SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-11419
File No. 811-4997
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 20 /X/
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AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 20
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DELAWARE GROUP EQUITY FUNDS V, INC.
(formerly Delaware Group Value Fund, Inc.)
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(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-2923
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George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- ----------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: February 3, 1998
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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X on February 3, 1998 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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on (date) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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Title of Securities Being Registered
Small Cap Value Fund A Class, Small Cap Value Fund B Class, Small Cap
Value Fund C Class, Small Cap Value Fund Institutional Class, Retirement
Income Fund A Class, Retirement Income Fund B Class, Retirement Income
Fund C Class, Retirement Income Fund Institutional Class
--- C O N T E N T S ---
This Post-Effective Amendment No. 20 to Registration File No. 33-11419
includes the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectuses
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
CROSS-REFERENCE SHEET
PART A
Location in
Item No. Description Prospectuses
Small Cap Value Fund
A Class/ Institutional
B Class/ Class
C Class
1 Cover Page Cover Page CoverPage
2 Synopsis Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses
3 Condensed Financial
Information Financial Financial
Highlights Highlights
4 General Description
of Registrant Investment Investment
Objective and Objective and
Policies; Classes of Shares; Policies Classes of
Other Investment Shares; Other
Policies and Risk Investment Policies
Considerations and Risk Considerations
5 Management of the Fund Management of Management of
the Fund the Fund
6 Capital Stock and
Other Securities The Delaware Dividends and
Difference; Dividends Distributions;
and Distributions; Taxes;
Taxes; Classes of Shares Classes of Shares
7 Purchase of Securities
Being Offered Cover Page; Cover Page;
Classes of Shares; Classes of Shares;
How to Buy Shares; How to Buy
Calculation of Shares;
Offering Price Calculation of Net
and Net Asset Asset Value Per
Value Per Share; Share;
Management of Management of
the Fund the Fund
8 Redemption or Repurchase Classes of Classes of
Shares; How to Shares; How to
Buy Shares; Buy Shares;
Redemption Redemption
and Exchange and Exchange
9 Legal Proceedings None None
Location in
Item No. Description Prospectuses
Retirement Income Fund
A Class/ Institutional
B Class/ Class
C Class
1 Cover Page Cover Page Cover Page
2 Synopsis Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses
3 Condensed Financial
Information Financial Financial
Highlights Highlights
4 General Description
of Registrant Investment Investment
Objective and Objective and
Policies; Classes of Shares; Policies Classes of
Other Investment Shares; Other
Policies and Risk Investment Policies
Considerations and Risk Considerations
5 Management of the Fund Management of Management of
the Fund the Fund
6 Capital Stock and
Other Securities The Delaware Dividends and
Difference; Dividends Distributions;
and Distributions; Taxes;
Taxes; Classes of Shares Classes of Shares
7 Purchase of Securities
Being Offered Cover Page; Cover Page;
How to Buy Shares; How to Buy
Calculation of Shares;
Offering Price Calculation of Net
and Net Asset Asset Value Per
Value Per Share; Share;
Management of Management of
the Fund the Fund
8 Redemption or Repurchase How to How to
Buy Shares; Buy Shares;
Redemption Redemption
and Exchange and Exchange
9 Legal Proceedings None None
CROSS REFERENCE SHEET
PART B
Location in Statement
Item No. Description of Additional Information
10 Cover Page Cover Page
11 Table of Contents Table of Contents
12 General Information and History General Information
13 Investment Objectives and Policies Investment Policies and
Portfolio Techniques
14 Management of the Registrant Officers and Directors
15 Control Persons and Principal
Holders of Securities Officers and Directors
16 Investment Advisory
and Other Services Plans Under Rule 12b-1
for the Fund Classes (under
Purchasing Shares);
Investment Management
Agreements; Officers
and Directors; General
Information; Financial
Statements
17 Brokerage Allocation Trading Practices and Brokerage
18 Capital Stock
and Other Securities Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption
and Pricing of Securities
Being Offered Purchasing Shares; Determining
Offering Price and Net Asset
Value; Redemption and
Repurchase; Exchange Privilege
20 Tax Status Accounting and Tax
Issues; Distributions
and Taxes
21 Underwriters Purchasing Shares
22 Calculation of
Performance Data Performance Information
23 Financial Statements Financial Statements
CROSS REFERENCE SHEET
PART C
Location
Item No. Description in Part C
24 Financial Statements and Exhibits Item 24
25 Persons Controlled by or under Common
Control with Registrant Item 25
26 Number of Holders of Securities Item 26
27 Indemnification Item 27
28 Business and Other Connections
of Investment Adviser Item 28
29 Principal Underwriters Item 29
30 Location of Accounts and Records Item 30
31 Management Services Item 31
32 Undertakings Item 32
A CLASS
B CLASS
C CLASS
DELAWARE GROUP
SMALL CAP VALUE FUND
(formerly Value Fund)
PROSPECTUS FEBRUARY 3, 1998
TABLE OF
CONTENTS
COVER PAGE 1
SYNOPSIS 2
SUMMARY OF EXPENSES 4
FINANCIAL HIGHLIGHTS 6
INVESTMENT OBJECTIVES AND POLICIES
SUITABILITY 8
INVESTMENT STRATEGY 8
RISK FACTORS 9
THE DELAWARE DIFFERENCE
PLANS AND SERVICES 10
CLASSES OF SHARES 12
HOW TO BUY SHARES 18
REDEMPTION AND EXCHANGE 21
DIVIDENDS AND DISTRIBUTIONS 25
TAXES 26
CALCULATION OF OFFERING PRICE AND
NET ASSET VALUE PER SHARE 28
MANAGEMENT OF THE FUND 29
OTHER INVESTMENT POLICIES AND
RISK CONSIDERATIONS 32
APPENDIX A -- RATINGS 34
SMALL CAP
VALUE FUND
A CLASS/B CLASS/C CLASS
FEBRUARY 3, 1998
1818 MARKET STREET, PHILADELPHIA, PA 19103
FOR PROSPECTUS AND PERFORMANCE:
NATIONWIDE 800-523-4640
INFORMATION ON EXISTING ACCOUNTS:
(SHAREHOLDERS ONLY)
NATIONWIDE 800-523-1918
DEALER SERVICES:
(BROKER/DEALERS ONLY)
NATIONWIDE 800-362-7500
REPRESENTATIVES OF FINANCIAL INSTITUTIONS:
NATIONWIDE 800-659-2265
This Prospectus describes the Small Cap Value Fund series (the
Fund) (formerly Value Fund series) of Delaware Group Equity Funds
V, Inc. ("Equity Funds V, Inc.") (formerly Delaware Group Value
Fund, Inc.), a professionally-managed mutual fund of the series
type. The Fund intends to achieve its investment objective of
capital appreciation by investing primarily in common stocks whose
market values appear low relative to their underlying value or
future potential.
The Fund offers Small Cap Value Fund A Class ("Class A Shares"),
Small Cap Value Fund B Class ("Class B Shares") and Small Cap Value
Fund C Class ("Class C Shares") (individually, a "Class" and
collectively, the "Classes").
This Prospectus relates only to the Classes listed above and sets
forth information that you should read and consider before you
invest. Please retain it for future reference. The Fund's Statement
of Additional Information ("Part B" of Equity Funds V, Inc.'s
registration statement), dated February 3, 1998, as it may be
amended from time to time, contains additional information about the
Fund and has been filed with the Securities and Exchange Commission
("SEC"). Part B is incorporated by reference into this Prospectus
and is available, without charge, by writing to Delaware
Distributors, L.P. at the above address or by calling the above
numbers. The Fund's financial statements appear in its Annual
Report, which will accompany any response to requests for Part B.
The SEC also maintains a Web site (http://www.sec.gov) that contains
Part B, material we incorporated by reference, and other information
regarding registrants that electronically file with the SEC.
The Fund also offers Small Cap Value Fund Institutional Class, which
is available for purchase only by certain investors. A prospectus
for Small Cap Value Fund Institutional Class can be obtained by
writing to Delaware Distributors, L.P. at the above address or by
calling the above number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS.
MUTUAL FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER,
SHARES OF THE FUND ARE NOT FDIC OR NCUSIF INSURED, ARE NOT
GUARANTEED BY ANY BANK OR ANY CREDIT UNION, ARE NOT OBLIGATIONS OF
ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT RISK, INCLUDING
THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF THE
FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
SYNOPSIS
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek capital appreciation
by investing primarily in common stocks whose market values appear
low relative to their underlying value or future potential. For
further details, see Investment Objective and Policies and Other
Investment Policies and Risk Considerations.
RISK FACTORS AND SPECIAL CONSIDERATIONS
The Fund may enter into options for hedging purposes to
counterbalance portfolio volatility. While the Fund does not engage
in options for speculative purposes, there are risks that result
from use of these instruments by the Fund, and the investor should
review the descriptions of these risks in this Prospectus. See
Investment Strategy under Investment Objective and Policies and
Other Investment Policies and Risk Considerations.
INVESTMENT MANAGER, DISTRIBUTOR AND
TRANSFER AGENT
Delaware Management Company, Inc. (the "Manager") furnishes
investment management services to the Fund, subject to the
supervision and direction of Equity Funds V, Inc.'s Board of
Directors. The Manager also provides investment management services
to certain of the other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor
for the Fund and for all of the other mutual funds in the Delaware
Group. Delaware Service Company, Inc. (the "Transfer Agent") is the
shareholder servicing, dividend disbursing, accounting services and
transfer agent for the Fund and for all of the other mutual funds in
the Delaware Group. See Summary of Expenses and Management of the
Fund for further information regarding the Manager and the fees
payable under the Fund's Investment Management Agreement.
SALES CHARGES
The price of Class A Shares includes a maximum front-end sales
charge of 4.75% of the offering price. The sales charge is reduced
on certain transactions of at least $100,000 but under $1,000,000.
For purchases of $1,000,000 or more, the front-end sales charge is
eliminated (subject to a CDSC of 1% if shares are redeemed within 12
months of purchase if in connection with such purchase a dealer
commission is paid). Class A Shares are subject to annual 12b-1 Plan
expenses for the life of the investment.
The price of Class B Shares is equal to the net asset value per
share. Class B Shares are subject to a contingent deferred sales
charge ("CDSC") of: (i) 4% if shares are redeemed within two years
of purchase; (ii) 3% if shares are redeemed during the third or
fourth year following purchase; (iii) 2% if shares are redeemed
during the fifth year following purchase; and (iv) 1% if shares are
redeemed during the sixth year following purchase. Class B Shares
are subject to annual 12b-1 Plan expenses for approximately eight
years after purchase.
The price of Class C Shares is equal to the net asset value per
share. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months of purchase. Class C Shares are subject to
annual 12b-1 Plan expenses for the life of the investment.
See Classes of Shares and Distribution (12b-1) and Service under
Management of the Fund.
PURCHASE AMOUNTS
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments must generally be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in
an amount that is less than $1,000,000. An investor may exceed these
maximum purchase limitations for Class B Shares and Class C Shares
by making cumulative purchases over a period of time. An investor
should keep in mind, however, that reduced front-end sales charges
apply toinvestments of $100,000 or more in Class A Shares, and that
Class A Shares are subject to lower annual 12b-1 Plan expenses than
Class B and Class C Shares and generally are not subject to a CDSC.
The minimum and maximum purchase amounts for retirement plans may
vary. See How to Buy Shares.
REDEMPTION AND EXCHANGE
Class A Shares of the Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange
request. Neither the Fund nor the Distributor assesses a charge for
redemptions or exchanges of Class A Shares, except for certain
redemptions of shares purchased at net asset value, which may be
subject to a CDSC if a dealer's commission was paid in connection
with such purchases. See Front-End Sales Charge Alternative -- Class
A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at
the net asset value calculated after receipt of the redemption or
exchange request subject, in the case of redemptions, to any
applicable CDSC. Neither the Fund nor the Distributor assesses any
charges other than the CDSC for redemptions or exchanges of Class B
or Class C Shares. There are certain limitations on an investor's
ability to exchange shares between the various classes of shares
that are offered. See Redemption and Exchange.
OPEN-END INVESTMENT COMPANY
Equity Funds V, Inc., which was organized as a Maryland corporation
on January 16, 1987, is an open-end management investment company.
The Fund's portfolio of assets is diversified as defined by the
Investment Company Act of 1940 (the "1940 Act"). See Shares under
Management of the Fund.
SUMMARY OF
EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:
CLASS A CLASS B CLASS C
SHAREHOLDER TRANSACTION EXPENSES SHARES SHARES SHARES
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 4.75% None None
Maximum Sales Charge Imposed
on Reinvested Dividends (as a
percentage of offering price) None None None
Maximum Contingent Deferred
Sales Charge (as a percentage
of original purchase price or
redemption proceeds,
as applicable) None* 4.00%* 1.00%*
Redemption Fees None** None** None**
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE CLASS A CLASS B CLASS C
DAILY NET ASSETS) SHARES SHARES SHARES
Management Fees 0.75% 0.75% 0.75%
12b-1 Expenses
(including service fees) 0.30%+ 1.00%+ 1.00%+
Other Operating Expenses 0.34% 0.34% 0.34%
-------- -------- --------
Total Operating Expenses 1.39% 2.09% 2.09%
======== ======== ========
* Class A purchases of $1 million or more may be made at net asset
value. However, if in connection with any such purchase a dealer
commission is paid to the financial adviser through whom such
purchase is effected, a CDSC of 1% will be imposed on certain
redemptions within 12 months of purchase ("Limited CDSC").
Additional Class A purchase options involving the imposition of a
CDSC may be permitted as described in the Prospectus from time to
time. Class B Shares are subject to a CDSC of: (i) 4% if shares are
redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase; (iii)
2% if shares are redeemed during the fifth year following purchase;
(iv) 1% if shares are redeemed during the sixth year following
purchase; and (v) 0% thereafter. Class C Shares are subject to a
CDSC of 1% if the shares are redeemed within 12 months of purchase.
See Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value under Redemption and
Exchange and Deferred Sales Charge Alternative -- Class B Shares and
Level Sales Charge Alternative -- Class C Shares under Classes of
Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
+ Class A Shares, Class B Shares and Class C Shares are subject to
separate 12b-1 Plans. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted
by rules of the National Association of Securities Dealers, Inc.
(the "NASD"). See Distribution (12b-1) and Service under Management
of the Fund.
Investors utilizing the Delaware Group Asset Planner asset
allocation service also typically incur an annual maintenance fee of
$35 per Strategy. However, effective November 1, 1996, the annual
maintenance fee is waived until further notice. Investors who
utilize the Asset Planner for an Individual Retirement Account
("IRA") will pay an annual IRA fee of $15 per Social Security
number. See Delaware Group Asset Planner in Part B.
For expense information about Small Cap Value Fund Institutional
Class, see the separate prospectus relating to that class.
The following example illustrates the expenses that an investor
would pay on a $1,000 investment over various time periods, assuming
(1) a 5% annual rate of return, (2) redemption and no redemption at
the end of each time period and (3) for Class B Shares and Class C
Shares, payment of a CDSC at the time of redemption, if applicable.
ASSUMING REDEMPTION
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------ -------- -------- -------- --------
Class A Shares $61(1) $89 $120 $206
Class B Shares $61 $95 $132 $224(2)
Class C Shares $31 $65 $112 $242
ASSUMING NO REDEMPTION
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------ -------- -------- -------- --------
Class A Shares $61 $89 $120 $206
Class B Shares $21 $65 $112 $224(2)
Class C Shares $21 $65 $112 $242
(1 ) Generally, no redemption charge is assessed upon redemption of
Class A Shares. Under certain circumstances, however, a Limited CDSC
or other CDSC, which has not been reflected in this calculation, may
be imposed on certain redemptions. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B
Shares of the Fund will be automatically converted into Class A
Shares of the Fund. The example above assumes conversion of Class B
Shares at the end of the eighth year. However, the conversion may
occur as late as three months after the eighth anniversary of
purchase, during which time the higher 12b-1 Plan fees payable by
Class B Shares will continue to be assessed. The ten year expense
numbers for Class B Shares reflect the expenses of Class B Shares
for year eight and the expenses of Class A Shares for years nine and
ten. See Automatic Conversion of Class B Shares under Classes of
Shares for a description of the automatic conversion feature.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in any
of the Classes will bear directly or indirectly.
FINANCIAL
HIGHLIGHTS
The following financial highlights are derived from the financial
statements of Delaware Group Equity Funds V, Inc. -- Small Cap Value
Fund and have been audited by Ernst & Young LLP, independent
auditors. The data should be read in conjunction with the financial
statements, related notes, and the report of Ernst & Young LLP
covering such financial information and highlights, all of which are
incorporated by reference into Part B. Further information about the
Fund's performance is contained in its Annual Report to
shareholders. A copy of the Fund's Annual Report (including the
report of Ernst & Young LLP) may be obtained from Equity Funds V,
Inc. upon request at no charge.
CLASS A SHARES
---------------------------------
YEAR ENDED
11/30/97 11/30/96 11/30/95
Net Asset Value, Beginning of Period $25.780 $22.760 $19.320
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(5) 0.131 0.122 0.253
Net Gains (Losses) on Securities
(both realized and unrealized) 7.914 4.028 3.597
-------- -------- --------
Total From Investment Operations 8.045 4.150 3.850
-------- -------- --------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.135) (0.240) (0.160)
Distributions (from capital gains) (3.900) (0.890) (0.250)
-------- -------- --------
Total Distributions (4.035) (1.130) (0.410)
-------- -------- --------
Net Asset Value, End of Period $29.790 $25.780 $22.760
======== ======== ========
TOTAL RETURN(1) 36.38% 19.08% 20.39%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $268,266 $192,297 $177,011
Ratio of Expenses to Average
Daily Net Assets 1.39% 1.45% 1.48%
Ratio of Net Investment Income
(Loss) to Average Daily
Net Assets 0.51% 0.51% 1.18%
Portfolio Turnover Rate 53% 87% 65%
Average Commission Rate Paid(6) $0.0599 $0.060 N/A
CLASS A SHARES
------------------------
YEAR ENDED
11/30/94 11/30/93
Net Asset Value, Beginning of Period $20.070 $17.750
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(5) 0.142 0.033
Net Gains (Losses) on Securities
(both realized and unrealized) (0.687) 3.147
-------- --------
Total From Investment Operations (0.545) 3.180
-------- --------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.035) (0.040)
Distributions (from capital gains) (0.170) (0.820)
-------- --------
Total Distributions (0.205) (0.860)
-------- --------
Net Asset Value, End of Period $19.320 $20.070
======== ========
TOTAL RETURN(1) (2.78%) 18.59%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $179,498 $151,384
Ratio of Expenses to Average
Daily Net Assets 1.46% 1.64%
Ratio of Net Investment Income
(Loss) to Average Daily
Net Assets 0.75% 0.25%
Portfolio Turnover Rate 14% 32%
Average Commission Rate Paid(6) N/A N/A
CLASS A SHARES
--------------------------------
YEAR ENDED
11/30/92 11/30/91 11/30/90
Net Asset Value, Beginning of Period $15.320 $11.050 $14.030
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(5) 0.060 (0.006) 0.149
Net Gains (Losses) on Securities
(both realized and unrealized) 3.360 4.681 (2.269)
-------- -------- --------
Total From Investment Operations 3.420 4.675 (2.120)
-------- -------- --------
LESS DISTRIBUTIONS
Dividends (from net investment income) none (0.155) (0.140)
Distributions (from capital gains) (0.990) (0.250) (0.720)
-------- -------- --------
Total Distributions (0.990) (0.405) (0.860)
-------- -------- --------
Net Asset Value, End of Period $17.750 $15.320 $11.050
======== ======== ========
TOTAL RETURN(1) 22.99% 43.61% (16.14%)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $38,792 $12,041 $7,746
Ratio of Expenses to Average
Daily Net Assets 1.93% 2.26% 1.79%
Ratio of Net Investment Income
(Loss) to Average Daily
Net Assets 0.39% (0.07% 1.12%
Portfolio Turnover Rate 68% 99% 69%
Average Commission Rate Paid(6) N/A N/A N/A
CLASS A SHARES
------------------------
YEAR ENDED
11/30/89 11/30/88
Net Asset Value, Beginning of Period $10.440 $7.740
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(5) 0.131 0.054
Net Gains (Losses) on Securities
(both realized and unrealized) 3.529 2.691
-------- --------
Total From Investment Operations 3.660 2.745
-------- --------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.070) (0.045)
Distributions (from capital gains) none none
-------- --------
Total Distributions (0.070) (0.045)
-------- --------
Net Asset Value, End of Period $14.030 $10.440
======== ========
TOTAL RETURN(1) 35.28%(2) 35.57%(2)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $11,055 $6,797
Ratio of Expenses to Average
Daily Net Assets 1.98%(3) 2.02%(3)
Ratio of Net Investment Income
(Loss) to Average Daily
Net Assets 1.14%(4) 0.35%(4)
Portfolio Turnover Rate 103% 66%
Average Commission Rate Paid(6) N/A N/A
(1) Does not reflect maximum front-end sales charge that is or was in
effect nor the 1% Limited CDSC that would apply in the event of
certain redemptions within 12 months of purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Made
At Net Asset Value.
(2) Total return reflects the expense limitation referenced in Notes 3
and 4.
(3) Ratio of expenses to average daily net assets prior to expense
limitation was 2.16% for 1989 and 2.23% for 1988.
(4) Ratio of net investment income to average daily net assets prior to
expense limitation was 0.97% for 1989 and 0.14% for 1988.
(5) The years ended November 30, 1996 and November 30, 1997 net
investment income per share information was based on the average
shares outstanding method.
(6) Computed by dividing the total amount of commissions paid by the
total number of shares purchased and sold during the period for
which there was a commission charged.
CLASS B SHARES
----------------------
YEAR ENDED
11/30/97 11/30/96
Net Asset Value, Beginning of Period $25.570 $22.590
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(5) (0.042) (0.041)
Net Gains (Losses) on Securities
(both realized and unrealized) 7.832 4.006
-------- --------
Total From Investment Operations 7.790 3.965
-------- --------
LESS DISTRIBUTIONS
Dividends (from net investment income) none (0.095)
Distributions (from capital gains) (3.900) (0.890)
-------- --------
Total Distributions (3.900) (0.985)
-------- --------
Net Asset Value, End of Period $29.460 $25.570
======== ========
TOTAL RETURN 35.36%(3) 18.26%(3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $39,733 $12,730
Ratio of Expenses to Average
Daily Net Assets 2.09% 2.15%
Ratio of Net Investment Income
(Loss) to Average Daily
Net Assets (0.19%) (0.19%)
Portfolio Turnover Rate 53% 87%
Average Commission Rate Paid(6) $0.0599 $0.060
CLASS B SHARES
---------------------
PERIOD
9/6/94(1)
YEAR ENDED THROUGH
11/30/95 11/30/94
Net Asset Value, Beginning of Period $19.300 $20.280
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(5) 0.141 0.011
Net Gains (Losses) on Securities
(both realized and unrealized) 3.549 (0.991)
-------- --------
Total From Investment Operations 3.690 (0.980)
-------- --------
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.150) none
Distributions (from capital gains) (0.250) none
-------- --------
Total Distributions (0.400) none
-------- --------
Net Asset Value, End of Period $22.590 $19.300
======== ========
TOTAL RETURN 19.55%(3) (4.83%)(3)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $5,788 $1,455
Ratio of Expenses to Average
Daily Net Assets 2.18% 2.16%
Ratio of Net Investment Income
(Loss) to Average Daily
Net Assets 0.48% 0.05%
Portfolio Turnover Rate 65% 14%
Average Commission Rate Paid(6) N/A N/A
CLASS C SHARES
---------------------------------
PERIOD
YEAR 11/29/95(2)
ENDED THROUGH
11/30/97 11/30/96 11/30/95
Net Asset Value, Beginning of Period $25.550 $22.760 $22.510
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)(5) (0.033) (0.043) none
Net Gains (Losses) on Securities
(both realized and unrealized) 7.823 4.003 0.250
-------- -------- --------
Total From Investment Operations 7.790 3.960 0.250
-------- -------- --------
LESS DISTRIBUTIONS
Dividends (from net investment income) none (0.280) none
Distributions (from capital gains) (3.900) (0.890) none
-------- -------- --------
Total Distributions (3.900) (1.170) none
-------- -------- --------
Net Asset Value, End of Period $29.440 $25.550 $22.760
======== ======== ========
TOTAL RETURN 35.40%(3) 18.23%(3) (4)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000's omitted) $12,547 $3,360 $5
Ratio of Expenses to Average
Daily Net Assets 2.09% 2.15% (4)
Ratio of Net Investment Income
(Loss) to Average Daily
Net Assets (0.19%) (0.19%) (4)
Portfolio Turnover Rate 53% 87% (4)
Average Commission Rate Paid(6) $0.0599 $0.060 N/A
(1) Date of initial public offering; ratios have been annualized, but
total return has not been annualized.
(2) Date of initial public offering.
(3) Total return does not include any applicable CDSC, which varies
from 1-4%, depending on the holding period for Class B Shares and 1%
for Class C Shares for 12 months from the date of purchase.
(4) The ratios of expenses and net investment income to average daily
net assets, portfolio turnover and total return have been omitted as
management believes that such ratios, portfolio turnover and total
return for this relatively short period are not meaningful.
(5) The years ended November 30, 1996 and November 30, 1997 net
investment income per share information was based on the average
shares outstanding method.
(6) Computed by dividing the total amount of commissions paid by the
total number of shares purchased and sold during the period for
which there was a commission charged.
INVESTMENT OBJECTIVES
AND POLICIES
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is capital appreciation. The
Fund's strategy is to invest primarily in common stocks and issues
convertible into common stocks which, in the opinion of the Manager,
have market values that appear low relative to their underlying
value or future earnings and growth potential.
SUITABILITY
The Fund may be suitable for investors interested in long-term
capital appreciation. Providing current income is not an objective
of the Fund. Any income produced is expected to be minimal.
Investors should not consider a purchase of Fund shares as
equivalent to a complete investment program. The Delaware Group
includes a family of funds, generally available through registered
investment dealers, which may be used together to create a more
complete investment program.
Ownership of Fund shares reduces the bookkeeping and administrative
inconvenience that would be involved with direct purchases of the
Fund's portfolio securities.
Net asset value may fluctuate at times in response to market
conditions and, as a result, the Fund is not appropriate for a
short-term investor.
INVESTMENT STRATEGY
While management believes that the Fund's investment objective may
best be attained by investing in common stocks, the Fund may also
invest in other securities including, but not limited to,
convertible securities, warrants, preferred stocks, bonds and
foreign securities. Fixed-income securities are expected to receive
only minor emphasis.
The Fund will purchase securities which the Manager believes to be
undervalued in relation to asset value or long-term earning power of
the companies. The Manager may also invest in securities of
companies where current or anticipated favorable changes within a
company provide an opportunity for capital appreciation. The
Manager's emphasis will be on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the
market.
The Fund may invest without regard to a minimum grade level where
there are favorable changes in a company's earnings or growth
potential or where general economic conditions and/or the interest
rate environment provide an opportunity for appreciation in these
securities. Investment characteristics and certain risks associated
with the types of securities in which the Fund will generally invest
are described in this Prospectus. See Risk Factors for more specific
information and risks associated with foreign and lower rated
securities. The strategies employed are dependent upon the judgment
of the Manager.
While not a fundamental policy, under normal market conditions the
Fund intends to invest 65% of its net assets in securities issued by
small cap companies, those currently having a market capitalization
generally of less than $1.5 billion. As a general matter, small cap
companies may have more limited product lines, markets and financial
resources than large cap companies. In addition, securities of small
cap companies, generally, may trade less frequently (and with a
lesser volume), may be more volatile and may be somewhat less liquid
than securities issued by larger capitalization companies.
The Manager will consider the financial strength of the company, the
nature of its management and any developments affecting the
security, the company or the industry. Securities may be out of
favor due to a variety of factors, such as lack of an institutional
following, unfavorable developments affecting the issuer of the
securities, such as poor earning reports, dividend reductions, or
cyclical economic or business conditions. Other securities
considered by the Manager would include those of companies where
current or anticipated favorable changes such as a new product or
service, technological breakthrough, management change, projected
takeovers, changes in capitalization or redefinition of future
corporate operations provide an opportunity for capital
appreciation. The Manager will also consider securities where
trading patterns suggest that significant positions are being
accumulated by officers of the company, outside investors or the
company itself. The Manager feels it may uncover situations where
those who have a vested interest in the company feel the securities
are undervalued and have appreciation potential.
In investing for capital appreciation, the Fund may hold securities
for any period of time. The degree of portfolio activity will affect
brokerage costs of the Fund and may affect taxes payable by the
Fund's shareholders. See Portfolio Trading Practices under
Management of the Fund.
Should the market warrant a temporary, defensive approach, the Fund
may also invest in fixed-income obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities, as well as
money market instruments, and corporate bonds rated A or above by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P"). (Appendix A to this Prospectus describes
these ratings.)
If the Manager believes that market conditions warrant, the Fund may
employ options strategies. The Fund may write covered call options
on individual issues as well as write call options on stock indices.
A call option is "covered" if, during the term of the option, the
Fund owns or has the right to obtain at no added cost the security
underlying the call option, owns a call option on the underlying
securities with an exercise price no higher than the exercise price
on the call option written or, subject to any regulatory
restrictions, has segregated an amount of cash or liquid high grade
debt obligations at least equal to the current price of the
underlying securities. The Fund may also purchase put options on
individual issues and on stock indices. The Manager will employ
these techniques in an attempt to protect appreciation attained, to
offset capital losses and/or to take advantage of the liquidity
available in the option markets. The ability to hedge effectively
using options on stock indices will depend, in part, on the
correlation between the composition of the index and the Fund's
portfolio as well as the price movement of individual securities.
The Fund does not currently intend to write or purchase options on
stock indices.
While there is no limit on the amount of the Fund's assets which may
be invested in covered call options, the Fund will not invest more
than 2% of its net assets in put options. The Fund will only use
exchange-traded options.
Although the Fund will constantly strive to attain the investment
objective of capital appreciation, there can be no assurance that it
will be attained. The investment objective of the Fund may not be
changed without shareholder approval.
RISK FACTORS
Investors should be willing to accept the risks associated with
investments in domestic and international securities (and currency
hedging transactions in connection with international investing).
Investing in international securities may be speculative and subject
the Fund to additional risks. Investing in a company temporarily out
of favor may involve the risk that the anticipated favorable change
may not occur and, as a result, that security may decline in value
or not appreciate as expected.
The Fund may also purchase, at times, lower rated or unrated
securities, including corporate bonds and convertible securities
without regard to a grade minimum, which may be considered
speculative and may increase the portfolio's credit risk. Although
the Fund will ordinarily place minor emphasis on fixed-income
securities and will not typically purchase bonds or other securities
rated below B by Moody's or S&P (i.e., high-yield, high-risk
securities, also known as "junk bonds"), it may do so if the Manager
believes that capital appreciation is likely. While the Fund is
authorized to invest up to 25% of its net assets in securities rated
below B, it does not presently intend to invest more than 5% of its
net assets in securities of this type. Investing in such lower rated
securities may involve certain risks not typically associated with
higher rated securities. Such securities are considered very
speculative and may possibly be in default or have interest payments
in arrears. See High-Yield, High-Risk Securities in Part B for
additional information on the risks associated with such securities.
See Appendix A to this Prospectus for more rating information.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of
securities, see Other Investment Policies and Risk Considerations.
THE DELAWARE
DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with
superior information and quality service on your investments in the
Delaware Group of funds.
SHAREHOLDER PHONE DIRECTORY
INVESTOR INFORMATION CENTER
800-523-4640
FUND INFORMATION; LITERATURE; PRICE;
YIELD AND PERFORMANCE FIGURES
SHAREHOLDER SERVICE CENTER
800-523-1918
INFORMATION ON EXISTING REGULAR INVESTMENT ACCOUNTS AND RETIREMENT
PLAN ACCOUNTS; WIRE INVESTMENTS; WIRE LIQUIDATIONS; TELEPHONE
LIQUIDATIONS AND TELEPHONE EXCHANGES
DELAPHONE
800-362-FUND
(800-362-3863)
PERFORMANCE INFORMATION
You can call the Investor Information Center at any time for current
performance information.
SHAREHOLDER SERVICES
During business hours, you can call the Delaware Group's Shareholder
Service Center. Our representatives can answer any questions about
your account, the Fund, various service features and other funds in
the Delaware Group.
DELAPHONE SERVICE
Delaphone is an account inquiry service for investors with
Touch-Tone (REGISTERED TRADEMARK) phone service. It enables you to
get information on your account faster than the mailed statements
and confirmations. Delaphone also provides current performance
information on the Fund, as well as other funds in the Delaware
Group. Delaphone is available seven days a week, 24 hours a day.
DIVIDEND PAYMENTS
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in
cash. You may also elect to have the dividends earned in one fund
automatically invested in another Delaware Group fund with a
different investment objective subject to certain exceptions and
limitations.
For more information, see Additional Methods of Adding to Your
Investment -- Dividend Reinvestment Plan under How to Buy Shares or
call the Shareholder Service Center.
MONEYLINESM SERVICES
Delaware Group offers the following services for fast and convenient
transfer of funds between your personal bank account and your
Delaware Group fund account.
1 MONEYLINESM DIRECT DEPOSIT SERVICE
If you elect to have your dividends and distributions paid in cash
and such dividends and distributions are in an amount of $25 or
more, you may choose the MoneyLineSM Direct Deposit Service and have
such payments transferred from your Fund account to your
predesignated bank account. See Dividends and Distributions. In
addition, you may elect to have your Systematic Withdrawal Plan
payments transferred from your Fund account to your predesignated
bank account through this service. See Systematic Withdrawal Plans
under Redemption and Exchange. This service is not available for
certain retirement plans.
2 MONEYLINESM ON DEMAND
You or your investment dealer may request purchases and redemptions
of Fund shares by using MoneyLineSM On Demand. When you authorize
the Fund to accept such requests from you or your investment dealer,
funds will be withdrawn from (for share purchases) or deposited to
(for share redemptions) your predesignated bank account. Your
request will be processed the same day if you call prior to 4 p.m.,
Eastern time. There is a $25 minimum and a $50,000 maximum limit for
MoneyLineSM On Demand transactions. This service is not available
for retirement plans, except for purchases of shares by IRAs.
For each MoneyLineSM Service, it may take up to four business days
for the transactions to be completed. You can initiate either
service by completing an Account Services form. If your name and
address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Fund does not
charge a fee for any MoneyLineSM Service; however, your bank may
change a fee. Please call the Shareholder Service Center for
additional information about these services.
STATEMENTS AND CONFIRMATIONS
You will receive quarterly statements of your account summarizing
all transactions during the period. A confirmation statement will be
sent following all transactions other than those involving a
reinvestment of dividends. You should examine statements and
confirmations immediately and promptly report any discrepancy by
calling the Shareholder Service Center.
DUPLICATE CONFIRMATIONS
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him
or her. This makes it easier for your adviser to help you manage
your investments.
RETIREMENT PLANNING
An investment in the Fund may be a suitable investment option for
tax-deferred retirement plans. Delaware Group offers a full spectrum
of qualified and non-qualified retirement plans, including the
popular 401(k) deferred compensation plan, IRA, and the new Roth
IRA. Just call the Delaware Group at 1-800-5230-1918 for more
information.
RIGHT OF ACCUMULATION
With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A
Shares, Class B Shares and Class C Shares of the Fund with the
dollar amount of new purchases of Class A Shares of the Fund to
qualify for a reduced front-end sales charge on such purchases of
Class A Shares. Under the COMBINED PURCHASES PRIVILEGE, you may also
include certain shares that you own in other funds in the Delaware
Group. See Classes of Shares.
LETTER OF INTENTION
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating
certain of your purchases of Delaware Group fund shares over a
13-month period. See Classes of Shares and Part B.
12-MONTH REINVESTMENT PRIVILEGE
The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares, within one year of the date of
the redemption, without paying a front-end sales charge. See Part B.
EXCHANGE PRIVILEGE
The Exchange Privilege permits shareholders to exchange all or part
of their shares into shares of other funds in the Delaware Group,
subject to certain exceptions and limitations. For additional
information on exchanges, see Investing by Exchange under How to Buy
Shares and Redemption and Exchange.
WEALTH BUILDER OPTION
You may elect to invest in the Fund through regular liquidations of
shares in your accounts in other funds in the Delaware Group.
Investments under this feature are exchanges and are therefore
subject to the same conditions and limitations as other exchanges of
Fund shares. See Additional Methods of Adding to Your Investment --
Wealth Builder Option and Investing by Exchange under How to Buy
Shares, and Redemption and Exchange.
FINANCIAL INFORMATION ABOUT THE FUND
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed
information about the Fund's investments and performance. Equity
Funds V, Inc.'s fiscal year ends on November 30.
CLASSES
OF SHARES
ALTERNATIVE PURCHASE ARRANGEMENTS
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be
imposed, at the election of the purchaser, at the time of the
purchase for Class A Shares ("front-end sales charge alternative"),
or on a contingent deferred basis for Class B Shares ("deferred
sales charge alternative") or Class C Shares ("level sales charge
alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when
they are purchased, but generally are not subject to any sales
charge when they are redeemed. Class A Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 0.30% of average daily net
assets of such shares. Certain purchases of Class A Shares qualify
for reduced front-end sales charges. See Front-End Sales Charge
Alternative -- Class A Shares, below. See also Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at
Net Asset Value under Redemption and Exchange and Distribution
(12b-1) and Service under Management of the Fund.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end
sales charge when they are purchased, but are subject to a
contingent deferred sales charge if they are redeemed within six
years of purchase. Class B Shares are subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (0.25% of which are service fees
to be paid to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of average
daily net assets of such shares for approximately eight years after
purchase. Class B Shares permit all of the investor's dollars to
work from the time the investment is made. The higher 12b-1 Plan
expenses paid by Class B Shares will cause such shares to have a
higher expense ratio and to pay lower dividends than Class A Shares.
At the end of approximately eight years after purchase, the Class B
Shares will automatically be converted into Class A Shares and,
thereafter, for the remainder of the life of the investment, the
annual 12b-1 Plan fee of up to 0.30% for the Class A Shares will
apply. See Automatic Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end
sales charge when they are purchased, but are subject to a
contingent deferred sales charge if they are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (0.25% of which are service fees
to be paid to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of average
daily net assets of such shares for the life of the investment. The
higher 12b-1 Plan expenses paid by Class C Shares will cause such
shares to have a higher expense ratio and to pay lower dividends
than Class A Shares. Unlike Class B Shares, Class C Shares do not
convert to another class.
The alternative purchase arrangements described above permit
investors to choose the method of purchasing shares that is most
suitable given the amount of their purchase, the length of time they
expect to hold their shares and other relevant circumstances.
Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares
and incur a front-end sales charge, purchase Class B Shares and have
the entire initial purchase amount invested in the Fund with their
investment being subject to a CDSC if they redeem shares within six
years of purchase, or purchase Class C Shares and have the entire
initial purchase amount invested in the Fund with their investment
being subject to a CDSC if they redeem shares within 12 months of
purchase. In addition, investors should consider the level of annual
12b-1 Plan expenses applicable to each Class. The higher 12b-1 Plan
expenses on Class B Shares and Class C Shares will be offset to the
extent a return is realized on the additional money initially
invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such
additional money and the effect of earning a return on such
additional money will diminish over time. In comparing Class B
Shares to Class C Shares, investors should also consider duration of
the annual 12b-1 Plan expenses to which each of these Classes is
subject and the desirability of an automatic conversion feature,
which is available only for Class B Shares.
For the distribution and related services provided to, and the
expenses borne on behalf of, the Fund, the Distributor and others
will be paid, in the case of Class A Shares, from the proceeds of
the front-end sales charge and 12b-1 Plan fees and, in the case of
Class B Shares and Class C Shares, from the proceeds of the 12b-1
Plan fees and, if applicable, the CDSC incurred upon redemption.
Financial advisers may receive different compensation for selling
Class A, Class B and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the
CDSCs applicable to Class B Shares and Class C Shares are the same
as those of the 12b-1 Plan and the front-end sales charge applicable
to Class A Shares in that such fees and charges are used to finance
the distribution of the respective Classes. See Distribution (12b-1)
and Service under Management of the Fund.
Dividends paid on Class A, Class B and Class C Shares, to the extent
any dividends are paid, will be calculated in the same manner, at
the same time, on the same day and will be in the same amount,
except that the additional amount of 12b-1 Plan expenses relating to
Class B Shares and Class C Shares will be borne exclusively by such
shares. See Calculation of Offering Price and Net Asset Value Per
Share.
The NASD has adopted certain rules relating to investment company
sales charges. Equity Funds V, Inc. and the Distributor intend to
operate in compliance with these rules.
FRONT-END SALES CHARGE ALTERNATIVE --
CLASS A SHARES
Class A Shares may be purchased at the offering price, which
reflects a maximum front-end sales charge of 4.75%. See Calculation
of Offering Price and Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge
as shown in the following table.
SMALL CAP VALUE FUND A CLASS
- -------------------------------------------------------------------------
Front-End Sales Dealer's
Charge as % of Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- -------------------------------------------------------------------------
Less than $100,000 4.75% 5.00% 4.00%
$100,000 but under $250,000 3.75 3.89 3.00
$250,000 but under $500,000 2.50 2.55 2.00
$500,000 but under $1,000,000* 2.00 2.04 1.60
* There is no front-end sales charge on purchases of Class A
Shares of $1 million or more but, under certain limited
circumstances, a 1% Limited CDSC may apply upon redemption of such
shares.
** Based upon the net asset value per share of the Class A Shares
as of the end of Equity Funds V, Inc.'s most recent fiscal year.
***Financial institutions or their affiliated brokers may receive
an agency transaction fee in the percentages set forth above.
- -----------------------------------------------------------------------
The Fund must be notified when a sale takes place which would
qualify for the reduced front-end sales charge on the basis of
previous or current purchases. The reduced front-end sales charge
will be granted upon confirmation of the shareholder's holdings by
the Fund. Such reduced front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow to dealers up to the full amount
of the front-end sales charge shown above. In addition, certain
dealers who enter into an agreement to provide extra training and
information on Delaware Group products and services and who increase
sales of Delaware Group funds may receive an additional commission
of up to 0.15% of the offering price. Dealers who receive 90% or
more of the sales charge may be deemed to be underwriters under the
Securities Act of 1933.
- ----------------------------------------------------------------------
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial
advisers through whom such purchases are made in accordance with the
following schedule:
DEALER'S COMMISSION
(AS A PERCENTAGE OF
AMOUNT OF PURCHASE AMOUNT PURCHASED)
- ---------------------------------- ------------------
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
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 Group funds as to which a Limited
CDSC applies may be aggregated with those of the Class A Shares of
the Fund. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter
of Intention or pursuant to an investor's Right of Accumulation.
Financial advisers should contact the Distributor concerning the
applicability and calculation of the dealer's commission in the case
of combined purchases.
An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or
similar payment has not been previously paid on the assets being
exchanged. The schedule and program for payment of the dealer's
commission are subject to change or termination at any time by the
Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC if the dealer's
commission described above was paid in connection with the purchase
of those shares. See Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange.
COMBINED PURCHASES PRIVILEGE
By combining your holdings of Class A Shares with your holdings of
Class B Shares and/or Class C Shares of the Fund and shares of the
other funds in the Delaware Group, except those noted below, you can
reduce the front-end sales charges on any additional purchases of
Class A Shares. Shares of Delaware Group Premium Fund, Inc.
beneficially owned in connection with ownership of variable
insurance products may be combined with other Delaware Group fund
holdings. In addition, assets held by investment advisory clients of
the Manager or its affiliates in a stable value account may be
combined with other Delaware Group fund holdings. Shares of other
funds that do not carry a front-end sales charge or CDSC may not be
included unless they were acquired through an exchange from a
Delaware Group fund that does carry a front-end sales charge or
CDSC.
This privilege permits you to combine your purchases and holdings
with those of your spouse, your children under 21 and any trust,
fiduciary or retirement account for the benefit of such family
members.
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a
13-month period and qualify the entire purchase for a reduction in
front-end sales charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain
purchases made at net asset value pursuant to a Right of
Accumulation or under a Letter of Intention, may result in the
payment of a dealer's commission and the applicability of a Limited
CDSC. Investors should consult their financial advisers or the
Shareholder Service Center about the operation of these features.
See Front-End Sales Charge Alternative -- Class A Shares, above.
ALLIED PLANS
Class A Shares are available for purchase by participants in certain
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
Group funds ("eligible Delaware Group fund shares"), as well as
shares of designated classes of non-Delaware Group funds ("eligible
non-Delaware Group 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 Group and eligible non-Delaware Group
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
Group fund shares.
Participants in Allied Plans may exchange all or part of their
eligible Delaware Group fund shares for other eligible Delaware
Group fund shares or for eligible non-Delaware Group fund shares at
net asset value without payment of a front-end sales charge.
However, exchanges of eligible fund shares, both Delaware Group and
non-Delaware Group, which were not subject to a front-end sales
charge, will be subject to the applicable sales charge if exchanged
for eligible Delaware Group 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 under How to Buy Shares.
A dealer's commission may be payable on purchases of eligible
Delaware Group 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 Group fund shares in
connection with Allied Plans, all participant holdings in the Allied
Plan will be aggregated.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has
been paid. Waivers of the Limited CDSC, as described under Waiver of
Limited Contingent Deferred Sales Charge -- Class A Shares under
Redemption and Exchange, apply to redemptions by participants in
Allied Plans except in the case of exchanges between eligible
Delaware Group and non-Delaware Group fund shares. When eligible
Delaware Group fund shares are exchanged into eligible non-Delaware
Group fund shares, the Limited CDSC will be imposed at the time of
the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or
selling dealer. See Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange.
BUYING CLASS A SHARES AT NET ASSET VALUE
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Group Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment
Privilege. See The Delaware Difference and Redemption and Exchange
for additional information.
Purchases of Class A Shares may be made at net asset value by
current and former officers, directors and employees (and members of
their families) of the Manager, any affiliate, any of the funds in
the Delaware Group, certain of their agents and registered
representatives and employees of authorized investment dealers and
by employee benefit plans for such entities. Individual purchases,
including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer at net
asset value within 12 months after the registered representative
changes employment, if the purchase is funded by proceeds from an
investment where a front-end sales charge, contingent deferred sales
charge or other sales charge has been assessed. Purchases of Class A
Shares may also be made at net asset value by bank employees who
provide services in connection with agreements between the bank and
unaffiliated brokers or dealers concerning sales of shares of
Delaware Group funds. Officers, directors and key employees of
institutional clients of the Manager or any of its affiliates may
purchase Class A Shares at net asset value. Moreover, purchases may
be effected at net asset value for the benefit of the clients of
brokers, dealers and registered investment advisers affiliated with
a broker or dealer, if such broker, dealer or investment adviser has
entered into an agreement with the Distributor providing
specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee
based programs. Investors may be charged a fee when effecting
transactions in Class A Shares through a broker or agent that offers
these special investment products.
Purchases of Class A Shares at net asset value may also be made by
the following: financial institutions investing for the account of
their trust customers if they are not eligible to purchase shares of
the Institutional Class of the Fund; 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
Delaware Investment & Retirement Services, Inc. ("DIRSI")
proprietary record keeping system that (i) has in excess of $500,000
of plan assets invested in Class A Shares of Delaware Group funds
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 Delaware
Group fund and such employer has properly represented to DIRSI in
writing that it has the requisite number of employees and has
received written confirmation back from DIRSI. See Group Investment
Plans for information regarding the applicability of the Limited
CDSC.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan
taken from such accounts will be made at net asset value. Loan
repayments made to a Delaware Group account in connection with loans
originated from accounts previously maintained by another investment
firm will also be invested at net asset value.
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into
Class A Shares of any of the funds in the Delaware Group at net
asset value.
The Fund must be notified in advance that an investment qualifies
for purchase at net asset value.
GROUP INVESTMENT PLANS
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA, SIMPLE
401(k), Profit Sharing and Money Purchase Pension Plans and 401(k)
Defined Contribution Plans and 403(b)(7) and 457 Deferred
Compensation Plans) may benefit from the reduced front-end sales
charges available on Class A Shares based on total plan assets. If a
company has more than one plan investing in the Delaware Group of
funds, then the total amount invested in all plans will be
aggregated to determine the applicable front-end sales charge
reduction on each purchase, both initial and subsequent, if, at the
time of each such purchase, the company notifies the Fund that it
qualifies for the reduction. Employees participating in such Group
Investment Plans may also combine the investments held in their plan
account to determine the front-end sales charge applicable to
purchases in non-retirement Delaware Group investment accounts if,
at the time of each such purchase, they notify the Fund that they
are eligible to combine purchase amounts held in their plan account.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a
dealer's commission has been paid only if such redemption is made
pursuant to a withdrawal of the entire plan from Delaware Group
funds. See Contingent Deferred Sales Charge for Certain Redemptions
of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange.
For additional information on retirement plans, including plan
forms, applications, minimum investments and any applicable account
maintenance fees, contact your investment dealer or the Distributor.
DEFERRED SALES CHARGE ALTERNATIVE --
CLASS B SHARES
Class B Shares may be purchased at net asset value without a
front-end sales charge and, as a result, the full amount of the
investor's purchase payment will be invested in Fund shares. The
Distributor currently anticipates compensating dealers or brokers
for selling Class B Shares at the time of purchase from its own
assets in an amount equal to no more than 4% of the dollar amount
purchased. In addition, from time to time, upon written notice to
all of its dealers, the Distributor may hold special promotions for
specified periods during which the Distributor may pay additional
compensation to dealers or brokers for selling Class B Shares at the
time of purchase. As discussed below, however, Class B Shares are
subject to annual 12b-1 Plan expenses and, if redeemed within six
years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to
the Distributor and others for providing distribution and related
services, and bearing related expenses, in connection with the sale
of Class B Shares. These payments support the compensation paid to
dealers or brokers for selling Class B Shares. Payments to the
Distributor and others under the Class B 12b-1 Plan may be in an
amount equal to no more than 1% annually. The combination of the
CDSC and the proceeds of the 12b-1 Plan fees makes it possible for
the Fund to sell Class B Shares without deducting a front-end sales
charge at the time of purchase.
Holders of Class B Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule for
the Class B Shares described in this Prospectus, even after the
exchange. Such CDSC schedule may be higher than the CDSC schedule
for the Class B Shares acquired as a result of the exchange. See
Redemption and Exchange.
AUTOMATIC CONVERSION OF CLASS B SHARES
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for
automatic conversion into Class A Shares. Conversions of Class B
Shares into Class A Shares will occur only four times in any
calendar year, on the last business day of the second full week of
March, June, September and December (each, a "Conversion Date"). If
the eighth anniversary after a purchase of Class B Shares falls on a
Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion
Dates, an investor's Class B Shares will be converted on the next
Conversion Date after such anniversary. Consequently, if a
shareholder's eighth anniversary falls on the day after a Conversion
Date, that shareholder will have to hold Class B Shares for as long
as three additional months after the eighth anniversary of purchase
before the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of
dividends will convert to the corresponding Class A Shares of that
fund (or, in the case of Delaware Group Cash Reserve, Inc., the
Delaware Cash Reserve Consultant Class) pro-rata with Class B Shares
of that fund not acquired through dividend reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
LEVEL SALES CHARGE ALTERNATIVE --
CLASS C SHARES
Class C Shares may be purchased at net asset value without a
front-end sales charge and, as a result, the full amount of the
investor's purchase payment will be invested in Fund shares. The
Distributor currently anticipates compensating dealers or brokers
for selling Class C Shares at the time of purchase from its own
assets in an amount equal to no more than 1% of the dollar amount
purchased. As discussed below, however, Class C Shares are subject
to annual 12b-1 Plan expenses and, if redeemed within 12 months of
purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to
the Distributor and others for providing distribution and related
services, and bearing related expenses, in connection with the sale
of Class C Shares. These payments support the compensation paid to
dealers or brokers for selling Class C Shares. Payments to the
Distributor and others under the Class C 12b-1 Plan may be in an
amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule for
the Class C Shares as described in this Prospectus. See Redemption
and Exchange.
CONTINGENT DEFERRED SALES CHARGE --
CLASS B SHARES AND CLASS C SHARES
Class B Shares redeemed within six years of purchase may be subject
to a CDSC at the rates set forth below and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs
are charged as a percentage of the dollar amount subject to the
CDSC. The charge will be assessed on an amount equal to the lesser
of the net asset value at the time of purchase of the shares being
redeemed or the net asset value of those shares at the time of
redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on
redemptions of shares acquired through reinvestments of dividends or
capital gains distributions. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at
purchase of the Class B Shares or the Class C Shares of the Fund,
even if those shares are later exchanged for shares of another
Delaware Group fund. In the event of an exchange of the shares, the
net asset value of such shares at the time of redemption will be
the net asset value of the shares that were acquired in the
exchange.
The following table sets forth the rates of the CDSC for the Class B
Shares of the Fund:
CONTINGENT DEFERRED
SALES CHARGE
(AS A PERCENTAGE OF
YEAR AFTER DOLLAR AMOUNT
PURCHASE MADE SUBJECT TO CHARGE)
- ----------------------- ------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until
converted automatically into Class A Shares, Class B Shares will
still be subject to the annual 12b-1 Plan expenses of up to 1% of
average daily net assets of those shares. See Automatic Conversion
of Class B Shares, above. Investors are reminded that the Class A
Shares into which the Class B Shares will convert are subject to
ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years
are redeemed first, followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares
held longest during the six-year period. With respect to Class C
Shares, it will be assumed that shares held for more than 12 months
are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares
held for 12 months or less.
All investments made during a calendar month, regardless of what day
of the month the investment occurred, will age one month on the last
day of that month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and
Class C Shares. See Waiver of Contingent Deferred Sales Charge --
Class B Shares and Class C Shares under Redemption and Exchange.
OTHER PAYMENTS TO DEALERS --
CLASS A, CLASS B AND CLASS C SHARES
From time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes
exceed certain limits, as set by the Distributor, may receive from
the Distributor an additional payment of up to 0.25% of the dollar
amount of such sales. The Distributor may also provide additional
promotional incentives or payments to dealers that sell shares of
the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have
sold or may sell certain amounts of shares.
Subject to pending amendments to the NASD's Conduct Rules, in
connection with the promotion of Delaware Group fund shares, the
Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, reimburse dealers for
expenses incurred in connection with preapproved seminars,
conferences and advertising and may, from time to time, pay or allow
additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip
to or attendance at a business or investment seminar at a luxury
resort, as part of preapproved sales contests. Payment of non-cash
compensation to dealers is currently under review by the NASD and
the Securities and Exchange Commission. It is likely that the NASD's
Conduct Rules will be amended such that the ability of the
Distributor to pay non-cash compensation as described above will be
restricted in some fashion. The Distributor intends to comply with
the NASD's Conduct Rules as they may be amended.
SMALL CAP VALUE FUND INSTITUTIONAL CLASS
In addition to offering Class A, Class B and Class C Shares, the
Fund also offers Small Cap Value Fund Institutional Class, which is
described in a separate prospectus and is available for purchase
only by certain investors. Small Cap Value Fund Institutional Class
shares generally are distributed directly by the Distributor and do
not have a front-end sales charge, a CDSC or a Limited CDSC, and are
not subject to 12b-1 Plan distribution expenses. To obtain the
prospectus that describes Small Cap Value Fund Institutional Class,
contact the Distributor by writing to the address or by calling the
telephone number listed on the back cover of this Prospectus.
HOW TO
BUY SHARES
PURCHASE AMOUNTS
Generally, the minimum initial purchase is $1,000 for Class A
Shares, Class B Shares and Class C Shares. Subsequent purchases of
shares of any Class generally must be $100 or more. For purchases
under a Uniform Gifts to Minors Act or Uniform Transfers to Minors
Act or through an Automatic Investing Plan, there is a minimum
initial purchase of $250 and a minimum subsequent purchase of $25.
Minimum purchase requirements do not apply to retirement plans other
than IRAs, for which there is a minimum initial purchase of $250,
and a minimum subsequent purchase of $25, regardless of which Class
is selected.
There is a maximum purchase limitation of $250,000 on each purchase
of Class B Shares. For Class C Shares, each purchase must be in an
amount that is less than $1,000,000. An investor may exceed these
maximum purchase limitations by making cumulative purchases over a
period of time. In doing so, an investor should keep in mind that
reduced front-end sales charges are available on investments of
$100,000 or more in Class A Shares, and that Class A Shares (i) are
subject to lower annual 12b-1 Plan expenses than Class B Shares and
Class C Shares and (ii) generally are not subject to a CDSC. For
retirement plans, the maximum purchase limitations apply only to the
initial purchase of Class B Shares or Class C Shares by the plan.
INVESTING THROUGH YOUR INVESTMENT DEALER
You can make a purchase of shares of the Fund through most
investment dealers who, as part of the service they provide, must
transmit orders promptly. They may charge for this service. If you
want a dealer but do not have one, the Delaware Group can refer you
to one.
INVESTING BY MAIL
1. Initial Purchases -- An Investment Application or, in the case of
a retirement account, an appropriate retirement plan application,
must be completed, signed and sent with a check, payable to Small
Cap Value Fund A Class, Small Cap Value Fund B Class or Small Cap
Value Fund C Class, to Delaware Group at 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases -- Additional purchases may be made at any
time by mailing a check payable to the specific Class selected. Your
check should be identified with your name(s) and account number. An
investment slip (similar to a deposit slip) is provided at the
bottom of transaction confirmations and dividend statements that you
will receive from Equity Funds V, Inc. Use of this investment slip
can help expedite processing of your check when making additional
purchases. Your investment may be delayed if you send additional
purchases by certified mail.
INVESTING BY WIRE
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number
1412893401 (include your name(s) and your account number for the
Class in which you are investing).
1. Initial Purchases -- Before you invest, telephone the Shareholder
Service Center to get an account number. If you do not call first,
processing of your investment may be delayed. In addition, you must
promptly send your Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, to
the specific Fund and Class selected, to Delaware Group at 1818
Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases -- You may make additional investments
anytime by wiring funds to CoreStates Bank, N.A., as described
above. You should advise the Shareholder Service Center by telephone
of each wire you send.
If you want to wire investments to a retirement plan account, call
the Shareholder Service Center for special wiring instructions.
INVESTING BY EXCHANGE
If you have an investment in another mutual fund in the Delaware
Group, you may write and authorize an exchange of part or all of
your investment into shares of the Fund. If you wish to open an
account by exchange, call the Shareholder Service Center for more
information. All exchanges are subject to the eligibility and
minimum purchase requirements set forth in each fund's prospectus.
See Redemption and Exchange for more complete information concerning
your exchange privilege.
Holders of Class A Shares may exchange all or part of their shares
for certain of the shares of other funds in the Delaware Group,
including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of the Fund or of any
other fund in the Delaware Group. Holders of Class B Shares of the
Fund are permitted to exchange all or part of their Class B Shares
only into Class B Shares of other Delaware Group funds. Similarly,
holders of Class C Shares of the Fund are permitted to exchange all
or part of their Class C Shares only into Class C Shares of other
Delaware Group funds. Class B Shares of the Fund and Class C Shares
of the Fund acquired by exchange will continue to carry the CDSC
and, in the case of Class B Shares, the automatic conversion
schedule of the fund from which the exchange is made. The holding
period of the Class B Shares of the Fund acquired by exchange will
be added to that of the shares that were exchanged for purposes of
determining the time of the automatic conversion into Class A Shares
of the Fund.
Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge, except for exchanges of shares
that were not previously subject to a front-end sales charge (unless
such shares were acquired through the reinvestment of dividends).
Permissible exchanges into Class B Shares or Class C Shares of the
Fund will be made without the imposition of a CDSC by the fund from
which the exchange is being made at the time of the exchange.
See Allied Plans under Classes of Shares for information on
exchanges by participants in an Allied Plan.
ADDITIONAL METHODS OF ADDING TO
YOUR INVESTMENT
Call the Shareholder Service Center for more information if you wish
to use the following services:
1. Automatic Investing Plan
THE AUTOMATIC INVESTING PLAN ENABLES YOU TO MAKE REGULAR MONTHLY
INVESTMENTS WITHOUT WRITING OR MAILING CHECKS. You may authorize
Equity Funds V, Inc. to transfer a designated amount monthly from
your checking account to your Fund account. Many shareholders use
this as an automatic savings plan. Shareholders should allow a
reasonable amount of time for initial purchases and changes to these
plans to become effective.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and
Money Purchase Pension Plans, 401(k) Defined Contribution Plans or
403(b)(7) or 457 Deferred Compensation Plans.
2. Direct Deposit
YOU MAY HAVE YOUR EMPLOYER OR BANK MAKE REGULAR INVESTMENTS DIRECTLY
TO YOUR ACCOUNT FOR YOU (for example: payroll deduction, pay by
phone, annuity payments). The Fund also accepts preauthorized
recurring government and private payments by Electronic Fund
Transfer, which avoids mail time and check clearing holds on
payments such as social security, federal salaries, Railroad
Retirement benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Equity Funds V,
Inc. has the right to liquidate your shares to reimburse the
government or transmitting bank. If there are insufficient funds in
your account, you are obligated to reimburse the Fund.
3. MoneyLine(SM) On Demand
Through the MoneyLine(SM) On Demand service, you or your investment
dealer may call the Fund to request a transfer of funds from your
predesignated bank account to your Fund account. See MoneyLineSM
Services under The Delaware Difference for additional information
about this service.
4. Wealth Builder Option
You can use our Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in
the Delaware Group. You may also elect to invest in other mutual
funds in the Delaware Group through the Wealth Builder Option
through regular liquidations of shares in your Fund account.
Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from
your account in one or more funds in the Delaware Group and invested
automatically into any other account in a Delaware Group mutual fund
that you may specify. If in connection with the election of the
Wealth Builder Option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial
purchase requirements described in the prospectus of the fund that
you select. Investments under this option are exchanges and are
therefore subject to the same conditions and limitations as other
exchanges noted above. You can terminate your participation in
Wealth Builder at any time by giving written notice to the fund from
which the exchanges are made. See Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and
Money Purchase Pension Plans, 401(k) Defined Contribution Plans or
403(b)(7) or 457 Deferred Compensation Plans.
5. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or
dividend income) paid to you by check or reinvested in your account.
Or, you may invest your distributions in certain other funds in the
Delaware Group, subject to the exceptions noted below as well as the
eligibility and minimum purchase requirements set forth in each
fund's prospectus.
Reinvestments of distributions into Class A Shares of the Fund or of
other Delaware Group funds are made without a front-end sales
charge. Reinvestments of distributions into Class B Shares of the
Fund or of other Delaware Group funds or into Class C Shares of the
Fund or of other Delaware Group funds are also made without any
sales charge and will not be subject to a CDSC if later redeemed.
See Automatic Conversion of Class B Shares under Classes of Shares
for information concerning the automatic conversion of Class B
Shares acquired by reinvesting dividends.
Holders of Class A Shares of the Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in
the Delaware Group, including the Fund. Holders of Class B Shares of
the Fund may reinvest their distributions only into Class B Shares
of the funds in the Delaware Group which offer that class of shares.
Similarly, holders of Class C Shares of the Fund may reinvest their
distributions only into Class C Shares of the funds in the Delaware
Group which offer that class of shares. For more information about
reinvestments, call the Shareholder Service Center.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the
same Delaware Group fund in which their investments are held:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and
Money Purchase Pension Plans, 401(k) Defined Contribution Plans or
403(b)(7) or 457 Deferred Compensation Plans.
PURCHASE PRICE AND EFFECTIVE DATE
The offering price and net asset value of Class A, Class B and Class
C Shares are determined as of the close of regular trading on the
New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on days
when the Exchange is open.
The effective date of a purchase is the date the order is received
by the Fund, its agent or designee. The effective date of a direct
purchase is the day your wire, electronic transfer or check is
received, unless it is received after the time the offering price or
net asset value of shares is determined, as noted above. Purchase
orders received after such time will be effective the next business
day.
THE CONDITIONS OF YOUR PURCHASE
The Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are
responsible for any loss incurred. The Fund can redeem shares from
your account(s) to reimburse itself for any loss, and you may be
restricted from making future purchases in any of the funds in the
Delaware Group. The Fund reserves the right to reject purchase
orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check
drawn on a foreign financial institution is accepted, you may be
subject to additional bank charges for clearance and currency
conversion.
The Fund also reserves the right, following shareholder
notification, to charge a service fee on non-retirement accounts
that, as a result of a redemption, have remained below the minimum
stated account balance for a period of three or more consecutive
months. Holders of such accounts may be notified of their
insufficient account balance and advised that they have until the
end of the current calendar quarter to raise their balance to the
stated minimum. If the account has not reached the minimum balance
requirement by that time, the Fund will charge a $9 fee for that
quarter and each subsequent calendar quarter until the account is
brought up to the minimum balance. The service fee will be deducted
from the account during the first week of each calendar quarter for
the previous quarter, and will be used to help defray the cost of
maintaining low-balance accounts. No fees will be charged without
proper notice, and no CDSC will apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial
purchase amount as a result of redemptions. An investor making the
minimum initial investment may be subject to involuntary redemption
without the imposition of a CDSC or Limited CDSC if he or she
redeems any portion of his or her account.
REDEMPTION
AND EXCHANGE
YOU CAN REDEEM OR EXCHANGE YOUR SHARES IN A NUMBER OF DIFFERENT
WAYS. The exchange service is useful if your investment requirements
change and you want an easy way to invest in other equity funds,
tax-advantaged funds, bond funds or money market funds. This service
is also useful if you are anticipating a major expenditure and want
to move a portion of your investment into a fund that has the
checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. See
Taxes. Further, in order for an exchange to be processed, shares of
the fund being acquired must be registered in the state where the
acquiring shareholder resides. You may want to consult your
financial adviser or investment dealer to discuss which funds in the
Delaware Group will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the
Delaware Group directly for fund information.
All exchanges involve a purchase of shares of the fund into which
the exchange is made. As with any purchase, an investor should
obtain and carefully read that fund's prospectus before buying
shares in an exchange. The prospectus contains more complete
information about the fund, including charges and expenses.
Your shares will be redeemed or exchanged at a price based on the
net asset value next determined after the Fund receives your request
in good order, subject, in the case of a redemption, to any
applicable CDSC or Limited CDSC. For example, redemption or exchange
requests received in good order after the time the offering price
and net asset value of shares are determined, as noted above, will
be processed on the next business day. See Purchase Price and
Effective Date under How to Buy Shares. A shareholder submitting a
redemption request may indicate that he or she wishes to receive
redemption proceeds of a specific dollar amount. In the case of such
a request, and in the case of certain redemptions from retirement
plan accounts, the Fund will redeem the number of shares necessary
to deduct the applicable CDSC in the case of Class B and Class C
Shares, or, if applicable, the Limited CDSC in the case of Class A
Shares and tender to the shareholder the requested amount, assuming
the shareholder holds enough shares in his or her account for the
redemption to be processed in this manner. Otherwise, the amount
tendered to the shareholder upon redemption will be reduced by the
amount of the applicable CDSC or Limited CDSC. Redemption proceeds
will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good
order," you must provide your account number, account registration,
and the total number of shares or dollar amount of the transaction.
