<PAGE>
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.
Post-Effective Amendment No. 23 X
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 23
DELAWARE GROUP EQUITY FUNDS V, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: March 30, 1999
--------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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X on March 30, 1999 pursuant to paragraph (b)
- ------
60 days after filing pursuant to paragraph (a)(1)
- ------
on (date) pursuant to paragraph (a)(1)
- ------
75 days after filing pursuant to paragraph (a)(2)
- ------
on (date) pursuant to paragraph (a)(2) of Rule 485
- ------
Title of Securities Being Registered
Small Cap Value Fund Institutional Class, Small Cap Value Fund A
Class, Small Cap Value Fund B Class, Small Cap Value Fund C Class,
Small Cap Contrarian Fund Institutional
Class, Small Cap Contrarian Fund A
Class, Small Cap Contrarian Fund B Class, Small Cap Contrarian Fund C Class
Mid-Cap Value Fund Institutional
Class, Mid-Cap Value Fund A Class, Mid-Cap Value Fund B Class,
Mid-Cap Value Fund C Class,
Retirement Income Fund Institutional Class, Retirement Income Fund A
Class, Retirement Income Fund B Class,
Retirement Income Fund C Class,
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 23 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
<PAGE>
CROSS-REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
Small Cap Value Fund
Class A
Class B Small Cap Value Fund
Item No. Description Class C Institutional Class
- -------- ----------- ------- -------------------
<S> <C>
1 Front and Back Cover Pages Same Same
2 Risk/Return Summary: Fund profile Fund profile
Investments, Risks and Performance
3 Risk/Return Summary: Fund profile Fund profile
Fee Table
4 Investment Objectives, Principal How we manage the How we manage the
Investment Strategies, and Related Fund Fund
Risks
5 Management's Discussion of N/A N/A
Performance
6 Management, Organization, and Who manages the Fund Who manages the Fund
Capital Structure
7 Shareholder Information How to buy shares; How to buy shares;
How to redeem shares; How to redeem shares;
Special services; Special services;
Dividends, distributions Dividends, distributions
and taxes all under and taxes all under
About your account About your account
8 Distribution Arrangements Choosing a share class; About your account
How to reduce sales
charges under About
your account
9 Financial Highlights Information Financial Information Financial Information
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART A (Continued)
<TABLE>
<CAPTION>
Small Cap Contrarian
Fund
Class A Small Cap Contrarian
Class B Fund
Item No. Description Class C Institutional Class
- -------- ----------- ------- -------------------
<S> <C>
1 Front and Back Cover Pages Same Same
2 Risk/Return Summary: Fund profile Fund profile
Investments, Risks and Performance
3 Risk/Return Summary: Fund profile Fund profile
Fee Table
4 Investment Objectives, Principal How we manage the How we manage the
Investment Strategies, and Related Fund Fund
Risks
5 Management's Discussion of N/A N/A
Performance
6 Management, Organization, and Who manages the Fund Who manages the Fund
Capital Structure
7 Shareholder Information How to buy shares; How to buy shares;
How to redeem shares; How to redeem shares;
Special services; Special services;
Dividends, distributions Dividends, distributions
and taxes all under and taxes all under
About your account About your account
8 Distribution Arrangements Choosing a share class; About your account
How to reduce sales
charges under About
your account
9 Financial Highlights Information Financial Information Financial Information
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART A (continued)
<TABLE>
<CAPTION>
Mid-Cap Value Fund
Class A
Class B Mid-Cap Value Fund
Item No. Description Class C Institutional Class
- -------- ----------- ------- -------------------
<S> <C>
1 Front and Back Cover Pages Same Same
2 Risk/Return Summary: Fund profile Fund profile
Investments, Risks and Performance
3 Risk/Return Summary: Fund profile Fund profile
Fee Table
4 Investment Objectives, Principal How we manage the How we manage the
Investment Strategies, and Related Fund Fund
Risks
5 Management's Discussion of N/A N/A
Performance
6 Management, Organization, and Who manages the Fund Who manages the Fund
Capital Structure
7 Shareholder Information How to buy shares; How to buy shares;
How to redeem shares; How to redeem shares;
Special services; Special services;
Dividends, distributions Dividends, distributions
and taxes all under and taxes all under
About your account About your account
8 Distribution Arrangements Choosing a share class; About your account
How to reduce sales
charges under About
your account
9 Financial Highlights Information Financial Information Financial Information
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART A (continued)
<TABLE>
<CAPTION>
Retirement Income Fund
Class A Retirement Income
Class B Fund
Item No. Description Class C Institutional Class
- -------- ----------- ------- -------------------
<S> <C>
1 Front and Back Cover Pages Same Same
2 Risk/Return Summary: Fund profile Fund profile
Investments, Risks and Performance
3 Risk/Return Summary: Fund profile Fund profile
Fee Table
4 Investment Objectives, Principal How we manage the How we manage the
Investment Strategies, and Related Fund; Other investment Fund; Other investment
Risks policies and risk policies and risk
considerations considerations
5 Management's Discussion of N/A N/A
Performance
6 Management, Organization, and Who manages the Fund Who manages the Fund
Capital Structure
7 Shareholder Information How to buy shares; How to buy shares;
How to redeem shares; How to redeem shares;
Special services; Special services;
Dividends, distributions Dividends, distributions
and taxes all under and taxes all under
About your account About your account
8 Distribution Arrangements Choosing a share class; About your account
How to reduce sales
charges under About
your account
9 Financial Highlights Information Financial Information Financial Information
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement of Additional
Information
Small Cap Value Fund
Small Cap Contrarian Fund
Mid Cap Value Fund
Item No. Description Retirement Income Fund
- -------- ----------- -----------
<S> <C>
10 Cover Page and Table of Contents Same
11 Fund History General Information
12 Description of the Fund and Its Investments and Investment Policies and Portfolio
Risks Techniques
13 Management of the Fund Officers and Directors; Purchasing
Shares
14 Control Persons and Principal Holders of Securities Officers and Directors
15 Investment Advisory and Other Services Officers and Directors; Purchasing
Shares; Investment Management
Agreements; General Information;
Financial Statements
16 Brokerage Allocation and Other Practices Trading Practices and Brokerage
17 Capital Stock and Other Securities Capitalization and Noncumulative
Voting (under General Information)
18 Purchase, Redemption, and Pricing of Shares Purchasing Shares; Redemption and
Exchange; Determining Offering Price
and Net Asset Value
19 Taxation of the Fund Taxes
20 Underwriters Purchasing Shares
21 Calculation of Performance Data Performance Information
22 Financial Statements Financial Statements
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Item No. Description Location in Part C
- -------- ----------- ------------------
<S> <C>
23 Exhibits Item 23
24 Persons Controlled by or under Item 24
Common Control with Registrant
25 Indemnification Item 25
26 Business and Other Connections Item 26
of the Investment Adviser
27 Principal Underwriters Item 27
28 Location of Accounts and Item 28
Records
29 Management Services Item 29
30 Undertakings Item 30
</TABLE>
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Small Cap Value Fund
Class A * Class B * Class C
Prospectus
March 30, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
[inside front cover]
Table of Contents
Fund profile page
Small Cap Value Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio manager
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial information page
<PAGE>
Profile: Small Cap Value Fund
What are the Fund's goals?
Small Cap Value Fund seeks capital appreciation. Although the Fund will strive
to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of small companies whose stock prices appear low
relative to their underlying value or future potential. Among other factors, we
consider the financial strength of a company, its management, the prospects for
its industry and any anticipated changes within the company, which might suggest
a more favorable outlook going forward.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock prices. In addition, the companies that
Small Cap Value Fund invests in may involve greater risk due to their size,
narrow product lines and limited financial resources. For a more complete
discussion of risk, please turn to page 7.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o ------Investors with long-term financial goals.
o ------Investors seeking an investment primarily in common stocks.
o ------Investors seeking exposure to the capital appreciation opportunities
of small companies.
Who should not invest in the Fund
o ------Investors with short-term financial goals.
o ------Investors whose primary goal is current income.
o ------Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
-1-
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Class A shares have varied over
the past ten calendar years as well as the average annual returns of all shares
for one-, five-, and ten-year periods, if applicable. The Fund's past
performance does not necessarily indicate how it will perform in the future.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A) ]
Year-by-year total return
Small Cap Value Fund Class A
1989 31.87%
1990 -13.15%
1991 50.97%
1992 14.78%
1993 18.82%
1994 -6.98%
1995 23.51%
1996 22.12%
1997 33.03%
1998 -5.10%
The Fund's Class A had a -10.08% year-to-date return as of February 28, 1999.
During the periods illustrated in this bar chart, Class A's highest return was
18.18% for the quarter ended March 31, 1995 and its lowest return was -16.40%
for the quarter ended March 31, 1994.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown below do include the sales charge.
Average annual returns for the period ending 12/31/98
CLASS A B (if redeemed)* C (if redeemed)* Russell 2000
(Inception (Inception 9/6/94) (Inception 11/29/95) Index
6/24/87)
1 year -10.55% -10.46% -6.69% -2.55%
5 years 10.80% N/A N/A 11.87%
10 years or
Lifetime** 14.07% 13.65% 15.54% 12.92%
The Fund's returns are compared to the performance of the Russell 2000 Index.
You should remember that unlike the Fund, the index is unmanaged and doesn't
include the costs of operating a mutual fund, such as the costs of buying,
selling and holding the securities.
*If redeemed at end of period shown. If shares were not redeemed, the returns
for Class B would be -5.75% and 13.95%, respectively, for the one-year and
lifetime periods. Returns for Class C would be -5.75% and 15.54%, respectively,
for the one-year and lifetime periods.
**Lifetime returns are shown if the Fund or Class existed for less than 10
years. Russell 2000 return is for 10 years. Index returns for Class B and
Class C lifetime periods were 14.10% and 12.19%, respectively. Maximum sales
charges are included in the returns shown in the table above.
-2-
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund. The Fund may waive or reduce sales charges; please see the
Statement of Additional Information for details.
