if the shares were redeemed at September 30, 1999. The average annual
total return for Class B and C Shares excluding CDSC assumes the shares were not
redeemed at September 30, 1999 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. Performance is
not shown for the Class B and C Shares of Diversified Growth Fund because these
shares have not commenced operations as of the date of this Part B.
-18-
<PAGE>
Average Annual Total Return
DelCap Fund
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Class B Class B Class C Class C
Class A Class A Institutional Shares Shares Shares Shares
Shares Shares Class (including (excluding (including (excluding
(at offer)(2) (at NAV) Shares CDSC)(3) CDSC) CDSC) CDSC)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year ended 9/30/99 30.66% 38.64% 39.08% 32.67% 37.67% 36.65% 37.65%
3 years ended 9/30/99 10.45% 12.65% 13.00% 11.20% 11.86% 11.87% 11.87%
5 years ended 9/30/99 14.77% 16.13% 16.50% 15.14% 15.36% N/A N/A
10 years ended 9/30/99 11.55% 12.21% 12.45% N/A N/A N/A N/A
Life of Fund (1) 19.73% 20.26% 20.44% 15.37% 15.48% 14.57% 14.57%
</TABLE>
(1) Class A Shares commenced operations on March 27, 1986. Institutional
Class Shares commenced operations on November 9, 1992. 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.
(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.
Average Annual Total Return
Diversified Growth Fund(1)
----------------------------------------------------------------------
Class A Shares Class A Shares Institutional
(at offer)(2)(3) (at NAV)(3) Class Shares
----------------------------------------------------------------------
1 year ended 9/30/98 8.86% 15.52% 15.52%
----------------------------------------------------------------------
Life of Fund (4) 7.05% 9.32% 9.32%
----------------------------------------------------------------------
(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.
-19-
<PAGE>
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.
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.
-20-
<PAGE>
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 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.
The following tables are an example, for purposes of illustration only,
of cumulative total return performance for the Classes through September 30,
1999. 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.
-21-
<PAGE>
Cumulative Total Return
DelCap Fund
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Class B Class B Class C Class C
Class A Class A Institutional Shares Shares Shares Shares
Shares Shares Class (including (excluding (including (excluding
(at (at Shares CDSC)(3) CDSC) CDSC) CDSC)
offer)(2) NAV)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3 months ended 9/30/99 (7.09%) (1.42%) (1.34%) (6.53%) (1.61%) (2.57%) (1.59%)
---------------------------------------------------------------------------------------------------------------------
6 months ended 9/30/99 3.82% 10.16% 10.32% 4.77% 9.77% 8.80% 9.80%
---------------------------------------------------------------------------------------------------------------------
9 months ended 9/30/99 4.77% 11.18% 11.45% 5.59% 10.59% 9.61% 10.61%
---------------------------------------------------------------------------------------------------------------------
1 year ended 9/30/99 30.66% 38.64% 39.08% 32.67% 37.67% 36.65% 36.65%
---------------------------------------------------------------------------------------------------------------------
3 years ended 9/30/99 34.72% 42.96% 44.28% 37.51% 39.99% 40.02% 40.02%
---------------------------------------------------------------------------------------------------------------------
5 years ended 9/30/99 99.12% 111.26% 114.56% 102.32% 104.28% N/A N/A
---------------------------------------------------------------------------------------------------------------------
10 years ended 9/30/99 198.40% 216.56% 223.23% N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------------------
Life of Fund (1) 1040.32% 1109.71% 1135.21% 106.37% 107.36% 168.55% 68.55%
---------------------------------------------------------------------------------------------------------------------
</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.
(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.
Cumulative Total Return
Diversified Growth Fund(1)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Class A Shares Class A Shares Institutional
(at offer)(2)(3) (at NAV)(3) Class Shares
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3 months ended 9/30/99 (7.95%) (2.37%) (2.37%)
6 months ended 9/30/99 (1.62%) 4.36% 4.46%
9 months ended 9/30/99 (4.89%) 0.88% 0.88%
1 year ended 9/30/99 8.86% 15.52% 15.52%
Life of Fund (4) 21.25% 28.67% 28.67%
-------------------------------------------------------------------------------
</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.
-22-
<PAGE>
(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.
-23-
<PAGE>
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.
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
-24-
<PAGE>
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.
TRADING PRACTICES AND BROKERAGE
Equity Funds IV 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 execution. Best execution refers to many factors, including the price paid
or received for a security, the commission charged, the promptness and
reliability of execution, the confidentiality and placement accorded the order
and other factors affecting the overall benefit obtained by the account on the
transaction. 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 the
Manager's trading department as to rates paid and charged for similar
transactions throughout the securities industry. In some instances, a Fund pays
a minimal share transaction cost when the transaction presents no difficulty.
During the fiscal years ended September 30, 1997, 1998 and 1999, the
aggregate dollar amounts of brokerage commissions paid by DelCap Fund were
$2,224,779, $2,027,792 and $1,561,580, respectively. For the period December 2,
1996 (date of initial public offering) through September 30, 1997 and the fiscal
years ended September 30, 1998 and 1999, the aggregate dollar amounts of
brokerage commissions paid by Diversified Growth Fund were $4,599, $6,662 and
$10,492, 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, 1999, portfolio transactions
of DelCap Fund in the amount of $270,178,559, resulting in brokerage commissions
of $544,051, were directed to brokers for brokerage and research services
provided. For the fiscal year ended September 30, 1999, portfolio transactions
of Diversified Growth Fund in the amount of $459,655, resulting in brokerage
commissions of $1,060, 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 believes that the
-25-
<PAGE>
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager which constitute in some part brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to a Fund and to other funds in Delaware
Investments. Subject to best execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds
receiving the pricing service.
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and Equity Funds
IV's Board of Trustees that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Conduct Rules of NASD Regulation, Inc. (the
"NASD"), and subject to seeking best execution, 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%. Diversified Growth Fund is expected
to have a portfolio turnover rate that is less than 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 115% and 114% for 1998 and 1999, respectively. Diversified
Growth Fund's portfolio turnover rates for the past two fiscal years were 163%
and 120%, respectively.
-26-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's
shares and has agreed to use its best efforts to sell shares of each Fund. See
the Prospectuses for information on how to invest. Shares of a Fund are offered
on a continuous basis and may be purchased through authorized investment dealers
or directly by contacting Equity Funds IV or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such Classes
generally must be at least $100. The initial and subsequent investment minimums
for Class A Shares will be waived for purchases by officers, trustees and
employees of any Delaware Investments fund, the Manager or any of the Manager's
affiliates if the purchases are made pursuant to a payroll deduction program.
Shares purchased pursuant to the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act and shares purchased in connection with an Automatic
Investing Plan are subject to a minimum initial purchase of $250 and a minimum
subsequent purchase of $25. Accounts opened under the Delaware Investments Asset
Planner service are subject to a minimum initial investment of $2,000 per Asset
Planner Strategy selected. There are no minimum purchase requirements for the
Institutional Class, 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 will reject any purchase order
for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. In doing so, an investor should keep in mind, however,
that reduced front-end sales charges apply to investments of $50,000 or more in
Class A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B Shares and Class C Shares and generally are not subject to
a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Equity Funds IV reserves the right to reject any order for the purchase of its
shares of a Fund if in the opinion of management such rejection is in the Fund's
best interest. If a purchase is canceled because your check is returned unpaid,
you are responsible for any loss incurred. A Fund can redeem shares from your
account(s) to reimburse itself for any loss, and you may be restricted from
making future purchases in any of the funds in the Delaware Investments family.
Each Fund reserves the right to reject purchase orders paid by third-party
checks or checks that are not drawn on a domestic branch of a United States
financial institution. If a check drawn on a foreign financial institution is
accepted, you may be subject to additional bank charges for clearance and
currency conversion.
A Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts that, as a result of redemption,
have remained below the minimum stated account balance for a period of three or
more consecutive months. Holders of such accounts may be notified of their
insufficient account balance and advised that they have until the end of the
current calendar quarter to raise their balance to the stated minimum. If the
account has not reached the minimum balance requirement by that time, a Fund
will charge a $9 fee for that quarter and each subsequent calendar quarter until
the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
-27-
<PAGE>
The NASD has adopted amendments to its Conduct Rules, as amended,
relating to investment company sales charges. Equity Funds IV 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. Class A Shares, absent any applicable fee waiver,
are also subject to annual 12b-1 Plan expenses. See the table in the Fund
Classes' Prospectuses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 5% if shares are redeemed within one year of purchase; (ii) 4% if
shares are redeemed within two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if shares
are redeemed during the fifth year following purchase; and (v) 1% if shares are
redeemed during the sixth year following purchase. Class B Shares are also
subject to annual 12b-1 Plan expenses which, absent any applicable fee waiver,
are higher than those to which Class A Shares are subject and are assessed
against the Class B Shares for approximately eight years after purchase. See
Automatic Conversion of Class B Shares, below.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares, 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 Diversified Growth Fund from the commencement of the public
offering through May 31, 1999. The Distributor has extended this waiver
through May 31, 2000.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses.
See Plans Under Rule 12b-1 for the Fund Classes under Purchasing
Shares, and Determining Offering Price and Net Asset Value in this Part B.
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 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 your 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.
-28-
<PAGE>
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 annual 12b-1 Plan expenses of up to a maximum of
0.30% of the average daily net assets of Class A Shares, or to purchase either
Class B or Class C Shares and have the entire initial purchase amount invested
in a Fund with the investment thereafter subject to a CDSC and annual 12b-1 Plan
expenses. Class B Shares are subject to a CDSC if the shares are redeemed within
six years of purchase, and Class C Shares are subject to a CDSC if the shares
are redeemed within 12 months of purchase. Class B and Class C Shares are each
subject to annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which
are service fees to be paid to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of average daily net
assets of the respective Class. Class B Shares will automatically convert to
Class A Shares at the end of approximately eight years after purchase and,
thereafter, be subject to annual 12b-1 Plan expenses of up to a maximum of 0.30%
of average daily net assets of such shares. Unlike Class B Shares, Class C
Shares do not convert to another Class.
The higher 12b-1 Plan expenses on Class B Shares and Class C Shares
will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, a 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 Shares, Class B Shares and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the CDSCs
applicable to Class B Shares and Class C Shares are the same as those of the
12b-1 Plan and the front-end sales charge applicable to Class A Shares in that
such fees and charges are used to finance the distribution of the respective
Classes. See Plans Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except that the additional amount of 12b-1
Plan expenses relating to Class B Shares and Class C Shares will be borne
exclusively by such shares. See Determining Offering Price and Net Asset Value.
Class A Shares
Purchases of $50,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the Fund Classes'
Prospectuses, and may include a series of purchases over a 13-month period under
a Letter of Intention signed by the purchaser. See Special Purchase Features -
Class A Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may reallow to dealers up to the full amount of the front-end sales.
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
-29-
<PAGE>
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectuses, for initial purchases of Class A
Shares of $1,000,000 or more, a dealer's commission may be paid by the
Distributor to financial advisers through whom such purchases are effected.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies (see Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) may be aggregated with those of the Class A Shares of a
Fund. Financial advisers also may be eligible for a dealer's commission in
connection with certain purchases made under a Letter of Intention or pursuant
to an investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of a Fund, even if those shares are later exchanged for shares of another
Delaware Investments fund. In the event of an exchange of the shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares that were acquired in the exchange. See Waiver of Contingent
Deferred Sales Charge--Class B Shares and Class C Shares under Redemption and
Exchange for the Fund Classes for a list of the instances in which the CDSC is
waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of that Fund.
See Automatic Conversion of Class B Shares below. Investors are reminded that
the Class A Shares into which Class B Shares will convert are subject to ongoing
annual 12b-1 Plan expenses of up to a maximum of 0.30% of average daily net
assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
-30-
<PAGE>
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class B Shares at the time of purchase from its
own assets in an amount equal to no more than 5% of the dollar amount purchased.
In addition, from time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may pay additional compensation to dealers or brokers for selling
Class B Shares at the time of purchase. As discussed below, however, Class B
Shares are subject to annual 12b-1 Plan expenses and, if redeemed within six
years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for a Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the 18th day or next
business day of March, June, September and December (each, a "Conversion Date").
If the eighth anniversary after a purchase of Class B Shares falls on a
Conversion Date, an investor's Class B Shares will be converted on that date. If
the eighth anniversary occurs between Conversion Dates, an investor's Class B
Shares will be converted on the next Conversion Date after such anniversary.
Consequently, if a shareholder's eighth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B Shares for as long
as three additional months after the eighth anniversary of purchase before the
shares will automatically convert into Class A Shares.
Class B Shares of a Fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of the Fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Fund Consultant
Class) pro-rata with Class B Shares of the Fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, Class C Shares are subject to annual 12b-1 Plan expenses
and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
-31-
<PAGE>
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Equity Funds IV 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 a 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 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's Board of Trustees may reduce these amounts at any time. The
Distributor has elected voluntarily to waive all payments under the 12b-1 Plan
for the Class A Shares, Class B Shares and Class C Shares of the Diversified
Growth Fund during the commencement of the public offering of the Fund through
May 31, 1999. The Distributor has extended this waiver through May 31, 2000.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A, 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 Trustees of Equity Funds IV, including a majority of
the Trustees who are not "interested persons" (as defined in the 1940 Act) of
Equity Funds IV 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
Trustees in the same manner as specified above.
Each year, the Trustees must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares 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 Trustees who are
not "interested persons" or by a majority vote of the outstanding voting
securities of the relevant Fund Class. Any amendment materially increasing the
maximum percentage payable under the Plans must likewise be approved by a
majority vote of the outstanding voting securities of the relevant Fund Class,
as well as by a majority vote of those Trustees who are not "interested
persons." With respect to the Class A Share Plan, any material increase in the
-32-
<PAGE>
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 Trustees including a
majority of the noninterested Trustees of Equity Funds IV having no interest in
the Plans. In addition, in order for the Plans to remain effective, the
selection and nomination of Trustees who are not "interested persons" of Equity
Funds IV must be effected by the Trustees who themselves are not "interested
persons" and who have no direct or indirect financial interest in the Plans.