For exchange requests, you must also provide the name of the fund in
which you want to invest the proceeds. Exchange instructions and
redemption requests must be signed by the record owner(s) exactly as
the shares are registered. You may request a redemption or an
exchange by calling the Shareholder Service Center at 800-523-1918.
The Fund may suspend, terminate, or amend the terms of the exchange
privilege upon 60 days' written notice to shareholders.
The Fund will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed
have already settled. The Fund will honor redemption requests as to
shares for which a check was tendered as payment, but the Fund will
not mail or wire the proceeds until it is reasonably satisfied that
the check has cleared, which may take up to 15 days from the
purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to
reject a written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the
shareholder's address of record.
There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any
applicable front-end sales charge will apply to exchanges from
shares of funds not subject to a front-end sales charge, except for
exchanges involving assets that were previously invested in a fund
with a front-end sales charge and/or exchanges involving the
reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their
shares ("Original Shares") for shares of other funds in the Delaware
Group (in each case, "New Shares") in a permitted exchange, will not
be subject to a CDSC that might otherwise be due upon redemption of
the Original Shares. However, such shareholders will continue to be
subject to the CDSC and, in the case of Class B Shares, the
automatic conversion schedule of the Original Shares as described in
this Prospectus and any CDSC assessed upon redemption will be
charged by the fund from which the Original Shares were exchanged.
In an exchange of Class B Shares from the Fund, the Fund's CDSC
schedule may be higher than the CDSC schedule relating to the New
Shares acquired as a result of the exchange. For purposes of
computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares
is added to the period of time that an investor held the New Shares.
With respect to Class B Shares, the automatic conversion schedule of
the Original Shares may be longer than that of the New Shares.
Consequently, an investment in New Shares by exchange may subject an
investor to the higher 12b-1 fees applicable to Class B Shares of
the Fund for a longer period of time than if the investment in New
Shares were made directly.
Various redemption and exchange methods are outlined below. Except
for the CDSC applicable to certain redemptions of Class B and Class
C Shares and the Limited CDSC applicable to certain redemptions of
Class A Shares purchased at net asset value, there is no fee charged
by the Fund or the Distributor for redeeming or exchanging your
shares, but such fees could be charged in the future. You may have
your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any
of the features described below, shall continue in effect until such
time as a written revocation or modification has been received by
the Fund or its agent.
WRITTEN REDEMPTION
You can write to the Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be
signed by all owners of the account or your investment dealer of
record. For redemptions of more than $50,000, or when the proceeds
are not sent to the shareholder(s) at the address of record, the
Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be
supplied by an eligible guarantor institution. The Fund reserves the
right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require
further documentation from corporations, executors, retirement
plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of
your redemption request. If your Class A Shares are in certificate
form, the certificate(s) must accompany your request and also be in
good order. Certificates are issued for Class A Shares only if a
shareholder submits a specific request. Certificates are not issued
for Class B Shares or Class C Shares.
WRITTEN EXCHANGE
You may also write to the Fund (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into
another mutual fund in the Delaware Group, subject to the same
conditions and limitations as other exchanges noted above.
TELEPHONE REDEMPTION AND EXCHANGE
To get the added convenience of the telephone redemption and
exchange methods, you must have the Transfer Agent hold your shares
(without charge) for you. If you choose to have your Class A Shares
in certificate form, you may redeem or exchange only by written
request and you must return your certificate(s).
The Telephone Redemption--Check to Your Address of Record service
and the Telephone Exchange service, both of which are described
below, are automatically provided unless you notify the Fund in
writing that you do not wish to have such services available with
respect to your account. The Fund reserves the right to modify,
terminate or suspend these procedures upon 60 days' written notice
to shareholders. It may be difficult to reach the Fund by telephone
during periods when market or economic conditions lead to an
unusually large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone
instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine. With respect to such telephone
transactions, the Fund will follow reasonable procedures to confirm
that instructions communicated by telephone are genuine (including
verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent transactions. Instructions received by
telephone are generally tape recorded, and a written confirmation
will be provided for all purchase, exchange and redemption
transactions initiated by telephone. By exchanging shares by
telephone, you are acknowledging prior receipt of a prospectus for
the fund into which your shares are being exchanged.
TELEPHONE REDEMPTION--CHECK TO YOUR ADDRESS OF RECORD
THE TELEPHONE REDEMPTION FEATURE IS A QUICK AND EASY METHOD TO
REDEEM SHARES. You or your investment dealer of record can have
redemption proceeds of $50,000 or less mailed to you at your address
of record. Checks will be payable to the shareholder(s) of record.
Payment is normally mailed the next business day after receipt of
the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize
this service when you open your account. If you change your
predesignated bank account, you must complete an Authorization Form
and have your signature guaranteed. For your protection, your
authorization must be on file. If you request a wire, your funds
will normally be sent the next business day. CoreStates Bank, N.A.'s
fee (currently $7.50) will be deducted from your redemption
proceeds. If you ask for a check, it will normally be mailed the
next business day after receipt of your redemption request to your
predesignated bank account. There are no separate fees for this
redemption method, but the mail time may delay getting funds into
your bank account. Simply call the Shareholder Service Center prior
to the time the offering price and net asset value are determined,
as noted above.
MONEYLINE(SM) ON DEMAND
Through the MoneyLine(SM) On Demand service, you or your investment
dealer may call the Fund to request a transfer of funds from your
Fund account to your predesignated bank account. See MoneyLineSM
Services under The Delaware Difference for additional information
about this service.
TELEPHONE EXCHANGE
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and
investment objectives change. You or your investment dealer of
record can exchange your shares into other funds in the Delaware
Group under the same registration, subject to the same conditions
and limitations as other exchanges noted above. As with the written
exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges
may be subject to limitations as to amounts or frequency.
SYSTEMATIC WITHDRAWAL PLANS
1. Regular Plans
This plan provides shareholders with a consistent monthly (or
quarterly) payment. THIS IS PARTICULARLY USEFUL TO SHAREHOLDERS
LIVING ON FIXED INCOMES, SINCE IT CAN PROVIDE THEM WITH A STABLE
SUPPLEMENTAL AMOUNT. With accounts of at least $5,000, you may elect
monthly withdrawals of $25 (quarterly $75) or more. The Fund does
not recommend any particular monthly amount, as each shareholder's
situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred
from your Fund account to your predesignated bank account through
the MoneyLine(SM) Direct Deposit Service. Your funds will normally be
credited to your bank account two business days after the payment
date. There are no separate fees for this redemption method. See
MoneyLineSM Services under The Delaware Difference for more
information about this service.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to
receive benefits in periodic payments, the Systematic Withdrawal
Plan provides you with maximum flexibility. A number of formulas are
available for calculating your withdrawals depending upon whether
the distributions are required or optional. Withdrawals must be for
$25 or more; however, no minimum account balance is required. The
MoneyLine(SM) Direct Deposit Service described above is not available
for certain retirement plans.
* * *
Shareholders should not purchase additional shares while
participating in a Systematic Withdrawal Plan.
Redemptions of Class A Shares via a Systematic Withdrawal Plan may
be subject to a Limited CDSC if the original purchase was made at
net asset value within the 12 months prior to the withdrawal and a
dealer's commission was paid on that purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value, below.
The applicable CDSC for Class B Shares and Class C Shares redeemed
via a Systematic Withdrawal Plan will be waived if, on the date that
the Plan is established, the annual amount selected to be withdrawn
is less than 12% of the account balance. If the annual amount
selected to be withdrawn exceeds 12% of the account balance on the
date that the Systematic Withdrawal Plan is established, all
redemptions under the Plan will be subject to the applicable CDSC.
Whether a waiver of the CDSC is available or not, the first shares
to be redeemed for each Systematic Withdrawal Plan payment will be
those not subject to a CDSC because they have either satisfied the
required holding period or were acquired through the reinvestment of
distributions. The 12% annual limit will be reset on the date that
any Systematic Withdrawal Plan is modified (for example, a change in
the amount selected to be withdrawn or the frequency or date of
withdrawals), based on the balance in the account on that date. See
Waiver of Contingent Deferred Sales Charge -- Class B and Class C
Shares, below.
For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.
CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN REDEMPTIONS OF CLASS A
SHARES PURCHASED AT NET ASSET VALUE
A Limited CDSC will be imposed on certain redemptions of Class A
Shares (or shares into which such Class A Shares are exchanged) made
within 12 months of purchase, if such purchases were made at net
asset value and triggered the payment by the Distributor of the
dealer's commission previously described. See Classes of Shares.
The Limited CDSC will be paid to the Distributor and will be equal
to the lesser of 1% 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
Group 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 12 months will
not be subjected to the Limited CDSC and an exchange of such Class A
Shares into another Delaware Group 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 12-month holding period.
The Limited CDSC is assessed if such 12-month period is not
satisfied irrespective of whether the redemption triggering its
payment is of Class A Shares of the Fund or Class A Shares acquired
in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed
followed by other shares held for the longest period of time. The
Limited CDSC will not be imposed upon shares representing reinvested
dividends or capital gains distributions, or upon amounts
representing share appreciation. All investments made during a
calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each
subsequent month.
WAIVER OF LIMITED CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES
The Limited CDSC for Class A Shares on which a dealer's commission
has been paid will be waived in the following instances: (i)
redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares
held in the account is less than the then-effective minimum account
size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue
Code of 1986, as amended (the "Code"), or due to death of a
participant in such a plan; (iii) redemptions pursuant to the
direction of a participant or beneficiary of a retirement plan
qualified under section 401(a) or 401(k) of the Code with respect to
that retirement plan; (iv) periodic distributions from an IRA,
SIMPLE IRA or 403(b)(7) or 457 Deferred Compensation Plan or due to
death, disability, or attainment of age 59 1/2 and IRA distributions
qualifying under Section 72(t) of the Code; (v) returns of excess
contributions to an IRA; (vi) distributions by other employee
benefit plans to pay benefits; (vii) distributions described in
(ii), (iv), and (vi) above pursuant to a Systematic Withdrawal Plan;
and (viii) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the
size of the purchase (see Buying Class A Shares at Net Asset Value
under Classes of Shares).
WAIVER OF CONTINGENT DEFERRED SALES CHARGE -- CLASS B AND CLASS C
SHARES
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that
result from the Fund's right to liquidate a shareholder's account if
the aggregate net asset value of the shares held in the account is
less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, SEP/IRA or 403(b)(7) or
457 Deferred Compensation Plan; (iii) periodic distributions from an
IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, 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 all registered owners of the
account (in the case of accounts established under the Uniform Gifts
to Minors or Uniform Transfers to Minors Acts or trust accounts, the
waiver applies upon the death of all beneficial owners) or a total
and permanent disability (as defined in Section 72 of the Code) of
all registered owners occurring after the purchase of the shares
being redeemed.
The CDSC on Class C Shares is waived in connection with the
following redemptions: (i) redemptions that result from the Fund's
right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the
then-effective minimum account size; (ii) returns of excess
contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan
or 401(k) Defined Contribution Plan; (iii) periodic distributions
from a 403(b)(7) or 457 Deferred Compensation Plan upon attainment
of age 59 1/2, Profit Sharing Plan, Money Purchase Pension Plan or
401(k) Defined Contribution Plan upon attainment of age 70 1/2, and
IRA distributions qualifying under Section 72(t) of the Code; (iv)
distributions from a 403(b)(7) Deferred Compensation Plan, 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) Deferred Compensation Plan, 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 all registered
owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust
accounts, the waiver applies upon the death of all beneficial
owners) or a total and permanent disability (as defined in Section
72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the
annual amount selected to be withdrawn under the Plan does not
exceed 12% of the value of the account on the date that the
Systematic Withdrawal Plan was established or modified.
DIVIDENDS AND
DISTRIBUTIONS
The Fund intends to distribute substantially all of its net capital
gains and net investment income earned during the year. Such
payments, if any, will generally be made once a year during the
first quarter following the end of the Fund's fiscal year.
Each class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the per share dividends
from net investment income on Class A Shares, Class B Shares and
Class C Shares will vary due to the expenses under the 12b-1 Plan
applicable to each Class. Generally, the dividends per share on
Class B Shares and Class C Shares can be expected to be lower than
the dividends per share on Class A Shares because the expenses under
the 12b-1 Plans relating to Class B and Class C Shares will be
higher than the expenses under the 12b-1 Plan relating to Class A
Shares. See Distribution (12b-1) and Service under Management of the
Fund.
Both dividends and distributions, if any, are automatically
reinvested in your account at net asset value unless you elect
otherwise. Any check in payment of dividends or other distributions
which cannot be delivered by the United States Post Office or which
remains uncashed for a period of more than one year may be
reinvested in your account at the then-current net asset value and
the dividend option may be changed from cash to reinvest. If you
elect to take your dividends and distributions in cash and such
dividends and distributions are in an amount of $25 or more, you may
choose the MoneyLine(SM) Direct Deposit Service and have such payments
transferred from your Fund account to your predesignated bank
account. The MoneyLine(SM) Direct Deposit Service is not available for
certain retirement plans. See MoneyLine(SM) Services under The
Delaware Difference for more information about this service.
TAXES
The tax discussion set forth below is included for general
information only. Investors should consult their own tax advisers
concerning the federal, state, local or foreign tax consequences of
an investment in the Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping
changes in the Code. Because many of these changes are complex, and
only indirectly affect the Fund and its distributions to you, they
are discussed in Part B. Changes in the treatment of capital gains,
however, are discussed in this section.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. As such, the Fund will not be subject to
federal income tax, or to any excise tax, to the extent its earnings
are distributed as provided in the Code and by satisfying certain
other requirements relating to the sources of its income and
diversification of its assets.
The Fund intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from net
investment income or net short-term capital gains will be taxable to
those investors who are subject to income taxes as ordinary income,
whether received in cash or in additional shares. For corporate
investors, dividends from net investment income will generally
qualify in part for the corporate dividends-received deduction. The
portion of dividends paid by the Fund that so qualifies will be
designated each year in a notice from the Fund to the Fund's
shareholders. For the fiscal year ended November 30, 1997, 37.97% of
the Fund's dividends from net investment income qualified for the
corporate dividends-received deduction.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those
investors who are subject to income taxes as long-term capital
gains, regardless of the length of time an investor has owned shares
in the Fund. The Fund does not seek to realize any particular amount
of capital gains during a year; rather, realized gains are a
by-product of Fund management activities. Consequently, capital
gains distributions may be expected to vary considerably from year
to year. Also, for those investors subject to tax, if purchases of
shares in the Fund are made shortly before the record date for a
dividend or capital gains distribution, a portion of the investment
will be returned as a taxable distribution.
THE TREATMENT OF CAPITAL GAIN DISTRIBUTIONS UNDER THE TAXPAYER
RELIEF ACT OF 1997
The 1997 Act creates a category of long-term capital gain for
individuals that will be taxed at new lower tax rates. For investors
who are in the 28% or higher federal income tax brackets, these
gains will be taxed at a maximum rate of 20%. For investors who are
in the 15% federal income tax bracket, these gains will be taxed at
a maximum rate of 10%. Capital gain distributions will qualify for
these new maximum tax rates, depending on when the Fund's securities
were sold and how long they were held by the Fund before they were
sold. Investors who want more information on holding periods and
other qualifying rules relating to these new rates should review the
expanded discussion in Part B, or should contact their own tax
advisers.
Equity Funds V, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain
distributions which will qualify for these maximum federal tax
rates.
Although dividends generally will be treated as distributed when
paid, dividends which are declared in October, November, or December
to shareholders of record on a specified date in one of those
months, but which, for operational reasons, may not be paid to the
shareholder until the following January, will be treated for tax
purposes as if paid by the Fund and received by the shareholder on
December 31 of the year declared.
The sale of shares of the Fund is a taxable event and may result in
a capital gain or loss to shareholders subject to tax. Capital gain
or loss may be realized from an ordinary redemption of shares or an
exchange of shares between the Fund and any other fund in the
Delaware Group. Any loss incurred on a sale or exchange of Fund
shares that had been held for six months or less will be treated as
a long-term capital loss to the extent of capital gain dividends
received with respect to such shares. All or a portion of the sales
charge incurred in acquiring the Fund's shares will be excluded from
the federal tax basis of any of such shares sold or exchanged within
90 days of their purchase (for purposes of determining gain or loss
upon sale of such shares) if the sale proceeds are reinvested in the
Fund or in another fund in the Delaware Group of funds and a sales
charge that would otherwise apply to the reinvestment is reduced or
eliminated. Any portion of such sales charge excluded from the tax
basis of the shares sold will be added to the tax basis of the
shares acquired in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at
the end of approximately eight years after purchase will be tax-free
for federal tax purposes. See Automatic Conversion of Class B Shares
under Classes of Shares.
In addition to the federal taxes described above, shareholders may
or may not be subject to various state and local taxes. For example,
distributions of interest income and capital gains realized from
certain types of U.S. government securities may be exempt from state
personal income taxes. Because investors' state and local taxes may
be different than the federal taxes described above, investors
should consult their own tax advisers.
Each year, Equity Funds V, Inc. will mail to you information on the
tax status of the Fund's dividends and distributions. Shareholders
will also receive each year information as to the portion of
dividend income, if any, that is derived from U.S. government
securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be
required to pay tax on amounts distributed to them by the Fund.
Equity Funds V, Inc. is required to withhold 31% of taxable
dividends, capital gains distributions, and redemptions paid to
shareholders who have not complied with IRS taxpayer identification
regulations. You may avoid this withholding requirement by
certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to
backup withholding.
See Accounting and Tax Issues and Distributions and Taxes in Part B
for additional information on tax matters relating to the Fund and
its shareholders.
CALCULATION OF
OFFERING PRICE AND
NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is computed by adding the
value of all securities and other assets in the portfolio, deducting
any liabilities (expenses and fees are accrued daily) and dividing
by the number of shares outstanding. Portfolio securities for which
market quotations are available are priced at market value. Foreign
securities expressed in foreign currency values will be converted
into U.S. dollar values at the mean between the currencies' bid and
offered quotations. Short-term investments having a maturity of less
than 60 days are valued at amortized cost, which approximates market
value. All other securities are valued at their fair value as
determined in good faith and in a method approved by Equity Funds V,
Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per share, while
Class B Shares and Class C Shares are purchased at the NAV per
share. The offering price per share of Class A Shares consists of
the NAV per share next computed after the order is received, plus
any applicable front-end sales charges.
The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share
based on the proportionate participation in the Fund represented by
the value of shares of that class. All income earned and expenses
incurred by the Fund will be borne on a pro-rata basis by each
outstanding share of a class, based on each class' percentage in the
Fund represented by the value of shares of such classes, except that
Small Cap Value Fund Institutional Class will not incur any of the
expenses under Equity Funds V, Inc.'s 12b-1 Plans and the Class A,
Class B and Class C Shares alone will bear the 12b-1 Plan expenses
payable under their respective Plans. Due to the specific
distribution expenses and other costs that will be allocable to each
class, the NAV of each class of the Fund will vary.
MANAGEMENT OF
THE FUND
DIRECTORS
The business and affairs of Equity Funds V, Inc. are managed under
the direction of its Board of Directors. Part B contains additional
information regarding Equity Funds V, Inc.'s directors and officers.
INVESTMENT MANAGER
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On November 30, 1997, the Manager and its
affiliates within the Delaware Group, including Delaware
International Advisers Ltd., were managing in the aggregate more
than $39 billion in assets in the various institutional or
separately managed (approximately $23,274,532,000) and investment
company (approximately $16,181,491,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger
between DMH and a wholly owned subsidiary of Lincoln National
Corporation ("Lincoln National") was completed. DMH and the Manager
are now indirect, wholly owned subsidiaries, and subject to the
ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization
with operations in many aspects of the financial services industry,
including insurance and investment management. In connection with
the merger, a new Investment Management Agreement between the Fund
and the Manager was executed following shareholder approval.
The Manager manages the Fund's portfolio and makes investment
decisions. The Manager also administers Equity Funds V, Inc.'s
affairs and pays the salaries of all the directors, officers and
employees of Equity Funds V, Inc. who are affiliated with the
Manager. For these services, the Manager is paid an annual fee of
3/4 of 1% of the average daily net assets of the Fund, less all
directors' fees paid to the unaffiliated directors of Equity Funds
V, Inc. The Fund's fee is higher than that paid by many other funds
and may be higher or lower than that paid by funds with comparable
investment objectives. Investment management fees paid by the Fund
for the fiscal year ended November 30, 1997 were 0.75% of average
daily net assets. The directors of Equity Funds V, Inc. annually
review fees paid to the Manager.
Christopher S. Beck, Vice President/Senior Portfolio Manager of
Equity Funds V, Inc. assumed primary responsibility for making
day-to-day investment decisions for the Fund in May 1997. Mr. Beck
has been in the investment business for 16 years, starting with
Wilmington Trust in 1981. Later, he became Director of Research at
Cypress Capital Management in Wilmington and Chief Investment
Officer of the University of Delaware Endowment Fund. Prior to
joining the Delaware Group in May 1997, he managed the small cap
value fund for two years at Pitcairn Trust Company. He holds a BS
from the University of Delaware, an MBA from Lehigh University and
is a CFA charterholder.
In making investment decisions for the Fund, Mr. Beck regularly
consults with Wayne A. Stork, Richard G. Unruh, Jr. and Andrea
Giles. Mr. Stork, Chairman of Delaware Management Company Inc.'s and
Equity Funds V, Inc.'s Boards of Directors, is a graduate of Brown
University and attended New York University's Graduate School of
Business Administration. Mr. Stork joined the Delaware Group in 1962
and has served in various executive capacities at different times
within the Delaware organization. A graduate of Brown University,
Mr. Unruh received his MBA from the University of Pennsylvania's
Wharton School and joined the Delaware Group in 1982 after 19 years
of investment management experience with Kidder, Peabody Co. Inc.
Mr. Unruh was named an Executive Vice President of Equity Funds V,
Inc. in 1994. He is also a member of the Board of Delaware
Management Company, Inc. and was named an Executive Vice President
of Delaware Management Company, Inc. in 1994. Andrea Giles, Research
Analyst for the Fund, holds a BSAD from the Massachusetts Institute
of Technology and an MBA in Finance from Columbia University. Prior
to joining the Delaware Group in 1996, she was an account officer in
the Leveraged Capital Group with Citibank.
PORTFOLIO TRADING PRACTICES
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length
of time they have been held. The degree of portfolio activity will
affect brokerage costs of the Fund and may affect taxes payable by
the Fund's shareholders to the extent that net capital gains are
realized. Given the Fund's investment objective, its annual
portfolio turnover rate may exceed 100%. A turnover rate of 100%
would occur, for example, if all the investments in the Fund's
portfolio at the beginning of the year were replaced by the end of
the year.
The Fund uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders may
be placed with brokers or dealers who provide brokerage and research
services to the Manager or its advisory clients. These services may
be used by the Manager in servicing any of its accounts. Subject to
best price and execution, the Fund may consider a broker/dealer's
sales of shares of funds in the Delaware Group of funds in placing
portfolio orders and may place orders with broker/dealers that have
agreed to defray certain expenses of such funds, such as custodian
fees.
PERFORMANCE INFORMATION
From time to time, the Fund may quote total return performance of
the Classes in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value
and: (i) in the case of Class A Shares, the impact of the maximum
front-end sales charge at the beginning of each specified period;
and (ii) in the case of Class B Shares and Class C Shares, the
deduction of any applicable CDSC at the end of the relevant period.
Each presentation will include the average annual total return for
one-, five- and ten-year or life-of-fund periods, as relevant. The
Fund may also advertise aggregate and average total return
information concerning a Class over additional periods of time. In
addition, the Fund may present total return information that does
not reflect the deduction of the maximum front-end sales charge or
any applicable CDSC. In this case, such total return information
would be more favorable than total return information that includes
the deductions of the maximum front-end sales charge or any
applicable CDSC.
Because securities prices fluctuate, investment results of the
Classes will fluctuate over time. Past performance is not a
guarantee of future results.
DISTRIBUTION (12B-1) AND SERVICE
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement with
Equity Funds V, Inc. dated April 3, 1995, as amended on November
29, 1995.
Equity Funds V, Inc. has adopted a separate distribution plan under
Rule 12b-1 for each of the Class A Shares, Class B Shares and Class
C Shares (the "Plans"). Each Plan permits the Fund to pay the
Distributor from the assets of the respective Classes a monthly fee
for the Distributor's services and expenses in distributing and
promoting sales of shares.
These expenses include, among other things, preparing and
distributing advertisements, sales literature, and prospectuses and
reports used for sales purposes, compensating sales and marketing
personnel, holding special promotions for specified periods of time,
and paying distribution and maintenance fees to brokers, dealers and
others. In connection with the promotion of shares of the Classes,
the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for
expenses incurred in connection with preapproved seminars,
conferences and advertising. The Distributor may pay or allow
additional promotional incentives to dealers as part of preapproved
sales contests and/or to dealers who provide extra training and
information concerning a Class and increase sales of the Class. In
addition, the Fund may make payments from the 12b-1 Plan fees of its
respective Classes directly to others, such as banks, who aid in the
distribution of Class shares or provide services in respect of a
Class, pursuant to service agreements with Equity Funds V, Inc.
The 12b-1 Plan expenses relating to each of the Class B Shares and
Class C Shares are also used to pay the Distributor for advancing
the commission costs to dealers with respect to the initial sale of
such shares.
The aggregate fees paid by the Fund from the assets of the
respective Classes to the Distributor and others under the Plans may
not exceed (i) 0.30% of the Class A Shares' average daily net assets
in any year, and (ii) 1% (0.25% of which are service fees to be paid
by the Fund to the Distributor, dealers and others, for providing
personal service and/or maintaining shareholder accounts) of each of
the Class B Shares' and Class C Shares' average daily net assets in
any year. The Fund's Class A, Class B and Class C Shares will not
incur any distribution expenses beyond these limits, which may not
be increased without shareholder approval.
While payments pursuant to the Plans may not exceed 0.30% annually
with respect to Class A Shares, and 1% annually with respect to each
of the Class B Shares and the Class C Shares, the Plans do not limit
fees to amounts actually expended by the Distributor. It is
therefore possible that the Distributor may realize a profit in any
particular year. However, the Distributor currently expects that its
distribution expenses will likely equal or exceed payments to it
under the Plans. The Distributor may, however, incur such additional
expenses and make additional payments to dealers from its own
resources to promote the distribution of shares of the Classes. The
monthly fees paid to the Distributor under the Plans are subject to
the review and approval of Equity Funds V, Inc.'s unaffiliated
directors, who may reduce the fees or terminate the Plans at any
time.
The Plans do not apply to Small Cap Value Fund Institutional Class
of shares. Those shares are not included in calculating the Plans'
fees, and the Plans are not used to assist in the distribution and
marketing of Small Cap Value Fund Institutional Class.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for
the Fund pursuant to an amended and restated agreement dated
November 29, 1996. The Transfer Agent also provides accounting
services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement.
The directors of Equity Funds V, Inc. annually review fees paid to
the Distributor and the Transfer Agent. The Distributor and the
Transfer Agent are also indirect, wholly owned subsidiaries of DMH.
EXPENSES
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and
those borne by the Distributor under the Distribution Agreement. For
the fiscal year ended November 30, 1997, the ratios of expenses to
average daily net assets were 1.39% for Class A Shares, 2.09% for
Class B Shares and 2.09% for Class C Shares. The expense ratio of
each Class reflects the impact of its 12b-1 Plan.
SHARES
Equity Funds V, Inc. is an open-end management investment company.
The Fund's portfolio of assets is diversified as defined by the 1940
Act. Commonly known as a mutual fund, Equity Funds V, Inc. was
organized as a Maryland corporation on January 16, 1987. In addition
to the Fund, Equity Funds V, Inc. presently offers one other series
of shares, the Retirement Income Fund series.
Fund shares have a par value of $.01, equal voting rights, except as
noted below, and are equal in all other respects.
Equity Funds V, Inc. shares have noncumulative voting rights which
means that the holders of more than 50% of Equity Funds V, Inc.'s
shares voting for the election of directors can elect 100% of the
directors if they choose to do so. Under Maryland law, Equity Funds
V, Inc. is not required, and does not intend, to hold annual
meetings of shareholders unless, under certain circumstances, it is
required to do so under the 1940 Act. Shareholders of 10% or more of
Equity Funds V, Inc.'s outstanding shares may request that a special
meeting be called to consider the removal of a director.
In addition to Class A Shares, Class B Shares and Class C Shares,
the Fund also offers Small Cap Value Fund Institutional Class
shares. Shares of each class represent proportionate interests in
the assets of the Fund and have the same voting and other rights and
preferences as the other classes of the Fund, except that shares of
Small Cap Value Fund Institutional Class are not subject to, and may
not vote on matters affecting, the Distribution Plans under Rule
12b-1 relating to Class A, Class B and Class C Shares. Similarly, as
a general matter, the shareholders of Class A Shares, Class B Shares
and Class C Shares may vote only on matters affecting the 12b-1 Plan
that relates to the class of shares that they hold. However, Class B
Shares may vote on any proposal to increase materially the fees to
be paid by the Fund under the 12b-1 Plan relating to Class A Shares.
Prior to September 6, 1994, Value Fund A Class was known as the
Value Fund class and Value Fund Institutional Class was known as the
Value Fund (Institutional) class. Effective as of the close of
business on July 31, 1997, the name Value Fund series changed to
Small Cap Value Fund series.
OTHER INVESTMENT
POLICIES AND
RISK CONSIDERATIONS
FOREIGN SECURITIES
The Fund may invest up to 25% of its assets in foreign securities.
Foreign markets may be more volatile than U.S. markets. Such
investments involve sovereign risk in addition to the normal risks
associated with U.S. securities. These risks include political
risks, foreign taxes and exchange controls and currency
fluctuations. For example, foreign portfolio investments may
fluctuate in value due to changes in currency rates (i.e., the value
of foreign investments would increase with a fall in the value of
the dollar, and decrease with a rise in the value of the dollar) and
control regulations apart from market fluctuations. The Fund may
also experience delays in foreign securities settlement.
The Fund will, from time to time, conduct 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). Investors should be aware that there are costs
and risks associated with such currency transactions. 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. When the
Manager believes that the currency of a particular foreign country
may suffer a decline against the U.S. dollar or against another
currency, the Fund may enter into a forward 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. It is
impossible to predict precisely the market value of portfolio
securities at the expiration of the forward contract. Accordingly,
it may be necessary for the Fund to purchase or sell additional
foreign currency on the spot market (and bear the expense of such
purchase or sale) if the market value of the security is less than
or greater than the amount of foreign currency the Fund is obligated
to deliver.
The Fund may incur gains or losses from currency transactions. No
type of foreign currency transaction will eliminate fluctuations in
the prices of the Fund's foreign securities or will prevent losses
if the prices of such securities should decline.
The Fund's Custodian for its foreign securities is The Chase
Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245.
RULE 144A SECURITIES
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A
("Rule 144A Securities") under the Securities Act of 1933. Rule 144A
permits many privately placed and legally restricted securities to
be freely traded among certain institutional buyers such as the
Fund. The Fund may invest no more than 10% of the value of its net
assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day function of determining whether or not
individual Rule 144A Securities are liquid for purposes of the
Fund's 10% limitation on investments in illiquid assets. The Board
has instructed the Manager to consider the following factors in
determining the liquidity of a Rule 144A Security: (i) the frequency
of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the
number of potential purchasers; (iii) whether at least two dealers
are making a market in the security; and (iv) the nature of the
security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a
result, the Fund's holdings of illiquid securities exceed the Fund's
10% limit on investment in such securities, the Manager will
determine what action to take to ensure that the Fund continues to
adhere to such limitation.
REPURCHASE AGREEMENTS
The Fund may also use repurchase agreements that are at least 102%
collateralized by U.S. government securities. Repurchase agreements
help the Fund to invest cash on a temporary basis. The Fund may
invest cash balances in joint repurchase agreements with other
Delaware Group funds. Under a repurchase agreement, the Fund
acquires ownership and possession of a security, and the seller
agrees to buy the security back at a specified time and higher
price. If the seller is unable to repurchase the security, the Fund
could experience delays in liquidating the securities. To minimize
this possibility, the Fund considers the creditworthiness of banks
and dealers when entering into repurchase agreements.
PORTFOLIO LOAN TRANSACTIONS
The Fund may loan up to 25% of its assets to qualified
broker/dealers or institutional investors for their use relating to
short sales or other security transactions.
The major risk to which the Fund would be exposed on a loan
transaction is the risk that the borrower would go bankrupt at a
time when the value of the security goes up. Therefore, the Fund
will only enter into loan arrangements after a review of all
pertinent facts by the Manager, subject to overall supervision by
the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the
consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the
Manager.
BORROWING
The Fund is permitted under certain circumstances to borrow money.
Investment securities will normally not be purchased while the Fund
has an outstanding borrowing.
INVESTMENTS BY FUNDS OF FUNDS
The Fund accepts investments from the series portfolios of Delaware
Group Foundation Funds, a fund of funds (the "Foundation Funds").
From time to time, the Fund may experience large investments or
redemptions due to allocations or rebalancings by the Foundation
funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio
management to the extent that 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 transactions
costs or portfolio turnover. The Manager will monitor such
transactions and will attempt to minimize any adverse effects on
both the Fund and the Foundation funds resulting from such
transactions.
CALL OPTIONS
Writing Covered Call Options -- A covered call option obligates the
Fund to sell one of its securities for an agreed price up to an
agreed date. When the Fund writes a call, it receives a premium and
agrees to sell the callable securities to a purchaser of a
corresponding call during the call period (usually not more than
nine months) at a fixed exercise price regardless of market price
changes during the call period. The advantage is that the Fund
receives premium income for the limited purpose of offsetting the
costs of purchasing put options or offsetting any capital loss or
decline in market value of the security. However, if the Manager's
forecast is wrong, the Fund may not fully participate in the market
appreciation if the security's price rises.
Writing a Call Option on Stock Indices -- Writing a call option on
stock indices is similar to the writing of a call option on an
individual stock. Stock indices used will include, but not be
limited to, the S&P 100 and the S&P Over-The-Counter ("OTC") 250.
PUT OPTIONS
Purchasing a Put Option -- A put option gives the Fund the right to
sell one of its securities for an agreed price up to an agreed date.
The advantage is that the Fund can be protected should the market
value of the security decline. However, the Fund must pay a premium
for this right which would be lost if the option is not exercised.
PURCHASING A PUT OPTION ON STOCK INDICES
Purchasing a protective put option on stock indices is similar to
the purchase of protective puts on an individual stock. Indices used
will include, but not be limited to, the S&P 100 and the S&P OTC
250
CLOSING TRANSACTIONS
Closing transactions essentially let the Fund offset a put option or
covered call option prior to its exercise or expiration. If the Fund
cannot effect a closing transaction, it may have to hold a security
it would otherwise sell or deliver a security it might want to hold.
Part B sets forth other more specific investment restrictions.
APPENDIX A --
RATINGS
BONDS
Excerpts from Moody'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; Ba --
judged to have speculative elements; their future cannot be
considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B --
generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be
small; Caa -- are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or
interest; Ca -- represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings; C --the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever/
attaining any real investment standing.
Excerpts from S&P'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; BB, B, CCC, CC -- regarded, on
balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the
obligation. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C
- -- reserved for income bonds on which no interest is being paid; D
- -- in default, and payment of interest and/or repayment of principal
is in arrears.
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-
exempt funds, money market funds, global and international funds and
closed-end funds give investors the ability to create a portfolio that
fits their personal financial goals. For more information, contact your
financial adviser or call Delaware Group at 800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
[LOGO] DELAWARE GROUP
Philadelphia * London
[RECYCLE LOGO] Printed in the U.S.A. on recycled paper
P-021[--] PP 1/98
SMALL CAP VALUE FUND PROSPECTUS
(FORMERLY VALUE FUND) FEBRUARY 3, 1998
INSTITUTIONAL CLASS
1818 MARKET STREET, PHILADELPHIA, PA 19103
FOR MORE INFORMATION ABOUT SMALL CAP VALUE FUND INSTITUTIONAL CLASS
CALL DELAWARE GROUP AT 800-828-5052.
This Prospectus describes the Small Cap Value Fund series (the
Fund) (formerly Value Fund series) of Delaware Fund Equity Funds
V, Inc. ("Equity Funds V, Inc.") (formerly Delaware Group Value
Fund, Inc.), a professionally-managed mutual fund of the series
type. The Fund intends to achieve its investment objective of
capital appreciation by investing primarily in common stocks whose
market values appear low relative to their underlying value or
future potential.
The Fund offers Small Cap Value Fund Institutional Class (the
Class) of shares.
This Prospectus relates only to the Class and sets forth information
that you should read and consider before you invest. Please retain
it for future reference. The Fund's Statement of Additional
Information ("Part B" of Equity Funds V, Inc.'s registration
statement), dated February 3, 1998, as it may be amended from time
to time, contains additional information about the Fund and has been
filed with the Securities and Exchange Commission ("SEC"). Part B is
incorporated by reference into this Prospectus and is available,
without charge, by writing to Delaware Distributors, L.P. at the
above address or by calling the above number. The Fund's financial
statements appear in its Annual Report, which will accompany any
response to requests for Part B. The SEC also maintains a Web site
(http://www.sec.gov) that contains Part B, material we incorporated
by reference, and other information regarding registrants that
electronically file with the SEC.
The Fund also offers Small Cap Value Fund A Class, Small Cap Value
Fund B Class and Small Cap Value Fund C Class. Shares of these
classes are subject to sales charges and other expenses, which may
affect their performance. A prospectus for these classes can be
obtained by writing to Delaware Distributors, L.P. at the above
address or by calling 800-523-4640.
TABLE OF CONTENTS
COVER PAGE 1
SYNOPSIS 2
SUMMARY OF EXPENSES 3
FINANCIAL HIGHLIGHTS 4
INVESTMENT OBJECTIVE AND POLICIES 5
SUITABILITY 5
INVESTMENT STRATEGY 5
RISK FACTORS 6
CLASSES OF SHARES 6
HOW TO BUY SHARES 7
REDEMPTION AND EXCHANGE 8
DIVIDENDS AND DISTRIBUTIONS 9
TAXES 9
CALCULATION OF NET ASSET VALUE PER SHARE 11
MANAGEMENT OF THE FUND 11
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS 13
APPENDIX A--RATINGS 15
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS.
MUTUAL FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER,
SHARES OF THE FUND ARE NOT FDIC OR NCUSIF INSURED, ARE NOT
GUARANTEED BY ANY BANK OR ANY CREDIT UNION, ARE NOT OBLIGATIONS OF
ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT RISK, INCLUDING
THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF THE
FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
SYNOPSIS
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek capital
appreciation by investing primarily in common stocks whose market
values appear low relative to their underlying value or future
potential. For further details, see Investment Objective and Policies
and Other Investment Policies and Risk Considerations.
RISK FACTORS AND SPECIAL CONSIDERATIONS
The Fund may enter into options for hedging purposes to
counterbalance portfolio volatility. While the Fund does not engage
in options for speculative purposes, there are risks that result
from use of these instruments by the Fund, and the investor should
review the descriptions of these risks in this Prospectus. See
Investment Strategy under Investment Objective and Policies and
Other Investment Policies and Risk Considerations.
INVESTMENT MANAGER, DISTRIBUTOR AND TRANSFER AGENT
Delaware Management Company, Inc. (the "Manager") furnishes
investment management services to the Fund, subject to the
supervision and direction of Equity Funds V, Inc.'s Board of
Directors. The Manager also provides investment management services
to certain of the other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor
for the Fund and for all of the other mutual funds in the Delaware
Group. Delaware Service Company, Inc. (the "Transfer Agent") is the
shareholder servicing, dividend disbursing, accounting services and
transfer agent for the Fund and for all of the other mutual funds in
the Delaware Group. See Summary of Expenses and Management of the
Fund for further information regarding the Manager and the fees
payable under the Fund's Investment Management Agreement.
PURCHASE PRICE
Shares of the Class offered by this Prospectus are available at net
asset value, without a front-end or contingent deferred sales charge
and are not subject to distribution fees under a Rule 12b-1
distribution plan. See Classes of Shares.
REDEMPTION AND EXCHANGE
Shares of the Class are redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request.
See Redemption and Exchange.
OPEN-END INVESTMENT COMPANY
Equity Funds V, Inc., which was organized as a Maryland
corporation on January 16, 1987, is an open-end management investment
company. The Fund's portfolio of assets is diversified as defined by
the Investment Company Act of 1940 (the "1940 Act"). See Shares under
Management of the Fund.
SUMMARY OF EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Exchange Fees None*
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
Management Fees 0.75%
12b-1 Fees None
Other Operating Expenses 0.34%
------
Total Operating Expenses 1.09%
======
* Exchanges are subject to the requirements of each fund and a
front-end sales charge may apply.
For expense information about Small Cap Value Fund Class A Shares,
Small Cap Value Fund Class B Shares and Small Cap Value Fund Class C
Shares, see the separate prospectus relating to those classes.
The following example illustrates the expenses that an investor
would pay on a $1,000 investment over various time periods, assuming
(1) a 5% annual rate of return and (2) redemption at the end of each
time period. The Fund charges no redemption fees.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$11 $35 $60 $133
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in the
Class will bear directly or indirectly.
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial
statements of Delaware Group Equity Funds V, Inc. - Small Cap Value
Fund and have been audited by Ernst & Young LLP, independent
auditors. The data should be read in conjunction with the financial
statements, related notes, and the report of Ernst & Young LLP
covering such financial information, all of which are incorporated
by reference into Part B. Further information about the Fund's
performance is contained in its Annual Report to shareholders. A
copy of the Fund's Annual Report (including the report of Ernst &
Young LLP) may be obtained from Equity Funds V, Inc. upon request at
no charge.
SMALL CAP VALUE FUND
----------------------------------
Year Ended
11/30/97(2) 11/30/96(2) 11/30/95(2)
[S] [C] [C] [C]
Net Asset Value,
Beginning of Period $25.910 $22.860 $19.400
Income From Investment Operations
- -----------------------------------
Net Investment Income (Loss)(8) 0.209 0.193 0.297
Net Gains (Losses) on Securities
(both realized and unrealized) 7.936 4.047 3.628
------- ------- -------
Total From Investment Operations 8.145 4.240 3.925
------- ------- -------
Less Distributions
Dividends (from net investment
income) (0.205) (0.300) (0.215)
Distributions (from capital gains) (3.900) (0.890) (0.250)
------- ------- -------
Total Distributions (4.105) (1.190) (0.465)
- --------------------- ------- ------- -------
Net Asset Value, End of Period $29.950 $25.910 $22.860
======= ======= =======
- -----------------------------------------------------------------------
Total Return 36.73% 19.45% 20.76%
- --------------
Ratios/Supplemental Data
- -----------------------------
Net Assets, End of Period
(000's omitted) $14,878 $16,373 $7,294
Ratio of Expenses
to Average Daily Net Assets 1.09% 1.15% 1.18%
Ratio of Net Investment Income (Loss)
to Average Daily Net Assets 0.81% 0.81% 1.48%
Portfolio Turnover Rate 53% 87% 65%
Average Commission Rate Paid(9) $0.0599 $0.060 N/A
[CAPTION]
FINANCIAL HIGHLIGHTS (Continued)
SMALL CAP VALUE FUND
----------------------------------
Period
11/9/92(2)
through
11/30/94(2) 11/30/93(2) 11/30/92
[S] [C] [C] [C]
Net Asset Value,
Beginning of Period $20.140 $17.750 $17.090
Income From Investment Operations
- -----------------------------------
Net Investment Income (Loss)(8) 0.195 0.092 0.004
Net Gains (Losses) on Securities
(both realized and unrealized) (0.685) 3.158 0.656
------- ------- -------
Total From Investment Operations (0.490) 3.250 0.660
------- ------- -------
Less Distributions
Dividends (from net investment
income) (0.080) (0.040) none
Distributions (from capital gains) (0.170) (0.820) none
------- ------- -------
Total Distributions (0.250) (0.860) none
- --------------------- ------- ------- -------
Net Asset Value, End of Period $19.400 $20.140 $17.750
======= ======= =======
- ----------------------------------------------------------------------
Total Return (2.51%) 19.00% 3.86%(3)
- --------------
Ratios/Supplemental Data
- -----------------------------
Net Assets, End of Period
(000's omitted) $6,385 $5,476 $1,558
Ratio of Expenses
to Average Daily Net Assets 1.16% 1.34% 1.63%(3)
Ratio of Net Investment Income (Loss)
to Average Daily Net Assets 1.05% 0.55% 0.69%(3)
Portfolio Turnover Rate 14% 32% 68%
Average Commission Rate Paid(9) N/A N/A N/A
[CAPTION]
FINANCIAL HIGHLIGHTS (Continued)
SMALL CAP VALUE FUND
------------------------------------
Year Ended
11/30/92(1) 11/30/91(1) 11/30/90(1)
[S] [C] [C] [C]
Net Asset Value,
Beginning of Period $15.320 $11.050 $14.030
Income From Investment Operations
- -----------------------------------
Net Investment Income (Loss)(8) 0.060 (0.006) 0.149
Net Gains (Losses) on Securities
(both realized and unrealized) 3.360 4.681 (2.269)
------- ------- -------
Total From Investment Operations 3.420 4.675 (2.120)
------- ------- -------
Less Distributions
Dividends (from net investment
income) none (0.155) (0.140)
Distributions (from capital gains) (0.990) (0.250) (0.720)
------- ------- -------
Total Distributions (0.990) (0.405) (0.860)
- --------------------- ------- ------- -------
Net Asset Value, End of Period $17.750 $15.320 $11.050
======= ======= =======
- -------------------------------------------------------------------------
Total Return 22.99%(4) 43.61%(4) (16.14%)(4)
- --------------
Ratios/Supplemental Data
- -----------------------------
Net Assets, End of Period
(000's omitted) $38,792 $12,041 $7,746
Ratio of Expenses
to Average Daily Net Assets 1.93% 2.26% 1.79%
Ratio of Net Investment Income (Loss)
to Average Daily Net Assets 0.39% (0.07%) 1.12%
Portfolio Turnover Rate 68% 99% 69%
Average Commission Rate Paid(9) N/A N/A N/A
[CAPTION]
FINANCIAL HIGHLIGHTS (Continued)
SMALL CAP VALUE FUND
---------------------
11/30/89(1) 11/30/88(1)
[S] [C] [C]
Net Asset Value,
Beginning of Period $10.440 $7.740
Income From Investment Operations
- -----------------------------------
Net Investment Income (Loss) 8 0.131 0.054
Net Gains (Losses) on Securities
(both realized and unrealized) 3.529 2.691
------- -------
Total From Investment Operations 3.660 2.745
------- -------
Less Distributions
Dividends (from net investment
income) (0.070) (0.045)
Distributions (from capital gains) none none
------- -------
Total Distributions (0.070) (0.045)
- --------------------- ------- -------
Net Asset Value, End of Period $14.030 $10.440
======= =======
- ---------------------------------------------------------
Total Return 35.28%(4,5) 35.57%(4,5)
- --------------
Ratios/Supplemental Data
- -----------------------------
Net Assets, End of Period
(000's omitted) $11,055 $6,797
Ratio of Expenses
to Average Daily Net Assets 1.98%(6) 2.02%(6)
Ratio of Net Investment Income (Loss)
to Average Daily Net Assets 1.14%(7) 0.35%(7)
Portfolio Turnover Rate 103% 66%
Average Commission Rate Paid(9) N/A N/A
(1)Data are derived from data of Small Cap Value Fund A Class (known
as Value Fund A Class September 6, 1994 though July 31, 1997 and
until September 6, 1994, referred to as Value Fund class) and
reflect the impact of Rule 12b-1 distribution expenses paid by Small
Cap Value Fund A Class. Small Cap Value Fund Institutional Class
(known as Value Fund Institutional Class September 6, 1994 through
July 31, 1997 and until September 6, 1994, referred to as Value Fund
(Institutional) class) are not subject to Rule 12b-1 distribution
expenses and per share data for periods beginning on and after
November 9, 1992 will not reflect the deduction of such expenses.
(2)Per share data are derived from data of Small Cap Value Fund
Institutional Class which commenced operations on November 9, 1992.
(3)Ratios have been annualized but total return has not been
annualized.
(4)Does not reflect any maximum sales charges that are or were in
effect for Small Cap Value Fund A Class.
(5)Total return reflects the expense limitation referenced in Notes 6
and 7.
(6)Ratio of expenses to average daily net assets prior to expense
limitation was 2.16% for 1989 and 2.23% for 1988.
(7)Ratio of net investment income to average daily net assets prior to
expense limitation was 0.97% for 1989 and 0.14% for 1988.
(8)The years ended November 30, 1996 and November 30, 1997 net
investment income per share information was based on the average
shares outstanding method.
(9)Computed by dividing the total amount of commissions paid by the
total number of shares purchased and sold during the period for
which there was a commission charged.
INVESTMENT OBJECTIVE
AND POLICIES
The investment objective of the Fund is capital appreciation. The
Fund's strategy is to invest primarily in common stocks and issues
convertible into common stocks which, in the opinion of the Manager,
have market values that appear low relative to their underlying
value or future earnings and growth potential.
SUITABILITY
The Fund may be suitable for investors interested in long-term
capital appreciation. Providing current income is not an objective
of the Fund. Any income produced is expected to be minimal.
Investors should not consider a purchase of Fund shares as
equivalent to a complete investment program. The Delaware Group
includes a family of funds, generally available through registered
investment dealers, which may be used together to create a more
complete investment program.
Ownership of Fund shares reduces the bookkeeping and administrative
inconvenience that would be involved with direct purchases of the
Fund's portfolio securities.
Net asset value may fluctuate at times in response to market
conditions and, as a result, the Fund is not appropriate for a
short-term investor.
INVESTMENT STRATEGY
While management believes that the Fund's investment objective may
best be attained by investing in common stocks, the Fund may also
invest in other securities including, but not limited to,
convertible securities, warrants, preferred stocks, bonds and
foreign securities. Fixed-income securities are expected to receive
only minor emphasis.
The Fund will purchase securities which the Manager believes to be
undervalued in relation to asset value or long-term earning power of
the companies. The Manager may also invest in securities of
companies where current or anticipated favorable changes within a
company provide an opportunity for capital appreciation. The
Manager's emphasis will be on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the
market.
The Fund may invest without regard to a minimum grade level where
there are favorable changes in a company's earnings or growth
potential or where general economic conditions and/or the interest
rate environment provide an opportunity for appreciation in these
securities. Investment characteristics and certain risks associated
with the types of securities in which the Fund will generally invest
are described in this Prospectus. See Risk Factors for more specific
information and risks associated with foreign and lower rated
securities. The strategies employed are dependent upon the judgment
of the Manager.
While not a fundamental policy, under normal market conditions the
Fund intends to invest 65% of its net assets in securities issued by
small cap companies, those currently having a market capitalization
generally of less than $1.5 billion. As a general matter, small cap
companies may have more limited product lines, markets and financial
resources than large cap companies. In addition, securities of small
cap companies, generally, may trade less frequently (and with a
lesser volume), may be more volatile and may be somewhat less liquid
than securities issued by larger capitalization companies.
The Manager will consider the financial strength of the company,
the nature of its management and any developments affecting the
security, the company or the industry. Securities may be out of
favor due to a variety of factors, such as lack of an institutional
following, unfavorable developments affecting the issuer of the
securities, such as poor earning reports, dividend reductions, or
cyclical economic or business conditions. Other securities
considered by the Manager would include those of companies where
current or anticipated favorable changes such as a new product or
service, technological breakthrough, management change, projected
takeovers, changes in capitalization or redefinition of future
corporate operations provide an opportunity for capital
appreciation. The Manager will also consider securities where
trading patterns suggest that significant positions are being
accumulated by officers of the company, outside investors or the
company itself. The Manager feels it may uncover situations where
those who have a vested interest in the company feel the securities
are undervalued and have appreciation potential.
In investing for capital appreciation, the Fund may hold securities
for any period of time. The degree of portfolio activity will affect
brokerage costs of the Fund and may affect taxes payable by the
Fund's shareholders. See Portfolio Trading Practices under
Management of the Fund.
Should the market warrant a temporary, defensive approach, the Fund
may also invest in fixed-income obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities, as well as
money market instruments, and corporate bonds rated A or above by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P"). (Appendix A to this Prospectus describes
these ratings.)
If the Manager believes that market conditions warrant, the Fund
may employ options strategies. The Fund may write covered call options
on individual issues as well as write call options on stock indices.
A call option is "covered" if, during the term of the option, the
Fund owns or has the right to obtain at no added cost the security
underlying the call option, owns a call option on the underlying
securities with an exercise price no higher than the exercise price
on the call option written or, subject to any regulatory
restrictions, has segregated an amount of cash or liquid high grade
debt obligations at least equal to the current price of the
underlying securities. The Fund may also purchase put options on
individual issues and on stock indices. The Manager will employ
these techniques in an attempt to protect appreciation attained, to
offset capital losses and/or to take advantage of the liquidity
available in the option markets. The ability to hedge effectively
using options on stock indices will depend, in part, on the
correlation between the composition of the index and the Fund's
portfolio as well as the price movement of individual securities.
The Fund does not currently intend to write or purchase options on
stock indices.
While there is no limit on the amount of the Fund's assets which
may be invested in covered call options, the Fund will not invest more
than 2% of its net assets in put options. The Fund will only use
exchange-traded options.
Although the Fund will constantly strive to attain the investment
objective of capital appreciation, there can be no assurance that it
will be attained. The investment objective of the Fund may not be
changed without shareholder approval.
RISK FACTORS
Investors should be willing to accept the risks associated with
investments in domestic and international securities (and currency
hedging transactions in connection with international investing).
Investing in international securities may be speculative and subject
the Fund to additional risks. Investing in a company temporarily out
of favor may involve the risk that the anticipated favorable change
may not occur and, as a result, that security may decline in value
or not appreciate as expected.
The Fund may also purchase, at times, lower rated or unrated
securities, including corporate bonds and convertible securities
without regard to a grade minimum, which may be considered
speculative and may increase the portfolio's credit risk. Although
the Fund will ordinarily place minor emphasis on fixed-income
securities and will not typically purchase bonds or other securities
rated below B by Moody's or S&P (i.e., high-yield, high-risk
securities, also known as "junk bonds"), it may do so if the Manager
believes that capital appreciation is likely. While the Fund is
authorized to invest up to 25% of its net assets in securities rated
below B, it does not presently intend to invest more than 5% of its
net assets in securities of this type. Investing in such lower rated
securities may involve certain risks not typically associated with
higher rated securities. Such securities are considered very
speculative and may possibly be in default or have interest payments
in arrears. See High-Yield, High-Risk Securities in Part B for
additional information on the risks associated with such securities.
See Appendix A to this Prospectus for more rating information.
* * *
For additional information about the Fund's investment policies and
certain risks associated with investments in certain types of
securities, see Other Investment Policies and Risk Considerations.
CLASSES OF SHARES
The Distributor serves as the national distributor for the Fund.
Shares of the Class may be purchased directly by contacting the Fund
or its agent or through authorized investment dealers. All purchases
of shares of the Class are at net asset value. There is no front-end
or contingent deferred sales charge.
INVESTMENT INSTRUCTIONS GIVEN ON BEHALF OF PARTICIPANTS IN AN
EMPLOYER-SPONSORED RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH
DIRECTIONS PROVIDED BY THE EMPLOYER. EMPLOYEES CONSIDERING
PURCHASING SHARES OF THE CLASS AS PART OF THEIR RETIREMENT PROGRAM
SHOULD CONTACT THEIR EMPLOYER FOR DETAILS.
Shares of the Class are available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers
or dealers that are primarily engaged in the retail securities
business and rollover individual retirement accounts from such
plans; (b) tax-exempt employee benefit plans of the Manager or its
affiliates and securities dealer firms with a selling agreement with
the Distributor; (c) institutional advisory accounts of the Manager
or its affiliates and those having client relationships with
Delaware Investment Advisers, a division of the Manager, or its
affiliates and their corporate sponsors, as well as subsidiaries and
related employee benefit plans and rollover individual retirement
accounts from such institutional advisory accounts; (d) 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 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.
SMALL CAP VALUE FUND A CLASS, SMALL CAP VALUE FUND B CLASS AND SMALL
CAP VALUE FUND C CLASS
In addition to offering Small Cap Value Fund Institutional Class of
shares, the Fund also offers Small Cap Value Fund A Class, Small Cap
Value Fund B Class and Small Cap Value Fund C Class, which are
described in a separate prospectus. Shares of Small Cap Value Fund A
Class, Small Cap Value Fund B Class and Small Cap Value Fund C Class
may be purchased through authorized investment dealers or directly
by contacting the Fund or the Distributor. Class A, Class B and
Class C Shares may have different sales charges and other expenses
which may affect performance. To obtain a prospectus relating to
such classes, contact the Distributor by writing to the address or
by calling the phone numbers listed on the cover of this Prospectus.
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and
by arrangement with your investment dealer. In all instances,
investors must qualify to purchase shares of the Class.
INVESTING DIRECTLY BY MAIL
1. Initial Purchases--An Investment Application or, in the case of a
retirement plan account, an appropriate retirement plan application,
must be completed, signed and sent with a check payable to Small Cap
Value Fund Institutional Class, to Delaware Group at 1818 Market
Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any
time by mailing a check payable to Small Cap Value Fund
Institutional Class. Your check should be identified with your
name(s) and account number.
INVESTING DIRECTLY BY WIRE
You may purchase shares by requesting your bank to transmit funds
by wire to CoreStates Bank, N.A., ABA #031000011, account number
1412893401 (include your name(s) and your account number for the
Fund).
1. Initial Purchases--Before you invest, telephone the Client
Services Department at 800-828-5052 to get an account number. If you
do not call first, it may delay processing your investment. In
addition, you must promptly send your Investment Application or, in
the case of a retirement plan account, an appropriate retirement
plan application, to Small Cap Value Fund Institutional Class, to
Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime
by wiring funds to CoreStates Bank, N.A., as described above. You
must advise your Client Services Representative by telephone at
800-828-5052 prior to sending your wire.
INVESTING BY EXCHANGE
If you have an investment in another mutual fund in the Delaware
Group and you qualify to purchase shares of the Class, you may write
and authorize an exchange of part or all of your investment into the
Fund. However, shares of Small Cap Value Fund B Class and Small Cap
Value Fund C Class and Class B Shares and Class C Shares of the
other funds in the Delaware Group offering such classes of shares
may not be exchanged into the Class. If you wish to open an account
by exchange, call your Client Services Representative at
800-828-5052 for more information. See Redemption and Exchange for
more complete information concerning your exchange privilege.
INVESTING THROUGH YOUR INVESTMENT DEALER
You can make a purchase of Fund shares through most investment
dealers who, as part of the service they provide, must transmit
orders promptly to the Fund. They may charge for this service.
PURCHASE PRICE AND EFFECTIVE DATE
The purchase price (net asset value) of the Class is determined as
of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
The effective date of a purchase made through an investment dealer
is the date the order is received by the Fund, its agent or
designee. The effective date of a direct purchase is the day your
wire, electronic transfer or check is received, unless it is
received after the time the share price is determined, as noted
above. Purchase orders received after such time will be effective
the next business day.
THE CONDITIONS OF YOUR PURCHASE
The Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are
responsible for any loss incurred. The Fund can redeem shares from
your account(s) to reimburse itself for any loss, and you may be
restricted from making future purchases in any of the funds in the
Delaware Group. The Fund reserves the right to reject purchases by
third-party checks or checks that are not drawn on a domestic branch
of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to
additional bank charges for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of
redemptions.
REDEMPTION AND EXCHANGE
REDEMPTION AND EXCHANGE REQUESTS MADE ON BEHALF OF PARTICIPANTS IN
AN EMPLOYER-SPONSORED RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH
DIRECTIONS PROVIDED BY THE EMPLOYER. EMPLOYEES SHOULD THEREFORE
CONTACT THEIR EMPLOYER FOR DETAILS.
Your shares will be redeemed or exchanged based on the net asset
value next determined after the Fund receives your request in good
order. For example, redemption and exchange requests received in
good order after the time the net asset value of shares is
determined, as noted above, will be processed on the next business
day. See Purchase Price and Effective Date under How to Buy Shares.
Except as otherwise noted below, for a redemption request to be in
good order, you must provide your account number, account
registration, and the total number of shares or dollar amount of the
transaction. With regard to exchanges, you must also provide the
name of the fund in which you want to invest the proceeds. Exchange
instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a
redemption or an exchange by calling the Fund at 800-828-5052.
Redemption proceeds will be distributed promptly, as described
below, but not later than seven days after receipt of a redemption
request.
All exchanges involve a purchase of shares of the fund into which
the exchange is made. As with any purchase, an investor should
obtain and carefully read that fund's prospectus before buying
shares in an exchange. The prospectus contains more complete
information about the fund, including charges and expenses.
The Fund will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed
have already settled. The Fund will honor redemption requests as to
shares for which a check was tendered as payment, but the Fund will
not mail or wire the proceeds until it is reasonably satisfied that
the check has cleared, which may take up to 15 days from the
purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to
reject a written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the
shareholder's address of record.
Shares of the Class may be exchanged into any other Delaware Group
mutual fund, provided: (1) the investment satisfies the eligibility
and other requirements set forth in the prospectus of the fund being
acquired, including the payment of any applicable front-end sales
charge; and (2) the shares of the fund being acquired are in a state
where that fund is registered. If exchanges are made into other
shares that are eligible for purchase only by those permitted to
purchase shares of the Class, such exchange will be exchanged at net
asset value. Shares of the Class may not be exchanged into the Class
B Shares or Class C Shares of the funds in the Delaware Group. The
Fund may suspend, terminate or amend the terms of the exchange
privilege upon 60 days' written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee
is charged by the Fund or the Distributor for redeeming or
exchanging your shares although, in the case of an exchange, a sales
charge may apply. You may also have your investment dealer arrange
to have your shares redeemed or exchanged. Your investment dealer
may charge for this service.
All authorizations given by shareholders, including selection of
any of the features described below, shall continue in effect until such
time as a written revocation or modification has been received by
the Fund or its agent.
WRITTEN REDEMPTION AND EXCHANGE
You can write to the Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares or to request an exchange
of any or all your shares into another mutual fund in the Delaware
Group, subject to the same conditions and limitations as other
exchanges noted above. The request must be signed by all owners of
the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not
sent to the shareholder(s) at the address of record, the Fund
requires a signature by all owners of the account and may require a
signature guarantee. Each signature guarantee must be supplied by an
eligible guarantor institution. The Fund reserves the right to
reject a signature guarantee supplied by an eligible institution
based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans,
administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of
your redemption request. Certificates are issued for shares only if
you submit a specific request. If your shares are in certificate
form, the certificate(s) must accompany your request and also be in
good order.
You also may submit your written request for redemption or exchange
by facsimile transmission at the following number: 215-255-8864.
TELEPHONE REDEMPTION AND EXCHANGE
To get the added convenience of the telephone redemption and
exchange methods, you must have the Transfer Agent hold your shares
(without charge) for you. If you choose to have your shares in
certificate form, you may redeem or exchange only by written request
and you must return your certificate(s).
The Telephone Redemption--Check to Your Address of Record service
and the Telephone Exchange service, both of which are described
below, are automatically provided unless you notify the Fund in
writing that you do not wish to have such services available with
respect to your account. The Fund reserves the right to modify,
terminate or suspend these procedures upon 60 days' written notice
to shareholders. It may be difficult to reach the Fund by telephone
during periods when market or economic conditions lead to an
unusually large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone
instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine. With respect to such telephone
transactions, the Fund will follow reasonable procedures to confirm
that instructions communicated by telephone are genuine (including
verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent transactions. A written confirmation
will be provided for all purchase, exchange and redemption
transactions initiated by telephone. By exchanging shares by
telephone, you are acknowledging prior receipt of a prospectus for
the fund into which your shares are being exchanged.
TELEPHONE REDEMPTION--CHECK TO YOUR ADDRESS
OF RECORD
You or your investment dealer of record can have redemption
proceeds of $50,000 or less mailed to you at your 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.
TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize
this service when you open your account. If you change your
predesignated bank account, you must submit a written authorization
and you may need to have your signature guaranteed. For your
protection, your authorization must be on file. If you request a
wire, your funds will normally be sent the next business day. If you
ask for a check, it will normally be mailed the next business day
after receipt of your redemption request to your predesignated bank
account. There are no fees for this redemption method, but the mail
time may delay getting funds into your bank account. Simply call
your Client Services Representative prior to the time the net asset
value is determined, as noted above.
TELEPHONE EXCHANGE
You or your investment dealer of record can exchange shares into
any fund in the Delaware Group under the same registration. As with the
written exchange service, telephone exchanges are subject to the
same conditions and limitations as other exchanges noted above.
Telephone exchanges may be subject to limitations as to amounts or
frequency.
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net capital
gains and net investment income earned during the year. Such
payments, if any, will be made once a year during the first quarter
of the next fiscal year.
Each class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the Class will not
incur any distribution fee under the 12b-1 Plans which apply to
Small Cap Value Fund A Class, Small Cap Value Fund B Class and Small
Cap Value Fund C Class.
Both dividends and distributions, if any, are automatically
reinvested in your account at net asset value.
TAXES
The tax discussion set forth below is included for general
information only. Investors should consult their own tax advisers
concerning the federal, state, local or foreign tax consequences of
an investment in the Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping
changes in the Internal Revenue Code (the "Code"). Because many of
these changes are complex, and only indirectly affect the Fund and
its distributions to you, they are discussed in Part B. Changes in
the treatment of capital gains, however, are discussed in this
section.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. As such, the Fund will not be subject to
federal income tax, or to any excise tax, to the extent its earnings
are distributed as provided in the Code and by satisfying certain
other requirements relating to the sources of its income and
diversification of its assets.
The Fund intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from net
investment income or net short-term capital gains will be taxable to
those investors who are subject to income taxes as ordinary income,
even though received in additional shares. For corporate investors,
dividends from net investment income will generally qualify in part
for the corporate dividends-received deduction. The portion of
dividends paid by the Fund that so qualifies will be designated each
year in a notice from Equity Funds V, Inc. to the Fund's
shareholders. For the fiscal year ended November 30, 1997, 37.97% of
the Fund's dividends from net investment income qualified for the
corporate dividends-received deduction.
Distributions paid by the Fund from long-term capital gains,
received in additional shares, are taxable to those investors who
are subject to income taxes as long-term capital gains, regardless
of the length of time an investor has owned shares in the Fund. The
Fund does not seek to realize any particular amount of capital gains
during a year; rather, realized gains are a by-product of Fund
management activities. Consequently, capital gains distributions may
be expected to vary considerably from year to year. Also, for those
investors subject to tax, if purchases of shares in the Fund are
made shortly before the record date for a dividend or capital gains
distribution, a portion of the investment will be returned as a
taxable distribution.