<TABLE>
<CAPTION>
- ------------------------------------------------------ ----------- ---------- ----------
CLASS A B C
- ------------------------------------------------------ ----------- ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases as 5.75% none none
a percentage of offering price
- ------------------------------------------------------ ----------- ---------- ----------
Maximum contingent deferred sales charge (load) as a none(1) 5%(2) 1%(3)
percentage of original purchase price or redemption
price, whichever is lower
- ------------------------------------------------------ ----------- ---------- ----------
Maximum sales charge (load) imposed on reinvested none none none
dividends
- ------------------------------------------------------ ----------- ---------- ----------
Redemption fees none none none
- ------------------------------------------------------ ----------- ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
<TABLE>
<CAPTION>
- ------------------------------------------------------ ----------- ---------- ----------
<S> <C> <C> <C>
Management fees 0.75% 0.75% 0.75%
- ------------------------------------------------------ ----------- ---------- ----------
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
- ------------------------------------------------------ ----------- ---------- ----------
Other expenses 0.34% 0.34% 0.34%
- ------------------------------------------------------ ----------- ---------- ----------
Total operating expenses 1.39% 2.09% 2.09%
- ------------------------------------------------------ ----------- ---------- ----------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(4) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- -------------- ------------- -------------- -------------------- ------------ ---------------------
CLASS(5) A B B C C
(if redeemed) (if redeemed)
- -------------- ------------- -------------- -------------------- ------------ ---------------------
<S> <C> <C> <C> <C> <C>
1 year $708 $212 $712 $212 $312
- --------------- ------------ -------------- -------------------- ------------ ---------------------
3 years $990 $655 $955 $655 $655
- --------------- ------------ -------------- -------------------- ------------ ---------------------
5 years $1,292 $1,124 $1,324 $1,124 $1,124
- --------------- ------------ -------------- -------------------- ------------ ---------------------
10 years $2,148 $2,242 $2,242 $2,421 $2,421
- --------------- ------------ -------------- -------------------- ------------ ---------------------
</TABLE>
<PAGE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will be imposed on
certain redemptions. Additional Class A purchase options that involve a
contingent deferred sales charge may be permitted from time to time and
will be disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
(5) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and
tenth years reflects expenses of the Class A shares.
-3-
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Small Cap Value Fund. Following is a description of how the
portfolio manager pursues the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify small companies that offer above-average opportunities for
long-term price appreciation because their current stock price does not
accurately reflect the companies' underlying value or future earning potential.
Under normal conditions, at least 65% of the Fund's net assets will be invested
in the common stock of small cap companies, those having a market capitalization
generally less than $1.5 billion. Our focus will be on value stocks, defined as
stocks whose price is historically low based on a given financial measure such
as profits, book value or cashflow.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will carefully evaluate the financial strength of the company, the nature of
its management, any developments affecting the company or its industry,
anticipated new products or services, possible management changes, projected
takeovers or technological breakthroughs. Using this extensive analysis, our
goal is to pinpoint the companies within the universe of undervalued stocks,
whose true value is likely to be recognized and rewarded with a rising stock
price in the future.
Because there is added risk when investing in smaller companies, which may still
be in their early developmental stages, we maintain a well-diversified
portfolio, typically holding 75 to 100 different stocks, representing a wide
array of industries.
-4-
<PAGE>
<TABLE>
<CAPTION>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay dividends as well.
- --------------------------------------------------- -----------------------------------------------------------------------
Securities How we use them
- --------------------------------------------------- -----------------------------------------------------------------------
Small Cap Value Fund
- --------------------------------------------------- -----------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent Generally, we invest 90% to 100% of net assets in common
shares of ownership in a corporation. stock of small companies that we believe are selling for less
Stockholders participate in the corporation's than their true value. Under normal conditions, we will hold at
profits and losses, proportionate to the least 65% of the Fund's net assets in these stocks.
number of shares they own.
- --------------------------------------------------- -----------------------------------------------------------------------
Real estate investment trusts: A The Fund is permitted to invest in REITs and would typically do
company, usually traded publicly, that so when this sector or specific companies within the sector
manages a portfolio of real estate to earn appeared to offer opportunities for price appreciation.
profits for shareholders.
- --------------------------------------------------- -----------------------------------------------------------------------
Foreign securities and American Although the Fund may invest up to 25% of its net assets in
Depositary Receipts foreign securities or depositary receipts, the manager has no
Securities of foreign entities issued directly present intention of doing so. We may hold ADRs when we believe
or, in the case of American Depositary they offer greater value and greater appreciation potential than
Receipts, through a U.S. bank. ADRs are issued U.S. securities.
by a U.S. bank and represent the bank's holding
of a stated number of shares of a foreign
corporation. An ADR entitles the holder to all
dividends and capital gains earned by the
underlying foreign shares. ADRs are bought and
sold the same as U.S. securities.
- --------------------------------------------------- -----------------------------------------------------------------------
Repurchase agreements: An agreement Typically, we use repurchase agreements as a short-term
between a buyer and seller of securities in investment for the Fund's cash position. In order to enter into
which the seller agrees to buy the securities these repurchase agreements, the Fund must have collateral of
back within a specified time at the same at least 102% of the repurchase price. The Fund may not have
price the buyer paid for them, plus an more than 10% of its total assets in repurchase agreements with
amount equal to an agreed upon interest maturities of over seven days.
rate. Repurchase agreements are often
viewed as equivalent to cash.
- --------------------------------------------------- -----------------------------------------------------------------------
Restricted securities: Privately placed We may invest without limitation in privately placed securities
securities whose resale is restricted under that are eligible for resale only among certain institutional
securities law. buyers without registration. These are commonly known as
Rule 144A Securities. Other restricted securities must be
limited to 10% of total Fund assets.
- --------------------------------------------------- -----------------------------------------------------------------------
Illiquid Securities: Securities that do not We may invest up to 10% of net assets in illiquid securities.
have a ready market, and cannot be easily
sold, if at all, approximately the price
that the Fund has valued them.
- --------------------------------------------------- -----------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and investors for
their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
Small Cap Value Fund may buy or sell securities on a when-issued or delayed
delivery basis; that is, paying for securities before delivery or taking
delivery at a later date.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover will be less than 100%.
A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year.
-5-
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment in it to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in the Fund. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- ---------------------------------------------- -------------------------------------------------------------------------------------
Risks How we strive to manage them
- ---------------------------------------------- -------------------------------------------------------------------------------------
Small Cap Value Fund
- ---------------------------------------------- -------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a We maintain a long-term investment approach and focus on stocks we believe
majority of the securities in a certain can appreciate over an extended time frame regardless of interim market
market -- like the stock or bond market fluctuations. We do not try to predict overall stock market movements and do
- -- will decline in value because of not trade for short-term purposes.
factors such as economic conditions,
future expectations or investor We may hold a substantial part of the Fund's assets in cash or cash equivalents
confidence. as a temporary, defensive strategy.
- ---------------------------------------------- -------------------------------------------------------------------------------------
Industry and security risk is the risk We limit the amount of the Fund's assets invested in any one industry and in any
that the value of securities in a individual security. We also follow a rigorous selection process before choosing
particular industry or the value of an securities and continuously monitor them while they remain in the portfolio.
individual stock or bond will decline
because of changing expectations for
the performance of that industry or for
the individual company issuing the
stock.
- ---------------------------------------------- -------------------------------------------------------------------------------------
Small company risk is the risk that The Fund maintains a well-diversified portfolio, selects stocks carefully and
prices of smaller companies may be monitors them continuously. And, because we focus on stocks that are already
more volatile than larger companies selling at relatively low prices, we believe we may experience less price volatility
because of limited financial resources than small-cap funds that do not use a value-oriented strategy.
or dependence on narrow product
lines.
- ---------------------------------------------- -------------------------------------------------------------------------------------
Interest rate risk is the risk that We analyze each company's financial situation and its cashflow to determine
securities will decrease in value if the company's ability to finance future expansion and operations. The
interest rates rise. The risk is generally potential affect that rising interest rates might have on a stock is taken into
associated with bonds; however, consideration before the stock is purchased.
because smaller companies often
borrow money to finance their
operations, they may be adversely
affected by rising interest rates.
- ---------------------------------------------- -------------------------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest only a small portion of the Fund's portfolio in foreign
securities may be adversely affected securities. When we do purchase foreign securities, they are often denominated
by political instability, changes in in U.S. dollars. To the extent we invest in foreign securities, we invest
currency exchange rates, foreign primarily in issuers of developed countries, which are less likely to encounter
economic conditions or inadequate these foreign risks than issuers in developing countries. The Fund may use
regulatory and accounting standards. hedging techniques to help offset potential foreign currency losses.
- ---------------------------------------------- -------------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, or
can only be sold at a price lower than
the Fund has valued them.
- ---------------------------------------------- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Who manages the Fund
Investment Manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager was paid 0.75% as a
percentage of average daily net assets for the last fiscal year.
Portfolio Manager
Christopher S. Beck, Vice President/Senior Portfolio Manager of the Fund,
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 18 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 Delaware Investments in
May 1997, he managed the Small Cap 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. When making investment decisions for the Fund, Mr. Beck
regularly consults with Andrea Giles.
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 Delaware Investments in 1996, she was an account officer in the
Leveraged Capital Group with Citibank.
-6-
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
Board of Directors
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Manager The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 8 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Financial advisers
Shareholders
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager or
sub-adviser to make investment decisions for individual portfolios on a
day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
-7-
<PAGE>
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you pay
when you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than
0.30% of average daily net assets, which is lower than the 12b-1 fee for
Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge.
-8-
<PAGE>
<TABLE>
<CAPTION>
Class A Sales Charges
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount of purchase Sales charge as % Sales charge as % of amount Dealer's commission as %
of offering price invested of offering price
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.08% 5.00%
$50,000 but 4.75% 4.98% 4.00%
under $100,000
$100,000 but 3.75% 3.89% 3.00%
under $250,000
$250,000 but 2.50% 2.55% 2.00%
under $500,000
$500,000 but 2.00% 2.04% 1.60%
under $1 million
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year and 0.50% if
you redeem them within the second year.
<TABLE>
<CAPTION>
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount of purchase Sales charge as % Sales charge as % of amount Dealer's commission as %
of offering price invested of offering price
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
<S> <C> <C> <C>
$1 million up to $5 none none 1.00%
million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Next $20 million none none 0.50%
Up to $25 million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount over $25 million none none 0.25%
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
</TABLE>
-9-
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge if you redeem your shares within six years after you
buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during
the third and fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, they are
subject to annual 12b-1 fees no greater than 1% of average daily net
assets, of which 0.25% are service fees paid to the distributor, dealers or
others for providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and
any dividends paid on these shares are lower than dividends on Class A
shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%.
Conversion may occur as late as three months after the eighth anniversary
of purchase, during which time Class B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge if you redeem your shares within 12 months after you
buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee which may not be greater
than 1% of average daily net assets, of which 0.25% are service fees paid
to the distributor, dealers or others for providing services and
maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and
pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any
one time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
-10-
<PAGE>
About your account
(continued)
How to reduce your sales charge We offer a number of ways to reduce or eliminate
the sales charge on shares. Please refer to the Statement of Additional
Information for detailed information and eligibility requirements. You can also
get additional information from your financial adviser. You or your financial
adviser must notify us at the time you purchase shares if you are eligible for
any of these programs.
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------- ------------------------------------------
Program How it works Share class
A B C
- --------------------------------------------- ------------------------------------- ------------------------------------------
<S> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of
agree to invest a certain Intent and Rights of
amount in Delaware Investment Accumulation do not apply
Funds (except money market to the purchase of Class
funds with no sales charge) B and C shares, you can
over a 13-month period to combine your purchase of
qualify for reduced front-end Class A shares with your
sales charges. purchase of B and C
- --------------------------------------------- ------------------------------------- -------------- shares to fulfill your
Rights of Accumulation You can combine your holdings X Letter of Intent or
or purchases of all funds in the qualify for Rights of
Delaware Investments family Accumulation.