Persons authorized to make payments under the Plans must provide written reports
at least quarterly to the Board of Trustees for their review.
For the fiscal year ended September 30, 1999, 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 $1,901,074, $228,820 and $48,446,
respectively.
Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DelCap Fund A Class DelCap Fund B Class DelCap Fund C Class
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advertising $6,519 --- ---
Annual/Semi-Annual Reports $46,306 --- ---
Broker Trails $1,532,853 $56,639 $24,919
Broker Sales Charges --- $96,932 $15,700
Dealer Service Expenses --- --- ---
Interest on Broker Sales Charges --- $63,243 $381
Commissions to Wholesalers $84,379 $11,429 $4,782
Promotional-Broker Meetings $29,583 $153 $157
Promotional-Other $88,701 --- ---
Prospectus Printing $31,382 --- ---
Telephone --- --- ---
Wholesaler Expenses $81,351 $424 $2,507
Other --- --- ---
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Other Payments to Dealers - Class A Shares, Class B Shares and Class C
Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain, have
sold or may sell certain amounts of shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of a Fund may be purchased at net asset value under the
Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
Purchases of Class A Shares may be made at net asset value by current
and former officers, trustees and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Investments family,
certain of their agents and registered representatives and employees of
authorized investment dealers and by employee benefit plans for such entities.
Individual purchases, including those in retirement accounts, must be for
accounts in the name of the individual or a qualifying family member. Class A
Shares may also be purchased at net asset value by current and former officers,
trustees and employees (and members of their families) of the Dougherty
Financial Group LLC.
-33-
<PAGE>
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, trustees and key employees of
institutional clients of the Manager or any of its affiliates may purchase Class
A Shares at net asset value. Moreover, purchases may be effected at net asset
value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs. Such purchasers are required to sign a letter stating that the
purchase is for investment only and that the securities may not be resold except
to the issuer. Such purchasers may also be required to sign or deliver such
other documents as a Fund may reasonably require to establish eligibility for
purchase at net asset value. Investors may be charged a fee when effecting
transactions in Class A Shares through a broker or agent that offers these
special investment products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional Class
of a Fund; any group retirement plan (excluding defined benefit pension plans),
or such plans of the same employer, for which plan participant records are
maintained on the Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of a fund in the Delaware Investments family and any stable value account
available to investment advisory clients of the Manager or its affiliates; or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented in
writing to Retirement Financial Services, Inc. that it has the requisite number
of employees and received written confirmation back from Retirement Financial
Services, Inc. See Group Investment Plans for information regarding the
applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares or purchase interests in a collective trust as a result of a change
in distribution arrangements.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Fund account
in connection with loans originated from accounts previously maintained by
another investment firm will also be invested at net asset value.
Equity Funds IV must be notified in advance that the trade qualifies
for purchase at net asset value.
-34-
<PAGE>
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares. See Combined
Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments fund shares to which a
sales charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on which a
sales charge was already paid or through the reinvestment of dividends. See
Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated. See Class A Shares.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made by
any such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or Equity Funds IV which
provides for the holding in escrow by the Transfer Agent, of 5% of the total
amount of Class A Shares intended to be purchased until such purchase is
completed within the 13-month period. A Letter of Intention may be dated to
include shares purchased up to 90 days prior to the date the Letter is signed.
The 13-month period begins on the date of the earliest purchase. If the intended
investment is not completed, except as noted below, the purchaser will be asked
to pay an amount equal to the difference between the front-end sales charge on
Class A Shares purchased at the reduced rate and the front-end sales charge
otherwise applicable to the total shares purchased. If such payment is not made
within 20 days following the expiration of the 13-month period, the Transfer
Agent will surrender an appropriate number of the escrowed shares for redemption
in order to realize the difference. Such purchasers may include the value (at
offering price at the level designated in their Letter of Intention) of all
their shares of a Fund and of any class of any of the other mutual funds in
Delaware Investments (except shares of any Delaware Investments fund which do
not carry a front-end sales charge, CDSC or Limited CDSC other than shares of
Delaware Group Premium Fund, 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) previously purchased and still held as of the date
-35-
<PAGE>
of their Letter of Intention toward the completion of such Letter. For purposes
of satisfying an investor's obligation under a Letter of Intention, Class B
Shares and Class C Shares of a Fund and the corresponding classes of shares of
other funds in the Delaware Investments family which offer such shares may be
aggregated with Class A Shares of a Fund and the corresponding class of shares
of the other funds in the Delaware Investments family.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in Delaware Investments funds that are offered with a front-end
sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent
reserves the right to adjust the signed Letter of Intention based on this
acceptance criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments exceed the
anticipated level and equal an amount that would qualify the plan for further
discounts, any front-end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the 13-month period, the
plan level will be adjusted (without completing another Letter of Intention) and
the employer will be billed for the difference in front-end sales charges due,
based on the plan's assets under management at that time. Employers may also
include the value (at offering price at the level designated in their Letter of
Intention) of all their shares intended for purchase that are offered with a
front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares and
Class C Shares of a Fund and other Delaware Investments funds which offer
corresponding classes of shares may also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of a Fund, 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 Delaware Investment Advisers, the Manager's affiliate, or any of the
Manager's other affiliates in a stable value account may be combined with other
Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund, as
well as shares of any other class of any of the other Delaware Investments funds
which offer such classes (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, 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 $10,000 and
subsequently purchases $40,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $10,000 purchase would currently be 4.75%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer to
the table of sales charges for Class A Shares to determine the applicability of
the Right of Accumulation to their particular circumstances.
-36-
<PAGE>
12-Month Reinvestment Privilege
Holders of Class A Shares and Class B Shares of a Fund (and of the
Institutional Class holding shares which were acquired through an exchange from
one of the other mutual funds in the Delaware Investments family offered with a
front-end sales charge) who redeem such shares have one year from the date of
redemption to reinvest all or part of their redemption proceeds in the same
Class of the Fund or in the same Class of any of the other funds in the Delaware
Investments family. In the case of Class A Shares, the reinvestment will not be
assessed a front-end sales charge and in the case of Class B Shares, the amount
of the CDSC previously charged on the redemption will be reimbursed by the
Distributor. The reinvestment will be subject to applicable eligibility and
minimum purchase requirements and must be in states where shares of such other
funds may be sold. This reinvestment privilege does not extend to Class A Shares
where the redemption of the shares triggered the payment of a Limited CDSC.
Persons investing redemption proceeds from direct investments in mutual funds in
the Delaware Investments family, offered without a front-end sales charge will
be required to pay the applicable sales charge when purchasing Class A Shares.
The reinvestment privilege does not extend to a redemption of Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. In the case of
Class B Shares, the time that the previous investment was held will be included
in determining any applicable CDSC due upon redemptions as well as the automatic
conversion into Class A Shares.
A redemption and reinvestment of Class B Shares could have income tax
consequences. Shareholders will receive from the Distributor the amount of the
CDSC paid at the time of redemption as part of the reinvested shares, which may
be treated as a capital gain to the shareholder for tax purposes. It is
recommended that a tax adviser be consulted with respect to such transactions.
Any reinvestment directed to a fund in which the investor does not then
have an account will be treated like all other initial purchases of the fund's
shares. Consequently, an investor should obtain and read carefully the
prospectus for the fund in which the investment is intended to be made before
investing or sending money. The prospectus contains more complete information
about the fund, including charges and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as each Fund's shareholder servicing agent, about the
applicability of the Class A Limited CDSC in connection with the features
described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares, 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 your Fund at the time of each such purchase.
Employees participating in such Group Investment Plans may also combine the
investments made in their plan account when determining the applicable front-end
sales charge on purchases to non-retirement Delaware Investments investment
accounts if they so notify the Fund in which they are investing in connection
with each purchase. See Retirement Plans for the Fund Classes under Investment
Plans for information about Retirement Plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
Institutional Class
The Institutional Class of each Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
-37-
<PAGE>
benefit plans of the Manager or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, an affiliate of the Manager, or its other
affiliates and their corporate sponsors, as well as subsidiaries and related
employee benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar financial
institution investing for its own account or for the account of its trust
customers for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the investment is
part of a program that requires payment of the financial institution of a Rule
12b-1 Plan fee; and (e) registered investment advisers investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
Shares of the Institutional Class are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class 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 Diversified
Growth 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
Class in which shares are being purchased. Such purchases, which must meet the
minimum subsequent purchase requirements set forth in the Prospectuses and this
Part B, are made for Class A Shares at the public offering price, and for Class
B Shares, Class C Shares and Institutional Class at the net asset value, at the
end of the day of receipt. A reinvestment plan may be terminated at any time.
This plan does not assure a profit nor protect against depreciation in a
declining market.
Reinvestment of Dividends in Other Delaware Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, including
the Funds, in states where their shares may be sold. Such investments will be at
net asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of the fund shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of a Fund,
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.
-38-
<PAGE>
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of a Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase requirements set
forth in each Fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
Holders of Class A Shares of a Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Investments
family, including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of a Fund or of any other fund in
the Delaware Investments family. Holders of Class B Shares of a Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C Shares
of a Fund are permitted to exchange all or part of their Class C Shares only
into Class C Shares of other Delaware Investments funds. Class B Shares of a
Fund and Class C Shares of a Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of a Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of the Fund.
Permissible exchanges into Class A Shares of a Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of each Fund will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for their Fund to
accept for investment in Class A Shares, Class B Shares or Class C Shares,
through an agent bank, preauthorized government or private recurring payments.
This method of investment assures the timely credit to the shareholder's account
of payments such as social security, veterans' pension or compensation benefits,
federal salaries, Railroad Retirement benefits, private payroll checks,
dividends, and disability or pension fund benefits. It also eliminates lost,
stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A Shares, Class B
Shares and Class C Shares may make automatic investments by authorizing, in
advance, monthly payments directly from their checking account for deposit into
their Fund account. This type of investment will be handled in either of the
following ways. (1) If the shareholder's bank is a member of the National
Automated Clearing House Association ("NACHA"), the amount of the investment
will be electronically deducted from his or her account by Electronic Fund
Transfer ("EFT"). The shareholder's checking account will reflect a debit each
month at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA, deductions
will be made by preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
-39-
<PAGE>
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 a 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 for proper
instructions.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be withdrawn from (for
share purchases) your predesignated bank account. Your request will be processed
the same day if you call prior to 4 p.m., Eastern time. There is a $25 minimum
and $50,000 maximum limit for MoneyLine (SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Funds do not charge a fee
for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. If in connection with the election of
the Wealth Builder Option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select. All
investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in the
Fund Classes' Prospectus. The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the next business day) at
the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month if
the value of the shareholder's account is less than the amount specified for
investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Redemption and Exchange for a brief summary of the tax consequences
-40-
<PAGE>
of exchanges. Shareholders can terminate their participation in Wealth Builder
at any time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Class.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange. Also see
Buying Class A Shares at Net Asset Value. The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of a Fund and of other funds in the
Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Retirement Plans for the Fund Classes
An investment in either Fund may be suitable for tax-deferred
retirement plans. Delaware Investments offers a full spectrum of retirement
plans, including the 401(k) Defined Contribution Plan, Individual Retirement
Account ("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange for a list of the instances in
which the CDSC is waived.
-41-
<PAGE>
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such Plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class
shares. See Institutional Class, above. For additional information on any of the
plans and Delaware's retirement services, call the Shareholder Service Center
telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans.
Contributions may be invested only in Class A Shares and Class C Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year; however, participation
may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
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
-42-
<PAGE>
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10
or more years;
(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
-43-
<PAGE>
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
-44-
<PAGE>
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of a Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC upon
redemption of Class B Shares and Class C Shares, see Contingent Deferred Sales
Charge - Class B Shares and Class C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes are available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware Investments family. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge applicable
to Class A Shares as set forth in the table the Prospectus for the Fund Classes.
-45-
<PAGE>
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 Prospectus for
the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of a Fund. Although investors may use their own
plan, there is available a Delaware Investments 457 Deferred Compensation Plan.
Interested investors should contact the Distributor or their investment dealers
to obtain further information. Purchases under the Plan may be combined for
purposes of computing the reduced front-end sales charge applicable to Class A
Shares as set forth in the table in the Prospectuses for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund, its agent or certain other authorized persons.
See Distribution and Service under Investments Management Agreement. 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
-46-
<PAGE>
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 Trustees. Prices provided
by a pricing service take into account appropriate factors such as institutional
trading in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics and other market data. Subject to the
foregoing, securities for which market quotations are not readily available and
other assets are valued at fair value as determined in good faith and in a
method approved by the Board of Trustees.
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 that the Institutional Classes will not incur any of the expenses under
Equity Funds IV'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
Diversified Growth Fund remain applicable, no such variance shall arise.
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
the fund and all exchanges of shares constitute taxable events. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See the Prospectus. A shareholder submitting
a redemption request may indicate that he or she wishes to receive redemption
proceeds of a specific dollar amount. In the case of such a request, and in the
case of certain redemptions from retirement plan accounts, a Fund will redeem
the number of shares necessary to deduct the applicable CDSC in the case of
Class B Shares and Class C Shares, and, if applicable, the Limited CDSC in the
case of Class A Shares and tender to the shareholder the requested amount,
assuming the shareholder holds enough shares in his or her account for the
redemption to be processed in this manner. Otherwise, the amount tendered to the
shareholder upon redemption will be reduced by the amount of the applicable CDSC
or Limited CDSC. Redemption proceeds will be distributed promptly, as described
below, but not later than seven days after receipt of a redemption request.
-47-
<PAGE>
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. A Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
In addition to redemption of Fund shares, the Distributor, acting as
agent of a Fund, offers to repurchase Fund shares from broker/dealers acting on
behalf of shareholders. The redemption or repurchase price, which may be more or
less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by a Fund, its agent, or
certain authorized persons, subject to applicable CDSC or Limited CDSC. This is
computed and effective at the time the offering price and net asset value are
determined. See Determining Offering Price and Net Asset Value. The Funds and
the Distributor end their business days at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by a Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreement); provided, however, that each
commitment to mail or wire redemption proceeds by a certain time, as described
below, is modified by the qualifications described in the next paragraph.
Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. A Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the purchase check has cleared, which may take
up to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. Each Fund reserves the right to reject
a written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, a
Fund 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 their Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a Fund fairly to value its assets, or in
the event that the SEC has provided for such suspension for the protection of
shareholders, a Fund may postpone payment or suspend the right of redemption or
repurchase. In such case, the shareholder may withdraw the request for
redemption or leave it standing as a request for redemption at the net asset
value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Equity Funds
IV has elected to be governed by Rule 18f-1
-48-
<PAGE>
under the 1940 Act pursuant to which a Fund is obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net asset value of such Fund
during any 90-day period for any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to their Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value, below.
Class B Shares are subject to a CDSC of: (i) 5% if shares are redeemed within
one year of purchase; (ii) 4% if shares are redeemed during the second year
after purchase (iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth year
following purchase; and (v) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Purchasing Shares. Except for
the applicable CDSC or Limited CDSC and, with respect to the expedited payment
by wire described below for which, in the case of the Fund Classes, there may be
a bank wire fee, neither the Funds nor the Distributor charges a fee for
redemptions or repurchases, but such fees could be charged at any time in the
future.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (in
each case, "New Shares") in a permitted exchange, will not be subject to a CDSC
that might otherwise be due upon redemption of the Original Shares. However,
such shareholders will continue to be subject to the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the Original Shares as
described in this Part B and any CDSC assessed upon redemption will be charged
by the fund from which the Original Shares were exchanged. In an exchange of
Class B Shares from the Funds, a Fund's CDSC schedule may be higher than the
CDSC schedule relating to the New Shares acquired as a result of the exchange.
For purposes of computing the CDSC that may be payable upon a disposition of the
New Shares, the period of time that an investor held the Original Shares is
added to the period of time that an investor held the New Shares. With respect
to Class B Shares, the automatic conversion schedule of the Original Shares may
be longer than that of the New Shares. Consequently, an investment in New Shares
by exchange may subject an investor to the higher 12b-1 fees applicable to Class
B Shares of a Fund for a longer period of time than if the investment in New
Shares were made directly.
Written Redemption
You can write to your 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, a 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"). Each Fund reserves the right to reject
a signature guarantee supplied by an eligible institution based on its
creditworthiness. A Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares 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 your 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.
-49-
<PAGE>
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 which you have your account
in writing that you do not wish to have such services available with respect to
your account. Each Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach a Fund by telephone during periods when market or economic conditions lead
to an unusually large volume of telephone requests.
Neither the Funds nor their Transfer Agent 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, a Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by the
Fund Classes are generally tape recorded, and a written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. If the
proceeds are wired to the shareholder's account at a bank which is not a member
of the Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account. A bank wire fee be deducted from Fund
Class redemption proceeds. If you ask for a check, it will normally be mailed
the next business day after receipt of your redemption request to your
predesignated bank account. There are no separate fees for this redemption
method, but the mail time may delay getting funds into your bank account. Simply
call the Shareholder Service Center prior to the time the offering price and net
asset value are determined, as noted above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of a Fund, as described above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
-50-
<PAGE>
MoneyLine (SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine (SM) On Demand transactions. See
MoneyLine (SM) On Demand under Investment Plans.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), each Fund will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. Each Fund reserves the right to temporarily
or permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of a Fund within two weeks of an earlier exchange
request out of a Fund, or (ii) makes more than two exchanges out of a Fund per
calendar quarter, or (iii) exchanges shares equal in value to at least $5
million, or more than 1/4 of 1% of a Fund's net assets. Accounts under common
ownership or control, including accounts administered so as to redeem or
purchase shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Delaware Decatur Equity Income Fund, (2) Delaware Growth and Income Fund, (3)
Delaware Small Cap Value Fund, (4) Delaware Limited-Term Government Fund, (5)
Delaware Trend Fund, (6) Delaware Cash Reserve Fund, (7) Delaware Delchester
Fund and (8) Delaware Tax-Free Pennsylvania Fund. No other Delaware Investments
funds are available for timed exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Investments funds not listed above may not be
reinvested back into that Timing Account. Each Fund reserves the right to apply
these same restrictions to the account(s) of any person whose transactions seem
to follow a time pattern (as described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may establish
a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Funds do not recommend any
specific amount of withdrawal. This is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. This $5,000 minimum does not apply for a Fund's prototype retirement
plans. Shares purchased with the initial investment and through reinvestment of
cash dividends and realized securities profits distributions will be credited to
the shareholder's account and sufficient full and fractional shares will be
redeemed at the net asset value calculated on the third business day preceding
the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
-51-
<PAGE>
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in 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. The
applicable Limited CDSC for Class A Shares and CDSC for Class B and C Shares
redeemed via a Systematic Withdrawal Plan will be waived if the annual amount
withdrawn in each year is less than 12% of the account balance on the date that
the Plan is established. If the annual amount withdrawn in any year exceeds 12%
of the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subjected to the applicable
contingent deferred sales charge, including an assessment for previously
redeemed amounts under the Plan. Whether a waiver of the contingent deferred
sales charge is available or not, the first shares to be redeemed for each
Systematic Withdrawal Plan payment will be those not subject to a contingent
deferred sales charge because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. See Waiver of
Contingent Deferred Sales Charges, below.
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. Each Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine (SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. The Funds do not charge a
fee for any this service; however, your bank may charge a fee. This service is
not available for retirement plans.
The Systematic Withdrawal Plan is not available for the Institutional
Classes or, currently, any of the Fund Classes of Diversified Growth Fund.
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.
-52-
<PAGE>
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser of : (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the two-year
holding period. The Limited CDSC is assessed if such two year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of a Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waivers of Contingent Deferred Sales Charges
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; (viii) distributions form an account if the redemption results
from a death of a registered owner, or a registered joint owner, of the account
(in the case of accounts established under the Uniform Gifts to Minors or
Uniform transfers to Minors Acts or trust accounts, the waiver applies upon the
death of all beneficial owners) or a total disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed; and (ix) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying Class A Shares at Net Asset Value under Purchasing Shares).
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from a
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of a registered owner, or a registered joint owner, of the account (in the
case of accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the death of
all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase of
the shares being redeemed.
-53-
<PAGE>
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from a Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of a registered owner, or a
registered joint owner, of the account (in the case of accounts established
under the Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust
accounts, the waiver applies upon the death of all beneficial owners) or a total
and permanent disability (as defined in Section 72 of the Code) of all
registered owners occurring after the purchase of the shares being redeemed.
* * *
In addition, the CDSC will be waived on Class A Shares, Class B Shares
and Class C Shares redeemed in accordance with a Systematic Withdrawal Plan if
the annual amount selected to be withdrawn under the Plan does not exceed 12% of
the value of the account on the date that the Systematic Withdrawal Plan was
established or modified.
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.
-54-
<PAGE>
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 Internal Revenue Service
Restructuring and Reform Act of 1998 (the "1998 Act") and the Omnibus
Consolidated and Emergency Supplemental Appropriations Act, a Fund is required
to track its sales of portfolio securities and to report its capital gain
distributions to you according to the following categories of holding periods:
Long-term capital gains": gains on securities sold after December 31,
1997 and held for more than 12 months as capital assets in the hands of
the holder are taxed at the 20% rate when distributed to shareholders
(15% for individual investors in the 15% tax bracket.
"Short -term capital gains": Gains on securities sold by a Fund that do
not meet the long-term holdings period are considered short term
capital gains and are taxable as ordinary income.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individual who are subject
to tax at higher rate brackets, qualified five-year gains are net gains
on securities which are purchased after December 31, 2000 and are held
for more than five years. Taxpayers subject to tax at a higher rate
brackets may also make an election for shares held on January 1, 2001
to recognize gain on their shares in order to qualify such shares as
qualified five-year property. These gains will be taxable to individual
investors at a maximum rate of 18% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 8% for investors
in the 15% federal income tax bracket when sold after the five-year
holding period.
Any loss incurred on the redemption or exchange of shares held for six
months or less will be disallowed to the extent of any exempt-interest dividends
distributed to you with respect to your Fund shares and any remaining loss will
be treated as a long-term capital loss to the extent of any long-term capital
gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of
your Fund shares will be disallowed to the extent that you buy other shares in
the Fund (through reinvestment of dividends or otherwise) within 30 days before
or after your share redemption. Any loss disallowed under these rules will be
added to your tax basis in the new shares you buy.
If you redeem some or all of yours shares in a Fund, and then reinvest
the sales proceeds in such Fund or in another Delaware Investments fund within
90 days of buying the original shares, the sales charge that would otherwise
apply to your reinvestment may be reduced or eliminated. The IRS will require
you to report gain or loss on the redemption of your original shares in a Fund.
In doing so, all or a portion of the sales charge that you paid for your
original shares in a Fund will be excluded from your tax basis in the shares
sold (for the purpose of determining gain or loss upon the sale of such shares).
The portion of the sales charge excluded will equal the amount that the sales
charge is reduced on your reinvestment. Any portion of the sales charge excluded
from your tax basis in the shares sold will be added to the tax basis of the
shares you acquire from your reinvestment.
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
-55-
<PAGE>
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, 1999, none of DelCap Fund's dividends from net
investment income qualified for the dividends-received deduction to
corporations and 14% of Diversified Growth Fund's dividends from net investment
income qualified for the dividends-received deduction to corporations.
Shareholders will be notified annually by Equity Funds IV as to the
federal income tax status of dividends and distributions paid by their Fund.
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.
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Fund, subject to the supervision
and direction of Equity Funds IV's Board of Trustees.
The Manager and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On September 30, 1999, the Manager and
its affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $46 billion in assets in
various institutional or separately managed (approximately $27,671,110,000) and
investment company (approximately $18,401,910,000) accounts.
The Investment Management Agreement for the Funds is dated December
17, 1999 and was approved by the initial shareholder on the same date. The
Agreement has an initial term of two years and may be renewed only so long as
such renewal and continuance are specifically approved at least annually by the
Board of Trustees or by vote of a majority of the outstanding voting securities
of the Fund, and only if the terms and the renewal thereof have been approved by
the vote of a majority of the trustees of Equity Funds IV who are not parties
thereto or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Agreement is terminable
without penalty on 60 days' notice by the trustees of Equity Funds IV or by the
Manager. The Agreement will terminate automatically in the event of its
assignment.
The annual compensation paid by each Funds for investment management
services is equal to the following fee rate which is based on the average daily
net assets of a Fund.
-------------------------------------------------------------------
DelCap Fund 0.75% on first $500 million;
0.70% on next $500 million;
0.65% on next $1.5 billion;
0.60% on assets in excess of $2.5 million
-------------------------------------------------------------------
Diversified Growth Fund 0.65% on the first $500 million;
0.60% on the next $500 million;
0.55% on the next $1.5 billion;
0.50% on assets in excess of $2.5 billion.
-------------------------------------------------------------------
-56-
<PAGE>
On September 30, 1999, the total net assets of DelCap Fund were
$701,582,524. Under the general supervision of the Board of Trustees, 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. The investment management
fees paid by DelCap Fund for the fiscal years ended September 30, 1997, 1998 and
1999 were $7,226,204, $6,278,318 and $5,542,943, respectively.
On September 30, 1999, the total net assets of Diversified Growth Fund
were $10,895,992. 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. The investment management
fee incurred by Diversified Growth 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 the
Fund was $18,019 and no fees were paid as a result of the voluntary waiver of
fees by the Manager. For the fiscal year ended September 30, 1999, the
investment management fee incurred by the Fund was $35,016 and $10,766 was paid
as a result of the voluntary waiver of fees by the Manager.
The Manager has elected voluntarily to waive that portion, if any, of
the annual management fees payable by Diversified Growth 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. The
Manager has extended this waiver through May 31, 2000.
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 separate Distribution Agreement dated December 17, 1999. The
Distributor is an affiliate of the Manager and bears all of the costs of
promotion and distribution, except for payments by each Fund on behalf of Class
A Shares, Class B Shares and Class C Shares under their respective 12b-1 Plans.
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 Diversified
Growth Fund during the commencement of the public offering of the Fund through
May 31, 2000.
Except for those expenses borne by the Manager under the Investment
Management Agreement and the Distributor under the Distribution Agreement, the
Fund is responsible for all of its own expenses. Among others, these include the
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.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Fund's shareholder servicing, dividend disbursing and transfer agent
pursuant to a Shareholders Services Agreement dated December 17, 1999. The
Transfer Agent also provides accounting services to the Fund pursuant to the
terms of a separate Fund Accounting Agreement. The Transfer Agent is also an
indirect, wholly owned subsidiary of Delaware Management Holdings, Inc.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
-57-
<PAGE>
redemption orders on the behalf of the Fund. For purposes of pricing, the Fund
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
OFFICERS AND TRUSTEES
The business and affairs of Equity Funds IV are managed under the
direction of its Board of Trustees.
Certain officers and trustees of Equity Funds IV hold identical
positions in each of the other funds in the Delaware Investments family. On
November 30, 1999, Equity Funds IV's officers and trustees owned less than 1% of
the outstanding shares of Class A Shares, Class B Shares, Class C Shares and the
Institutional Class.
As of November 30, 1999, management believes the following accounts
held 5% or more of the outstanding shares of a Class of the Fund. With the
exception of DMC Profit Sharing Plans, the Fund has no knowledge of beneficial
ownership.