THE TREATMENT OF CAPITAL GAIN DISTRIBUTIONS UNDER THE TAXPAYER
RELIEF ACT OF 1997
The 1997 Act creates a category of long-term capital gain for
individuals that will be taxed at new lower tax rates. For investors
who are in the 28% or higher federal income tax brackets, these
gains will be taxed at a maximum rate of 20%. For investors who are
in the 15% federal income tax bracket, these gains will be taxed at
a maximum rate of 10%. Capital gain distributions will qualify for
these new maximum tax rates, depending on when the Fund's securities
were sold and how long they were held by the Fund before they were
sold. Investors who want more information on holding periods and
other qualifying rules relating to these new rates should review the
expanded discussion in Part B, or should contact their own tax
advisers.
Equity Funds V, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain
distributions which will qualify for these maximum federal tax
rates.
Although dividends generally will be treated as distributed when
paid, dividends which are declared in October, November, or December
to shareholders of record on a specified date in one of those
months, but which, for operational reasons, may not be paid to the
shareholder until the following January, will be treated for tax
purposes as if paid by the Fund and received by the shareholder on
December 31 of the year declared.
The sale of shares of the Fund is a taxable event and may result in
a capital gain or loss to shareholders subject to tax. Capital gain
or loss may be realized from an ordinary redemption of shares or an
exchange of shares between the Fund and any other fund in the
Delaware Group. Any loss incurred on a sale or exchange of Fund
shares that had been held for six months or less will be treated as
a long-term capital loss to the extent of capital gain dividends
received with respect to such shares.
In addition to the federal taxes described above, shareholders may
or may not be subject to various state and local taxes. For example,
distributions of interest income and capital gains realized from
certain types of U.S. government securities may be exempt from state
personal income taxes. Because investors' state and local taxes may
be different than the federal taxes described above, investors
should consult their own tax advisers.
Each year, Equity Funds V, Inc. will mail to you information on the
tax status of the Fund's dividends and distributions. Shareholders
will also receive each year information as to the portion of
dividend income, if any, that is derived from U.S. government
securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be
required to pay tax on amounts distributed to them by the Fund.
Equity Funds V, Inc. is required to withhold 31% of taxable
dividends, capital gains distributions, and redemptions paid to
shareholders who have not complied with IRS taxpayer identification
regulations. You may avoid this withholding requirement by
certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to
backup withholding.
See Accounting and Tax Issues and Distributions and Taxes in Part B
for additional information on tax matters relating to the Fund and
its shareholders.
CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of the Class is the net asset
value ("NAV") per share of Class shares next computed after the
order is received. The NAV is computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The NAV per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of
shares outstanding. Portfolio securities for which market quotations
are available are priced at market value. Foreign securities
expressed in foreign currency values will be converted into U.S.
dollar values at the mean between the currencies' bid and offered
quotations. Short-term investments having a maturity of less than 60
days are valued at amortized cost, which approximates market value.
All other securities are valued at their fair value as determined in
good faith and in a method approved by the Fund's Board of
Directors.
The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share
based on the proportionate participation in the Fund represented by
the value of shares of that class. All income earned and expenses
incurred by the Fund will be borne on a pro-rata basis by each
outstanding share of a class, based on each class' percentage in the
Fund represented by the value of shares of such classes, except that
the Class will not incur any of the expenses under the Fund's 12b-1
Plans and Small Cap Value Fund A, B and C Classes alone will bear
the 12b-1 Plan fees payable under their respective Plans. Due to the
specific distribution expenses and other costs that will be
allocable to each class, the net asset value of and dividends paid
to each class of the Fund will vary.
MANAGEMENT OF THE FUND
DIRECTORS
The business and affairs of Equity Funds V, Inc. are managed under
the direction of its Board of Directors. Part B contains additional
information regarding Equity Funds V, Inc.'s directors and officers.
INVESTMENT MANAGER
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On November 30, 1997, the Manager and its
affiliates within the Delaware Group, including Delaware
International Advisers Ltd., were managing in the aggregate more
than $39 billion in assets in the various institutional or
separately managed (approximately $23,274,532,000) and investment
company (approximately $16,181,491,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger
between DMH and a wholly owned subsidiary of Lincoln National
Corporation ("Lincoln National") was completed. DMH and the Manager
are now indirect, wholly owned subsidiaries, and subject to the
ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization
with operations in many aspects of the financial services industry,
including insurance and investment management. In connection with
the merger, a new Investment Management Agreement between the Fund
and the Manager was executed following shareholder approval.
The Manager manages the Fund's portfolio and makes investment
decisions for the Fund which are implemented by the Fund's Trading
Department. The Manager also administers Equity Funds V, Inc.'s
affairs and pays the salaries of all the directors, officers and
employees of Equity Funds V, Inc. who are affiliated with the
Manager. For these services, the Manager is paid an annual fee of
3/4 of 1% of the average daily net assets of the Fund, less all
directors' fees paid to the unaffiliated directors of Equity Funds
V, Inc. The Fund's fee is higher than that paid by many other funds.
The fee may be higher or lower than that paid by funds with
comparable investment objectives. Investment management fees paid by
the Fund for the fiscal year ended November 30, 1997 were 0.75% of
average daily net assets. The directors of Equity Funds V, Inc.
annually review fees paid to the Manager.
Christopher S. Beck, Vice President/Senior Portfolio Manager of
Equity Funds V, Inc. assumed primary responsibility for making
day-to-day investment decisions for the Fund in May 1997. Mr. Beck
has been in the investment business for 16 years, starting with
Wilmington Trust in 1981. Later, he became Director of Research at
Cypress Capital Management in Wilmington and Chief Investment
Officer of the University of Delaware Endowment Fund. Prior to
joining the Delaware Group in May 1997, he managed the small cap
value fund for two years at Pitcairn Trust Company. He holds a BS
from the University of Delaware, an MBA from Lehigh University and
is a CFA charterholder.
In making investment decisions for the Fund, Mr. Beck regularly
consults with Wayne A. Stork, Richard G. Unruh, Jr. and Andrea
Giles. Mr. Stork, Chairman of Delaware Management Company Inc.'s and
Equity Funds V, Inc.'s Boards of Directors, is a graduate of Brown
University and attended New York University's Graduate School of
Business Administration. Mr. Stork joined the Delaware Group in 1962
and has served in various executive capacities at different times
within the Delaware organization. A graduate of Brown University,
Mr. Unruh received his MBA from the University of Pennsylvania's
Wharton School and joined the Delaware Group in 1982 after 19 years
of investment management experience with Kidder, Peabody Co. Inc.
Mr. Unruh was named an Executive Vice President of Equity Funds V,
Inc. in 1994. He is also a member of the Board of Delaware
Management Company, Inc. and was named an Executive Vice President
of Delaware Management Company, Inc. in 1994. Andrea Giles, Research
Analyst for the Fund, holds a BSAD from the Massachusetts Institute
of Technology and an MBA in Finance from Columbia University. Prior
to joining the Delaware Group in 1996, she was an account officer in
the Leveraged Capital Group with Citibank.
PORTFOLIO TRADING PRACTICES
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length
of time they have been held. The degree of portfolio activity will
affect brokerage costs of the Fund and may affect taxes payable by
the Fund's shareholders to the extent that net capital gains are
realized. Given the Fund's investment objective, its annual
portfolio turnover rate may exceed 100%. A turnover rate of 100%
would occur, for example, if all the investments in the Fund's
portfolio at the beginning of the year were replaced by the end of
the year. The turnover rate also may be affected by cash
requirements for redemptions and repurchases of Fund shares.
The Fund uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders may
be placed with brokers or dealers who provide brokerage and research
services to the Manager or its advisory clients. These services may
be used by the Manager in servicing any of its accounts. Subject to
best price and execution, the Fund may consider a broker/dealer's
sales of shares of funds in the Delaware Group of funds in placing
portfolio orders and may place orders with broker/dealers that have
agreed to defray certain expenses of such funds, such as custodian
fees.
PERFORMANCE INFORMATION
From time to time, the Fund may quote total return performance for
the Class in advertising and other types of literature.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value.
Each presentation will include the average annual total return for
one-, five- and ten-year or life-of-fund periods, as relevant. The
Fund may also advertise aggregate and average total return
information concerning the Class over additional periods of time.
Because securities prices fluctuate, investment results of the Class
will fluctuate over time and past performance should not be
considered a guarantee of future results.
STATEMENTS AND CONFIRMATIONS
You will receive quarterly statements of your account summarizing
all transactions during the period. A confirmation statement will be
sent following all transactions other than those involving a
reinvestment of dividends. You should examine statements and
confirmations immediately and promptly report any discrepancy by
calling your Client Services Representative.
FINANCIAL INFORMATION ABOUT THE FUND
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed
information about the Fund's investments and performance. Equity
Funds V, Inc.'s fiscal year ends on November 30.
DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P., serves as the national
distributor for the Fund's shares under a Distribution Agreement
with Equity Funds V, Inc. dated April 3, 1995, as amended on
November 29, 1995. The Distributor bears all of the costs of
promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for
the Fund pursuant to an amended and restated agreement dated as of
November 29, 1996. The Transfer Agent also provides accounting
services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement. Certain recordkeeping and other shareholder
services that otherwise would be performed by the Transfer Agent may
be performed by certain other entities and the Transfer Agent may
elect to enter into an agreement to pay such other entities for
those services. In addition, participant account maintenance fees
may be assessed for certain recordkeeping services provided as part
of retirement plan and administration service packages. These fees
are based on the number of participants in the plan and the various
services selected. Fees will be quoted upon request and are subject
to change.
The directors of Equity Funds V, Inc. annually review service fees
paid to the Distributor and the Transfer Agent. The Distributor and
the Transfer Agent are indirect, wholly owned subsidiaries of DMH.
EXPENSES
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and
those borne by the Distributor under the Distribution Agreement. For
the fiscal year ended November 30, 1997, the ratio of operating
expenses to average daily net assets for the Class was 1.09%.
SHARES
Equity Funds V, Inc. is an open-end management investment company.
The Fund's portfolio of assets is diversified as defined by the 1940
Act. Commonly known as a mutual fund, Equity Funds V, Inc. was
organized as a Maryland corporation on January 16, 1987. In addition
to the Fund, Equity Funds V, Inc. presently offers one other series
of shares, the Retirement Income Fund series.
Fund shares have a par value of $.01, equal voting rights, except as
noted below, and are equal in all other respects. Equity Funds V,
Inc.'s shares have noncumulative voting rights which means that the
holders of more than 50% of Equity Funds V, Inc.'s shares voting for
the election of directors can elect 100% of the directors if they
choose to do so. Under Maryland law, Equity Funds V, Inc. is not
required, and does not intend, to hold annual meetings of
shareholders unless, under certain circumstances, it is required to
do so under the 1940 Act. Shareholders of 10% or more of Equity
Funds V, Inc.'s outstanding shares may request that a special
meeting be called to consider the removal of a director.
In addition to the Class, the Fund also offers Small Cap Value Fund
A Class, Small Cap Value Fund B Class and Small Cap Value Fund C
Class. Shares of each class represent proportionate interests in the
assets of the Fund and have the same voting and other rights and
preferences as the Class, except that shares of the Class are not
subject to, and may not vote on matters affecting, the Distribution
Plans under Rule 12b-1 relating to Small Cap Value Fund A Class,
Small Cap Value Fund B Class and Small Cap Value Fund C Class.
Prior to September 6, 1994, Value Fund Institutional Class was known
as the Value Fund (Institutional) class and Value Fund A Class was
known as the Value Fund class. Effective as of the close of business
on July 31, 1997, the name Value Fund series changed to Small Cap
Value Fund series.
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
FOREIGN SECURITIES--The Fund may invest up to 25% of its assets in
foreign securities. Foreign markets may be more volatile than U.S.
markets. Such investments involve sovereign risk in addition to the
normal risks associated with U.S. securities. These risks include
political risks, foreign taxes and exchange controls and currency
fluctuations. For example, foreign portfolio investments may
fluctuate in value due to changes in currency rates (i.e., the value
of foreign investments would increase with a fall in the value of
the dollar, and decrease with a rise in the value of the dollar) and
control regulations apart from market fluctuations. The Fund may
also experience delays in foreign securities settlement.
The Fund will, from time to time, conduct 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). Investors should be aware that there are costs
and risks associated with such currency transactions. 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. When the
Manager believes that the currency of a particular foreign country
may suffer a decline against the U.S. dollar or against another
currency, the Fund may enter into a forward 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. It is
impossible to predict precisely the market value of portfolio
securities at the expiration of the forward contract. Accordingly,
it may be necessary for the Fund to purchase or sell additional
foreign currency on the spot market (and bear the expense of such
purchase or sale) if the market value of the security is less than
or greater than the amount of foreign currency the Fund is obligated
to deliver.
The Fund may incur gains or losses from currency transactions. No
type of foreign currency transaction will eliminate fluctuations in
the prices of the Fund's foreign securities or will prevent losses
if the prices of such securities should decline.
The Fund's Custodian for its foreign securities is The Chase
Manhattan Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245.
RULE 144A SECURITIES--The Fund may invest in restricted securities,
including securities eligible for resale without registration
pursuant to Rule 144A ("Rule 144A Securities") under the Securities
Act of 1933. Rule 144A permits many privately placed and legally
restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more
than 10% of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day function of determining whether or not
individual Rule 144A Securities are liquid for purposes of the
Fund's 10% limitation on investments in illiquid assets. The Board
has instructed the Manager to consider the following factors in
determining the liquidity of a Rule 144A Security: (i) the frequency
of trades and trading volume for the security; (ii) whether at least
three dealers are willing to purchase or sell the security and the
number of potential purchasers; (iii) whether at least two dealers
are making a market in the security; and (iv) the nature of the
security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a
result, the Fund's holdings of illiquid securities exceed the Fund's
10% limit on investment in such securities, the Manager will
determine what action to take to ensure that the Fund continues to
adhere to such limitation.
REPURCHASE AGREEMENTS--The Fund may also use repurchase agreements
that are at least 102% collateralized by U.S. government securities.
Repurchase agreements help the Fund to invest cash on a temporary
basis. The Fund may invest cash balances in joint repurchase
agreements with other Delaware Group funds. Under a repurchase
agreement, the Fund acquires ownership and possession of a security,
and the seller agrees to buy the security back at a specified time
and higher price. If the seller is unable to repurchase the
security, the Fund could experience delays in liquidating the
securities. To minimize this possibility, the Fund considers the
creditworthiness of banks and dealers when entering into repurchase
agreements.
PORTFOLIO LOAN TRANSACTIONS--The Fund may loan up to 25% of its
assets to qualified broker/dealers or institutional investors for
their use relating to short sales or other security transactions.
The major risk to which the Fund would be exposed on a loan
transaction is the risk that the borrower would go bankrupt at a
time when the value of the security goes up. Therefore, the Fund
will only enter into loan arrangements after a review of all
pertinent facts by the Manager, subject to overall supervision by
the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the
consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the
Manager.
BORROWING
The Fund is permitted under certain circumstances to borrow money.
Investment securities will normally not be purchased while the Fund
has an outstanding borrowing.
INVESTMENTS BY FUNDS OF FUNDS
The Fund accepts investments from the series portfolios of Delaware
Group Foundation Funds, a fund of funds (the "Foundation Funds").
From time to time, the Fund may experience large investments or
redemptions due to allocations or rebalancings by the Foundation
funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio
management to the extent that 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 transactions
costs or portfolio turnover. The Manager will monitor such
transactions and will attempt to minimize any adverse effects on
both the Fund and the Foundation funds resulting from such
transactions.
CALL OPTIONS
Writing Covered Call Options--A covered call option obligates the
Fund to sell one of its securities for an agreed price up to an
agreed date. When the Fund writes a call, it receives a premium and
agrees to sell the callable securities to a purchaser of a
corresponding call during the call period (usually not more than
nine months) at a fixed exercise price regardless of market price
changes during the call period. The advantage is that the Fund
receives premium income for the limited purpose of offsetting the
costs of purchasing put options or offsetting any capital loss or
decline in market value of the security. However, if the Manager's
forecast is wrong, the Fund may not fully participate in the market
appreciation if the security's price rises.
Writing a Call Option on Stock Indices--Writing a call option on
stock indices is similar to the writing of a call option on an
individual stock. Stock indices used will include, but not be
limited to, the S&P 100 and the S&P Over-The-Counter ("OTC") 250.
PUT OPTIONS
Purchasing a Put Option--A put option gives the Fund the right to
sell one of its securities for an agreed price up to an agreed date.
The advantage is that the Fund can be protected should the market
value of the security decline. However, the Fund must pay a premium
for this right which would be lost if the option is not exercised.
Purchasing a Put Option on Stock Indices--Purchasing a protective
put option on stock indices is similar to the purchase of protective
puts on an individual stock. Indices used will include, but not be
limited to, the S&P 100 and the S&P OTC 250.
Closing Transactions--Closing transactions essentially let the Fund
offset a put option or covered call option prior to its exercise or
expiration. If the Fund cannot effect a closing transaction, it may
have to hold a security it would otherwise sell or deliver a
security it might want to hold.
Part B sets forth other more specific investment restrictions.
APPENDIX A -- RATINGS
BONDS
Excerpts from Moody'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;
BA--judged to have speculative elements; their future cannot be
considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class;
B--generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be
small; CAA--are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or
interest; CA--represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked
shortcomings; C--the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Excerpts from S&P'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; BB, B, CCC, CC--regarded, on balance, as
predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and CC the highest
degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions;
C--reserved for income bonds on which no interest is being paid;
D--in default, and payment of interest and/or repayment of principal
is in arrears.
For more information, contact
Delaware Group at 800-828-5052.
Investment Manager
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
National Distributor
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
Shareholder Servicing,
Dividend Disbursing,
Accounting Services
and Transfer Agent
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
Legal Counsel
Stradley, Ronon, Stevens
& Young, LLP
One Commerce Square
Philadelphia, PA 19103
Independent Auditors
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
Custodian
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
[RECYCLE LOGO] Printed in the U.S.A.on recycyled paper.
P-046[--] PP 1/98
SMALL CAP
VALUE FUND
INSTITUTIONAL CLASS
Prospectus
February 3, 1998
[LOGO]
DELAWARE
GROUP
- ---------
Philadelphia * London
RETIREMENT INCOME FUND A CLASS SHARES
RETIREMENT INCOME FUND B CLASS SHARES PROSPECTUS
RETIREMENT INCOME FUND C CLASS SHARES FEBRUARY 3, 1998
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance:
Nationwide 800-523-4640
Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions:
Nationwide 800-659-2265
This Prospectus describes the Retirement Income Fund series (the
"Fund") of Delaware Group Equity Funds V, Inc. ("Equity Funds V, Inc."),
a professionally-managed mutual fund of the series type. The investment
objective of the Fund is to seek to provide investors with high current
income and the potential for capital appreciation.
The Fund offers Retirement Income Fund A Class ("Class A Shares"),
the Retirement Income Fund B Class ("Class B Shares") and the Retirement
Income Fund C Class ("Class C Shares") (individually, a "Class" and
collectively, the "Classes").
This Fund has the authority to invest up to all of its net assets
in lower rated securities, commonly known as "junk bonds" and "lower
rated equity securities." Such securities involve greater risks,
including default risks, than higher rated securities. Purchasers
should carefully assess these risks before investing in this Fund. See
Investment Objective and Policies, Special Risk Considerations, and
Appendix A--Ratings.
This Prospectus relates only to the Classes listed above and sets
forth information that you should read and consider before you invest.
Please retain it for future reference. The Fund's Statement of
Additional Information ("Part B" of Equity Funds V, Inc.'s registration
statement), dated February 3, 1998, as it may be amended from time to
time, contains additional information about the Fund and has been filed
with the Securities and Exchange Commission ("SEC"). Part B is
incorporated by reference into this Prospectus and is available, without
charge, by writing to Delaware Distributors, L.P. at the above address
or by calling the above numbers. The SEC also maintains a Web site
(http://www.sec.gov) that contains Part B, material we incorporated by
reference, and other information regarding registrants that
electronically file with the SEC.
The Fund also offers Retirement Income Fund Institutional Class,
which is available for purchase only by certain investors. A prospectus
for Retirement Income Fund Institutional Class can be obtained by
writing to Delaware Distributors, L.P. at the above address or by
calling the above numbers.
TABLE OF CONTENTS
Cover Page Classes of Shares
Synopsis How to Buy Shares
Summary of Expenses Redemption and Exchange
Investment Objective and Policies Dividends and Distributions
Suitability Taxes
Investment Strategy Calculation of
Offering Price and
Net Asset Value Per Share
Special Risk Considerations Management of the Fund
High-Yield Securities Other Investment Policies and
Lower Rated Convertible Securities Risk Considerations
and Preferred Stock Appendix A--Ratings
Foreign Securities
The Delaware Difference
Plans and Services
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS.
MUTUAL FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER,
SHARES OF THE FUND ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY
ANY BANK OR ANY CREDIT UNION, ARE NOT OBLIGATIONS OF ANY BANK OR ANY
CREDIT UNION, AND INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS
OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF THE FUND ARE NOT BANK OR
CREDIT UNION DEPOSITS.
SYNOPSIS
Investment Objective
The investment objective of the Fund is to seek to provide
investors with high current income and an investment that has the
potential for capital appreciation. The Fund seeks to achieve its
investment objective by investing principally in equity securities which
generate income through dividends or otherwise ("income generating
equity securities") and debt securities including, but not limited to,
dividend paying common stocks, securities of real estate investment
trusts, preferred stocks, warrants, rights, convertible securities, non-
convertible debt securities, high-yield, high risk securities,
investment grade fixed-income securities, U.S. government securities and
foreign equity and fixed-income securities. For further details, see
Investment Objective and Policies and Other Investment Policies and Risk
Considerations.
Risk Factors
Prospective investors should consider the following:
1. The Fund has the authority to invest up to all of its net
assets in lower rated securities. Up to 45% of its net assets may be
invested in high-yield, higher risk fixed-income securities ("junk
bonds"). In addition, the Fund may invest in certain income generating
equity securities such as convertible securities and preferred stock,
rated below investment grade. These securities generally will have
speculative characteristics similar to those of lower rated fixed-income
securities. The Fund may invest an unrestricted portion of its total
assets in such lower rated income generating equity securities. Such
securities may increase the risks of an investment in this Fund. See
High-Yield Securities under Special Risk Considerations.
2. Investing in securities of foreign governments and non-United
States companies which are generally denominated in foreign currencies
and the utilization of forward foreign currency exchange contracts
involve certain risk and opportunity considerations not typically
associated with investing in United States government securities and
securities of United States companies. See Special Risk Considerations
and Other Investment Policies and Risk Considerations.
3. The Fund has the ability to engage in options transactions for
hedging purposes to counterbalance portfolio volatility. While the Fund
does not engage in options transactions for speculative purposes, there
are risks which result from the use of options, and an investor should
carefully review the descriptions of these risks in this Prospectus.
Certain options may be considered to be derivative securities. See
Options under Other Investment Policies and Risk Considerations.
4. The Fund may invest up to 20% of its net assets in issuers
organized or having a majority of their assets or deriving a majority of
their operating income in foreign countries. Investment in foreign
securities involve risks which are in addition to those risks inherent
in domestic investments. See Foreign Securities under Special Risk
Considerations.
Investment Manager, Distributor and Transfer Agent
Delaware Management Company, Inc. (the "Manager") furnishes
investment management services to the Fund, subject to the supervision
and direction of Equity Funds V, Inc.'s Board of Directors. The Manager
also provides investment management services to certain other funds in
the Delaware Group. Delaware Distributors, L.P. (the "Distributor") is
the national distributor for the Fund and for all of the other mutual
funds in the Delaware Group. Delaware Service Company, Inc. (the
"Transfer Agent") is the shareholder servicing, dividend disbursing,
accounting services and transfer agent for the Fund and for all of the
other mutual funds in the Delaware Group. See Summary of Expenses and
Management of the Fund for further information regarding the Manager and
the fees payable under the Fund's Investment Management Agreement.
Sales Charges
The price of Class A Shares includes a maximum front-end sales
charge of 4.75% of the offering price. The front-end sales charge is
reduced on certain transactions of at least $100,000 but under
$1,000,000. For purchases of $1,000,000 or more, the front-end sales
charge is eliminated (subject to a CDSC of 1% if shares are redeemed
within 12 months of purchase if in connection with such purchase a
dealer commission is paid). Class A Shares are subject to annual 12b-1
Plan expenses for the life of the investment.
The price of Class B Shares is equal to the net asset value per
share. Class B Shares are subject to a contingent deferred sales charge
("CDSC") of: (i) 4% if shares are redeemed within two years of
purchase; (ii) 3% if shares are redeemed during the third or fourth year
following purchase; (iii) 2% if shares are redeemed during the fifth
year following purchase; and (iv) 1% if shares are redeemed during the
sixth year following purchase. Class B Shares are subject to annual
12b-1 Plan expenses for approximately eight years after purchase. See
Deferred Sales Charge Alternative - Class B Shares and Automatic
Conversion of Class B Shares under Classes of Shares.
The price of Class C Shares is equal to the net asset value per
share. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months of purchase. Class C Shares are subject to
annual 12b-1 Plan expenses for the life of the investment.
See Classes of Shares and Distribution (12b-1) and Service under
Management of the Fund.
Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments must generally be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an
amount that is less than $1,000,000. An investor may exceed these
maximum purchase limitations for Class B Shares and Class C Shares by
making cumulative purchases over a period of time. An investor should
keep in mind, however, that reduced front-end sales charges apply to
investments of $100,000 or more in Class A Shares, and that Class A
Shares are subject to lower annual 12b-1 Plan expenses than Class B and
Class C Shares and generally are not subject to a CDSC. The minimum and
maximum purchase amounts for retirement plans may vary. See How to Buy
Shares.
Redemption and Exchange
Class A Shares of the Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange
request. Neither the Fund nor the Distributor assesses a charge for
redemptions or exchanges of Class A Shares, except for certain
redemptions of shares purchased at net asset value, which may be subject
to a CDSC if a dealer's commission was paid in connection with such
purchases. See Front-End Sales Charge Alternative - Class A Shares
under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at
the net asset value calculated after receipt of the redemption or
exchange request subject, in the case of redemptions, to any applicable
CDSC. Neither the Fund nor the Distributor assesses any charges other
than the CDSC for redemptions or exchanges of Class B or Class C Shares.
There are certain limitations on an investor's ability to exchange
shares between the various classes of shares that are offered. See
Redemption and Exchange.
Open-End Investment Company
Equity Funds V, Inc., which was organized as a Maryland corporation
on January 16, 1987, is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the Investment
Company Act of 1940 (the "1940 Act"). See Shares under Management of
the Fund.
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:
Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 4.75% None None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price) None None None
Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds,
as applicable) None* 4.00%* 1.00%*
Redemption Fees None** None** None**
Annual Operating Expenses
(as a percentage of Class A Class B Class C
average daily net assets) Shares Shares Shares
Management Fees
(after voluntary waivers) 0.00% 0.00% 0.00%
12b-1 Plan Expenses
(including service fees)
(after voluntary waivers) 0.00%+ 0.00%+ 0.00%+
Other Operating Expenses 0.75% 0.75% 0.75%
Total Operating Expenses++. . .
(after voluntary waivers) 0.75% 0.75% 0.75%
*Class A purchases of $1 million or more may be made at net asset value.
However, if in connection with any such purchase a dealer commission is
paid to the financial adviser through whom such purchase is effected, a
CDSC of 1% will be imposed on certain redemptions within 12 months of
purchase ("Limited CDSC"). Additional Class A purchase options
involving the imposition of a CDSC may be permitted as described in the
Prospectus from time to time. Class B Shares are subject to a CDSC of:
(i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase;
(iii) 2% if shares are redeemed during the fifth year following
purchase; (iv) 1% if shares are redeemed during the sixth year following
purchase; and (v) 0% thereafter. Class C Shares are subject to a CDSC
of 1% if the shares are redeemed within 12 months of purchase. See
Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange and
Deferred Sales Charge Alternative - Class B Shares and Level Sales
Charge Alternative - Class C Shares under Classes of Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
+Class A Shares, Class B Shares and Class C Shares are subject to
separate 12b-1 Plans. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by
rules of the National Association of Securities Dealers, Inc. (the
"NASD"). The Distributor has elected voluntarily to waive its right to
receive 12b-1 Plan fees (including service fees) from the commencement
of the public offering of the Classes through May 31, 1998. In absence
of those waivers, 12b-1 Plan expenses would equal 0.30% for Class A
Shares and 1.00% for each of the Class B and Class C Shares. See
Distribution (12b- 1) and Service under Management of the Fund.
++As noted above, the Distributor has elected voluntarily to waive 12b-1
Plan expenses through May 31, 1998. Also, the Manager has elected
voluntarily to waive that portion, if any, of the annual management fees
payable by the Fund and to pay certain expenses of the Fund to the
extent necessary to ensure that the Fund's total operating expenses
(exclusive of 12b-1 plan expenses, taxes, interest, brokerage commissions
and extraordinary expenses), do not exceed, on an annualized basis, 0.75%,
of the average daily net assets of the Fund. The Manager's voluntary
fee waiver and expense payment began upon the commencement of the
public offering of the Classes and will extend through May 31, 1998.
If the voluntary expense waivers by the Distributor and the Manager
were not in effect, the Total Operating Expenses, as a percentage of
average daily net assets, would be 2.18%, 2.88%, and 2.88%, respectively,
for the Class A Shares, the Class B Shares and the Class C Shares,
reflecting Management Fees of 0.65%.
For expense information about Retirement Income Fund Institutional
Class of shares, see the separate prospectus relating to that class.
The following example illustrates the expenses that an investor
would pay on a $1,000 investment over various time periods, assuming (1)
a 5% annual rate of return, (2) redemption and no redemption at the end
of each time period and (3) for Class B Shares and Class C Shares,
payment of a CDSC at the time of redemption, if applicable. The
following example assumes the voluntary waiver of the management fees by
the Manager and of the 12b-1 Plan fees by the Distributor as discussed
in this Prospectus.
Assuming Redemption Assuming No Redemption
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------------------------------- -----------------------------
Class A
Shares $55(1) $70 $87 $136 $55 $70 $87 $136
Class B
Shares(2) $48 $54 $62 $93 $8 $24 $42 $93
Class C
Shares $18 $24 $42 $93 $8 $24 $42 $93
(1) Generally, no redemption charge is assessed upon redemption of
Class A Shares. Under certain circumstances, however, a Limited CDSC or
other CDSC, which has not been reflected in this calculation, may be
imposed on certain redemptions. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value
under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B
Shares of a Fund will be automatically converted into Class A Shares of
that Fund. The example above assumes conversion of Class B Shares at
the end of the eighth year. However, the conversion may occur as late
as three months after the eighth anniversary of purchase, during which
time the higher 12b-1 Plan fees payable by Class B Shares will continue
to be assessed. The ten year expense numbers for Class B Shares reflect
the expenses of Class B Shares for year eight and the expenses of Class
A Shares for years nine and ten. See Automatic Conversion of Class B
Shares under Classes of Shares for a description of the automatic
conversion feature.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than
those shown.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in each
Class will bear directly or indirectly.
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial
statements of Delaware Group Equity Funds V, Inc. - Retirement Income
Fund and have been audited by Ernst & Young LLP, independent auditors.
The data should be read in conjunction with the financial statements,
related notes, and the report of Ernst & Young LLP covering such
financial information and highlights, all of which are incorporated by
reference into Part B. Further information about the Fund's performance
is contained in its Annual Report to shareholders. A copy of the Fund's
Annual Report (including the report of Ernst & Young LLP) may be
obtained from Equity Funds V, Inc. upon request at no charge.
Information regarding Class B Shares and Class C Shares has not been
included in the following table because such shares were not offered to
the public prior to the date of this Prospectus.
RIF-ABC-CHT
Class A Shares
-------------
Period
12/2/96(1)
through
11/30/97
Net Asset Value, Beginning of Period $8.500
Income From Investment Operations
- ---------------------------------
Net Investment Income 0.558
Net Gains (Losses) on Securities
(both realized and unrealized) 2.685
Total From Investment Operations 3.243
Less Distributions
- ------------------
Dividends (from net investment income) (0.043)
Distributions (from capital gains) none
Total Distributions (0.043)
Net Asset Value, End of Period $11.700
Total Return (2)(3) 38.31%
- -------------------
- ----------------------------------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000's omitted) $8
Ratio of Expenses to Average Daily Net Assets 0.75%
Ratio of Expenses to Average Daily Net Assets
Prior to Voluntary Waivers and Payment
of Expenses by the Manager and Voluntary
Waiver of 12b-1 Plan Expenses by
the Distributor 2.18%
Ratio of Net Investment Income to
Average Daily Net Assets 5.48%
Ratio of Net Investment Income to Average Daily
Net Assets Prior Voluntary Waivers and
Payment of Expenses by the Manager and
Voluntary Waiver of 12b-1 Plan Expenses
by the Distributor 4.05%
Portfolio Turnover Rate 196%
Average Commission Rate Paid(4) $0.060
(1) Date of initial public offering; ratios and total return have
been annualized.
(2) Does not reflect the maximum sales charge of 4.75% nor the 1%
CDSC that would apply in the event of certain redemption within 12
months of purchase for Class A Shares.
(3) Total return reflects the voluntary waiver of fees and payment
of expenses by the Manager and the Distributor as described in
Summary of Expenses.
(4) Computed by dividing the total amount of commissions paid by the
total number of shares purchased and sold during the period for which
there was a commission charged.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek to provide
investors with high current income and an investment that has the
potential for capital appreciation. Although the Fund will constantly
strive to attain its investment objective, there can be no assurance
that it will be attained.
SUITABILITY
The Fund may be suitable for investors interested in high current
income and a potential for capital appreciation. In particular, the
Fund may be suitable for retirees who are seeking income that may be
equivalent to or in excess of that available from investments in
certificates of deposit but who also desire an investment which has the
potential for capital appreciation as a hedge against inflation. The
Fund may also be suitable for investors seeking to diversify their
investment portfolio and obtain the potential for a moderate level of
income. The Manager believes that the Fund's combined investments in
income generating equity securities and debt securities could provide an
income return which would exceed that of an investment exclusively in
equity securities. Because the Fund will invest at least 50% of its
total assets in income generating equity and equity equivalent
securities, the Manager also believes that investors will have the
opportunity to benefit from capital appreciation. The net asset value
per share of each Class may fluctuate in response to the condition of
individual companies and general market and economic conditions and, as
a result, the Fund is not appropriate for a short-term investor. The
Fund cannot assure a specific yield, rate of return or that principal
will be protected. However, through the cautious selection and
supervision of its portfolio, the Manager will strive to achieve the
Fund's investment objective.
The types of securities in which the Fund may invest are subject to
price fluctuations particularly due to changes in interest rates.
Investors should consider asset value fluctuation, as well as yield, in
making an investment decision. While investments in unrated, lower-
rated and certain restricted securities have the potential for higher
yields, they are more speculative and increase the credit risk of the
Fund's portfolio. Changes in the market value of portfolio securities
will not affect interest income from such securities, but will be
reflected in a Class' net asset value. In addition, investments in
foreign securities involve special risks, including those related to
currency fluctuations, as well as to political, economic and social
situations different from and potentially more volatile than those in
the United States. Investors should be willing to accept the risks,
including the risk of net asset value fluctuations, associated with
investing in these types of securities. See Special Risk Considerations
and Other Investment Policies and Risk Considerations for a complete
discussion of the risk factors affecting the Fund's portfolio
securities.
An investor should not consider a purchase of Fund shares as
equivalent to a complete investment or retirement program. The Delaware
Group includes a family of funds, generally available through registered
investment dealers, which may be used together to create a more complete
investment or retirement program.
Ownership of Fund shares can reduce the bookkeeping and
administrative inconveniences that would be connected with direct
purchases of the types of securities in which the Fund invests.
INVESTMENT STRATEGY
The investment objective of the Fund is to seek to provide
investors with high current income and an investment that has the
potential for capital appreciation. The Manager will seek to achieve
this objective by investing in a combination of income generating equity
securities and debt securities including, but not limited to, dividend
paying common stocks, securities of real estate investment trusts,
preferred stocks, warrants, rights, convertible securities, non-
convertible debt securities, high-yield, high risk securities,
investment grade fixed- income securities, U.S. government securities
and foreign equity and fixed-income securities. Under normal
circumstances, at least 50% of the Fund's total assets will be invested
in income generating equity securities. In making investments in income
generating equity securities, the Fund may invest an unrestricted
portion of its total assets in convertible securities and preferred
stock rated below investment grade. While debt securities may comprise
up to 50% of the Fund's total assets, no more than 45% of the Fund's
total assets will be invested in high-yield, high risk debt securities.
No more than 25% of the Fund's total assets will be invested in any one
industry sector nor, as to 75% of the Fund's total assets, will more
than 5% be invested in securities of any one issuer. The Fund may
invest up to 20% of its total assets in foreign equity and debt
securities. The Fund will not, however, invest more than 5% of its
total assets in securities of issuers principally located or principally
operating in markets of emerging countries.
Within the percentage guidelines set forth above, the Manager will
determine the proportion of the Fund's assets that will be allocated to
income generating equity securities and equity equivalents and to debt
securities, based on its analysis of economic and market conditions and
its assessment of the income and potential for appreciation that can be
achieved from investment in such asset classes. It is expected that the
proportion of the Fund's total assets invested in income generating
equity securities and equity equivalent securities will vary from 50% to
100% of the Fund's total assets. The proportion of the Fund's total
assets in debt securities will correspondingly vary from 0% to 50% of
the Fund's total assets.
The following is a more detailed description of some of the
securities in which the Fund may invest.
Common Stock
Common stock is generally considered to be shares of a corporation
that entitle the holder to a pro-rata share of the profits of the
corporation, if any, without a preference over any other shareholder or
class of shareholders, including holders of the corporation's preferred
stock and other senior equity. Common stock usually carries with it the
right to vote and frequently an exclusive right to do so. Holders of
common stock also have the right to participate in the remaining assets
of the corporation after all other claims are paid, including those of
debt securities and preferred stock. In selecting common stocks for
investment, the Manager will focus primarily on a security's dividend-
paying capacity rather than on its potential for appreciation.
Preferred Stock
Generally, preferred stock receives dividends prior to
distributions on common stock and usually has a priority of claim over
common stockholders if the issuer of the stock is liquidated. Unlike
common stock, preferred stock does not usually have voting rights;
preferred stock, in some instances, is convertible into common stock.
Dividends on typical preferred stock are cumulative, causing dividends
to accrue even if not declared by the board of directors. There is,
however, no assurance that dividends will be declared by the boards of
directors of issuers of the preferred stocks in which the Fund invests.
Preferred stock in which the Fund may invest may be rated below
investment grade (i.e., "Ba" or lower by Moody's Investors Service, Inc.
("Moody's") or "BB" or lower by Standard & Poor's Ratings Group ("S&P")
or similarly rated by other comparable rating agencies) or, if unrated,
determined to be of comparable quality by the Manager.
Convertible Securities
Traditional convertible securities include corporate bonds, notes
and preferred stocks that may be converted into or exchanged for common
stock, and other securities that also provide an opportunity for equity
participation. These securities are generally convertible either at a
stated price or a stated rate (that is, for a specific number of shares
of common stock or other security). As with other fixed-income
securities, the price of a convertible security to some extent varies
inversely with interest rates. While providing a fixed-income stream
(generally higher in yield than the income derivable from a common stock
but lower than that afforded by a non-convertible debt security), a
convertible security also affords the investor an opportunity, through
its conversion feature, to participate in the capital appreciation of
the common stock into which it is convertible. As the market price of
the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis and so may not experience market
value declines to the same extent as the underlying common stock. When
the market price of the underlying common stock increases, the price of
a convertible security tends to rise as a reflection of the value of the
underlying common stock. To obtain such a higher yield, the Fund may be
required to pay for a convertible security an amount in excess of the
value of the underlying common stock. Common stock acquired by the Fund
upon conversion of a convertible security will generally be held for so
long as the Manager anticipates such stock will provide the Fund with
opportunities which are consistent with the Fund's investment objectives
and policies. Convertible securities in which the Fund may invest may
be rated below investment grade (i.e., "Ba" or lower by Moody's or "BB"
or lower by S&P or similarly rated by other comparable rating agencies)
or, if unrated, determined to be of comparable quality by the Manager.
Real Estate Investment Trust Securities
Real Estate Investment Trusts ("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 V,
Inc., REITs are not taxed on income distributed to shareholders provided
they comply with several requirements of the Internal Revenue Code (the
"Code"). REITs are subject to substantial cash flow dependency,
defaults by borrowers, self-liquidation, and the risk of failing to
qualify for tax-free pass-through of income under the Code, and/or
maintain exemptions from the 1940 Act. Equity REITs may be affected by
changes in the value of the underlying property owned by the REITs,
while mortgage REITs may be affected by the quality of any credit
extended.
REITs invest all of their assets in the real estate and real estate
related sectors of the economy, and are subject to the risks of
financing projects. REITs may have limited financial resources, may
trade less frequently and in a limited volume, and are more volatile
than the high-yield, high risk securities in which the Fund may also
invest.
High-Yield, High Risk Securities
Debt Securities
High-yield, high risk debt securities, like all debt securities,
represent money borrowed that must be repaid and has a fixed amount, a
specific maturity or maturities and usually a specific rate of interest
or original purchase discount. Unlike common and preferred stock, debt
securities, including high-yield, high risk debt securities, do not
represent an equity interest in the issuer. However, debt securities
have a priority claim over stockholders if the issuer is liquidated.
The Fund may invest in a wide variety of debt securities, although it is
anticipated that under normal market conditions, the Fund primarily will
invest in high-yield corporate debt obligations, including zero coupon
bonds and pay-in-kind securities ("PIKs"), debentures, convertible
debentures, corporate notes (including convertible notes) and units
consisting of bonds with stock or warrants to buy stock attached. See
Zero Coupon Bonds and Pay-In-Kind Bonds under Other Investment Policies
and Risk Considerations.
The Fund will invest in both rated and unrated bonds. The rated
bonds that the Fund may purchase in this sector of its portfolio will be
rated BBB or lower by S&P or Fitch Investors Service, Inc. ("Fitch"),
Baa or lower by Moody's, or similarly rated by another nationally
recognized statistical rating organization. See Appendix A to this
Prospectus for more rating information and High-Yield Securities under
Special Risk Considerations for a description of the risks associated
with investing in lower-rated fixed-income securities. Unrated bonds
may be more speculative in nature than rated bonds.
Convertible Securities and Preferred Stock
The Fund may invest in convertible securities and preferred stock
rated below investment grade or which are unrated but are of comparable
quality as determined by the Manager. The Fund includes these
securities in its income generating equity securities category and they
are in addition to the high-yield, high risk debt securities discussed
above. Such securities are judged to have speculative elements and may
be subject to greater risks with respect to the timely repayment of
principal and timely payment of interest and dividends. See Investment
Objectives and Policies--Investment Strategy and Special Risk
Considerations. Also see Lower Rated Convertible Securities and
Preferred Stock under Special Risk Considerations.
Foreign Securities
The Fund may invest up to 20% of its total assets in securities of
issuers organized or having a majority of their assets or deriving a
majority of their operating income in foreign countries. These income
generating equity securities and debt securities include foreign
government securities, equity securities and debt obligations of foreign
companies, and securities issued by supranational entities. A
supranational entity is an entity established or financially supported
by the national governments of one or more countries to promote
reconstruction or development. Examples of supranational entities
include, among others, the International Bank for Reconstruction and
Development (more commonly known as the World Bank), the European
Economic Community, the European Coal and Steel Community, the European
Investment Bank, the Inter-Development Bank, the Export-Import Bank and
the Asian Development Bank.
The Fund may invest in sponsored and unsponsored American
Depositary Receipts, European Depositary Receipts, or Global Depositary
Receipts ("Depositary Receipts"). Depositary Receipts are receipts
typically issued by a bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. "Sponsored"
Depositary Receipts are issued jointly by the issuer of the underlying
security and a depository, and "unsponsored" Depositary Receipts are
issued without the participation of the issuer of the deposited
security. The Fund may also invest in Brady Bonds, which are described
more fully under the Other Investment Policies and Risk Considerations
section of this Prospectus.
The Fund may invest in securities issued in any currency and may
hold foreign currencies. Securities of issuers within a given country
may be denominated in the currency of another country or in
multinational currency units, such as the European Currency Unit. The
Fund may, from time to time, purchase or sell foreign currencies and/or
engage in forward foreign currency transactions in order to expedite
settlement of Fund transactions and to minimize currency value
fluctuations. See Other Investment Policies and Risk Considerations for
a further description of the Fund's foreign currency transactions.
While the Fund may purchase securities of issuers in any foreign
country, developed and underdeveloped, no more than 5% of the Fund's
assets may be invested in direct obligations or equity securities of
issuers located in emerging market countries. See Emerging Market
Securities under Special Risk Considerations.
The Fund will invest in both rated and unrated foreign securities.
The rated securities that the Fund may purchase in the international
sector of its portfolio may include those rated BBB or lower by S&P or
Fitch, Baa or lower by Moody's, or similarly rated by another nationally
reorganized statistical rating organization. See Appendix A to this
Prospectus for more rating information and Foreign Securities and High-
Yield Securities under Special Risk Considerations for a description of
the risks associated with investing in foreign securities and lower-
rated securities.
The Fund may also invest in zero coupon bonds, purchase shares of
other investment companies and may engage in short sales. See Zero
Coupon Bonds and Pay-In-Kind Bonds and Investment Company Securities
under Other Investment Polices and Risk Considerations.
* * *
For a description of the Fund's other investment policies and for a
further description of some of the policies described above, see Other
Investment Policies and Risk Considerations.
In unusual market conditions, in order to meet redemption requests,
for temporary defensive purposes, and pending investment or at such
other times when suitable income generating equity or debt securities
are not available, the Fund may hold a substantial portion of its assets
in (i) cash, (ii) debt securities issued by the U.S. government, its
agencies or instrumentalities, (iii) commercial paper, (iv) certificates
of deposit and bankers' acceptances or repurchase agreements with
respect to any of the foregoing investments. The Fund will only invest
in commercial paper of companies rated "A-2" or better by S&P or "P-2"
or better by Moody's or similarly rated by another comparable rating
agency or, if not so rated, of equivalent investment quality as
determined by the Manager. See Appendix A to this Prospectus for more
rating information.
The Fund's designation as an open-end investment company and as a
diversified fund may not be changed unless authorized by the vote of a
majority of the Fund's outstanding voting securities. A "majority vote
of the outstanding voting securities" is the vote by the holders of the
lesser of a) 67% or more of the Fund's voting securities present in
person or represented by proxy if the holders of more than 50% of the
outstanding voting securities of the Fund are present or represented by
proxy; or b) more than 50% of the outstanding voting securities. Part B
lists other more specific investment restrictions of the Fund which may
not be changed without a majority shareholder vote.
The remaining investment policies of the Fund not identified above
or in Part B are not fundamental and may be changed by the Board of
Directors of Equity Funds V, Inc. without a shareholder vote.
SPECIAL RISK CONSIDERATIONS
Generally
The Fund may invest a substantial portion of its assets in fixed-
income securities. The market values of fixed-income securities
generally fall when interest rates rise and, conversely, rise when
interest rates fall. Lower-rated and unrated fixed-income securities
tend to reflect short-term corporate and market developments to a
greater extent than higher-rated fixed-income securities, which react
primarily to fluctuations in the general level of interest rates. These
lower-rated or unrated securities generally have higher yields, but, as
a result of factors such as reduced creditworthiness of issuers,
increased risk of default and a more limited and less liquid secondary
market, are subject to greater volatility and risk of loss of income and
principal than are higher-rated securities. The Manager will attempt to
reduce such risk through portfolio diversification, credit analysis, and
attention to trends in the economy, industries and financial markets.
High-Yield Securities
The Fund may invest up to 45% of its total assets in bonds rated
BBB or lower by S&P or Fitch, Baa or lower by Moody's, or similarly
rated by another rating organization, and in unrated corporate bonds.
See Appendix A to this Prospectus for more rating information.
Investing in these so-called "junk" or "high-yield" bonds entails
certain risks, including the risk of loss of principal and default on
interest payments, which may be greater than the risks involved in
investment grade bonds, and which should be considered by investors
contemplating an investment in the Fund. Such bonds are sometimes
issued by companies whose earnings at the time of issuance are less than
the projected debt service on the junk bonds. In addition to the
considerations discussed elsewhere in this Prospectus, those risks
include the following:
Youth and Volatility of the High-Yield Market. Although the market for
high-yield bonds has been in existence for many years, including periods
of economic downturns, the high-yield market grew rapidly during the
long economic expansion which took place in the United States during the
1980s. During that economic expansion, the use of high-yield debt
securities to fund highly leveraged corporate acquisitions and
restructurings increased dramatically. As a result, the high-yield
market grew substantially during that economic expansion. Although
experts disagree on the impact recessionary periods have had and will
have on the high-yield market, some analysts believe a protracted
economic downturn would severely disrupt the market for high-yield
bonds, would adversely affect the value of outstanding bonds and would
adversely affect the ability of high-yield issuers to repay principal
and interest. Those analysts cite volatility experienced in the high-
yield market in the past as evidence for their position. It is likely
that protracted periods of economic uncertainty would result in
increased volatility in the market prices of high-yield bonds, an
increase in the number of high-yield bond defaults and corresponding
volatility in a Class' net asset value.
Redemptions. If, as a result of volatility in the high-yield market or
other factors, the Fund experiences substantial net redemptions of the
Fund's shares for a sustained period of time (i.e., more shares of the
Fund are redeemed than are purchased), the Fund may be required to sell
certain of its high-yield securities without regard to the investment
merits of the securities to be sold. If the Fund sells a substantial
number of securities to generate proceeds for redemptions, the asset
base of the Fund will decrease and the Fund's expense ratios may
increase.
Liquidity and Valuation. The secondary market for high-yield securities
is currently dominated by institutional investors, including mutual
funds, and certain financial institutions. There is generally no
established retail secondary market for high-yield securities. As a
result, the secondary market for high-yield securities is more limited
and less liquid than other secondary securities markets. The high-yield
secondary market is particularly susceptible to liquidity problems when
the institutions that dominate it temporarily cease buying bonds for
regulatory, financial or other reasons, such as the savings and loan
crisis. A less liquid secondary market may have an adverse effect on
the Fund's ability to dispose of particular issues, when necessary, to
meet the Fund's liquidity needs or in response to a specific economic
event, such as the deterioration in the creditworthiness of the issuer.
In addition, a less liquid secondary market makes it more difficult for
the Fund to obtain precise valuations of the high-yield securities in
its portfolio. During periods involving such liquidity problems,
judgment plays a greater role in valuing high-yield securities than is
normally the case. The secondary market for high-yield securities is
also generally considered to be more likely to be disrupted by adverse
publicity and investor perceptions than the more established secondary
securities markets. The privately placed high-yield securities that the
Fund may purchase are particularly susceptible to the liquidity and
valuation risks outlined above.
Lower Rated Convertible Securities and Preferred Stock
The Fund may invest in lower rated convertible securities and
preferred stock (i.e., "Ba" or lower for convertible securities or "ba"
or lower for preferred stock by Moody's or "BB" or lower for convertible
securities or preferred stock by S&P or similarly rated by other
comparable rating agencies) or, if unrated, determined to be of
comparable quality by the Manager. Investing in lower rated convertible
securities and preferred stock entails certain risks, including the risk
of loss of principal which may be greater than the risks involved in
investing in higher rated securities, and which should be considered by
investors contemplating an investment in the Fund. The Fund may have
difficulty disposing of such securities because the trading market for
such securities may be thinner than the market for higher rated
convertible securities and preferred stock. To the extent a secondary
trading market for these securities does exist, it generally is not as
liquid as the secondary trading market for higher rated securities. The
lack of a liquid secondary market as well as adverse publicity with
respect to these securities, may have an adverse impact on market price
and the Fund's ability to dispose of particular issues in response to a
specific economic event such as a deterioration in the creditworthiness
of the issuer. The lack of a liquid secondary market for certain
securities also may make it more difficult for the Fund to obtain
accurate market quotations for purposes of pricing the Fund's portfolio
and calculating its net asset value. The market behavior of convertible
securities and preferred stocks in lower rating categories is often more
volatile than that of higher quality securities. Lower quality
convertible securities and preferred stocks are judged by Moody's and
S&P to have speculative elements or characteristics; their future cannot
be considered as well assured and earnings and asset protection may be
moderate or poor in comparison to investment grade securities. In
addition, such lower quality securities face major ongoing uncertainties
or exposure to adverse business, financial or economic conditions, which
could lead to inadequate capacity to meet timely payments. A
description of the ratings used by Moody's and S&P for such securities
is set forth in Appendix A to this Prospectus. See also Special Risk
Considerations--High-Yield Securities.
Foreign Securities
The Fund has the ability to purchase income generating equity
securities and debt securities in any foreign country. Investors should
consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations.
These risks are in addition to the usual risks inherent in domestic
investments. There is the possibility of expropriation, nationalization
or confiscatory taxation, taxation of income earned in foreign nations
or other taxes imposed with respect to investments in foreign nations,
foreign exchange controls (which may include suspension of the ability
to transfer currency from a given country), default in foreign
government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in
those nations.
In addition, in many countries, there is substantially less
publicly available information about issuers than is available in
reports about companies in the United States. Foreign companies are not
subject to uniform accounting, auditing and financial reporting
standards, and auditing practices and requirements may not be comparable
to those applicable to United States companies. Consequently, financial
data about foreign companies may not accurately reflect the real
condition of those issuers and securities markets.
Further, the Fund may encounter difficulty or be unable to pursue
legal remedies and obtain judgments in foreign courts. Commission rates
on securities transactions in foreign countries, which are sometimes
fixed rather than subject to negotiation as in the United States, are
likely to be higher. Further, the settlement period of securities
transactions in foreign markets may be longer than in domestic markets,
and may be subject to administrative uncertainties. In many foreign
countries, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed
companies than in the United States, and capital requirements for
brokerage firms are generally lower. The foreign securities markets of
many of the countries in which the Fund may invest may also be smaller,
less liquid and subject to greater price volatility than those in the
United States.
Emerging Market Securities. The Fund may invest up to 5% of its
assets in income generating equity securities and debt securities of
issuers located in emerging market nations. Compared to the United
States and other developed countries, emerging countries may have
volatile social conditions, relatively unstable governments and
political systems, economies based on only a few industries and economic
structures that are less diverse and mature, and securities markets that
trade a small number of securities, which can result in a low or
nonexistent volume of trading. Prices in these securities markets tend
to be volatile and, in the past, securities in these countries have
offered greater potential for gain (as well as loss) than securities of
companies located in developed countries. Until recently, there has
been an absence of a capital market structure or market-oriented economy
in certain emerging countries. Further, investments and opportunities
for investments by foreign investors are subject to a variety of
national policies and restrictions in many emerging countries. Also,
the repatriation of both investment income and capital from several
foreign countries is restricted and controlled under certain
regulations, including, in some cases, the need for certain governmental
consents. Countries such as those in which the Fund may invest may have
historically experienced and may continue to experience, substantial,
and in some periods extremely high rates of inflation for many years,
high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and
trade difficulties and extreme poverty and unemployment. Other factors
which may influence the ability or willingness to service debt include,
but are not limited to, a country's cash flow situation, the
availability of sufficient foreign exchange on the date a payment is
due, the relative size of its debt service burden to the economy as a
whole, its government's policy towards the International Monetary Fund,
the World Bank and other international agencies and the political
constraints to which a government debtor may be subject. The Manager
currently considers countries such as Argentina, Brazil, Chile, China,
Mexico, India, Portugal, Poland and Thailand to be emerging markets.
This list is not intended to be exhaustive, but rather representative of
the types of countries now considered by the Manager to present special
investment risks.
See Other Investment Policies and Risk Considerations for a further
description of certain risks associated with certain of the Fund's
investments, including the risks associated with investments in foreign
government securities and engaging in foreign currency transactions and
options.
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with
superior information and quality service on your investments in the
Delaware Group of funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information; Literature; Price; Yield and Performance Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular Investment Accounts and Retirement Plan
Accounts; Wire Investments; Wire Liquidations; Telephone Liquidations
and Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
You can call the Investor Information Center at any time for
current performance information. Current yield and total return
information may also be included in advertisements and information given
to shareholders. Yields are computed on an annualized basis over a 30-
day period.
Shareholder Services
During business hours, you can call the Delaware Group's
Shareholder Service Center. Our representatives can answer any
questions about your account, the Fund, various service features and
other funds in the Delaware Group.
Delaphone Service
Delaphone is an account inquiry service for investors with Touch-
Tone(R) phone service. It enables you to get information on your
account faster than the mailed statements and confirmations. Delaphone
also provides current performance information on the Fund, as well as
other funds in the Delaware Group. Delaphone is available seven days a
week, 24 hours a day.
Dividend Payments
Dividends, capital gains and other distributions are automatically
reinvested in your account. You may, however, elect to have the
dividends earned in one fund automatically invested in another Delaware
Group fund with a different investment objective, subject to certain
exceptions and limitations.
For more information, see Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares or call
the Shareholder Service Center.
Statements and Confirmations
You will receive quarterly statements of your account summarizing
all transactions during the period. A confirmation statement will be
sent following all transactions other than those involving a
reinvestment of dividends. You should examine statements and
confirmations immediately and promptly report any discrepancy by calling
the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or
her. This makes it easier for your adviser to help you manage your
investments.
Retirement Planning
An investment in the Fund may be a suitable investment option for
tax-deferred retirement plans. Delaware Group offers a full spectrum of
qualified and non-qualified retirement plans, including the popular
401(k) deferred compensation plan, IRA, and the new Roth IRA. Just call
the Delaware Group at 1-800-5230-1918 for more information.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A
Shares, Class B Shares and Class C Shares of the Fund with the dollar
amount of new purchases of Class A Shares of the Fund to qualify for a
reduced front-end sales charge on such purchases of Class A Shares.
Under the Combined Purchases Privilege, you may also include certain
shares that you own in other funds in the Delaware Group. See Classes
of Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating
certain of your purchases of Delaware Group fund shares over a 13-month
period. See Classes of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest
proceeds from a redemption of Class A Shares, within one year of the
date of the redemption, without paying a front-end sales charge. See
Part B.
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part
of their shares into shares of the other funds in the Delaware Group,
subject to certain exceptions and limitations. For additional
information on exchanges, see Investing by Exchange under How to Buy
Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to invest in the Fund through regular liquidations of
shares in your accounts in other funds in the Delaware Group.
Investments under this feature are exchanges and are therefore subject
to the same conditions and limitations as other exchanges of Fund
shares. See Additional Methods of Adding to Your Investment - Wealth
Builder Option and Investing by Exchange under How to Buy Shares and
Redemption and Exchange.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed
information about the Fund's investments and performance. Equity Funds
V, Inc.'s fiscal year ends on November 30.
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed,
at the election of the purchaser, at the time of the purchase for Class
A Shares ("front-end sales charge alternative"), or on a contingent
deferred basis for Class B Shares ("deferred sales charge alternative")
or Class C Shares ("level sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when
they are purchased, but generally are not subject to any sales charge
when they are redeemed. Absent any applicable fee waiver, Class A
Shares are subject to annual 12b-1 Plan expenses of up to a maximum of
0.30% average daily net assets of such shares. Certain purchases of
Class A Shares qualify for reduced front-end sales charges. See Front-
End Sales Charge Alternative - Class A Shares, below. See also
Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange and
Distribution (12b-1) and Service under Management of the Fund.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end
sales charge when they are purchased, but are subject to a contingent
deferred sales charge if they are redeemed within six years of purchase.
Absent any applicable fee waiver, Class B Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of average
daily net assets of such shares for approximately eight years after
purchase. Class B Shares permit all of the investor's dollars to work
from the time the investment is made. If no waiver of 12b-1 fees is in
effect, the higher 12b-1 Plan expenses paid by Class B Shares will cause
such shares to have a higher expense ratio and to pay lower dividends
than Class A Shares. At the end of approximately eight years after
purchase, the Class B Shares will automatically be converted into Class
A Shares and, thereafter, for the remainder of the life of the
investment, the annual 12b-1 Plan fees of up to 0.30% for the Class A
Shares will apply. See Automatic Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end
sales charge when they are purchased, but are subject to a contingent
deferred sales charge if they are redeemed within 12 months of purchase.
Absent any applicable fee waiver, Class C Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of average
daily net assets of such shares for the life of the investment. If no
waiver of 12b-1 fees is in effect, the higher 12b-1 Plan expenses paid
by Class C Shares will cause such shares to have a higher expense ratio
and to pay lower dividends than Class A Shares. Unlike Class B Shares,
Class C Shares do not convert to another class.
The alternative purchase arrangements described above permit
investors to choose the method of purchasing shares that is most
suitable given the amount of their purchase, the length of time they
expect to hold their shares and other relevant circumstances. Investors
should determine whether, given their particular circumstances, it is
more advantageous to purchase Class A Shares and incur a front-end sales
charge, purchase Class B Shares and have the entire initial purchase
amount invested in the Fund with their investment being subject to a
CDSC if they redeem shares within six years of purchase, or purchase
Class C Shares and have the entire initial purchase amount invested in
the Fund with their investment being subject to a CDSC if they redeem
shares within 12 months of purchase. In addition, investors should
consider the level of annual 12b-1 Plan expenses applicable to each
Class. If no waiver of 12b-1 fees is in effect, the higher 12b-1 Plan
expenses 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
and the effect of earning a return on such additional money will
diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan
expenses to which each of these Classes is subject and the desirability
of an automatic conversion feature, which is available only for Class B
Shares.
For the distribution and related services provided to, and the
expenses borne on behalf of, the Fund, absent any applicable fee waiver,
the Distributor and others will be paid, in the case of Class A Shares,
from the proceeds of the front-end sales charge and 12b-1 Plan fees and,
in the case of Class B Shares and Class C Shares, from the proceeds of
the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for
selling Class A, Class B and Class C Shares. Investors should
understand that the purpose and function of the respective 12b-1 Plans
and the CDSCs applicable to Class B Shares and Class C Shares are the
same as those of the 12b-1 Plan and the front-end sales charge
applicable to Class A Shares in that such fees and charges are used to
finance the distribution of the respective Classes. See 12b-1
Distribution Plans - Class A, Class B and Class C Shares.
Dividends paid on Class A, Class B and Class C Shares, to the
extent any dividends are paid, will be calculated in the same manner, at
the same time, on the same day and will be in the same amount, except
that, when assessed, the additional amount of 12b-1 Plan expenses
relating to Class B Shares and Class C Shares will be borne exclusively
by such shares. See Calculation of Offering Price and Net Asset Value
Per Share.
The NASD has adopted certain rules relating to investment company
sales charges. Equity Funds V, Inc. and the Distributor intend to
operate in compliance with these rules.
Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price, which
reflects a maximum front-end sales charge of 4.75%. See Calculation of
Offering Price and Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales
charge as shown in the following table.
Retirement Income Fund A Class
Dealer's
Front-End Sales Charge Commission***
as % of as % of
Offering Amount Offering
Amount of Purchase Price Invested** Price
Less than $100,000 4.75% 4.96% 4.00%
$100,000 but under $250,000 3.75 3.93 3.00
$250,000 but under $500,000 2.50 2.56 2.00
$500,000 but under $1,000,000* 2.00 2.05 1.60
* There is no front-end sales charge on purchases of Class A
Shares of $1 million or more but, under certain limited circumstances, a
1% Limited CDSC may apply upon redemption of such shares.
** Based upon the net asset value of Class A Shares as of the end
of Equity Funds V, Inc's most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive
an agency transaction fee in the percentages set forth above.
The Fund must be notified when a sale takes place which would qualify
for the reduced front-end sales charge on the basis of previous or
current purchases. The reduced front-end sales charge will be granted
upon confirmation of the shareholder's holdings by the Fund. Such
reduced front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow to dealers up to the full amount of
the front-end sales charge shown above. In addition, certain dealers
who enter into an agreement to provide extra training and information on
Delaware Group products and services and who increase sales of Delaware
Group funds may receive an additional commission of up to 0.15% of the
offering price. Dealers who receive 90% or more of the sales charge may
be deemed to be underwriters under the Securities Act of 1933.
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers
through whom such purchases are made in accordance with the following
schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
Up to $2 million 1.00%
Next $1 million up to $3 million 0.75
Next $2 million up to $5 million 0.50
Amount over $5 million 0.25
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 Group funds as to which a Limited CDSC applies may be
aggregated with those of the Class A Shares of the Fund. Financial
advisers also may be eligible for a dealer's commission in connection
with certain purchases made under a Letter of Intention or pursuant to
an investor's Right of Accumulation. Financial advisers should contact
the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or
similar payment has not been previously paid on the assets being
exchanged. The schedule and program for payment of the dealer's
commission are subject to change or termination at any time by the
Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC if the dealer's commission
described above was paid in connection with the purchase of those
shares. See Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value under Redemption and
Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of
Class B Shares and/or Class C Shares of the Fund and shares of other
funds in the Delaware Group, except those noted below, you can reduce
the front-end sales charges on any additional purchases of Class A
Shares. Shares of Delaware Group Premium Fund, Inc. beneficially owned
in connection with ownership of variable insurance products may be
combined with other Delaware Group fund holdings. In addition, assets
held by investment advisory clients of the Manager or its affiliates in
a stable value account may be combined with other Delaware Group fund
holdings. Shares of other funds that do not carry a front-end sales
charge or CDSC may not be included unless they were acquired through an
exchange from a Delaware Group fund that does carry a front-end sales
charge or CDSC.
This privilege permits you to combine your purchases and holdings
with those of your spouse, your children under 21 and any trust,
fiduciary or retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a
13-month period and qualify the entire purchase for a reduction in
front-end sales charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain
purchases made at net asset value pursuant to a Right of Accumulation or
under a Letter of Intention, may result in the payment of a dealer's
commission and the applicability of a Limited CDSC. Investors should
consult their financial advisers or the Shareholder Service Center about
the operation of these features. See Front-End Sales Charge Alternative
- - Class A Shares, above.
Allied Plans
Class A Shares are available for purchase by participants in
certain 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 Group
funds ("eligible Delaware Group fund shares"), as well as shares of
designated classes of non-Delaware Group funds ("eligible non-Delaware
Group 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 Group and eligible non-Delaware Group
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 Group fund
shares.
Participants in Allied Plans may exchange all or part of their
eligible Delaware Group fund shares for other eligible Delaware Group
fund shares or for eligible non-Delaware Group fund shares at net asset
value without payment of a front-end sales charge. However, exchanges
of eligible fund shares, both Delaware Group and non-Delaware Group,
which were not subject to a front-end sales charge, will be subject to
the applicable sales charge if exchanged for eligible Delaware Group
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 under
How to Buy Shares.