(except money market funds with
no sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end
sales charges.
- --------------------------------------------- ------------------------------------- -------------- ---------------------------
Reinvestment of redeemed shares Up to 12 months after you X Not available.
redeem shares, you can reinvest
the proceeds without paying a
front-end sales charge.
- --------------------------------------------- ------------------------------------- -------------- ---------------------------
SIMPLE IRA, SEP IRA, SARSEP, Prototype These investment plans may X Not available.
Profit Sharing, Pension, 401(k), SIMPLE qualify for reduced sales
401(k), 403(b)(7), and 457 Retirement charges by combining the
Plans purchases of all members of the
group. Members of these groups
may also qualify to purchase
shares without a front-end sales
charge and a waiver of any
contingent deferred sales
charges.
- --------------------------------------------- ------------------------------------- -------------- ---------------------------
</TABLE>
-11-
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service, or through our web site, www.delawarefunds.com. For more information
about how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
-12-
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000--and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently the Exchange is closed when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
-13-
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, the First Union Bank fee (currently
$7.50) will be deducted from your proceeds. Bank information must be on file
before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawarefunds.com. For more information about how to
sign up for these services, call our Shareholder Service Center at 800.523.1918.
-14-
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will deduct any applicable contingent deferred sales charges.
You may also have to pay taxes on the proceeds from your sale of shares. We will
send you a check, normally the next business day, but no later than seven days
after we receive your request to sell your shares. If you purchased your shares
by check, we will wait until your check has cleared, which can take up to 15
days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimum
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, the Fund may redeem your account
after 60 days' written notice to you.
-15-
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly investments
directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for similar shares in other
funds, your new shares will be subject to the same contingent deferred sales
charge as the shares you originally purchased. The holding period for the CDSC
will also remain the same, with the amount of time you held your original shares
being credited toward the holding period of your new shares. You don't pay sales
charges on shares that you acquired through the reinvestment of dividends. You
may have to pay taxes on your exchange. When you exchange shares, you are
purchasing shares in another fund so you should be sure to get a copy of the
fund's prospectus and read it carefully before buying shares through an
exchange.
-16-
<PAGE>
About your account (continued)
Special services (continued)
MoneyLineSM On Demand Service
Through our MoneyLineSM On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans, except
for purchases into IRAs. MoneyLine has a minimum transfer of $25 and a maximum
transfer of $50,000.
MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains, unless you tell us otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
-17-
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The portfolio managers and
investment professionals of the Fund consider Year 2000 compliance in the
securities selection and investment process. However, there can be no guarantee
that, even with their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
Investments by Fund of Funds
Small Cap Value Fund accepts investments from the series portfolios of Delaware
Group Foundation Funds, a fund of funds. From time to time, the Fund may
experience large investments or redemptions due to allocations or rebalancings
by Foundation Funds. While it is impossible to predict the overall impact of
these transactions over time, there could be adverse effects on portfolio
management. For example, the Fund may be required to sell securities or invest
cash at times when it would not otherwise do so. These transactions could also
have tax consequences if sales of securities result in gains, and could also
increase transactions costs or portfolio turnover. The manager will monitor
transactions by Foundation Funds and will attempt to minimize any adverse
effects on both Small Cap Value Fund and Foundation Funds as a result of these
transactions.
-18-
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
Class A Shares
Year Ended 11/30
------------------------------------------------------------
Small Cap Value Fund 1998 1997 1996 1995 1994
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $29.790 $25.780 $22.760 $19.320 $20.070
Income (loss) from investment operations
Net investment income(1) 0.215 0.131 0.122 0.253 0.142
Net realized and unrealized gain (loss) on investments (2.285) 7.914 4.028 3.597 (0.687)
------- ----- ----- ----- -------
Total from investment operations (2.070) 8.045 4.150 3.850 (0.545)
------- ----- ----- ----- -------
Less dividends and distributions
Dividends from net investment income (0.140) (0.135) (0.240) (0.160) (0.035)
Distributions from net realized gain on investments (2.100) (3.900) (0.890) (0.250) (0.170)
------- ------- ------- ------- -------
Total dividends and distributions (2.240) (4.035) (1.130) (0.410) (0.205)
------- ------- ------- ------- -------
Net asset value, end of period $25.480 $29.790 $25.780 $22.760 $19.320
======= ======= ======= ======= =======
Total return(2) (7.47%) 36.38% 19.08% 20.39% (2.78%)
Ratios and supplemental data
Net assets, end of period (000 omitted) $271,192 $268,266 $192,297 $177,011 $179,498
Ratio of expenses to average net assets 1.39% 1.39% 1.45% 1.48% 1.46%
Ratio of net investment income to average net assets 0.81% 0.51% 0.51% 1.18% 0.75%
Portfolio turnover 38% 53% 87% 65% 14%
----------- ---------- ---------- ---------- ----------
Volatility
Volatility, as indicated by year-by-year total return(2) 1998 1997 1996 1995 1994
----------- ---------- ---------- ---------- ----------
Volatility chart is not part of the Financial highlights and has (7.47%) 36.38% 19.08% 20.39% (2.78%)
not been audited by Ernst & Young LLP.
</TABLE>
(1) Per share information for the years ended November 30, 1996 and 1997 was
based on the average shares outstanding method.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
-19-
<PAGE>
<TABLE>
<CAPTION>
Class B Shares Period
Small Cap Value Fund Year Ended 11/30 9/6/94(3)
----------------------------------------------- through
1998 1997 1996 1995 11/30/94
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $29.460 $25.570 $22.590 $19.300 $20.280
Income (loss) from investment operations
Net investment income (loss)(2) 0.052 (0.042) (0.041) 0.141 0.011
Net realized and unrealized gain (loss) on investments (2.272) 7.832 4.006 3.549 (0.991)
------- ----- ----- ----- -------
Total from investment operations (2.220) 7.790 3.965 3.690 (0.980)
------- ----- ----- ----- -------
Less dividends and distributions
Dividends from net investment income none none (0.095) (0.150) none
Distributions from net realized gain on investments (2.100) (3.900) (0.890) (0.250) none
------- ------- ------- ------- ----
Total dividends and distributions (2.100) (3.900) (0.985) (0.400) none
------- ------- ------- ------- ----
Net asset value, end of period $25.140 $29.460 $25.570 $22.590 $19.300
======= ======= ======= ======= =======
Total return(2) (8.08%) 35.36% 18.26% 19.55% (4.83%)
Ratios and supplemental data
Net assets, end of period (000 omitted) $83,899 $39,733 $12,730 $5,788 $1,455
Ratio of expenses to average net assets 2.09% 2.09% 2.15% 2.18% 2.16%
Ratio of net investment income (loss) to average net assets 0.11% (0.19%) (0.19%) 0.48% 0.05%
Portfolio turnover 38% 53% 87% 65% 14%
Volatility
Volatility, as indicated by year-by-year total return(2)
Volatility chart is not part of the Financial highlights and has
not been audited by Ernst & Young LLP. (8.08%) 35.36% 18.26% 19.55% (4.83%)
</TABLE>
(1) Per share information for the years ended November 30, 1996 and 1997 was
based on the average shares outstanding method.
(2) Total investment return is based on the change in net asset value and does
not reflect the impact of a sales charge.
(3) Date of initial public offering; ratios have been annualized but total
return has not been annualized.
-20-
<PAGE>
<TABLE>
<CAPTION>
Class C Shares Period
Small Cap Value Fund Year Ended 11/30 11/29/95(3)
----------------------------------- through
1998 1997 1996 11/30/95
----------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $29.440 $25.550 $22.760 $22.510
Income (loss) from investment operations
Net investment income (loss)(1) 0.036 (0.033) (0.043) none
Net realized and unrealized gain (loss) on investments (2.256) 7.823 4.003 0.250
------- ----- ----- -----
Total from investment operations (2.220) 7.790 3.960 0.250
------- ----- ----- -----
Less dividends and distributions
Dividends from net investment income none none (0.280) none
Distributions from realized gain on investments (2.100) (3.900) (0.890) none
------- ------- ------- ----
Total dividends and distributions (2.100) (3.900) (1.170) none
------- ------- ------- ----
Net asset value, end of period $25.120 $29.440 $25.550 $22.760
======= ======= ======= =======
Total return(2) (8.08%) 35.40% 18.23% (4)
Ratios and supplemental data
Net assets, end of period (000 omitted) $31,041 $12,547 $3,360 $5
Ratio of expenses to average net assets 2.09% 2.09% 2.15% (4)
Ratio of net investment income (loss) to average net assets 0.11% (0.19%) (0.19%) (4)
Portfolio turnover 38% 53% 87% (4)
Volatility
Volatility, as indicated by year-by-year total return(2)
Volatility chart is not part of the Financial highlights and has (8.08%) 35.40% 18.23%
not been audited by Ernst & Young LLP.
</TABLE>
(1) Per share information for the years ended November 30, 1996 and 1997 was
based on the average shares outstanding method.
(2) Total investment return is based on the change in net asset value and does
not reflect the impact of a sales charge.
(3) Date of initial public offering.
(4) The ratios of expenses and net investment income to average net assets,
portfolio turnover and total return have been omitted as management
believes that such ratios and returns for this relatively short period are
not meaningful.
-21-
<PAGE>
How to read the Financial highlights
Net investment income
Net investment income includes dividend and interest income earned from the
Fund's securities; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less dividends and distributions-Distributions from net realized
gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average daily net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
-22-
<PAGE>
How to use this glossary
Words found in the glossary are printed in boldface only the first time they
appear in the prospectus. So if you would like to know the meaning of a word
that isn't in boldface, you might still find it in the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Corporate bond
A debt security issued by a corporation. See bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Currency exchange rates
The price at which one country's currency can be converted into another's. The
exchange rate varies almost daily according to a wide range of political,
economic and other factors.
-23-
<PAGE>
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service
(Moody's), Standard & Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and
Fitch IBCA, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
-24-
<PAGE>
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price-to-earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Russell 2000 Index
Russell 2000 Index, an unmanaged index that measures the performance of the 2000
smallest companies in the Russell 3000 Index.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
-25-
<PAGE>
Small Cap Value Fund
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4997
CUSIP Number NASDAQ Symbol
Small Cap Value Fund A Class 246097109 DEVLX
Small Cap Value Fund B Class 246097307 DEVBX
Small Cap Value Fund C Class 246097406 DEVCX
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 3/99
<PAGE>
DELAWARE
INVESTMENTS
\ -----------
Philadelphia * London
Small Cap Value Fund
Institutional Class
Prospectus
March 30, 1998
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
[inside front cover]
Table of Contents
Fund profile page
Small Cap Value Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio manager
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Dividends, distributions and taxes
Certain management considerations page
Financial information page
2
<PAGE>
Profile: Small Cap Value Fund
What are the Fund's goals?