<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 3,088,789 12.62%
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 98,000 8.49%
Attention: Fund Administration
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246
- --------------------------------------------------------------------------------------------------------------
DelCap Fund C Class MLPF&S for the Sole Benefit of its Customers 12,097 5.21%
Attention: Fund Administration
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246
- --------------------------------------------------------------------------------------------------------------
RS DMTC 401(k) Plan 11,719 5.05%
Tower City Title Agency LLC
Attemtion: Patti Marino
6151 Wilson Mills Road
Highland Heights, OH 44143
- --------------------------------------------------------------------------------------------------------------
DelCap Fund RS 401(k) Plan 153,055 21.04%
Institutional Class Waterfield Group 401(k) Plan
Attention: Greg Lawrence
P.O. Box 128
Fort Wayne, IN 46804
- --------------------------------------------------------------------------------------------------------------
RS DMTC 401(k) Plan 112,578 15.48%
Aloha Air IAMCLRK
Attention: Marion Kanemori
371 Aokea Place
Honolulu, HI 96819
- --------------------------------------------------------------------------------------------------------------
</TABLE>
-58-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Class Name and Address of Account Share Amount Percentage
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RS DMC Employee Profit Sharing Plan 86,700 11.92%
Delaware Management Company
Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------------------------------------
RS DMTC 401(k) Plan 81,253 11.17%
Long John Silver, Inc. 401(k) Plan
Attention: Jeanie Metcalf
P.O. Box 11988
Lexington, KY 40579
- --------------------------------------------------------------------------------------------------------------
RS DMTC 401(k) Plan 74,237 10.20%
Aloha Air IAM MEC
Attention: Marion Kanemori
371 Aokea Place
Honolulu, HI 96819
- --------------------------------------------------------------------------------------------------------------
RS DMTC 401(k) Plan 64,814 8.91%
Aloha Airlines 401(k) Plan for Non- Represented
Employees
Attention: Marion Kanemori
371 Aokea Place
Honolulu, HI 96819
- --------------------------------------------------------------------------------------------------------------
RS DMTC 401(k) Plan 56,504 7.77%
Aloha Airlines Flight Attendants
Attention: Marion Kanemori
371 Aokea Place
Honolulu, HI 96819
- --------------------------------------------------------------------------------------------------------------
Diversified Growth J. Chris Meyer 1,037 43.51%
Fund A Class Cust. Spencer D. Meyer
UTMA/MA
1680 Governors Way
Blue Bell, PA 19422
- --------------------------------------------------------------------------------------------------------------
DMTC C/F the 403(b)(7) plan of 537 22.53%
Jerauld D. Myers
468 County Road, 3A
Greene, NY 13778
- --------------------------------------------------------------------------------------------------------------
Christopher S. Adams and Stefanie G. Adams 423 17.74%
JT WROS
619 Greythorne Road
Wynnewood, PA 19096
- --------------------------------------------------------------------------------------------------------------
Douglas W. Degenhardt 317 13.28%
237 Marple Rd.
Haverford, PA 19041
- --------------------------------------------------------------------------------------------------------------
Diversified Growth Fund Chase Manhattan Bank Custodian For Delaware Group 318,433 30.13%
Institutional Class Foundation Funds -
Balanced Portfolio
Attn: Marisol Gordan Global Inv. Ser.
3 Metrotech Center, 8th Floor
Brooklyn, NY 11201
- --------------------------------------------------------------------------------------------------------------
</TABLE>
-59-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Class Name and Address of Account Share Amount Percentage
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Chase Manhattan Bank Custodian For Delaware Group 293,567 27.77%
Foundation Funds -
Growth Portfolio
Attn: Marisol Gordan Global Inv. Ser.
3 Metrotech Center, 8th Floor
Brooklyn, NY 11201
- --------------------------------------------------------------------------------------------------------------
Chicago Trust Co. 249,834 23.64%
FBO Lincoln National Corp.
Empl. Ret. Pln
c/o Marshall & Ilsley Trust Co.
P.O. Box 2977
Milwaukee, WI 53201
- --------------------------------------------------------------------------------------------------------------
Chase Manhattan Bank Custodian For Delaware Group 194,947 18.44%
Foundation Funds -
Growth Portfolio
Attn: Marisol Gordan Global Inv. Ser.
3 Metrotech Center, 8th Floor
Brooklyn, NY 11201
- --------------------------------------------------------------------------------------------------------------
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc. and Retirement
Financial Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
Certain officers and trustees of Equity Funds IV hold identical
positions in each of the other funds in the Delaware Investments family.
Trustees and principal officers of the Equity Funds IV are noted below along
with their ages and their business experience for the past five years. Unless
otherwise noted, the address of each officer and trustee is One Commerce Square,
Philadelphia, PA 19103.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Trustee/Officer Business Experience
- ----------------------------------------------------------------------------------------------------------
<S> <C>
*Wayne A. Stork (62) Chairman, Trustee/Director of Equity Funds IV and each of the other 32
investment companies in the Delaware Investments family.
Chairman and Director of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
Prior to January 1, 1999, Mr. Stork was Director of Delaware Capital
Management, Inc.; Chairman, President and Chief Executive Officer and
Director/Trustee of DMH Corp., Delaware Distributors, Inc. and Founders
Holdings, Inc.; Chairman, President, Chief Executive Officer, Chief
Investment Officer and Director/Trustee of Delaware Management Company,
Inc. and Delaware Management Business Trust; Chairman, President, Chief
Executive Officer and Chief Investment Officer of Delaware Management
Company (a series of Delaware Management Business Trust); Chairman,
Chief Executive Officer and Chief Investment Officer of Delaware
- ----------------------------------------------------------------------------------------------------------
</TABLE>
-60-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Trustee/Officer Business Experience
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Investment Advisers (a series of Delaware Management Business Trust);
Chairman and Chief Executive Officer of Delaware International Advisers
Ltd.; Chairman, Chief Executive Officer and Director of Delaware
International Holdings Ltd.; Chief Executive Officer of Delaware
Management Holdings, Inc.; President and Chief Executive Officer of
Delvoy, Inc.; Chairman of Delaware Distributors, L.P.; Director of
Delaware Service Company, Inc. and Retirement Financial Services, Inc.
In addition, during the five years prior to January 1, 1999, Mr. Stork
has served in various executive capacities at different times within
Delaware Investments.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
*Trustee affiliated with Equity Funds IV's investment manager and considered an
"interested person" as defined in the 1940 Act.
- -------------------------------------------------------------------------------
-61-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------- ----------------------------------------------------------------------
Trustee/Officer Business Experience
- -------------------------------- ----------------------------------------------------------------------
<S> <C>
*David K. Downes (59) President, Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer and Trustee/Director of Equity Funds IV and each of
the other 32 investment companies in the Delaware Investments family.
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a series of Delaware
Management Business Trust)
President, Chief Executive Officer and Director of Delaware Capital
Management, Inc.
Chairman, President, Chief Executive Officer and Director of Delaware
Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and
Director of Delaware International Holdings Ltd.
Chairman and Director of Delaware Management Trust Company and
Retirement Financial Services, Inc.
Executive Vice President, Chief Operating Officer, Chief Financial
Officer of Delaware Management Holdings, Inc., Founders CBO
Corporation, Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware Distributors, L.P.
Executive Vice President, Chief Financial Officer, Chief Administrative
Officer and Trustee of Delaware Management Business Trust
Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of DMH Corp., Delaware Distributors, Inc.,
Founders Holdings, Inc. and Delvoy, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive
capacities at different times within Delaware Investments.
</TABLE>
- ----------------------
*Trustee affiliated with Equity Funds IV's investment manager and considered an
"interested person" as defined in the 1940 Act.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- ----------------------------------------------------------------------
Officer Business Experience
- ---------------------------------- ----------------------------------------------------------------------
<S> <C>
Richard G. Unruh, Jr. (60) Executive Vice President and Chief Investment Officer, Equities of
Equity Funds IV, each of the other 32 investment companies in the
Delaware Investments family Delaware Management Holdings, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Capital Management, Inc.
Chief Executive Officer/Chief Investment Officer/DIA Equity of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Executive Vice President and Director/Trustee of Delaware Management
Company, Inc. and Delaware Management Business Trust
Director of Delaware International Advisers Ltd. During the past five
years, Mr. Unruh has served in various executive capacities at
different times within Delaware Investments.
- ---------------------------------------------------------------------------------------------------------
H. Thomas McMeekin (46) Executive Vice President and Chief Investment Officer, Fixed Income of
Equity Funds IV and each of the other 32 investment companies in the
Delaware Investments family.
Director of Delaware Management Holdings, Inc. and Founders CBO
Corporation.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Management Business Trust,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Capital Management, Inc.
Mr. McMeekin joined Delaware Investments in 1999. During the past five
years, he has also served in various executive capacities for Lincoln
National Corporation.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-63-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- ----------------------------------------------------------------------
Officer Business Experience
- ---------------------------------- ----------------------------------------------------------------------
<S> <C>
Richard J. Flannery (42) Executive Vice President/General Counsel of Equity Funds IV and each
of the other 32 investment companies in the Delaware Investments
family, Delaware Management Holdings, Inc., Delaware Distributors,
L.P., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Founders CBO Corporation.
Executive Vice President/General Counsel and Director of Delaware
International Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc.,
DMH Corp., Delaware Management Company, Inc., Delaware Service
Company, Inc., Delaware Capital Management, Inc., Retirement Financial
Services, Inc., Delaware Distributors, Inc. and Delaware Management
Business Trust.
Executive Vice President and Trustee of Delaware Management Business
Trust.
Director of Delaware International Advisers Ltd.
Director of HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various
executive capacities at different times within Delaware
Investments.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-64-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- ----------------------------------------------------------------------
Trustee Business Experience
<S> <C>
- ---------------------------------- ----------------------------------------------------------------------
Walter P. Babich (72) Trustee/Director of Equity Funds IV and each of the other 32
investment companies in the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
- ---------------------------------------------------------------------------------------------------------
John H. Durham (62) Trustee/Director of Equity Funds IV and 18 other investment companies
in the Delaware Investments family
Private Investor.
P.O. Box 819, Gwynedd Valley, PA 19437
Mr. Durham served as Chairman of the Board of each fund in the
Delaware Investments family from 1986 to 1991; President of each fund
from 1977 to 1990; and Chief Executive Officer of each fund from 1984
to 1990. Prior to 1992, with respect to Delaware Management Holdings,
Inc., Delaware Management Company, Delaware Distributors, Inc. and
Delaware Service Company, Inc., Mr. Durham served as a director and in
various executive capacities at different times. He was also a Partner
of Complete Care Services from 1995 to 1999.
- ---------------------------------------------------------------------------------------------------------
Anthony D. Knerr (61) Trustee/Director of Equity Funds IV and each of the 32 other
investment companies in the Delaware Investments family.
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was
also a lecturer in English at the University. In addition, Mr. Knerr
was Chairman of The Publishing Group, Inc., New York, from 1988 to
1990. Mr. Knerr founded The Publishing Group, Inc. in 1988.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-65-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- ----------------------------------------------------------------------
Trustee/Officer Business Experience
<S> <C>
- ---------------------------------- ----------------------------------------------------------------------
Ann R. Leven (59) Trustee/Director of Equity Funds IV and each of the other 32 other
investment companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Retired Treasurer, National Gallery of Art
From 1994 to 1999, Ms. Leven was the Treasurer of the National
Gallery of Art and from 1990 to 1994, Ms. Leven was Deputy Treasurer
of the National Gallery of Art. In addition, from 1984 to 1990, Ms.
Leven was Treasurer and Chief Fiscal Officer of the Smithsonian
Institution, Washington, DC, and from 1975 to 1992, she was Adjunct
Professor of Columbia Business School.
- ---------------------------------------------------------------------------------------------------------
Thomas F. Madison (63) Trustee/Director of Equity Funds IV and each of the other 32
investment companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications
Holdings, Inc. since 1996. From February to September 1994, Mr.
Madison served as Vice Chairman--Office of the CEO of The Minnesota
Mutual Life Insurance Company and from 1988 to 1993, he was President
of U.S. WEST Communications--Markets.
- ---------------------------------------------------------------------------------------------------------
Charles E. Peck (74) Trustee/Director of Equity Funds IV and each of the other 32
investment companies in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer
of The Ryland Group, Inc., Columbia, MD.
- ---------------------------------------------------------------------------------------------------------
Janet L. Yeomans (50) Trustee/Director of Equity Funds IV and each of the other 32
investment companies in the Delaware Investments family.
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
From 1987-1994, Ms. Yeomans was Director of Benefit Funds and
Financial Markets for the 3M Corporation; Manager of Benefit Fund
Investments for the 3M Corporation, 1985-1987; Manager of Pension
Funds for the 3M Corporation, 1983-1985; Consultant--Investment
Technology Group of Chase Econometrics, 1982-1983; Consultant for Data
Resources, 1980-1982; Programmer for the Federal Reserve Bank of
Chicago, 1970-1974.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-66-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- ----------------------------------------------------------------------
Officer Business Experience
<S> <C>
- ---------------------------------- ----------------------------------------------------------------------
Eric E. Miller (45) Senior Vice President/Deputy General Counsel and Secretary of Equity
Funds IV and each of the other 32 investment companies in Delaware
Investments.
Senior Vice President/Deputy General Counsel and Assistant Secretary
of Delaware Management Holdings, Inc., DMH Corp., Delvoy, Inc.,
Delaware Management Company, Inc., Delaware Management Business Trust,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management
Business Trust), Delaware Service Company, Inc., Delaware Capital
Management, Inc., Retirement Financial Services, Inc., Delaware
Distributors, Inc., Delaware Distributors, L.P. and Founders Holdings,
Inc.
During the past five years, Mr. Miller has served in various executive
capacities at different times within Delaware Investments.
- ---------------------------------------------------------------------------------------------------------
Joseph H. Hastings (49) Senior Vice President/Corporate Controller of Income Funds and each of
the other 32 investment companies in the Delaware Investments family.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Capital Management,
Inc., Delaware International Holdings Ltd., Delvoy, Inc., Retirement
Financial Services, Inc., Founders Holdings, Inc. and Delaware
Management Business Trust
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
During the past five years, Mr. Hastings has served in various
executive capacities at different times within Delaware Investments.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-67-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- ----------------------------------------------------------------------
Officer Business Experience
<S> <C>
- ---------------------------------- ----------------------------------------------------------------------
Michael P. Bishof (37) Senior Vice President and Treasurer of Equity Funds IV and each of the
other 32 investment companies in the Delaware Investments family.