A dealer's commission may be payable on purchases of eligible
Delaware Group 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 Group fund shares in connection
with Allied Plans, all participant holdings in the Allied Plan will be
aggregated.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been
paid. Waivers of the Limited CDSC, as described under Waiver of Limited
Contingent Deferred Sales Charge - Class A Shares under Redemption and
Exchange, apply to redemptions by participants in Allied Plans except in
the case of exchanges between eligible Delaware Group and non-Delaware
Group fund shares. When eligible Delaware Group fund shares are
exchanged into eligible non-Delaware Group fund shares, the Limited CDSC
will be imposed at the time of the exchange, unless the joint venture
agreement specifies that the amount of the Limited CDSC will be paid by
the financial adviser or selling dealer. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value
under the Delaware Group Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment
Privilege. See The Delaware Difference and Redemption and Exchange for
additional information.
Purchases of Class A Shares may be made at net asset value by
current and former officers, directors and employees (and members of
their families) of the Manager, any affiliate, any of the funds in the
Delaware Group, certain of their agents and registered representatives
and employees of authorized investment dealers and by employee benefit
plans for such entities. Individual purchases, including those in
retirement accounts, must be for accounts in the name of the individual
or a qualifying family member.
Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer at net
asset value within 12 months after the registered representative changes
employment, if the purchase is funded by proceeds from an investment
where a front-end sales charge, contingent deferred sales charge or
other sales charge has been assessed. Purchases of Class A Shares may
also be made at net asset value by bank employees who provide services
in connection with agreements between the bank and unaffiliated brokers
or dealers concerning sales of shares of Delaware Group funds.
Officers, directors and key employees of institutional clients of the
Manager or any of its affiliates may purchase Class A Shares at net
asset value. Moreover, purchases may be effected at net asset value for
the benefit of the clients of brokers, dealers and registered investment
advisers affiliated with a broker or dealer, if such broker, dealer or
investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection
with special investment products, such as wrap accounts or similar fee
based programs. Investors may be charged a fee when effecting
transactions in Class A Shares through a broker or agent that offers
these special investment products.
Purchases of Class A Shares at net asset value may also be made by
the following: financial institutions investing for the account of
their trust customers if they are not eligible to purchase shares of the
Institutional Class of the Fund and any group retirement plan (excluding
defined benefit pension plans), or such plans of the same employer, for
which plan participant records are maintained on the Delaware Investment
& Retirement Services, Inc. ("DIRSI") proprietary record keeping system
that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of Delaware Group funds 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
Delaware Group fund and such employer has properly represented to DIRSI
in writing that it has the requisite number of employees and has
received written confirmation back from DIRSI. See Group Investment
Plans for information regarding the applicability of the Limited CDSC.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken
from such accounts will be made at net asset value. Loan repayments
made to a Delaware Group account in connection with loans originated
from accounts previously maintained by another investment firm will also
be invested at net asset value.
The Fund must be notified in advance that an investment qualifies
for purchase at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA, SIMPLE
401(k), Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans and 403(b)(7) and 457 Deferred Compensation Plans)
may benefit from the reduced front-end sales charges available on Class
A Shares based on total plan assets. If a company has more than one
plan investing in the Delaware Group of funds, then the total amount
invested in all plans will be aggregated to determine the applicable
front-end sales charge reduction on each purchase, both initial and
subsequent, if, at the time of each such purchase, the company notifies
the Fund that it qualifies for the reduction. Employees participating
in such Group Investment Plans may also combine the investments held in
their plan account to determine the front-end sales charge applicable to
purchases in non-retirement Delaware Group investment accounts if, at
the time of each such purchase, they notify the Fund that they are
eligible to combine purchase amounts held in their plan account.
The Limited CDSC is applicable to any redemptions of net asset
value purchases made on behalf of any group retirement plan on which a
dealer's commission has been paid only if such redemption is made
pursuant to a withdrawal of the entire plan from Delaware Group funds.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
For additional information on retirement plans, including plan
forms, applications, minimum investments and any applicable account
maintenance fees, contact your investment dealer or the Distributor.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-
end sales charge and, as a result, the full amount of the investor's
purchase payment will be invested in Fund shares. The Distributor
currently anticipates compensating dealers or brokers for selling Class
B Shares at the time of purchase from its own assets in an amount equal
to no more than 4% of the dollar amount purchased. In addition, from
time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the
Distributor may pay additional compensation to dealers or brokers for
selling Class B Shares at the time of purchase. As discussed below,
however, absent any applicable fee waiver, Class B Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within six years of
purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, are
paid to the Distributor and others for providing distribution and
related services, and bearing related expenses, in connection with the
sale of Class B Shares. These payments support the compensation paid to
dealers or brokers for selling Class B Shares. Payments to the
Distributor and others under the Class B 12b-1 Plan may be in an amount
equal to no more than 1% annually. The combination of the CDSC and the
proceeds of the 12b-1 Plan fees makes it possible for the Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule for the
Class B Shares described in this Prospectus, even after the exchange.
Such CDSC schedule may be higher than the CDSC schedule for the Class B
Shares acquired as a result of the exchange. See Redemption and
Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for
automatic conversion into Class A Shares. Conversions of Class B Shares
into Class A Shares will occur only four times in any calendar year, on
the last business day of the second full week of March, June, September
and December (each, a "Conversion Date"). If the eighth anniversary
after a purchase of Class B Shares falls on a Conversion Date, an
investor's Class B Shares will be converted on that date. If the eighth
anniversary occurs between Conversion Dates, an investor's Class B
Shares will be converted on the next Conversion Date after such
anniversary. Consequently, if a shareholder's eighth anniversary falls
on the day after a Conversion Date, that shareholder will have to hold
Class B Shares for as long as three additional months after the eighth
anniversary of purchase before the shares will automatically convert
into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of
dividends will convert to the corresponding Class A Shares of that fund
(or, in the case of Delaware Group Cash Reserve, Inc., the Delaware Cash
Reserve Consultant Class) pro-rata with Class B Shares of that fund not
acquired through dividend reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-
end sales charge and, as a result, the full amount of the investor's
purchase payment will be invested in Fund shares. The Distributor
currently anticipates compensating dealers or brokers for selling Class
C Shares at the time of purchase from its own assets in an amount equal
to no more than 1% of the dollar amount purchased. As discussed below,
however, absent any applicable fee waiver, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within 12 months of
purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, are
paid to the Distributor and others for providing distribution and
related services, and bearing related expenses, in connection with the
sale of Class C Shares. These payments support the compensation paid to
dealers or brokers for selling Class C Shares. Payments to the
Distributor and others under the Class C 12b-1 Plan may be in an amount
equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule for the
Class C Shares as described in this Prospectus. See Redemption and
Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject
to a CDSC at the rates set forth below and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are
charged as a percentage of the dollar amount subject to the CDSC. The
charge will be assessed on an amount equal to the lesser of the net
asset value at the time of purchase of the shares being redeemed or the
net asset value of those shares at the time of redemption. No CDSC will
be imposed on increases in net asset value above the initial purchase
price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestments of dividends or capital gains distributions. For
purposes of this formula, the "net asset value at the time of purchase"
will be the net asset value at purchase of the Class B Shares or the
Class C Shares of the Fund, even if those shares are later exchanged for
shares of another Delaware Group fund. In the event of an exchange of
the shares, the "net asset value of such shares at the time of
redemption" will be the net asset value of the shares that were acquired
in the exchange.
The following table sets forth the rates of the CDSC for the Class
B Shares of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
------------------------ -------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject
to the annual 12b-1 Plan expenses of up to 1% of average daily net
assets of those shares, absent any applicable fee waiver. See Automatic
Conversion of Class B Shares, above. Investors are reminded that the
Class A Shares into which the Class B Shares will convert are subject to
ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are
redeemed first, followed by shares acquired through the reinvestment of
dividends or distributions, and finally by shares held longest during
the six-year period. With respect to Class C Shares, it will be assumed
that shares held for more than 12 months are redeemed first followed by
shares acquired through the reinvestment of dividends or distributions,
and finally by shares held for 12 months or less.
All investments made during a calendar month, regardless of what
day of the month the investment occurred, will age one month on the last
day of that month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and
Class C Shares. See Waiver of Contingent Deferred Sales Charge - Class
B and Class C Shares under Redemption and Exchange.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed
certain limits, as set by the Distributor, may receive from the
Distributor an additional payment of up to 0.25% of the dollar amount of
such sales. The Distributor may also provide additional promotional
incentives or payments to dealers that sell shares of the Delaware Group
of funds. In some instances, these incentives or payments may be
offered only to certain dealers who maintain, have sold or may sell
certain amounts of shares.
Subject to pending amendments to the NASD's Conduct Rules, in
connection with the promotion of Delaware Group fund shares, the
Distributor may, from time to time, pay to participate in dealer-
sponsored seminars and conferences, reimburse dealers for expenses
incurred in connection with preapproved seminars, conferences and
advertising and may, from time to time, pay or allow additional
promotional incentives to dealers, which shall include non-cash
concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as
part of preapproved sales contests. Payment of non-cash compensation to
dealers is currently under review by the NASD and the Securities and
Exchange Commission. It is likely that the NASD's Conduct Rules will be
amended such that the ability of the Distributor to pay non-cash
compensation as described above will be restricted in some fashion. The
Distributor intends to comply with the NASD's Conduct Rules as they may
be amended.
Retirement Income Fund Institutional Class
In addition to offering Class A, Class B and Class C Shares, the
Fund also offers Retirement Income Fund Institutional Class, which is
described in a separate prospectus and is available for purchase only by
certain investors. Retirement Income Fund Institutional Class shares
generally are distributed directly by the Distributor and do not have a
front-end sales charge, a CDSC or a Limited CDSC, and are not subject to
12b-1 Plan distribution expenses. To obtain the prospectus that
describes Retirement Income Fund Institutional Class, contact the
Distributor by writing to the address or by calling the telephone number
listed on the back cover of this Prospectus.
HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A
Shares, Class B Shares and Class C Shares. Subsequent purchases of
shares of any Class generally must be $100 or more. For purchases under
a Uniform Gifts to Minors Act or Uniform Transfers to Minors Act or
through an Automatic Investing Plan, there is a minimum initial purchase
of $250 and a minimum subsequent purchase of $25. Minimum purchase
requirements do not apply to retirement plans other than IRAs, for which
there is a minimum initial purchase of $250, and a minimum subsequent
purchase of $25, regardless of which Class is selected.
There is a maximum purchase limitation of $250,000 on each purchase
of Class B Shares. For Class C Shares, each purchase must be in an
amount that is less than $1,000,000. An investor may exceed these
maximum purchase limitations by making cumulative purchases over a
period of time. In doing so, an investor should keep in mind that
reduced front-end sales charges are available on investments of $100,000
or more in Class A Shares, and that Class A Shares (i) are subject to
lower annual 12b-1 Plan expenses than Class B Shares and Class C Shares
and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class
B Shares or Class C Shares by the plan.
Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most
investment dealers who, as part of the service they provide, must
transmit orders promptly. They may charge for this service. If you
want a dealer but do not have one, the Delaware Group can refer you to
one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, must be
completed, signed and sent with a check, payable to Retirement Income
Fund A Class, Retirement Income Fund B Class or Retirement Income Fund C
Class, to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any
time by mailing a check payable to the specific Fund and Class selected.
Your check should be identified with your name(s) and account number.
An investment slip (similar to a deposit slip) is provided at the bottom
of transaction confirmations and dividend statements that you will
receive from Equity Funds V, Inc. Use of this investment slip can help
expedite processing of your check when making additional purchases.
Your investment may be delayed if you send additional purchases by
certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds
by wire to CoreStates Bank, N.A., ABA #031000011, account number
1412893401 (include your name(s) and your account number for the Class
in which you are investing).
1. Initial Purchases--Before you invest, telephone the Shareholder
Service Center to get an account number. If you do not call first,
processing of your investment may be delayed. In addition, you must
promptly send your Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, to the
specific Fund and Class selected, to Delaware Group at 1818 Market
Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime
by wiring funds to CoreStates Bank, N.A., as described above. You
should advise the Shareholder Service Center by telephone of each wire
you send.
If you want to wire investments to a retirement plan account, call
the Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Group, you may write and authorize an exchange of part or all of your
investment into shares of the Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase
requirements set forth in each fund's prospectus. See Redemption and
Exchange for more complete information concerning your exchange
privilege.
Holders of Class A Shares may exchange all or part of their shares
for certain of the shares of other funds in the Delaware Group,
including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of the Fund or of any other
fund in the Delaware Group. Holders of Class B Shares of the Fund are
permitted to exchange all or part of their Class B Shares only into
Class B Shares of other Delaware Group funds. Similarly, holders of
Class C Shares of the Fund are permitted to exchange all or part of
their Class C Shares only into Class C Shares of other Delaware Group
funds. Class B Shares of the Fund and Class C Shares of the Fund
acquired by exchange will continue to carry the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the fund from which
the exchange is made. The holding period of Class B Shares of the Fund
acquired by exchange will be added to that of the shares that were
exchanged for purposes of determining the time of the automatic
conversion into Class A Shares of the Fund.
Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge, except for exchanges of shares that
were not previously subject to a front-end sales charge (unless such
shares were acquired through the reinvestment of dividends).
Permissible exchanges into Class B Shares or Class C Shares of the Fund
will be made without the imposition of a CDSC by the fund from which the
exchange is being made at the time of the exchange.
See Allied Plans under Classes of Shares for information on
exchanges by participants in an Allied Plan.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you
wish to use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Equity
Funds V, Inc. to transfer a designated amount monthly from your checking
account to your Fund account. Many shareholders use this as an
automatic savings plan. Shareholders should allow a reasonable amount
of time for initial purchases and changes to these plans to become
effective.
This option is not available to participants in the following
plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and
Money Purchase Pension Plans, 401(k) Defined Contribution Plans or
403(b)(7) or 457 Deferred Compensation Plans.
2. Direct Deposit
You may have your employer or bank make regular investments
directly to your account for you (for example: payroll deduction, pay
by phone, annuity payments). The Fund also accepts preauthorized
recurring government and private payments by Electronic Fund Transfer,
which avoids mail time and check clearing holds on payments such as
social security, federal salaries, Railroad Retirement benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Equity Funds V, Inc.
has the right to liquidate your shares to reimburse the government or
transmitting bank. If there are insufficient funds in your account, you
are obligated to reimburse the Fund.
3. Wealth Builder Option
You can use our Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in the
Delaware Group. You may also elect to invest in other mutual funds in
the Delaware Group through the Wealth Builder Option through regular
liquidations of shares in your Fund account.
Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your
account in one or more funds in the Delaware Group and invested
automatically into any other account in a Delaware Group mutual fund
that you may specify. If in connection with the election of the Wealth
Builder Option, you wish to open a new account to receive the automatic
investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select.
All investments under this option are exchanges and are therefore
subject to the same conditions and limitations as other exchanges noted
above. You can terminate your participation in Wealth Builder at any
time by giving written notice to the fund from which the exchanges are
made. See Redemption and Exchange.
This option is not available to participants in the following
plans: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and
Money Purchase Pension Plans, 401(k) Defined Contribution Plans or
403(b)(7) or 457 Deferred Compensation Plans.
5. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or
dividend income) reinvested in your Fund account or invested in certain
other funds in the Delaware Group, subject to the exceptions noted below
as well as the eligibility and minimum purchase requirements set forth
in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Fund or
of other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of
other Delaware Group funds or into Class C Shares of the Fund or of
other Delaware Group funds are also made without any sales charge and
will not be subject to a CDSC if later redeemed. See Automatic
Conversion of Class B Shares under Classes of Shares for information
concerning the automatic conversion of Class B Shares acquired by
reinvesting dividends.
Holders of Class A Shares of the Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the
Delaware Group, including the Fund. Holders of Class B Shares of the
Fund may reinvest their distributions only into Class B Shares of the
funds in the Delaware Group which offer that class of shares.
Similarly, holders of Class C Shares of the Fund may reinvest their
distributions only into Class C Shares of the funds in the Delaware
Group which offer that class of shares. For more information about
reinvestments, call the Shareholder Service Center.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same
Delaware Group fund in which their investments are held: SAR/SEP,
SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans or 403(b)(7) or 457
Deferred Compensation Plans.
Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and
Class C Shares are determined as of the close of regular trading on the
New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when
the Exchange is open.
The effective date of a purchase is the date the order is received
by the Fund, its agent or designee. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received
unless it is received after the time the offering price or net asset
value of shares is determined, as noted above. Purchase orders received
after such time will be effective the next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are
responsible for any loss incurred. The Fund can redeem shares from your
account(s) to reimburse itself for any loss, and you may be restricted
from making future purchases in any of the funds in the Delaware Group.
The Fund reserves the right to reject purchase orders paid by third-
party checks or checks that are not drawn on a domestic branch of a
United States financial institution. If a check drawn on a foreign
financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder
notification, to charge a service fee on non-retirement accounts that,
as a result of a redemption, have remained below the minimum stated
account balance for a period of three or more consecutive months.
Holders of such accounts may be notified of their insufficient account
balance and advised that they have until the end of the current calendar
quarter to raise their balance to the stated minimum. If the account
has not reached the minimum balance requirement by that time, the Fund
will charge a $9 fee for that quarter and each subsequent calendar
quarter until the account is brought up to the minimum balance. The
service fee will be deducted from the account during the first week of
each calendar quarter for the previous quarter, and will be used to help
defray the cost of maintaining low-balance accounts. No fees will be
charged without proper notice, and no CDSC will apply to such
assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial
purchase amount as a result of redemptions. An investor making the
minimum initial investment may be subject to involuntary redemption
without the imposition of a CDSC or Limited CDSC if he or she redeems
any portion of his or her account.
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different
ways. The exchange service is useful if your investment requirements
change and you want an easy way to invest in other equity funds, tax-
advantaged funds, bond funds or money market funds. This service is
also useful if you are anticipating a major expenditure and want to move
a portion of your investment into a fund that has the checkwriting
feature. Exchanges are subject to the requirements of each fund and all
exchanges of shares constitute taxable events. See Taxes. Further, in
order for an exchange to be processed, shares of the fund being acquired
must be registered in the state where the acquiring shareholder resides.
You may want to consult your financial adviser or investment dealer to
discuss which funds in the Delaware Group will best meet your changing
objectives, and the consequences of any exchange transaction. You may
also call the Delaware Group directly for fund information.
All exchanges involve a purchase of shares of the fund into which
the exchange is made. As with any purchase, an investor should obtain
and carefully read that fund's prospectus before buying shares in an
exchange. The prospectus contains more complete information about the
fund, including charges and expenses.
Your shares will be redeemed or exchanged at a price based on the
net asset value next determined after the Fund receives your request in
good order, subject, in the case of a redemption, to any applicable CDSC
or Limited CDSC. For example, redemption or exchange requests received
in good order after the time the offering price and net asset value of
shares are determined, as noted above, will be processed on the next
business day. See Purchase Price and Effective Date under How to Buy
Shares. A shareholder submitting a redemption request may indicate that
he or she wishes to receive redemption proceeds of a specific dollar
amount. In the case of such a request, and in the case of certain
redemptions from retirement plan accounts, the Fund will redeem the
number of shares necessary to deduct the applicable CDSC in the case of
Class B and Class C Shares, and, if applicable, the Limited CDSC in the
case of Class A Shares and tender to the shareholder the requested
amount, assuming the shareholder holds enough shares in his or her
account for the redemption to be processed in this manner. Otherwise,
the amount tendered to the shareholder upon redemption will be reduced
by the amount of the applicable CDSC or Limited CDSC. Redemption
proceeds will be distributed promptly, as described below, but not later
than seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good
order," you must provide your account number, account registration, and
the total number of shares or dollar amount of the transaction. For
exchange requests, you must also provide the name of the fund in which
you want to invest the proceeds. Exchange instructions and redemption
requests must be signed by the record owner(s) exactly as the shares are
registered. You may request a redemption or an exchange by calling the
Shareholder Service Center at 800-523-1918. The Fund may suspend,
terminate, or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.
The Fund will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have
already settled. The Fund will honor redemption requests as to shares
for which a check was tendered as payment, but the Fund will not mail or
wire the proceeds until it is reasonably satisfied that the check has
cleared, which may take up to 15 days from the purchase date. You can
avoid this potential delay if you purchase shares by wiring Federal
Funds. The Fund reserves the right to reject a written or telephone
redemption request or delay payment of redemption proceeds if there has
been a recent change to the shareholder's address of record.
There is no front-end sales charge or fee for exchanges made
between shares of funds which both carry a front-end sales charge. Any
applicable front-end sales charge will apply to exchanges from shares of
funds not subject to a front-end sales charge, except for exchanges
involving assets that were previously invested in a fund with a front-
end sales charge and/or exchanges involving the reinvestment of
dividends.
Holders of Class B Shares or Class C Shares that exchange their
shares ("Original Shares") for shares of other funds in the Delaware
Group (in each case, "New Shares") in a permitted exchange, will not be
subject to a CDSC that might otherwise be due upon redemption of the
Original Shares. However, such shareholders will continue to be subject
to the CDSC and, in the case of Class B Shares, the automatic conversion
schedule of the Original Shares as described in this Prospectus and any
CDSC assessed upon redemption will be charged by the Fund from which the
Original Shares were exchanged. In an exchange of Class B Shares from
the Fund, the Fund's CDSC schedule may be higher than the CDSC schedule
relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of
the New Shares, the period of time that an investor held the Original
Shares is added to the period of time that an investor held the New
Shares. With respect to Class B Shares, the automatic conversion
schedule of the Original Shares may be longer than that of the New
Shares. Consequently, an investment in New Shares by exchange may
subject an investor, absent any applicable fee waiver, to the higher
12b-1 fees applicable to Class B Shares of the Fund for a longer period
of time than if the investment in New Shares were made directly.
Various redemption and exchange methods are outlined below. Except
for the CDSC applicable to certain redemptions of Class B and Class C
Shares and the Limited CDSC applicable to certain redemptions of Class A
Shares purchased at net asset value, there is no fee charged by the Fund
or the Distributor for redeeming or exchanging your shares, but such
fees could be charged in the future. You may have your investment
dealer arrange to have your shares redeemed or exchanged. Your
investment dealer may charge for this service.
All authorizations given by shareholders, including selection of
any of the features described below, shall continue in effect until such
time as a written revocation or modification has been received by the
Fund or its agent.
Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be signed
by all owners of the account or your investment dealer of record. For
redemptions of more than $50,000, or when the proceeds are not sent to
the shareholder(s) at the address of record, the Fund requires a
signature by all owners of the account and a signature guarantee for
each owner. Each signature guarantee must be supplied by an eligible
guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from
corporations, executors, retirement plans, administrators, trustees or
guardians.
Payment is normally mailed the next business day after receipt of
your redemption request. If your Class A Shares are in certificate
form, the certificate(s) must accompany your request and also be in good
order. Certificates are issued for Class A Shares only if a shareholder
submits a specific request. Certificates are not issued for Class B
Shares or Class C Shares.
Written Exchange
You may also write to the Fund (at 1818 Market Street,
Philadelphia, PA 19103) to request an exchange of any or all of your
shares into another mutual fund in the Delaware Group, subject to the
same conditions and limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and
exchange methods, you must have the Transfer Agent hold your shares
(without charge) for you. If you choose to have your Class A Shares in
certificate form, you may redeem or exchange only by written request and
you must return your certificate(s).
The Telephone Redemption--Check to Your Address of Record service
and the Telephone Exchange service, both of which are described below,
are automatically provided unless you notify the Fund in writing that
you do not wish to have such services available with respect to your
account. The Fund reserves the right to modify, terminate or suspend
these procedures upon 60 days' written notice to shareholders. It may
be difficult to reach the Fund by telephone during periods when market
or economic conditions lead to an unusually large volume of telephone
requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone
instructions for redemption or exchange of Fund shares which are
reasonably believed to be genuine. With respect to such telephone
transactions, the Fund will follow reasonable procedures to confirm that
instructions communicated by telephone are genuine (including
verification of a form of personal identification) as, if it does not,
the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by
telephone are generally tape recorded, and a written confirmation will
be provided for all purchase, exchange and redemption transactions
initiated by telephone. By exchanging shares by telephone, you are
acknowledging prior receipt of a prospectus for the fund into which your
shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to
redeem shares. You or your investment dealer of record can have
redemption proceeds of $50,000 or less mailed to you at your address of
record. Checks will be payable to the shareholder(s) of record.
Payment is normally mailed the next business day after receipt of the
redemption request. This service is only available to individual, joint
and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize
this service when you open your account. If you change your
predesignated bank account, you must complete an Authorization Form and
have your signature guaranteed. For your protection, your authorization
must be on file. If you request a wire, your funds will normally be
sent the next business day. CoreStates Bank, N.A.'s fee (currently
$7.50) will be deducted from your redemption proceeds. If you ask for a
check, it will normally be mailed the next business day after receipt of
your redemption request to your predesignated bank account. There are
no separate fees for this redemption method, but the mail time may delay
getting funds into your bank account. Simply call the Shareholder
Service Center prior to the time the offering price and net asset value
are determined, as noted above.
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 the Delaware Group under
the same registration, subject to the same conditions and limitations as
other exchanges noted above. As with the written exchange service,
telephone exchanges are subject to the requirements of each fund, as
described above. Telephone exchanges may be subject to limitations as
to amounts or frequency.
Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of Class A
Shares (or shares into which such Class A Shares are exchanged) made
within 12 months of purchase, if such purchases were made at net asset
value and triggered the payment by the Distributor of the dealer's
commission previously described. See Classes of Shares.
The Limited CDSC will be paid to the Distributor and will be equal
to the lesser of 1% 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 Group 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 12 months
will not be subjected to the Limited CDSC and an exchange of such Class
A Shares into another Delaware Group 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 12-month holding period. The Limited CDSC
is assessed if such 12-month period is not satisfied irrespective of
whether the redemption triggering its payment is of Class A Shares of
the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be
assumed that shares not subject to the Limited CDSC are the first
redeemed followed by other shares held for the longest period of time.
The Limited CDSC will not be imposed upon shares representing reinvested
dividends or capital gains distributions, or upon amounts representing
share appreciation. All investments made during a calendar month,
regardless of what day of the month the investment occurred, will age
one month on the last day of that month and each subsequent month.
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission
has been paid will be waived in the following instances: (i)
redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares
held in the account is less than the then-effective minimum account
size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of
1986, as amended (the "Code"), or due to death of a participant in such
a plan; (iii) redemptions pursuant to the direction of a participant or
beneficiary of a retirement plan qualified under section 401(a) or
401(k) of the Code with respect to that retirement plan; (iv) periodic
distributions from an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan due to death, disability, or attainment of age 59 1/2
and IRA distributions qualifying under Section 72(t) of the Code; (v)
returns of excess contributions to an IRA; (vi) distributions by other
employee benefit plans to pay benefits; and (vii) redemptions by the
classes of shareholders who are permitted to purchase shares at net
asset value, regardless of the size of the purchase (see Buying Class A
Shares at Net Asset Value under Classes of Shares).
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the
aggregate net asset value of the shares held in the account is less than
the then-effective minimum account size; (ii) returns of excess
contributions to an IRA, SIMPLE IRA, SEP/IRA or 403(b)(7) or 457
Deferred Compensation Plan; (iii) periodic distributions from an IRA,
SIMPLE IRA, SAR/SEP, SEP/IRA, 403(b)(7) or 457 Deferred Compensation
Plan due to death, disability or attainment of age 59 1/2, and IRA
distributions qualifying under Section 72(t) of the Code; and (iv)
distributions from an account if the redemption results from the death
of all registered owners of the account (in the case of accounts
established under the Uniform Gifts to Minors or Uniform Transfers to
Minors Acts or trust accounts, the waiver applies upon the death of all
beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the
following redemptions: (i) redemptions that result from the Fund's
right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective
minimum account size; (ii) returns of excess contributions to an IRA,
SIMPLE IRA, 403(b)(7) or 457 Deferred Compensation Plan, Profit Sharing
Plan, Money Purchase Pension Plan or 401(k) Defined Contribution Plan;
(iii) periodic distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or
401(k) Defined Contribution Plan upon attainment of age 70 1/2, and IRA
distributions qualifying under Section 72(t) of the Code; (iv)
distributions from a 403(b)(7) Deferred Compensation Plan, 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) Deferred Compensation Plan, 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 all registered owners of the account (in the case of accounts
established under the Uniform Gifts to Minors or Uniform Transfers to
Minors Acts or trust accounts, the waiver applies upon the death of all
beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to declare and pay dividends monthly. Both
dividends and distributions, if any, are automatically reinvested in
your account at net asset value unless you elect to have them reinvested
in shares of another Delaware Group fund. Distributions from net
realized securities profits, if any, will be distributed twice a year.
The first payment normally would be made during the first quarter of the
next fiscal year. The second payment would be made near the end of the
calendar year to comply with certain requirements of the Code.
Each Class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that, absent any applicable fee
waiver, the per share dividends from net investment income on Class A
Shares, Class B Shares and Class C Shares will vary due to the expenses
under the 12b-1 Plan applicable to each Class. Generally, except in the
absence of a fee waiver, the dividends per share on Class B Shares and
Class C Shares can be expected to be lower than the dividends per share
on Class A Shares because the expenses under the 12b-1 Plans relating to
Class B and Class C Shares will be higher than the expenses under the
12b-1 Plan relating to Class A Shares. See Distribution (12b-1) and
Service under Management of the Fund.
TAXES
The tax discussion set forth below is included for general
information only. Investors should consult their own tax advisers
concerning the federal, state, local or foreign tax consequences of an
investment in the Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping
changes in the Code. Because many of these changes are complex, and
only indirectly affect the Fund and its distributions to you, they are
discussed in Part B. Changes in the treatment of capital gains,
however, are discussed in this section.
The Fund intends to qualify as a regulated investment company
under Subchapter M of the Code. As such, the Fund will not be
subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code and by satisfying
certain other requirements relating to the sources of its income and
diversification of its assets.
The Fund intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from net
investment income or net short-term capital gains will be taxable to
those investors who are subject to income taxes as ordinary income,
whether received in cash or in additional shares. For the period
December 2, 1997 (date of initial sale) through November 30, 1997, 14%
of the Fund's dividends from net investment income qualified for the
corporate dividends-received deduction.
Distributions paid by the Fund from long-term capital gains,
whether received in cash or in additional shares, are taxable to those
investors who are subject to income taxes as long-term capital gains,
regardless of the length of time an investor has owned shares in the
Fund. The Fund does not seek to realize any particular amount of
capital gains during a year; rather, realized gains are a by-product of
Fund management activities. Consequently, capital gains distributions
may be expected to vary considerably from year to year. Also, for those
investors subject to tax, if purchases of shares in the Fund are made
shortly before the record date for a dividend or capital gains
distribution, a portion of the investment will be returned as a taxable
distribution.
The Treatment of Capital Gain Distributions under the Taxpayer Relief
Act of 1997
The 1997 Act creates a category of long-term capital gain for
individuals that will be taxed at new lower tax rates. For investors
who are in the 28% or higher federal income tax brackets, these gains
will be taxed at a maximum of 20%. For investors who are in the 15%
federal income tax bracket, these gains will be taxed at a maximum of
10%. Capital gain distributions will qualify for these new maximum tax
rates, depending on when the Fund's securities were sold and how long
they were held by the Fund before they were sold. Investors who want
more information on holding periods and other qualifying rules relating
to these new rates should review the expanded discussion in Part B, or
should contact their own tax advisers.
Equity Funds V, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain
distributions which will qualify for these maximum federal tax rates.
Although dividends generally will be treated as distributed when
paid, dividends which are declared in October, November or December to
shareholders of record on a specified date in one of those months, but
which, for operational reasons, may not be paid to the shareholder until
the following January, will be treated for tax purposes as if paid by
the Fund and received by the shareholder on December 31 of the calendar
year in which they are declared.
The sale of shares of the Fund is a taxable event and may result in
a capital gain or loss to shareholders subject to tax. Capital gain or
loss may be realized from an ordinary redemption of shares or an
exchange of shares between the Fund and any other fund in the Delaware
Group. Any loss incurred on a sale or exchange of Fund shares that had
been held for six months or less will be treated as a long-term capital
loss to the extent of capital gain dividends received with respect to
such shares. All or a portion of the sales charge incurred in acquiring
Fund shares will be excluded from the federal tax basis of any of such
shares sold or exchanged within 90 days of their purchase (for purposes
of determining gain or loss upon the sale of such shares) if the sale
proceeds are reinvested in the Fund or in another fund in the Delaware
Group of funds and a sales charge that would otherwise apply to the
reinvestment is reduced or eliminated. Any portion of such sales charge
excluded from the tax basis of the shares sold will be added to the tax
basis of the shares acquired in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at
the end of approximately eight years after purchase will be tax-free for
federal tax purposes. See Automatic Conversion of Class B Shares under
Classes of Shares.
The Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities.
In addition to the federal taxes described above, shareholders may
or may not be subject to various state and local taxes. For example,
distributions of interest income and capital gains realized from certain
types of U.S. government securities may be exempt from state personal
income taxes. Because investors' state and local taxes may be different
than the federal taxes described above, investors should consult their
own tax advisers.
Each year, Equity Funds V, Inc. will mail to you information on the
tax status of the Fund's dividends and distributions. Shareholders will
also receive each year information as to the portion of dividend income,
if any, that is derived from U.S. government securities that are exempt
from state income tax. Of course, shareholders who are not subject to
tax on their income would not be required to pay tax on amounts
distributed to them by the Fund.
Equity Funds V, Inc. is required to withhold 31% of taxable
dividends, capital gains distributions, and redemptions paid to
shareholders who have not complied with IRS taxpayer identification
regulations. You may avoid this withholding requirement by certifying
on your Investment Application your proper Taxpayer Identification
Number and by certifying that you are not subject to backup withholding.
See Accounting and Tax Issues and Distribution and Taxes in Part B
for additional information on tax matters relating to the Fund and its
shareholders.
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is computed by adding the
value of all securities and other assets in the portfolio, deducting any
liabilities (expenses and fees are accrued daily) and dividing by the
number of shares outstanding. Equity securities for which market
quotations are available are priced at market value. Foreign securities
expressed in foreign currency values will be converted into U.S. dollar
values at the mean between the currencies' bid and offered quotations.
Debt securities are priced on the basis of valuations provided by an
independent pricing service using methods approved by Equity Funds V,
Inc.'s Board of Directors. Short-term investments having a maturity of
less than 60 days are valued at amortized cost, which approximates
market value. All other securities are valued at their fair value as
determined in good faith and in a method approved by Equity Funds V,
Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per share, while
Class B Shares and Class C Shares are purchased at the NAV per share.
The offering price per share of Class A Shares consists of the NAV per
share next computed after the order is received, plus any applicable
front-end sales charges.
The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share
based on the proportionate participation in the Fund represented by the
value of shares of that class. All income earned and expenses incurred
by the Fund will be borne on a pro-rata basis by each outstanding share
of a class, based on each class' percentage in the Fund represented by
the value of shares of such classes, except that Retirement Income Fund
Institutional Class will not incur any of the expenses under Equity
Funds V, Inc.'s 12b-1 Plans and Class A, Class B and Class C Shares
alone will bear the 12b-1 Plan expenses, if any, payable under their
respective Plans.
MANAGEMENT OF THE FUND
Directors
The business and affairs of Equity Funds V, Inc. are managed under
the direction of its Board of Directors. Part B contains additional
information regarding Equity Funds V, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in
the Delaware Group since 1938. On November 30, 1997, the Manager and
its affiliates in the Delaware Group, including Delaware International
Advisers Ltd., were managing in the aggregate more than $39 billion in
assets in the various institutional or separately managed (approximately
$23,274,532,000) and investment company (approximately $16,181,491,000)
accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation
("Lincoln National") was completed. DMH and the Manager are now
indirect, wholly owned subsidiaries, and subject to the ultimate
control, of Lincoln National. Lincoln National, with headquarters in
Fort Wayne, Indiana, is a diversified organization with operations in
many aspects of the financial services industry, including insurance and
investment management.
The Manager manages the Fund's portfolio and makes investment
decisions for the Fund. The Manager also administers Equity Funds V,
Inc.'s affairs and pays the salaries of all the directors, officers and
employees of Equity Funds V, Inc. who are affiliated with the Manager.
For these services, the Manager is paid an annual fee equal to: 0.65% on
the first $500 million of average daily net assets, 0.625% on the next
$500 million and 0.60% on the average daily net assets in excess of $1
billion. Investment management fees incurred by the Fund for the fiscal
year ended November 30, 1997 were 0.65% of average daily net assets and
no fees were paid due to the voluntary waiver of fees by the Manager.
The directors of Equity Funds V, Inc. annually review fees paid to
the Manager.
Babak Zenouzi oversees the Fund's asset allocation strategy and has
primary responsibility for making day-to-day investment decisions for
the Fund's investments in income generating equity securities. Mr.
Zenouzi, a Vice President/Portfolio Manager of Equity Funds V, Inc., has
been a member of the Fund's management team since its inception. Mr.
Zenouzi holds a BS in Finance and Economics from Babson College in
Wellesley, Massachusetts, and an MS in Finance from Boston College.
Prior to joining the Manager in 1992, he was with The Boston Company
where he held the positions of assistant vice president, senior
financial analyst, financial analyst and portfolio accountant.
Gerald T. Nichols has primary responsibility for making day-to-day
investment decisions for the Fund regarding its investments in debt
securities. Mr. Nichols, a Vice President/Senior Portfolio Manager of
Equity Funds V, Inc., has been a member of the Fund's management team
since its inception. Mr. Nichols is a graduate of the University of
Kansas, where he received a BS in Business Administration and an MS in
Finance. Prior to joining the Manager, he was a high yield credit
analyst at Waddell & Reed, Inc. and subsequently the investment officer
for a private merchant banking firm. He is a CFA charterholder.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of
time they have been held. The degree of portfolio activity will affect
brokerage costs of the Fund and may affect taxes payable by the Fund's
shareholders. Given the Fund's investment objective, its annual
portfolio turnover rate is not expected to exceed 100%. A turnover rate
of 100% would occur, for example, if all the investments in the Fund's
portfolio at the beginning of the year were replaced by the end of the
year.
The Fund uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders may be
placed with brokers or dealers who provide brokerage and research
services to the Manager or to their advisory clients. These services
may be used by the Manager in servicing any of its accounts. Subject to
best price and execution, the Fund may consider a broker/dealer's sales
of shares of funds in the Delaware Group of funds in placing portfolio
orders and may place orders with broker/dealers that have agreed to
defray certain expenses of such funds, such as custodian fees.
Performance Information
From time to time, the Fund may quote yield or total return
performance of the Classes in advertising and other types of literature.
The current yield for each Class will be calculated by dividing the
annualized net investment income earned by that Class during a recent
30-day period by the maximum offering price per share on the last day of
the period. The yield formula provides for semi-annual compounding,
which assumes that net investment income is earned and reinvested at a
constant rate and annualized at the end of a six-month period.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value and:
(i) in the case of Class A Shares, the impact of the maximum front-end
sales charge at the beginning of each specified period; and (ii) in the
case of Class B Shares and Class C Shares, the deduction of any
applicable CDSC at the end of the relevant period. Each presentation
will include the average annual total return for one-, five- and ten-
year or life-of-fund periods, as relevant. The Fund may also advertise
aggregate and average total return information concerning a Class over
additional periods of time. In addition, the Fund may present total
return information that does not reflect the deduction of the maximum
front-end sales charge or any applicable CDSC. In this case, such total
return information would be more favorable than total return information
that includes the deductions of the maximum front-end sales charge or
any applicable CDSC.
Yield and net asset value fluctuate and are not guaranteed. Past
performance is not a guarantee of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the
national distributor of the Fund's shares under a Distribution Agreement
with Equity Funds V, Inc. dated as of November 29, 1996.
Equity Funds V, Inc. has adopted a separate distribution plan under
Rule 12b-1 for each of the Class A Shares, Class B Shares and Class C
Shares of the Fund (the "Plans"). Each Plan permits the Fund to pay the
Distributor from the assets of the respective Classes a monthly fee for
the Distributor's services and expenses in distributing and promoting
sales of shares.
These expenses include, among other things, preparing and
distributing advertisements, sales literature, and prospectuses and
reports used for sales purposes, compensating sales and marketing
personnel, holding special promotions for specified periods of time, and
paying distribution and maintenance fees to brokers, dealers and others.
In connection with the promotion of shares of the Classes, the
Distributor may, from time to time, pay to participate in dealer-
sponsored seminars and conferences, and reimburse dealers for expenses
incurred in connection with preapproved seminars, conferences, and
advertising. The Distributor may pay or allow additional promotional
incentives to dealers as part of preapproved sales contests and/or to
dealers who provide extra training and information concerning a Class
and increase sales of the Class. In addition, the Fund may make
payments from the 12b-1 Plan fees of the respective Class directly to
others, such as banks, who aid in the distribution of Class shares or
provide services in respect of a Class, pursuant to service agreements
with Equity Funds V, Inc. The Distributor has elected voluntarily to
waive its right to receive 12b-1 fees (including service fees) from the
commencement of the public offering of the Classes through May 31, 1998.
The 12b-1 Plan expenses relating to each of the Class B Shares and
Class C Shares of the Fund are also used to pay the Distributor for
advancing the commission costs to dealers with respect to the initial
sale of such shares.
Absent any applicable fee waiver, the aggregate fees paid by the
Fund from the assets of the respective Classes to the Distributor and
others under the Plans may not exceed (i) 0.30% of the Class A Shares'
average daily net assets in any year, and (ii) 1% (0.25% of which are
service fees to be paid to the Distributor, dealers and others, for
providing personal service and/or maintaining shareholder accounts) of
each of the Class B Shares' and Class C Shares' average daily net assets
in any year. The Fund's Class A, Class B and Class C Shares will not
incur any distribution expenses beyond these limits, which may not be
increased without shareholder approval.
While payments, if any, pursuant to the Plans may not exceed 0.30%
annually with respect to the Class A Shares, and 1% annually with
respect to each of the Class B Shares and the Class C Shares, the Plans
do not limit fees to amounts actually expended by the Distributor. It
is therefore possible that the Distributor may realize a profit in any
particular year. However, the Distributor currently expects that its
distribution expenses will likely equal or exceed payments to it under
the Plans. The Distributor may, however, incur such additional expenses
and make additional payments to dealers from its own resources to
promote the distribution of shares of the Classes. The monthly fees
paid to the Distributor under the Plans are subject to the review and
approval of Equity Funds V, Inc.'s unaffiliated directors, who may
reduce the fees or terminate the Plans at any time.
The Plans do not apply to Retirement Income Fund Institutional
Class of shares. Those shares are not included in calculating the
Plans' fees, and the Plans are not used to assist in the distribution
and marketing of Retirement Income Fund Institutional Class shares.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the
Fund pursuant to an amended and restated agreement dated as of November
29, 1996. The Transfer Agent also provides accounting services to the
Fund pursuant to the terms of a separate Fund Accounting Agreement.
The directors of Equity Funds V, Inc. annually review service fees
paid to the Distributor and the Transfer Agent. The Distributor and the
Transfer Agent are also indirect, wholly owned subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than
those borne by the Manager under the Investment Management Agreement and
those borne by the Distributor under the Distribution Agreement. For
the period December 2, 1997 through November 30, 1997, the ratio of
expenses to average daily net assets was 0.75% for Class A Shares,
reflecting the waiver of fees by the Manager and the Distributor. The
expense ratio of the Class will reflect the impact of its 12b-1 Plan.
The Class B Shares and Class C Shares had not commenced operations as of
November 30, 1997.
Shares
Equity Funds V, Inc. is an open-end management investment company.
The Fund's portfolio of assets is diversified as defined by the 1940
Act. Commonly known as a mutual fund, Equity Funds V, Inc. was
organized as a Maryland corporation on January 16, 1987. In addition to
the Fund, Equity Funds V, Inc. presently offers one other series of
shares, the Small Cap Value Fund series.
Equity Funds V, Inc.'s shares have a par value of $0.01, equal
voting rights, except as noted below, and are equal in all other
respects. Equity Funds V, Inc.'s shares have noncumulative voting
rights which means that the holders of more than 50% of Equity Funds V,
Inc.'s shares voting for the election of directors can elect 100% of the
directors if they choose to do so. Under Maryland law, Equity Funds V,
Inc. is not required, and does not intend, to hold annual meetings of
shareholders unless, under certain circumstances, it is required to do
so under the 1940 Act. Shareholders of 10% or more of Equity Funds V,
Inc.'s shares may request that a special meeting be called to consider
the removal of a director.
In addition to Class A Shares, Class B Shares and Class C Shares,
the Fund also offers Retirement Income Fund Institutional Class of
shares. Shares of each Class represent proportionate interests in the
assets of the Fund and have the same voting and other rights and
preferences as the other classes of the Fund, except that shares of
Retirement Income Fund Institutional Class are not subject to, and may
not vote on matters affecting, the Distribution Plans under Rule 12b-1
relating to Class A, Class B and Class C Shares. Similarly, as a
general matter, the shareholders of Class A Shares, Class B Shares and
Class C Shares may vote only on matters affecting the 12b-1 Plan that
relates to the class of shares that they hold. However, Class B Shares
may vote on any proposal to increase materially the fees to be paid by
the Fund under the Rule 12b-1 Plan relating to Class A Shares.
Lincoln National Corporation Employees' Retirement Trust (the
"Trust") has made an investment in the Fund. As a result, as of
December 31, 1997, the Trust owns 100% of the outstanding shares of the
Fund. Subject to certain limited exceptions, there are no limitations
on the Trust's ability to redeem its shares of the Fund and it may elect
to do so at any time.
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
U.S. Government Securities
U.S. Treasury securities are backed by the "full faith and credit"
of the United States. Securities issued or guaranteed by federal
agencies and U.S. government sponsored instrumentalities may or may not
be backed by the full faith and credit of the United States. In the
case of securities not backed by the full faith and credit of the United
States, investors in such securities look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United
States itself in the event the agency or instrumentality does not meet
its commitment. Agencies which are backed by the full faith and credit
of the United States include the Export-Import Bank, Farmers Home
Administration, Federal Financing Bank, the Federal Housing
Administration, the Maritime Administration, the Small Business
Administration, and others. Certain agencies and instrumentalities,
such as the Government National Mortgage Association ("GNMA"), are, in
effect, backed by the full faith and credit of the United States through
provisions in their charters that they may make "indefinite and
unlimited" drawings on the Treasury, if needed to service its debt.
Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Federal National Mortgage Association, are
not guaranteed by the United States, but those institutions are
protected by the discretionary authority for the U.S. Treasury to
purchase certain amounts of their securities to assist the institutions
in meeting their debt obligations. Finally, other agencies and
instrumentalities, such as the Farm Credit System, the Tennessee Valley
Authority and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under U.S. government supervision, but their debt
securities are backed only by the creditworthiness of those
institutions, not the U.S. government.
An instrumentality of a U.S. government agency is a government
agency organized under Federal charter with government supervision.
Instrumentalities issuing or guaranteeing securities include, among
others, Federal Home Loan Banks, the Federal Land Banks, Central Bank
for Cooperatives, Federal Intermediate Credit Banks and the Federal
National Mortgage Association.
The maturities of such securities usually range from three months
to thirty years. While such securities are guaranteed as to principal
and interest by the U.S. government or its instrumentalities, their
market values may fluctuate and are not guaranteed, which may, along
with the other securities in the Fund's portfolio, cause a Class' daily
net asset value to fluctuate.
Brady Bonds
Among the foreign fixed-income securities in which the Fund may
invest are Brady Bonds. Brady Bonds are debt securities issued under
the framework of the Brady Plan, an initiative announced by former U.S.
Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor
nations to restructure their outstanding external indebtedness
(generally commercial bank debt). Brady Bonds are not direct or
indirect obligations of the U.S. government or any of its agencies or
instrumentalities and are not guaranteed by the U.S. government or any
of its agencies or instrumentalities. In so restructuring its external
debt, a debtor nation negotiates with its existing bank lenders, as well
as multilateral institutions such as the World Bank and the
International Monetary Fund, to exchange its commercial bank debt for
newly issued bonds (Brady Bonds). The Manager believes that economic
reforms undertaken by countries in connection with the issuance of Brady
Bonds make the debt of countries which have issued or have announced
plans to issue Brady Bonds an attractive opportunity for investment.
Investors, however, should recognize that the Brady Plan only sets forth
general guiding principles for economic reform and debt reduction,
emphasizing that solutions must be negotiated on a case-by-case basis
between debtor nations and their creditors. In addition, Brady Bonds
have been issued only recently and, accordingly, do not have a long
payment history.
Foreign Government Securities
With respect to investment in debt issues of foreign governments,
including Brady Bonds, the ability of a foreign government or
government-related issuer to make timely and ultimate payments on its
external debt obligations will also be strongly influenced by the
issuer's balance of payments, including export performance, its access
to international credits and investments, fluctuations in interest rates
and the extent of its foreign reserves. A country whose exports are
concentrated in a few commodities or whose economy depends on certain
strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. If foreign government or
government-related issuers cannot generate sufficient earnings from
foreign trade to service its external debt, they may need to depend on
continuing loans and aid from foreign governments, commercial banks and
multilateral organizations, and inflows of foreign investment. The
commitment on the part of these foreign governments, multilateral
organizations and others to make such disbursements may be conditioned
on the government's implementation of economic reforms and/or economic
performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or
repay principal or interest when due may curtail the willingness of such
third parties to lend funds, which may further impair the issuer's
ability or willingness to service its debts in a timely manner. The
cost of servicing external debt generally will also be adversely
affected by rising international interest rates because many external
debt obligations bear interest at rates which are adjusted based upon
international interest rates. The ability to service external debt will
also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency
devaluations may affect the ability of a government issuer to obtain
sufficient foreign exchange to service its external debt. If a foreign
governmental issuer defaults on its obligations, the Fund may have
limited legal recourse against the issuer and/or guarantor.
Zero Coupon Bonds and Pay-In-Kind Bonds
Although the Fund does not intend to purchase a substantial amount
of zero coupon bonds or PIK bonds, from time to time, the Fund may
acquire zero coupon bonds and, to a lesser extent, PIK bonds. Zero
coupon bonds are debt obligations which do not entitle the holder to any
periodic payments of interest prior to maturity or a specified date when
the securities begin paying current interest, and therefore are issued
and traded at a discount from their face amounts or par value. PIK
bonds pay interest through the issuance to holders of additional
securities. Zero coupon bonds and PIK bonds are generally considered to
be more interest-sensitive than income bearing bonds, to be more
speculative than interest-bearing bonds, and to have certain tax
consequences which could, under certain circumstances, be adverse to the
Fund. For example, with zero coupon bonds, the Fund accrues, and is
required to distribute to shareholders, income on such bonds. However,
the Fund may not receive the cash associated with this income until the
bonds are sold or mature. If the Fund did not have sufficient cash to
make the required distribution of accrued income, the Fund could be
required to sell other securities in its portfolio or to borrow to
generate the cash required.
Borrowings
The Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Fund will not borrow money
in excess of one-third of the value of its net assets. The 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 the 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%, the 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%. The Fund will not pledge
more than 10% of its net assets, or issue senior securities as defined
in the 1940 Act, except for notes to banks. Investment securities will
normally not be purchased while the Fund has an outstanding borrowing.
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed
delivery basis. In such transactions, instruments are purchased with
payment and delivery taking place in the future in order to secure what
is considered to be an advantageous yield or 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 and the interest rates that
will be received are each fixed at the time the Fund enters into the
commitment and no interest accrues to the Fund until settlement. Thus,
it is possible that the market value at the time of settlement could be
higher or lower than the purchase price if the general level of interest
rates has changed.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified
broker/dealers or institutional investors.
The major risk to which the Fund would be exposed on a loan
transaction is the risk that the borrower would become bankrupt at a
time when the value of the security goes up. Therefore, the Fund will
only enter into loan arrangements after a review of all pertinent facts
by the Manager, subject to overall supervision by the Board of
Directors, including the creditworthiness of the borrowing broker,
dealer or institution and then only if the consideration to be received
from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Rule 144A Securities
The Fund may invest in restricted securities, including privately
placed securities, some of which may be eligible for resale without
registration pursuant to Rule 144A ("Rule 144A Securities") under the
Securities Act of 1933. Rule 144A permits many privately placed and
legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than
15% of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated
to the Manager the day-to-day function of determining whether or not
individual Rule 144A Securities are liquid for purposes of the Fund's
15% limitation on investments in illiquid securities. The Board has
instructed the Manager to consider the following factors in determining
the liquidity of a Rule 144A Security: (i) the frequency of trades and
trading volume for the security; (ii) whether at least three dealers are
willing to purchase or sell the security and the number of potential
purchasers; (iii) whether at least two dealers are making a market in
the security; (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security,
the method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result,
the Fund's holdings of illiquid securities exceed the Fund's 15% limit
on investments in such securities, the Manager will determine what
action to take to ensure that the Fund continues to adhere to such
limitation.
Investment Company Securities
Any investments that the Fund makes in either closed-end or open-
end investment companies will be limited by the 1940 Act, and would
involve an indirect payment of a portion of the expenses, including
advisory fees, of such other investment companies. Under the 1940 Act's
current limitations, the Fund may not (1) own more than 3% of the voting
stock of another investment company; (2) invest more than 5% of the
Fund's total assets in the shares of any one investment company; nor (3)
invest more than 10% of the Fund's total assets in shares of other
investment companies. If the Fund elects to limit its investment in
other investment companies to closed-end investment companies, the 3%
limitation described above is increased to 10%. These percentage
limitations also apply to the Fund's investments in unregistered
investment companies.
Repurchase Agreements
In order to invest its short-term cash reserves or when in a
temporary defensive posture, the Fund may enter into repurchase
agreements with banks or broker/dealers deemed to be creditworthy by the
Manager, under guidelines approved by the Board of Directors. A
repurchase agreement is a short-term investment in which the purchaser
(i.e. the Fund) 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.
Generally, repurchase agreements are of short duration, often less than
one week but on occasion for longer periods. Not more than 15% of the
Fund's assets may be invested in repurchase agreements of over seven-
days' maturity or other illiquid assets. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the
loss to the Fund, if any, would be the difference between the repurchase
price and the market value of the security. The Fund will limit its
investments in repurchase agreements to those which the Manager under
guidelines of the Board of Directors determines to present minimal
credit risks and which are of high quality. In addition, the Fund must
have collateral of at least 100% of the repurchase price, including the
portion representing the Fund's yield under such agreements, which is
monitored on a daily basis.
Foreign Currency Transactions
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into
U.S. dollars on a daily basis. The Fund will, however, from time to
time, purchase or sell foreign currencies and/or engage in forward
foreign currency transactions in order to expedite settlement of
portfolio transactions and to minimize currency value fluctuations. The
Fund may conduct its foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into contracts to purchase or sell
foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). A forward contract involves an
obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract,
agreed upon by the parties, at a price set at the time of the contract.
The Fund will convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion.
The Fund may enter into forward contracts to "lock in" the price of
a security it has agreed to purchase or sell, in terms of U.S. dollars
or other currencies in which the transaction will be consummated. By
entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars or foreign currency, of the amount of foreign
currency involved in the underlying security transaction, the Fund will
be able to protect itself against a possible loss resulting from an
adverse change in currency exchange rates during the period between the
date the security is purchased or sold and the date on which payment is
made or received.
When the Manager believes that the currency of a particular country
may suffer a significant decline against the U.S. dollar or against
another currency, the Fund may enter into a forward foreign currency
contract 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.
At 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. With respect to forward
foreign currency contracts, the precise matching of forward contract
amounts and the value of the securities involved is generally not
possible since the future value of such securities in foreign currencies
will change as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is
highly uncertain.
It is impossible to forecast the market value of Fund securities at
the expiration of the contract. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot market (and
bear the expense of such purchase) if the market value of the security
is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery
of the foreign currency. Conversely, it may be necessary to sell on the
spot market some of the foreign currency received upon the sale of a
security if its market value exceeds the amount of foreign currency the
Fund is obligated to deliver.
Options
The Manager may employ options techniques in an attempt to protect
appreciation attained and to increase shareholder return by seeking to
take advantage of the liquidity available in the options market. The
Fund may purchase call options on foreign or U.S. securities and indices
and enter into related closing transactions and the Fund may write
covered call options on such securities. The Fund may also purchase put
options on such securities and indices and enter into related closing
transactions.
A call option enables the purchaser, in return for the premium
paid, to purchase securities from the writer of the option at an agreed
price up to an agreed date. A covered call option obligates the writer,
in return for the premium received, to sell the securities subject to
the option to the purchaser of the option for an agreed upon price up to
an agreed date. The advantage is that the purchaser may hedge against
an increase in the price of securities it ultimately wishes to buy or
take advantage of a rise in a particular index. The Fund will only
purchase call options to the extent that premiums paid on all
outstanding call options do not exceed 2% of its total assets. The Fund
may write covered call options in an amount not to exceed 10% of its
total assets.
A put option enables the purchaser of the option, in return for the
premium paid, to sell the security underlying the option to the writer
at the exercise price during the option period, and the writer of the
option has the obligation to purchase the security from the purchaser of
the option. The Fund will only purchase put options to the extent that
the premiums on all outstanding put options do not exceed 2% of its
total assets. The advantage is that the purchaser can be protected
should the market value of the security decline or should a particular
index decline.
An option on a securities index gives the purchaser of the option,
in return for the premium paid, the right to receive from the seller
cash equal to the difference between the closing price of the index and
the exercise price of the option.
Closing transactions essentially let the Fund offset put options or
call options prior to exercise or expiration. If the Fund cannot effect
closing transactions, it may have to hold a security it would otherwise
sell or deliver a security it might want to hold.
In purchasing put and call options, the premium paid by the Fund
plus any transaction costs will reduce any benefit realized by the Fund
upon exercise of the option. With respect to writing covered call
options, the Fund may lose the potential market appreciation of the
securities subject to the option, if the Manager's judgment is wrong and
the price of the security moves in the opposite direction from what was
anticipated.
The Fund may use both Exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Fund will only
invest in such options to the extent consistent with its 15% limitation
on investment in illiquid securities. The Fund will comply with
Securities and Exchange Commission asset segregation and coverage
requirements when engaging in these types of transactions.
Futures
Futures contracts are agreements for the purchase or sale for
future delivery of securities. When a futures contract is sold, the
Fund incurs a contractual obligation to deliver the securities
underlying the contract at a specified price on a specified date during
a specified future month. A purchase of a futures contract means the
acquisition of a contractual right to obtain delivery to the Fund of the
securities called for by the contract at a specified price during a
specified future month.
While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally terminated by
entering into an offsetting transaction. When the Fund enters into a
futures transaction, it must deliver to the futures commission merchant
selected by the Fund an amount referred to as "initial margin." This
amount is maintained by the futures commission merchant in a segregated
account. Thereafter, a "variation margin" may be paid by the Fund to,
or drawn by the Fund from, such account in accordance with controls set
for such account, depending upon changes in the price of the underlying
securities subject to the futures contract.
The Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities
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 actually to purchase or sell the futures contract, at a specified
exercise price at any time during the period of the option.
The purpose of the purchase or sale of futures contracts with
respect to a certain security is to protect the Fund against the adverse
effects of fluctuations in interest rates without actually buying or
selling that security. Similarly, when it is expected that interest
rates may decline, futures contracts may be purchased to hedge in
anticipation of subsequent purchases of securities at higher prices.
Foreign currency futures contracts operate similarly to futures
contracts related to securities. When the Fund sells a futures contract
on a foreign currency it is obligated to deliver that foreign currency
at a specified future date. Similarly, a purchase by the Fund gives it
a contractual right to receive a foreign currency. This enables the
Fund to "lock-in" exchange rates.
APPENDIX A--RATINGS
The Fund's assets may be invested in securities rated BBB or lower
by S&P or Fitch, Baa or lower by Moody's, in securities similarly rated
by another nationally recognized statistical rating organization, and in
unrated securities that are deemed by the Manager to be comparable in
quality to similar rated securities. Credit ratings evaluate only the
safety of principal, interest and dividends and do not consider the
market value risk associated with high-yield securities.
General Rating Information
Bonds and Convertible Securities
Excerpts from Moody'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; Ba--judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class; B--
generally lack characteristics of the desirable investment. Assurance
of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small; Caa--are of poor
standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest; Ca--represent
obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings; C--the lowest rated
class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P'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; BB, B, CCC, CC--
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation
and CC the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions; C-
- -reserved for income bonds on which no interest is being paid; D- -in
default, and payment of interest and/or repayment of principal is in
arrears.
Excerpts from Fitch'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 than 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; BB--Bonds are considered speculative.
The obligor's ability to pay interest and repay principal may be
affected over time by adverse economic changes. However, business and
financial alternatives can be identified which could assist the obligor
in satisfying its debt service requirements; B--Bonds are considered
highly speculative. While bonds in this class are currently meeting
debt service requirements, the probability of continued timely payment
of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity
throughout the life of the issue; CCC--Bonds have certain identifiable
characteristics which, if not remedied, may lead to default. The
ability to meet obligations requires an advantageous business and
economic environment; CC--Bonds are minimally protected. Default in
payment of interest and/or principal seems probable over time; C--Bonds
are in imminent default in payment of interest or principal; and DDD, DD
and D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the
obligor. "DDD" represents the highest potential for recovery on these
bonds, and "D" represents the lowest potential for recovery.
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.
Preferred Stock
The following are excerpts from S&P's description of its preferred
stock ratings:
An S&P preferred stock rating is an assessment of the capacity and
willingness of an issuer to pay preferred stock dividends and any
applicable sinking fund obligations. A preferred stock rating differs
from a bond rating inasmuch as it is assigned to an equity issue, which
issue is intrinsically different from, and subordinated to, a debt
issue. Therefore, to reflect this difference, the preferred stock
rating symbol will normally not be higher than the debt rating symbol
assigned to, or that would be assigned to, the senior debt of the same
issuer.
The preferred stock ratings are based on the following
considerations:
1. Likelihood of payment--capacity and willingness of the
issuer to meet the timely payment of preferred stock dividends and any
applicable sinking fund requirements in accordance with the terms of the
obligation.
2. Nature of, and provisions of, the issue.
3. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
AAA This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong capacity to pay
the preferred stock obligations.
AA A preferred stock issue rated "AA" also qualifies as a high-
quality fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues
rated "AAA."
A An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions.
BBB An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
make payments for a preferred stock in this category than for issues in
the "A" category.
BB, B, CCC Preferred stocks rated "BB," "B" and "CCC" are regarded, on
balance, as predominantly speculative with respect to the issuer's
capacity to pay preferred stock obligations. "BB" indicates the lowest
degree of speculation and "CCC" the highest degree of speculation.
While such issues will likely have some quality andd protective
characteristics,these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CC The rating "CC" is reserved for a preferred stock issue in
arrears on dividends or sinking fund payments but that is currently
paying.
C A preferred stock rated "C" is a non-paying issue.
D A preferred stock rated "D" is a non-paying issue with the issuer
in default on debt instruments.
NR indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligations as a matter of policy.
Plus (+) or Minus (-) To provide more detailed indications of
preferred stock quality, the ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within
the major rating categories.
The following are excerpts from Moody's description of its
preferred stock ratings:
"aaa" An issue which is rated "aaa" is considered to be a top-
quality preferred stock. This rating indicates good asset protection
and the least risk of dividend impairment within the universe of
preferred stocks.
"aa" An issue which is rated "aa" is considered a high-grade
preferred stock. This rating indicates that there is a reasonable
assurance the earnings and asset protection will remain relatively well-
maintained in the foreseeable future.
"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater
than in the "aaa" and "aa" classification, earnings and asset protection
are, nevertheless, expected to be maintained at adequate levels.
"baa" An issue which is rated "baa" is considered to be a medium-
grade preferred stock, neither high protected nor poorly secured.
Earnings and asset protection appear adequate at present but may be
questionable over any great length of time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and
asset protection may be very moderate and not well safeguarded during
adverse periods. Uncertainty of position characterizes preferred stocks
in this class.
"b" An issue which is rated "b" generally lacks the characteristics
of a desirable investment. Assurance of dividend payments and
maintenance of other terms of the issue over any long period of time may
be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividends payments. This rating designation does not purport to
indicate the future status of payments.
"ca" An issue which is rated "ca" is speculative in a high degree
and is likely to be in arrears on dividends with little likelihood of
eventual payments.
"c" This is the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-
exempt funds, money market funds, global and international funds and
closed-end funds give investors the ability to create a portfolio that
fits their personal financial goals. For more information, contact your
financial adviser or call Delaware Group at 800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
RETIREMENT INCOME FUND
A CLASS
B CLASS
C CLASS
PROSPECTUS
FEBRUARY 3, 1998
DELAWARE
GROUP
RETIREMENT INCOME FUND PROSPECTUS
INSTITUTIONAL CLASS SHARES FEBRUARY 3, 1998
1818 Market Street, Philadelphia, PA 19103
For more information about
Retirement Income Fund Institutional Class
call the Delaware Group at 800-828-5052.
This Prospectus describes the Retirement Income Fund series (the
"Fund") of Delaware Group Equity Funds V, Inc. ("Equity Funds V, Inc."), a
professionally-managed mutual fund of the series type. The investment
objective of the Fund is to seek to provide investors with high current
income and the potential for capital appreciation.
This Fund has the authority to invest up to all of its net assets in
lower rated securities, commonly known as "junk bonds" and "lower rated
equity securities." Such securities involve greater risks, including
default risks, than higher rated securities. Purchasers should carefully
assess these risks before investing in this Fund. See Investment
Objective and Policies, Special Risk Considerations, and Appendix A--
Ratings.
The Fund offers Retirement Income Fund Institutional Class (the
"Class") of shares.
This Prospectus relates only to the Class and sets forth information
that you should read and consider before you invest. Please retain it for
future reference. The Fund's Statement of Additional Information ("Part
B" of Equity Funds V, Inc.'s registration statement), dated February 3,
1998, as it may be amended from time to time, contains additional
information about the Fund and has been filed with the Securities and
Exchange Commission ("SEC"). Part B is incorporated by reference into
this Prospectus and is available, without charge, by writing to Delaware
Distributors, L.P. at the above address or by calling the above number.
The SEC also maintains a Web site (http://www.sec.gov) that contains Part
B, material we incorporated by reference, and other information regarding
registrants that electronically file with the SEC.
The Fund also offers Retirement Income Fund A Class, Retirement
Income Fund B Class and Retirement Income Fund C Class. Shares of these
classes are subject to sales charges and other expenses, which may affect
their performance. A prospectus for these classes can be obtained by
writing to Delaware Distributors, L.P. at the above address or by calling
800-523-4640.