Small Cap Value Fund seeks capital appreciation. Although the Fund will strive
to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of small companies whose stock prices appear low
relative to their underlying value or future potential. Among other factors, we
consider the financial strength of a company, its management, the prospects for
its industry and any anticipated changes within the company, that might suggest
a more favorable outlook going forward.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock prices. In addition, the companies that
Small Cap Value Fund invests in may involve greater risk due to their size,
narrow product lines and limited financial resources. For a more complete
discussion of risk, please turn to page 9.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
small companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
3
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Institutional Class shares have
varied over the past ten calendar years, as well as the average annual returns
for one, five and ten years. Small Cap Value Fund's Institutional Class
commenced operations on November 9, 1992. Return information for the Class for
the periods prior to the time the Class commenced operations is calculated by
taking the performance of Small Cap Value Fund A Class and eliminating all sales
charges that apply to Class A shares. However, for those periods, Class A 12b-1
payments were not eliminated, and performance would have been affected if this
adjustment had been made. The Fund's past performance does not necessarily
indicate how it will perform in the future.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (INSTITUTIONAL
CLASS)]
Year-by-year total return (Institutional Class)
Small Cap Value Fund
1989 31.87%
1990 -13.15%
1991 50.97%
1992 14.85%
1993 19.18%
1994 -6.70%
1995 23.84%
1996 22.49%
1997 33.48%
1998 -4.82%
The Institutional Class had a -10.04% year-to-date return as of February 28,
1999. During the ten years illustrated in this bar chart, the Institutional
Class' highest return was 18.18% for the quarter ended March 31, 1995 and its
lowest return was -16.40% for the quarter ended March 31, 1994.
Average annual return as of 12/31/98
Institutional Class Russell 2000 Index
1 year -4.82% -2.55%
5 years 12.45% 11.87%
10 years 15.58% 12.92%
The Fund's returns are compared to the performance of the Russell 2000 Index.
You should remember that unlike the Fund, the index is unmanaged and doesn't
include the costs of operating a mutual fund, such as the costs of buying,
selling and holding the securities.
4
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- ----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
- -----------------------------------------------------------------
Maximum contingent deferred sales charge (load) as none
a percentage of original purchase price or
redemption price, whichever is lower
- ----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
- ----------------------------------------------------------------
Redemption fees none
- ----------------------------------------------------------------
Exchange Fees(1) none
- ----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
- -----------------------------------------------------------------
Management fees 0.75%
- -----------------------------------------------------------------
Distribution and service (12b-1) fees none
- -----------------------------------------------------------------
Other expenses 0.34%
- -----------------------------------------------------------------
Total operating expenses 1.09%
- -----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(2) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ---------------------------
1 year $111
- ---------------------------
3 years $347
- ---------------------------
5 years $601
- ---------------------------
10 years $1,329
- ---------------------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the Fund's
total operating expenses remain unchanged in each of the periods we show.
5
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Small Cap Value Fund. Following is a description of how the
portfolio manager pursues the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify small companies that offer above-average opportunities for
long-term price appreciation because their current stock price does not
accurately reflect the companies' underlying value or future earning potential.
Under normal conditions, at least 65% of the Fund's net assets will be invested
in the common stock of small cap companies, those having a market capitalization
generally less than $1.5 billion. Our focus will be on value stocks, defined as
stocks whose price is historically low based on a given financial measure such
as profits, book value or cashflow.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will carefully evaluate the financial strength of the company, the nature of
its management, any developments affecting the company or its industry,
anticipated new products or services, possible management changes, projected
takeovers or technological breakthroughs. Using this extensive analysis, our
goal is to pinpoint the companies within the universe of undervalued stocks,
whose true value is likely to be recognized and rewarded with a rising stock
price in the future.
Because there is added risk when investing in smaller companies, which may still
be in their early developmental stages, we maintain a well-diversified
portfolio, typically holding 75 to 100 different stocks, representing a wide
array of industries.
6
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Value Fund
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stocks: Securities that represent shares of Generally, we invest 90% to 100% of net assets in
ownership in a corporation. Stockholders participate common stock of small companies that we believe are
in the corporation's profits and losses, selling for less than their true value. Under normal
proportionate to the number of shares they own. conditions, we will hold at least 65% of Fund's net
assets in these stocks.
- -----------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts: A company, usually The Fund is permitted to invest in REITs and would
traded publicly, that manages a portfolio of real typically do so when this sector or specific
estate to earn profits for shareholders. companies within the sector appeared to offer
opportunities for price appreciation.
- -----------------------------------------------------------------------------------------------------------------------------
Foreign Securities and American Depositary Receipts: Although the Fund may invest up to 25% of its net
Securities of foreign entities issued directly or, in assets in foreign securities or depositary receipts,
the case of American Depositary Receipts, through a the manager has no present intention of doing so. We
U.S. bank. ADRs are issued by a U.S. bank and may hold ADRs when we believe they offer greater value
represent the bank's holding of a stated number of and greater appreciation potential than U.S.
shares of a foreign corporation. An ADR entitles the securities.
holder to all dividends and capital gains earned by
the underlying foreign shares. ADRs are bought and
sold the same as U.S. securities.
- -----------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer Typically, we use repurchase agreements as a
and seller of securities in which the seller agrees short-term investment for the Fund's cash position. In
to buy the securities back within a specified time at order to enter into these repurchase agreements, the
the same price the buyer paid for them, plus an Fund must have collateral of at least 102% of the
amount equal to an agreed upon interest rate. repurchase price. The Fund may not have more than 10%
Repurchase agreements are often viewed as equivalent of its total assets in repurchase agreements with
to cash. maturities of over seven days.
- -----------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest without limitation in privately placed
whose resale is restricted under securities law. securities that are eligible for resale only among
certain institutional buyers without registration.
These are commonly known as Rule 144A Securities.
Other restricted securities must be limited to 10% of
total Fund assets.
- -----------------------------------------------------------------------------------------------------------------------------
Illiquid Securities: Securities that do not have a We may invest up to 10% of net assets in illiquid
ready market, and cannot be easily sold, if at all, securities.
at approximately the price the Fund has valued
them.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
7
<PAGE>
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and investors for
their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis the Fund may
buy or sell securities on a when-issued or delayed delivery basis; that is,
paying for securities before delivery or taking delivery at a later date.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover will be less than 100%.
A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year.
8
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment in it to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in the Fund. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- -----------------------------------------------------------------------------------------------------------------------------
Small Cap Value Fund
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus
securities in a certain market -- like the stock or on stocks we believe can appreciate over an extended
bond market -- will decline in value because of time frame regardless of interim market fluctuations.
factors such as economic conditions, future We do not try to predict overall stock market
expectations or investor confidence. movements and do not trade for short-term purposes.
We may hold a substantial part of the Fund's assets in
cash or cash equivalents as a temporary, defensive
strategy.
- -----------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the value We limit the amount of the Fund's assets invested in
of securities in a particular industry or the value any one industry and in any individual security.
of an individual stock or bond will decline because We also follow a rigorous selection process before
of changing expectations for the performance of that choosing securities and continuously monitor them
industry or for the individual company issuing the while they remain in the portfolio.
stock.
- -----------------------------------------------------------------------------------------------------------------------------
Small company risk is the risk that prices of smaller The Fund maintains a well-diversified portfolio,
companies may be more volatile than larger companies selects stocks carefully and monitors them
because of limited financial resources or dependence continuously. And, because we focus on stocks that
on narrow product lines. are already selling at relatively low prices, we
believe we may experience less price volatility than
small-cap funds that do not use a value-oriented
strategy.
- -----------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities will We analyze each company's financial situation and its
decrease in value if interest rates rise. The risk is cashflow to determine the company's ability to
generally associated with bonds; however, because finance future expansion and operations. The
smaller companies often borrow money to finance their potential affect that rising interest rates might
operations, they may be adversely affected by rising have on a stock is taken into consideration before
interest rates. the stock is purchased.
- -----------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign securities may We typically invest only a small portion of the
be adversely affected by political instability, Fund's portfolio in foreign securities. When we
changes in currency exchange rates, foreign economic do purchase foreign securities, they are often
conditions or inadequate regulatory and accounting denominated in U.S. dollars. To the extent we invest
standards. in foreign securities, we invest primarily in issuers
of developed countries, which are less likely to
encounter these foreign risks than issuers in
developing countries. The Fund may use hedging
techniques to help offset potential foreign currency
losses.
- -----------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, or can
only be sold at a price lower than
the Fund has valued them.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Who manages the Fund
Investment Manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager was paid 0.75% as a
percentage of average daily net assets for the last fiscal year.
Portfolio Manager
Christopher S. Beck, Vice President/Senior Portfolio Manager of the Fund,
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 18 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 Delaware Investments in
May 1997, he managed the Small Cap 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. When making investment decisions for the Fund, Mr. Beck
regularly consults with and Andrea Giles.
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 Delaware Investments in 1996, she was an account officer in the
Leveraged Capital Group with Citibank.
10
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
Board of Directors
Investment Manager The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio manager Distributor Service agent
(see page 10 for details) Delaware Distributors, L.P. Delaware Service
1818 Market Street Company, Inc.
Philadelphia, PA 19103 1818 Market Street
Philadelphia, PA 19103
Shareholders
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
11
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the
following:
o retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts
o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee
o registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if
the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services
12
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable
to the fund and class of shares you wish to purchase, to Delaware Investments,
1818 Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
13
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently, the Exchange is closed when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
14
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
15
<PAGE>
About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern Time), you will receive the net asset value as determined on the
business day we receive your request. We will send you a check, normally the
next business day, but no later than seven days after we receive your request to
sell your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from this Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
16
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The portfolio manager and
investment professionals of the Fund consider Year 2000 compliance in the
securities selection and investment process. However, there can be no guarantee
that, even with their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
Investments by Fund of Funds
Small Cap Value Fund accepts investments from the series portfolios of Delaware
Group Foundation Funds, a fund of funds. From time to time, the Fund may
experience large investments or redemptions due to allocations or rebalancings
by Foundation Funds. While it is impossible to predict the overall impact of
these transactions over time, there could be adverse effects on portfolio
management. For example, the Fund may be required to sell securities or invest
cash at times when it would not otherwise do so. These transactions could also
have tax consequences if sales of securities result in gains, and could also
increase transactions costs or portfolio turnover. The manager will monitor
transactions by Foundation Funds and will attempt to minimize any adverse
effects on both Small Cap Value Fund and Foundation Funds as a result of these
transactions.