Senior Vice President/Investment Accounting of Delaware Service
Company, Inc. and Delaware Capital Management, Inc.
Senior Vice President and Treasurer/ Investment Accounting of Delaware
Distributors, L.P., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) Delaware International Holdings,
Inc. and Founders Holdings, Inc.
Senior Vice President and Assistant Treasurer of Founders CBO
Corporation
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a Vice
President for CS First Boston Investment Management, New York, NY from
1993 to 1994 and an Assistant Vice President for Equitable Capital
Management Corporation, New York, NY from 1987 to 1993.
- ---------------------------------------------------------------------------------------------------------
Gerald S. Frey (53) Vice President/Senior Portfolio Manager of Equity Funds IV and each of
the other 32 investment companies in the Delaware Investments family,
Delaware Management Company, Inc., Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Investment
Advisers (a series of Delaware Management Business Trust).
Before joining Delaware Investments in 1996, Mr. Frey was a Senior
Trustee with Morgan Grenfell Capital Management, New York, NY from
1986 to 1995.
- ---------------------------------------------------------------------------------------------------------
J. Paul Dokas (40) Vice President/Senior Portfolio Manager of Equity Funds IV and each of
the other 32 investment companies in the Delaware Investments family,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Before joining Delaware Investments in 1997, he was a Director of
Trust Investments for Bell Atlantic Corporation in Philadelphia.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-68-
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- ----------------------------------------------------------------------
Officer Business Experience
<S> <C>
- ---------------------------------- ----------------------------------------------------------------------
Marshall T. Bassett (45) Vice President/Portfolio Manager of Equity Funds IV, and each of the
other 32 investment companies in the Delaware Investments family,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Investment Advisers (a series of series of
Delaware Management Business Trust).
Prior to joining Delaware Investments in 1997, Mr. Basset served as
Vice President in Morgan Stanley Asset Management's Emerging Growth
Group, where he analyzed small growth companies. Prior to that, he was
a trust officer at Sovran Bank and Trust Company.
- ---------------------------------------------------------------------------------------------------------
John A. Heffern (38) Vice President/Portfolio Manager of Equity Funds IV, and each of the
other 32 investment companies in the Delaware Investments family,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Investment Advisers (a series of series of
Delaware Management Business Trust).
Prior to joining Delaware Investments in 1997, Mr. Heffern was a
Senior Vice President, Equity Research at NatWest Securities
Corporation's Specialty Finance Services unit. Prior to that, he was a
Principal and Senior Regional Bank Analyst at Alex. Brown & Sons.
- ---------------------------------------------------------------------------------------------------------
Jeffrey W. Hynoski (37) Vice President/Portfolio Manager of Equity Funds IV and each of the
other 32 investment companies in the Delaware Investments family,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Investment Advisers (a series of series of
Delaware Management Business Trust).
Prior to joining Delaware Investments in 1998, Mr. Hynoski served as a
Vice President at Bessemer Trust Company in the mid and large
capitalization growth group, where he specialized in the areas of
science, technology, and telecommunications. Prior to that, Mr.
Hynoski held positions at Lord Abbett & Co. and Cowen Asset
Management.
- ---------------------------------------------------------------------------------------------------------
Lori P. Wachs (30) Vice President/Portfolio Manager of the Fund, and the other 32
investment companies in the Delaware Investments family, Delaware
Management Company (a series of Delaware Management Business Trust)
and Delaware Investment Advisers (a series of series of Delaware
Management Business Trust).
During the past five years, Ms. Wachs has served in various capacities
at different times within the Delaware organization.
- ---------------------------------------------------------------------------------------------------------
Steven T. Lampe (31) Vice President/Portfolio Manager of Equity Funds IV and each of the
other 32 investment companies in the Delaware Investments family,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Investment Advisers (a series of Delaware
Management Business Trust).
Prior to joining Delaware Investments in 1995, Mr. Lampe served as a
manager at Price Waterhouse.]
- ---------------------------------------------------------------------------------------------------------
</TABLE>
-69-
<PAGE>
The following is a compensation table listing for each trustee/director
entitled to receive compensation, the aggregate compensation received from
Equity Funds IV and the total compensation received from all investment
companies in the Delaware Investments family for which he or she serves as a
trustee or director for the fiscal year ended September 30, 1999 and an
estimate of annual benefits to be received upon retirement under the Delaware
Group Retirement Plan for Trustees/ Directors as of September 30, 1999.
Only the independent trustees of Equity Funds IV receive compensation from
Equity Funds IV.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Pension or Total Compensation
Retirement Benefits from the Investment
Aggregate Accrued Estimated Annual Companies in
Compensation from as Part of Benefits Delaware
Name(3) Equity Funds IV Fund Expenses Upon Retirement(1) Investments(2)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Walter P. Babich $2,377 None $38,000 $59,066
- -----------------------------------------------------------------------------------------------------------------------
John H. Durham $2,279 None $32,180 $49,984
- -----------------------------------------------------------------------------------------------------------------------
Anthony D. Knerr $2,597 None $38,000 $65,126
- -----------------------------------------------------------------------------------------------------------------------
Ann R. Leven $2,642 None $38,000 $66,126
- -----------------------------------------------------------------------------------------------------------------------
Thomas F. Madison $2,597 None $38,000 $65,126
- -----------------------------------------------------------------------------------------------------------------------
Charles E. Peck $2,499 None $38,000 $63,043
- -----------------------------------------------------------------------------------------------------------------------
Janet L. Yeomans(4) $1,289 None $38,000 $34,715
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested trustee/director who, at the
time of his or her retirement from the Board, has attained the age of
70 and served on the Board for at least five continuous years, is
entitled to receive payments from each investment company in the
Delaware Investments family for which he or she serves as a
trustee/director for a period equal to the lesser of the number of
years that such person served as a trustee/director or the remainder of
such person's life. The amount of such payments will be equal, on an
annual basis, to the amount of the annual retainer that is paid to
trustees/directors of each investment company at the time of such
person's retirement. If an eligible trustee/director retired as of June
30, 1999, he or she would be entitled to annual payments totaling the
amount noted above, in the aggregate, from all of the investment
companies in the Delaware Investments family for which he or she served
as trustee/director, based on the number of investment companies in the
Delaware Investments family as of that date.
(2) Each independent trustee/director (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a
trustee/director for all 33 investment companies in Delaware
Investments, plus $3,145 for each Board Meeting attended. John H.
Durham currently receives a total annual retainer fee of $32,180 for
serving as a trustee/director for 19 investment companies in Delaware
Investments, plus $1,810 for each Board Meeting attended. Ann R. Leven,
Charles E. Peck, Anthony D. Knerr and Thomas F. Madison serve on Equity
Funds IV's audit committee; Ms. Leven is the chairperson. Members of
the audit committee currently receive additional annual compensation of
$5,000 from all investment companies, in the aggregate, with the
exception of the chairperson, who receives $6,000.
(3) W. Thacher Longstreth served as an independent trustee of Equity Funds
IV during its last fiscal year for the period July 1, 1998 through
March 17, 1999, the date on which he retired. For this period, Mr.
Longstreth received $1,862 from Equity Funds IV and $44,465
for all investment companies in the Delaware Investments family.
(4) Janet L. Yeomans joined the Boards of all investment companies in
the Delaware Investments family in March 1999 for some funds and in
April 1999 for other funds.
-70-
<PAGE>
GENERAL INFORMATION
Equity Funds IV, Inc., which was organized as a Maryland corporation in
1985 and subsequently as a Delaware business trust on December 17, 1999, is an
open-end management investment company. Each Fund's portfolio of assets is
diversified as defined by the Investment Company Act of 1940 (the "1940 Act").
The Manager is the investment manager of the Fund. The Manager also
provides investment management services to certain of the other funds available
from the Delaware Investments family. An affiliate of the Manager manages
private investment accounts. While investment decisions of the Fund are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Fund.
Delaware or Delaware International also manages the investment options
for Delaware-Lincoln Choice Plus and Delaware Medallion (SM) IV Variable
Annuities. Choice Plus is issued and distributed by Lincoln National Life
Insurance Company. Choice Plus offers a variety of different investment styles
managed by leading money managers. Medallion is issued by Allmerica Financial
Life Insurance and Annuity Company (First Allmerica Financial Life Insurance
Company in New York and Hawaii). Delaware Medallion offers various investment
series ranging from domestic equity funds, international equity and bond funds
and domestic fixed income funds. Each investment series available through Choice
Plus and Medallion utilizes an investment strategy and discipline the same as or
similar to one of the Delaware Investments mutual funds available outside the
annuity. See Delaware Group Premium Fund, Inc., in Appendix A.
Access persons and advisory persons of the funds in the Delaware
Investments family, as those terms are defined in SEC Rule 17j-1 under the 1940
Act, who provide services to the Manager, Delaware International Advisers Ltd.
or their affiliates, are permitted to engage in personal securities transactions
subject to the exceptions set forth in Rule 17j-1 and the following general
restrictions and procedures: (1) certain blackout periods apply to personal
securities transactions of those persons; (2) transactions must receive advance
clearance and must be completed on the same day as the clearance is received;
(3) certain persons are prohibited from investing in initial public offerings of
securities and other restrictions apply to investments in private placements of
securities; (4) opening positions by certain covered persons in certain
securities may only be closed-out at a profit after a 60-day holding period has
elapsed; and (5) the Compliance Officer must be informed periodically of all
securities transactions and duplicate copies of brokerage confirmations and
account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for the Fund and for the
other mutual funds in the Delaware Investments family. The Distributor ("DDLP")
received net commissions from the Fund on behalf of the Class A Shares, after
reallowances to dealers, as follows:
- --------------------------------------------------------------------------------
DelCap Fund
- --------------------------------------------------------------------------------
Total
Amounts Amount of Net
Reallowed Underwriting Commission
Fiscal Year Ended to Dealers Commission to Distributor
- --------------------------------------------------------------------------------
September 30, 1999 $529,323 $455,643 $73,680
- --------------------------------------------------------------------------------
September 30, 1998 581,650 477,907 103,743
- --------------------------------------------------------------------------------
September 30, 1997 1,003,867 837,830 166,037
- --------------------------------------------------------------------------------
-71-
<PAGE>
- --------------------------------------------------------------------------------
Delaware Diversified Growth Fund
- --------------------------------------------------------------------------------
Total
Amounts Amount of Net
Reallowed Underwriting Commission
Fiscal Year Ended to Dealers Commission to Distributor
- --------------------------------------------------------------------------------
September 30, 1999 --- --- ---
- --------------------------------------------------------------------------------
September 30, 1998 --- --- ---
- --------------------------------------------------------------------------------
September 30, 1997* --- --- ---
- --------------------------------------------------------------------------------
*Commenced operations on December 2, 1997.
The Distributor received Limited CDSC payments with respect to DelCap
Fund and Diversified Growth Fund A Class as follows:
- --------------------------------------------------------------------------------
Fiscal Year Ended Limited CDSC Payments
- --------------------------------------------------------------------------------
DelCap Fund Diversified Growth Fund*
- --------------------------------------------------------------------------------
September 30, 1999 --- N/A
- --------------------------------------------------------------------------------
September 30, 1998 --- N/A
- --------------------------------------------------------------------------------
September 30, 1997 $2,088 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, 1999 $74,429
- ------------------------------------------------------
September 30, 1998 70,190
- ------------------------------------------------------
September 30, 1997 57,254
- ------------------------------------------------------
The Distributor received CDSC payments with respect to the DelCap Fund
C Class as follows:
- ------------------------------------------------------
Fiscal Year Ended CDSC Payments
- ------------------------------------------------------
September 30, 1999 $819
- ------------------------------------------------------
September 30, 1998 679
- ------------------------------------------------------
September 30, 1997 1,715
- ------------------------------------------------------
*Date of initial public offering was November 29, 1995.
-72-
<PAGE>
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the other
mutual funds in the Delaware Investments family. The Transfer Agent is paid a
fee by the Fund for providing these services consisting of an annual per account
charge of $5.50 plus transaction charges for particular services according to a
schedule. Compensation is fixed each year and approved by the Board of Trustees,
including a majority of the disinterested trustees. The Transfer Agent also
provides accounting services to the Fund. Those services include performing all
functions related to calculating the Fund's net asset value and providing all
financial reporting services, regulatory compliance testing and other related
accounting services. For its services, the Transfer Agent is paid a fee based on
total assets of all funds in the Delaware Investments family for which it
provides such accounting services. Such fee is equal to 0.25% multiplied by the
total amount of assets in the complex for which the Transfer Agent furnishes
accounting services, where such aggregate complex assets are $10 billion or
less, and 0.20% of assets if such aggregate complex assets exceed $10 billion.
The fees are charged to the Fund, including the Fund, on an aggregate pro-rata
basis. The asset-based fee payable to the Transfer Agent is subject to a minimum
fee calculated by determining the total number of investment portfolios and
associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Equity Funds IV's advisory
relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Equity Funds IV to
delete the words "Delaware Group" from Equity Funds IV's name.
Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn, NY
11245, is custodian of the Fund's securities and cash. As custodian for the
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 has a present unlimited authorized number of shares of
beneficial interest with no par value allocated to each Class. Each Class
represents a proportionate interest in the assets of the Fund, and each has the
same voting and other rights and preferences as the other classes of the Fund,
except that shares of the Institutional Class may not vote on any matter that
affects the Fund Classes' Distribution Plans under Rule 12b-1. Similarly, as a
general matter, shareholders of Class A Shares, Class B Shares and Class C
Shares may vote only on matters affecting the 12b-1 Plan that relates to the
class of shares that they hold. However, Class B Shares may vote on any proposal
to increase materially the fees to be paid by the Fund under the Rule 12b-1 Plan
relating to Class A Shares. General expenses of the Fund will be allocated on a
pro-rata basis to the classes according to asset size, except that expenses of
the Plans of Class A Shares, Class B Shares and Class C Shares will be allocated
solely to those classes.
All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above, have
equal voting rights.
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.