TABLE OF CONTENTS
Cover Page Classes of Shares
Synopsis How to Buy Shares
Summary of Expenses Redemption and Exchange
Investment Objective and Policies Dividends and Distributions
Suitability Taxes
Investment Strategy Calculation of Net Asset
Special Risk Considerations Value Per Share
High-Yield Securities Management of the Fund
Lower Rated Convertible Securities Other Investment Policies and
and Preferred Stock Risk Considerations
Foreign Securities Appendix A--Ratings
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL
FUNDS CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF
THE FUND ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR
ANY CREDIT UNION, ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED. SHARES OF THE FUND ARE NOT BANK OR CREDIT UNION
DEPOSITS.
SYNOPSIS
Investment Objective
The investment objective of the Fund is to seek to provide investors
with high current income and an investment that has the potential for
capital appreciation. The Fund seeks to achieve its investment objective
by investing principally in equity securities which generate income
through dividends or otherwise ("income generating equity securities") and
debt securities including, but not limited to, dividend paying common
stocks, securities of real estate investment trusts, preferred stocks,
warrants, rights, convertible securities, non-convertible debt securities,
high-yield, high risk securities, investment grade fixed-income
securities, U.S. government securities and foreign equity and fixed-income
securities. For further details, see Investment Objective and Policies
and Other Investment Policies and Risk Considerations.
Risk Factors
Prospective investors should consider the following:
1. The Fund has the authority to invest up to all of its net
assets in lower rated securities. Up to 45% of its net assets may be
invested in high-yield, higher risk fixed-income securities ("junk
bonds"). In addition, the Fund may invest in certain income generating
equity securities such as convertible securities and preferred stock,
rated below investment grade. These securities generally will have
speculative characteristics similar to those of lower rated fixed-income
securities. The Fund may invest an unrestricted portion of its total
assets in such lower rated income generating equity securities. Such
securities may increase the risks of an investment in this Fund. See
High-Yield Securities under Special Risk Considerations.
2. Investing in securities of foreign governments and non-United
States companies which are generally denominated in foreign currencies and
the utilization of forward foreign currency exchange contracts involve
certain risk and opportunity considerations not typically associated with
investing in United States government securities and securities of United
States companies. See Special Risk Considerations and Other Investment
Policies and Risk Considerations.
3. The Fund has the ability to engage in options transactions for
hedging purposes to counterbalance portfolio volatility. While the Fund
does not engage in options transactions for speculative purposes, there
are risks which result from the use of options, and an investor should
carefully review the descriptions of these risks in this Prospectus.
Certain options may be considered to be derivative securities. See
Options under Other Investment Policies and Risk Considerations.
4. The Fund may invest up to 20% of its net assets in issuers
organized or having a majority of their assets or deriving a majority of
their operating income in foreign countries. Investment in foreign
securities involve risks which are in addition to those risks inherent in
domestic investments. See Foreign Securities under Special Risk
Considerations.
Investment Manager, Distributor and Transfer Agent
Delaware Management Company, Inc. (the "Manager") furnishes
investment management services to the Fund, subject to the supervision and
direction of Equity Funds V, Inc.'s Board of Directors. The Manager also
provides investment management services to certain other funds in the
Delaware Group.
Delaware Distributors, L.P. (the "Distributor") is the national
distributor for the Fund and for all of the other mutual funds in the
Delaware Group. Delaware Service Company, Inc. (the "Transfer Agent") is
the shareholder servicing, dividend disbursing, accounting services and
transfer agent for the Fund and for all of the other mutual funds in the
Delaware Group. See Summary of Expenses and Management of the Fund for
further information regarding the Manager and the fees payable under the
Fund's Investment Management Agreement.
Purchase Price
Shares of the Class offered by this Prospectus are available at net
asset value, without a front-end or contingent deferred sales charge, and
are not subject to distribution fees under a Rule 12b-1 distribution plan.
See Classes of Shares.
Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See
Redemption and Exchange.
Open-End Investment Company
Equity Funds V, Inc., which was organized as a Maryland corporation
on January 16, 1987, is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the Investment
Company Act of 1940 (the "1940 Act"). See Shares under Management of the
Fund.
SUMMARY OF EXPENSES
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price) None
Exchange Fees None*
Annual Operating Expenses
(as a percentage of average daily net assets)
Management Fees (after voluntary waivers) 0.00%
12b-1 Fees None
Other Operating Expenses+ 0.75%
Total Operating Expenses+
(after voluntary waivers) 0.75%
*Exchanges are subject to the requirements of each fund and a front-end
sales charge may apply.
+The Manager has elected voluntarily to waive that portion, if any, of the
annual management fees payable by the Fund and to pay certain expenses of
the Fund to the extent necessary to ensure that the Fund's total operating
expenses (exclusive of taxes, interest, brokerage commissions and
extraordinary expenses) do not exceed, on an annualized basis, 0.75%
of the average daily net assets of the Fund. The Manager's voluntary
fee waiver and expense payment began upon the commencement of the
public offering of the Class and will extend through May 31, 1998.
If the voluntary expense waivers were not in effect, it is estimated
that the Total Operating Expenses, as a percentage of average daily
net assets, would be 1.88%, reflecting Management Fees of 0.65%.
For expense information about Retirement Income Fund A Class,
Retirement Income Fund B Class and Retirement Income Fund C Class, see the
separate prospectus relating to those classes.
The following example illustrates the expenses that an investor
would pay on a $1,000 investment over various time periods, assuming (1) a
5% annual rate of return, and (2) redemption at the end of each time
period. Equity Funds V, Inc. charges no redemption fees. The following
example reflects the waiver of investment management fees by the Manager
as discussed above.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$8 $24 $42 $93
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than
those shown.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in the Class
will bear directly or indirectly.
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial
statements of Delaware Group Equity Funds V, Inc. - Retirement Income Fund
and have been audited by Ernst & Young LLP, independent auditors. The
data should be read in conjunction with the financial statements, related
notes, and the report of Ernst & Young LLP covering such financial
information and highlights, all of which are incorporated by reference
into Part B. Further information about the Fund's performance is
contained in its Annual Report to shareholders. A copy of the Fund's
Annual Report (including the report of Ernst & Young LLP) may be obtained
from Equity Funds V, Inc. upon request at no charge.
Period
12/2/96(1)
through
11/30/97
---------
Net Asset Value, Beginning of Period $8.500
Income From Investment Operations
- ---------------------------------
Net Investment Income 0.558
Net Gains (Losses) on Securities
(both realized and unrealized) 2.675
Total From Investment Operations 3.233
Less Distributions
- ------------------
Dividends (from net investment income) (0.043)
Distributions (from capital gains) none
Total Distributions (0.043)
Net Asset Value, End of Period $11.690
Total Return (2) 38.19%
- ----------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted) $2,763
Ratio of Expenses to Average Daily Net Assets 0.75%
Ratio of Expenses to Average Daily Net Assets
Prior to Voluntary Waivers and Payment
of Expenses by the Manager 1.88%
Ratio of Net Investment Income to
Average Daily Net Assets 5.48%
Ratio of Net Investment Income to Averaged Daily
Net Assets Prior to Voluntary Waivers and Payment
of Expenses by the Manager 4.35%
Portfolio Turnover Rate 196%
Average Commission Rate Paid(3) $0.060
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) Total return reflects the voluntary waiver of fees and payment
of expenses by the Manager as described in Summary of Expenses.
(3) Computed by dividing the total amount of commissions paid by the
total number of shares purchased and sold during the period for which
there was a commission paid.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek to provide investors
with high current income and an investment that has the potential for
capital appreciation. Although the Fund will constantly strive to attain
its investment objective, there can be no assurance that it will be
attained.
SUITABILITY
The Fund may be suitable for investors interested in high current
income and a potential for capital appreciation. In particular, the Fund
may be suitable for retirees who are seeking income that may be equivalent
to or in excess of that available from investments in certificates of
deposit but who also desire an investment which has the potential for
capital appreciation as a hedge against inflation. The Fund may also be
suitable for investors seeking to diversify their investment portfolio and
obtain the potential for a moderate level of income. The Manager believes
that the Fund's combined investments in income generating equity
securities and debt securities could provide an income return which would
exceed that of an investment exclusively in equity securities. Because
the Fund will invest at least 50% of its total assets in income generating
equity and equity equivalent securities, the Manager also believes that
investors will have the opportunity to benefit from capital appreciation.
The net asset value per share of the Class may fluctuate in response to
the condition of individual companies and general market and economic
conditions and, as a result, the Fund is not appropriate for a short-term
investor. The Fund cannot assure a specific yield, rate of return or that
principal will be protected. However, through the cautious selection and
supervision of its portfolio, the Manager will strive to achieve the
Fund's investment objective.
The types of securities in which the Fund may invest are subject to
price fluctuations particularly due to changes in interest rates.
Investors should consider asset value fluctuation, as well as yield, in
making an investment decision. While investments in unrated, lower-
rated and certain restricted securities have the potential for higher
yields, they are more speculative and increase the credit risk of the
Fund's portfolio. Changes in the market value of portfolio securities
will not affect interest income from such securities, but will be
reflected in the Class' net asset value. In addition, investments in
foreign securities involve special risks, including those related to
currency fluctuations, as well as to political, economic and social
situations different from and potentially more volatile than those in the
United States. Investors should be willing to accept the risks, including
the risk of net asset value fluctuations, associated with investing in
these types of securities. See Special Risk Considerations and Other
Investment Policies and Risk Considerations for a complete discussion of
the risk factors affecting the Fund's portfolio securities.
An investor should not consider a purchase of Fund shares as
equivalent to a complete investment or retirement program. The Delaware
Group includes a family of funds, generally available through registered
investment dealers, which may be used together to create a more complete
investment or retirement program.
Ownership of Fund shares can reduce the bookkeeping and
administrative inconveniences that would be connected with direct
purchases of the types of securities in which the Fund invests.
INVESTMENT STRATEGY
The investment objective of the Fund is to seek to provide investors
with high current income and an investment that has the potential for
capital appreciation. The Manager will seek to achieve this objective by
investing in a combination of income generating equity securities and debt
securities including, but not limited to, dividend paying common stocks,
securities of real estate investment trusts, preferred stocks, warrants,
rights, convertible securities, non-convertible debt securities, high-
yield, high risk securities, investment grade fixed- income securities,
U.S. government securities and foreign equity and fixed-income securities.
Under normal circumstances, at least 50% of the Fund's total assets will
be invested in income generating equity securities. In making investments
in income generating equity securities, the Fund may invest an
unrestricted portion of its total assets in convertible securities and
preferred stock rated below investment grade. While debt securities may
comprise up to 50% of the Fund's total assets, no more than 45% of the
Fund's total assets will be invested in high-yield, high risk debt
securities. No more than 25% of the Fund's total assets will be invested
in any one industry sector nor, as to 75% of the Fund's total assets, will
more than 5% be invested in securities of any one issuer. The Fund may
invest up to 20% of its total assets in foreign equity and debt
securities. The Fund will not, however, invest more than 5% of its total
assets in securities of issuers principally located or principally
operating in markets of emerging countries.
Within the percentage guidelines set forth above, the Manager will
determine the proportion of the Fund's assets that will be allocated to
income generating equity securities and equity equivalents and to debt
securities, based on its analysis of economic and market conditions and
its assessment of the income and potential for appreciation that can be
achieved from investment in such asset classes. It is expected that the
proportion of the Fund's total assets invested in income generating equity
securities and equity equivalent securities will vary from 50% to 100% of
the Fund's total assets. The proportion of the Fund's total assets in
debt securities will correspondingly vary from 0% to 50% of the Fund's
total assets.
The following is a more detailed description of some of the
securities in which the Fund may invest.
Common Stock
Common stock is generally considered to be shares of a corporation
that entitle the holder to a pro-rata share of the profits of the
corporation, if any, without a preference over any other shareholder or
class of shareholders, including holders of the corporation's preferred
stock and other senior equity. Common stock usually carries with it the
right to vote and frequently an exclusive right to do so. Holders of
common stock also have the right to participate in the remaining assets of
the corporation after all other claims are paid, including those of debt
securities and preferred stock. In selecting common stocks for
investment, the Manager will focus primarily on a security's dividend-
paying capacity rather than on its potential for appreciation.
Preferred Stock
Generally, preferred stock receives dividends prior to distributions
on common stock and usually has a priority of claim over common
stockholders if the issuer of the stock is liquidated. Unlike common
stock, preferred stock does not usually have voting rights; preferred
stock, in some instances, is convertible into common stock. Dividends on
typical preferred stock are cumulative, causing dividends to accrue even
if not declared by the board of directors. There is, however, no
assurance that dividends will be declared by the boards of directors of
issuers of the preferred stocks in which the Fund invests. Preferred
stock in which the Fund may invest may be rated below investment grade
(i.e., "Ba" or lower by Moody's Investors Service, Inc. ("Moody's") or
"BB" or lower by Standard & Poor's Ratings Group ("S&P") or similarly
rated by other comparable rating agencies) or, if unrated, determined to
be of comparable quality by the Manager.
Convertible Securities
Traditional convertible securities include corporate bonds, notes and
preferred stocks that may be converted into or exchanged for common stock,
and other securities that also provide an opportunity for equity
participation. These securities are generally convertible either at a
stated price or a stated rate (that is, for a specific number of shares of
common stock or other security). As with other fixed-income securities,
the price of a convertible security to some extent varies inversely with
interest rates. While providing a fixed-income stream (generally higher
in yield than the income derivable from a common stock but lower than that
afforded by a non-convertible debt security), a convertible security also
affords the investor an opportunity, through its conversion feature, to
participate in the capital appreciation of the common stock into which it
is convertible. As the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying
common stock increases, the price of a convertible security tends to rise
as a reflection of the value of the underlying common stock. To obtain
such a higher yield, the Fund may be required to pay for a convertible
security an amount in excess of the value of the underlying common stock.
Common stock acquired by the Fund upon conversion of a convertible
security will generally be held for so long as the Manager anticipates
such stock will provide the Fund with opportunities which are consistent
with the Fund's investment objectives and policies. Convertible
securities in which the Fund may invest may be rated below investment
grade (i.e., "Ba" or lower by Moody's or "BB" or lower by S&P or similarly
rated by other comparable rating agencies) or, if unrated, determined to
be of comparable quality by the Manager.
Real Estate Investment Trust Securities
Real Estate Investment Trusts ("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 V, Inc., REITs
are not taxed on income distributed to shareholders provided they comply
with several requirements of the Internal Revenue Code (the "Code").
REITs are subject to substantial cash flow dependency, defaults by
borrowers, self-liquidation, and the risk of failing to qualify for tax-
free pass-through of income under the Code, and/or maintain exemptions
from the 1940 Act. Equity REITs may be affected by changes in the value
of the underlying property owned by the REITs, while mortgage REITs may be
affected by the quality of any credit extended.
REITs invest all of their assets in the real estate and real estate
related sectors of the economy, and are subject to the risks of financing
projects. REITs may have limited financial resources, may trade less
frequently and in a limited volume, and are more volatile than the high-
yield, high risk securities in which the Fund may also invest.
High-Yield, High Risk Securities
Debt Securities
High-yield, high risk debt securities, like all debt securities,
represent money borrowed that must be repaid and has a fixed amount, a
specific maturity or maturities and usually a specific rate of interest or
original purchase discount. Unlike common and preferred stock, debt
securities, including high-yield, high risk debt securities, do not
represent an equity interest in the issuer. However, debt securities have
a priority claim over stockholders if the issuer is liquidated. The Fund
may invest in a wide variety of debt securities, although it is
anticipated that under normal market conditions, the Fund primarily will
invest in high-yield corporate debt obligations, including zero coupon
bonds and pay-in-kind securities ("PIKs"), debentures, convertible
debentures, corporate notes (including convertible notes) and units
consisting of bonds with stock or warrants to buy stock attached. See
Zero Coupon Bonds and Pay-In-Kind Bonds under Other Investment Policies
and Risk Considerations.
The Fund will invest in both rated and unrated bonds. The rated
bonds that the Fund may purchase in this sector of its portfolio will be
rated BBB or lower by S&P or Fitch Investors Service, Inc. ("Fitch"), Baa
or lower by Moody's, or similarly rated by another nationally recognized
statistical rating organization. See Appendix A to this Prospectus for
more rating information and High-Yield Securities under Special Risk
Considerations for a description of the risks associated with investing in
lower-rated fixed-income securities. Unrated bonds may be more
speculative in nature than rated bonds.
Convertible Securities and Preferred Stock
The Fund may invest in convertible securities and preferred stock
rated below investment grade or which are unrated but are of comparable
quality as determined by the Manager. The Fund includes these securities
in its income generating equity securities category and they are in
addition to the high-yield, high risk debt securities discussed above.
Such securities are judged to have speculative elements and may be subject
to greater risks with respect to the timely repayment of principal and
timely payment of interest and dividends. See Investment Objectives and
Policies--Investment Strategy and Special Risk Considerations. Also see
Lower Rated Convertible Securities and Preferred Stock under Special Risk
Considerations.
Foreign Securities
The Fund may invest up to 20% of its total assets in securities of
issuers organized or having a majority of their assets or deriving a
majority of their operating income in foreign countries. These income
generating equity securities and debt securities include foreign
government securities, equity securities and debt obligations of foreign
companies, and securities issued by supranational entities. A
supranational entity is an entity established or financially supported by
the national governments of one or more countries to promote
reconstruction or development. Examples of supranational entities
include, among others, the International Bank for Reconstruction and
Development (more commonly known as the World Bank), the European Economic
Community, the European Coal and Steel Community, the European Investment
Bank, the Inter-Development Bank, the Export-Import Bank and the Asian
Development Bank.
The Fund may invest in sponsored and unsponsored American Depositary
Receipts, European Depositary Receipts, or Global Depositary Receipts
("Depositary Receipts"). Depositary Receipts are receipts typically
issued by a bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. "Sponsored" Depositary
Receipts are issued jointly by the issuer of the underlying security and a
depository, and "unsponsored" Depositary Receipts are issued without the
participation of the issuer of the deposited security. The Fund may also
invest in Brady Bonds, which are described more fully under the Other
Investment Policies and Risk Considerations section of this Prospectus.
The Fund may invest in securities issued in any currency and may hold
foreign currencies. Securities of issuers within a given country may be
denominated in the currency of another country or in multinational
currency units, such as the European Currency Unit. The Fund may, from
time to time, purchase or sell foreign currencies and/or engage in forward
foreign currency transactions in order to expedite settlement of Fund
transactions and to minimize currency value fluctuations. See Other
Investment Policies and Risk Considerations for a further description of
the Fund's foreign currency transactions.
While the Fund may purchase securities of issuers in any foreign
country, developed and underdeveloped, no more than 5% of the Fund's
assets may be invested in direct obligations or equity securities of
issuers located in emerging market countries. See Emerging Market
Securities under Special Risk Considerations.
The Fund will invest in both rated and unrated foreign securities.
The rated securities that the Fund may purchase in the international
sector of its portfolio may include those rated BBB or lower by S&P or
Fitch, Baa or lower by Moody's, or similarly rated by another nationally
reorganized statistical rating organization. See Appendix A to this
Prospectus for more rating information and Foreign Securities and High-
Yield Securities under Special Risk Considerations for a description of
the risks associated with investing in foreign securities and lower-rated
securities.
The Fund may also invest in zero coupon bonds, purchase shares of
other investment companies and may engage in short sales. See Zero Coupon
Bonds and Pay-In-Kind Bonds and Investment Company Securities under Other
Investment Polices and Risk Considerations.
* * *
For a description of the Fund's other investment policies and for a
further description of some of the policies described above, see Other
Investment Policies and Risk Considerations.
In unusual market conditions, in order to meet redemption requests,
for temporary defensive purposes, and pending investment or at such other
times when suitable income generating equity or debt securities are not
available, the Fund may hold a substantial portion of its assets in (i)
cash, (ii) debt securities issued by the U.S. government, its agencies or
instrumentalities, (iii) commercial paper, (iv) certificates of deposit
and bankers' acceptances or repurchase agreements with respect to any of
the foregoing investments. The Fund will only invest in commercial paper
of companies rated "A-2" or better by S&P or "P-2" or better by Moody's or
similarly rated by another comparable rating agency or, if not so rated,
of equivalent investment quality as determined by the Manager. See
Appendix A to this Prospectus for more rating information.
The Fund's designation as an open-end investment company and as a
diversified fund may not be changed unless authorized by the vote of a
majority of the Fund's outstanding voting securities. A "majority vote of
the outstanding voting securities" is the vote by the holders of the
lesser of a) 67% or more of the Fund's voting securities present in person
or represented by proxy if the holders of more than 50% of the outstanding
voting securities of the Fund are present or represented by proxy; or b)
more than 50% of the outstanding voting securities. Part B lists other
more specific investment restrictions of the Fund which may not be changed
without a majority shareholder vote.
The remaining investment policies of the Fund not identified above or
in Part B are not fundamental and may be changed by the Board of Directors
of Equity Funds V, Inc. without a shareholder vote.
SPECIAL RISK CONSIDERATIONS
Generally
The Fund may invest a substantial portion of its assets in fixed-
income securities. The market values of fixed-income securities generally
fall when interest rates rise and, conversely, rise when interest rates
fall. Lower-rated and unrated fixed-income securities tend to reflect
short-term corporate and market developments to a greater extent than
higher-rated fixed-income securities, which react primarily to
fluctuations in the general level of interest rates. These lower-rated or
unrated securities generally have higher yields, but, as a result of
factors such as reduced creditworthiness of issuers, increased risk of
default and a more limited and less liquid secondary market, are subject
to greater volatility and risk of loss of income and principal than are
higher-rated securities. The Manager will attempt to reduce such risk
through portfolio diversification, credit analysis, and attention to
trends in the economy, industries and financial markets.
High-Yield Securities
The Fund may invest up to 45% of its total assets in bonds rated BBB
or lower by S&P or Fitch, Baa or lower by Moody's, or similarly rated by
another rating organization, and in unrated corporate bonds. See Appendix
A to this Prospectus for more rating information. Investing in these so-
called "junk" or "high-yield" bonds entails certain risks, including the
risk of loss of principal and default on interest payments, which may be
greater than the risks involved in investment grade bonds, and which
should be considered by investors contemplating an investment in the Fund.
Such bonds are sometimes issued by companies whose earnings at the time of
issuance are less than the projected debt service on the junk bonds. In
addition to the considerations discussed elsewhere in this Prospectus,
those risks include the following:
Youth and Volatility of the High-Yield Market. Although the market for
high-yield bonds has been in existence for many years, including periods
of economic downturns, the high-yield market grew rapidly during the long
economic expansion which took place in the United States during the 1980s.
During that economic expansion, the use of high-yield debt securities to
fund highly leveraged corporate acquisitions and restructurings increased
dramatically. As a result, the high-yield market grew substantially
during that economic expansion. Although experts disagree on the impact
recessionary periods have had and will have on the high-yield market, some
analysts believe a protracted economic downturn would severely disrupt the
market for high-yield bonds, would adversely affect the value of
outstanding bonds and would adversely affect the ability of high-yield
issuers to repay principal and interest. Those analysts cite volatility
experienced in the high-yield market in the past as evidence for their
position. It is likely that protracted periods of economic uncertainty
would result in increased volatility in the market prices of high-yield
bonds, an increase in the number of high-yield bond defaults and
corresponding volatility in the Class' net asset value.
Redemptions. If, as a result of volatility in the high-yield market or
other factors, the Fund experiences substantial net redemptions of the
Fund's shares for a sustained period of time (i.e., more shares of the
Fund are redeemed than are purchased), the Fund may be required to sell
certain of its high-yield securities without regard to the investment
merits of the securities to be sold. If the Fund sells a substantial
number of securities to generate proceeds for redemptions, the asset base
of the Fund will decrease and the Fund's expense ratios may increase.
Liquidity and Valuation. The secondary market for high-yield
securities is currently dominated by institutional investors, including
mutual funds, and certain financial institutions. There is generally no
established retail secondary market for high-yield securities. As a
result, the secondary market for high-yield securities is more limited and
less liquid than other secondary securities markets. The high-yield
secondary market is particularly susceptible to liquidity problems when
the institutions that dominate it temporarily cease buying bonds for
regulatory, financial or other reasons, such as the savings and loan
crisis. A less liquid secondary market may have an adverse effect on the
Fund's ability to dispose of particular issues, when necessary, to meet
the Fund's liquidity needs or in response to a specific economic event,
such as the deterioration in the creditworthiness of the issuer. In
addition, a less liquid secondary market makes it more difficult for the
Fund to obtain precise valuations of the high-yield securities in its
portfolio. During periods involving such liquidity problems, judgment
plays a greater role in valuing high-yield securities than is normally the
case. The secondary market for high-yield securities is also generally
considered to be more likely to be disrupted by adverse publicity and
investor perceptions than the more established secondary securities
markets. The privately placed high-yield securities that the Fund may
purchase are particularly susceptible to the liquidity and valuation risks
outlined above.
Lower Rated Convertible Securities and Preferred Stock
The Fund may invest in lower rated convertible securities and
preferred stock (i.e., "Ba" or lower for convertible securities or "ba" or
lower for preferred stock by Moody's or "BB" or lower for convertible
securities or preferred stock by S&P or similarly rated by other
comparable rating agencies) or, if unrated, determined to be of comparable
quality by the Manager. Investing in lower rated convertible securities
and preferred stock entails certain risks, including the risk of loss of
principal which may be greater than the risks involved in investing in
higher rated securities, and which should be considered by investors
contemplating an investment in the Fund. The Fund may have difficulty
disposing of such securities because the trading market for such
securities may be thinner than the market for higher rated convertible
securities and preferred stock. To the extent a secondary trading market
for these securities does exist, it generally is not as liquid as the
secondary trading market for higher rated securities. The lack of a
liquid secondary market as well as adverse publicity with respect to these
securities, may have an adverse impact on market price and the Fund's
ability to dispose of particular issues in response to a specific economic
event such as a deterioration in the creditworthiness of the issuer. The
lack of a liquid secondary market for certain securities also may make it
more difficult for the Fund to obtain accurate market quotations for
purposes of pricing the Fund's portfolio and calculating its net asset
value. The market behavior of convertible securities and preferred stocks
in lower rating categories is often more volatile than that of higher
quality securities. Lower quality convertible securities and preferred
stocks are judged by Moody's and S&P to have speculative elements or
characteristics; their future cannot be considered as well assured and
earnings and asset protection may be moderate or poor in comparison to
investment grade securities. In addition, such lower quality securities
face major ongoing uncertainties or exposure to adverse business,
financial or economic conditions, which could lead to inadequate capacity
to meet timely payments. A description of the ratings used by Moody's and
S&P for such securities is set forth in Appendix A to this Prospectus.
See also Special Risk Considerations--High-Yield Securities.
Foreign Securities
The Fund has the ability to purchase income generating equity
securities and debt securities in any foreign country. Investors should
consider carefully the substantial risks involved in investing in
securities issued by companies and governments of foreign nations. These
risks are in addition to the usual risks inherent in domestic investments.
There is the possibility of expropriation, nationalization or confiscatory
taxation, taxation of income earned in foreign nations or other taxes
imposed with respect to investments in foreign nations, foreign exchange
controls (which may include suspension of the ability to transfer currency
from a given country), default in foreign government securities, political
or social instability or diplomatic developments which could affect
investments in securities of issuers in those nations.
In addition, in many countries, there is substantially less publicly
available information about issuers than is available in reports about
companies in the United States. Foreign companies are not subject to
uniform accounting, auditing and financial reporting standards, and
auditing practices and requirements may not be comparable to those
applicable to United States companies. Consequently, financial data about
foreign companies may not accurately reflect the real condition of those
issuers and securities markets.
Further, the Fund may encounter difficulty or be unable to pursue
legal remedies and obtain judgments in foreign courts. Commission rates
on securities transactions in foreign countries, which are sometimes fixed
rather than subject to negotiation as in the United States, are likely to
be higher. Further, the settlement period of securities transactions in
foreign markets may be longer than in domestic markets, and may be subject
to administrative uncertainties. In many foreign countries, there is less
government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States,
and capital requirements for brokerage firms are generally lower. The
foreign securities markets of many of the countries in which the Fund may
invest may also be smaller, less liquid and subject to greater price
volatility than those in the United States.
Emerging Market Securities. The Fund may invest up to 5% of its
assets in income generating equity securities and debt securities of
issuers located in emerging market nations. Compared to the United States
and other developed countries, emerging countries may have volatile social
conditions, relatively unstable governments and political systems,
economies based on only a few industries and economic structures that are
less diverse and mature, and securities markets that trade a small number
of securities, which can result in a low or nonexistent volume of trading.
Prices in these securities markets tend to be volatile and, in the past,
securities in these countries have offered greater potential for gain (as
well as loss) than securities of companies located in developed countries.
Until recently, there has been an absence of a capital market structure or
market-oriented economy in certain emerging countries. Further,
investments and opportunities for investments by foreign investors are
subject to a variety of national policies and restrictions in many
emerging countries. Also, the repatriation of both investment income and
capital from several foreign countries is restricted and controlled under
certain regulations, including, in some cases, the need for certain
governmental consents. Countries such as those in which the Fund may
invest may have historically experienced and may continue to experience,
substantial, and in some periods extremely high rates of inflation for
many years, high interest rates, exchange rate fluctuations or currency
depreciation, large amounts of external debt, balance of payments and
trade difficulties and extreme poverty and unemployment. Other factors
which may influence the ability or willingness to service debt include,
but are not limited to, a country's cash flow situation, the availability
of sufficient foreign exchange on the date a payment is due, the relative
size of its debt service burden to the economy as a whole, its
government's policy towards the International Monetary Fund, the World
Bank and other international agencies and the political constraints to
which a government debtor may be subject. The Manager currently considers
countries such as Argentina, Brazil, Chile, China, Mexico, India,
Portugal, Poland and Thailand to be emerging markets. This list is not
intended to be exhaustive, but rather representative of the types of
countries now considered by the Manager to present special investment
risks.
See Other Investment Policies and Risk Considerations for a further
description of certain risks associated with certain of the Fund's
investments, including the risks associated with investments in foreign
government securities and engaging in foreign currency transactions and
options.
CLASSES OF SHARES
The Distributor serves as the national distributor for the Fund.
Shares of the Class may be purchased directly by contacting the Fund or
its agent or through authorized investment dealers. All purchases of
shares of the Class are at net asset value. There is no front-end or
contingent deferred sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the
Class as part of their retirement program should contact their employer
for details.
Shares of the Class are available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt
employee benefit plans of the Manager or its affiliates and securities
dealer firms with a selling agreement with the Distributor; (c)
institutional advisory accounts of the Manager or its affiliates and those
having client relationships with Delaware Investment Advisers, a division
of the Manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts; (d) 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 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.
Retirement Income Fund A Class, Retirement Income Fund B Class and
Retirement Income Fund C Class
In addition to offering Retirement Income Fund Institutional Class,
the Fund also offers Retirement Income Fund A Class, Retirement Income
Fund B Class and Retirement Income Fund C Class, which are described in a
separate prospectus. Shares of Retirement Income Fund A Class, Retirement
Income Fund B Class and Retirement Income Fund C Class may be purchased
through authorized investment dealers or directly by contacting the Fund
or its Distributor. Class A Shares, Class B Shares and Class C Shares may
have different sales charges and other expenses which may affect
performance. To obtain a prospectus relating to such classes, contact the
Distributor by writing to the address or by calling the phone numbers
listed on the cover of this Prospectus.
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application or, in the case of a
retirement plan account, an appropriate retirement plan application, must
be completed, signed and sent with a check payable to Retirement Income
Fund Institutional Class, to Delaware Group at 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time
by mailing a check payable to Retirement Income Fund Institutional Class.
Your check should be identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number).
1. Initial Purchases--Before you invest, telephone the Client Services
Department at 800-828-5052 to get an account number. If you do not call
first, it may delay processing your investment. In addition, you must
promptly send your Investment Application or, in the case of a retirement
plan account, an appropriate retirement plan application, to Retirement
Income Fund Institutional Class, to Delaware Group at 1818 Market Street,
Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime
by wiring funds to CoreStates Bank, N.A., as described above. You must
advise your Client Services Representative by telephone at 800-828-5052
prior to sending your wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Group and you qualify to purchase shares of the Class, you may write and
authorize an exchange of part or all of your investment into the Fund.
However, shares of Retirement Income Fund B Class and Retirement Income
Fund C Class and Class B Shares and Class C Shares of the other funds in
the Delaware Group offering such a class of shares may not be exchanged
into the Class. If you wish to open an account by exchange, call your
Client Services Representative at 800-828-5052 for more information. See
Redemption and Exchange for more complete information concerning your
exchange privileges.
Investing through Your Investment Dealer
You can make a purchase of Fund shares through most investment
dealers who, as part of the service they provide, must transmit orders
promptly to the Fund. They may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m.,
Eastern time) on days when the Exchange is open.
The effective date of a purchase is the date the order is received by
the Fund, its agent or designee. The effective date of a direct purchase
is the day your wire, electronic transfer or check is received, unless it
is received after the time the share price is determined, as noted above.
Purchase orders received after such time will be effective the next
business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are
responsible for any loss incurred. The Fund can redeem shares from your
account(s) to reimburse itself for any loss, and you may be restricted
from making future purchases in any of the funds in the Delaware Group.
The Fund reserves the right to reject purchase orders paid by third-party
checks or checks that are not drawn on a domestic branch of a United
States financial institution. If a check drawn on a foreign financial
institution is accepted, you may be subject to additional bank charges for
clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of
redemptions.
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their
employer for details.
Your shares will be redeemed or exchanged based on the net asset
value next determined after the Fund receives your request in good order.
For example, redemption and exchange requests received in good order after
the time the net asset value of shares is determined, as noted above, will
be processed on the next business day. See Purchase Price and Effective
Date under How to Buy Shares. Except as otherwise noted below, for a
redemption request to be in "good order," you must provide your account
number, account registration, and the total number of shares or dollar
amount of the transaction. With regard to exchanges, you must also
provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a
redemption or an exchange by calling the Fund at 800-828-5052. Redemption
proceeds will be distributed promptly, as described below, but not later
than seven days after receipt of a redemption request.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and
carefully read that fund's prospectus before buying shares in an exchange.
The prospectus contains more complete information about the fund,
including charges and expenses.
The Fund will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have
already settled. The Fund will honor redemption requests as to shares for
which a check was tendered as payment, but the Fund will not mail or wire
the proceeds until it is reasonably satisfied that the check has cleared,
which may take up to 15 days from the purchase date. You can avoid this
potential delay if you purchase shares by wiring Federal Funds. The Fund
reserves the right to reject a written or telephone redemption request or
delay payment of redemption proceeds if there has been a recent change to
the shareholder's address of record.
Shares of the Class may be exchanged into any other Delaware Group
mutual fund, provided: (1) the investment satisfies the eligibility and
other requirements set forth in the prospectus of the fund being acquired,
including the payment of any applicable front-end sales charge; and (2)
the shares of the fund being acquired are in a state where that fund is
registered. If exchanges are made into other shares that are eligible for
purchase only by those permitted to purchase shares of the Class, such
exchange will be exchanged at net asset value. Shares of the Class may
not be exchanged into Class B Shares or Class C Shares of the funds in the
Delaware Group. The Fund may suspend, terminate or amend the terms of the
exchange privilege upon 60 days' written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee
is charged by the Fund or the Distributor for redeeming or exchanging your
shares although, in the case of an exchange, a sales charge may apply.
You may also have your investment dealer arrange to have your shares
redeemed or exchanged. Your investment dealer may charge for this
service.
All authorizations, including selection of any of the features
described below, shall continue in effect until such time as a written
revocation or modification has been received by the Fund or its agent.
Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares or to request an exchange of
any or all of your shares into another mutual fund in the Delaware Group,
subject to the same conditions and limitations as other exchanges noted
above. The request must be signed by all owners of the account or your
investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not
sent to the shareholder(s) at the address of record, the Fund requires a
signature by all owners of the account and may require a signature
guarantee. Each signature guarantee must be supplied by an eligible
guarantor institution. The Fund reserves the right to reject a signature
guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from
corporations, executors, retirement plans, administrators, trustees or
guardians.
Payment is normally mailed the next business day after receipt of
your redemption request. Certificates are issued for shares only if you
submit a specific request. If your shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
You also may submit your written request for redemption or exchange
by facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without
charge) for you. If you choose to have your shares in certificate form,
you may redeem or exchange only by written request and you must return
your certificate(s).
The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do
not wish to have such services available with respect to your account.
The Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be
difficult to reach the Fund by telephone during periods when market or
economic conditions lead to an unusually large volume of telephone
requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions
for redemption or exchange of Fund shares which are reasonably believed to
be genuine. With respect to such telephone transactions, the Fund will
follow reasonable procedures to confirm that instructions communicated by
telephone are genuine (including verification of a form of personal
identification) as, if it does not, the Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent transactions. A
written confirmation will be provided for all purchase, exchange and
redemption transactions initiated by telephone. By exchanging shares by
telephone, you are acknowledging prior receipt of a prospectus for the
fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds
of $50,000 or less mailed to you at your record address. Checks will be
payable to the shareholder(s) of record. Payment is normally mailed the
next business day after receipt of the redemption request.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have
your signature guaranteed. For your protection, your authorization must
be on file. If you request a wire, your funds will normally be sent the
next business day. If you ask for a check, it will normally be mailed the
next business day after receipt of your redemption request to your
predesignated bank account. There are no fees for this redemption method,
but the mail time may delay getting funds into your bank account. Simply
call your Client Services Representative prior to the time the net asset
value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the
written exchange service, telephone exchanges are subject to the same
conditions and limitations as other exchanges noted above. Telephone
exchanges may be subject to limitations as to amounts or frequency.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to declare and pay dividends monthly. Distributions
from net realized securities profits, if any, will be distributed twice a
year. The first payment normally would be made during the first quarter
of the next fiscal year. The second payment would be made near the end of
the calendar year to comply with certain requirements of the Internal
Revenue Code (the "Code"). Both dividends and distributions, if any, are
automatically reinvested in your account at net asset value.
Each Class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the Class will not incur
distribution fees under the Rule 12b-1 Plans which, absent any applicable
fee waiver, apply to Retirement Income Fund A Class, Retirement Income
Fund B Class and Retirement Income Fund C Class.
TAXES
The tax discussion set forth below is included for general
information only. Investors should consult their own tax advisers
concerning the federal, state, local or foreign tax consequences of an
investment in the Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping changes
in the Code. Because many of these changes are complex, and only
indirectly affect the Fund and its distributions to you, they are
discussed in Part B. Changes in the treatment of capital gains, however,
are discussed in this section.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. As such, the Fund will not be subject to
federal income tax, or to any excise tax, to the extent its earnings are
distributed as provided in the Code and by satisfying certain other
requirements relating to the sources of its income and diversification
of its assets.
The Fund intends to distribute substantially all of its net
investment income and net capital gains, if any. Dividends from net
investment income or net short-term capital gains will be taxable to those
investors who are subject to income taxes as ordinary income, even though
received in additional shares. For the period December 2, 1997 (date of
initial sale) through November 30, 1997, 14% of the Fund's dividends from
net investment income qualified for the corporate dividends-received
deduction.
Distributions paid by the Fund from long-term capital gains, received
in additional shares, are taxable to those investors who are subject to
income taxes as long-term capital gains, regardless of the length of time
an investor has owned shares in the Fund. The Fund does not seek to
realize any particular amount of capital gains during a year; rather,
realized gains are a by-product of Fund management activities.
Consequently, capital gains distributions may be expected to vary
considerably from year to year. Also, for those investors subject to tax,
if purchases of shares in the Fund are made shortly before the record date
for a dividend or capital gains distribution, a portion of the investment
will be returned as a taxable distribution.
The Treatment of Capital Gain Distributions under the Taxpayer Relief Act
of 1997
The 1997 Act creates a category of long-term capital gain for
individuals that will be taxed at new lower tax rates. For investors who
are in the 28% or higher federal income tax brackets, these gains will be
taxed at a maximum of 20%. For investors who are in the 15% federal
income tax bracket, these gains will be taxed at a maximum of 10%.
Capital gain distributions will qualify for these new maximum tax rates,
depending on when the Fund's securities were sold and how long they were
held by the Fund before they were sold. Investors who want more
information on holding periods and other qualifying rules relating to
these new rates should review the expanded discussion in Part B, or should
contact their own tax advisers.
Equity Funds V, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain
distributions which will qualify for these maximum federal tax rates.
Although dividends generally will be treated as distributed when
paid, dividends which are declared in October, November or December to
shareholders of record on a specified date in one of those months, but
which, for operational reasons, may not be paid to the shareholder until
the following January, will be treated for tax purposes as if paid by the
Fund and received by the shareholder on December 31 of the calendar year
in which they are declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss
may be realized from an ordinary redemption of shares or an exchange of
shares between the Fund and any other fund in the Delaware Group. Any
loss incurred on a sale or exchange of Fund shares that had been held for
six months or less will be treated as a long-term capital loss to the
extent of capital gain dividends received with respect to such shares.
The Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities.
In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes. For example,
distributions of interest income and capital gains realized from certain
types of U.S. government securities may be exempt from state personal
income taxes. Because investors' state and local taxes may be different
than the federal taxes described above, investors should consult their own
tax advisers.
Each year, Equity Funds V, Inc. will mail to you information on the
tax status of the Fund's dividends and distributions. Shareholders will
also receive each year information as to the portion of dividend income,
if any, that is derived from U.S. government securities that are exempt
from state income tax. Of course, shareholders who are not subject to tax
on their income would not be required to pay tax on amounts distributed to
them by the Fund.
Equity Funds V, Inc. is required to withhold 31% of taxable
dividends, capital gains distributions, and redemptions paid to
shareholders who have not complied with IRS taxpayer identification
regulations. You may avoid this withholding requirement by certifying on
your Investment Application your proper Taxpayer Identification Number and
by certifying that you are not subject to backup withholding.
See Accounting and Tax Issues and Distributions and Taxes in Part B
for additional information on tax matters relating to the Fund and its
shareholders.
CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of Class shares is the net asset
value ("NAV") per share of the Class next computed after the order is
received. The NAV is computed as of the close of regular trading on the
New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when
the Exchange is open.
The NAV per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities (expenses and
fees are accrued daily) and dividing by the number of shares outstanding.
Portfolio securities for which market quotations are available are priced
at market value. Foreign securities expressed in foreign currency values
will be converted into U.S. dollar values at the mean between the
currencies' bid and offered quotations. Debt securities are priced on the
basis of valuations provided by an independent pricing service using
methods approved by Equity Funds V, Inc.'s Board of Directors. Short-term
investments having a maturity of less than 60 days are valued at amortized
cost, which approximates market value. All other securities are valued at
their fair value as determined in good faith and in a method approved by
Equity Funds V, Inc.'s Board of Directors.
The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share based
on the proportionate participation in the Fund represented by the value of
shares of that class. All income earned and expenses incurred by the Fund
will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Fund represented by the value of
shares of such classes, except that the Class will not incur any of the
expenses under the Fund's 12b-1 Plans and Retirement Income Fund A, B and
C Classes alone will bear the 12b-1 Plan fees payable under their
respective Plans.
MANAGEMENT OF THE FUND
Directors
The business and affairs of Equity Funds V, Inc. are managed under
the direction of its Board of Directors. Part B contains additional
information regarding Equity Funds V, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On November 30, 1997, the Manager and its
affiliates within the Delaware Group, including Delaware International
Advisers Ltd., were managing in the aggregate more than $39 billion in
assets in the various institutional or separately managed (approximately
$23,274,532,000) and investment company (approximately $16,181,491,000)
accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH
and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH and the Manager are now indirect, wholly
owned subsidiaries, and subject to the ultimate control, of Lincoln
National. Lincoln National, with headquarters in Fort Wayne, Indiana, is
a diversified organization with operations in many aspects of the
financial services industry, including insurance and investment
management.
The Manager manages the Fund's portfolio and makes investment
decisions for the Fund, which are implemented by the Fund's Trading
Department. The Manager also administers Equity Funds V, Inc.'s affairs
and pays the salaries of all the directors, officers and employees of
Equity Funds V, Inc. who are affiliated with the Manager. For these
services, the Manager is paid an annual fee equal to 0.65% on the first
$500 million of average daily net assets, 0.625% on the next $500 million
and 0.60% on the average daily net assets in excess of $1 billion.
Investment management fees incurred by the Fund for the fiscal year ended
November 30, 1997 were 0.65% of average daily net assets and no fees
were paid due to the voluntary waiver of fees by the Manager. The
directors of Equity Funds V, Inc. annually review fees paid to the Manager.
Babak Zenouzi oversees the Fund's asset allocation strategy and has
primary responsibility for making day-to-day investment decisions for the
Fund's investments in income generating equity securities. Mr. Zenouzi, a
Vice President/Portfolio Manager of Equity Funds V, Inc., has been a
member of the Fund's management team since its inception. Mr. Zenouzi
holds a BS in Finance and Economics from Babson College in Wellesley,
Massachusetts, and an MS in Finance from Boston College. Prior to joining
the Manager in 1992, he was with The Boston Company where he held the
positions of assistant vice president, senior financial analyst, financial
analyst and portfolio accountant.
Gerald T. Nichols has primary responsibility for making day-to-day
investment decisions for the Fund regarding its investments in debt
securities. Mr. Nichols, a Vice President/Senior Portfolio Manager of
Equity Funds V, Inc., has been a member of the Fund's management team
since its inception. Mr. Nichols is a graduate of the University of
Kansas, where he received a BS in Business Administration and an MS in
Finance. Prior to joining the Manager, he was a high yield credit analyst
at Waddell & Reed, Inc. and subsequently the investment officer for a
private merchant banking firm. He is a CFA charterholder.
Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time
they have been held. The degree of portfolio activity will affect
brokerage costs of the Fund and may affect taxes payable by the Fund's
shareholders. Given the Fund's investment objective, its annual portfolio
turnover rate is not expected to exceed 100%. A turnover rate of 100%
would occur, for example, if all the investments in the Fund's portfolio
at the beginning of the year were replaced by the end of the year.
The Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed
with brokers or dealers who provide brokerage and research services to the
Manager or to their advisory clients. These services may be used by the
Manager in servicing any of its accounts. Subject to best price and
execution, the Fund may consider a broker/dealer's sales of Fund shares in
placing portfolio orders and may place orders with broker/dealers that
have agreed to defray certain Fund expenses such as custodian fees.
Performance Information
From time to time, the Fund may quote yield or total return
performance of the Class in advertising and other types of literature.
The current yield for the Class will be calculated by dividing the
annualized net investment income earned by the Class during a recent 30-
day period by the net asset value per share on the last day of the period.
The yield formula provides for semi-annual compounding, which assumes that
net investment income is earned and reinvested at a constant rate and
annualized at the end of a six-month period.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value. Each
presentation will include the average annual total return for one-, five-
and ten-year or life-of-fund periods, as relevant. The Fund may also
advertise aggregate and average total return information concerning the
Class over additional periods of time.
Yield and net asset value fluctuate and are not guaranteed. Past
performance is not a guarantee of future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent
following all transactions other than those involving a reinvestment of
dividends. You should examine statements and confirmations immediately
and promptly report any discrepancy by calling your Client Services
Representative.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information
about the Fund's investments and performance. Equity Funds V, Inc.'s
fiscal year ends on November 30.
Distribution and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement with
Equity Funds V, Inc. dated as of November 29, 1996. The Distributor bears
all of the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund
under an amended and restated agreement dated as of November 29, 1996.
The Transfer Agent also provides accounting services to the Fund pursuant
to the terms of a separate Fund Accounting Agreement. Certain
recordkeeping and other shareholder services that otherwise would be
performed by the Transfer Agent may be performed by certain other entities
and the Transfer Agent may elect to enter into an agreement to pay such
other entities for their services. In addition, participant account
maintenance fees may be assessed for certain recordkeeping services
provided as part of retirement plan and administration service packages.
These fees are based on the number of participants in the plan and the
various services selected. Fees will be quoted upon request and are
subject to change.
The directors of Equity Funds V, Inc. annually review service fees
paid to the Distributor and the Transfer Agent. The Distributor and
the Transfer Agent are also indirect, wholly owned subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those
borne by the Distributor under the Distribution Agreement. For the fiscal
year ended November 30, 1997, the ratio of operating expenses to average
daily net assets for the Class was 0.75%, which reflects the voluntary
waiver of fees by the Manager.
Shares
Equity Funds V, Inc. is an open-end management investment company.
The Fund's portfolio of assets is diversified as defined by the 1940 Act.
Commonly known as a mutual fund, Equity Funds V, Inc. was organized as a
Maryland corporation on January 16, 1987. In addition to the Fund, Equity
Funds V, Inc. presently offers one other series of shares, the Small Cap
Value Fund series.
Equity Funds V, Inc.'s shares have a par value of $.01, equal voting
rights, except as noted below, and are equal in all other respects.
Equity Funds V, Inc.'s shares have noncumulative voting rights which means
that the holders of more than 50% of Equity Funds V, Inc.'s shares voting
for the election of directors can elect 100% of the directors if they
choose to do so. Under Maryland law, Equity Funds V, Inc. is not
required, and does not intend, to hold annual meetings of shareholders
unless, under certain circumstances, it is required to do so under the
1940 Act. Shareholders of 10% or more of Equity Funds V, Inc.'s
outstanding shares may request that a special meeting be called to
consider the removal of a director.
In addition to the Class, the Fund also offers Retirement Income Fund
A Class, Retirement Income Fund B Class and Retirement Income Fund C
Class. Shares of each class represent proportionate interests in the
assets of the Fund and have the same voting and other rights and
preferences as the other classes of the Fund, except that shares of the
Class are not subject to, and may not vote on matters affecting, the
Distribution Plans under Rule 12b-1 relating to Retirement Income Fund A
Class, Retirement Income Fund B Class and Retirement Income Fund C Class.
Lincoln National Corporation Employees' Retirement Trust (the
"Trust") has made an investment in the Fund. As a result, as of December
31, 1997, the Trust owns 100% of the outstanding shares of the Fund.
Subject to certain limited exceptions, there are no limitations on the
Trust's ability to redeem its shares of the Fund and it may elect to do so
at any time.
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
U.S. Government Securities
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies
and U.S. government sponsored instrumentalities may or may not be backed
by the full faith and credit of the United States. In the case of
securities not backed by the full faith and credit of the United States,
investors in such securities look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency or instrumentality does not meet its
commitment. Agencies which are backed by the full faith and credit of the
United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, the Federal Housing Administration, the Maritime
Administration, the Small Business Administration, and others. Certain
agencies and instrumentalities, such as the Government National Mortgage
Association ("GNMA"), are, in effect, backed by the full faith and credit
of the United States through provisions in their charters that they may
make "indefinite and unlimited" drawings on the Treasury, if needed to
service its debt. Debt from certain other agencies and instrumentalities,
including the Federal Home Loan Bank and Federal National Mortgage
Association, are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S.
Treasury to purchase certain amounts of their securities to assist the
institutions in meeting their debt obligations. Finally, other agencies
and instrumentalities, such as the Farm Credit System, the Tennessee
Valley Authority and the Federal Home Loan Mortgage Corporation, are
federally chartered institutions under U.S. government supervision, but
their debt securities are backed only by the creditworthiness of those
institutions, not the U.S. government.
An instrumentality of a U.S. government agency is a government agency
organized under Federal charter with government supervision.
Instrumentalities issuing or guaranteeing securities include, among
others, Federal Home Loan Banks, the Federal Land Banks, Central Bank for
Cooperatives, Federal Intermediate Credit Banks and the Federal National
Mortgage Association.
The maturities of such securities usually range from three months to
thirty years. While such securities are guaranteed as to principal and
interest by the U.S. government or its instrumentalities, their market
values may fluctuate and are not guaranteed, which may, along with the
other securities in the Fund's portfolio, cause the Class' daily net asset
value to fluctuate.
Brady Bonds
Among the foreign fixed-income securities in which the Fund may
invest are Brady Bonds. Brady Bonds are debt securities issued under the
framework of the Brady Plan, an initiative announced by former U.S.
Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor
nations to restructure their outstanding external indebtedness (generally
commercial bank debt). Brady Bonds are not direct or indirect obligations
of the U.S. government or any of its agencies or instrumentalities and are
not guaranteed by the U.S. government or any of its agencies or
instrumentalities. In so restructuring its external debt, a debtor nation
negotiates with its existing bank lenders, as well as multilateral
institutions such as the World Bank and the International Monetary Fund,
to exchange its commercial bank debt for newly issued bonds (Brady Bonds).
The Manager believes that economic reforms undertaken by countries in
connection with the issuance of Brady Bonds make the debt of countries
which have issued or have announced plans to issue Brady Bonds an
attractive opportunity for investment. Investors, however, should
recognize that the Brady Plan only sets forth general guiding principles
for economic reform and debt reduction, emphasizing that solutions must be
negotiated on a case-by-case basis between debtor nations and their
creditors. In addition, Brady Bonds have been issued only recently and,
accordingly, do not have a long payment history.
Foreign Government Securities
With respect to investment in debt issues of foreign governments,
including Brady Bonds, the ability of a foreign government or government-
related issuer to make timely and ultimate payments on its external debt
obligations will also be strongly influenced by the issuer's balance of
payments, including export performance, its access to international
credits and investments, fluctuations in interest rates and the extent of
its foreign reserves. A country whose exports are concentrated in a few
commodities or whose economy depends on certain strategic imports could be
vulnerable to fluctuations in international prices of these commodities or
imports. If foreign government or government-related issuers cannot
generate sufficient earnings from foreign trade to service its external
debt, they may need to depend on continuing loans and aid from foreign
governments, commercial banks and multilateral organizations, and inflows
of foreign investment. The commitment on the part of these foreign
governments, multilateral organizations and others to make such
disbursements may be conditioned on the government's implementation of
economic reforms and/or economic performance and the timely service of its
obligations. Failure to implement such reforms, achieve such levels of
economic performance or repay principal or interest when due may curtail
the willingness of such third parties to lend funds, which may further
impair the issuer's ability or willingness to service its debts in a
timely manner. The cost of servicing external debt generally will also be
adversely affected by rising international interest rates because many
external debt obligations bear interest at rates which are adjusted based
upon international interest rates. The ability to service external debt
will also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency
devaluations may affect the ability of a government issuer to obtain
sufficient foreign exchange to service its external debt. If a foreign
governmental issuer defaults on its obligations, the Fund may have limited
legal recourse against the issuer and/or guarantor.
Zero Coupon Bonds and Pay-In-Kind Bonds
Although the Fund does not intend to purchase a substantial amount of
zero coupon bonds or PIK bonds, from time to time, the Fund may acquire
zero coupon bonds and, to a lesser extent, PIK bonds. Zero coupon bonds
are debt obligations which do not entitle the holder to any periodic
payments of interest prior to maturity or a specified date when the
securities begin paying current interest, and therefore are issued and
traded at a discount from their face amounts or par value. PIK bonds pay
interest through the issuance to holders of additional securities. Zero
coupon bonds and PIK bonds are generally considered to be more interest-
sensitive than income bearing bonds, to be more speculative than interest-
bearing bonds, and to have certain tax consequences which could, under
certain circumstances, be adverse to the Fund. For example, with zero
coupon bonds, the Fund accrues, and is required to distribute to
shareholders, income on such bonds. However, the Fund may not receive the
cash associated with this income until the bonds are sold or mature. If
the Fund did not have sufficient cash to make the required distribution of
accrued income, the Fund could be required to sell other securities in its
portfolio or to borrow to generate the cash required.
Borrowings
The Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Fund will not borrow money in
excess of one-third of the value of its net assets. The 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 the 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%, the 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%. The Fund will not pledge more than 10%
of its net assets, or issue senior securities as defined in the 1940 Act,
except for notes to banks. Investment securities will normally not be
purchased while the Fund has an outstanding borrowing.
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and
delivery taking place in the future in order to secure what is considered
to be an advantageous yield or 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 and the interest rates that will be received are each
fixed at the time the Fund enters into the commitment and no interest
accrues to the Fund until settlement. Thus, it is possible that the
market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors.
The major risk to which the Fund would be exposed on a loan
transaction is the risk that the borrower would become bankrupt at a time
when the value of the security goes up. Therefore, the Fund will only
enter into loan arrangements after a review of all pertinent facts by the
Manager, subject to overall supervision by the Board of Directors,
including the creditworthiness of the borrowing broker, dealer or
institution and then only if the consideration to be received from such
loans would justify the risk. Creditworthiness will be monitored on an
ongoing basis by the Manager.
Rule 144A Securities
The Fund may invest in restricted securities, including privately
placed securities, some of which may be eligible for resale without
registration pursuant to Rule 144A ("Rule 144A Securities") under the
Securities Act of 1933. Rule 144A permits many privately placed and
legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than
15% of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day function of determining whether or not
individual Rule 144A Securities are liquid for purposes of the Fund's 15%
limitation on investments in illiquid securities. The Board has
instructed the Manager to consider the following factors in determining
the liquidity of a Rule 144A Security: (i) the frequency of trades and
trading volume for the security; (ii) whether at least three dealers are
willing to purchase or sell the security and the number of potential
purchasers; (iii) whether at least two dealers are making a market in the
security; (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result,
the Fund's holdings of illiquid securities exceed the Fund's 15% limit on
investments in such securities, the Manager will determine what action to
take to ensure that the Fund continues to adhere to such limitation.
Investment Company Securities
Any investments that the Fund makes in either closed-end or open-end
investment companies will be limited by the 1940 Act, and would involve an
indirect payment of a portion of the expenses, including advisory fees, of
such other investment companies. Under the 1940 Act's current
limitations, the Fund may not (1) own more than 3% of the voting stock of
another investment company; (2) invest more than 5% of the Fund's total
assets in the shares of any one investment company; nor (3) invest more
than 10% of the Fund's total assets in shares of other investment
companies. If the Fund elects to limit its investment in other investment
companies to closed-end investment companies, the 3% limitation described
above is increased to 10%. These percentage limitations also apply to the
Fund's investments in unregistered investment companies.
Repurchase Agreements
In order to invest its short-term cash reserves or when in a
temporary defensive posture, the Fund may enter into repurchase agreements
with banks or broker/dealers deemed to be creditworthy by the Manager,
under guidelines approved by the Board of Directors. A repurchase
agreement is a short-term investment in which the purchaser (i.e. the
Fund) 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. Generally,
repurchase agreements are of short duration, often less than one week but
on occasion for longer periods. Not more than 15% of the Fund's assets
may be invested in repurchase agreements of over seven days' maturity or
other illiquid assets. Should an issuer of a repurchase agreement fail to
repurchase the underlying security, the loss to the Fund, if any, would be
the difference between the repurchase price and the market value of the
security. The Fund will limit its investments in repurchase agreements to
those which the Manager under guidelines of the Board of Directors
determines to present minimal credit risks and which are of high quality.
In addition, the Fund must have collateral of at least 100% of the
repurchase price, including the portion representing the Fund's yield
under such agreements, which is monitored on a daily basis.
Foreign Currency Transactions
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund will, however, from time to time,
purchase or sell foreign currencies and/or engage in forward foreign
currency transactions in order to expedite settlement of portfolio
transactions and to minimize currency value fluctuations. The Fund may
conduct its foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market
or through entering into contracts to purchase or sell foreign currencies
at a future date (i.e., a "forward foreign currency" contract or "forward"
contract). A forward contract involves an obligation to purchase or sell
a specific currency at a future date, which may be any fixed number of
days from the date of the contract, agreed upon by the parties, at a price
set at the time of the contract. The Fund will convert currency on a spot
basis from time to time, and investors should be aware of the costs of
currency conversion.
The Fund may enter into forward contracts to "lock in" the price of a
security it has agreed to purchase or sell, in terms of U.S. dollars or
other currencies in which the transaction will be consummated. By
entering into a forward contract for the purchase or sale, for a fixed
amount of U.S. dollars or foreign currency, of the amount of foreign
currency involved in the underlying security transaction, the Fund will be
able to protect itself against a possible loss resulting from an adverse
change in currency exchange rates during the period between the date the
security is purchased or sold and the date on which payment is made or
received.
When the Manager believes that the currency of a particular country
may suffer a significant decline against the U.S. dollar or against
another currency, the Fund may enter into a forward foreign currency
contract 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.
At 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. With respect to forward foreign currency
contracts, the precise matching of forward contract amounts and the value
of the securities involved is generally not possible since the future
value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between
the date the forward contract is entered into and the date it matures.
The projection of short-term currency strategy is highly uncertain.
It is impossible to forecast the market value of Fund securities at
the expiration of the contract. Accordingly, it may be necessary for the
Fund to purchase additional foreign currency on the spot market (and bear
the expense of such purchase) if the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver and
if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the sale of a security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver.
Options
The Manager may employ options techniques in an attempt to protect
appreciation attained and to increase shareholder return by seeking to
take advantage of the liquidity available in the options market. The Fund
may purchase call options on foreign or U.S. securities and indices and
enter into related closing transactions and the Fund may write covered
call options on such securities. The Fund may also purchase put options
on such securities and indices and enter into related closing
transactions.
A call option enables the purchaser, in return for the premium paid,
to purchase securities from the writer of the option at an agreed price up
to an agreed date. A covered call option obligates the writer, in return
for the premium received, to sell the securities subject to the option to
the purchaser of the option for an agreed upon price up to an agreed date.
The advantage is that the purchaser may hedge against an increase in the
price of securities it ultimately wishes to buy or take advantage of a
rise in a particular index. The Fund will only purchase call options to
the extent that premiums paid on all outstanding call options do not
exceed 2% of its total assets. The Fund may write covered call options in
an amount not to exceed 10% of its total assets.
A put option enables the purchaser of the option, in return for the
premium paid, to sell the security underlying the option to the writer at
the exercise price during the option period, and the writer of the option
has the obligation to purchase the security from the purchaser of the
option. The Fund will only purchase put options to the extent that the
premiums on all outstanding put options do not exceed 2% of its total
assets. The advantage is that the purchaser can be protected should the
market value of the security decline or should a particular index decline.
An option on a securities index gives the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash
equal to the difference between the closing price of the index and the
exercise price of the option.
Closing transactions essentially let the Fund offset put options or
call options prior to exercise or expiration. If the Fund cannot effect
closing transactions, it may have to hold a security it would otherwise
sell or deliver a security it might want to hold.
In purchasing put and call options, the premium paid by the Fund plus
any transaction costs will reduce any benefit realized by the Fund upon
exercise of the option. With respect to writing covered call options, the
Fund may lose the potential market appreciation of the securities subject
to the option, if the Manager's judgment is wrong and the price of the
security moves in the opposite direction from what was anticipated.
The Fund may use both Exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Fund will only
invest in such options to the extent consistent with its 15% limitation on
investment in illiquid securities. The Fund will comply with Securities
and Exchange Commission asset segregation and coverage requirements when
engaging in these types of transactions.
Futures
Futures contracts are agreements for the purchase or sale for future
delivery of securities. When a futures contract is sold, the Fund incurs
a contractual obligation to deliver the securities underlying the contract
at a specified price on a specified date during a specified future month.
A purchase of a futures contract means the acquisition of a contractual
right to obtain delivery to the Fund of the securities called for by the
contract at a specified price during a specified future month.
While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally terminated by
entering into an offsetting transaction. When the Fund enters into a
futures transaction, it must deliver to the futures commission merchant
selected by the Fund an amount referred to as "initial margin." This
amount is maintained by the futures commission merchant in a segregated
account. Thereafter, a "variation margin" may be paid by the Fund to, or
drawn by the Fund from, such account in accordance with controls set for
such account, depending upon changes in the price of the underlying
securities subject to the futures contract.
The Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities 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
actually to purchase or sell the futures contract, at a specified exercise
price at any time during the period of the option.
The purpose of the purchase or sale of futures contracts with respect
to a certain security is to protect the Fund against the adverse effects
of fluctuations in interest rates without actually buying or selling that
security. Similarly, when it is expected that interest rates may decline,
futures contracts may be purchased to hedge in anticipation of subsequent
purchases of securities at higher prices.
Foreign currency futures contracts operate similarly to futures
contracts related to securities. When the Fund sells a futures contract
on a foreign currency it is obligated to deliver that foreign currency at
a specified future date. Similarly, a purchase by the Fund gives it a
contractual right to receive a foreign currency. This enables the Fund to
"lock-in" exchange rates.
APPENDIX A--RATINGS
The Fund's assets may be invested in securities rated BBB or lower by
S&P or Fitch, Baa or lower by Moody's, in securities similarly rated by
another nationally recognized statistical rating organization, and in
unrated securities that are deemed by the Manager to be comparable in
quality to similar rated securities. Credit ratings evaluate only the
safety of principal, interest and dividends and do not consider the market
value risk associated with high-yield securities.
General Rating Information
Bonds and Convertible Securities
Excerpts from Moody'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; Ba--judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over
any long period of time may be small; Caa--are of poor standing. Such
issues may be in default or there may be present elements of danger with
respect to principal or interest; Ca--represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings; C--the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Excerpts from S&P'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; BB, B, CCC, CC--
regarded, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms
of the obligation. BB indicates the lowest degree of speculation and CC
the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D- -in default, and
payment of interest and/or repayment of principal is in arrears.
Excerpts from Fitch'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 than 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; BB--Bonds are considered speculative. The
obligor's ability to pay interest and repay principal may be affected over
time by adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in
satisfying its debt service requirements; B--Bonds are considered highly
speculative. While bonds in this class are currently meeting debt service
requirements, the probability of continued timely payment of principal and
interest reflects the obligor's limited margin of safety and the need for
reasonable business and economic activity throughout the life of the
issue; CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment; CC--Bonds are minimally
protected. Default in payment of interest and/or principal seems probable
over time; C--Bonds are in imminent default in payment of interest or
principal; and DDD, DD and D--Bonds are in default on interest and/or
principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. "DDD" represents the highest potential for
recovery on these bonds, and "D" represents the lowest potential for
recovery.
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.
Preferred Stock
The following are excerpts from S&P's description of its preferred
stock ratings:
An S&P preferred stock rating is an assessment of the capacity and
willingness of an issuer to pay preferred stock dividends and any
applicable sinking fund obligations. A preferred stock rating differs
from a bond rating inasmuch as it is assigned to an equity issue, which
issue is intrinsically different from, and subordinated to, a debt issue.
Therefore, to reflect this difference, the preferred stock rating symbol
will normally not be higher than the debt rating symbol assigned to, or
that would be assigned to, the senior debt of the same issuer.
The preferred stock ratings are based on the following
considerations:
1. Likelihood of payment--capacity and willingness of the issuer
to meet the timely payment of preferred stock dividends and any applicable
sinking fund requirements in accordance with the terms of the obligation.
2. Nature of, and provisions of, the issue.
3. Relative position of the issue in the event of bankruptcy,
reorganization, or other arrangements affecting creditors' rights.
AAA This is the highest rating that may be assigned by S&P to a
preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA A preferred stock issue rated "AA" also qualifies as a high-quality
fixed-income security. The capacity to pay preferred
stock obligations is very strong, although not as
overwhelming as for issues rated "AAA."
A An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB An issue rated "BBB" is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to make payments
for a preferred stock in this category than for issues in
the "A" category.