17
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Institutional Class
Year Ended 11/30
----------------------------------------------------------
Small Cap Value Fund 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.950 $25.910 $22.860 $19.400 $20.140
Income (loss) from investment operations
Net investment income(1) 0.160 0.209 0.193 0.297 0.195
Net realized and net unrealized gain (loss) on investments (2.150) 7.936 4.047 3.628 (0.685)
-------- ------- ------- ------- -------
Total from investment operations (1.990) 8.145 4.240 3.925 (0.490)
-------- ------- ------- ------- -------
Less dividends and distributions
Dividends from net investment income (0.220) (0.205) (0.300) (0.215) (0.080)
Distributions from realized gain on investments (2.100) (3.900) (0.890) (0.250) (0.170)
-------- ------- ------- ------- -------
Total dividends and distributions (2.320) (4.105) (1.190) (0.465) (0.250)
-------- ------- ------- ------- -------
Net asset value, end of period $ 25.640 $29.950 $25.910 $22.860 $19.400
======== ======= ======= ======= =======
Total return (7.16%) 36.73% 19.45% 20.76% (2.51%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $113,930 $14,878 $16,373 $ 7,294 $ 6,385
Ratio of expenses to average net assets 1.09% 1.09% 1.15% 1.18% 1.16%
Ratio of net investment income to average net assets 1.11% 0.81% 0.81% 1.48% 1.05%
Portfolio turnover 38% 53% 87% 65% 14%
- ---------------------------------------------------------------------------------------------------------------------------------
Volatility
Volatility, as indicated by year-by-year total return 1998 1997 1996 1995 1994
-------- ------- ------- ------- -------
Volatility chart is not part of Financial highlights and has not (7.16%) 36.73% 19.45% 20.76% (2.51%)
been audited by Ernst & Young LLP
</TABLE>
(1) Per share for the years ended November 30, 1996 and 1997 was based on
the average shares outstanding method.
18
<PAGE>
How to read the financial highlights
Net investment income
Net investment income includes dividend and interest income earned from the
Fund's securities; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less dividends and distributions-Distributions from net realized
gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers and assume the shareholder has
reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
19
<PAGE>
How to use this glossary
Words found in the glossary are printed in boldface only the first time they
appear in the prospectus. So if you would like to know the meaning of a word
that isn't in boldface, you might still find it in the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
20
<PAGE>
Corporate bond
A debt security issued by a corporation. See bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Currency exchange rates
The price at which one country's currency can be converted into another's. The
exchange rate varies almost daily according to a wide range of political,
economic and other factors.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
21
<PAGE>
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
22
<PAGE>
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Russell 2000 Index
Russell 2000 Index, an unmanaged index that measures the performance of the 2000
smallest companies in the Russell 3000 Index.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
23
<PAGE>
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
24
<PAGE>
[back cover]
Small Cap Value Fund
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in this Fund, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
Investment Company Act file number: 811-4997
DELAWARE
INVESTMENTS
Philadelphia * London
P-002 [--] PP 3/99
Small Cap Value Fund
Institutional Class CUSIP Number NASDAQ Symbol
246097208 DEVIX
25
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Small Cap Contrarian Fund
Class A * Class B* Class C
Prospectus
March 30, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
Fund profile page
Small Cap Contrarian Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
Glossary page
2
<PAGE>
Profile: Small Cap Contrarian Fund
What are the Fund's goals?
Small Cap Contrarian Fund seeks long-term capital appreciation. Although the
Fund will strive to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of small companies whose stock prices appear low
relative to their underlying value or future potential. Among other factors, we
consider the financial strength of a company, its management, the prospects for
its industry and any anticipated changes within the company, which might suggest
a more favorable outlook going forward.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock prices. The companies that Small Cap
Contrarian Fund invests in may involve greater risk due to their size, narrow
product lines and limited financial resources. In addition, the Small Cap
Contrarian Fund may be concentrated in certain industries at any given time, a
strategy that may increase volatility. For a more complete discussion of risk,
please turn to page 9.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of small
companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
3
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund. The Fund may waive or reduce sales charges; please see the
Statement of Additional Information for details.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price 5.75% none none
- ---------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
Redemption price, whichever is lower none(1) 5%(2) 1%(3)
- ---------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
Reinvested dividends None none none
- ---------------------------------------------------------------------------------------------
Redemption fees None none none
- ---------------------------------------------------------------------------------------------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses.
- -----------------------------------------------------------------------------
Management fees 0.75% 0.75% 0.75%
- -----------------------------------------------------------------------------
Distribution and service (12b-1) fees(4) 0.30% 1.00% 1.00%
- -----------------------------------------------------------------------------
Other expenses(5) 0.65% 0.65% 0.65%
- -----------------------------------------------------------------------------
Total operating expenses(6) 1.70% 2.40% 2.40%
- -----------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. 7 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS(8) A B B (if redeemed) C C (if redeemed)
- ---------------------------------------------------------------------------------------------
1 year $738 $243 $743 $243 $343
- ---------------------------------------------------------------------------------------------
3 years $1,080 $748 $1,048 $748 $748
- ---------------------------------------------------------------------------------------------
</TABLE>
1. A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is paid
a commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be
disclosed in the prospectus if they are available.
2. If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
3. Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
4. The Class A shares are subject to a 12b-1 fee of 0.30% of average daily net
assets and Class B and C shares are each subject to a 12b-1 fee of 1.00% of
average daily net assets. The distributor has agreed to waive these 12b-1
fees through May 31, 1999.
4
<PAGE>
5. Other expenses are based on estimated amounts for the current fiscal year.
6. The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through May 31, 1999 in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees, extraordinary expenses and 12b-1 fees) from exceeding 0.75% of average
daily net assets.
7. The Fund's actual rate of return may be greater or less than the hypothetical
5% return we use here. Also, this example assumes that the Fund's total
operating expenses remain unchanged in each of the periods we show. This
example does not reflect the voluntary expense cap described in footnote 6.
8. Class B shares automatically convert to Class A shares at the end of the
eighth year. The example does not assume this conversion since it only
reflects expenses for one and three years.
5
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Small Cap Contrarian Fund. Following is a description of how the
portfolio manager pursues the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify small companies that offer above-average opportunities for
long-term price appreciation because their current stock price does not
accurately reflect the companies' underlying value or future earning potential.
Under normal conditions, at least 65% of the Fund's net assets will be invested
in the common stock of small cap companies, those having a market capitalization
generally less than $1.5 billion. Our focus will be on value stocks, defined as
stocks whose price is historically low based on a given financial measure such
as profits, book value or cashflow.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will use a selection model which we developed ourselves, to help identify
companies that meet our investment guidelines. Our initial search will focus on
several key characteristics including price-to-sales ratio, price-to-cash flow
ratio and price-to-earnings ratio.
We will then carefully evaluate the financial strength of the company, the
nature of its management, any developments affecting the company or its
industry, anticipated new products or services, possible management changes,
projected takeovers or technological breakthroughs. Using this extensive
analysis, our goal is to pinpoint the companies within the universe of
undervalued stocks, whose true value is likely to be recognized and rewarded
with a rising stock price in the future.
Because there is added risk when investing in smaller companies, which may still
be in their early developmental stages, we maintain a well-diversified
portfolio, typically holding 55 to 80 different stocks, representing a wide
array of industries.
6
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ---------------------------------------------------------------------------------------------------------------------------------
Small Cap Contrarian Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of Generally, we invest 90% to 100% of net assets in common stock of
ownership in a corporation. Stockholders participate small companies that we believe are selling for less than their
in the corporation's profits and losses, true value. Under normal conditions, we will hold at least 65% of
proportionate to the number of shares they own. the net assets in these stocks.
- ---------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts: A company, usually The Fund is permitted to invest in REITs and would typically do so
traded publicly, that manages a portfolio of real when this sector or specific companies within the sector appeared to
estate to earn profits for shareholders. offer opportunities for price appreciation.
- ---------------------------------------------------------------------------------------------------------------------------------
Foreign Securities and American Depositary Receipts The Fund may invest up to 25% of its net assets in foreign
Securities of foreign entities issued directly or, securities or depositary receipts. We have no present intention of
in the case of American Depositary Receipts, through investing directly in foreign securities; however, we may hold ADRs
a U.S. bank. ADRs are issued by a U.S. bank and when we believe they offer greater value and greater appreciation
represent the bank's holding of a stated number of potential than U.S. securities.
shares of a foreign corporation. An ADR entitles the
holder to all dividends and capital gains earned by
the underlying foreign shares. ADRs are bought and
sold the same as U.S. securities.
- ---------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer Typically, we use repurchase agreements as a short-term investment
and seller of securities in which the seller agrees for the Fund's cash position. In order to enter into these repurchase
to buy the securities back within a specified time agreements, the Fund must have collateral of at least 102% of the
at the same price the buyer paid for them, plus an repurchase price. The Fund may not have more than 15% of its
amount equal to an agreed upon interest rate. total assets in repurchase agreements with maturities of over
Repurchase agreements are often viewed as equivalent seven days.
to cash.
- ---------------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest without limitation in privately placed securities that
whose resale is restricted under securities law. are eligible for resale only among certain institutional buyers
without registration. These are commonly known as Rule 144A
Securities. Other restricted securities must be limited to 15% of
total Fund assets.
- ---------------------------------------------------------------------------------------------------------------------------------
Illiquid Securities: Securities that do not have a We may invest up to 15% of net assets in illiquid securities.
ready market, and cannot be easily sold, if at all,
at a reasonable price.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
7
<PAGE>
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and investors for
their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis the Fund may
buy or sell securities on a when-issued or delayed delivery basis; that is,
paying for securities before delivery or taking delivery at a later date.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover will be less than 100%.
A turnover rate of 100% would occur if the Fund sold and replaced securities
valued at 100% of its net assets within one year.
8
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment in it to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in the Fund. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Contrarian Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we believe can
of the securities in a certain market -- like appreciate over an extended time frame regardless of interim market fluctuations.
the stock or bond market -- will decline in We do not try to predict overall stock market movements and do not trade for
value because of factors such as economic short-term purposes.
conditions, future expectations or investor
confidence. We may hold a substantial part of the Fund's assets in cash or cash equivalents
as a temporary, defensive strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the We follow a rigorous selection process before choosing securities and
value of securities in a particular industry or continuously monitor them while they remain in the portfolio.
the value of an individual stock or bond will
decline because of changing expectations for The Fund is a diversified portfolio with investments in companies representing
the performance of that industry or for the many different industries. We do not make additional investments in a stock if
individual company issuing the stock. that stock represents 5% of net assets, nor in an industry if that industry
represents 25% of net assets. However, it is likely that our holdings will be more
concentrated in certain industries if the industry as a whole has strong value
characteristics. This could increase volatility.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Contrarian Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Small company risk is the risk that prices of The Fund maintains a well-diversified portfolio, selects stocks carefully and
smaller companies may be more volatile than monitors them continuously. And, because we focus on stocks that are already
larger companies because of limited financial selling at relatively low prices, we believe we may experience less price
resources or dependence on narrow product lines. volatility than small-cap funds that do not use a value-oriented strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities We analyze each company's financial situation and its cashflow to determine the
will decrease in value if interest rates rise. company's ability to finance future expansion and operations. The potential
The risk is generally associated with bonds; affect that rising interest rates might have on a stock is taken into
however, because smaller companies often borrow consideration before the stock is purchased.
money to finance their operations, they may be
adversely affected by rising interest rates.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest only a small portion of the Fund's portfolio in foreign
securities may be adversely affected by securities. When we do purchase foreign securities, they are often denominated in
political instability, changes in currency U.S. dollars. To the extent we invest in foreign securities, we invest primarily
exchange rates, foreign economic conditions or in issuers of developed countries, which are less likely to encounter these
inadequate regulatory and accounting standards. foreign risks than issuers in developing countries. The Fund may use hedging
techniques to help offset potential foreign currency losses.