Effective May 11, 1999, the name of Capital Appreciation Fund changed
to Delaware Diversified Growth Fund and effective August 16, 1999, the name of
DelCap Fund changed to Delaware DelCap Fund. Corresponding changes were also
made to the class names.
-73-
<PAGE>
Effective December 17, 1999, Delaware Group Equity Funds IV, Inc. changed its
name to Delaware Group Equity Funds IV.
Noncumulative Voting
Equity Funds IV shares have noncumulative voting rights which means
that the holders of more than 50% of the shares of Equity Funds IV voting for
the election of trustees can elect all the trustees if they choose to do so,
and, in such event, the holders of the remaining shares will not be able to
elect any trustees.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group
Equity Funds IV 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, 1999
are included in 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.
-74-
<PAGE>
APPENDIX A--INVESTMENT OBJECTIVES OF THE FUNDS IN THE DELAWARE INVESTMENTS
FAMILY
Following is a summary of the investment objectives of the funds in the
Delaware Investments family:
Delaware Balanced Fund seeks long-term growth by a balance of
Diversified Growth, 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
investment adviser believes have the potential for above average dividend
increases over time.
Delaware Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong capital
appreciation potential.
Delaware Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential.
Delaware DelCap Fund seeks long-term capital growth by investing in
common stocks and securities convertible into common stocks of companies that
have a demonstrated history of growth and have the potential to support
continued growth.
Delaware Decatur Equity Income Fund seeks the highest possible current
income by investing primarily in common stocks that provide the potential for
income and capital appreciation without undue risk to principal. Delaware Growth
and Income Fund seeks long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation without undue risk to
principal. Delaware Blue Chip Fund seeks to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks to achieve these
objectives by investing primarily in equity securities and any securities that
are convertible into equity securities. Delaware Social Awareness Fund seeks to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to large-sized companies
expected to grow over time that meet the Fund's "Social Criteria" strategy.
Delaware Delchester Fund seeks as high a current income as possible by
investing principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Delaware Strategic Income Fund seeks
to provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. Delaware High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Delaware Corporate Bond Fund seeks to provide investors with total return by
investing primarily in corporate bonds. Delaware Extended Duration Bond Fund
seeks to provide investors with total return by investing primarily in corporate
bonds
Delaware American Government Bond Fund seeks high current income by
investing primarily in long-term debt obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
Delaware Limited-Term Government Fund seeks high, stable income by
investing primarily in a portfolio of short-and intermediate-term securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
and instruments secured by such securities.
Delaware Cash Reserve Fund seeks the highest level of income consistent
with the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
-75-
<PAGE>
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
Delaware Tax-Free Money Fund seeks high current income, exempt from
federal income tax, by investing in short-term municipal obligations, while
maintaining a stable net asset value.
Delaware Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of geographically-diverse
issuers. Delaware Tax-Free Insured Fund invests in these same types of
securities but with an emphasis on municipal bonds protected by insurance
guaranteeing principal and interest are paid when due. Delaware Tax-Free USA
Intermediate Fund seeks a high level of current interest income exempt from
federal income tax, consistent with the preservation of capital by investing
primarily in municipal bonds.
Delaware Tax-Free Pennsylvania Fund seeks a high level of current
interest income exempt from federal and, to the extent possible, certain
Pennsylvania state and local taxes, consistent with the preservation of capital.
Delaware Tax-Free New Jersey Fund seeks a high level of current interest income
exempt from federal income tax and New Jersey state and local taxes, consistent
with preservation of capital. Delaware Tax-Free Ohio Fund seeks a high level of
current interest income exempt from federal income tax and Ohio state and local
taxes, consistent with preservation of capital.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds"). Delaware Income
Portfolio seeks a combination of current income and preservation of capital with
capital appreciation by investing primarily in a mix of fixed income and
domestic equity securities, including fixed income and domestic equity
Underlying Funds. Delaware Balanced Portfolio seeks capital appreciation with
current income as a secondary objective by investing primarily in domestic
equity and fixed income securities, including domestic equity and fixed income
Underlying Funds. Delaware Growth Portfolio seeks long-term capital growth by
investing primarily in equity securities, including equity Underlying Funds,
and, to a lesser extent, in fixed income securities, including fixed-income
Underlying Funds.
Delaware International Equity Fund seeks to achieve long-term growth
without undue risk to principal by investing primarily in international
securities that provide the potential for capital appreciation and income.
Delaware Global Bond Fund seeks to achieve current income consistent with the
preservation of principal by investing primarily in global fixed-income
securities that may also provide the potential for capital appreciation.
Delaware Global Equity Fund seeks to achieve long-term total return by investing
in global securities that provide the potential for capital appreciation and
income. Delaware Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers located or operating in
emerging countries.
Delaware U.S. Growth Fund seeks to maximize capital appreciation by
investing in companies of all sizes which have low dividend yields, strong
balance sheets and high expected earnings growth rates relative to their
industry. Delaware Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an internationally
diversified portfolio of equity securities. Delaware New Pacific Fund seeks
long-term capital appreciation by investing primarily in companies which are
domiciled in or have their principal business activities in the Pacific Basin.
Delaware Group Premium Fund, Inc. offers various funds available
exclusively as funding vehicles for certain insurance company separate accounts.
Growth and Income Series seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. Delchester Series seeks as high a
current income as possible by investing in rated and unrated corporate bonds,
U.S. government securities and commercial paper. Capital Reserves Series seeks a
high stable level of current income while minimizing fluctuations in principal
by investing in a diversified portfolio of short- and intermediate-term
securities. Cash Reserve Series seeks the highest level of income consistent
with preservation of capital and liquidity through investments in short-term
money market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
-76-
<PAGE>
potential for significant growth. Delaware Balanced Series seeks a balance of
capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Small Cap Value
Series seeks capital appreciation by investing primarily in small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth. U.S.
Growth Series seeks to maximize capital appreciation. The Series seeks to
achieve its investment objective by investing in companies of all sizes which
have low dividend yields, strong balance sheets and high expected earnings
growth rates relative to their industry.
Delaware U.S. Government Securities Fund seeks to provide a high level
of current income consistent with the prudent investment risk by investing in
U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware Tax-Free Arizona Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Minnesota Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Minnesota personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Minnesota Intermediate Fund seeks to provide a high
level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware Tax-Free California Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the California personal
income tax, consistent with the preservation of capital. Delaware Tax-Free
Florida Insured Fund seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital. The Fund will
seek to select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. Delaware Tax-Free Florida Fund seeks
to provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to select
investments that will enable its shares to be exempt from the Florida intangible
personal property tax. Delaware Tax-Free Kansas Fund seeks to provide a high
level of current income exempt from federal income tax, the Kansas personal
income tax and the Kansas intangible personal property tax,
-77-
<PAGE>
consistent with the preservation of capital. Delaware Tax-Free Missouri Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Missouri personal income tax, consistent with the preservation of
capital. Delaware Tax-Free New Mexico Fund seeks to provide a high level of
current income exempt from federal income tax and the New Mexico personal income
tax, consistent with the preservation of capital. Delaware Tax-Free Oregon
Insured Fund seeks to provide a high level of current income exempt from federal
income tax and the Oregon personal income tax, consistent with the preservation
of capital.
Delaware Tax-Free Arizona Fund seeks to provide a high level
of current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Tax-Free California
Fund seeks to provide a high level of current income exempt from federal income
tax and the California personal income tax, consistent with the preservation of
capital. Delaware Tax-Free Iowa Fund seeks to provide a high level of current
income exempt from federal income tax and the Iowa personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Idaho Fund seeks
to provide a high level of current income exempt from federal income tax and the
Idaho personal income tax, consistent with the preservation of capital. Delaware
Minnesota High Yield Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax primarily through investment in medium and lower grade municipal
obligations. Delaware National High Yield Municipal Fund seeks to provide a high
level of income exempt from federal income tax, primarily through investment in
medium and lower grade municipal obligations. Delaware Tax-Free New York Fund
seeks to provide a high level of current income exempt from federal income tax
and the personal income tax of the state of New York and the city of New York,
consistent with the preservation of capital. Delaware Tax-Free Wisconsin Fund
seeks to provide a high level of current income exempt from federal income tax
and the Wisconsin personal income tax, consistent with the preservation of
capital. Delaware Montana Municipal Bond Fund seek as high a level of current
income exempt from federal income tax and from the Montana personal income tax,
as is consistent with preservation of capital.
Delaware Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Delaware Select Growth Fund seeks long-term capital appreciation,
which the Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the Fund, in
seeking its objective, may receive current income from dividends and interest,
income is only an incidental consideration in the selection of the Fund's
investments. Delaware Growth Stock Fund has an objective of long-term capital
appreciation. The Fund seeks to achieve its objective from equity securities
diversified among individual companies and industries. Delaware Tax-Efficient
Equity Fund seeks to obtain for taxable investors a high total return on an
after-tax basis. The Fund will attempt to achieve this objective by seeking to
provide a high long-term after-tax total return through managing its portfolio
in a manner that will defer the realization of accrued capital gains and
minimize dividend income.
Delaware Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware Tax-Free North Dakota
Fund seeks to provide a high level of current income exempt from federal income
tax and the North Dakota personal income tax, consistent with the preservation
of capital.
-78-
<PAGE>
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 the Portfolio's prospectus(es).
-79-
<PAGE>
APPENDIX B--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.
-80-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Delaware Investments includes funds with a wide ----------------------------------------------------
range of investment objectives. Stock funds,
income funds, national and state-specific DELAWARE GROUP EQUITY FUNDS IV
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 DELAWARE DELCAP FUND
information, shareholders of the Fund Classes DELAWARE DIVERSIFIED GROWTH FUND
should contact their financial adviser or call
Delaware Investments at 800.523.1918 and A CLASS
shareholders of the Institutional Classes should B CLASS
contact Delaware Investments at 800.828.5052. C CLASS
INSTITUTIONAL CLASS
----------------------------------------------------
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
PART B
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P. STATEMENT OF ADDITIONAL INFORMATION
1818 Market Street
Philadelphia, PA 19103 ----------------------------------------------------
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING, DECEMBER 17, 1999
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 DELAWARE
Ernst & Young LLP INVESTMENTS
Two Commerce Square --------------
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
</TABLE>
<PAGE>
PART C
Other Information
Item 23. Exhibits
(a) Agreement and Declaration of Trust.
(1) Agreement and Declaration of Trust (December
17, 1998) incorporated into this filing by
reference to Post-Effective Amendment No. 25
filed October 18, 1999.
(2) Certificate of Trust (December 17, 1998)
incorporated into this filing by reference
to Post-Effective Amendment No. 25 filed
October 18, 1999.
(b) By-Laws. By-Laws (December 17, 1998) incorporated
into this filing by reference to Post-Effective
Amendment No. 25 filed October 18, 1999.
(c) Copies of All Instruments Defining the Rights of
Holders.
(1) Agreement and Declaration of Trust. Articles
III, V and VI of Agreement and Declaration
of Trust incorporated into this filing by
reference to Post-Effective Amendment No. 25
filed October 18, 1999.
(2) By-Laws. Article II of By-Laws incorporated
into this filing by reference to
Post-Effective Amendment No. 25 filed
October 18, 1999.
(d) Investment Management Agreement.
(1) Form of Investment Management Agreement
(1999) between Delaware Management Company,
Inc. and the Registrant incorporated into
this filing by reference to Post-Effective
Amendment No. 25 filed October 18, 1999.
(e) (1) Distribution Agreement.
(i) Form of Distribution Agreement
(1999) between Delaware
Distributors, L.P. and the
Registrant incorporated into this
filing by reference to
Post-Effective Amendment No. 22
filed April 30, 1997.
(2) 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.
(3) 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.
<PAGE>
(4) 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.
(f) Inapplicable.
(g) Custodian Agreement.
(1) Form of Custodian Agreement (1999) (Module)
between The Chase Manhattan Bank and the
Registrant incorporated into this filing by
reference to Post-Effective Amendment No. 21
filed November 27, 1996.
(i) Form of Amendment to Custodian
Agreement (1999) between The Chase
Manhattan Bank and the Registrant
incorporated into this filing by
reference to Post-Effective
Amendment No. 22 filed April 30,
1997.
(2) Form of Securities Lending Agreement (1999)
between The Chase Manhattan Bank and the
Registrant incorporated into this filing by
reference to Post-Effective Amendment No. 21
filed November 27, 1996.
(h) Other Material Contracts.
(1) Form of Shareholders Services Agreement
(1999) between Delaware Service Company,
Inc. incorporated into this filing by
reference to Post-Effective Amendment No. 22
filed April 30, 1997.
(2) Form of Fund Accounting Agreement (1999)
between Delaware Service Company, Inc. and
the Registrant incorporated into this filing
by reference to Post-Effective Amendment No.
21 filed November 27, 1996.
(i) Opinion of Counsel. Incorporated into this filing by
reference to Post-Effective Amendment No. 25 filed
October 18, 1999.
(j) Consent and Report of Auditors. Attached as Exhibit.
(k) Inapplicable.
(l) Investment Letter of Initial Shareholder.
Incorporated into this filing by reference to
Pre-Effective Amendment No. 2 filed March 26, 1986.
(m) Plans under Rule 12b-1.
<PAGE>
(1) Form of Plan under Rule 12b-1 for DelCap
Fund A Class (1999) incorporated into this
filing by reference to Post-Effective
Amendment No. 21 filed November 27, 1996.
(2) Form of Plan under Rule 12b-1 for DelCap
Fund B Class (1999) incorporated into this
filing by reference to Post-Effective
Amendment No. 21 filed November 27, 1996.
(3) Form of Plan under Rule 12b-1 for DelCap
Fund C Class (1999) incorporated into this
filing by reference to Post-Effective
Amendment No. 21 filed November 27, 1996.
(4) Form of Plan under Rule 12b-1 for Capital
Appreciation Fund A Class (1999)
incorporated into this filing by reference
to Post-Effective Amendment No. 22 filed
April 30, 1997.
(5) Form of Plan under Rule 12b-1 for Capital
Appreciation Fund B Class (1999)
incorporated into this filing by reference
to Post-Effective Amendment No. 22 filed
April 30, 1997.