BB, B, CCC Preferred stocks rated "BB," "B" and "CCC" are regarded, on
balance, as predominantly speculative with respect to the issuer's
capacity to pay preferred stock obligations. "BB" indicates the
lowest degree of speculation and "CCC" the highest degree
of speculation. While such issues will likely have some
quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures
to adverse conditions.
CC The rating "CC" is reserved for a preferred stock issue in arrears
on dividends or sinking fund payments but that is
currently paying.
C A preferred stock rated "C" is a non-paying issue.
D A preferred stock rated "D" is a non-paying issue with the issuer in
default on debt instruments.
NR indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligations as a matter of policy.
Plus (+) or Minus (-) To provide more detailed indications of
preferred stock quality, the ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
The following are excerpts from Moody's description of its preferred
stock ratings:
"aaa" An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset
protection and the least risk of dividend impairment
within the universe of preferred stocks.
"aa" An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable
assurance the earnings and asset protection will remain
relatively well-maintained in the foreseeable future.
"a" An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be
somewhat greater than in the "aaa" and "aa"
classification, earnings and asset protection are,
nevertheless, expected to be maintained at adequate
levels.
"baa" An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither high protected nor poorly
secured. Earnings and asset protection appear adequate
at present but may be questionable over any great length
of time.
"ba" An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well
assured. Earnings and asset protection may be very
moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in
this class.
"b" An issue which is rated "b" generally lacks the characteristics of
a desirable investment. Assurance of dividend payments
and maintenance of other terms of the issue over any long
period of time may be small.
"caa" An issue which is rated "caa" is likely to be in arrears on
dividends payments. This rating designation does not
purport to indicate the future status of payments.
"ca" An issue which is rated "ca" is speculative in a high degree and
is likely to be in arrears on dividends with little
likelihood of eventual payments.
"c" This is the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
For more information contact the Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
RETIREMENT INCOME FUND
INSTITUTIONAL
P R O S P E C T U S
FEBRUARY 3, 1998
DELAWARE
GROUP
PART B--STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 3, 1998
DELAWARE GROUP EQUITY FUNDS V, INC.
1818 Market Street
Philadelphia, PA 19103
For more information about the Institutional Classes: 800-828-5052
For Prospectus and Performance of the Class A Shares, Class B Shares and
Class C Shares:: Nationwide 800-523-4640
Information on Existing Accounts of the Class A Shares, Class B Shares and
Class C Shares: (SHAREHOLDERS ONLY) Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
TABLE OF CONTENTS
Cover Page
Investment Policies and Portfolio Techniques
Accounting and Tax Issues
Performance Information
Trading Practices and Brokerage
Purchasing Shares
Investment Plans
Determining Offering Price and
Net Asset Value
Redemption and Repurchase
Distributions and Taxes
Investment Management Agreements
Officers and Directors
Exchange Privilege
General Information
Appendix A--IRA Information
Appendix B--The Company Life Cycle
Financial Statements
Delaware Group Equity Funds V, Inc. ("Equity Funds V, Inc.") (formerly
Delaware Group Value Fund, Inc.) is a professionally-managed mutual fund
of the series type which currently offers two series of portfolios: the
Small Cap Value Fund series ("Small Cap Value Fund") (formerly Value Fund
series) and the Retirement Income Fund series ("Retirement Income Fund")
(individually a "Fund", and collectively, the "Funds").
Each Fund of Equity Funds V, Inc. offers three retail classes: Small
Cap Value Fund A Class and Retirement Income Fund A Class (the "Class A
Shares"); Small Cap Value Fund B Class and Retirement Income Fund B (the
"Class B Shares"); and Small Cap Value Fund C Class and Retirement Income
Fund C Class (the "Class C Shares"). Class A Shares, Class B Shares and
Class C Shares are collectively referred to as the "Fund Classes." Each
Fund also offers an institutional class: Small Cap Value Fund
Institutional Class and Retirement Income Fund Institutional Class (the
"Institutional Classes"). Each class is individually referred to as a
"Class" and collectively referred to as "Classes."
Class B Shares, Class C Shares and Institutional Class shares of a Fund
may be purchased at a price equal to the next determined net asset value
per share. Class A Shares may be purchased at the public offering price,
which is equal to the next determined net asset value per share, plus a
front-end sales charge. Class A Shares are subject to a maximum front-end
sales charge of 4.75% and, absent any applicable fee waiver, annual Rule
12b-1 Plan ("12b-1 Plan") expenses of up to 0.30%. Class B Shares are
subject to a contingent deferred sales charge ("CDSC") which may be
imposed on redemptions made within six years of purchase and, absent any
applicable fee waiver, annual 12b-1 Plan expenses of up to 1%, which are
assessed against Class B Shares for approximately eight years after
purchase. See Automatic Conversion of Class B Shares under Classes of
Shares in the Fund Classes' Prospectuses. Class C Shares are subject to a
CDSC which may be imposed on redemptions made within 12 months of purchase
and, absent any applicable fee waiver, annual 12b-1 Plan expenses of up to
1%, which are assessed against the Class C Shares for the life of the
investment. Retirement Income Fund will not pay a 12b-1 fee with respect
to any Class until May 31, 1998.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current
Prospectuses for the Fund Classes dated February 3, 1998, as they may be
amended from time to time. Part B should be read in conjunction with the
respective Class' Prospectus. Part B is not itself a prospectus but is,
in its entirety, incorporated by reference into each Class' Prospectus. A
prospectus relating to the Fund Classes and a prospectus relating to the
Institutional Classes may be obtained by writing or calling your
investment dealer or by contacting the Fund's national distributor,
Delaware Distributors, L.P. (the "Distributor"), 1818 Market Street,
Philadelphia, PA 19103.
All references to "shares" in this Part B refer to all Classes of
shares of Equity Funds V, Inc., except where noted.
INVESTMENT POLICIES AND PORTFOLIO TECHNIQUES
Investment Restrictions--Small Cap Value Fund has adopted the following
restrictions which, along with its investment objective, cannot be changed
without approval by the holders of a "majority" of the Fund's outstanding
shares, which is a vote by the holders of the lesser of a) 67% or more of
the voting securities of the Fund 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 of the Fund. The percentage limitations
contained in the restrictions and policies set forth herein apply at the
time of purchase of securities.
The Small Cap Value 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 the
Fund's investment objective and policies, are considered loans and except
that the Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
4. Purchase or sell real estate but this shall not prevent the 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, the 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 the Fund may write covered call options with respect to any or all
parts of its portfolio securities and purchase put options if the 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. The Fund may sell put options previously purchased and
enter into closing transactions with respect to covered call and put
options. In addition, the 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 the Fund's net assets. Included in that amount, but not to exceed 2%
of the Fund's net assets, may be warrants not listed on the New York Stock
Exchange or American Stock Exchange.
12. Purchase or retain the securities of any issuer which has an
officer, director or security holder who is a director or officer of the
Fund or of its investment manager if or so long as the directors and
officers of the Fund and of its investment manager together own
beneficially more than 5% of any class of securities of such issuer.
13. Invest in interests in oil, gas or other mineral exploration or
development programs.
14. Invest more than 10% of the Fund's net assets in repurchase
agreements maturing in more than seven days and other illiquid assets.
15. Borrow money in excess of one-third of the value of its net
assets and then only as a temporary measure for extraordinary purposes or
to facilitate redemptions. The 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 the 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%, the 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%.
The Fund will not pledge more than 10% of its net assets. The 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 the Fund has an outstanding
borrowing.
Small Cap Value Fund has a policy, which may not be changed without
shareholder approval, that it will not invest in commodities; however, the
Fund reserves the right to invest in financial futures and options
thereon, including stock index futures, to the extent these instruments
are considered commodities.
In addition, although not a fundamental investment restriction, Small
Cap Value Fund currently does not invest its assets in real estate limited
partnerships.
Retirement Income Fund has adopted the following restrictions which
cannot be changed without approval by the holders of a "majority" of the
Fund's outstanding shares, which is a vote by the holders of the lesser of
a) 67% or more of the voting securities of the Fund 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 of the Fund. The percentage
limitations contained in the restrictions and policies set forth herein
apply at the time of purchase of securities.
Retirement Income Fund shall not:
1. With respect to 75% of its total assets, invest more than 5% of
the value of its assets in 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) or purchase more than 10% of the outstanding voting
securities of any one company.
2. Invest in securities of other investment companies, except that
the Fund may invest in securities of open-end, closed-end and unregistered
investment companies, in accordance with the limitations contained in the
1940 Act.
3. Make loans, except to the extent that purchases of debt
obligations (including repurchase agreements), in accordance with the
Fund's investment objectives and policies, are considered loans and except
that the Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
4. Purchase or sell real estate. This restriction shall not
preclude the Fund's purchase of securities issued by real estate
investment trusts, the purchase of securities issued by companies that
deal in real estate, or the investment in securities secured by real
estate or interests therein.
5. Invest in companies for the purpose of exercising control or
management.
6. Engage in the underwriting of securities of other issuers, except
that the Fund may acquire restricted or not readily marketable securities
under circumstances where, if such securities are sold, the Fund might be
deemed to be an underwriter for purposes of the Securities Act of 1933
("1933 Act").
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 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. Buy or sell commodities or commodity contracts, except that the
Fund may invest in financial futures and options thereon, including stock
index futures, to the extent these instruments are considered commodities.
9. Invest in interests in oil, gas or other mineral exploration or
development programs.
10. Purchase securities on margin, except that the Fund may satisfy
margin requirements with respect to futures transactions.
11. Borrow money in excess of one-third of the value of its net
assets and then only as a temporary measure for extraordinary purposes or
to facilitate redemptions. The 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 the 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%, the 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%.
The Fund shall not issue senior securities as defined by the 1940 Act,
except for notes to banks. Investment securities will not normally be
purchased while the Fund has an outstanding borrowing.
In addition to the above fundamental investment restrictions,
Retirement Income Fund has the following investment restrictions which may
be amended or changed without approval of shareholders.
1. Retirement Income Fund will not purchase or retain securities of a
company which has an officer or director who is an officer or director of
Equity Funds V, Inc., or an officer, director or partner of Delaware
Management Company, Inc. (the "Manager") if, to the knowledge of the Fund,
one or more of such persons beneficially owns more than 1/2 of 1% of the
shares of the company, and in the aggregate more than 5% thereof.
2. Other than securities of real estate investment trusts, Retirement
Income Fund will not invest in the securities of companies which have a
record of less than three years' continuous operation, including any
predecessor company or companies, if such investment at the time of
purchase would cause more than 5% of the Fund's total assets to be
invested in the securities of such company or companies.
In addition, from time to time, the Funds may also engage in the
following investment techniques:
Repurchase Agreements
A repurchase agreement is a short-term investment by which the
purchaser acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby
determining the yield during the purchaser's holding period. Should an
issuer of a repurchase agreement fail to repurchase the underlying
security, the loss to the Funds, if any, would be the difference between
the repurchase price and the market value of the security. Each Fund will
limit its investments in repurchase agreements to those which the Manager,
under the guidelines of the Board of Directors, determines to present
minimal credit risks and which are of high quality. In addition, each
Fund must have collateral of at least 102% of the repurchase price,
including the portion representing such Fund's yield under such agreements
which is monitored on a daily basis. While the Funds are permitted to do
so, they normally do not invest in repurchase agreements, except to invest
cash balances.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow
the Delaware Group 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.
Portfolio Loan Transactions
Each Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of the Manager that the staff of the Securities
and Exchange Commission permits portfolio lending by registered investment
companies if certain conditions are met. These conditions are as follows:
1) each transaction must have 100% collateral in the form of cash, short-
term U.S. government securities, or irrevocable letters of credit payable
by banks acceptable to a Fund from the borrower; 2) this collateral must
be valued daily and should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund; 3)
the Fund must be able to terminate the loan after notice, at any time; 4)
the Fund must receive reasonable interest on any loan, and any dividends,
interest or other distributions on the lent securities, and any increase
in the market value of such securities; 5) the Fund may pay reasonable
custodian fees in connection with the loan; and 6) the voting rights on
the lent securities may pass to the borrower; however, if the directors of
Equity Funds V, Inc. know that a material event will occur affecting a
loan, they must either terminate the loan in order to vote the proxy or
enter into an alternative arrangement with the borrower to enable the
directors to vote the proxy.
The major risk to which a Fund would be exposed on a loan transaction
is the risk that a borrower would go bankrupt at a time when the value of
the security goes up. Therefore, each Fund will only enter into loan
arrangements after a review of all pertinent facts by the Manager, under
the supervision of the Board of Directors, including the creditworthiness
of the borrowing broker, dealer or institution and then only if the
consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the Manager.
Non-Traditional Equity Securities
Retirement Income 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.
Retirement Income 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.
* * *
Restricted Securities
Each Fund may invest in restricted securities, including unregistered
securities eligible for resale without registration pursuant to Rule 144A
("Rule 144A Securities") under the 1933 Act. Rule 144A Securities may be
freely traded among qualified institutional investors without registration
under the 1933 Act. All of the Funds' option activities will be engaged
in a manner that is consistent with the Securities and Exchange
Commission's position concerning segregation of assets with a Fund's
custodian bank.
Investing in Rule 144A Securities could have the effect of increasing
the level of a Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. After the purchase of a Rule 144A Security, however, the
Board of Directors and the Manager will continue to monitor the liquidity
of that security to ensure that Small Cap Value Fund has no more than 10%
and Retirement Income Fund has no more than 15% of their respective net
assets invested in illiquid securities.
Options
Small Cap Value Fund may write call options and purchase put options on
a covered basis only, and will not engage in option writing strategies for
speculative purposes. Retirement Income Fund may purchase call and put
options and write call options on a covered basis only. The Funds will
not engage in option strategies for speculative purposes.
A. Covered Call Writing--Small Cap Value 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 that Fund's
investment objective. Retirement Income Fund may write covered call
options in an amount not to exceed 10% of its total assets. 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 the Fund receives additional income, in the
form of a premium, which may offset any capital loss or decline in market
value of the security. 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
the Funds and options on stock indices, the Funds may enter into closing
purchase transactions. A closing purchase transaction is one in which a
Fund, when obligated as a writer of an option, terminates its obligation
by purchasing an option of the same series as the option previously
written.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security
from being called, to permit the sale of the underlying security or to
enable a Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both. A Fund may
realize a net gain or loss from a closing purchase transaction depending
upon whether the net amount of the original premium received on the call
option is more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase transaction may be
partially or entirely offset by the premium received from a sale of a
different call option on the same underlying security. Such a loss may
also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting
from a closing purchase transaction could be offset in whole or in part by
a decline in the market value of the underlying security.
If a call option expires unexercised, a Fund will realize a short-term
capital gain in the amount of the premium on the option, less the
commission paid. Such a gain, however, may be offset by depreciation in
the market value of the underlying security during the option period. If
a call option is exercised, a Fund will realize a gain or loss from the
sale of the underlying security equal to the difference between the cost
of the underlying security, and the proceeds of the sale of the security
plus the amount of the premium on the option, less the commission paid.
The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.
A Fund will write call options only on a covered basis, which means
that the Fund will own the underlying security subject to a call option at
all times during the option period or securities convertible or
exchangeable into the securities subject to the call option at no
additional consideration or a Fund owns a call option on the relevant
securities with an exercise price no higher than the exercise price on the
call option written or subject to any regulatory restrictions, an amount
of cash or liquid high grade debt obligations at least equal to the
current underlying securities. 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 Call Options--Retirement Income Fund may purchase call
options in an amount not to exceed 2% of its total assets. When
Retirement Income Fund purchases a call option, in return for a premium
paid by the Fund to the writer of the option, the Fund obtains the right
to buy the security underlying the option at a specified exercise price at
any time during the term of the option. The advantage of purchasing call
options is that the Fund may alter its portfolio's characteristics and
modify portfolio maturities without incurring the cost associated with
portfolio transactions.
Retirement Income Fund may, following the purchase of a call option,
liquidate its position by effecting a closing sale transaction. This is
accomplished by selling an option of the same series as the option
previously purchased. The Fund will realize a profit from a closing sale
transaction if the price received on the transaction is more than the
premium paid to purchase the original call option; the Fund will realize a
loss from a closing sale transaction if the price received on the
transaction is less than the premium paid to purchase the original call
option. There is no assurance, however, that a liquid secondary market on
an exchange will exist for any particular option, or at any particular
time, and for some options no secondary market on an exchange may exist.
In such event, it may not be possible to effect closing transactions in
particular options, with the result that the Fund would have to exercise
its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of
such options. Further, unless the price of the underlying security
changes sufficiently, a call option purchased by the Fund may expire
without any value to the Fund.
C. Purchasing Put Options--Each Fund may invest up to 2% of its total
assets in the purchase of put options. The Funds will, at all times
during which they hold a put option, own the security covered by such
option.
The Funds intend to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise
price less the premium paid for the option ("protective puts"). The
ability to purchase put options will allow the Funds to protect an
unrealized gain in an appreciated security in their portfolios without
actually selling the security. If the security does not drop in value,
the Funds will lose the value of the premium paid. Each 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.
The Funds 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 a Fund on transactions in stock index options
will depend on price movements in the stock market generally (or in a
particular industry or segment of the market) rather than price movements
of individual securities.
As with stock options, the Funds may offset their positions in stock
index options prior to expiration by entering into closing transactions,
on an Exchange or they may let the options 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 (R) Composite Stock Price Index ("S&P
500") or the New York Stock Exchange Composite Index, or a narrower market
index such as the Standard & Poor's 100 ("S&P 100"). Indices are also
based on an industry or market segment such as the AMEX Oil and Gas Index
or the Computer and Business Equipment Index. Options on stock indices
are currently traded on the following Exchanges among others: The Chicago
Board Options Exchange, New York Stock Exchange and American Stock
Exchange.
The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in
a Fund's portfolio correlate with price movements of the stock index
selected. Because the value of an index option depends upon movements in
the level of the index rather than the price of a particular stock,
whether a Fund will realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the level of stock prices in
the stock market generally or, in the case of certain indices, in an
industry or market segment, rather than movements in the price of a
particular stock. Since each 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. Accordingly, successful use by the Funds of options
on stock indices will be subject to the Manager's ability to predict
correctly movements in the direction of the stock market generally or of a
particular industry. This requires different skills and techniques than
predicting changes in the price of individual stocks.
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. Each Fund will enter into an option
position only if there appears to be a liquid secondary market for such
options.
The Funds 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,
Small Cap Value Fund will not invest more than 25% of the value of its
total assets, at the time of purchase, in foreign securities (other than
securities of Canadian issuers registered under the Securities Exchange
Act of 1934 or American Depositary Receipts, on which there are no such
limits). Retirement Income Fund may, in addition to investing in
securities of foreign companies, invest in foreign government securities.
No more than 20% of the value of Retirement Income Fund's total assets, at
the time of purchase, will be invested in foreign securities (other than
securities of Canadian issuers registered under the Securities Exchange
Act of 1934 or American 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 the Funds by United States corporations.
Investors should recognize that investing in foreign corporations
involves certain considerations, including those set forth below, which
are not typically associated with investing in United States corporations.
Foreign corporations are not generally subject to uniform accounting,
auditing and financial standards and requirements comparable to those
applicable to United States corporations. There may also be less
supervision and regulation of foreign stock exchanges, brokers and listed
corporations than exist in the United States. The Funds may be affected
either unfavorably or favorably by fluctuations in the relative rates of
exchange as between the currencies of different nations and control
regulations. Furthermore, there may be the possibility of expropriation
or confiscatory taxation, political, economic or social instability or
diplomatic developments which could affect assets of the Funds held in
foreign countries.
The Funds will, from time to time, conduct 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). Investors should be
aware that there are costs and risks associated with such currency
transactions. The Funds 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.
When the Manager believes that the currency of a particular foreign
country may suffer a decline against the U.S. dollar or against another
currency, a Fund may enter into a forward 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 that Fund's
securities denominated in such foreign currency. It is impossible to
predict precisely the market value of portfolio securities at the
expiration of the forward contract. Accordingly, it may be necessary for
a Fund to purchase or sell additional foreign currency on the spot market
(and bear the expense of such purchase or sale) if the market value of the
security is less than or greater than the amount of foreign currency the
Fund is obligated to deliver.
The Funds may incur gains or losses from currency transactions. No
type of foreign currency transaction will eliminate fluctuations in the
prices of the Funds' foreign securities or will prevent loss if the prices
of such securities should decline.
Each Fund's Custodian for its foreign securities is The Chase Manhattan
Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245.
Futures and Options on Futures
Retirement Income Fund may enter into contracts for the purchase or
sale for future delivery of securities. While futures contracts provide
for the delivery of securities, deliveries usually do not occur.
Contracts are generally terminated by entering into an offsetting
transaction. When Retirement Income Fund enters into a futures
transaction, it must deliver to the futures commission merchant selected
by the Fund an amount referred to as "initial margin." This amount is
maintained by the futures commission merchant in an account at the Fund's
Custodian Bank. Thereafter, a "variation margin" may be paid by the Fund
to, or drawn by the Fund from, such account in accordance with controls
set for such account, depending upon changes in the price of the
underlying securities subject to the futures contract.
Retirement Income Fund may enter into such futures contracts to protect
against the adverse effects of fluctuations in interest rates without
actually buying or selling securities. For example, if interest rates are
expected to increase, the Fund might enter into futures contracts for the
sale of debt securities. Such a sale would have much the same effect as
selling an equivalent value of the debt securities owned by the Fund. If
interest rates did increase, the value of the debt securities in the
portfolio would decline, but the value of the futures contracts to the
Fund would increase at approximately the same rate, thereby keeping the
net asset value of the Fund from declining as much as it otherwise would
have. Similarly, when it is expected that interest rates may decline,
futures contracts may be purchased to hedge in anticipation of subsequent
purchases of securities at higher prices. Because the fluctuations in the
value of futures contracts should be similar to those of debt securities,
the Fund could take advantage of the anticipated rise in value of debt
securities without actually buying them until the market had stabilized.
At that time, the futures contracts could be liquidated and the Fund could
then buy debt securities on the cash market.
With respect to options on futures contracts, when the Fund is not
fully invested, it may purchase a call option on a futures contract to
hedge against a market advance due to declining interest rates. The
purchase of a call option on a futures contract is similar in some
respects to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the price of the
futures contract upon which it is based, or the price of the underlying
debt securities, it may or may not be less risky than ownership of the
futures contract or underlying debt securities.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security which is
deliverable upon exercise of the futures contract. If the futures price
at the expiration of the option is below the exercise price, the Fund will
retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's holdings.
The writing of a put option on a futures contract constitutes a partial
hedge against the increasing price of the security which is deliverable
upon exercise of the futures contract. If the futures price at the
expiration of the option is higher than the exercise price, the Fund will
retain the full amount of option premium which provides a partial hedge
against any increase in the price of securities which the Fund intends to
purchase.
If a put or call option that the Fund has written is exercised, the
Fund will incur a loss which will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in
the value of its portfolio securities and changes in the value of its
futures positions, the Fund's losses from existing options on futures may,
to some extent, be reduced or increased by changes in the value of
portfolio securities. The purchase of a put option on a futures contract
is similar in some respects to the purchase of protective puts on
portfolio securities. For example, the Fund will purchase a put option on
a futures contract to hedge the Fund's securities against the risk of
rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Fund may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize a loss. For example, if the
Fund is hedged against the possibility of an increase in interest rates
which would adversely affect the price of securities held in its portfolio
and interest rates decrease instead, the Fund will lose part or all of the
benefit of the increased value of its securities which it has because it
will have offsetting losses in its futures position. In addition, in such
situations, if the Fund had insufficient cash, it may be required to sell
securities from its portfolio to meet daily variation margin requirements.
Such sales of securities may, but will not necessarily, be at increased
prices which reflect the rising market. The Fund may be required to sell
securities at a time when it may be disadvantageous to do so.
Further, with respect to options on futures contracts, the Fund may
seek to close out an option position by writing or buying an offsetting
position covering the same securities or contracts and have the same
exercise price and expiration date. The ability to establish and close
out positions on options will be subject to the maintenance of a liquid
secondary market, which cannot be assured.
High-Yield, High Risk Securities
Investing in so-called "high-yield" or "high risk" securities entails
certain risks, including the risk of loss of principal, which may be
greater than the risks involved in investment grade securities, and which
should be considered by investors contemplating an investment in the
Funds. Such securities are sometimes issued by companies whose earnings
at the time of issuance are less than the projected debt service on the
high-yield securities. The risks include the following:
A. Youth and Volatility of the High-Yield Market--Although the market
for high-yield securities has been in existence for many years, including
periods of economic downturns, the high-yield market grew rapidly during
the long economic expansion which took place in the United States during
the 1980s. During that economic expansion, the use of high-yield debt
securities to fund highly leveraged corporate acquisitions and
restructurings increased dramatically. As a result, the high-yield market
grew substantially during that economic expansion. Although experts
disagree on the impact recessionary periods have had and will have on the
high-yield market, some analysts believe a protracted economic downturn
would severely disrupt the market for high-yield securities, would
adversely affect the value of outstanding bonds and would adversely affect
the ability of high-yield issuers to repay principal and interest. Those
analysts cite volatility experienced in the high-yield market in the past
as evidence for their position. It is likely that protracted periods of
economic uncertainty would result in increased volatility in the market
prices of high-yield securities, an increase in the number of high-yield
bond defaults and corresponding volatility in a Fund's net asset value.
Small Cap Value Fund will not ordinarily purchase securities rated
below B by Moody's and S&P. However, it may do so if the Manager believes
that capital appreciation is likely. Small Cap Value Fund will not invest
more than 25% of its assets in such securities. While Retirement Income
Fund will not invest more than 45% of its assets in high-yield, high risk
debt securities, it has the authority to invest up to all of its net
assets in lower rated securities, which would include income generating
equity securities such as convertible securities and preferred stocks.
B. Liquidity and Valuation--The secondary market for high-yield
securities is currently dominated by institutional investors, including
mutual funds and certain financial institutions. There is generally no
established retail secondary market for high-yield securities. As a
result, the secondary market for high-yield securities is more limited and
less liquid than other secondary securities markets. The high-yield
secondary market is particularly susceptible to liquidity problems when
the institutions which dominate it temporarily cease buying such
securities for regulatory, financial or other reasons, such as the savings
and loan crisis. A less liquid secondary market may have an adverse
effect on a Fund's ability to dispose of particular issues, when
necessary, to meet a Fund's liquidity needs or in response to a specific
economic event, such as the deterioration in the creditworthiness of the
issuer. In addition, a less liquid secondary market makes it more
difficult for a Fund to obtain precise valuations of the high-yield
securities in its portfolio. During periods involving such liquidity
problems, judgment plays a greater role in valuing high-yield securities
than is normally the case. The secondary market for high-yield securities
is also generally considered to be more likely to be disrupted by adverse
publicity and investor perceptions than the more established secondary
securities markets. Privately placed high-yield securities are
particularly susceptible to the liquidity and valuation risks outlined
above.
C. Legislative and Regulatory Action and Proposals--There are a
variety of legislative actions which have been taken or which are
considered from time to time by the United States Congress which could
adversely affect the market for high-yield bonds. For example,
Congressional legislation limited the deductibility of interest paid on
certain high-yield bonds used to finance corporate acquisitions. Also,
Congressional legislation has, with some exceptions, generally prohibited
federally-insured savings and loan institutions from investing in high-
yield securities. Regulatory actions have also affected the high-yield
market. For example, many insurance companies have restricted or
eliminated their purchases of high-yield bonds as a result of, among other
factors, actions taken by the National Association of Insurance
Commissioners. If similar legislative and regulatory actions are taken in
the future, they could result in further tightening of the secondary
market for high-yield issues and could reduce the number of new high-yield
securities being issued.
Short Sales
Retirement Income Fund may make short sales in an attempt to protect
against market declines. Typically, short sales are transactions in which
the Fund sells a security it does not own in anticipation of a decline in
the market value of that security. At the time a short sale is effected,
the Fund incurs an obligation to replace the security borrowed at whatever
its price may be at the time the Fund purchases it for delivery to the
lender. The price at such time may be more or less than the price at
which the security was sold by the Fund. When a short sale transaction is
closed out by delivery of the security, any gain or loss on the
transaction is taxable as short-term capital gain or loss. Until the
security is replaced, the Fund is required to pay to the lender amounts
equal to any dividends or interest which accrue during the period of the
loan. To borrow the security, the Fund also may be required to pay a
premium, which would increase the cost of the security sold. The proceeds
of the short sale will be retained by the broker, to the extent necessary
to meet margin requirements, until the short position is closed out.
Until the Fund replaces a borrowed security in connection with a short
sale, the Fund will be required to maintain daily a segregated account,
containing cash or U.S. government securities, at such a level that (i)
the amount deposited in the account plus the amount deposited with the
broker as collateral will at all times be equal to at least 100% of the
current value of the security sold short, and (ii) the amount deposited in
the segregated account plus the amount deposited with the broker as
collateral will not be less than the market value of the security at the
time it was sold short.
The Fund will incur a loss as a result of a short sale if the price of
the security sold short increases between the date of the short sale and
the date on which the Fund replaces the borrowed security; conversely, the
Fund will realize a gain if the security declines in price between those
dates. This result is the opposite of what one would expect from a cash
purchase of a long position in a security. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any
premium or amounts in lieu of interest the Fund may be required to pay in
connection with a short sale.
In addition to the short sales discussed above, the Fund also may make
short sales "against the box," a transaction in which the Fund enters into
a short sale of a security which the Fund owns. The proceeds of the short
sale are held by a broker until the settlement date, at which time the
Fund delivers the security to close the short position. The Fund receives
the net proceeds from the short sale.
The ability of the Fund to effect short sales may be limited because of
certain requirements the Fund must satisfy to maintain its status as a
regulated investment company. See Accounting and Tax Issues - Other Tax
Requirements.
ACCOUNTING AND TAX ISSUES
When the 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
the Fund has written expires on its stipulated expiration date, the Fund
reports a realized gain. If the 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 the 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 the 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 the 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 the 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 the 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 capital gain or loss for tax purposes.
Such options held by the Fund at the end of each fiscal year will be
required to be marked to market for federal income tax purposes. Sixty
percent of any net gain or loss recognized on such deemed sales or on any
actual sales will be treated as long-term capital gain or loss, and the
remainder will be treated as short-term capital gain or loss.
Other Tax Requirements--Each Fund intends 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 investment company taxable income and net tax-exempt income for
each of its fiscal years, and
(iv) The Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other
assets that have been held by the Fund for less than three months ("short-
short income"). The Taxpayer Relief Act of 1997 (the "1997 Act") repealed
the 30% short-short income test for tax years of regulated investment
companies beginning after August 5, 1997; however, this rule may have
continuing effect in some states for purposes of classifying the Fund as a
regulated investment company.
The Code requires 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 November 30 (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 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 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 for federal income tax purposes, rather
than as an ordinary dividend or capital gain distribution. If a
distribution is treated as a return of capital, your tax basis in your
Fund shares will be reduced by a like amount (to the extent of such
basis), and any excess of the distribution over your tax basis in your
Fund shares will be treated as capital gain to you.
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 at fiscal year end (and at calendar year end for
excise tax purposes) an adjustment that reflects the difference between
the spot rates recorded for each transaction and the year-end average
exchange rate for all of 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 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 its average annual compounded total 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 of its Classes over additional
periods of time. The net asset value of a Class fluctuates so shares,
when redeemed, may be worth more or less than the original investment, and
a Class' results should not be considered as representative of future
performance.
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 Prospectus 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 Class A Shares and the Institutional Class of Small
Cap Value Fund, as shown below, is the average annual total return through
November 30, 1997 computed as described above. The average annual total
return for Class A Shares at offer reflects the maximum front-end sales
charge of 4.75% 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 Small Cap Value Fund Institutional Class for the
periods prior to the commencement of operations of such Class is
calculated by taking the performance of Small Cap Value Fund Class A
Shares and adjusting it to reflect the elimination of all sales charges.
However, for those periods, no adjustment has been made to eliminate the
impact of 12b-1 payments, and performance would have been affected had
such an adjustment been made.
Average Annual Total Return
Small Cap Value Fund Small Cap Value Fund Small Cap Value Fund
A Class A Class Institutional
(at Offer)(2) (at NAV) Class(3)
1 year
ended
11/30/97 29.88% 36.38% 36.73%
3 years
ended
11/30/97 23.04% 25.04% 25.41%
5 years
ended
11/30/97 16.50% 17.65% 18.00%
10 years
ended
11/30/97 19.28% 19.87% 20.18%
Period
6/24/87(1)
through
11/30/97 16.06% 16.61% 16.71%
(1) Date of initial public offering of Small Cap Value Fund A Class.
(2) Prior to November 29, 1995, the maximum front-end sales charge was
5.75%. Effective November 29, 1995, the maximum front-end sales charge
was reduced to 4.75% and the above performance figures are calculated
using 4.75% as the applicable sales charge, and are more favorable than
they would have been had they been calculated using 5.75%.
(3) Date of initial public offering of Small Cap Value Fund
Institutional Class was November 9, 1992.
The performance of Class B Shares of Small Cap Value Fund, as shown
below, is the average annual total return quotation through November 30,
1997. The average annual total return for Class B Shares and Class C
Shares including deferred sales charge reflects the deduction of the
applicable CDSC that would be paid if the shares were redeemed at November
30, 1997. The average annual total return for Class B Shares and Class C
Shares excluding deferred sales charge assumes the shares were not
redeemed at November 30, 1997 and therefore does not reflect the deduction
of a CDSC.
Average Annual Total Return
Small Cap Value Fund B Class Small Cap Value Fund B Class
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
1 year
ended
11/30/97 31.36% 35.36%
3 years
ended
11/30/97 23.50% 24.15%
Period
9/6/94(1)
through
11/30/97 19.74% 20.36%
(1) Date of initial public offering of Small Cap Value Fund B Class.
Average Annual Total Return
Small Cap Value Fund C Class Small Cap Value Fund C Class
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)
1 year
ended
11/30/97 34.40% 35.40%
Period
11/29/95(1)
through
11/30/97 27.14% 27.14%
(1) Date of initial public offering of Small Cap Value Fund C Class.
The performance of Class A Shares and the Institutional Class of
Retirement Income Fund, as shown below, is the average annual total return
for the period December 2, 1997 (date of initial public offering) through
November 30, 1997 computed as described above. The average annual total
return for Class A Shares at offer reflects the maximum front-end sales
charge of 4.75% 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. Class B Shares and Class C Shares
have not commenced operation as of the date of this Part B, therefore
total return is not provided for these Classes.
Aggregate Total Return(1)
Retirement
Income Fund Retirement Income Fund Retirement Income Fund
A Class A Class Institutional
(at Offer)(2) (at NAV)(2) Class
Period
12/2/96(3)
through
11/30/97 31.80% 38.31% 38.19%
(1) Delaware Management Company, Inc. has elected voluntarily to waive
that portion, if any, of the annual management fees payable by the Fund
and to pay certain expenses of the Fund to the extent necessary to ensure
that the Total Operating Expenses of each Class of the Fund does not
exceed 0.75% (in each case, exclusive of taxes, interest, brokerage
commissions and extraordinary expenses and applicable 12b-1 expenses)
through May 31, 1998. In the absence of such waiver, performance would
have been affected negatively.
(2) Delaware Distributors, L.P. has elected voluntarily to waive its
right to receive 12b-1 Plan fees (including service fees) from the
commencement of the public offering of Class A Shares of the Fund through
May 31, 1998. In the absence of such waiver, performance would have been
affected negatively.
(3) Date of initial public offering; total return for this short of a
time period may not be representative of longer term results.
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance.
Retirement Income Fund may also quote the current yield of each of its
Classes in advertisements and investor communications.
The yield computation is determined by dividing the net investment
income per share earned during the period by the maximum offering price
per share on the last day of the period and annualizing the resulting
figure, according to the following formula.
a-b 6
YIELD = 2[( ---- + 1) - 1]
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends;
d = the maximum offering price per share on the last day of
the period.
The above formula will be used in calculating quotations of yield,
based on specific 30-day periods identified in advertising by Retirement
Income Fund. Yield assumes the maximum front-end sales charge, if any,
and does not reflect the deduction of any CDSC or Limited CDSC. Actual
yield may be affected by variations in sales charges on investments.
Past performance, such as reflected in quoted yields, should not be
considered as representative of the results which may be realized from
an investment in any class of the Funds in the future. Investors should
note that the income earned and dividends paid by Retirement Income Fund
will vary with the fluctuation of interest rates and performance of the
portfolio to the extent of a Fund's investments in debt securities.
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 thta 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 fudns. Morningstar, Inc. is a mutual fund rating service that
rates mutual funds on the basis of risk-adjusted performance. Ranking
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 seeking its investment objective, Small Cap Value Fund's portfolio
primarily includes common stocks considered by the Manager to be more
aggressive than those tracked by these indices.
Total return performance of each Class will be computed by adding
all reinvested income and realized securities profits distributions plus
the change in net asset value during a specific period and dividing by
the offering price at the beginning of the period. It will not reflect
any income taxes payable by shareholders on the reinvested distributions
included in the calculation. Because securities prices fluctuate, past
performance should not be considered as a representation of the results
which may be realized from an investment in the Fund in the future.
In addition, the performance of multiple indices compiled and
maintained by statistical research firms, such as Salomon Borthers 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 the Funds 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. The Funds 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 the Funds. The Funds may also compare
performance to that of other compilations or indices that may be
developed and made available in the future.
The Funds may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that
describe general principles of investing, such as asset allocation,
diversification, risk tolerance, and goal setting, questionnaires
designed to help create a personal financial profile, worksheets used to
project savings needs based on assumed rates of inflation and
hypothetical rates of return and action plans offering investment
alternatives), investment management techniques, policies or investment
suitability of a Fund (such as value investing, market timing, dollar
cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments), economic and political
conditions, the relationship between sectors of the economy and the
economy as a whole, the effects of inflation and historical performance
of various asset classes, including but not limited to, stocks, bonds
and Treasury bills. From time to time advertisements, sales literature,
communications to shareholders or other materials may summarize the
substance of information contained in shareholder reports (including the
investment composition of a Fund), as well as the views as to current
market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related
matters believed to be of relevance to a Fund. In addition, selected
indices may be used to illustrate historic performance of selected asset
classes. The Funds may also include in advertisements, sales
literature, communications to shareholders or other materials, charts,
graphs or drawings which illustrate the potential risks and rewards of
investment in various investment vehicles, including but not limited to,
stocks, bonds, treasury bills and shares of a Fund. In addition,
advertisements, sales literature, communications to shareholders or
other materials may include a discussion of certain attributes or
benefits to be derived by an investment in a Fund and/or other mutual
funds, shareholder profiles and hypothetical investor scenarios, timely
information on financial management, tax and retirement planning ( such
as information on Roth IRAs and Educational 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 the Funds and may
illustrate how to find the listings of the Funds in newspapers and
periodicals. Materials may also include discussions of other Funds,
products, and services.
The Funds may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Funds may compare these
measures to those of other funds. Measures of volatility seek to
compare the historical share price fluctuations or total returns to
those of a benchmark. Measures of benchmark correlation indicate how
valid a comparative benchmark may be. Measures of volatility and
correlation may be calculated using averages of historical data. A Fund
may advertise its current interest rate sensitivity, duration, weighted
average maturity or similar maturity characteristics. Advertisements
and sales materials relating to a Fund may include information regarding
the background and experience of its portfolio managers.
The following tables are examples, for purposes of illustration only,
of cumulative total return performance for Class A Shares, Class B Shares,
Class C Shares and the Institutional Class of Small Cap Value Fund through
November 30, 1997. Cumulative total return performance for Class A Shares
and Institutional Class Shares of Retirement Income Fund through November
30, 1997 is also provided below. For these purposes, the calculations
assume the reinvestment of any realized securities profits distributions
and income dividends paid during the period, but does not reflect any
income taxes payable by shareholders on the reinvested distributions. The
performance of Class A Shares reflects the maximum front-end sales charge
paid on the purchase of shares but may also be shown without reflecting
the impact of any front-end sales charge. The performance of Class B
Shares and Class C Shares is calculated both with the applicable CDSC
included and excluded. Comparative information on the S&P 500 Stock
Index, the Dow Jones Industrial Average and the NASDAQ Composite Index is
also included. Past performance is no guarantee of future results.
Performance shown for short periods of time may not be representative of
longer term results.
Cumulative Total Return
Small Cap
Value Small Cap Standard
Fund Value Fund & Poor's Dow Jones NASDAQ
A Class(2) Institutional 500 Stock Industrial Composite
(at Offer) Class(3) Index(4) Average(4) Index(4)
3 months
ended
11/30/97 (0.57%) 4.47% 6.67% 3.09% 0.83%
6 months
ended
11/30/97 11.41.%(5) 17.13% 13.54% 7.63% 14.30%
9 months
ended
11/30/97 20.07% 26.32% 22.43% 15.30% 22.27%
1 year
ended
11/30/97 29.88% 36.73% 28.50% 22.20% 23.82%
3 years
ended
11/30/97 86.25% 97.22% 124.96% 123.86% 113.32%
5 years
ended
11/30/97 114.64% 128.82% 150.21% 167.92% 145.21%
10 years
ended
11/30/97 482.93% 521.56% 454.85% 478.79% 424.50%
Period
6/24/87(1)
through
11/30/97 373.45% 404.82% 325.84% 344.57% 276.89%
(1) Date of initial public offering of Small Cap Value Fund A Class.
(2) Prior to November 29, 1995, the maximum front-end sales charge was
5.75%. Effective November 29, 1995, the maximum front-end sales charge
was reduced to 4.75% and the above performance figures are calculated
using 4.75% as the applicable sales charge, and are more favorable than
they would have been had they been calculated using 5.75%.
(3) Date of initial public offering of Small Cap Value Fund
Institutional Class was November 9, 1992. Pursuant to applicable
regulation, total return shown for the Institutional Class for the periods
prior to the commencement of operations of such Class is calculated by
taking the performance of Class A Shares and adjusting it to reflect the
elimination of all sales charges. However, for those periods, no
adjustment has been made to eliminate the impact of 12b-1 payments, and
performance would have been affected had such an adjustment been made.
(4) Source: Lipper Analytical Services, Inc.
(5) For the six months ended November 30, 1997, cumulative total return
for Small Cap Value Fund A Class at net asset value was 16.96%.
Cumulative Total Return
Small Cap Value Small Cap Value
Fund B Class Fund B Class
(Including (Excluding Standard
Deferred Deferred & Poor's Dow Jones NASDAQ
Sales Sales 500 Stock Industrial Composite
Charge) Charge) Index(2) Average(2) Index(2)
3 months
ended
11/30/97 0.17% 4.17% 6.67% 3.09% 0.83%
6 months
ended
11/30/97 12.54% 16.54% 13.54% 7.63% 14.30%
9 months
ended
11/30/97 21.36% 25.36% 22.43% 15.30% 22.27%
1 year
ended
11/30/97 31.36% 35.36% 28.50% 22.20% 23.82%
3 years
ended
11/30/97 88.38% 91.38% 124.96% 123.86% 113.32%
Period
9/6/94(1)
through
11/30/97 79.13% 82.13% 116.23% 115.42% 109.05%
(1) Date of initial public offering of Small Cap Value Fund B Class.
(2) Source: Lipper Analytical Services, Inc.
Cumulative Total Return
Small Cap Small Cap
Value Value
Fund C Class Fund C Class Standard
(Including (Excluding & Poor's Dow Jones NASDAQ
Deferred Deferred 500 Stock Industrial Composite
Sales Charge) Sales Charge) Index (2) Average (2) Index (2)
3 months
ended
11/30/97 3.18% 4.18% 6.67% 3.09% 0.83%
6 months
ended
11/30/97 15.55% 16.55% 13.54% 7.63% 14.30%
9 months
ended
11/30/97 24.38% 25.38% 22.43% 15.30% 22.27%
1 year
ended
11/30/97 34.40% 35.40% 28.50% 22.20% 23.82%
Period
11/29/95(1)
through
11/30/97 61.87% 61.87% 64.29% 60.69% 51.11%
(1) Date of initial public offering of Small Cap Value Fund C Class.
(2) Source: Lipper Analytical Services, Inc.
Cumulative Total Return(1)
Retirement Retirement Standard
Income Fund Income Fund & Poor's Dow Jones NASDAQ
A Class(2) Institutional 500 Stock Industrial Composite
(at Offer) Class Index (4) Average (4) Index (4)
3 months
ended 11/30/97 1.74% 6.86% 6.67% 3.09% 0.83%
6 months
ended 11/30/97 13.37%(3) 18.92% 13.54% 7.63% 14.30%
9 months
ended 11/30/97 17.47% 23.31% 22.43% 15.30% 22.27%
Period
12/2/96
through
11/30/97 31.80% 38.19% 28.50% 22.20% 23.82%
(1) Delaware Management Company, Inc. has elected voluntarily to waive
that portion, if any, of the annual management fees payable by the Fund
and to pay certain expenses of the Fund to the extent necessary to ensure
that the Total Operating Expenses of each Class of the Fund does not
exceed 0.75% (in each case, exclusive of taxes, interest, brokerage
commissions, and extraordinary expenses and applicable 12b-1 expenses)
through May 31, 1998. In the absence of such waiver, performance would
have been affected negatively.
(2) Delaware Distributors, L.P. has elected voluntarily to waive its
right to receive 12b-1 Plan fees (including service fees) from the
commencement of the public offering of Class A Shares of the Fund through
May 31, 1998. In the absence of such waiver, performance would have been
affected negatively.
(3) For the six months ended November 30, 1997, cumulative total return
for Retirement Income Fund A Class at net asset value was 19.02%.
(4) Source: Lipper Analytical Services, Inc.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for each Fund and other mutual funds in the
Delaware Group, will provide general information about investment
alternatives and scenarios that will allow investors to assess their
personal goals. This information will include general material about
investing as well as materials reinforcing various industry-accepted
principles of prudent and responsible financial planning. One typical way
of addressing these issues is to compare an individual's goals and the
length of time the individual has to attain these goals to his or her risk
threshold. In addition, the Distributor will provide information that
discusses the Manager's overriding investment philosophy and how that
philosophy impacts a Fund's, and other Delaware Group funds', investment
disciplines employed in seeking their objectives. The Distributor may also
from time to time cite general or specific information about the
institutional clients of the Manager, including the number of such clients
serviced by the Manager.
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 Group 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 and Automatic Investing Plan under Investment Plans
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
- ------------------------------------------
$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 any stock or bond fund in the Delaware
Group of funds.
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. Each Fund may included illustrations
showing the power of compounding in advertisements and other types of
literature.
TRADING PRACTICES AND BROKERAGE
Each Fund selects brokers or dealers to execute transactions for the
purchase or sale of portfolio securities on the basis of its judgment of
their professional capability to provide the service. The primary
consideration is to have brokers or dealers execute transactions at best
price and execution. Best price and execution refers to many factors,
including the price paid or received for a security, the commission
charged, the promptness and reliability of execution, the confidentiality
and placement accorded the order and other factors affecting the overall
benefit obtained by the account on the transaction. A number of trades
are made on a net basis where a Fund either buys the securities directly
from the dealer or sells them to the dealer. In these instances, there is
no direct commission charged but there is a spread (the difference between
the buy and sell price) which is the equivalent of a commission. When a
commission is paid, a Fund pays reasonably competitive brokerage
commission rates based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions
throughout the securities industry. In some instances, a Fund pays a
minimal share transaction cost when the transaction presents no
difficulty.
During the fiscal years ended November 30, 1995, 1996 and 1997, the
aggregate dollar amounts of brokerage commissions paid by Small Cap Value
Fund were $384,243, $515,711 and $440,318, respectively. During the
period December 2, 1996 through November 30, 1997, the aggregate dollar
amount of brokerage commissions paid by Retirement Income Fund was $6,272.
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 November 30, 1997, portfolio transactions
of Small Cap Value Fund in the amount of $00,000,000, resulting in
brokerage commissions of $199,642, were directed to brokers for brokerage
and research services provided. For the period December 2, 1996 (date of
initial public offering) through November 30, 1997, portfolio transactions
of Retirement Income Fund in the amount of $000, resulting in brokerage
commissions of $000, 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, the Funds
believe that the commissions paid to such broker/dealers are not, in
general, higher than commissions that would be paid to broker/dealers not
providing such services and that such commissions are reasonable in
relation to the value of the brokerage and research services provided. In
some instances, services may be provided to the Manager which constitute
in some part brokerage and research services used by the Manager in
connection with its investment decision-making process and constitute in
some part services used by the Manager in connection with administrative
or other functions not related to its investment decision-making process.
In such cases, the Manager will make a good faith allocation of brokerage
and research services and will pay out of its own resources for services
used by the Manager in connection with administrative or other functions
not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who
provide daily portfolio pricing services to a Fund and to other funds in
the Delaware Group. Subject to best price and execution, commissions
allocated to brokers providing such pricing services may or may not be
generated by the funds receiving the pricing service.
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its
judgment, joint execution is in the best interest of each participant and
will result in best price and execution. Transactions involving
commingled orders are allocated in a manner deemed equitable to each
account or fund. When a combined order is executed in a series of
transactions at different prices, each account participating in the order
may be allocated an average price obtained from the executing broker. It
is believed that the ability of the accounts to participate in volume
transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of
orders could adversely affect the price or volume of the security that a
particular account or fund may obtain, it is the opinion of the Manager
and Equity Funds V, Inc.'s Board of Directors that the advantages of
combined orders outweigh the possible disadvantages of separate
transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price
and execution, the Funds may place orders with broker/dealers that have
agreed to defray certain expenses of the funds in the Delaware Group of
funds, such as custodian fees, and may, at the request of the Distributor,
give consideration to sales of shares of a 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. Each Fund is free to dispose of portfolio securities
at any time, subject to complying with the Code and the 1940 Act, 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 a Fund's investment objective.
Under certain market conditions, a Fund may experience high rates of
portfolio turnover which could exceed 100%. The portfolio turnover rate
of a Fund is calculated by dividing the lesser of purchases or sales of
portfolio securities for the particular fiscal year by the monthly average
of the value of the portfolio securities owned by the Fund during the
particular fiscal year, exclusive of securities whose maturities at the
time of acquisition are one year or less.
The degree of portfolio activity may affect brokerage costs of a Fund
and taxes payable by a Fund's shareholders to the extent of any net
realized capital gains. 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. Portfolio turnover will also be
increased if a Fund writes a large number of call options which are
subsequently exercised. 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.
In investing for capital appreciation, Small Cap Value Fund may hold
securities for any period of time.
During the past two fiscal years, Small Cap Value Fund's portfolio
turnover rates were 87% for 1996 and 53% for 1997. For the period
December 2, 1996 (date of initial public offering) through November 30,
1997, Retirement Income Fund's portfolio turnover rate was 196%.
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's four
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares
of each Fund. See the Prospectuses for information on how to invest.
Shares of each Fund are offered on a continuous basis and may be purchased
through authorized investment dealers or directly by contacting Equity
Funds V, Inc. or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases generally must be
at least $100. The initial and subsequent investment minimums for Class A
Shares will be waived for purchases by officers, directors and employees
of any Delaware Group 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
Group Asset Planner service are subject to a minimum initial investment of
$2,000 per Asset Planner Strategy selected. There are no minimum purchase
requirements for the Institutional Classes, but certain eligibility
requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an
amount that is less than $1,000,000. See Investment Plans for purchase
limitations applicable to retirement plans. Equity Funds V, Inc. will
reject any purchase order for more than $250,000 of Class B Shares and
$1,000,000 or more of Class C Shares. An investor may exceed these
limitations by making cumulative purchases over a period of time. An
investor should keep in mind, however, that reduced front-end sales
charges apply to investments of $100,000 or more in Class A Shares, and
that Class A Shares, absent any applicable fee waiver, 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 V, Inc. reserves the right to reject any order for the
purchase of its shares of either Fund if in the opinion of management such
rejection is in such Fund's best interest.
The NASD has adopted amendments to certain rules relating to investment
company sales charges. Equity Funds V, Inc. and the Distributor intend to
operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales
charges apply for larger purchases. See the table below. Class A Shares,
absent any applicable fee waivers, are also subject to annual 12b-1 Plan
expenses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii)
3% if shares are redeemed during the third or fourth year following
purchase; (iii) 2% if shares are redeemed during the fifth year following
purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class B Shares are also subject to annual 12b-1 Plan
expenses which, 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. 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. See Automatic Conversion of Class B Shares under Classes of Shares
in the Fund Classes' Prospectuses.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase.
Class C Shares, absent any applicable fee waivers, 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 Retirement Income Fund from the commencement of the
public offering through May 31, 1998.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales
charge, or 12b-1 Plan expenses. See Determining Offering Price and Net
Asset Value and Plans Under Rule 12b-1 for the Fund Classes in this Part
B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Fund's assets and will
receive a proportionate interest in that Fund's income, before
application, as to the Class A, Class B and Class C Shares, of any
expenses, if any, under that Fund's 12b-1 Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in
the case of Class B Shares or Class C Shares or in the case of any
retirement plan account including self-directed IRAs. However, purchases
not involving the issuance of certificates are confirmed to the investor
and credited to the shareholder's account on the books maintained by
Delaware Service Company, Inc. (the "Transfer Agent"). The investor will
have the same rights of ownership with respect to such shares as if
certificates had been issued. An investor that is permitted to obtain a
certificate may receive a certificate representing full share
denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is
assessed by Equity Funds V, Inc. for any certificate issued. A
shareholder may be subject to fees for replacement of a lost or stolen
certificate under certain conditions, including the cost of obtaining a
bond covering the lost or stolen certificate. Please contact the Funds
for further information. Investors who hold certificates representing any
of their shares may only redeem those shares by written request. The
investor's certificate(s) must accompany such request..
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A, Class B and Class C
Shares permit investors to choose the method of purchasing shares that is
most suitable for their needs given the amount of their purchase, the
length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge and, absent any applicable fee waiver,
annual 12b-1 Plan expenses of up to a maximum of 0.30% of the average
daily net assets of Class A Shares, or to purchase either Class B or Class
C Shares and have the entire initial purchase amount invested in a Fund
with the investment thereafter subject to a CDSC and, absent any
applicable fee waiver, annual 12b-1 Plan expenses.
Class A Shares - Small Cap Value Fund and Retirement Income Fund
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges and may include a series of
purchases over a 13-month period under a Letter of Intention signed by the
purchaser. See Front-End Sales Charge Alternative - Class A Shares in the
Prospectuses for the Fund Classes
for a table illustrating reduced front-end sales charge. See also Special
Purchase Features - Class A Shares, below for more information on ways in
which investors can avail themselves of reduced front-end sales charges
and other purchase features.
Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase
sales of Delaware Group funds may receive an additional commission of up
to 0.15% of the offering price in connection with sales of Class A Shares.
Such dealers must meet certain requirements in terms of organization and
distribution capabilities and their ability to increase sales. The
Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the
additional commission will be paid. Participating dealers may be deemed
to have additional responsibilities under the securities laws.
Dealer's Commission
As described more fully in the Prospectus for the Fund Classes, for
initial purchases of Class A Shares of $1,000,000 or more, a dealer's
commission may be paid by the Distributor to financial advisers through
whom such purchases are effected. See Front-End Sales Charge Alternative
- - Class A Shares in the Prospectuses for the Fund Classes for the
applicable schedule and further details.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B and Class C Shares are purchased without a front-end sales
charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth 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. See
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
under Redemption and Exchange in the Prospectuses for the Fund Classes for
a list of the instances in which the CDSC is waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares, absent any applicable
fee waivers, will still be subject to the annual 12b-1 Plan expenses of up
to 1% of average daily net assets of those shares. At the end of
approximately eight years after purchase, the investor's Class B Shares
will be automatically converted into Class A Shares of the same Fund. See
Automatic Conversion of Class B Shares under Classes of Shares in the Fund
Classes' Prospectuses. Such conversion will constitute a tax-free
exchange for federal income tax purposes. See Taxes in the Prospectuses
for the Fund Classes.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Equity Funds V, Inc. has
adopted a separate plan for each of the Class A Shares, the Class B Shares
and the Class C Shares of each Fund (the "Plans"). Each Plan permits 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 its 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 its Plans, and a
Fund's Distribution Agreement, is on an annual basis, 0.30% of the Class A
Shares' average daily net assets for the year, and 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 V, Inc.'s Board of Directors may reduce
these amounts at any time. The Distributor has elected voluntarily to
waive all payments under the 12b-1 Plan for the Class A Shares, Class B
Shares and Class C Shares of Retirement Income Fund during the
commencement of the public offering of the Fund through May 31, 1998.
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 its Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreements, as amended, have been
approved by the Board of Directors of Equity Funds V, Inc., including a
majority of the directors who are not "interested persons" (as defined in
the 1940 Act) of Equity Funds V, Inc. and who have no direct or indirect
financial interest in the Plans by vote cast in person at a meeting duly
called for the purpose of voting on the Plans and such Agreements.
Continuation of the Plans and the Distribution Agreements, as amended,
must be approved annually by the Board of Directors in the same manner as
specified above.
Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A
Shares, Class B Shares and Class C Shares and that there is a reasonable
likelihood of the Plan relating to a Fund Class providing a benefit to
that Class. The Plans and the Distribution Agreements, as amended, may be
terminated with respect to a class at any time without penalty by a
majority of those directors who are not "interested persons" or by a
majority vote of the outstanding voting securities of the relevant Fund
Class. Any amendment materially increasing the maximum percentage payable
under the Plans must likewise be approved by a majority vote of the
outstanding voting securities of the relevant Fund Class, as well as by a
majority vote of those directors who are not "interested persons." With
respect to the Class A Share Plan, any material increase in the maximum
percentage payable thereunder must also be approved by a majority of the
outstanding voting securities of the Class B Shares. Also, any other
material amendment to the Plans must be approved by a majority vote of the
directors including a majority of the noninterested directors of Equity
Funds V, Inc. having no interest in the Plans. In addition, in order for
the Plans to remain effective, the selection and nomination of directors
who are not "interested persons" of Equity Funds V, Inc. must be effected
by the directors who themselves are not "interested persons" and who have
no direct or indirect financial interest in the Plans. Persons authorized
to make payments under the Plans must provide written reports at least
quarterly to the Board of Directors for their review.
For the fiscal year ended November 30, 1997, payments from the Class A
Shares, Class B Shares and Class C Shares of Small Cap Value Fund amounted
to $677,608, $201,371 and $61,990, respectively. Such amounts were used
for the following purposes:
Small Cap Small Cap Small Cap
Value Fund Value Fund Value Fund
A Class B Class C Class
---------- ---------- ----------
Advertising $157 ---- ----
Annual/Semi-Annual Reports $12,964 ---- ----
Broker Trails $547,786 $46,620 $9,550
Broker Sales Charges ---- $88,607 $40,397
Dealer Service Expenses $4,806 ---- ----
Interest on Broker Sales Charges ---- $52,353 $1,740
Commissions to Wholesalers $27,851 $9,301 $9,206
Promotional-Broker Meetings $16,815 $2,083 $760
Promotional-Other $54,988 ---- ----
Prospectus Printing $8,211 ---- ----
Telephone $726 $31 $143
Wholesaler Expenses $3,304 $2,376 $194
Other ---- ---- ----
Other Payments to Dealers - Class A, Class B and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits
as set by the Distributor, may receive from the Distributor an additional
payment of up to 0.25% of the dollar amount of such sales. The
Distributor may also provide additional promotional incentives or payments
to dealers that sell shares of the Delaware Group of funds. In some
instances, these incentives or payments may be offered only to certain
dealers who maintain, have sold or may sell certain amounts of shares.
The Distributor may also pay a portion of the expense of preapproved
dealer advertisements promoting the sale of Delaware Group fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the
Exchange Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, directors and employees of Equity Funds V,
Inc., any other fund in the Delaware Group, the Manager, the Manager's
affiliates, the Sub-Adviser, any of the Sub-Adviser's affiliates, legal
counsel to the funds, and registered representatives and employees of
broker/dealers who have entered into Dealer's Agreements with the
Distributor may purchase Class A Shares of the Funds and any such class of
shares of any of the other funds in the Delaware Group, including any fund
that may be created, at the net asset value per share. Family members of
such persons at their direction, and any employee benefit plan established
by any of the foregoing funds, corporations, counsel or broker/dealers may
also purchase Class A Shares at net asset value. Class A Shares may also
be purchased at net asset value by current and former officers, directors
and employees (and members of their families) of the Dougherty Financial
Group LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value
within 12 months after the registered representative changes employment,
if the purchase is funded by proceeds from an investment where a front-end
sales charge, contingent deferred sales charge or other sales charge has
been assessed. Purchases of Class A Shares may also be made at net asset
value by bank employees who provide services in connection with agreements
between the bank and unaffiliated brokers or dealers concerning sales of
shares of Delaware Group funds. Officers, directors and key employees of
institutional clients of the Manager, the Sub-Adviser or any of their
affiliates may purchase Class A Shares at net asset value. Moreover,
purchases may be effected at net asset value for the benefit of the
clients of brokers, dealers and registered investment advisers affiliated
with a broker or dealer, if such broker, dealer or investment adviser has
entered into an agreement with the Distributor providing specifically for
the purchase of Class A Shares in connection with special investment
products, such as wrap accounts or similar fee based programs. Such
purchasers are required to sign a letter stating that the purchase is for
investment only and that the securities may not be resold except to the
issuer. Such purchasers may also be required to sign or deliver such
other documents as Equity Funds V, Inc. may reasonably require to
establish eligibility for purchase at net asset value.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their
customers when they are not eligible to purchase shares of the
institutional class of a Fund and any group retirement plan (excluding
defined benefit pension plans), or such plans of the same employer, for
which plan participant records are maintained on the Delaware Investment &
Retirement Services, Inc. ("DIRSI") proprietary record keeping system that
(i) has in excess of $500,000 of plan assets invested in Class A Shares of
Delaware Group funds and in any stable value product available through the
Delaware Group, or (ii) is sponsored by an employer that has at any point
after May 1, 1997 more than 100 employees while such plan has held Class A
Shares of a Delaware Group fund and such employer has properly represented
to DIRSI in writing that it has the requisite number of employees and has
received written confirmation back from DIRSI.
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A
Shares of any of the funds in the Delaware Group at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from
such accounts will be made at net asset value. Loan repayments made to a
Delaware Group account in connection with loans originated from accounts
previously maintained by another investment firm will also be invested at
net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases
made within a 13-month period pursuant to a written Letter of Intention
provided by the Distributor and signed by the purchaser, and not legally
binding on the signer or Equity Funds V, Inc., which provides for the
holding in escrow by the Transfer Agent, of 5% of the total amount of the
Class A Shares intended to be purchased until such purchase is completed
within the 13-month period. A Letter of Intention may be dated to include
shares purchased up to 90 days prior to the date the Letter is signed.
The 13-month period begins on the date of the earliest purchase. If the
intended investment is not completed, except as noted below, the purchaser
will be asked to pay an amount equal to the difference between the front-
end sales charge on the Class A Shares purchased at the reduced rate and
the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the
expiration of the 13-month period, the Transfer Agent will surrender an
appropriate number of the escrowed shares for redemption in order to
realize the difference. Such purchasers may include the value (at
offering price at the level designated in their Letter of Intention) of
all their shares of the Funds and of any class of any of the other mutual
funds in the Delaware Group (except shares of any Delaware Group fund
which do not carry a front-end sales charge, CDSC or Limited CDSC, other
than shares of Delaware Group Premium Fund, Inc. beneficially owned in
connection with the ownership of variable insurance products, unless they
were acquired through an exchange from a Delaware Group fund which carried
a front-end sales charge, CDSC or Limited CDSC) previously purchased and
still held as of the date of their Letter of Intention toward the
completion of such Letter.
Employers offering a Delaware Group 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 Group funds that
are offered with a front-end sales charge, CDSC or Limited CDSC for a 13-
month period. The Transfer Agent reserves the right to adjust the signed
Letter of Intention based on this acceptance criteria. The 13-month
period will begin on the date this Letter of Intention is accepted by the
Transfer Agent. If actual investments exceed the anticipated level and
equal an amount that would qualify the plan for further discounts, any
front-end sales charges will be automatically adjusted. In the event this
Letter of Intention is not fulfilled within the 13-month period, the plan
level will be adjusted (without completing another Letter of Intention)
and the employer will be billed for the difference in front-end sales
charges due, based on the plan's assets under management at that time.
Employers may also include the value (at offering price at the level
designated in their Letter of Intention) of all their shares intended for
purchase that are offered with a front-end sales charge, CDSC or Limited
CDSC of any class. Class B Shares and Class C Shares of a Fund and other
Delaware Group funds which offer corresponding classes of shares may also
be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may
combine the total amount of any combination of Class A Shares, Class B
Shares and/or Class C Shares of the Funds, as well as shares of any other
class of any of the other Delaware Group funds (except shares of any
Delaware Group fund which do not carry a front-end sales charge, CDSC or
Limited CDSC, other than shares of Delaware Group Premium Fund, Inc.
beneficially owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from a Delaware
Group fund which carried a front-end sales charge, CDSC or Limited CDSC).
In addition, assets held in any stable value account by investment
advisory clients of the Manager or its affiliates may be combined with
other Delaware Group fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under
21; or a trustee or other fiduciary of trust estates or fiduciary accounts
for the benefit of such family members (including certain employee benefit
programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund,
as well as shares of any other class of any of the other Delaware Group
funds which offer such classes (except shares of any Delaware Group fund
which do not carry a front-end sales charge, CDSC or Limited CDSC, other
than shares of Delaware Group Premium Fund, Inc. beneficially owned in
connection with the ownership of variable insurance products, unless they
were acquired through an exchange from a Delaware Group fund which carried
a front-end sales charge, CDSC or Limited CDSC). If, for example, any
such purchaser has previously purchased and still holds Class A Shares
and/or shares of any other of the classes described in the previous
sentence with a value of $40,000 and subsequently purchases $60,000 at
offering price of additional shares of Class A Shares, the charge
applicable to the $60,000 purchase would currently be 3.75%. For the
purpose of this calculation, the shares presently held shall be valued at
the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should
refer to the table of sales charges for Class A Shares to determine the
applicability of the Right of Accumulation to their particular
circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of a Fund (and of the Institutional Classes
holding shares which were acquired through an exchange from one of the
other mutual funds in the Delaware Group offered with a front-end sales
charge) who redeem such shares of a Fund have one year from the date of
redemption to reinvest all or part of their redemption proceeds in Class A
Shares of that Fund or in Class A Shares of any of the other funds in the
Delaware Group, subject to applicable eligibility and minimum purchase
requirements, in states where shares of such other funds may be sold, at
net asset value without the payment of a front-end sales charge. This
privilege does not extend to Class A Shares where the redemption of the
shares triggered the payment of a Limited CDSC. Persons investing
redemption proceeds from direct investments in mutual funds in the
Delaware Group offered without a front-end sales charge will be required
to pay the applicable sales charge when purchasing Class A Shares. The
reinvestment privilege does not extend to a redemption of either Class B
Shares or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made
at the net asset value next determined after receipt of remittance. A
redemption and reinvestment could have income tax consequences. It is
recommended that a tax adviser be consulted with respect to such
transactions. Any reinvestment directed to a fund in which the investor
does not then have an account will be treated like all other initial
purchases of a fund's shares. Consequently, an investor should obtain and
read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus
contains more complete information about the fund, including charges and
expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Funds' shareholder servicing agent, about
the applicability of the Limited CDSC (see Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange in the Fund Classes' Prospectuses) in
connection with the features described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales
charges for investments in Class A Shares set forth in the Prospectuses
for the Fund Classes, based on total plan assets. See Front-End Sales
Charge Alternative--Class A Shares in the Prospectuses for the Fund
Classes for the applicable schedule and further details. If a company has
more than one plan investing in the Delaware Group of funds, then the
total amount invested in all plans would be used in determining the
applicable front-end sales charge reduction upon each purchase, both
initial and subsequent, upon notification to the Fund in which the
investment is being made at the time of each such purchase. Employees
participating in such Group Investment Plans may also combine the
investments made in their plan account when determining the applicable
front-end sales charge on purchases to non-retirement Delaware Group
investment accounts if they so notify the Fund in connection with each
purchase. See Retirement Plans for the Fund Classes under Investment Plans
for information about Retirement Plans.