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, or can only
be sold at a price lower than the price that
the Fund has valued them.
- ------------------------------------------------- ----------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Who manages the Fund
Investment Manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the Manager is paid an annual fee
equal to on an annual basis: 0.75% on the first $500 million of average daily
net assets; 0.70% on the next $500 million; 0.65% on the next $1.5 billion; and
0.60% on the average daily net assets in excess of $2.5 billion.
Portfolio Managers
Christopher S. Beck, Vice President/Senior Portfolio Manager of the Fund,
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 18 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 Delaware Investments in
May 1997, he managed the Small Cap 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.
Andrea Giles, Assistant Vice President/Portfolio Manager of the Fund, holds a
BSAD from the Massachusetts Institute of Technology and an MBA in Finance from
Columbia University. Prior to joining Delaware Investments in 1996, she was an
account officer in the Leveraged Capital Group with Citibank.
11
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
<TABLE>
<CAPTION>
Board of Directors
<S> <C> <C>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 11 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
</TABLE>
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
12
<PAGE>
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
13
<PAGE>
About your account
Investing in the Funds
You can choose from a number of share classes for each Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you pay when
you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class A shares are also subject to an annual 12b-1
fee no greater than 0.30% of average daily net assets, which is lower than
the 12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge.
<TABLE>
<CAPTION>
Class A Sales Charges
- ----------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge Sales charge as % of amount Dealer's commission as %
as % invested Of offering price
of offering price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.12% 5.00%
- ----------------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 4.75% 4.94% 4.00%
- ----------------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 3.75% 3.88% 3.00%
- ----------------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 2.50% 2.59% 2.00%
- ----------------------------------------------------------------------------------------------------------------------------
$500,000 but under $1 million 2.00% 2.00% 1.60%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year and 0.50% if
you redeem them within the second year.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge Sales charge as % of amount Dealer's commission as %
as % invested Of offering price
of offering price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1,000,000 up to $5 million none none 1.00%
- ----------------------------------------------------------------------------------------------------------------------------
next $20 million
up to $25 million none none 0.50%
- ----------------------------------------------------------------------------------------------------------------------------
amount over $25 million none none 0.25%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge if you redeem your shares within six years after you buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth year,
and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, absent 12b-1
fee waivers, they are subject to annual 12b-1 fees no greater than 1% of
average daily net assets, of which 0.25% are service fees paid to the
distributor, dealers or others for providing services and maintaining
accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and any
dividends paid on these shares are lower than dividends on Class A shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%, which is
currently being waived. Conversion may occur as late as three months after
the eighth anniversary of purchase, during which time Class B's higher 12b-1
fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
15
<PAGE>
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge if you redeem your shares within 12 months after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class C shares are subject to an annual 12b-1 fee
which may not be greater than 1% of average daily net assets, of which 0.25%
are service fees paid to the distributor, dealers or others for providing
services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and pay
lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any one
time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
16
<PAGE>
About your account continued
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Program How it works Share class
A B C
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of
agree to invest a certain Intent and Rights of
amount in Delaware Investment Accumulation do not apply
Funds (except money market to the purchase of Class
funds with no sales charge) B and C shares, you can
over a 13-month period to combine your purchase of
qualify for reduced front-end Class A shares with your
sales charges. purchase of B and C
- ---------------------------------------------------------------------------------------------- shares to fulfill your
Rights of accumulation You can combine your holdings X Letter of Intent or
or purchases of all funds in the qualify for Rights of
Delaware Investments family Accumulation.
(except money market funds with
no sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end
sales charges.
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of redeemed shares Up to 12 months after you X Not available.
redeem shares, you can reinvest
the proceeds without paying a
front-end sales charge.
- ---------------------------------------------------------------------------------------------------------------------------
SIMPLE IRA, SEP IRA, SARSEP, Prototype These investment plans may X Not available.
Profit Sharing, Pension, 401(k), SIMPLE qualify for reduced sales
401(k), 403(b)(7), and 457 Retirement charges by combining the
Plans purchases of all members of the
group. Members of these groups
may also qualify to purchase
shares without a front-end sales
charge and a waiver of any
contingent deferred sales
charges.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
How to buy shares
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service. For more information about how to sign up for this service, call our
Shareholder Service Center at 800.523.1918.
18
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000--and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently the Exchange is closed when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800o523o1918.
19
<PAGE>
How to redeem shares
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, the First Union Bank fee (currently
$7.50) will be deducted from your proceeds. Bank information must be on file
before you request a wire redemption.
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawarefunds.com. For more information about how to
sign up for these services, call our Shareholder Service Center at 800o523o1918.
20
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will deduct any applicable contingent deferred sales charges.
You may also have to pay taxes on the proceeds from your sale of shares. We will
send you a check, normally the next business day, but no later than seven days
after we receive your request to sell your shares. If you purchased your shares
by check, we will wait until your check has cleared, which can take up to 15
days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, the Fund may redeem your account
after 60 days' written notice to you.
21
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly investments
directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for similar shares in other
funds, your new shares will be subject to the same contingent deferred sales
charge as the shares you originally purchased. The holding period for the CDSC
will also remain the same, with the amount of time you held your original shares
being credited toward the holding period of your new shares. You don't pay sales
charges on shares that you acquired through the reinvestment of dividends. You
may have to pay taxes on your exchange. When you exchange shares, you are
purchasing shares in another fund so you should be sure to get a copy of the
fund's prospectus and read it carefully before buying shares through an
exchange.
22
<PAGE>
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
23
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The portfolio managers and
investment professionals of the Fund consider Year 2000 compliance in the
securities selection and investment process. However, there can be no guarantee
that, even with their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
24
<PAGE>
Financial highlights
Financial highlights are not shown for the Fund since it commenced operations
after the close of the fiscal year end.
25
<PAGE>
How to use this glossary
Words found in the glossary are printed in boldface only the first time they
appear in the prospectus. So if you would like to know the meaning of a word
that isn't in boldface, you might still find it in the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Corporate bond
A debt security issued by a corporation. See "bond."
Depreciation
A decline in an investment's value.
26
<PAGE>
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service
(Moody's), Standard & Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and
Fitch Investor Services, Inc. (Fitch).
27
<PAGE>
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
S&P 500 Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
28
<PAGE>
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
29
<PAGE>
Small Cap Contrarian Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions and
telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a day,
use this Touch-Tone(R) service.
Investment Company Act file number: 811-4997
Class A CUSIP Number: 24610B883
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 3/99
<PAGE>
DELAWARE
INVESTMENTS
Philadelphia * London
Small Cap Contrarian Fund
Institutional Class
Prospectus
March 30, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
[inside front cover]
Table of Contents
Fund profile page
Small Cap Contrarian Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
Glossary page
2
<PAGE>
Profile: Small Cap Contrarian Fund
What are the Fund's goals?
Small Cap Contrarian Fund seeks long-term capital appreciation. Although the
Fund will strive to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of small companies whose stock prices appear low
relative to their underlying value or future potential. Among other factors, we
consider the financial strength of a company, its management, the prospects for
its industry and any anticipated changes within the company, which might suggest
a more favorable outlook going forward.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock prices. The companies that Small Cap
Contrarian Fund invests in may involve greater risk due to their size, narrow
product lines and limited financial resources. In addition, the Small Cap
Contrarian Fund may be concentrated in certain industries at any given time, a
strategy that may increase volatility. For a more complete discussion of risk,
please turn to page 8.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
small companies.
Who should not invest in the Fund Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
3
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
------------------------------------------------------ ----------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
------------------------------------------------------ ----------
Maximum contingent deferred sales charge none
(load) as a percentage of original purchase
price or redemption price, whichever is lower
------------------------------------------------------ ----------
Maximum sales charge (load) imposed on reinvested none
dividends
------------------------------------------------------ ----------
Redemption fees none
------------------------------------------------------ ----------
Exchange Fees(1) none
------------------------------------------------------ ----------
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses.
------------------------------------------------------ -----------
Management fees 0.75%
------------------------------------------------------ -----------
Distribution and service (12b-1) fees none
------------------------------------------------------ -----------
Other expense(2) 0.65%
------------------------------------------------------ -----------
Total operating expenses(3) 1.40%
------------------------------------------------------ -----------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(4) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
--------------- ------------
1 year $143
--------------- ------------
3 years $443
--------------- ------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange
your shares into a fund that has a front-end sales charge.
(2) Other expenses are based on estimated amounts for the current fiscal
year.
(3) The investment manager has agreed to waive fees and pay expenses from
the commencement of the Fund's operations through May 31, 1999, in
order to prevent total operating expenses (excluding any taxes,
interest, brokerage fees and extraordinary expenses) from exceeding
0.75% of average daily net assets.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. This example does not reflect the voluntary expense cap
described in footnote 3.
4
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Small Cap Contrarian Fund. Following is a description of how the
portfolio manager pursues the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify small companies that offer above-average opportunities for
long-term price appreciation because their current stock price does not
accurately reflect the companies' underlying value or future earning potential.
Under normal conditions, at least 65% of the Fund's net assets will be invested
in the common stock of small cap companies, those having a market capitalization
generally less than $1.5 billion. Our focus will be on value stocks, defined as
stocks whose price is historically low based on a given financial measure such
as profits, book value or cashflow.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will use a selection model which we developed ourselves, to help identify
companies that meet our investment guidelines. Our initial search will focus on
several key characteristics including price-to-sales ratio, price-to-cash flow
ratio and price-to-earnings ratio.
We will then carefully evaluate the financial strength of the company, the
nature of its management, any developments affecting the company or its
industry, anticipated new products or services, possible management changes,
projected takeovers or technological breakthroughs. Using this extensive
analysis, our goal is to pinpoint the companies within the universe of
undervalued stocks, whose true value is likely to be recognized and rewarded
with a rising stock price in the future.
Because there is added risk when investing in smaller companies, which may still
be in their early developmental stages, we maintain a well-diversified
portfolio, typically holding 55 to 80 different stocks, representing a wide
array of industries.