(6) Form of Plan under Rule 12b-1 for Capital
Appreciation Fund C Class (1999)
incorporated into this filing by reference
to Post-Effective Amendment No. 22 filed
April 30, 1997.
(n) Plan under Rule 18f-3.
(a) Form of Amended Plan under Rule 18f-3 (1999)
incorporated into this filing by reference
to Post-Effective Amendment No. 23 filed
November 16, 1997.
(o) Other: Trustees' Power of Attorney. Incorporated into
this filing by reference to Post-Effective Amendment
No. 25 filed October 18, 1999.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 27. Indemnification. Article VI of the By-Laws attached as Exhibit
incorporated into this filing by reference to Post-Effective
Amendment No. 58 filed June 25, 1999.
<PAGE>
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,
Delaware Group Equity Funds II, Delaware Group Equity Funds III, Delaware Group
Equity Funds V, Delaware Group Government Fund, Delaware Group Income Funds,
Delaware Group Limited-Term Government Funds, Delaware Group Cash Reserve,
Delaware Group State Tax-Free Income Trust, Delaware Group Tax-Free Money Fund,
Delaware Group Tax-Free Fund, Delaware Group Premium Fund, Delaware Group Global
& International Funds, Delaware Pooled Trust, Delaware Group Adviser Funds,
Delaware Group Dividend and Income Fund, Inc., Delaware Group Global Dividend
and Income Fund, Inc., Delaware Group Foundation Funds, Voyageur Intermediate
Tax Free Funds, Voyageur Tax Free Funds, Voyageur Funds, Voyageur Insured Funds,
Voyageur Investment Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II,
Voyageur Mutual Funds III, 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.
The following persons serving as directors or officers of the
Manager have held the following positions during the past two years:
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
David K. Downes President of Delaware Management Company (a series of Delaware Management
Business Trust); President, Chief Executive Officer and Director of Delaware
Capital Management, Inc.; Director of Delaware International Advisers Ltd.;
President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and Director/Trustee of the Registrant and each of the other
investment companies in the Delaware Investments family; President and
Director of Delaware Management Company, Inc.; Chairman, President, Chief
Executive Officer and Director of Delaware Service Company, Inc.; President,
Chief Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.; Chairman and Director of Delaware Management
Trust Company and Retirement Financial Services, Inc.; Executive Vice
President, Chief Operating Officer, Chief Financial Officer of Delaware
Management Holdings, Inc., Founders CBO Corporation, Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware
Distributors, L.P.; Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director of DMH Corp., Delaware Distributors, Inc.,
Founders Holdings, Inc. and Delvoy, Inc.; Executive Vice President and
Trustee of Delaware Management Business Trust
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8
Clayton Place, Newtown Square, PA
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
Richard J. Flannery Executive Vice President/General Counsel of the Registrant and each of the
other investment companies in the Delaware Investments family, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Founders CBO Corporation; Director of Delaware International Advisers Ltd.;
Executive Vice President/General Counsel and Director of Delaware
International Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc., DMH
Corp., Delaware Management Company, Inc., Delaware Service Company, Inc.,
Delaware Capital Management, Inc., Retirement Financial Services, Inc.,
Delaware Distributors, Inc. and Delaware Management Trust Company.;
Executive Vice President and Trustee of Delaware Management Business Trust;
Director of 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
- ------------------------------------------------- ------------------------------------------------------------------------------
Richard G. Unruh Executive Vice President/Chief Investment Officer of Delaware Management
Company (a series of Delaware Management Business Trust); Director of
Delaware International Advisers Ltd.; Executive Vice President and Chief
Investment Officer, Equity of the Registrant and each of the other
investment companies in the Delaware Investments family; Chief Executive
Officer/Chief Investment Officer of Delaware Investment Advisers (a series
of Delaware Management Business Trust); Executive Vice President of Delaware
Management Holdings, Inc. and Delaware Capital Management, Inc.; Executive
Vice President and Trustee of Delaware Management Business Trust
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
- ------------------------------------------------- ------------------------------------------------------------------------------
H. Thomas McMeekin(1) Executive Vice President of Delaware Management Business Trust; Executive
Vice President/Chief Investment Officer DMC-Fixed Income of Delaware
Management Company (a series of Delaware Management Business Trust);
Executive Vice President/Chief Investment Officer DIA-Fixed Income of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Executive Vice President of Delaware Capital Management, Inc.;
Executive Vice President and Director of Delaware Management Holdings, Inc.;
Executive Vice President and Chief Investment Officer, Fixed Income of the
Registrant and each of the other investment companies in the Delaware Investments
family.
- ------------------------------------------------- ------------------------------------------------------------------------------
William E. Dodge(2) Executive Vice President/Chief Investment Officer, DMC-Equity of Delaware
Management Company (a series of Delaware Management Trust Company); Executive
Vice President of Delaware Management Business Trust; President/Chief
Investment Officer, DIA-Equity of Delaware Investment Advisers (a series of
Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company (a series of
Delaware Management Business Trust; Senior Vice President/Operations of
Delaware Service Company, Inc.; Senior Vice President/Operations of
Retirement Financial Services, Inc.; Senior Vice President/Operations of
Delaware Management Trust Company.
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President/Investment Accounting of Delaware Management Company
(a series of Delaware Management Business Trust), Delaware Service Company,
Inc. and Delaware Capital Management, Inc. and Founders Holdings, Inc.;
Senior Vice President and Treasurer of the Registrant and each of the other
investment companies in the Delaware Investments family; Senior Vice
President and Treasurer/ Investment Accounting of Delaware Distributors,
L.P. and Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President/Manager of Investment Accounting of
Delaware International Holdings, Inc.; Senior Vice President and Assistant
Treasurer of Founders CBO Corporation
- ------------------------------------------------- ------------------------------------------------------------------------------
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company
(a series of Delaware Management Business Trust); Senior Vice President/Head
of Equity Trading of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President/Head of Equity Trading of
Delaware Capital Management, Inc.
- ------------------------------------------------- ------------------------------------------------------------------------------
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management
Company (a series of Delaware Management Business Trust); Trustee of
Delaware Management Business Trust; Senior Vice President/Senior Portfolio
Manager of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President/Senior Portfolio Manager of Delaware
Capital Management, Inc.; Senior Vice President/Senior Portfolio Manager of
the Registrant and each of the other investment companies in the Delaware
Investments family.
- ------------------------------------------------- ------------------------------------------------------------------------------
Gerald S. Frey Senior Vice President/Senior Portfolio Manager of the Registrant and each of
the other investment companies in the Delaware Investments family, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Delaware Capital Management, Inc.
- ------------------------------------------------- ------------------------------------------------------------------------------
Susan L. Hanson Senior Vice President/Global Marketing and Client Services of Delaware
Management Company (a series of Delaware Management Business Trust); Senior
Vice President/Global Marketing and Client Services of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delvoy , Inc., Delaware Management
Company, Inc., Delaware Management Business Trust, Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Capital Management, Inc., Delaware International Holdings
Ltd., Founders Holdings, Inc. and Delaware Management Business Trust; Senior
Vice President/Corporate Controller of the Registrant and each of the other
investment companies in the Delaware Investments family and Delaware
Investment Advisers (a series of Delaware Management Business Trust);
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company; Senior Vice President/Assistant Treasurer of
Founders CBO Corporation; Chief Financial Officer of Retirement Financial
Services, Inc.
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President/Human
Resources of Delaware Management Holdings, Inc.; Senior Vice President/Human
Resources of DMH Corp.; Senior Vice President/Human Resources of Delvoy,
Inc.; Senior Vice President/Human Resources of Delaware Management Company,
Inc.; Senior Vice President/Human Resources of Delaware Management Business
Trust; Senior Vice President/Human Resources of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Senior Vice
President/Human Resources of Delaware Service Company, Inc.; Senior Vice
President/Human Resources of Delaware Capital Management, Inc.; Senior Vice
President/Human Resources of Delaware Retirement Financial Services, Inc.;
Senior Vice President/Human Resources of Delaware Management Trust Company;
Senior Vice President/Human Resources of Delaware Distributors, Inc.;
Senior Vice President/Human Resources of Delaware Distributors, L.P.;
Senior Vice President/Human Resources of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President, Deputy General Counsel and Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Senior
Vice President, Deputy General Counsel and Secretary of Delaware Management
Holdings, Inc.; Senior Vice President, Deputy General Counsel and Secretary
of DMH Corp.; Senior Vice President, Deputy General Counsel and Secretary of
Delaware Management Business Trust; Senior Vice President, Deputy General
Counsel and Secretary of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President, Deputy General Counsel
and Secretary of Retirement Financial Services, Inc.; Senior Vice President,
Deputy General Counsel and Secretary of Delaware Distributors, Inc.; Senior
Vice President, Deputy General Counsel and Assistant Secretary of Delaware
Distributors, L.P.; Senior Vice President, Secretary and Deputy General
Counsel of Delaware Management Trust Company; Senior Vice President,
Secretary and Deputy General Counsel of Delaware International Holdings
Ltd.; Senior Vice President, Secretary and Deputy General Counsel of Delvoy,
Inc.; Senior Vice President, Secretary and Deputy General Counsel of
Delaware Management Company, Inc.; Senior Vice President, Secretary and
Deputy General Counsel of Delaware Service Company, Inc.; Senior Vice
President, Secretary and Deputy General Counsel of Delaware Capital
Management, Inc.; Secretary of Founders CBO Corporation; Senior Vice
President, Deputy General Counsel and Secretary of Founders Holdings, Inc.;
Senior Vice President, Deputy General Counsel and Assistant Secretary of the
Registrant and each of the other investment companies in the Delaware
Investments family
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane,
Philadelphia, PA.
- ------------------------------------------------- ------------------------------------------------------------------------------
Eric E. Miller Senior Vice President, Deputy General Counsel and Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business
Trust); Senior Vice President, Deputy General Counsel and Assistant
Secretary of Delaware Management Holdings, Inc.; Senior Vice President,
Deputy General Counsel and Assistant Secretary of DMH Corp.; Senior Vice
President, Deputy General Counsel and Assistant Secretary of Delvoy, Inc.;
Senior Vice President, Deputy General Counsel and Assistant Secretary of
Delaware Management Company, Inc.; Senior Vice President, Deputy General
Counsel and Assistant Secretary of Delaware Management Business Trust;
Senior Vice President, Deputy General Counsel and Assistant Secretary of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Senior Vice President, Deputy General Counsel and Assistant
Secretary of Delaware Service Company, Inc.; Senior Vice President, Deputy
General Counsel and Assistant Secretary of Delaware Capital Management,
Inc.; Senior Vice President, Deputy General Counsel and Assistant Secretary
of Retirement Financial Services, Inc.; Senior Vice President, Deputy
General Counsel and Assistant Secretary of Delaware Distributors, Inc.;
Senior Vice President, Deputy General Counsel and Assistant Secretary of
Delaware Distributors, L.P.; Senior Vice President, Deputy General Counsel
and Assistant Secretary of Founders Holdings, Inc.; Senior Vice President,
Deputy General Counsel and Secretary of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
James L. Shields Senior Vice President, Chief Information Officer of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice
President, Chief Information Officer of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Senior Vice President, Chief
Information Officer of Delaware Service Company, Inc.; Senior Vice
President, Chief Information Officer of Delaware Capital Management Company,
Inc.; Senior Vice President, Chief Information Officer of Retirement
Financial Services, Inc.; Senior Vice President, Chief Information Officer
of Delaware Distributors, L.P.
- ------------------------------------------------- ------------------------------------------------------------------------------
Gary T. Abrams Vice President/Equity Trading of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Equity Trading of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Christopher S. Adams Vice President/Equity Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Equity Analyst of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Robert L. Arnold Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Capital Management, Inc.; Vice President/Senior Portfolio Manager
of the Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Marshall T. Bassett Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Christopher S. Beck Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family.
Trustee of New Castle County Pension Board since October 1992, Wilmington DE.