The Institutional Classes
The Institutional Class of each Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt
employee benefit plans of the Manager or its affiliates and securities
dealer firms with a selling agreement with the Distributor; (c)
institutional advisory accounts of the Manager or its affiliates and those
having client relationships with Delaware Investment Advisers, a division
of the Manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts; (d) 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 fee; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if
the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for
such advisory services.
Shares of the Institutional Classes are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred
sales charge and are not subject to Rule 12b-1 expenses.
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by 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 Small Cap Value 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 each Class of Retirement Income Fund and of
Small Cap Value Fund Institutional Class 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
specific Fund and Class in which shares are being purchased. Such
purchases, which must meet the minimum subsequent purchase requirements
set forth in the Prospectuses and this Part B, are made for Class A Shares
at the public offering price and, for Class B Shares, Class C Shares and
Institutional Classes shares 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 Group Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A,
Class B and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Group, including
the Funds, in states where their shares may be sold. Such investments
will be at net asset value at the close of business on the reinvestment
date without any front-end sales charge or service fee. The shareholder
must notify the Transfer Agent in writing and must have established an
account in the fund into which the dividends and/or distributions are to
be invested. Any reinvestment directed to a fund in which the investor
does not then have an account will be treated like all other initial
purchases of a fund's shares. Consequently, an investor should obtain and
read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus
contains more complete information about the fund, including charges and
expenses. See also Additional Methods of Adding to Your Investment -
Dividend Reinvestment Plan under How to Buy Shares in the Prospectuses for
the Fund Classes.
Subject to the following limitations, dividends and/or distributions
from other funds in the Delaware Group may be invested in shares of the
Funds, provided an account has been established. Dividends from Class A
Shares may not be directed to Class B Shares or Class C Shares. Dividends
from Class B Shares may only be directed to other Class B Shares and
dividends from Class C Shares may only be directed to other Class C
Shares. See Appendix B--Classes Offered in the Fund Classes' Prospectuses
for the funds in the Delaware Group that are eligible for investment by
holders of Fund shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans, 403(b)(7)
Deferred Compensation Plans or 457 Deferred Compensation Plans.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for either Fund to
accept for investment in Class A, Class B or Class C Shares, through an
agent bank, preauthorized government or private recurring payments. This
method of investment assures the timely credit to the shareholder's
account of payments such as social security, veterans' pension or
compensation benefits, federal salaries, Railroad Retirement benefits,
private payroll checks, dividends, and disability or pension fund
benefits. It also eliminates lost, stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the
following ways. (1) If the shareholder's bank is a member of the National
Automated Clearing House Association ("NACHA"), the amount of the
investment will be electronically deducted from his or her account by
Electronic Fund Transfer ("EFT"). The shareholder's checking account will
reflect a debit each month at a specified date although no check is
required to initiate the transaction. (2) If the shareholder's bank is
not a member of NACHA, deductions will be made by preauthorized checks,
known as Depository Transfer Checks. Should the shareholder's bank become
a member of NACHA in the future, his or her investments would be handled
electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans, 403(b)(7)
Deferred Compensation Plans or 457 Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent
investments under such Plans must be for $25 or more. An investor wishing
to take advantage of either service must complete an authorization form.
Either service can be discontinued by the shareholder at any time without
penalty by giving written notice.
Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after
such payments should have been terminated by reason of death or otherwise.
Any such payments are subject to reclamation by the federal government or
its agencies. Similarly, under certain circumstances, investments from
private sources may be subject to reclamation by the transmitting bank.
In the event of a reclamation, a Fund may liquidate sufficient shares from
a shareholder's account to reimburse the government or the private source.
In the event there are insufficient shares in the shareholder's account,
the shareholder is expected to reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. Either 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 V, Inc. for proper instructions.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other
mutual funds in the Delaware Group. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in the Delaware
Group through the Wealth Builder Option. See Wealth Builder Option and
Redemption and Exchange in the Prospectuses for the Fund Classes.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated
from their account and invested automatically into other mutual funds in
the Delaware Group, subject to the conditions and limitations set forth in
the Fund Classes' Prospectuses. The investment will be made on the 20th
day of each month (or, if the fund selected is not open that day, the next
business day) at the public offering price or net asset value, as
applicable, of the fund selected on the date of investment. No investment
will be made for any month if the value of the shareholder's account is
less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the
fund into which investments are made could fluctuate. Since this program
involves continuous investment regardless of such fluctuating value,
investors selecting this option should consider their financial ability to
continue to participate in the program through periods of low fund share
prices. This program involves automatic exchanges between two or more
fund accounts and is treated as a purchase of shares of the fund into
which investments are made through the program. See Exchange Privilege
for a brief summary of the tax consequences of exchanges. Shareholders
can terminate their participation at any time by written notice to the
Fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money
Purchase Pension Plans, 401(k) Defined Contribution Plans, 403(b)(7)
Deferred Compensation Plans or 457 Deferred Compensation Plans. This
option also is not available to shareholders of the Institutional Classes.
Delaware Group Asset Planner
To invest in Delaware Group funds using the Delaware Group Asset
Planner asset allocation service, you should complete a Delaware Group
Asset Planner Account Registration Form, which is available only from a
financial adviser or investment dealer. Effective September 1, 1997, the
Delaware Group Asset Planner Service is only available to financial
advisers or investment dealers who have previously used this service. The
Delaware Group Asset Planner service offers a choice of four predesigned
asset allocation strategies (each with a different risk/reward profile) in
predetermined percentages in Delaware Group 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 Group accounts into the Asset Planner service may be
made at net asset value under the circumstances described under How to Buy
Shares--Investing by Exchange in the Prospectus. Also see Buying Class A
Shares at Net Asset Value under Classes of Shares. The minimum initial
investment per Strategy is $2,000; subsequent investments must be at least
$100. Individual fund minimums do not apply to investments made using the
Asset Planner service. Class A, Class B and Class C Shares are available
through the Asset Planner service. Generally, only shares within the same
class may be used within the same Strategy. However, Class A Shares of
the Fund and of other funds in the Delaware Group may be used in the same
Strategy with consultant class shares that are offered by certain other
Delaware Group 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 Delaware Group 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 Group offers a full spectrum of qualified and
non-qualified retirement plans, including the 401(k) deferred compensation
plan, Individual Retirement Account ("IRA"), and the new Roth IRA.
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
and Class C Shares under Redemption and Exchange in the Prospectuses for
the Fund Classes for a list of the instances in which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares
must be in an amount that is less than $1,000,000 for such plans. The
maximum purchase limitations apply only to the initial purchase of shares
by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans, other than Individual Retirement
Accounts for which there is a minimum initial purchase of $250, and a
minimum subsequent purchase of $25, regardless of which class is selected.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are
based upon the number of participants in the plan as well as the services
selected. Additional information about fees is included in retirement
plan materials. Fees are quoted upon request. Annual maintenance fees
may be shared by Delaware Management Trust Company, the Transfer Agent,
other affiliates of the Manager and others that provide services to such
plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders.
Certain retirement plans may qualify to purchase shares of the
Institutional Classes. See The Institutional Classes, above. For
additional information on any of the plans and Delaware's retirement
services, call the Shareholder Service Center telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a
qualified retirement plan consultant. For further details, including
applications for any of these plans, contact your investment dealer or the
Distributor.
Taxable distributions from the retirement plans may be subject to
withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the plans.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships and corporations. These plans can be maintained as Section
401(k), profit sharing or money purchase pension plans. Contributions may
be invested only in Class A and Class C Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
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
or, for years prior to 1997, elects to be treated as having no
compensation for the year. Investments in each of the Fund Classes are
permissible.
An individual can contribute up to $2,000 of his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayers
adjusted gross income and whether the taxpayer or his or her spouse is an
active participant in an employer-sponsored retirement plan. Even if a
taxpayer (or his or her spouse) is an active participant in an employer-
sponsored retirement plan, the full $2,000 deduction is still available if
the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for
married couples with incomes between $40,000 and $50,000, and for single
individuals with incomes between $25,000 and $35,000. No deductions are
available for contributions to IRAs by taxpayers whose adjusted gross
income before IRA deductions exceeds $50,000 ($35,000 for singles) and who
are active participants in an employer-sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make nondeductible IRA contributions of as much as $2,000 for each working
spouse ($2,250 for one-income couples for years prior to 1997), and defer
taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married
individuals filing separate returns.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined
compensation of both spouses is at least equal to the total contributions
for both spouses. If the working spouse is an active participant in an
employer-sponsored retirement plan and earns over $40,000, the maximum
deduction limit is reduced in the same way that the limit is reduced for
contributions to a non-spousal IRA.
A company or association may establish a Group IRA for employees or
members who want to purchase shares of a Fund. Purchases of $1 million or
more of Class A Shares qualify for purchase at net asset value but may,
under certain circumstances, be subject to a Limited CDSC. See Purchasing
Shares for information on reduced front-end sales charges applicable to
Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally
must commence no later than April 1 of the calendar year following the
year in which the participant reaches age 70 1/2. Individuals are
entitled to revoke the account, for any reason and without penalty, by
mailing written notice of revocation to Delaware Management Trust Company
within seven days after the receipt of the IRA Disclosure Statement or
within seven days after the establishment of the IRA, except, if the IRA
is established more than seven days after receipt of the IRA Disclosure
Statement, the account may not be revoked. Distributions from the account
(except for the pro-rata portion of any nondeductible contributions) are
fully taxable as ordinary income in the year received. Excess
contributions removed after the tax filing deadline, plus extensions, for
the year in which the excess contributions were made are subject to a 6%
excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and
certain other limited circumstances) will be subject to a 10% excise tax
on the amount prematurely distributed, in addition to the income tax
resulting from the distribution. See Alternative Purchase Arrangements -
Class B Shares and Class C Shares under Classes of Shares, Contingent
Deferred Sales Charge - Class B Shares and Class C Shares under Classes of
Shares, and Waiver of Contingent Deferred Sales Charge - Class B and Class
C Shares under Redemption and Exchange in the Fund Classes' Prospectuses
concerning the applicability of a CDSC upon redemption.
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.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Fund Classes is available for investment
by a SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
New SAR/SEP plans may not be established after December 31, 1996. In
addition, employers must have 25 or fewer eligible employees to maintain
an existing SEP/IRA which permits salary deferral contributions. SAR/SEP
plans may only invest in Class A Shares and Class C Shares.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Plan documents are
available to enable employers to establish a plan. An employer may also
elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain
other funds in the Delaware Group. Purchases under the plan may be
combined for purposes of computing the reduced front-end sales charge
applicable to Class A Shares as set forth in the Prospectuses for the Fund
Classes. See Front-End Sales Charge Alternative--Class A Shares in the
Prospectuses for the Fund Classes for the applicable schedule and further
details.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial
account to fund deferred compensation arrangements for their employees. A
custodial account agreement is available for those employers who wish to
purchase any of the Fund Classes in conjunction with such an arrangement.
Applicable front-end sales charges with respect to Class A Shares for such
purchases are set forth in the Prospectuses for the Fund Classes. See
Front-End Sales Charge Alternative- -Class A Shares in the Prospectuses
for the Fund Classes for the applicable schedule and further details.
Deferred Compensation Plan for State and Local Government Employees
("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation
plan for their employees who wish to participate. This enables employees
to defer a portion of their salaries and any federal (and possibly state)
taxes thereon. Such plans may invest in shares of any of the Fund
Classes. Although investors may use their own plan, there is available a
Delaware Group 457 Deferred Compensation Plan. Interested investors
should contact the Distributor or their investment dealers to obtain
further information. Applicable front-end sales charges for such
purchases of Class A Shares are set forth in the Prospectuses for the Fund
Classes. See Front-End Sales Charge Alternative--Class A Shares in the
Prospectuses for the Fund Classes for the applicable schedule and further
details.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an Individual Retirement
Account (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.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that plan sponsors are
limited to 100 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 Investment Management
Agreements. Orders for purchases of Class B Shares, Class C Shares and the
Institutional Classes are effected at the net asset value per share next
calculated after receipt of the order by the Fund, its agent or certain
other authorized persons. Selling dealers are responsible for transmitting
orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset
value are computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the
Exchange is open. The New York Stock Exchange is scheduled to be open
Monday through Friday throughout the year except for New Year's Day,
Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the
New York Stock Exchange is closed, the Funds will generally be closed,
pricing calculations will not be made and purchase and redemption orders
will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included
in each Fund's financial statements which are incorporated by reference
into this Part B.
Each Fund's net asset value per share is computed by adding the value
of all the securities and other assets in the portfolio, deducting any
liabilities and dividing by the number of shares outstanding. Expenses
and fees are accrued daily. In determining a Fund's total net assets,
portfolio securities primarily listed or traded on a national or foreign
securities exchange, except for bonds, are valued at the last sales price
on that exchange upon which such securities are primarily traded. Options
are valued at the last reported sales price or, if no sales are reported,
at the mean between bid and asked prices. Foreign securities and the
prices of foreign securities denominated in foreign currencies are
translated to U.S. dollars at the mean between the bid and offer
quotations of such currencies based on rates in effect as of the close of
business of the London Stock Exchange. Securities not traded on a
particular day, over-the-counter securities, and government and agency
securities are valued at the mean value between bid and asked prices.
Money market instruments having a maturity of less than 60 days are valued
at amortized cost. Debt securities (other than short-term obligations)
are valued on the basis of valuations provided by a pricing service when
such prices are believed to reflect the fair value of such securities.
Use of a pricing service has been approved by the Board of Directors.
Prices provided by a pricing service take into account appropriate factors
such as institutional trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and
other market data. Subject to the foregoing, securities for which market
quotations are not readily available and other assets are valued at fair
value as determined in good faith and in a method approved by the Board of
Directors.
Each Class of a Fund will bear, pro-rata, all of the common expenses of
that Fund. The net asset values of all outstanding shares of each Class
of a Fund will be computed on a pro-rata basis for each outstanding share
based on the proportionate participation in that Fund represented by the
value of shares of that Class. All income earned and expenses incurred by
a Fund will be borne on a pro-rata basis by each outstanding share of a
Class, based on each Class' percentage in that 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 V, Inc.'s 12b-1
Plans and the Class A, Class B and Class C Shares alone will bear any 12b-
1 Plan expenses payable under their respective Plans. Due to the specific
distribution expenses and other costs that will be allocable to each
Class, the net asset value of each Class of Small Cap Value 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 Retirement Income Fund remain applicable no such
variance shall arise.
REDEMPTION AND REPURCHASE
Any shareholder may require a Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the
shares are registered, to the Fund at 1818 Market Street, Philadelphia, PA
19103. In addition, certain expedited redemption methods described below
are available when stock certificates have not been issued. Certificates
are issued for Class A Shares and Institutional Class shares only if a
shareholder specifically requests them. Certificates are not issued for
Class B Shares or Class C Shares. If stock certificates have been issued
for shares being redeemed, they must accompany the written request. For
redemptions of $50,000 or less paid to the shareholder at the address of
record, the request must be signed by all owners of the shares or the
investment dealer of record, but a signature guarantee is not required.
When the redemption is for more than $50,000, or if payment is made to
someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. 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. The Funds may request
further documentation from corporations, retirement plans, executors,
administrators, trustees or guardians.
In addition to redemption of Fund shares, the Distributor, acting as
agent of the Funds, offers to repurchase Fund shares from broker/dealers
acting on behalf of shareholders. The redemption or repurchase price,
which may be more or less than the shareholder's cost, is the net asset
value per share next determined after receipt of the request in good order
by the respective Fund, its agent or certain other authorized persons
subject to any applicable CDSC or Limited CDSC. See Distribution and Service
under Investment Management Agreements. This is computed and
effective at the time the offering price and net asset value are determined.
See Determining Offering Price and Net Asset Value. The Funds and the
Distributor end their business days at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the
net asset value per share computed that day (subject to the applicable
CDSC or Limited CDSC), if the repurchase order was received by the
broker/dealer from the shareholder prior to the time the offering price
and net asset value are determined on such day. The selling dealer has
the responsibility of transmitting orders to the Distributor promptly.
Such repurchase is then settled as an ordinary transaction with the
broker/dealer (who may make a charge to the shareholder for this service)
delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange in the Prospectuses for the Fund
Classes. Class B Shares are subject to a CDSC of: (i) 4% if shares are
redeemed within two years of purchase; (ii) 3% if shares are redeemed
during the third or fourth year following purchase; (iii) 2% if shares are
redeemed during the fifth year following purchase; and (iv) 1% if shares
are redeemed during the sixth year following purchase. Class C Shares are
subject to a CDSC of 1% if shares are redeemed within 12 months following
purchase. See Contingent Deferred Sales Charge - Class B Shares and Class
C Shares under Classes of Shares in the Prospectuses for the Fund Classes.
Except for the applicable CDSC or Limited CDSC, and with respect to the
expedited payment by wire described below for which, in the case of the
Fund Classes, there is currently a $7.50 bank wiring cost, neither the
Funds nor the Distributor charges a fee for redemptions or repurchases,
but such fees could be charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption
request in good order; provided, however, that each commitment to mail or
wire redemption proceeds by a certain time, as described below, is
modified by the qualifications described in the next paragraph.
Each Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. A Fund will honor redemption requests as to shares for which a
check was tendered as payment, but a Fund will not mail or wire the
proceeds until it is reasonably satisfied that the check has cleared.
This potential delay can be avoided by making investments by wiring
Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other
reason, the Fund involved will automatically redeem from the shareholder's
account the shares purchased by the check plus any dividends earned
thereon. Shareholders may be responsible for any losses to a Fund or to
the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a
result of which disposal by a Fund of securities owned by it is not
reasonably practical, or it is not reasonably practical for a Fund fairly
to value its assets, or in the event that the Securities and Exchange
Commission has provided for such suspension for the protection of
shareholders, a Fund may postpone payment or suspend the right of
redemption or repurchase. In such case, the shareholder may withdraw the
request for redemption or leave it standing as a request for redemption at
the net asset value next determined after the suspension has been
terminated.
Payment for shares redeemed or repurchased may be made in either cash
or kind, or partly in cash and partly in kind. Any portfolio securities
paid or distributed in kind would be valued as described in Determining
Offering Price and Net Asset Value. Subsequent sale by an investor
receiving a distribution in kind could result in the payment of brokerage
commissions. However, Equity Funds V, Inc. has elected to be governed by
Rule 18f-1 under the 1940 Act pursuant to which each Fund is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
asset value of such Fund during any 90-day period for any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain
or loss, depending upon the price paid and the price received for such
shares.
Small Accounts
Before a Fund involuntarily redeems shares from an account that, under
the circumstances noted in the relevant Prospectus, has remained below the
minimum amounts required by the Fund's Prospectuses and sends the proceeds
to the shareholder, the shareholder will be notified in writing that the
value of the shares in the account is less than the minimum required and
will be allowed 60 days from the date of notice to make an additional
investment to meet the required minimum. See The Conditions of Your
Purchase under How to Buy Shares in the Prospectuses. Any redemption in
an inactive account established with a minimum investment may trigger
mandatory redemption. No CDSC or Limited CDSC will apply to the
redemptions described in this paragraph.
Effective November 29, 1995, the minimum initial investment in Small
Cap Value Fund A Class was increased from $250 to $1,000. Accounts of
Small Cap Value Fund A Class that were established prior to November 29,
1995 and maintain a balance in excess of $250 will not presently be
subject to the $9 quarterly service fee that may be assessed against
accounts with balances below the stated minimum nor subject to involuntary
redemption.
* * *
Each Fund has made available certain redemption privileges, as
described below. The Funds reserves the right to suspend or terminate
these expedited payment procedures upon 60 days' written notice to
shareholders.
Expedited Telephone Redemptions
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of shares of $50,000 or less for which
certificates have not been issued may call the Shareholder Service Center
at 800-523-1918 or, in the case of shareholders of the Institutional
Classes, their Client Services Representative at 800-828-5052 prior to the
time the offering price and net asset value are determined, as noted
above, and have the proceeds mailed to them at the address of record.
Checks payable to the shareholder(s) of record will normally be mailed the
next business day, but no later than seven days, after the receipt of the
redemption request. This option is only available to individual, joint
and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the
phone numbers listed above. An authorization form must have been
completed by the shareholder and filed with the relevant Fund before the
request is received. Payment will be made by wire or check to the bank
account designated on the authorization form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will
normally be wired on the next business day following receipt of the
redemption request. There is a $7.50 wiring fee (subject to change)
charged by CoreStates Bank, N.A. which will be deducted from the
withdrawal proceeds each time the shareholder requests a redemption from
Class A Shares, Class B Shares and Class C Shares. If the proceeds are
wired to the shareholder's account at a bank which is not a member of the
Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally
be mailed the next business day, but no later than seven days, from the
date of the telephone request. This procedure will take longer than the
Payment by Wire option (1 above) because of the extra time necessary for
the mailing and clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the
relevant Fund and a signature guarantee may be required. Each signature
guarantee must be supplied by an eligible guarantor institution. The
Funds reserve the right to reject a signature guarantee supplied by an
eligible institution based on its creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank
account designated on the authorization form.
If expedited payment under these procedures could adversely affect a
Fund, such Fund may take up to seven days to pay the shareholder.
Neither the Funds nor the Funds' Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions
for redemption or exchange of Fund shares which are reasonably believed to
be genuine. With respect to such telephone transactions, each Fund will
follow reasonable procedures to confirm that instructions communicated by
telephone are genuine (including verification of a form of personal
identification) as, if it does not, such Fund or the Transfer Agent may be
liable for any losses due to unauthorized or fraudulent transactions.
Telephone instructions received by shareholders of the Fund Classes are
generally tape recorded. A written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone.
Systematic Withdrawal Plans
Shareholders of Class A, Class B and Class C Shares of Small Cap Value
Fund who own or purchase $5,000 or more of shares at the offering price,
or net asset value, as applicable, for which certificates have not been
issued may establish a Systematic Withdrawal Plan for monthly withdrawals
of $25 or more, or quarterly withdrawals of $75 or more, although Small
Cap Value Fund does not recommend any specific amount of withdrawal. This
$5,000 minimum does not apply for Small Cap Value Fund's prototype
retirement plans. Shares purchased with the initial investment and
through reinvestment of cash dividends and realized securities profits
distributions will be credited to the shareholder's account and sufficient
full and fractional shares will be redeemed at the net asset value
calculated on the third business day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and
are normally mailed within two business days. Both ordinary income
dividends and realized securities profits distributions will be
automatically reinvested in additional shares of the Class at net asset
value. This plan is not recommended for all investors and should be
started only after careful consideration of its operation and effect upon
the investor's savings and investment program. To the extent that
withdrawal payments from the plan exceed any dividends and/or realized
securities profits distributions paid on shares held under the plan, the
withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on
the holding period for the specific shares liquidated. Premature
withdrawals from retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of
Class A Shares of Small Cap Value Fund through a periodic investment
program in a fund managed by the Manager must be terminated before a
Systematic Withdrawal Plan with respect to such shares can take effect,
except if the shareholder is a participant in one of our retirement plans
or is investing in Delaware Group funds which do not carry a sales charge.
Redemptions of Class A Shares pursuant to a Systematic Withdrawal Plan may
be subject to a Limited CDSC if the purchase was made at net asset value
and a dealer's commission has been paid on that purchase. Redemptions of
Class B Shares or Class C Shares pursuant to a Systematic Withdrawal Plan
may be subject to a CDSC, unless the annual amount selected to be
withdrawn is less than 12% of the account balance on the date that the
Systematic Withdrawal Plan was established. See Waiver of Contingent
Deferred Sales Charge - Class B and Class C Shares and Waiver of Limited
Contingent Deferred Sales Charge - Class A Shares under Redemption and
Exchange in the Prospectus for the Fund Classes of Small Cap Value Fund.
Shareholders should consult their financial advisers to determine whether
a Systematic Withdrawal Plan would be suitable for them.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan
payments is other than the registered shareholder, the shareholder's
signature on this authorization must be guaranteed. Each signature
guarantee must be supplied by an eligible guarantor institution. Small
Cap Value Fund reserves the right to reject a signature guarantee supplied
by an eligible institution based on its creditworthiness. This plan may
be terminated by the shareholder or the Transfer Agent at any time by
giving written notice.
The Systematic Withdrawal Plan is not available for the Institutional
Classes or, currently, any of the Fund Classes of Retirement Income Fund.
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, a
Fund will not be subject to federal income tax on net investment income
and net realized capital gains which are distributed to shareholders.
Each Class of shares of a Fund will share proportionately in the
investment income and expenses of that 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.
Small Cap Value Fund intends to pay out substantially all of its net
investment income and net realized capital gains. Such payments, if any,
will be made once a year during the first quarter of the following fiscal
year. Retirement Income Fund expects to declare and pay dividends from
net investment income monthly to shareholders of each Class of the Fund's
shares. 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 Small Cap Value 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.
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. Small Cap Value 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.
Dividends from investment income and short-term capital gains
distributions are treated by shareholders as ordinary income for federal
income tax purposes. Distributions of long-term capital gains, if any,
are taxable to shareholders as long-term capital gains, regardless of the
length of time an investor has held such shares, and these gains are
currently taxed at long-term capital gain rates. The tax status of
dividends and distributions paid to shareholders will not be affected by
whether they are paid in cash or in additional shares. Persons not
subject to tax will not be required to pay taxes on distributions.
Under the Taxpayer Relief act of 1997 (the "1997 Act"), the 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:
"Pre-Act long-term capital gains": securities sold by a Fund before
May 7, 1997, that were held for more than 12 months. These gains will
be taxable to individual investors at a maximum rate of 28%.
"Mid-term capital gains" or "28 percent rate gain": securities sold by
a Fund after July 28, 1997 that were held more than one year but not
more than 18 months. These gains will be taxable to individual
investors at a maximum rate of 28%.
"1997 Act long-term capital gains" or "20 percent rate gain":
securities sold by a Fund between May 7, 1997 and July 28, 1997 that
were held for more than 12 months, and securities sold by the Fund after
July 28, 1997 that were held for more than 18 months. These gains will
be taxable to individual investors at a maximum rate of 20% for
investors in the 28% or higher federal income tax brackets, and at a
maximum rate of 10% for investors in the 15% federal income tax bracket.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
5-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 5-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than 5 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 5-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..
A portion of each Fund's dividends may qualify for the dividends-
received deduction for corporations provided in the federal income tax
law. The portion of dividends paid by each Fund that so qualifies will be
designated each year in a notice to that Fund's shareholders, and cannot
exceed the gross amount of dividends received by the Fund from domestic
(U.S.) corporations that would have qualified for the dividends-received
deduction in the hands of the Fund if the Fund was a regular corporation.
The availability of the dividends-received deduction is subject to certain
holding period and debt financing restrictions imposed under the Code on
the corporation claiming the deduction. Under the 1997 Act, the amount
that a Fund may designate as eligible for the dividends-received deduction
will be reduced or eliminated if the shares on which the dividends earned
by the Fund were debt-financed or held by the Fund for less than a 46-day
period during a 90-day period beginning 45 days before the ex-dividend
date and ending 45 days after the ex-dividend date. Similarly, if your
Fund shares are debt-financed or held by you for less than a 46-day period
during a 90-day period beginning 45 days before the ex-dividend date and
ending 45 days after the ex-dividend date, then the dividends-received
deduction for Fund dividends on your shares may also be reduced or
eliminated. Even if designated as dividends eligible for the dividends-
received deduction, all dividends (including any deducted portion) must be
included in your alternative minimum taxable income calculation. For the
fiscal year ended November 30, 1997, 37.97% and 14.34% of the dividends
from net investment income of Small Cap Value Fund and Retirement Income
Fund, respectively, were eligible for this deduction.
Shareholders will be notified annually by Equity Funds V, Inc. as to
the federal income tax status of dividends and distributions.
Distributions may also be subject to state and local taxes;
shareholders are advised to consult with their tax advisers in this
regard. Shares of each Fund will be exempt from Pennsylvania county
personal property taxes.
See also Other Tax Requirements under Accounting and Tax Issues in this
Part B.
INVESTMENT MANAGEMENT AGREEMENTS
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to each Fund, subject to the
supervision and direction of Equity Funds V, Inc.'s Board of Directors.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On November 30, 1997, the Manager and its
affiliates within the Delaware Group, including Delaware International
Advisers Ltd., were supervising in the aggregate more than $39 billion in
assets in the various institutional or separately managed (approximately
$23,274,532,000 ) and investment company (approximately $16,181,491,000 )
accounts.
The Investment Management Agreement for Small Cap Value Fund is dated
April 3, 1995, and was approved by shareholders on March 29, 1995. The
Investment Management Agreement for Retirement Income Fund is dated
November 29, 1996, and was approved by the initial shareholder on November
29, 1996. Each Agreement has an initial term of two years and may be
renewed each year only so long as such renewal and continuance are
specifically approved at least annually by the Board of Directors or by
vote of a majority of the outstanding voting securities of a Fund, and
only if the terms of and the renewal thereof have been approved by the
vote of a majority of the directors of Equity Funds V, Inc. who are not
parties thereto or interested persons of any such party, cast in person at
a meeting called for the purpose of voting on such approval. Each
Agreement is terminable without penalty on 60 days' notice by the
directors of Equity Funds V, Inc. or by the Manager. Each Agreement will
terminate automatically in the event of its assignment.
The compensation paid by Small Cap Value Fund for investment management
services is equal to 1/16 of 1% per month (the equivalent of 3/4 of 1% per
year) of the Fund's average daily net assets, less all directors' fees
paid to the unaffiliated directors by the Fund. This fee is higher than
that paid by many other funds; it may be higher or lower than that paid by
funds with comparable investment objectives. On November 30, 1997, the
total net assets of Small Cap Value Fund were $335,423,907 and of
Retirement Income Fund were $2,771,743. Under the general supervision of
the Board of Directors, the Manager makes all investment decisions which
are implemented by the Fund. Investment management fees paid by Small Cap
Value Fund for the fiscal years ended November 30, 1995, 1996 and 1997
amounted to $1,371,155, $1,513,474 and $2,012,899, respectively.
The annual compensation paid by Retirement Income Fund for investment
management services is equal to 0.65% on the first $500 million of the
Fund's average daily net assets, 0.625% of the next $500 million and 0.60%
of the average daily net assets in excess of $1 billion. Investment
management fees incurred by the Retirement Income Fund for the fiscal year
ended November 30, 1997 were $15,939 and $0 was paid and $15,939 was
waived due to the voluntary waiver of fees by the Manager.
The directors of Equity Funds V, Inc. annually review fees paid to the
Manager.
The Manager pays the salaries of all directors, officers and employees
who are affiliated with both the Manager and Equity Funds V, Inc. Except
for those expenses borne by the Manager under the Investment Management
Agreements and the Distributor under the Distribution Agreements, each
Fund is responsible for all of its own expenses. Among others, these
include each 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. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of each Fund's
shares under a Distribution Agreement dated April 3, 1995, as amended on
November 29, 1995 for Small Cap Value Fund and under a Distribution
Agreement dated November 29, 1996 for Retirement Income Fund. The
Distributor is an affiliate of the Manager and bears all of the costs of
promotion and distribution, except for payments by each Fund on behalf of
Class A Shares, Class B Shares and Class C Shares under their respective
12b-1 Plans. Prior to January 3, 1995, Delaware Distributors, Inc.
("DDI") served as the national distributor of Small Cap Value Fund's
shares. On that date, Delaware Distributors, L.P., a newly formed limited
partnership, succeeded to the business of DDI. All officers and employees
of DDI became officers and employees of Delaware Distributors, L.P. DDI
is the corporate general partner of Delaware Distributors, L.P. and both
DDI and Delaware Distributors, L.P. are indirect, wholly owned
subsidiaries of Delaware Management Holdings, Inc. The Distributor has
elected voluntarily to waive payments under the 12b-1 Plan for the Class A
Shares, Class B Shares and the Class C Shares of Retirement Income Fund
during the commencement of the public offering of the Fund through May 31,
1998.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103,
serves as each Funds' shareholder servicing, dividend disbursing and
transfer agent pursuant to an agreement dated November 29, 1996. The
Transfer Agent also provides accounting services to the Funds pursuant to
the terms of a separate Fund Accounting Agreement. The Transfer Agent is
also an indirect, wholly owned subsidiary of Delaware Management Holdings,
Inc.
The Fund has authorized one or more brokers to accept on its
behalf purchase and redemption orders in addition to the Transfer Agent.
Such brokers are authorized to designate other intermediaries to accept
purchase and redemption orders on the behalf of the Funds. For purposes
of pricing, the Funds will be deemed to have received a purchase or
redemption order when an authorized broker or, if applicable, a
broker's authorized designee, accepts the order.
OFFICERS AND DIRECTORS
The business and affairs of Equity Funds V, Inc. are managed under the
direction of its Board of Directors.
Certain officers and directors of Equity Funds V, Inc. hold identical
positions in each of the other funds in the Delaware Group. On December
31, 1997, Equity Fund V, Inc.'s officers and directors owned less than 1%
of the outstanding shares of the Class A Shares, Class B Shares, Class C
Shares and Institutional Class of Small Cap Value Fund and Retirement
Income Fund, respectively.
As of December 31, 1997, management believes the following accounts
held 5% or more of the outstanding shares of the Class A Shares, Class B
Shares, Class C Shares and Institutional Class of Small Cap Value Fund and
Retirement Income Fund, respectively.
Class Name and Address
of Account Share Amount Percentage
- ---------------------------------------------------------------------------
Small Cap Value
Fund A Class MLPF&S for the sole
benefit of its
customers
Attn: Fund Administration
4800 Deer Lake Drive
East - 3rd Floor
Jacksonville, FL 32246 750,063 7.58%
Small Cap Value
Fund B Class MLPF&S for the sole
benefit of its
customers
Attn: Fund Administration
4800 Deer Lake Drive
East - 3rd Floor
Jacksonville, FL 32246 258,573 16.32%
Small Cap Value
Fund C Class MLPF&S for the sole
benefit of its
customers
Attn: Fund Administration
4800 Deer Lake Drive
East - 3rd Floor
Jacksonville, FL 32246 232,636 46.90%
Small Cap Value
Fund Institutional Amalgamated Bank of New York
Class Cust. TWU-NYC PVT Bus Lines
Pension Fund
Amivest Corp. Discretionary
Investment Manager
P.O. Box 370 Cooper Station
New York, NY 10276 132,103 24.23%
Small Cap Value
Fund Institutional RS DMC Employee Profit
Class Sharing Plan
Delaware Management Company
Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103 92,093 16.89%
Bank of New York
Cust. Annuity Fund of
Local One IATSE
Amivest Corp.
Discretionary Investment
Manager 717103
Attn: William Biempca -
Master/TR/Custody
One Wall Street - 7th Floor
New York, NY 10005 53,490 9.81%
Amalgamated Bank of New York
Cust. NYC Htl Trds Cncl and
Htl Assn PN FD
Amivest Corp.
Discretionary Investment Manager
P.O. Box 370 Cooper Station
New York, NY 10276 39,793 7.30%
Retirement
Income Fund John P. Finnegan
A Class 213 Memorial Ave.
Haddon Twp, NJ 08033 388 75.65%
Spencer J. Fleming
65 Winding Way Rd.
Stratford, NJ 08084 123 24.11%
Retirement
Income Fund
Institutional Chicago Trust Co.
Class FBO Lincoln National Corp.
Employee Retirement Plan
c/o Marshall & Ilsley Trust Co.
P.O. Box 2977
Milwaukee, WI 53201 278,616 99.99%
DMH Corp., Delvoy, Inc., Delaware Management Company, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Management Trust Company, Delaware International Holdings
Ltd., Founders Holdings, Inc., Delaware International Advisers Ltd.,
Delaware Capital Management, Inc. and Delaware Investment & Retirement
Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger
between DMH and a wholly owned subsidiary of Lincoln National Corporation
("Lincoln National") was completed. In connection with the merger, a new
Investment Management Agreement between Equity Funds V, Inc. and the
Manager on behalf of Small Cap Value Fund was executed following
shareholder approval. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National.
Lincoln National, with headquarters in Fort Wayne, Indiana, is a
diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management.
Directors and principal officers of Equity Funds V, Inc. are noted
below along with their ages and their business experience for the past
five years. Unless otherwise noted, the address of each officer and
director is One Commerce Square, Philadelphia, PA 19103.
*Wayne A. Stork (60)
Chairman and Director and/or Trustee of Equity Funds V, Inc., each of
the other 33 other investment companies in the Delaware Group,
Delaware Management Holdings, Inc. and Delaware Capital Management,
Inc.
Chairman, President, Chief Executive Officer, Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware International
Advisers Ltd. and Delaware International Holdings Ltd.
President and Chief Executive Officer of Delvoy, Inc.
Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
* Jeffrey J. Nick (44)
President, Chief Executive Officer and Director and/or Trustee of Equity
Funds V, Inc. and each of the other 33 investment companies in the
Delaware Group.
President, Chief Executive Officer and Director of Delaware Management
Holdings, Inc.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc.
President of Lincoln Funds Corporation.
From 1992 to 1996, Mr. Nick was Managing Director of Lincoln National
UK plc and from 1989 to 1992, he was Senior Vice President
responsible for corporate planning and development for Lincoln National
Corporation.
______________________
*Director affiliated with the Funds' investment manager and considered an
"interested person" as defined in the 1940 Act.
Richard G. Unruh, Jr. (58)
Executive Vice President of Equity Funds V, Inc., each of the other 33
investment companies in the Delaware Group, Delaware Management
Holdings, Inc. and Delaware Capital Management, Inc.
Executive Vice President and Director of Delaware Management Company,
Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed Income of
Equity Funds V, Inc., each of the other 33 investment companies in
the Delaware Group, Delaware Management Company, Inc. and Delaware
Management Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, Inc.
Director of Founders CBO Corporation.
Director of HYPPCO Finance Company Ltd.
Before returning to the Delaware Group in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for Oppenheimer
Management Corporation, New York, NY from 1985 to 1992. Prior to
that, Mr. Suckow was a fixed-income portfolio manager for the Delaware
Group.
Walter P. Babich (70)
Director and/or Trustee of Equity Funds V, Inc. and each of the other
33 investment companies in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (58)
Director and/or Trustee of Equity Funds V, Inc. and each of the other 33
investment companies in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was
also a lecturer in English at the University. In addition, Mr. Knerr
was Chairman of The Publishing Group, Inc., New York, from 1988 to
1990. Mr. Knerr founded The Publishing Group, Inc. in 1988.
Ann R. Leven (57)
Director and/or Trustee of Equity Funds V, Inc. and each of the other 33
investment companies in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of
the Smithsonian Institution, Washington, DC, and from 1975 to 1992,
she was Adjunct Professor of Columbia Business School.
W. Thacher Longstreth (77)
Director and/or Trustee of Equity Funds V, Inc. and each of the other
33 investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Thomas F. Madison (61)
Director and/or Trustee of Equity Funds V, Inc. and each of the other
33 investment companies in the Delaware Group.
President and Chief Executive Officer, MLM Partners, Inc.
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402.
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 (72)
Director and/or Trustee of Equity Funds V, Inc. and each of the other 33
investment companies in the Delaware Group.
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.
David K. Downes (57)
Executive Vice President/Chief Operating Officer/Chief Financial
Officer of Equity Funds V, Inc., each of the other 33 investment
companies in the Delaware Group, Delaware Management Holdings, Inc,
Founders CBO Corporation, Delaware Capital Management, Inc. and Delaware
Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Founders Holdings, Inc. and Delvoy, Inc.
President, Chief Executive Officer, Chief Financial Officer and
Director of Delaware Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and
Director of Delaware International Holdings Ltd.
Chairman, Chief Executive Officer and Director of Delaware Management
Trust Company and Delaware Investment & Retirement Services, Inc.
Director of Delaware International Advisers Ltd.
Vice President of Lincoln Funds Corporation
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer of
Equitable Capital Management Corporation, New York, from December 1985
through August 1992, Executive Vice President from December 1985
through March 1992, and Vice Chairman from March 1992 through August
1992.
George M. Chamberlain, Jr. (50)
Senior Vice President, Secretary and General Counsel of Equity Funds V,
Inc., each of the other 33 investment companies in the Delaware
Group, Delaware Distributors, L.P. and Delaware Management Holdings,
Inc.
Senior Vice President, Secretary, General Counsel and Director of DMH
Corp., Delaware Management Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Founders Holdings, Inc., Delaware
Investment & Retirement Services, Inc., Delaware Capital Management,
Inc. and Delvoy, Inc.
Executive Vice President, Secretary, General Counsel and Director of
Delaware Management Trust Company.
Senior Vice President and Director of Delaware International Holdings
Ltd.
Director of Delaware International Advisers Ltd.
Secretary of Lincoln Funds Corporation
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware organization.
Joseph H. Hastings (47)
Senior Vice President/Corporate Controller of the Equity Funds V, Inc.,
each of the other 33 investment companies in the Delaware Group and
Founders Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company,
Inc., Delaware Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Capital Management, Inc.,
Delaware International Holdings Ltd. and Delvoy, Inc.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Senior Vice President/Assistant Treasurer of Founders CBO Corporation.
Treasurer of Lincoln Funds Corporation
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P., New
York, NY from 1989 to 1992. Prior to that, Mr. Hastings served as
Controller and Treasurer for Fine Homes International, L.P., Stamford,
CT from 1987 to 1989.
Michael P. Bishof (35)
Senior Vice President/Treasurer of Equity Funds V, Inc., each of the
other 33 investment companies in the Delaware Group and Founders
Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc. and Delaware Service Company, Inc.
Senior Vice President and Treasurer/Manager of Investment Accounting of
Delaware Distributors, L.P.
Senior Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a Vice
President for CS First Boston Investment Management, New York, NY from
1993 to 1994 and an Assistant Vice President for Equitable Capital
Management Corporation, New York, NY from 1987 to 1993.
Gerald T. Nichols (39)
Vice President/Senior Portfolio Manager of Equity Funds V, Inc. and of
22 other investment companies in the Delaware Group and of Delaware
Management Company, Inc.
Vice President of Founders Holdings, Inc.
Assistant Secretary, Treasurer and Director of Founders CBO
Corporation.
During the past five years, Mr. Nichols has served in various capacities
at different times within
the Delaware organization.
Babak Zenouzi (34)
Vice President/Portfolio Manager of Equity Funds V, Inc. and 11 other
investment companies in the Delaware Group.
Vice President/Assistant Portfolio Manager of Delaware Investment
Advisers.
During the past five years, Mr. Zenouzi has served in various
capacities at different times within the Delaware organization.
Christopher S. Beck (40)
Vice President/Senior Portfolio Manager of Equity Funds V, Inc. and 9
other investment companies in the Delaware Group and of Delaware
Management Company, Inc.
Before joining the Delaware Group in 1997, Mr. Beck managed the small
cap value fund for two years at Pitcairn Trust Company. Prior to
1995, he was Director of Research at Cypress Capital Management in
Wilmington and Chief Investment Officer of the University of Delaware
Endowment Fund.
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from
Equity Funds V, Inc. and the total compensation received from all Delaware
Group funds for the fiscal year ended November 30, 1997 and an estimate of
annual benefits to be received upon retirement under the Delaware Group
Retirement Plan for Directors/Trustees as of December 31, 1997.
Pension or
Retirement
Benefits
Aggregate Accrued Estimated Total
Compensation as Part of Annual Compensation
from Equity Equity Benefits from all 33
Funds V, Funds V, Inc. Upon Delaware Group
Name Inc. Expenses Retirement* Investment Companies
W. Thacher
Longstreth $2,646 None $38,500 $59,243
Ann R.
Leven $1,745 None $38,500 $64,452
Walter P.
Babich $1,726 None $38,500 $63,452
Anthony D.
Knerr $1,726 None $38,000 $63,452
Charles E.
Peck $1,550 None $38,500 $56,057
Thomas F.
Madison** $875 None $38,500 $37,225
* Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director who, at the time of his or
her retirement from the Board, has attained the age of 70 and served on
the Board for at least five continuous years, is entitled to receive
payments from each fund in the Delaware Group for a period equal to the
lesser of the number of years that such person served as a director or the
remainder of such person's life. The amount of such payments will be
equal, on an annual basis, to the amount of the annual retainer that is
paid to directors of each fund at the time of such person's retirement.
If an eligible director retired as of December 31, 1997, he or she would
be entitled to annual payments totaling $38,500, in the aggregate, from
all of the funds in the Delaware Group, based on the number of funds in
the Delaware Group as of that date.
** Thomas F. Madison joined Equity Funds V, Inc.'s Board of Directors on
April 30, 1997.
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and
for shareholders of classes of other funds in the Delaware Group are set
forth in the relevant prospectuses for such classes. The following
supplements that information. Each Fund may modify, terminate or suspend
the exchange privilege upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and
carefully read that fund's prospectus before buying shares in an exchange.
The prospectus contains more complete information about the fund,
including charges and expenses. A shareholder requesting an exchange will
be sent a current prospectus and an authorization form for any of the
other mutual funds in the Delaware Group. Exchange instructions must be
signed by the record owner(s) exactly as the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund or
series and the purchase of another. The sale may involve either a capital
gain or loss to the shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between
funds in the Delaware Group on behalf of their clients by telephone or
other expedited means. This service may be discontinued or revised at any
time by the Transfer Agent. Such exchange requests may be rejected if it
is determined that a particular request or the total requests at any time
could have an adverse effect on any of the funds. Requests for expedited
exchanges may be submitted with a properly completed exchange
authorization form, as described above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued
or their investment dealers of record may exchange shares by telephone for
shares in other mutual funds in the Delaware Group. This service is
automatically provided unless the relevant Fund receives written notice
from the shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 or, in the case of shareholders
of the Institutional Classes, their Client Services Representative at 800-
828-5052, to effect an exchange. The shareholder's current Fund account
number must be identified, as well as the registration of the account, the
share or dollar amount to be exchanged and the fund into which the
exchange is to be made. Requests received on any day after the time the
offering price and net asset value are determined will be processed the
following day. See Determining Offering Price and Net Asset Value. Any
new account established through the exchange will automatically carry the
same registration, shareholder information and dividend option as the
account from which the shares were exchanged. The exchange requirements
of the fund into which the exchange is being made, such as sales charges,
eligibility and investment minimums, must be met. (See the prospectus of
the fund desired or inquire by calling the Transfer Agent or, as relevant,
your Client Services Representative.) Certain funds are not available for
retirement plans.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-
term swings in the securities market through frequent transactions in and
out of the funds in the Delaware Group. Telephone exchanges may be
subject to limitations as to amounts or frequency. The Transfer Agent and
each Fund reserve the right to record exchange instructions received by
telephone and to reject exchange requests at any time in the future.
As described in the Funds' Prospectuses, neither the Funds nor the
Transfer Agent is responsible for any shareholder loss incurred in acting
upon written or telephone instructions for redemption or exchange of Fund
shares which are reasonably believed to be genuine.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic
and market conditions ("Timing Accounts"), the Funds will refuse any new
timing arrangements, as well as any new purchases (as opposed to
exchanges) in Delaware Group funds from Timing Firms. A Fund reserves the
right to temporarily or permanently terminate the exchange privilege or
reject any specific purchase order for any person whose transactions seem
to follow a timing pattern who: (i) makes an exchange request out of the
Fund within two weeks of an earlier exchange request out of the Fund, or
(ii) makes more than two exchanges out of the Fund per calendar quarter,
or (iii) exchanges shares equal in value to at least $5 million, or more
than 1/4 of 1% of the Fund's net assets. Accounts under common ownership
or control, including accounts administered so as to redeem or purchase
shares based upon certain predetermined market indicators, will be
aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Group funds: (1)
Decatur Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4)
Limited-Term Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash
Reserve, (7) Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other
Delaware Group funds are available for timed exchanges. Assets redeemed
or exchanged out of Timing Accounts in Delaware Group funds not listed
above may not be reinvested back into that Timing Account. Each Fund
reserves the right to apply these same restrictions to the account(s) of
any person whose transactions seem to follow a timing pattern (as
described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the
Manager's judgment, the Fund would be unable to invest effectively in
accordance with its investment objectives and policies, or would otherwise
potentially be adversely affected. A shareholder's purchase exchanges may
be restricted or refused if a Fund receives or anticipates simultaneous
orders affecting significant portions of the Fund's assets. In
particular, a pattern of exchanges that coincide with a "market timing"
strategy may be disruptive to a Fund and therefore may be refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
* * *
Following is a summary of the investment objectives of the other
Delaware Group funds:
Delaware Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-
oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and
capital growth. Devon Fund seeks current income and capital appreciation
by investing primarily in income-producing common stocks, with a focus on
common stocks the Manager believes have the potential for above average
dividend increases over time.
Trend Fund seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation
potential.
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.
Decatur Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income
and capital appreciation without undue risk to principal. Decatur Total
Return Fund seeks long-term growth by investing primarily in securities
that provide the potential for income and capital appreciation without
undue risk to principal. Blue Chip Fund seeks to achieve long-term
capital appreciation. Current income is a secondary objective. It seeks
to achieve these objectives by investing primarily in equity securities
and any securities that are convertible into equity securities. Social
Awareness Fund seeks to achieve long-term capital appreciation. It seeks
to achieve this objective by investing primarily in equity securities of
medium- to large-sized companies expected to grow over time that meet the
Fund's "Social Criteria" strategy.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Strategic Income Fund seeks
to provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors
of the fixed-income securities markets: high yield, higher risk
securities, investment grade fixed-income securities and foreign
government and other foreign fixed-income securities. High-Yield
Opportunities Fund seeks to provide investors with total return and, as a
secondary objective, high current income.
U.S. Government Fund seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued
or guaranteed by the U.S. government, its agencies or instrumentalities
and instruments secured by such securities. U.S. Government Money Fund
seeks maximum current income with preservation of principal and
maintenance of liquidity by investing only in short-term securities issued
or guaranteed as to principal and interest by the U.S. government, its
agencies or instrumentalities, and repurchase agreements collateralized by
such securities, while maintaining a stable net asset value.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-
term money market instruments, while maintaining a stable net asset value.
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.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers.
Tax-Free Insured Fund invests in these same types of securities but with
an emphasis on municipal bonds protected by insurance guaranteeing
principal and interest are paid when due. Tax-Free USA Intermediate Fund
seeks a high level of current interest income exempt from federal income
tax, consistent with the preservation of capital by investing primarily in
municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from federal
income tax, by investing in short-term municipal obligations, while
maintaining a stable net asset value.
Tax-Free New Jersey Fund seeks a high level of current interest income
exempt from federal income tax and New Jersey state and local taxes,
consistent with preservation of capital. Tax-Free Ohio Fund seeks a high
level of current interest income exempt from federal income tax and Ohio
state and local taxes, consistent with preservation of capital. Tax-Free
Pennsylvania Fund seeks a high level of current interest income exempt
from federal income tax and Pennsylvania state and local taxes, consistent
with the preservation of capital.
International Equity Fund seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities
that provide the potential for capital appreciation and income. Global
Bond Fund seeks to achieve current income consistent with the preservation
of principal by investing primarily in global fixed-income securities that
may also provide the potential for capital appreciation. Global Assets
Fund seeks to achieve long-term total return by investing in global
securities which will provide higher current income than a portfolio
comprised exclusively of equity securities, along with the potential for
capital growth. Emerging Markets Fund seeks long-term capital
appreciation by investing primarily in equity securities of issuers
located or operating in emerging countries.
U.S. Growth Fund seeks to maximize capital appreciation by investing in
companies of all sizes which have low dividend yields, strong balance
sheets and high expected earnings growth rates relative to their industry.
Overseas Equity Fund seeks to maximize total return (capital appreciation
and income), principally through investments in an internationally
diversified portfolio of equity securities. New Pacific Fund seeks long-
term capital appreciation by investing primarily in companies which are
domiciled in or have their principal business activities in the Pacific
Basin.
Delaware Group Premium Fund, Inc. offers 15 funds available exclusively
as funding vehicles for certain insurance company separate accounts.
Decatur Total Return Series seeks the highest possible total rate of
return by selecting issues that exhibit the potential for capital
appreciation while providing higher than average dividend income.
Delchester Series seeks as high a current income as possible by investing
in rated and unrated corporate bonds, U.S. government securities and
commercial paper. Capital Reserves Series seeks a high stable level of
current income while minimizing fluctuations in principal by investing in
a diversified portfolio of short- and intermediate-term securities. Cash
Reserve Series seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term
money market instruments. DelCap Series seeks long-term capital
appreciation by investing its assets in a diversified portfolio of
securities exhibiting the potential for significant growth. Delaware
Series seeks a balance of capital appreciation, income and preservation of
capital. It uses a dividend-oriented valuation strategy to select
securities issued by established companies that are believed to
demonstrate potential for income and capital growth. International Equity
Series seeks long-term growth without undue risk to principal by investing
primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. Value Series seeks capital
appreciation by investing in small- to mid-cap common stocks whose market
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. Quantum 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.
Delaware-Voyageur US Government Securities Fund seeks to provide a high
level of current income consistent with the prudent investment risk by
investing in U.S. Treasury bills, notes, bonds, and other obligations
issued or unconditionally guaranteed by the full faith and credit of the
U.S. Treasury, and repurchase agreements fully secured by such
obligations.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the
Arizona personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Minnesota Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to provide
a high level of current income exempt from federal income tax and the
Minnesota personal income tax, consistent with preservation of capital.
The Fund seeks to reduce market risk by maintaining an average weighted
maturity from five to ten years.
Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the
California personal income tax, consistent with the preservation of
capital. Delaware-Voyageur Tax-Free Florida Insured Fund seeks to
provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to select
investments that will enable its shares to be exempt from the Florida
intangible personal property tax. Delaware-Voyageur Tax-Free Florida Fund
seeks to provide a high level of current income exempt from federal income
tax, consistent with the preservation of capital. The Fund will seek to
select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. Delaware-Voyageur Tax-Free
Kansas Fund seeks to provide a high level of current income exempt from
federal income tax, the Kansas personal income tax and the Kansas
Intangible personal property tax, consistent with the preservation of
capital. Delaware-Voyageur Tax-Free Missouri Insured Fund seeks to
provide a high level of current income exempt from federal income tax and
the Missouri personal income tax, consistent with the preservation of
capital. Delaware-Voyageur Tax-Free New Mexico Fund seeks to provide a
high level of current income exempt from federal income tax and the New
Mexico personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Oregon Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Oregon
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Utah Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Washington Insured
Fund seeks to provide a high level of current income exempt from federal
income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Intermediate 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. The Fund seeks to reduce market risk by
maintaining an average weighted maturity from five to ten years.
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level
of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-
Voyageur Tax-Free California Fund seeks to provide a high level of current
income exempt from federal income tax and the California personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-
Free Iowa Fund seeks to provide a high level of current income exempt from
federal income tax and the Iowa personal income tax, consistent with the
preservation of capital. Delaware- Voyageur Tax-Free Idaho Fund seeks to
provide a high level of current income exempt from federal income tax and
the Idaho personal income tax, consistent with the preservation of
capital. Delaware-Voyageur Minnesota High Yield Municipal Bond Fund seeks
to provide a high level of current income exempt from federal income tax
and the Minnesota personal income tax primarily through investment in
medium and lower grade municipal obligations. National High Yield
Municipal Fund seeks to provide a high level of income exempt from federal
income tax, primarily through investment in medium and lower grade
municipal obligations. Delaware-Voyageur Tax-Free New York Fund seeks to
provide a high level of current income exempt from federal income tax and
the personal income tax of the state of New York and the city of New York,
consistent with the preservation of capital. Delaware-Voyageur Tax-Free
Wisconsin Fund seeks to provide a high level of current income exempt from
federal income tax and the Wisconsin personal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high level
of current income exempt from federal income tax and the Colorado personal
income tax, consistent with the preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the
Fund, in seeking its objective, may receive current income from dividends
and interest, income is only an incidental consideration in the selection
of the Fund's investments. Growth Stock Fund has an objective of long-
term capital appreciation. The Fund seeks to achieve its objective from
equity securities diversified among individual companies and industries.
Tax-Efficient Equity Fund seeks to obtain for taxable investors a high
total return on an after-tax basis. The Fund will attempt to achieve this
objective by seeking to provide a high long-term after-tax total return
through managing its portfolio in a manner that will defer the realization
of accrued capital gains and minimize dividend income.
Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high level
of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free North Dakota Fund seeks to provide a high level
of current income exempt from federal income tax and the North Dakota
personal income tax, consistent with the preservation of capital.
For more complete information about any of the Delaware Group funds,
including charges and expenses, you can obtain a prospectus from the
Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
GENERAL INFORMATION
The Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of the other funds in
the Delaware Group. The Manager, through a separate division, also
manages private investment accounts. While investment decisions of the
Funds are made independently from those of the other funds and accounts,
investment decisions for such other funds and accounts may be made at the
same time as investment decisions for the Funds.
The Manager, or its affiliate Delaware International Advisers Ltd.,
also manages the investment options for Delaware Medallion(SM) III
Variable Annuity. Medallion is issued by Allmerica Financial Life
Insurance and Annuity Company (First Allmerica Financial Life Insurance
Company in New York and Hawaii). Delaware Medallion offers 15 different
investment series ranging from domestic equity funds, international equity
and bond funds and domestic fixed income funds. Each investment series
available through Medallion utilizes an investment strategy and discipline
the same as or similar to one of the Delaware Group mutual funds available
outside the annuity. See Delaware Group Premium Fund, Inc., above.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in Rule 17j-1 under the 1940 Act, who provide
services to the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions
subject to the exceptions set forth in Rule 17j-1 and the following
general restrictions and procedures: (1) certain blackout periods apply
to personal securities transactions of those persons; (2) transactions
must receive advance clearance and must be completed on the same day as
the clearance is received; (3) certain persons are prohibited from
investing in initial public offerings of securities and other restrictions
apply to investments in private placements of securities; (4) opening
positions may only be closed-out at a profit after a 60-day holding period
has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage
confirmations and account statements must be supplied to the Compliance
Officer.
The Distributor acts as national distributor for each Fund and for the
other mutual funds in the Delaware Group. As previously described, prior
to January 3, 1995, DDI served as the national distributor for Small Cap
Value Fund. The Distributor ("DDLP") (for all periods beginning January
3, 1995) and, in its capacity as such, DDI (prior to January 3, 1995)
received net commissions from Small Cap Value Fund and Retirement Income
Fund on behalf of Class A Shares, after reallowances to dealers, as
follows:
Fiscal Total Amount Amounts Net
Year of Underwriting Reallowed Commission
Ended Commission to Dealers to DDLP/DDI
- ----------------------------------------------------------------------
Small Cap Value Fund
November 30, 1997 $787,817 $654,991 $132,826
November 30, 1996 402,194 335,756 66,438
November 30, 1995 608,374 527,679 80,695
Retirement Income Fund
November 30, 1997 $-0- $-0- $-0-
The Distributor and, in its capacity as such, DDI received in the
aggregate Limited CDSC payments with respect to Class A Shares of Small
Cap Value Fund and Retirement Income Fund as follows:
Fiscal Year Ended Limited CDSC Payments
- -------------------------------------------------
Small Cap Value Fund
November 30, 1997 $-0-
November 30, 1996 -0-
November 30, 1995 218
Retirement Income Fund
November 30, 1997 $-0-
The Distributor and, in its capacity as such, DDI received in the
aggregate CDSC payments with respect to Class B Shares of Small Cap Value
Fund as follows:
Fiscal Year Ended CDSC Payments
- ---------------------------------------
November 30, 1997 $38,699
November 30, 1996 30,116
November 30, 1995 14,682
The Distributor received CDSC payments with respect to Class C Shares
of Small Cap Value Fund as follows:
Fiscal Year Ended CDSC Payments
- ---------------------------------------
November 30, 1997 $4,799
November 30, 1996 $56
November 30, 1995* -0-
*Date of initial public offering was November 29, 1995.
Effective as of January 3, 1995, all such payments described above have
been paid to the Distributor.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for each Fund and for
the other mutual funds in the Delaware Group. The Transfer Agent is paid
a fee by each Fund for providing these services consisting of an annual
per account charge of $5.50 plus transaction charges for particular
services according to a schedule. Compensation is fixed each year and
approved by the Board of Directors, including a majority of the
unaffiliated directors. The Transfer Agent also provides accounting
services to each Fund. Those services include performing all functions
related to calculating each Fund's net asset value and providing all
financial reporting services, regulatory compliance testing and other
related accounting services. For its services, the Transfer Agent is paid
a fee based on total assets of all funds in the Delaware Group for which
it provides such accounting services. Such fee is equal to 0.25%
multiplied by the total amount of assets in the complex for which the
Transfer Agent furnishes accounting services, where such aggregate complex
assets are $10 billion or less, and 0.20% of assets if such aggregate
complex assets exceed $10 billion. The fees are charged to each fund,
including each Fund, on an aggregate pro-rata basis. The asset-based fee
payable to the Transfer Agent is subject to a minimum fee calculated by
determining the total number of investment portfolios and associated
classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Equity Funds V, Inc.'s
advisory relationship with the Manager or its distribution relationship
with the Distributor, the Manager and its affiliates could cause Equity
Funds V, Inc. to delete the words "Delaware Group" from Equity Funds V,
Inc.'s name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245, is custodian of each Fund's securities and cash. As custodian
for a Fund, Chase maintains a separate account or accounts for the Fund;
receives, holds and releases portfolio securities on account of the Fund;
receives and disburses money on behalf of the Fund; and collects and
receives income and other payments and distributions on account of the
Fund's portfolio securities.
Capitalization
Equity Funds V, Inc. has a present authorized capitalization of one
billion shares of capital stock with a $.01 par value per share. The
Board of Directors has allocated shares to each fund as follows:
Small Cap Value Fund 350 million
Small Cap Value Fund A Class 150 million
Small Cap Value Fund B Class 100 million
Small Cap Value Fund C Class 50 million
Small Cap Value Fund Institutional Class 50 million
Retirement Income Fund 200 million
Retirement Income Fund A Class 100 million
Retirement Income Fund B Class 25 million
Retirement Income Fund C Class 25 million
Retirement Income Fund Institutional Class 50 million
Each Class of each Fund represents a proportionate interest in the
assets of that Fund, and each has the same voting and other rights and
preferences as the other classes except that shares of an Institutional
Class may not vote on any matter affecting a Fund Classes' 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 of each Fund may vote on any proposal to
increase materially the fees to be paid by a Fund under the Rule 12b-1
Plan relating to Class A Shares. General expenses of a Fund will be
allocated on a pro-rata basis to the classes according to asset size,
except that expenses of the Rule 12b-1 Plans of that Fund's Class A, Class
B and Class C Shares will be allocated solely to those classes. While
shares of Equity Funds V, Inc. have equal voting rights on matters
effecting both Funds, each Fund would vote separately on any matter which
it is directly affected by, such as any change in its own investment
objective and policy or action to dissolve the Fund and as otherwise
prescribed by the 1940 Act. Shares of each Fund have a priority in that
Fund's assets, and in gains on and income from the portfolios of that
Fund.
Prior to November 9, 1992, Equity Funds V, Inc. offered only one
series, now known as Value Fund, and one class of shares, Value Fund A
Class. Beginning November 9, 1992, Equity Funds V, Inc. began offering
Value Fund Institutional Class, beginning September 6, 1994, Equity Funds
V, Inc. began offering Value Fund B Class, and beginning November 29,
1995, Equity Funds V, Inc. began offering Value Fund C Class. Prior to
September 6, 1994, Value Fund A Class was known as the Value Fund class
and Value Fund Institutional Class was known as the Value Fund
(Institutional) class. Effective as of the close of business November 29,
1996, the name Delaware Group Value Fund, Inc. was changed to Delaware
Group Equity Funds V, Inc. Effective as of the close of business on July
31, 1997, the name of the Value Fund series changed to Small Cap Value
Fund series and the names of the Value Fund A Class, Value Fund B Class,
Value Fund C Class and Value Fund Institutional Class changed to Small Cap
Value Fund A Class, Small Cap Value Fund B Class, Small Cap Value Fund C
Class and Small Cap Value Fund Institutional Class, respectively.
All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above,
have equal voting rights.
Noncumulative Voting
Equity Funds V, Inc. shares have noncumulative voting rights which
means that the holders of more than 50% of the shares of Equity Funds V,
Inc. voting for the election of directors can elect all the directors if
they choose to do so, and, in such event, the holders of the remaining
shares will not be able to elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group
Equity Funds V, Inc. and, in its capacity as such, audits the annual
financial statements of the Funds. Each Fund's Statement of Net Assets,
Statement of Operations, Statements 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
November 30, 1997, are included in each Fund's Annual Reports to
shareholders. The financial statements and financial highlights,the
notes relating thereto and the reports of Ernst & Young LLP, listed
above are incorporated by reference from the Annual Reports into
this Part B.
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-
exempt funds, money market funds, global and international funds and
closed-end funds give investors the ability to create a portfolio that
fits their personal financial goals. For more information, shareholders
of the Fund Classes should contact their financial adviser or call
Delaware Group at 800-523-4640 and shareholders of the Institutional Class
should contact Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
DELAWARE GROUP EQUITY FUNDS V, INC.
SMALL CAP VALUE FUND (formerly Value Fund)
RETIREMENT INCOME FUND
A CLASS
B CLASS
C CLASS
INSTITUTIONAL CLASS
CLASSES OF DELAWARE GROUP
EQUITY FUNDS V, INC.
PART B
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 3, 1998
DELAWARE
GROUP
-----
PART C
Other Information
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statement of Net Assets
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Accountant's Report
* The financial statements and Accountant's Report listed above for
the Registrant's Small Cap Value Fund (formerly known as Value Fund) and
Retirement Income Fund are incorporated by reference into Part B from
the Registrant's Annual Report for the fiscal year ended November 30,
1997.
(b) Exhibits:
(1) Articles of Incorporation.