5
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
--------------------------------------------------- -----------------------------------------------------------------------
Securities How we use them
--------------------------------------------------- -----------------------------------------------------------------------
Small Cap Contrarian Fund
--------------------------------------------------- -----------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares Generally, we invest 90% to 100% of net assets in common stock of
of ownership in a corporation. Stockholders small companies that we believe are selling for less than their
participate in the corporation's profits and true value. Under normal conditions, we will hold at least 65% of
losses, proportionate to the number of shares the Fund's net assets in these stocks.
they own.
--------------------------------------------------- -----------------------------------------------------------------------
Real Estate Investment Trusts: A company, usually The Fund is permitted to invest in REITs and would typically do so
traded publicly, that manages a portfolio of real when this sector or specific companies within the sector appeared to
estate to earn profits for shareholders. offer opportunities for price appreciation.
--------------------------------------------------- -----------------------------------------------------------------------
Foreign Securities and American Depositary The Fund may invest up to 25% of its net assets in foreign
Receipts securities or depositary receipts. We have no present intention of
Securities of foreign entities issued directly investing directly in foreign securities; however, we may hold ADRs
or, in the case of American Depositary Receipts, when we believe they offer greater value and greater appreciation
through a U.S. bank. ADRs are issued by a U.S. potential than U.S. securities.
bank and represent the bank's holding of a stated
number of shares of a foreign corporation. An ADR
entitles the holder to all dividends and capital
gains earned by the underlying foreign shares.
ADRs are bought and sold the same as U.S.
securities.
--------------------------------------------------- -----------------------------------------------------------------------
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment
buyer and seller of securities in which the for the Fund's cash position. In order to enter into these repurchase
seller agrees to buy the securities back within a agreements, the Fund must have collateral of at least 102% of the
specified time at the same price the buyer paid repurchase price. The Fund may not have more than 15% of its total
for them, plus an amount equal to an agreed upon assets in repurchase agreements with maturities of over seven days.
interest rate. Repurchase agreements are often
viewed as equivalent to cash.
--------------------------------------------------- -----------------------------------------------------------------------
Restricted securities: Privately placed We may invest without limitation in privately placed securities that
securities whose resale is restricted under are eligible for resale only among certain institutional buyers
securities law. without registration. These are commonly known as Rule 144A
Securities. Other restricted securities must be limited to 15% of
total Fund assets.
--------------------------------------------------- -----------------------------------------------------------------------
Illiquid Securities: Securities that do not have We may invest up to 15% of net assets in illiquid securities.
a ready market, and cannot be easily sold, if at
all, at a reasonable price.
--------------------------------------------------- -----------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and investors for
their use in security transactions.
6
<PAGE>
Purchasing securities on a when-issued or delayed delivery basis the Fund may
buy or sell securities on a when-issued or delayed delivery basis; that is,
paying for securities before delivery or taking delivery at a later date.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover will be less than 100%.
A turnover rate of 100% would occur if the Fund sold and replaced securities
valued at 100% of its net assets within one year.
7
<PAGE>
The risks of investing in the Fund Investing in any mutual fund involves risk,
including the risk that you may receive little or no return on your investment,
and the risk that you may lose part or all of the money you invest. Before you
invest in the Fund you should carefully evaluate the risks. Because of the
nature of the Fund, you should consider an investment in it to be a long-term
investment that typically provides the best results when held for a number of
years. The following are the chief risks you assume when investing in the Fund.
Please see the Statement of Additional Information for further discussion of
these risks and the other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------- ----------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------- ----------------------------------------------------------------------------------
Small Cap Contrarian Fund
- ------------------------------------------------- ----------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we believe can
of the securities in a certain market -- like appreciate over an extended time frame regardless of interim market fluctuations.
the stock or bond market -- will decline in We do not try to predict overall stock market movements and do not trade for
value because of factors such as economic short-term purposes.
conditions, future expectations or investor
confidence. We may hold a substantial part of the Fund's assets in cash or cash equivalents
as a temporary, defensive strategy.
- ------------------------------------------------ -----------------------------------------------------------------------------------
Industry and security risk is the risk that the We follow a rigorous selection process before choosing securities and
value of securities in a particular industry or continuously monitor them while they remain in the portfolio.
the value of an individual stock or bond will
decline because of changing expectations for The the Fund is a diversified portfolio with investments in companies
the performance of that industry or for the representing many different industries. We do not make additional investments
individual company issuing the stock. in a stock if that stock represents 5% of net assets, nor in an industry if
that industry represents 25% of net assets. However, it is likely that our
holdings will be more concentrated in certain industries if the industry as a
whole has strong value characteristics. This could increase volatility.
- ------------------------------------------------ -----------------------------------------------------------------------------------
Small company risk is the risk that prices of The Fund maintains a well-diversified portfolio, selects stocks carefully and
smaller companies may be more volatile than monitors them continuously. And, because we focus on stocks that are already
larger companies because of limited financial selling at relatively low prices, we believe we may experience less price
resources or dependence on narrow product lines. volatility than small-cap funds that do not use a value-oriented strategy.
- ------------------------------------------------ -----------------------------------------------------------------------------------
Interest rate risk is the risk that securities We analyze each company's financial situation and its cashflow to determine the
will decrease in value if interest rates rise. company's ability to finance future expansion and operations. The potential
The risk is generally associated with bonds; affect that rising interest rates might have on a stock is taken into
however, because smaller companies often borrow consideration before the stock is purchased.
money to finance their operations, they may be
adversely affected by rising interest rates.
- ------------------------------------------------ -----------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------ -----------------------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest only a small portion of the Fund's portfolio in foreign
securities may be adversely affected by securities. When we do purchase foreign securities, they are often denominated
political instability, changes in currency in U.S. dollars. To the extent we invest in foreign securities, we invest
exchange rates, foreign economic conditions or primarily in issuers of developed countries, which are less likely to
inadequate regulatory and accounting standards. encounter these foreign risks than issuers in developing countries. The Fund
may use hedging techniques to help offset potential foreign currency losses.
- ------------------------------------------------ -----------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, or can only
be sold at a price lower than the price that
the Fund has valued them.
- ------------------------------------------------- ----------------------------------------------------------------------------------
</TABLE>
Who manages the Fund
Investment Manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the Manager is paid an annual fee
equal to on an annual basis: 0.75% on the first $500 million of average daily
net assets; 0.70% on the next $500 million; 0.65% on the next $1.5 billion; and
0.60% on the average daily net assets in excess of $2.5 billion.
Portfolio Managers
Christopher S. Beck, Vice President/Senior Portfolio Manager of the Fund,
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 18 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 Delaware Investments in
May 1997, he managed the Small Cap 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.
Andrea Giles, Assistant Vice President/Portfolio Manager of the Fund, holds a
BSAD from the Massachusetts Institute of Technology and an MBA in Finance from
Columbia University. Prior to joining Delaware Investments in 1996, she was an
account officer in the Leveraged Capital Group with Citibank.
9
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
Board of Directors
Investment Manager The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
<TABLE>
<CAPTION>
<S> <C> <C>
Portfolio managers Distributor Service agent
(see page 9 for details) Delaware Distributors, L.P.. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Shareholders
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
10
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the
following:
o retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts
o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee
o registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if
the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services
11
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
12
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently, the Exchange is closed when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
13
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. You can also fax
your written request to 215-255-8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
14
<PAGE>
About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from this Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
15
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The portfolio managers and
investment professionals of the Fund consider Year 2000 compliance in the
securities selection and investment process. However, there can be no guarantee
that, even with their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
16
<PAGE>
Financial highlights
Financial highlights are not shown for the Fund since it commenced operations
after the close of the fiscal year end.
17
<PAGE>
How to use this glossary
Words found in the glossary are printed in boldface only the first time they
appear in the prospectus. So if you would like to know the meaning of a word
that isn't in boldface, you might still find it in the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Corporate bond
A debt security issued by a corporation. See bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
18
<PAGE>
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
19
<PAGE>
S&P 500 Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
20
<PAGE>
Small Cap Contrarian Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in this Fund, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawarefunds.com
- ---------------------
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
Investment Company Act file number: 811-4997
Institutional Class CUSIP Number: 24610B859
DELAWARE
INVESTMENTS
Philadelphia * London
P-002 [--] PP 3/99
<PAGE>
DELAWARE
INVESTMENTS
Philadelphia * London
Mid-Cap Value Fund
Class A * Class B* Class C
Prospectus
March 30, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
[inside front cover]
Table of Contents
Fund profile page
Mid-Cap Value Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio manager
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
Glossary page
2
<PAGE>
Profile: Mid-Cap Value Fund
- ----------------------------
What are the Fund's goals?
Mid-Cap Value Fund seeks to provide long-term capital growth. Although the Fund
will strive to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of medium size companies, typically those with
market capitalizations between $1 billion and $9 billion at the time of
purchase. We look for stocks whose stock prices appear low relative to their
underlying value or future potential. Among other factors, we consider the
financial strength of a company, its management, the prospects for its industry
and any anticipated changes within the company, which might suggest a more
favorable outlook going forward.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock prices. In addition, the companies that
Mid-Cap Value Fund invests in may involve slightly more risk than large
companies due to their size, narrow product lines and limited financial
resources. For a more complete discussion of risk, please turn to page 9.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of
medium size companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
3
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund. The Fund may waive or reduce sales charges; please see the
Statement of Additional Information for details.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
CLASS A B C
- -------------------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price 5.75% none none
- -------------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
Redemption price, whichever is lower none(1) 5%(2) 1%(3)
- -------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
Reinvested dividends None none none
- -------------------------------------------------------------------------------------------------
Redemption fees None none none
- -------------------------------------------------------------------------------------------------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses.
- --------------------------------------------------------------------------------
Management fees 0.75% 0.75% 0.75%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees(4) 0.30% 1.00% 1.00%
- --------------------------------------------------------------------------------
Other expenses(5) 0.57% 0.57% 0.57%
- --------------------------------------------------------------------------------
Total operating expenses(6) 1.62% 2.32% 2.32%
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. 7 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
CLASS(8) A B B (if redeemed) C C (if redeemed)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $730 $235 $735 $235 $335
- ---------------------------------------------------------------------------------------------
3 years $1,057 $724 $1,024 $724 $724
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net
asset value. However, if you buy the shares through a financial adviser
who is paid a commission, a contingent deferred sales charge will apply
to certain redemptions. Additional Class A purchase options that
involve a contingent deferred sales charge may be permitted from time
to time and will be disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them,
you will pay a contingent deferred sales charge of 5%, which declines
to 4% during the second year, 3% during the third and fourth years, 2%
during the fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Class A shares are subject to a 12b-1 fee of 0.30% of average daily
net assets and Class B and C shares are each subject to a 12b-1 fee of
1.00% of average daily net assets. The distributor has agreed to waive
these 12b-1 fees through May 31, 1999.
(5) Other expenses are based on estimated amounts for the current fiscal
year.