- ------------------------------------------------- ------------------------------------------------------------------------------
Richard E. Beister Vice President/Trading Operations of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Trading Operations of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Lisa O. Brinkley Vice President/Compliance Director of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Compliance Director
of Delaware Management Holdings, Inc.; Vice President/Compliance Director of
DMH Corp.; Vice President/Compliance Director of Delvoy, Inc.; Vice
President/Compliance Director of Delaware Management Company, Inc.; Vice
President/Compliance Director of Delaware Management Business Trust; Vice
President/Compliance Director of Delaware Investment Advisers (a series of
Delaware Management Business Trust);Vice President/Compliance Director of
Delaware Service Company, Inc.; Vice President/Compliance Director of
Delaware Capital Management, Inc.; Vice President/Compliance Director of
Retirement Financial Services, Inc.; Vice President/Compliance
Director/Assistant Secretary of Delaware Management Business Trust; Vice
President/Compliance Director of Delaware Distributors, Inc.; Vice
President/Compliance Director of Delaware Distributors, L.P.; Vice
President/Compliance Director of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
Michael P. Buckley Vice President/Portfolio Manager/Senior Municipal Analyst of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager/Senior Municipal Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager/Senior Municipal Analyst of the Registrant and
each of the other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
MaryEllen M. Carrozza Vice President/Client Services of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Client Services of
Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President/Client Services of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Stephen R. Cianci Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Mitchell L. Conery Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Timothy G. Connors Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Capital Management, Inc.; Vice President/Senior Portfolio Manager
of the Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
George E. Deming Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
James P. Dokas Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/ Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Michael J. Dugan Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Taxation of Delaware Management
Holdings, Inc.; Vice President/Taxation of DMH Corp.; Vice
President/Taxation of Delvoy, Inc.; Vice President/Taxation of Delaware
Management Company, Inc.; Vice President/Taxation of Delaware Management
Business Trust; Vice President/Taxation of Delaware Investment Advisers (a
series of Delaware Management Business Trust);Vice President/Taxation of
Delaware Service Company, Inc.; Vice President/Taxation of Delaware Capital
Management, Inc.; Vice President/Taxation of Retirement Financial Services,
Inc.; Vice President/Taxation of Delaware Distributors, Inc.; Vice
President/Taxation of Delaware Distributors, L.P.; Vice President/Taxation
of Founders Holdings, Inc.; Vice President/Taxation of Founders CBO
Corporation; Vice President/Taxation of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Joseph Fiorilla Vice President/Performance Analyst of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Performance Analyst
of Delaware Investment Advisers (a series of Delaware Management Business
Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
James A. Furgele Vice President/Investment Accounting of Delaware Management Company (a
series of Delaware Management Business Trust);Vice President/Investment
Accounting of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Vice President/Investment Accounting of Delaware Service
Company, Inc.; Vice President/Investment Accounting of the Registrant and
each of the other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Thomas C. Gariepy(3) Vice President/Director of Corporate Communications of Delaware Management
Company (a series of Delaware Management Business Trust); Vice
President/Director of Corporate Communications of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Stuart M. George Vice President/Equity Trading of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Equity Trading of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Barry Gladstein Vice President/Business Manager of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Business Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Brian T. Hannon Vice President of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
John A. Heffern Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
Elizabeth H. Howell Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
Jeffrey W. Hynoski Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Karina J. Ivstan Vice President/Strategic Planning of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Strategic Planning of
Delaware Management Holdings, Inc.; Vice President/Strategic Planning of
Delaware Management Business Trust; Vice President/Strategic Planning of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Strategic Planning of Delaware Service Company, Inc.;
Vice President/Strategic Planning of Delaware Capital Management, Inc.; Vice
President/Strategic Planning of Retirement Financial Services, Inc.; Vice
President/Strategic Planning of Delaware Management Trust Company; Vice
President/Strategic of Delaware Distributors, L.P.; Vice President/Strategic
Planning of the Registrant and each of the other investment companies in the
Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Audrey E. Kohart Vice President/Assistant Controller/Corporate Accounting of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President/Assistant Controller/Corporate Accounting of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Steven T. Lampe Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/ Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Philip Y. Lin Vice President, Associate General Counsel and Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business
Trust); Vice President, Associate General Counsel and Assistant Secretary of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President, Associate General Counsel and Assistant Secretary of
Delaware Service Company, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Delaware Capital Management, Inc.; Vice
President, Associate General Counsel and Assistant Secretary of Retirement
Financial Services, Inc.; Vice President, Associate General Counsel and
Assistant Secretary of Delaware Management Trust Company; Vice President,
Associate General Counsel and Assistant Secretary of Delaware Distributors,
L.P.; Vice President, Associate General Counsel and Assistant Secretary of
the Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Michael D. Mabry Vice President, Associate General Counsel and Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business
Trust); Vice President, Associate General Counsel and Assistant Secretary of
Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President, Associate General Counsel and Assistant Secretary of
Delaware Service Company, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Delaware Capital Management, Inc.; Vice
President, Associate General Counsel and Assistant Secretary of Retirement
Financial Services, Inc.; Vice President, Associate General Counsel and
Assistant Secretary of Delaware Distributors, L.P.; Vice President,
Associate General Counsel and Assistant Secretary of the Registrant and each
of the other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Founders Holdings, Inc., President and Director of Founders CBO Corporation;
Vice President/Senior Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family.
- ------------------------------------------------- ------------------------------------------------------------------------------
Andrew M. McCullagh, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Francis X. Morris Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Founders Holdings, Inc., Treasurer, Assistant Secretary and Director of
Founders CBO Corporation; Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Robert A. Norton, Jr. Vice President/Research Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Research Analyst of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
David P. O'Connor Vice President, Associate General Counsel and Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business
Trust); Vice President, Associate General Counsel and Assistant Secretary of
Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President, Associate General Counsel and Assistant Secretary of
Delaware Service Company, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Delaware Capital Management, Inc.; Vice
President, Associate General Counsel and Assistant Secretary of Retirement
Financial Services, Inc.; Vice President, Associate General Counsel and
Assistant Secretary of Delaware Distributors, L.P.; Vice President,
Associate General Counsel and Assistant Secretary of the Registrant and each
of the other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
- ------------------------------------------------- ------------------------------------------------------------------------------
Vice President/Assistant Controller of Delaware Management Company (a series
Richard Salus of Delaware Management Business Trust); Vice President/Assistant Controller
of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Assistant Controller of Delaware Management Trust
Company; Vice President/Assistant Controller of Delaware International
Holdings Ltd.
- ------------------------------------------------- ------------------------------------------------------------------------------
Richard D. Siedel Vice President/Assistant Controller/Manager, Payroll of Delaware Management
Company (a series of Delaware Management Business Trust); Vice
President/Assistant Controller/Manager, Payroll of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and Administration Services of Delaware Management
Company (a series of Delaware Management Business Trust); Vice
President/Facilities and Administration Services of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice
President/Facilities and Administration Services of Delaware Service
Company, Inc.; Vice President/Facilities and Administration Services of
Delaware Distributors, L.P.
- ------------------------------------------------- ------------------------------------------------------------------------------
Thomas J. Trotman Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Lori P. Wachs Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/ Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/ Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
*Business Address is 1818 Market Street, Philadelphia, PA 19103.
- --------------------------------------------------------------------------------
(1) PRESIDENT AND DIRECTOR, Lincoln Investment Management, Inc. 1987 to
present. EXECUTIVE VICE PRESIDENT/CHIEF INVESTMENT OFFICER of Lincoln
National Corporation 1992 to present.
(2) PRESIDENT, DIRECTOR OF MARKETING AND SENIOR PORTFOLIO MANAGER, Marvin &
Palmer Associates, Wilmington, DE 1996-1998.
(3) VICE PRESIDENT/DIRECTOR OF PUBLIC RELATIONS, Liberty Funds Distributor,
Inc., Boston, MA, 1996-1998.
- --------------------------------------------------------------------------------
<PAGE>
Item 27. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal
underwriter for all the mutual funds in the Delaware
Investments family.
(b) Information with respect to each director, officer or
partner of principal underwriter:
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- --------------------------------------------- ------------------------------------------- -----------------------------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Delaware Investment Advisers Limited Partner None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Delaware Capital Management, Inc. Limited Partner None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Bruce D. Barton President and Chief Executive Officer None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
David K. Downes Executive Vice President/Chief Operating President and Chief Executive
Officer/Chief Financial Officer Officer/Chief Financial Officer/Chief
Operating Officer and Trustee
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard J. Flannery Executive Vice President/General Counsel Executive Vice President/General Counsel
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Diane M. Anderson Senior Vice President/Retirement None
Operations
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael P. Bishof Senior Vice President/Treasurer/ Senior Vice President/Treasurer
Investment Accounting
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Daniel J. Brooks III Senior Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Terrence P. Cunningham Senior Vice President/National Sales None
Director, Financial Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/ Senior Vice President/Corporate
Corporate Controller Controller
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources Senior Vice President/Human Resources
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Bradley L. Kolstoe Senior Vice President/Western Division None
Sales, Independent Plannner and Insurance
Channel
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richelle S. Maestro Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/ Secretary Counsel/ Assistant Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Mac Macaulliffe Senior Vice President/Divisional Sales None
Manager
- --------------------------------------------- ------------------------------------------- -----------------------------------------
J. Chris Meyer Senior Vice President/Director, Product None
Management
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Eric E. Miller Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Stephen C. Nell Senior Vice President/National Retirement None
Sales
- --------------------------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- --------------------------------------------- ------------------------------------------- -----------------------------------------
<S> <C> <C>
Henry W. Orvin Senior Vice President/Eastern Divisional None
Sales Manager
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Christopher H. Price Senior Vice President/Channel Manager, None
Insurance
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Thomas E. Sawyer Senior Vice President/Director, National None
Sales
- --------------------------------------------- ------------------------------------------- -----------------------------------------
James L. Shields Senior Vice President/Chief Information None
Officer
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Steven Sorenson Senior Vice President/National Director,
Independent Planner Channel None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard P. Allen Vice President/Wholesaler, Midwest None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
David P. Anderson, Jr. Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Jeffrey H. Arcy Vice President/Wholesaler, None
South East Region
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Patrick A. Bearss Vice President/Wholesaler - Midwest None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Gabriella Bercze Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Larry D. Bridwell Vice President/Financial Institutions None
Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Lisa O. Brinkley Vice President/Compliance Director Vice President/Compliance Director
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Terrance L. Bussard Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Daniel H. Carlson Vice President/Marketing Services None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Larry Carr Vice President/Variable Annuity Sales None
Manager
- --------------------------------------------- ------------------------------------------- -----------------------------------------
William S. Carroll Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Matthew Coldren Vice President/National Accounts None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Patrick A Connelly Vice President/Registered Investment None
Adviser Sales
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Jessie V. Emery Vice President/Marketing Communications None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Edward A. Foley Vice President/Marketing Communications None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Susan T. Friestedt Vice President/Retirement Services None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Douglas R. Glennon Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Darryl S. Grayson Vice President/Director, Internal Sales None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Rhonda J. Guido Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- --------------------------------------------- ------------------------------------------- -----------------------------------------
<S> <C> <C>
Ronald A. Haimowitz Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Edward J. Hecker Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John R. Herron Vice President/Variable Annuity Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Steven N. Horton Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Dinah J. Huntoon Vice President/Product Manager, Equities None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Karina J. Istvan Vice President/Strategic Planning Vice President/Strategic Planning
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Christopher L. Johnston Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael J. Jordan Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Carolyn Kelly Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard M. Koerner Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Ellen M. Krott Vice President/Marketing None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John LeBoeuf Vice President/Independent Planner and None
Insurance Sales-East
- --------------------------------------------- ------------------------------------------- -----------------------------------------
SooHee Lee Vice President/Fixed Income & None
International Product Management
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Philip Y. Lin Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John R. Logan Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael D. Mabry Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Theodore T. Malone Vice President/ Independent Planner and None
Insurance Sales Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Debbie Marler Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Raymond G. McCarthy Vice President/National Accounts,
Independent Planner & Insurance Channel None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joanne C. McCranie Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Gregory J. McMillan Vice President/National Accounts None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Nathan W. Medin Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Scott L. Metzger Vice President/Business Development None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Jamie L. Meyer Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Roger J. Miller Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- --------------------------------------------- ------------------------------------------- -----------------------------------------
<S> <C> <C>
Christopher W. Moore Vice President/Variable Annuity Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Andrew F. Morris Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Patrick L. Murphy Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Scott E. Naughton Vice President/Independent Planner & None
Insurance Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Julie Nusbaum Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Julie A. Nye Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Daniel J. O'Brien Vice President/Insurance Products None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joseph T. Owczarek Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Otis S. Page Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Eric Preus Vice President/Wrap Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Philip G. Rickards Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Laura E. Roman Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Robert A. Rosso Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Terri Lynn Sabby Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard Salus Vice President/Assistant Controller None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Linda D. Shulz Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Gordon E. Searles Vice President/Client Services None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Catherine A. Seklecki Vice President/Retirement Sales None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John C. Shalloe Vice President/Wrap Fee Wholesaler, None
Western Region
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Edward B. Sheridan Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Kimberly Spangler Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Robert E. Stansbury Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Stephanie R. Szabo Vice President/Retirement Marketing None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael T. Taggart Vice President/Facilities and None
Administration Services
- --------------------------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
- ------------------------------------ -------------------------------------- -------------------------------------
- --------------------------------------------- ------------------------------------------- -----------------------------------------
<S> <C> <C>
Julia R. Vander Els Vice President/Retirement Plan None
Communications
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Wayne W. Wagner Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John A. Wells Vice President/Marketing Technology None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Courtney S. West Vice President/Institutional Sales None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Andrew J. Whitaker Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Scott Whitehouse Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Wesley Williams Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Theodore V. Wood Vice President/Technical Systems Officer None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Item 28. 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 29. Management Services. None.
Item 30. Undertakings.
(a) 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 17th day of December, 1999.
DELAWARE GROUP EQUITY FUNDS IV
By /s/David K. Downes
--------------------
David K. Downes
President and Chief Executive Officer
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/ David K. Downes President/Chief Executive Officer December 17, 1999
- -------------------------------------------- Chief Operating Officer/Chief Financial
David K. Downes Officer (Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer) and
Trustee
/s/ Wayne A. Stork * Trustee December 17, 1999
- --------------------------------------------
Wayne A. Stork
/s/Walter P. Babich * Trustee December 17, 1999
- --------------------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Trustee December 17, 1999
- --------------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Trustee December 17, 1999
- --------------------------------------------
Ann R. Leven
/s/Thomas F. Madison * Trustee December 17, 1999
- --------------------------------------------
Thomas F. Madison
/s/Charles E. Peck * Trustee December 17, 1999
- --------------------------------------------
Charles E. Peck
/s/John H. Durham * Trustee December 17, 1999
- --------------------------------------------
John H. Durham
/s/Janet L. Yeomans * Trustee December 17, 1999
- --------------------------------------------
Janet L. Yeomans
*By /s/ David K. Downes
--------------------
David K. Downes
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.J Consent of Auditors
<PAGE>
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. 26 to the Registration Statement (Form N-1A) (No.
33-442) of Delaware Group Equity Funds IV of our reports dated November 8, 1999,
included in the 1999 Annual Reports to shareholders.
/s/Ernst & Young LLP
- ---------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
December 15, 1999
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Equity Funds IV, Inc. - Delaware DelCap Fund
We have audited the accompanying statement of net assets of Delaware Group
Equity Funds IV, Inc. - Delaware DelCap Fund (the "Fund") as of September 30,
1999, 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, 1999, by correspondence with the 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. - Delaware DelCap Fund at September 30,
1999, 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.
Ernst & Young LLP
- -------------------------------
Philadelphia, Pennsylvania
November 8, 1999
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Equity Funds IV, Inc. - Delaware Diversified Growth Fund
We have audited the accompanying statement of net assets of Delaware Group
Equity Funds IV, Inc. - Delaware Diversified Growth Fund (the "Fund") as of
September 30, 1999, 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, 1999, by correspondence with the 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. - Delaware Diversified Growth Fund at
September 30, 1999, 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.
/s/Ernst & Young LLP
- -----------------------------
Philadelphia, Pennsylvania
November 8, 1999