(a) Articles of Incorporation, as amended and supplemented
through November 28, 1995, incorporated into this filing by reference to
Post-Effective Amendment No. 13 filed September 14, 1995 and Post-
Effective Amendment No. 15 filed January 29, 1996.
(b) Executed Article Fourth of Articles Supplementary
(November 27, 1996) incorporated into this filing by reference to Post-
Effective Amendment No. 17 filed January 28, 1997.
(c) Executed Articles of Amendment (November 27,
1996) incorporated into this filing by reference to Post-Effective
Amendment No. 17 filed January 28, 1997.
(2) By-Laws. By-Laws, as amended through September 14,
1995, incorporated into this filing by reference to Post-Effective
Amendment No. 13 filed September 14, 1995.
(3) Voting Trust Agreement. Inapplicable.
(4) Copies of all Instruments Defining the Rights of
Holders.
(a) Articles of Incorporation, Articles of Amendment
and Articles Supplementary.
(i) Article Second of Articles Supplementary
(May 27, 1992 and September 6, 1994) and Article Fifth and Article
Eighth of Articles of Incorporation (January 16, 1987) incorporated into
this filing by reference to Post-Effective Amendment No. 13 filed
September 14, 1995 and Article Third of Articles Supplementary (November
28, 1995) incorporated into this filing by reference to Post-Effective
Amendment No. 15 filed January 29, 1996.
(ii) Executed Article Fourth of Articles
Supplementary (November 27, 1996) incorporated into this filing by
reference to Post-Effective Amendment No. 17 filed January 28, 1997.
(b) By-Laws. Article II, Article III, as amended,
and Article XIII, which was subsequently redesignated as Article XIV,
incorporated into this filing by reference to Post-Effective Amendment
No. 13 filed September 14, 1995.
(5) Investment Management Agreement.
(a) Investment Management Agreement between
Delaware Management Company, Inc. and the Registrant (April 3, 1995) on
behalf of Small Cap Value Fund (formerly known as Value Fund)
incorporated into this filing by reference to Post-Effective Amendment
No. 13 filed September 14, 1995.
(b) Executed Investment Management Agreement
(November 29, 1996) between Delaware Management Company, Inc. and the
Registrant on behalf of Retirement Income Fund incorporated into this
filing by reference to Post-Effective Amendment No. 17 filed January 28,
1997.
(6) (a) Distribution Agreement.
(i) Executed Distribution Agreement between
Delaware Distributors, L.P. and the Registrant (April 3, 1995) and
Amendment No. 1 to Distribution Agreement (November 29, 1995)
incorporated into this filing by reference to Post-Effective Amendment
No. 15 filed January 29, 1996.
(ii) Executed Distribution Agreement
(November 29, 1996) between Delaware
Distributors, L.P. and the Registrant
on behalf of Retirement Income Fund
incorporated into this filing by
reference to Post-Effective Amendment
No. 17 filed January 28, 1997.
(b) Administration and Service Agreement. Form
of Administration and Service Agreement (as amended November 1995)
incorporated into this filing by reference to Post-Effective Amendment
No. 15 filed January 29, 1996.
(c) Dealer's Agreement. Dealer's Agreement (as
amended November 1995) incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed January 29, 1996.
(d) Mutual Fund Agreement. Mutual Fund
Agreement for the Delaware Group of Funds (as amended November 1995)
incorporated into this filing by reference to Post-Effective Amendment
No. 15 filed January 29, 1996.
(7) Bonus, Profit Sharing, Pension Contracts. Amended and
Restated Profit Sharing Plan (November 17, 1994) incorporated into this
filing by reference to Post-Effective Amendment No. 13 filed September
14, 1995 and Amendment to Profit Sharing Plan (December 21, 1995)
incorporated into this filing by reference to Post-Effective Amendment
No. 15 filed January 29, 1996.
(8) Custodian Agreement.
(a) Executed Custodian Agreement (May 1, 1996)
between The Chase Manhattan Bank and the Registrant on behalf of Small
Cap Value Fund (formerly known as Value Fund) (Module) incorporated into
this filing by reference to Post-Effective Amendment No. 16 filed
September 13, 1996.
(i) Executed Amendment to Custodian
Agreement (November 29, 1996) between The Chase Manhattan Bank and the
Registrant on behalf of Retirement Income Fund incorporated into this
filing by reference to Post-Effective Amendment No. 18 filed April 30,
1997.
(b) Form of Securities Lending Agreement between
The Chase Manhattan Bank and the Registrant on behalf of Small Cap
Value Fund (formerly known as Value Fund) incorporated into this filing
by reference to Post-Effective Amendment No. 16 filed September 13, 1996.
(c) Form of Securities Lending Agreement (1996)
between The Chase Manhattan Bank and the Registrant on behalf of Retirement
Income Fund incorporated into this filing by reference to Post-Effective
Amendment No. 17 filed January 28, 1997.
(d) Amendment to Executed Custodian Agreement
(November 20,1997) between The Chase Manhattan Bank and the Registrant on
behalf of Small Cap Value Fund and Retirement Income Fund attached as
Exhibit.
(9) Other Material Contracts.
(a) Executed Amended and Restated Shareholders
Services Agreement (November 29, 1996) between Delaware Service Company,
Inc. and the Registrant on behalf of Small Cap Value Fund (formerly
known as Value Fund) and Retirement Income Fund incorporated into this
filing by reference to Post-Effective Amendment No. 17 filed January 28,
1997.
(i) Schedule A to Shareholders Services
Agreement incorporated into this filing by reference to Post-Effective
Amendment No. 19 filed November 28, 1997.
(ii) Schedule A to Shareholders Services
Agreement incorporated into this filing by reference to Post-Effective
Amendment No. 19 filed November 28, 1997.
(iii) Schedule A to Shareholders Services
Agreement incorporated into this filing by reference to Post-Effective
Amendment No. 19 filed November 28, 1997.
(b) Executed Delaware Group of Funds Fund
Accounting Agreement (August 19, 1996) between Delaware Service Company,
Inc. and the Registrant on behalf of Small Cap Value Fund (formerly known
as Value Fund)and Retirement Income Fund incorporated into this filing by
reference to Post-Effective Amendment No. 17 filed January 28, 1997.
(10) Opinion and Consent of Counsel. Inapplicable.
(11) Consent of Auditors. Consent and Report of Auditors
attached as Exhibit.
(12) Inapplicable.
(13) Undertaking of Initial Shareholder. Incorporated
into this filing by reference to Pre-Effective Amendment No. 2 filed
June 17, 1987.
(14) Model Plans. Incorporated into this filing by
reference to Post-Effective Amendment No. 9 filed January 29, 1993,
Post-Effective Amendment No. 10 filed January 28, 1994 and Post-
Effective Amendment No. 13 filed September 14, 1995.
**(15) Plans under Rule 12b-1.
(a) Plan under Rule 12b-1 for Class A (November
29, 1995) on behalf of Small Cap Value Fund (formerly known as Value
Fund) incorporated into this filing by reference to Post-Effective
Amendment No. 15 filed January 29, 1996.
(b) Plan under Rule 12b-1 for Class B (November
29, 1995) on behalf of Small Cap Value Fund (formerly known as Value
Fund) incorporated into this filing by reference to Post-Effective
Amendment No. 15 filed January 29, 1996.
(c) Plan under Rule 12b-1 for Class C (November
29, 1995) on behalf of Small Cap Value Fund (formerly known as Value
Fund) incorporated into this filing by reference to Post-Effective
Amendment No. 15 filed January 29, 1996.
(d) Plan under Rule 12b-1 for Class A (November
29, 1996) on behalf of Retirement Income Fund incorporated into this
filing by reference to Post-Effective Amendment No. 17 filed January 28,
1997.
(e) Plan under Rule 12b-1 for Class B (November
29, 1996) on behalf of Retirement Income Fund incorporated into
this filing by reference to Post-Effective Amendment No. 17 filed
January 28, 1997.
(f) Plan under Rule 12b-1 for Class C (November
29, 1996) on behalf of Retirement Income Fund incorporated into this
filing by reference to Post-Effective Amendment No. 17 filed January 28,
1997.
** Relates to Small Cap Value Fund's and Retirement Income Fund's retail
classes of shares only.
(16) Schedules of Computation for each Performance
Quotation.
(a) Incorporated into this filing by reference to
Post-Effective Amendment No. 13 filed September 14, 1995, Post-Effective
Amendment No. 15 filed January 29, 1996, Post-Effective Amendment No. 16
filed September 13, 1996, Post-Effective Amendment No. 17 filed January
28, 1997 and Post-Effective Amendment No. 18 filed April 30, 1997.
(b) Schedule of Computation for periods not
previously filed attached as Exhibit.
(17) Financial Data Schedules.
(a) Incorporated into this filing by reference
to Post-Effective Amendment No. 17 filed January 28, 1997 and
Post-Effective Amendment No. 18 filed April 30, 1997.
(18) Plan under Rule 18f-3.
(a) Amended Rule 18f-3 Plan incorporated
into this filing by reference to Post-Effective Amendment No. 19 filed
November 28, 1997.
(b) Amended Appendix A (December 18, 1997)
to Rule 18f-3 Plan attached as Exhibit.
(19) Other: Directors' Power of Attorney.
(a) Incorporated into this filing by
reference to Post-Effective Amendment No. 13 filed September 14, 1995.
(b) Power of Attorney for Thomas F. Madison
and Jeffrey J. Nick incorporated into this filing by reference to Post-
Effective Amendment No. 19 filed November 28, 1997.
(c) Directors' Power of Attorney attached as
Exhibit.
Item 25. Persons Controlled by or under Common Control with
Registrant. None.
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
Delaware Group Equity Funds V, Inc.'s
Small Cap Value Fund:
Small Cap Value Fund (formerly known
as Value Fund) A Class
Common Stock Par Value 15,582 Accounts as of
$.01 Per Share December 31, 1997
Small Cap Value Fund (formerly known
as Value Fund) B Class
Common Stock Par Value 3,739 Accounts as of
$.01 Per Share December 31, 1997
Small Cap Value Fund (formerly known
as Value Fund) C Class
Common Stock Par Value 628 Accounts as of
$.01 Per Share December 31, 1997
Small Cap Value Fund (formerly known
as) Institutional Class
Common Stock Par Value 50 Accounts as of
$.01 Per Share December 31, 1997
Delaware Group Equity Funds V, Inc.'s
Retirement Income Fund:
Retirement Income Fund A Class
Common Stock Par Value 5 Account as of
$.01 Per Share December 31, 1997
Retirement Income Fund B Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share December 31, 1997
Retirement Income Fund C Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share December 31, 1997
Retirement Income Fund
Institutional Class
Common Stock Par Value 5 Accounts as of
$.01 Per Share December 31, 1997
Item 27. Indemnification. Incorporated into this filing by
reference to initial Registration Statement filed January 23, 1987 and
Article VII of the By-Laws, as amended, incorporated into this filing by
reference to Post-Effective Amendment No. 13 filed September 14, 1995.
Item 28. Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. (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
Group (Delaware Group Equity Funds I, Inc., Delaware Group Equity Funds
II, Inc., Delaware Group Equity Funds III, Inc., Delaware Group Equity
Funds IV, Inc., Delaware Group Government Fund, Inc., Delaware Group
Foundation Funds, Delaware Group Income Funds, Inc., Delaware Group
Limited-Term Government Funds, Inc., Delaware Group Cash Reserve, Inc.,
Delaware Group Tax-Free Fund, Inc., Delaware Group State Tax-Free Income
Trust, Delaware Group Tax-Free Money Fund, Inc., Delaware Group Premium
Fund, Inc., Delaware Group Global & International Funds, Inc., Delaware
Pooled Trust, Inc., Delaware Group Adviser Funds, Inc., Delaware Group
Dividend and Income Fund, Inc., Delaware Group Global Dividend and
Income Fund, Inc., Voyageur Tax-Free Funds, Inc., Voyageur Intermediate
Tax-Free Funds, Inc., Voyageur Insured Funds, Inc., Voyageur Funds,
Inc., Voyageur Investment Trust, Voyageur Investment Trust II, Voyageur
Mutual Funds, Inc., Voyageur Mutual Funds II, Inc., Voyageur Mutual
Funds III, Inc., Voyageur Arizona Municipal Income Fund, Inc., Voyageur
Colorado Insured Municipal Income Fund, Inc., Voyageur Florida Insured
Municipal Income Fund, Voyageur Minnesota Municipal Fund, Inc., Voyageur
Minnesota Municipal Fund II, Inc. and Voyageur Minnesota Municipal Fund
III, Inc.) and provides investment advisory services to institutional
accounts, primarily retirement plans and endowment funds. In addition,
certain directors of the Manager also serve as directors/trustees of the
other Delaware Group funds, and certain officers are also officers of
these other funds. A company owned by the Manager's parent company acts
as principal underwriter to the mutual funds in the Delaware Group (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 Group.
The following persons serving as directors or officers of the
Manager have held the following positions during the past two years:
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Wayne A. Stork
Chairman of the Board, President, Chief
Executive Officer, Chief Investment Officer and Director of Delaware
Management Company, Inc.; Chairman of the Board, President, Chief
Executive Officer and Director of DMH Corp., Delaware Distributors,
Inc. and Founders Holdings, Inc.; Chairman, Chief Executive Officer and
Director of Delaware International Holdings Ltd. and Delaware
International Advisers Ltd.; Chairman of the Board and Director of the
Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc. and Delaware Capital Management, Inc.;
Chairman of Delaware Distributors, L.P.; President and Chief Executive
Officer of Delvoy, Inc.; and Director of Delaware Service Company, Inc.
and Delaware Investment & Retirement Services, Inc.
Richard G. Unruh, Jr.
Executive Vice President and Director of
Delaware Management Company, Inc.; Executive Vice President of the
Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc. and Delaware Capital Management, Inc; and
Director of Delaware International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance
Company since 1989, 2040 Market Street, Philadelphia, PA; Board of
Directors, Chairman of Finance Committee, AAA Mid Atlantic, Inc. since
1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Metron,
Inc. since 1995, 11911 Freedom Drive, Reston, VA
Paul E. Suckow
Executive Vice President/Chief Investment Officer,
Fixed Income of Delaware Management Company, Inc., the Registrant, each
of the other funds in the Delaware Group and Delaware Management
Holdings, Inc.; Executive Vice President and Director of Founders
Holdings, Inc.; Executive Vice President of Delaware Capital Management,
Inc.; and Director of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ ------------------------------------------------
David K. Downes
Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Director of Delaware Management
Company, Inc., DMH Corp, Delaware Distributors, Inc., Founders Holdings,
Inc. and Delvoy, Inc.; Executive Vice President, Chief Operating Officer
and Chief Financial Officer of the Registrant and each of the other
funds in the Delaware Group, Delaware Management Holdings, Inc.,
Founders CBO Corporation, Delaware Capital Management, Inc. and Delaware
Distributors, L.P.; President, Chief Executive Officer, Chief Financial
Officer and Director of Delaware Service Company, Inc.; President, Chief
Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.; Chairman, Chief Executive Officer and
Director of Delaware Investment & Retirement Services, Inc.; Chairman
and Director of Delaware Management Trust Company; Director of Delaware
International Advisers Ltd.; and Vice President of Lincoln Funds
Corporation
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8
Clayton Place, Newtown Square, PA
George M. Chamberlain, Jr.
Senior Vice President, General Counsel,
Secretary and Director of Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Founders
Holdings, Inc., Delaware Capital Management, Inc., Delaware Investment &
Retirement Services, Inc. and Delvoy, Inc.; Senior Vice President,
Secretary and General Counsel of the Registrant, each of the other funds
in the Delaware Group, Delaware Distributors, L.P. and Delaware
Management Holdings, Inc.; Senior Vice President and Director of
Delaware International Holdings Ltd.; Executive Vice President,
Secretary, General Counsel and Director of Delaware Management Trust
Company; Director of Delaware International Advisers Ltd.; Secretary of
Lincoln Funds Corporation
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richard J. Flannery
Senior Vice President/Corporate and
International Affairs of the Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware
Distributors, L.P., Delaware Management Trust Company, Delaware Capital
Management, Inc., Delaware Service Company, Inc. and Delaware Investment
& Retirement Services, Inc.; Executive Vice Presidnet/Corporate &
International Affairs and Director of Delaware International Holdings
Ltd.; Senior Vice President/ Corporate and International Affairs and
Director of Founders Holdings, Inc. and Delvoy, Inc.; Senior Vice
President of Founders CBO Corporation; and Director of Delaware
International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd.,
Elverton, PA; Director and Member of Executive Committee of Stonewall
Links, Inc. since 1991, Bulltown Rd., Elverton, PA.
Michael P. Bishof
Senior Vice President and Treasurer of the
Registrant, each of the other funds in the Delaware Group and Founders
Holdings, Inc.; Senior Vice President/Investment Accounting of Delaware
Management Company, Inc. and Delaware Service Company, Inc.; Senior Vice
President and Treasurer/ Manager, Investment Accounting of Delaware
Distributors, L.P.; Assistant Treasurer of Founders CBO Corporation; and
Senior Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Joseph H. Hastings
Senior Vice President/Corporate Controller
and Treasurer of Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware Capital
Management, Inc., Delaware Distributors, L.P., Delaware Service Company,
Inc., Delaware International Holdings Ltd. and Delvoy, Inc.; Senior
Vice President/Corporate Controller of the Registrant, each of the other
funds in the Delaware Group and Founders Holdings, Inc.; Executive Vice
President, Chief Financial Officer and Treasurer of Delaware Management
Trust Company; Chief Financial Officer and Treasurer of Delaware
Investment & Retirement Services, Inc.; Senior Vice President/Assistant
Treasurer of Founders CBO Corporation; and Treasurer of Lincoln Funds
Corporation.
Michael T. Taggart
Senior Vice President/Facilities Management
and Administrative Services of Delaware Management Company, Inc.
Douglas L. Anderson
Senior Vice President/Operations of
Delaware Management Company, Inc., Delaware Investment and Retirement
Services, Inc. and Delaware Service Company, Inc.; Senior Vice
President/ Operations and Director of Delaware Management Trust Company
James L. Shields
Senior Vice President/Chief Information
Officer of Delaware Management Company, Inc., Delaware Service Company,
Inc. and Delaware Investment & Retirement Services, Inc.
Eric E. Miller
Vice President, Assistant Secretary and
Deputy General Counsel of the Registrant and each of the other funds in
the Delaware Group, Delaware Management Company, Inc., Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Founders Holdings, Inc., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services, Inc.;
and Vice President and Assistant Secretary of Delvoy, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
Richelle S. Maestro
Vice President and Assistant Secretary of
Delaware Management Company, Inc., the Registrant, each of the other
funds in the Delaware Group, Delaware Management Holdings, Inc.,
Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware
Service Company, Inc., DMH Corp., Delaware Management Trust Company,
Delaware Capital Management, Inc., Delaware Investment & Retirement
Services, Inc. and Founders Holdings, Inc.; Secretary of Founders CBO
Corporation; and Assistant Secretary of Delaware International Holdings
Ltd.
Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane,
Philadelphia, PA
Richard Salus1
Vice President/Assistant Controller of
Delaware Management Company, Inc. and Delaware Management Trust Company
Bruce A. Ulmer
Vice President/Director of LNC Internal
Audit of Delaware Management Company, Inc., the Registrant, each of the
other funds in the Delaware Group, Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Trust Company and Delaware Investment &
Retirement Services, Inc.; Vice President/Director of Internal Audit of
Delvoy, Inc.
Steven T. Lampe2
Vice President/Taxation of Delaware Management
Company, Inc., the Registrant, each of the other funds in the Delaware
Group, Delaware Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Management Trust Company, Founders Holdings,
Inc., Founders CBO Corporation, Delaware Capital Management, Inc.,
Delaware Investment & Retirement Services, Inc. and Delvoy, Inc.
Christopher Adams3
Vice President/Strategic Planning of
Delaware Management Company, Inc. and Delaware Service Company, Inc.
Susan L. Hanson
Vice President/Strategic Planning of Delaware
Management Company, Inc. and Delaware Service Company, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ ------------------------------------------------
Dennis J. Mara4
Vice President/Acquisitions of Delaware
Management Company, Inc.
Scott Metzger
Vice President/Business Development of
Delaware Management Company, Inc. and Delaware Service Company, Inc.
Lisa O. Brinkley
Vice President/Compliance of Delaware
Management Company, Inc., the Registrant, each of the other funds in the
Delaware Group, DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware Capital Management, Inc. and Delaware Investment
& Retirement Services, Inc.; Vice President of Delvoy, Inc.
Rosemary E. Milner
Vice President/Legal Registrations of
Delaware Management Company, Inc., the Registrant, each of the other
funds in the Delaware Group, Delaware Distributors, L.P. and Delaware
Distributors, Inc.
Mary Ellen Carrozza
Vice President/Client Services of Delaware
Management Company, Inc. and the Registrant
Gerald T. Nichols
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the tax-exempt funds, the
fixed income funds and the closed-end funds in the Delaware Group; Vice
President of Founders Holdings, Inc.; and Treasurer, Assistant Secretary
and Director of Founders CBO Corporation
Paul A. Matlack
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the tax-exempt funds, the
fixed income funds and the closed-end funds in the Delaware Group; Vice
President of Founders Holdings, Inc.; and President and Director of
Founders CBO Corporation.
Gary A. Reed
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the tax-exempt funds and the
fixed income funds in the Delaware Group and Delaware Capital
Management, Inc.
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -------------------------------------------------
Patrick P. Coyne
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the tax-exempt funds and the
fixed income funds in the Delaware Group and Delaware Capital
Management, Inc.
Roger A. Early
Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., each of the tax-exempt funds and the fixed
income funds in the Delaware Group
Mitchell L. Conery5
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of the tax-exempt and
fixed income funds in the Delaware Group
George H. Burwell
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the Registrant and each of the equity
funds in the Delaware Group
John B. Fields
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the Registrant and each of the equity
funds in the Delaware Group and Delaware Capital Management, Inc.
Gerald S. Frey6
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the Registrant and each of the equity
funds in the Delaware Group
Christopher Beck7
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the Registrant and each of the
equity funds in the Delaware Group
Elizabeth H. Howell8
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and the Delaware-Voyageur Tax-Free
Minnesota Intermediate, Delaware-Voyageur Minnesota Insured, Delaware-
Voyageur Tax-Free Minnesota, Delaware-Voyageur Tax-Free Idaho, Delaware-
Voyageur Tax-Free Kansas, Delaware-Voyageur Tax-Free Missouri, Delaware-
Voyageur Tax-Free Oregon, Delaware-Voyageur Tax-Free Washington,
Delaware-Voyageur Tax-Free Iowa and Delaware-Voyageur Tax-Free Wisconin
Funds.
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------- -----------------------------------------------
Andrew M. McCullagh9
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and the Delaware-Voyageur Tax-Free
Arizona Insured, Delaware-Voyageur Tax-Free Arizona, Delaware-Voyageur
Tax-Free California Insured, Delaware-Voyageur Tax-Free Colorado,
Delaware-Voyageur Tax-Free New Mexico, Delaware-Voyageur Tax-Free North
Dakota and Delaware-Voyageur Tax-Free Utah Funds.
Babak Zenouzi
Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the Registrant and each of the equity
funds and the closed-end funds in the Delaware Group
Paul Grillo
Vice President/Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each of the tax-exempt and
fixed income funds in the Delaware Group
Marshall T. Bassett
Vice President/Portfolio Manager of Delaware
Management Company, Inc. and each of the equity funds in the
Delaware Group
John Heffern
Vice President/Portfolio Manager of Delaware
Management Company, Inc. and each of the equity funds in the Delaware
Group
1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 TAX MANAGER, Price Waterhouse LLP prior to October 1995.
3 SENIOR ASSOCIATE, FAS, Coopers & Lybrand LLP prior to October
1995.
4 CORPORATE CONTROLLER, IIS prior to July 1997 and DIRECTOR,
FINANCIAL PLANNING, Decision One prior to March 1996.
5 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
6 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June
1996.
7 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May
1997.
8 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to
May 1997.
9 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset
Management LLC prior to May 1997.
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter
for all the mutual funds in the Delaware Group.
(b) Information with respect to each director, officer or
partner of principal underwriter:
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Wayne A. Stork Chairman Chairman
Bruce D. Barton President and Chief None
Executive Officer
David K. Downes Senior Vice President, Executive Vice Chief
and Chief Financial Administrative Officer
Officer President/Chief Operating
Officer/Chief Financial
Officer
George M. Chamberlain Jr. Senior Vice President Senior Vice President/
/Secretary/ Secretary/General
General Counsel Counsel
Terrence P. Cunningham Senior Vice President/ None
Financial Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Dana B. Hall Senior Vice President/ None
Key Accounts
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
Mac McAuliffe Senior Vice President/ None
Sales Manager, Western
Division
William F. Hostler Senior Vice President/ None
Marketing Services
J. Chris Meyer Senior Vice President/ None
Director Product
Management
Stephen H. Slack Senior Vice President/ None
Wholesaler
William M. Kimbrough Senior Vice President/ None
Wholesaler
Daniel J. Brooks Senior Vice President/ None
Wholesaler
Richard J. Flannery Senior Vice President/ Senior Vice President/
Corporate and Corporate and
International Affairs International Affairs
Bradley L. Kolstoe Senior Vice President/ None
Western Division
Sales Manager
Henry W. Orvin Senior Vice President/ None
Eastern Division Sales
Manager - Wire/ Regional Channel
Michael P. Bishof Senior Vice President Senior Vice
and Treasurer/ President/Treasurer
Manager, Investment
Accounting
Eric E. Miller Vice President/Assistant Vice President
Secretary/ Assistant Secretary/
Deputy General Counsel Deputy General Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Steven T. Lampe Vice President/Taxation Vice President/Taxation
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
Joseph H. Hastings Vice President/Corporate Senior Vice
Controller & Treasurer President/
Corporate Controller
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice
Registrations President/Legal
Registrations
Daniel H. Carlson Vice President/ None
Strategic Marketing
Diane M. Anderson Vice President/ None
Plan Record Keeping
and Administration
Anthony J. Scalia Vice President/Defined None
Contribution
Sales, SW Territory
Courtney S. West Vice President/Defined None
Contribution Sales,
NE Territory
Denise F. Guerriere Vice President/Client None
Services
Gordon E. Searles Vice President/Client None
Services
Julia R. Vander Els Vice President/ None
Participant Services
Jerome J. Alrutz Vice President/Retail None
Sales
Joanne A. Mettenheimer Vice President/New None
Business Development
Scott Metzger Vice President/Business Vice
Development President/Business
Development
Stephen C. Hall Vice President/ None
Institutional Sales
Gregory J. McMillan Vice President/ None
National Accounts
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis Vice President/Product None
Development
Andrew W. Whitaker Vice President/ None
Financial Institutions
Jesse Emery Vice President/ None
Marketing
Communications
Darryl S. Grayson Vice President, Broker/ None
Dealer Internal
Sales
Susan T. Friestedt Vice President/Client None
Service
Dinah J. Huntoon Vice President/Product None
Manager Equity
Soohee Lee Vice President/Fixed None
Income Product
Management
Michael J. Woods Vice President/ UIT None
Product Management
Ellen M. Krott Vice President/ None
Marketing
Dale L. Kurtz Vice President/ None
Marketing Support
Holly W. Reimel Vice President/Manager, None
Key Accounts
David P. Anderson Vice President/ None
Wholesaler
Lee D. Beck Vice President/ None
Wholesaler
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
Gabriella Bercze Vice President/ None
Wholesaler
Terrence L. Bussard Vice President/ None
Wholesaler
William S. Carroll Vice President/ None
Wholesaler
William L. Castetter Vice President/ None
Wholesaler
Thomas J. Chadie Vice President/ None
Wholesaler
Thomas C. Gallagher Vice President/ None
Wholesaler
Douglas R. Glennon Vice President/ None
Wholesaler
Ronald A. Haimowitz Vice President/ None
Wholesaler
Christopher L. Johnston Vice President/ None
Wholesaler
Michael P. Jordan Vice President/ None
Wholesaler
Jeffrey A. Keinert Vice President/ None
Wholesaler
Thomas P. Kennett Vice President/ None
Wholesaler
Debbie A. Marler Vice President/ None
Wholesaler
Nathan W. Medin Vice President/ None
Wholesaler
Roger J. Miller Vice President/ None
Wholesaler
Patrick L. Murphy Vice President/ None
Wholesaler
Stephen C. Nell Vice President/ None
Wholesaler
Julia A. Nye Vice President/ None
Wholesaler
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
Joseph T. Owczarek Vice President/ None
Wholesaler
Mary Ellen Vice President/ None
Pernice-Fadden Wholesaler
Mark A. Pletts Vice President/ None
Wholesaler
Philip G. Rickards Vice President/ None
Wholesaler
Laura E. Roman Vice President/ None
Wholesaler
Linda Schulz Vice President/ None
Wholesaler
Edward B. Sheridan Vice President/ None
Wholesaler
Robert E. Stansbury Vice President/ None
Wholesaler
Julia A. Stanton Vice President/ None
Wholesaler
Larry D. Stone Vice President/ None
Wholesaler
Edward J. Wagner Vice President/ None
Wholesaler
Wayne W. Wagner Vice President/ None
Wholesaler
John A. Wells Vice President/ None
Marketing Technology
Scott Whitehouse Vice President/ None
Wholesaler
(c) Not Applicable.
* Business address of each is 1818 Market Street, Philadelphia, PA
19103.
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818 Market
Street, Philadelphia, PA 19103 or One Commerce Square, Philadelphia, PA
19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each
person to whom a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and without charge.
(d) The Registrant hereby undertakes to promptly call
a meeting of shareholders for the purpose of voting upon the question of
removal of any director when requested in writing to do so by the record
holders of not less than 10% of the outstanding shares.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Registrant certifies that it meet
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 27th day of January 1998.
DELAWARE GROUP EQUITY FUNDS V, INC.
By /s/ Wayne A. Stork
-------------------
Wayne A. Stork
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
Signature Title Date
- ----------------------- ------------------------- -----------------
/s/ Wayne A. Stork Chairman and Director January 27, 1998
- -----------------------
Wayne A. Stork
Executive Vice President
/Chief Operating Officer/
Chief Financial Officer
/s/ David K. Downes (Principal Financial
- ----------------------- Officer and Principal
David K. Downes Accounting Officer) January 27, 1998
/s/Walter P. Babich * Director January 27, 1998
- -----------------------
Walter P. Babich
/s/Anthony D. Knerr * Director January 27, 1998
- -----------------------
Anthony D. Knerr
/s/ Ann R. Leven * Director January 27, 1998
- -----------------------
Ann R. Leven
/s/ W. Thacher Longstreth * Director January 27, 1998
- -----------------------
W. Thacher Longstreth
/s/ Thomas F. Madison * Director January 27, 1998
- -----------------------
Thomas F. Madison
/s/ Jeffrey J. Nick * Director January 27, 1998
- -----------------------
Jeffrey J. Nick
/s/ Charles E. Peck * Director January 27, 1998
- -----------------------
Charles E. Peck
*By /s/ Wayne A. Stork
-----------------------
Wayne A. Stork
as Attorney-in-Fact
for each of the persons indicated
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDEX TO EXHIBITS
Exhibit No. Exhibit
EX-99.B8D Amendment to the Custodian Agreement (November 20, 1997)
between The Chase Manhattan Bank and the Registrant on
behalf of Small Cap Value Fund and Retirement Income Fund
EX-99.B11 Consent and Report of Auditors
EX-99.16B Schedules of Computation
EX-99.B18B Amended Appendix A (December 18, 1997) to Rule 18f-3 Plan
EX-99.B19C Directors' Power of Attorney
EX-27 Financial Data Schedules
EX-99.B8D
Exhibit 24(b)(8)(d)
AMENDMENT, dated November 20, 1997 to the May 1, 1996 custody
agreement ("Agreement"), between those registered investment
companies listed on Schedule A to the Agreement (each a "Customer"),
having a place of business at 1818 Market Street, Philadelphia, PA
19103 and The Chase Manhattan Bank ("Bank"), having a place of
business at 270 Park Ave., New York, N.Y. 10017-2070.
It is hereby agreed as follows:
Section 1. Except as modified hereby, the Agreement is
confirmed in all respects. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the
Agreement.
Section 2. The Agreement is amended by deleting the mutual fund
rider thereto and inserting, in lieu thereof, the following mutual
fund rider:
1. Add a new Section 15 to the Agreement as follows:
15. Compliance with SEC rule 17f-5 ("Rule 17f-5").
(a) Customer's board of directors (or equivalent body)
(hereinafter "Board") hereby delegates to Bank, and Bank hereby
accepts the delegation to it, of the obligation to perform as
Customer's "Foreign Custody Manager" (as that term is defined in Rule
17f-5(a)(2)) adopted under the Investment Company Act of 1940
("Act"), as amended ("1940 Act"), the following responsibilities in a
manner consistent with Rule 17f-5, to: (i) select Eligible Foreign
Custodians (as that term is defined in Rule 17f-5(a)(1), and as the
same may be amended from time to time, or that have otherwise been
made exempt pursuant to an SEC exemptive order); (ii) enter into
written contracts with such Eligible Foreign Custodians that are
banks or trust companies and with Eligible Foreign Custodians that
are "Securities Depositories" (as defined in Rule 17f-5(a)(6)) and
that are not Compulsory Depositories (as defined below) where the
Depository has such a contract; and (iii) to monitor the
appropriateness of maintaining Assets of the series of the Customer
with such Eligible Foreign Custodians; provided that, Bank shall not
be responsible for these duties with respect to any compulsory
Securities Depository ("Compulsory Depository"). A Compulsory
Depository shall mean a Securities Depository or clearing agency the
use of which is compulsory because: (1) its use is required by law
or regulation or (2) maintaining securities outside the depository
is not consistent with prevailing custodial practices in the country
which the Depository serves. Compulsory Depositories used by Chase
as of the date hereof are set forth in Appendix 1-A hereto.
Appendix 1-A may be amended on notice to Customer from time to time.
In that connection, Bank shall notify Customer promptly of pending
changes to Appendix 1-A.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports to Customer's Board upon the placement of
Assets with a particular Eligible Foreign Custodian and of any
Material Change (as defined below) in the arrangements with such
Eligible Foreign Custodians, with such reports to be provided to
Customer's Board at such times as the Board deems reasonable and
appropriate based on the circumstances of Customer's foreign custody
arrangements (and until further notice from Customer such reports
shall be provided within 30 days after Bank becomes aware of any
such Material Change. For purposes of the foregoing, a Material
Change shall include, but shall not be limited to, Bank's decision
to remove Customer's Assets from a particular Eligible Foreign
Custodian, an event that has a material adverse affect on an
Eligible Foreign Custodian's financial or operational strength, any
non-compliance by an Eligible Foreign Custodian with a "Material
Term" of Bank's subcustodian agreement with such Eligible Foreign
Custodian (as defined below) or any failure by an Eligible Foreign
Custodian to meet the requirements for its status as such under Rule
17f-5. A Material Term shall mean a term which provides that (a)
the Customer will be adequately indemnified or its Assets adequately
insured, or an adequate combination thereof, in the event of loss;
(b) the Assets of the Series will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of an
Eligible Foreign Custodian or such Eligible Foreign Custodian's
creditors, except a claim of payment for their safe custody or
administration, or in the case of cash deposits, liens or rights in
favor of creditors of the Eligible Foreign Custodian arising under
bankruptcy, insolvency or similar laws; (c) beneficial ownership for
the Assets of the Series will be freely transferable without the
payment of money or value other than for safe custody or
administration of the Assets of the Series; (d) adequate records
will be maintained identifying the Assets as belonging to the
Customer or the Series or as being held by a third party for the
benefit of the Customer or the Series; (e) the independent auditors
for the Customer will be given access to those records or
confirmation of the contents of those records; and (f) the Customer
will receive periodic reports with respect to the safekeeping of the
Series' Assets, including, but not necessarily limited to,
notification of any transfer to or from the Customer's account or a
third party account containing Assets held for the benefit of the
Customer. In addition, in the event that a contract with an
Eligible Foreign Custodian does not include any or all of the terms
described in (a) through (f) of this paragraph 15(b)(i), a Material
Term shall mean a term which, in the Bank's judgment, if not
complied with, would cause the contract not to provide the same or
greater level of care and protection for Customer's Assets than if
the contract contained the provisions described in (a) through (f)
of this paragraph 15(b)(i).
(ii) exercise such reasonable care, prudence and diligence in
performing as Customer's Foreign Custody Manager as a person having
responsibility for the safekeeping of Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have
determined that Assets placed and maintained in the safekeeping of
such Eligible Foreign Custodian shall be subject to reasonable care,
based on the standards applicable to custodians in the relevant
market, after having considered all factors relevant to the
safekeeping of such Assets, including, without limitation, those
factors set forth in Rule 17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodian that is
a Securities Depository or clearing agency, such contract, the rules
or established practices or procedures of the depository, or any
combination of the foregoing) requires that the Eligible Foreign
Custodian will provide reasonable care for Assets based on the
standards applicable to custodians in the relevant market.
(v) have established a system to monitor the continued
appropriateness of maintaining Assets with particular Eligible
Foreign Custodians based on the standards set forth herein and of the
governing contractual arrangements based on the standards set forth
in Rule 17f-5(c)(2), as it may be amended from time to time.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and
maintain Assets on behalf of Customer with Eligible Foreign
Custodians pursuant to a written contract which either contains the
terms described in Rule 17f-5(c)(2)(i) or which, in lieu of any or
all of the terms described in Rule 17f-5(c)(2)(i), contains such
other provisions which the Bank determines will provide in their
entirety, the same or a greater level of care and protection for the
Customer's Assets as the provisions of Rule 17f-5(c)(2)(i) in their
entirety. The written contract shall be in such form as deemed
appropriate by Bank. In addition, with respect to Eligible Foreign
Custodians that are non-compulsory Securities Depositories, reliance
may be had on such a contract, the rules or established practices and
procedures of such Depository or any combination thereof.
(c) Except as expressly provided herein, Customer shall be
solely responsible to assure that the maintenance of Assets hereunder
complies with the rules, regulations, interpretations and exemptive
orders promulgated by or under the authority of the SEC which are
applicable to Fund's business or which have been granted to Fund.
Bank shall advise Customer of any exemptive orders which it obtains
which may have an impact on Bank's relationship with Customer.
(d) Bank represents to Customer that it is a U.S. Bank as
defined in Rule 17f-5(a)(7). Customer represents to Bank that: (1)
the Assets being placed and maintained in Bank's custody are subject
to the 1940 Act, as the same may be amended from time to time; (2)
its Board has determined that it is reasonable to rely on Bank to
perform as Customer's Foreign Custody Manager. Nothing contained
herein shall require Bank, on Customer's behalf, to make any
selection regarding countries in which Customer invests or to engage
in any monitoring of Customer's decision to invest in any particular
country in which Bank selects , contracts and monitors Eligible
Foreign Custodians, as Customer's Foreign Custody Manager pursuant
to the Agreement.
(e) Bank shall provide to Customer such information as is
specified in Appendix 1-B hereto. Customer hereby acknowledges
that: (i) such information is solely designed to inform Customer of
market conditions and procedures, but is not intended to influence
Customer's investment decisions; and (ii) Bank has gathered the
information from sources it considers reliable, but that Bank shall
have no responsibility for inaccuracies or incomplete information
except to the extent that Bank was negligent in selecting the
sources of such information.
2. Add the following after the first sentence of Section 3 of
the Agreement:
At the request of Customer, Bank may, but need not, add to Schedule A
an Eligible Foreign Custodian that is either a bank or a non-
Compulsory Depository where Bank has not acted as Foreign Custody
Manager with respect to the selection thereof. Bank shall notify
Customer in the event that it elects not to add any such entity.
3. Add the following language to the end of Section 3 of the
Agreement:
The term Subcustodian as used herein shall mean the following:
(a) a "U.S. Bank," which shall mean a U.S. bank as defined in
Rule 17f-5(a)(7); and
(b) with respect to Securities for which the primary market is
outside the U.S. an "Eligible Foreign Custodian," shall mean (i) a
banking institution or trust company, incorporated or organized under
the laws of a country other than the United States, that is regulated
as such by that country's government or an agency thereof, (ii) a
majority-owned direct or indirect subsidiary of a U.S. Bank or bank
holding company which subsidiary is incorporated or organized under
the laws of a country other than the United States; (iii) a
Securities Depository or clearing agency (other than a Compulsory
Depository), incorporated or organized under the laws of a country
other than the United States, that acts as a system for the central
handling of securities or equivalent book-entries in that country and
that is regulated by a foreign financial regulatory authority as
defined under section 2(a)(50) of the 1940 Act, (iv) a Securities
Depository or clearing agency organized under the laws of a country
other than the United States that acts as a transnational system
("Transnational Depository") for the central handling of securities
or equivalent book-entries, and (v) any other entity that shall have
been so qualified by exemptive order, rule or other appropriate
action of the SEC.
The term Subcustodian as used in Section 12(a)(i) (except the
last sentence thereof) shall not include any Eligible Foreign
Custodians as to which Bank has not acted as Foreign Custody Manager,
any Compulsory Depository and any Transnational Depository.
4. Add the following after the word "administration" at the end
of Subsection 4(d)(i): "or, in the case of cash deposits, liens or
rights in favor of creditors of Subcustodian arising under
bankruptcy, insolvency, or similar laws".
5. Delete all of Subsection 4(e) after the word "located" in
(ii) thereof and add the word "and" between "Subcustodian" and
"(ii)".
*********************
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the date first above written.
Customer THE CHASE MANHATTAN BANK
By: /s/ Michael P. Bishof By: /s/ Rosemary M. Stidmon
- -------------------------- ----------------------------
Name: Michael P. Bishof Name: Rosemary M. Stidmon
Title: Senior Vice President/ Title: Vice President
Treasurer
Date: Nov. 20, 1997 Date: Nov. 20, 1997
APPENDIX A
Delaware Group Adviser Funds, Inc.
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
Delaware Group Equity Funds I, Inc.
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc.
Blue Chip Fund
Quantum Fund
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Capital Appreciation Fund
Delaware Group Equity Funds V, Inc.
Retirement Income Fund
Small Cap Value Fund
Delaware Pooled Trust, Inc.
The International Equity Portfolio
The International Fixed Income Portfolio
The Global Equity Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio II
The Emerging Markets Portfolio
Delaware Group Global & International Funds, Inc.
Emerging Markets Series
Global Assets Series
Global Bond Series
Global Equity Series
International Equity Series
International Small Cap Series
Delaware Group Premium Fund, Inc.
Convertible Securities Series
Devon Series
Emerging Markets Series
Quantum Series
Strategic Income Series
Global Bond Series
DelCap Series
International Equity Series
Delaware Series
Value Series
Voyageur Mutual Funds III, Inc.
Tax-Efficient Equity Fund
Dated: November 20, 1997
Appendix 1-A
COMPULSORY DEPOSITORIES
Argentina Caja de Valores Equity, Corporate &
Government Debt
Australia Austraclear Ltd. Corporate Debt,
Money Market
& Semi-Government
Debt
CHESS Equity
(Clearing House Electronic Sub-
register System)
RITS Government Debt
(Reserve Bank Information and
Transfer System)
Austria Oesterreichische Kontrolbank AG Equity, Corporate +
Government Debt
Belgium CIK Equity + Corporate
(Caisse Interprofessionnelle de Debt
Depots et de Virements de Titres)
Banque Nationale de Belgique Treasury Bills +
Government Debt
Brazil BOVESPA Equity
(Bolsa de Valores de Sao Paolo)
BVRJ Equity
(Bolsa de Valores de Rio de
Janeiro)
Canada CDS Equity, Corporate +
(Canadian Depository for Government Debt
Securities)
China, SSCCRC Equity
Shanghai (Shanghai Securities Central
Clearing and Registration Corp.)
China, SSCC Equity
Shenzhen (Shenzhen Securities
Registration Co., Ltd.)
Czech SCP Equity + Long-Term
Republic (Securities Center) Government Debt
TKD Treasury Bills +
(Trh Kratkododich Dlluhopisu or Money Market
Short-Term Bond Market)
Denmark VP Equity, Corporate +
(Vaerdipapircentralen) Government Debt
Egypt Misr Clearing & Sec. Dep. Equity
Estonia EVK Equity
(Estonian Central Depository for
Securities Ltd.)
Euromarket Cedel & Euroclear Euro-Debt
Finland CSR Equity + Government
(Central Share Registry Finland) Debt
Helsinki Money Market Center Money Market
Ltd.
France SICOVAM Equity + Corporate
(Banque de France) Debt.
France SATURNE Government Debt.
(Banque de France)
Germany DKV Equity, Corporate +
(Deutscher Kassenverein) Government Debt
Greece Apothetirio Titlon A.E. Equity
Bank of Greece Government Debt
Hong Kong CCASS Equity
(Central Clearing and
Settlement System)
CMU Corporate +
(Central Moneymarkets Unit) Government Debt
Hungary Keler Ltd. Equity + Government
Debt
Ireland CREST Equity
GSO Government Debt
(Gilt Settlement Office)
Israel TASE Clearing House Equity, Corporate +
(Tel Aviv Stock Exchange Government Debt
Clearing House)
Italy Monte Titoli Equity + Corporate
Debt
Bank of Italy Government Debt
Japan Bank of Japan Registered Government
Debt
Latvia LCD Equity + Government
(Latvian Central Depository) Debt
Lebanon Midclear Equity
(Custodian and Clearing Center
of Lebanon and the Middle East)
Luxembourg Cedel Equity
Malaysia MCD Equity
(Malaysian Central Depository
Snd Bhd)
Mauritius CDS Equity
(Central Depository System)
Mexico Indeval Equity, Corporate +
(Institucion para el Deposito Government Debt.
de Valores)
Morocco Maroclear Equity + Corporate
Debt
Bank Al'Maghrib Government Debt
Netherlands NECIGEF/KAS Associate NV Equity, Corp. + Govt.
De Nederlandsche Bank N.V. Money Market
Netherlands NIEC Premium Bonds
(Nederlands Interpforessioneel
Effectencentrum B.V.)
New Zealand Austraclear New Zealand Equity, Corporate +
Government Debt
Norway VPS Equity, Corporate +
(Verdipapirsentralen) Government Debt
Oman NONE
Pakistan CDC Equity
(Central Depository Company of
Pakistan Ltd.)
Peru CAVALI Equity
(Caja de Valores)
Philippines PCD Equity
(Philippine Central Depository)
Poland NDS Equity, Long-Term
(National Securities Government Debt +
Depository) Vouchers
CRT Treasury-Bills
(Central Registry of Treasury-
Bills)
Portugal Interbolsa Equity, Corporate +
Government Debt
Romania SNCDD - RASDAQ Equity
(National Company for Clearing,
Settlement and Depository for
Securities)
Budapest Stock Exchange Equity
Registry
National Bank of Romania Treasury-Bills
Russia MICEX GKO's
(Moscow Interbank Currency (Gosudarstvennye
Exchange) Kratkosrochnye
Obyazatelstva [T-
Bills])
OFZ's
(Obligatsyi
Federalnogo Zaima
[Federal Loan
Bonds])s
Singapore CDP Equity + Corporate
(Central Depository Pte. Ltd.) Debt and Malaysian
equities traded on
CLOB
Monetary Authority of Singapore Government Debt
Slovak SCP Equity + Government
Republic (Stredisko Cennych Papiru) Debt
National Bank of Slovakia Treasury-Bills
So. Africa CD Corporate +
Government
(Central Depository) Debt
So. Korea KSD Equity, Corporate +
Government Debt
Spain SCLV Equity + Corporate
(Servicio de Compensacion y Debt.
Liquidacion de Valores)
CBEO Government Debt
(Central Book Entry Office)
Sri Lanka CDS Equity
(Central Depository System
(Private) Ltd.)
Sweden VPC Equity, Corporate +
(Vardepapperscentralen AB) Government Debt
Switzerland SEGA Equity, Corporate +
(Schweizerische Effekten-Giro Government Debt
AG)
Taiwan TSCD Equity + Government
(Taiwan Securities Central Debt
Depository Co., Ltd.)
Thailand TSDC Equity, Corporate +
(Thailand Securities Depository Government Debt
Company Ltd.)
Tunisia STICODEVAM Equity
(Societe Tunisienne
Interprofessionnelle pour la
Compensation et le Depot des
Valeurs Mobilieres)
Ministry of Finance Government Debt
tradable on the stock
exchange (BTNBs)
Central Bank of Tunisia Government Debt not
tradable on the stock
exchange (BTCs)
Turkey Takas Bank Equity + Corporate
Debt
Central Bank of Turkey Government Debt
United CREST Equity + Corp. Debt
Kingdom
CMO Sterling CDs & CP
(Central Moneymarket Office)
CGO Gilts
(Central Gilts Office)
United DTC Equity + Corporate
States (Depository Trust Company) Debt
PTC Mortgage Back Debt
(Participants Trust Company)
Fed Book-Entry Government Debt.
Zambia LuSE Equity + Government
(LuSE Central Shares Depository Debt
Ltd.)
Appendix 1-B
Information Regarding Country Risk
1. To aid Customer's board in its determinations regarding
Country Risk, Bank shall furnish board annually and upon the initial
placing of Assets into a country the following information (check
items applicable):
A Opinions of local counsel concerning:
i. Whether applicable foreign law would restrict the
access afforded Customer's independent public accountants to books
and records kept by an eligible foreign custodian located in that
country.
ii. Whether applicable foreign law would restrict the
Customer's ability to recover its assets in the event of the
bankruptcy of an Eligible Foreign Custodian located in that country.
iii. Whether applicable foreign law would restrict the
Customer's ability to recover assets that are lost while under the
control of an Eligible Foreign Custodian located in the country.
B. Written information concerning:
i. The likelihood of expropriation, nationalization,
freezes, or confiscation of Customer's assets.
ii. Whether difficulties in converting Customer's cash
and cash equivalents to U.S. dollars are reasonably foreseeable.]
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership
restrictions, (iii) foreign exchange, (iv) securities settlement and
registration, (v) taxation, and (vi) compulsory depositories
(including depository evaluation).
2. To aid Customer's board in monitoring Country Risk, Bank
shall furnish board the following additional information:
Market flashes, including with respect to changes in the
information in market reports.
EX-99.B11
Exhibit 24(b)(11)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions
"Financial Highlights" in the Prospectuses and "Financial Statements"
in the Statement of Additional Information and to the incorporation by
reference in this Post-Effective Amendment No. 20 to the Registration
Statement (Form N-1A) (No. 33-11419) of Delaware Group Equity Funds V,
Inc. of our reports dated January 5, 1998, included in the 1997 Annual
Reports to shareholders.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 2, 1998
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Equity Funds V, Inc. - Small Cap Value Fund
We have audited the accompanying statements of net assets of Delaware
Group Equity Funds V, Inc. - Small Cap Value Fund as of November 30,
1997, and the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements and financial
highlights. Our procedures included confirmation of securities owned as
of November 30, 1997, 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 V, Inc. - Small Cap
Value Fund at November 30, 1997, the results of its operations for the
year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each
of the periods indicated therein, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
January 5, 1998
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Equity Funds V, Inc. - Retirement Income Fund
We have audited the accompanying statement of net assets of Delaware
Group Equity Funds V, Inc. - Retirement Income Fund as of November 30,
1997, and the related statement of operations, the statement of
changes in net assets, and the financial highlights for the period
December 2, 1996 (commencement of operations) to November 30, 1997.
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 audit.
We conducted our audit 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 November
30, 1997, 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 audit provides 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 V, Inc. - Retirement
Income Fund at November 30, 1997, and the results of its operations,
the changes in its net assets, and the financial highlights for the
period December 2, 1996 (commencement of operations) to November 30,
1997, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
January 5, 1998
DELAWARE GROUP SMALL CAP VALUE FUND (AT NAV)
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1997
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
TEN
YEARS
- -------
10
$1000(1 - T) = $6,122.95
T = 19.87%
DELAWARE GROUP SMALL CAP VALUE FUND (AT OFFER)
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1997
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
TEN
YEARS
- -------
10
$1000(1 - T) = $5,829.31
T = 19.28%
DELAWARE GROUP SMALL CAP VALUE FUND
TOTAL RETURN PERFORMANCE
TEN YEARS (AT OFFER)
Initial Investment $1,000.00
Beginning OFFER $8.13
Initial Shares 123.001
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1987 123.001 $0.045 0.630 123.631
1988 123.631 $0.070 0.821 124.452
1989 124.452 $0.860 8.059 132.511
1990 132.511 $0.405 4.745 137.256
1991 137.256 $0.990 8.440 145.696
1992 145.696 $0.860 7.111 152.807
1993 152.807 $0.205 1.525 154.332
1994 154.332 $0.410 3.382 157.714
1995 157.714 $1.130 8.086 165.800
1996 165.800 $4.035 29.880 195.680
1997 195.680 $0.000 0.000 195.680
Ending Shares 195.680
Ending NAV x $29.79
--------
INVESTMENT RETURN $5,829.31
Total Return Performance
- ------------------------
Investment Return $5,829.31
Less Initial Investment $1,000.00
--------
$4,829.31 / $1,000.00 x 100
Total Return: 482.93%
DELAWARE GROUP SMALL CAP VALUE FUND
TOTAL RETURN PERFORMANCE
TEN YEARS (AT NAV)
Initial Investment $1,000.00
Beginning NAV $7.74
Initial Shares 129.199
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1987 129.199 $0.045 0.661 129.860
1988 129.860 $0.070 0.862 130.722
1989 130.722 $0.860 8.465 139.187
1990 139.187 $0.405 4.984 144.171
1991 144.171 $0.990 8.865 153.036
1992 153.036 $0.860 7.469 160.505
1993 160.505 $0.205 1.602 162.107
1994 162.107 $0.410 3.552 165.659
1995 165.659 $1.130 8.493 174.152
1996 174.152 $4.035 31.385 205.537
1997 205.537 $0.000 0.000 205.537
Ending Shares 205.537
Ending NAV x $29.79
--------
INVESTMENT RETURN $6,122.95
Total Return Performance
- ------------------------
Investment Return $6,122.95
Less Initial Investment $1,000.00
--------
$5,122.95 / $1,000.00 x 100
Total Return: 512.30%
DELAWARE GROUP SMALL CAP VALUE FUND INSTITUTIONAL
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1997
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
TEN
YEARS
- -------
10
$1000(1 - T) = $6,215.64
T = 20.05%
DELAWARE GROUP SMALL CAP VALUE FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
TEN YEARS
Initial Investment $1,000.00
Beginning NAV $7.74
Initial Shares 129.199
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1987 129.199 $0.045 0.661 129.860
1988 129.860 $0.070 0.862 130.722
1989 130.722 $0.860 8.465 139.187
1990 139.187 $0.405 4.984 144.171
1991 144.171 $0.990 8.865 153.036
1992 153.036 $0.860 7.465 160.501
1993 160.501 $0.250 1.951 162.452
1994 162.452 $0.465 4.031 166.483
1995 166.483 $1.190 8.969 175.452
1996 175.452 $4.105 32.082 207.534
1997 207.534 $0.000 0.000 207.534
Ending Shares 207.534
Ending NAV x $29.95
--------
INVESTMENT RETURN $6,215.64
Total Return Performance
- ------------------------
Investment Return $6,215.64
Less Initial Investment $1,000.00
--------
$5,215.64 / $1,000.00 x 100
Total Return: 521.56%
DELAWARE GROUP SMALL CAP VALUE FUND CLASS B
TOTAL RETURN PERFORMANCE
THREE YEARS (INCLUDING CDSC)
Initial Investment $1,000.00
Beginning NAV $19.30
Initial Shares 51.813
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1994 51.813 $0.400 1.109 52.922
1995 52.922 $0.985 2.369 55.291
1996 55.291 $3.900 9.670 64.961
1997 64.961 $0.000 0.000 64.961
Ending Shares 64.961
Ending NAV x $29.46
--------
$1,913.75
LESS CDSC $30.00
--------
INVESTMENT RETURN $1,883.75
Total Return Performance
- ------------------------
Investment Return $1,883.75
Less Initial Investment $1,000.00
--------
$883.75 / $1,000.00 x 100
Total Return: 88.38%
DELAWARE GROUP SMALL CAP VALUE FUND CLASS B
TOTAL RETURN PERFORMANCE
THREE YEARS (EXCLUDING CDSC)
Initial Investment $1,000.00
Beginning NAV $19.30
Initial Shares 51.813
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1994 51.813 $0.400 1.109 52.922
1995 52.922 $0.985 2.369 55.291
1996 55.291 $3.900 9.670 64.961
1997 64.961 $0.000 0.000 64.961
Ending Shares 64.961
Ending NAV x $29.46
--------
INVESTMENT RETURN $1,913.75
Total Return Performance
- ------------------------
Investment Return $1,913.75
Less Initial Investment $1,000.00
--------
$913.75 / $1,000.00 x 100
Total Return: 91.38%
DELAWARE GROUP RETIREMENT INCOME FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND (AT NAV)
Initial Investment $1,000.00
Beginning NAV $8.50
Initial Shares 117.647
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1996 117.647 $0.043 0.570 118.217
Ending Shares 118.217
Ending NAV x $11.70
--------
INVESTMENT RETURN $1,383.14
Total Return Performance
- ------------------------
Investment Return $1,383.14
Less Initial Investment $1,000.00
--------
$383.14 / $1,000.00 x 100
Total Return: 38.31%
DELAWARE GROUP RETIREMENT INCOME FUND A
TOTAL RETURN PERFORMANCE
LIFE OF FUND (AT OFFER)
Initial Investment $1,000.00
Beginning OFFER $8.92
Initial Shares 112.108
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1987 112.108 $0.043 0.543 112.651
Ending Shares 112.651
Ending NAV x $11.70
--------
INVESTMENT RETURN $1,318.02
Total Return Performance
- ------------------------
Investment Return $1,318.02
Less Initial Investment $1,000.00
--------
$318.02 / $1,000.00 x 100
Total Return: 31.80%
DELAWARE GROUP RETIREMENT INCOME FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
LIFE OF FUND
Initial Investment $1,000.00
Beginning NAV $8.50
Initial Shares 117.647
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1996 117.647 $0.043 0.568 118.215
Ending Shares 118.215
Ending NAV x $11.69
--------
INVESTMENT RETURN $1,381.93
Total Return Performance
- ------------------------
Investment Return $1,381.93
Less Initial Investment $1,000.00
--------
$381.93 / $1,000.00 x 100
Total Return: 38.19%
DELAWARE GROUP RETIREMENT INCOME FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS (AT NAV)
Initial Investment $1,000.00
Beginning NAV $10.95
Initial Shares 91.324
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1997 91.324 $0.000 0.000 91.324
Ending Shares 91.324
Ending NAV x $11.70
--------
INVESTMENT RETURN $1,068.49
Total Return Performance
- ------------------------
Investment Return $1,068.49
Less Initial Investment $1,000.00
--------
$68.49 / $1,000.00 x 100
Total Return: 6.85%
DELAWARE GROUP RETIREMENT INCOME FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS (AT OFFER)
Initial Investment $1,000.00
Beginning OFFER $11.50
Initial Shares 86.957
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1997 86.957 $0.000 0.000 86.957
Ending Shares 86.957
Ending NAV x $11.70
--------
INVESTMENT RETURN $1,017.40
Total Return Performance
- ------------------------
Investment Return $1,017.40
Less Initial Investment $1,000.00
--------
$17.40 / $1,000.00 x 100
Total Return: 1.74%
DELAWARE GROUP RETIREMENT INCOME FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS (AT NAV)
Initial Investment $1,000.00
Beginning NAV $9.83
Initial Shares 101.729
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1997 101.729 $0.000 0.000 101.729
Ending Shares 101.729
Ending NAV x $11.70
--------
INVESTMENT RETURN $1,190.23
Total Return Performance
- ------------------------
Investment Return $1,190.23
Less Initial Investment $1,000.00
--------
$190.23 / $1,000.00 x 100
Total Return: 19.02%
DELAWARE GROUP RETIREMENT INCOME FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS (AT OFFER)
Initial Investment $1,000.00
Beginning OFFER $10.32
Initial Shares 96.899
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1997 96.899 $0.000 0.000 96.899
Ending Shares 96.899
Ending NAV x $11.70
--------
INVESTMENT RETURN $1,133.72
Total Return Performance
- ------------------------
Investment Return $1,133.72
Less Initial Investment $1,000.00
--------
$133.72 / $1,000.00 x 100
Total Return: 13.37%
DELAWARE GROUP RETIREMENT INCOME FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS (AT NAV)
Initial Investment $1,000.00
Beginning NAV $9.49
Initial Shares 105.374
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1997 105.374 $0.000 0.000 105.374
Ending Shares 105.374
Ending NAV x $11.70
--------
INVESTMENT RETURN $1,232.88
Total Return Performance
- ------------------------
Investment Return $1,232.88
Less Initial Investment $1,000.00
--------
$232.88 / $1,000.00 x 100
Total Return: 23.29%
DELAWARE GROUP RETIREMENT INCOME FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS (AT OFFER)
Initial Investment $1,000.00
Beginning OFFER $9.96
Initial Shares 100.402
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1997 100.402 $0.000 0.000 100.402
Ending Shares 100.402
Ending NAV x $11.70
--------
INVESTMENT RETURN $1,174.70
Total Return Performance
- ------------------------
Investment Return $1,174.70
Less Initial Investment $1,000.00
--------
$174.70 / $1,000.00 x 100
Total Return: 17.47%
DELAWARE GROUP RETIREMENT INCOME FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
THREE MONTHS
Initial Investment $1,000.00
Beginning NAV $10.94
Initial Shares 91.408
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1997 91.408 $0.000 0.000 91.408
Ending Shares 91.408
Ending NAV x $11.69
--------
INVESTMENT RETURN $1,068.56
Total Return Performance
- ------------------------
Investment Return $1,068.56
Less Initial Investment $1,000.00
--------
$68.56 / $1,000.00 x 100
Total Return: 6.86%
DELAWARE GROUP RETIREMENT INCOME FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
SIX MONTHS
Initial Investment $1,000.00
Beginning NAV $9.83
Initial Shares 101.729
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1997 101.729 $0.000 0.000 101.729
Ending Shares 101.729
Ending NAV x $11.69
--------
INVESTMENT RETURN $1,189.21
Total Return Performance
- ------------------------
Investment Return $1,189.21
Less Initial Investment $1,000.00
--------
$189.21 / $1,000.00 x 100
Total Return: 18.92%
DELAWARE GROUP RETIREMENT INCOME FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
NINE MONTHS
Initial Investment $1,000.00
Beginning NAV $9.48
Initial Shares 105.485
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
1997 105.485 $0.000 0.000 105.485
Ending Shares 105.485
Ending NAV x $11.69
--------
INVESTMENT RETURN $1,233.12
Total Return Performance
- ------------------------
Investment Return $1,233.12
Less Initial Investment $1,000.00
--------
$233.12 / $1,000.00 x 100
Total Return: 23.31%
EX-99.B18B
EXHIBIT 24(18)(b)
APPENDIX A
(As revised December 18, 1997)
List of Funds and Their Classes
1. Delaware Group Equity Funds I, Inc.
Delaware Fund
Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class
Devon Fund
Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class
2. Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class
Decatur Income Fund Institutional Class
Decatur Total Return Fund
Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class
Blue Chip Fund (Added February 24, 1997)
Blue Chip Fund A Class
Blue Chip Fund B Class
Blue Chip Fund C Class
Blue Chip Fund Institutional Class
Quantum Fund (Added February 24, 1997)
Quantum Fund A Class
Quantum Fund B Class
Quantum Fund C Class
Quantum Fund Institutional Class
3. Delaware Group Equity Funds III, Inc. (Formerly Trend)
Trend Fund
Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class
4. Delaware Group Equity Funds IV, Inc.
DelCap Fund
DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class
Capital Appreciation Fund (Added November 29, 1996)
Capital Appreciation Fund A Class
Capital Appreciation Fund B Class
Capital Appreciation Fund C Class
Capital Appreciation Fund Institutional Class
5. Delaware Group Equity Funds V, Inc. (Formerly Value)
Small Cap Value Fund (Formerly Value Fund)
Small Cap Value Fund A Class
Small Cap Value Fund B Class
Small Cap Value Fund C Class
Small Cap Value Fund Institutional Class
Retirement Income Fund (Added November 29, 1996)
Retirement Income Fund A Class
Retirement Income Fund B Class
Retirement Income Fund C Class
Retirement Income Fund Institutional Class
6. Delaware Group Global & International Funds, Inc.
International Equity Series
International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class
Global Bond Series
Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class
Global Assets Series
Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class
Emerging Markets Series (Added May 1, 1996)
Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class
7. Delaware Group Income Funds, Inc.
Strategic Income Fund (Added September 30, 1996)
Strategic Income Fund A Class
Strategic Income Fund B Class
Strategic Income Fund C Class
Strategic Income Fund Institutional Class
8. Delaware Pooled Trust, Inc.
The Real Estate Investment Trust Portfolio (added
October 14, 1997)
REIT Fund A Class
REIT Fund B Class
REIT Fund C Class
REIT Fund Institutional Class
9. Delaware Group Foundation Funds (added December 18, 1997)
Income Portfolio
Income Fund A Class
Income Fund B Class
Income Fund C Class
Income Fund Institutional Class
Balanced Portfolio
Balanced Fund A Class
Balanced Fund B Class
Balanced Fund C Class
Balanced Fund Institutional Class
Growth Portfolio
Growth Fund A Class
Growth Fund B Class
Growth Fund C Class
Growth Fund Institutional Class
h:\ateam\fundmisc\18f-3amd.ff
4
EX-99.B19
EXHIBIT 24(19)(b)
POWER OF ATTORNEY
Each of the undersigned, a member of the Boards of
Directors/Trustees of the Delaware Group Funds listed on Exhibit A to
this Power of Attorney, hereby constitutes and appoints on behalf of
each of the Funds listed on Exhibit A, Wayne A. Stork, Jeffrey J. Nick
and Walter P. Babich and any one of them acting singly, his true and
lawful attorneys-in-fact, in his name, place, and stead, to execute and
cause to be filed with the Securities and Exchange Commission and other
federal or state government agency or body, such registration
statements, and any and all amendments thereto as either of such
designees may deem to be appropriate under the Securities Act of 1933,
as amended, the Investment Company Act of 1940, as amended, and all
other applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument
as of this 18th day of December, 1997.
/s/ Walter P. Babich /s/ Thomas F. Madison
- --------------------- ----------------------
Walter P. Babich Thomas F. Madison
/s/ Anthony D. Knerr /s/ Jeffrey J. Nick
- --------------------- -----------------------
Anthony D. Knerr Jeffrey J. Nick
/s/ Ann R. Leven /s/ Charles E. Peck
- ----------------- ----------------------
Ann R. Leven Charles E. Peck
/s/W. Thacher Longstreth /s/ Wayne A. Stork
- ------------------------- ----------------------
W. Thacher Longstreth Wayne A. Stork
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
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<NAME> DELAWARE GROUP EQUITY FUNDS V, INC.
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<NAME> SMALL CAP VALUE FUND INSTITUTIONAL CLASS
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