4
<PAGE>
(6) The investment manager has agreed to waive fees and pay expenses from
the commencement of the Fund's operations through May 31, 1999 in order
to prevent total operating expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) from exceeding
0.75% of average daily net assets.
(7) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. This example does not reflect the voluntary expense cap
described in footnote 6.
(8) Class B shares automatically convert to Class A shares at the end of
the eighth year. The example does not assume this conversion since it
only reflects expenses for one and three years.
5
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Mid Cap Value Fund. Following is a description of how the
portfolio manager pursues the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify medium size companies that offer above-average
opportunities for long-term price appreciation because their current stock price
does not accurately reflect the companies' underlying value or future earning
potential.
We will use a selection model which we developed ourselves, to help identify
companies that meet our investment guidelines. Our search will focus on several
key characteristics including price-to-sales ratio, price-to-cash flow ratio and
price-to-earnings ratio.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will carefully evaluate the financial strength of the company, the nature of
its management, any developments affecting the company or its industry,
anticipated new products or services, possible management changes, projected
takeovers or technological breakthroughs. Using this extensive analysis, our
goal is to pinpoint the companies within the universe of undervalued stocks,
whose true value is likely to be recognized and rewarded with a rising stock
price in the future.
Because there is added risk when investing in medium size companies, which may
not have fully matured, we maintain a well-diversified portfolio, typically
holding 55 to 80 different stocks, representing a wide array of industries.
6
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- ---------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of Generally, we invest 90% to 100% of net assets in
ownership in a corporation. Stockholders participate common stock of medium size companies that we believe
in the corporation's profits and losses, are selling for less than their true value.
proportionate to the number of shares they own.
- ---------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts: A company, usually The Fund is permitted to invest in REITs and would
traded publicly, that manages a portfolio of real typically do so when this sector or specific
estate to earn profits for shareholders. companies within the sector appeared to offer
opportunities for price appreciation.
- ---------------------------------------------------------------------------------------------------------------------------
Foreign Securities and American Depositary Receipts: Although the Fund may invest up to 5% of its net
Securities of foreign entities issued directly or, in assets in foreign securities, the manager has no
the case of American Depositary Receipts, through a present intention of doing so. We may invest without
U.S. bank. ADRs are issued by a U.S. bank and limit in ADRs and will do so when we believe they
represent the bank's holding of a stated number of offer greater value and greater appreciation
shares of a foreign corporation. An ADR entitles the potential than U.S. securities.
holder to all dividends and capital gains earned by
the underlying foreign shares. ADRs are bought and
sold the same as U.S. securities.
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer Typically, we use repurchase agreements as a
and seller of securities in which the seller agrees short-term investment for the Fund's cash position.
to buy the securities back within a specified time at In order to enter into these repurchase agreements,
the same price the buyer paid for them, plus an the Fund must have collateral of at least 102% of the
amount equal to an agreed upon interest rate. repurchase price. The Fund may not have more than 15%
Repurchase agreements are often viewed as equivalent of its total assets in repurchase agreements with
to cash. maturities of over seven days.
- ---------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest without limitation in privately placed
whose resale is restricted under securities law. securities that are eligible for resale only among
certain institutional buyers without registration.
These are commonly known as Rule 144A Securities.
Other restricted securities must be limited to 15% of
total Fund assets.
- ---------------------------------------------------------------------------------------------------------------------------
Illiquid Securities: Securities that do not have a We may invest up to 15% of net assets in illiquid
ready market, and cannot be easily sold, if at all, securities.
at approximately the price the Fund has valued
them.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and investors for
their use in security transactions.
7
<PAGE>
Purchasing securities on a when-issued or delayed delivery basis the Fund may
buy or sell securities on a when-issued or delayed delivery basis; that is,
paying for securities before delivery or taking delivery at a later date.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover will be less than 100%.
A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year.
8
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment in it to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in the Fund. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- -----------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus
securities in a certain market -- like the stock or on stocks we believe can appreciate over an extended
bond market -- will decline in value because of time frame regardless of interim market fluctuations.
factors such as economic conditions, future We do not try to predict overall stock market
expectations or investor confidence. movements and do not trade for short-term purposes.
We may hold a substantial part of the Fund's assets
in cash or cash equivalents as a temporary, defensive
strategy.
- -----------------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the value We limit the amount of the Fund's assets invested
of securities in a particular industry or the value in any one industry and in any individual security.
of an individual stock or bond will decline because We also follow a rigorous selection process before
of changing expectations for the performance of that choosing securities and continuously monitor them
industry or for the individual company issuing the while they remain in the portfolio.
stock.
- -----------------------------------------------------------------------------------------------------------------------------------
Smaller company risk is the risk that prices of The Fund maintains a well-diversified portfolio,
medium size or smaller companies may be more volatile selects stocks carefully and monitors them
than larger companies because of limited financial continuously. And, because we focus on stocks that
resources or dependence on narrow product lines. are already selling at relatively low prices, we
believe we may experience less price volatility than
small or mid-cap funds that do not use a
value-oriented strategy.
- -----------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities will We analyze each company's financial situation and its
decrease in value if interest rates rise. The risk is cashflow to determine the company's ability to
generally associated with bonds; however, because finance future expansion and operations. The
smaller companies often borrow money to finance their potential affect that rising interest rates might
operations, they may be adversely affected by rising have on a stock is taken into consideration before
interest rates. the stock is purchased.
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign securities may We typically invest only a small portion of the
be adversely affected by political instability, Fund's portfolio in foreign securities. When we do
changes in currency exchange rates, foreign economic purchase foreign securities, they are often
conditions or inadequate regulatory and accounting denominated in U.S. dollars. To the extent we invest
standards. in foreign securities, we invest primarily in issuers
of developed countries, which are less likely to
encounter these foreign risks than issuers in
developing countries. The Fund may use hedging
techniques to help offset potential foreign currency
losses.
- -----------------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold, or can only be sold at a
price lower than the price that the Fund has
valued them.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Who manages the Fund
Investment Manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the Manager is paid an annual fee
equal to on an annual basis: 0.75% on the first $500 million of average daily
net assets; 0.70% on the next $500 million; 0.65% on the next $1.5 billion; and
0.60% on the average daily net assets in excess of $2.5 billion.
Portfolio managers
Christopher S. Beck, Vice President/Senior Portfolio Manager, 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 18 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 Delaware Investments in May 1997,
he managed the Small Cap 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.
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 Delaware Investments in 1996, she was an account officer in the
Leveraged Capital Group with Citibank.
Christopher Driver, Research Analyst for the Fund, holds a BS in Finance from
the University of Delaware. Prior to joining Delaware Investments in 1998, he
was a Research Analyst in the Equity Value group at Blackrock, Inc. Prior to
Blackrock, he was a partner at Cashman Farrell & Associates. Mr. Driver is a CFA
charterholder.
10
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
Board of Directors
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio manager Distributor Service agent
(see page 10 for details) Delaware Distributors, L.P. Delaware Service
1818 Market Street Company, Inc.
Philadelphia, PA 19103 1818 Market Street
Philadelphia, PA 19103
Financial advisers
Shareholders
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
11
<PAGE>
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
12
<PAGE>
About your account
Investing in the Funds
You can choose from a number of share classes for each Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you
pay when you buy the shares. The offering price for Class A shares
includes the front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be
reduced.
o You may qualify for other reduced sales charges, as described in "How
to reduce your sales charge," and under certain circumstances the sales
charge may be waived; please see the Statement of Additional
Information.
o Absent 12b-1 fee waivers, Class A shares are also subject to an annual
12b-1 fee no greater than 0.30% of average daily net assets, which is
lower than the 12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge.
Class A Sales Charges
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge Sales charge as % of amount Dealer's commission as %
as % invested Of offering price
of offering price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.12% 5.00%
- ------------------------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000
4.75% 4.94% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000
3.75% 3.88% 3.00%
- ------------------------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000
2.50% 2.59% 2.00%
- ------------------------------------------------------------------------------------------------------------------------------------
$500,000 but under $1 million
2.00% 2.00% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year and 0.50% if
you redeem them within the second year.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge as % Sales charge as % Dealer's commission as %
of offering price of amount invested of offering price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$1,000,000 up to $5 million none none 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
next $20 million
up to $25 million none none 0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
amount over $25 million none none 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within six
years after you buy them.
o If you redeem Class B shares during the first year after you buy them,
the shares will be subject to a contingent deferred sales charge of 5%.
The contingent deferred sales charge is 4% during the second year, 3%
during the third and fourth years, 2% during the fifth year, 1% during
the sixth year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, absent
12b-1 fee waivers, they are subject to annual 12b-1 fees no greater
than 1% of average daily net assets, of which 0.25% are service fees
paid to the distributor, dealers or others for providing services and
maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses
and any dividends paid on these shares are lower than dividends on
Class A shares.
o Approximately eight years after you buy them, Class B shares
automatically convert into Class A shares with a 12b-1 fee of no more
than 0.30%, which is currently being waived. Conversion may occur as
late as three months after the eighth anniversary of purchase, during
which time Class B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
14
<PAGE>
Class C
o Class C shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within 12
months after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class C shares are subject to an annual 12b-1
fee which may not be greater than 1% of average daily net assets, of
which 0.25% are service fees paid to the distributor, dealers or others
for providing services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses
and pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at
any one time. The limitation on maximum purchases varies for retirement
plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
15
<PAGE>
About your account
continued
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Program How it works Share class
A B C
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of
agree to invest a certain Intent and Rights of
amount in Delaware Investment Accumulation do not apply
Funds (except money market to the purchase of Class
funds with no sales charge) B and C shares, you can
over a 13-month period to combine your purchase of
qualify for reduced front-end Class A shares with your
sales charges. purchase of B and C
shares to fulfill your
Letter of Intent or
qualify for Rights of
Accumulation.
- ----------------------------------------------------------------------------------------------------------------------------
Rights of accumulation You can combine your holdings X
or purchases of all funds in the
Delaware Investments family
(except money market funds with
no sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end
sales charges.
- ----------------------------------------------------------------------------------------------------------------------------
Reinvestment of redeemed shares Up to 12 months after you X Not available.
redeem shares, you can reinvest
the proceeds without paying a
front-end sales charge.
- ----------------------------------------------------------------------------------------------------------------------------
SIMPLE IRA, SEP IRA, SARSEP, Prototype These investment plans may X Not available.
Profit Sharing, Pension, 401(k), SIMPLE qualify for reduced sales
401(k), 403(b)(7), and 457 Retirement charges by combining the
Plans purchases of all members of the
group. Members of these groups
may also qualify to purchase
shares without a front-end sales
charge and a waiver of any
contingent deferred sales
charges.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
How to buy shares
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service. For more information about how to sign up for this service, call our
Shareholder Service Center at 800.523.1918.
17
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000--and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently the Exchange is closed when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800o523o1918.
18
<PAGE>
How to redeem shares
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, the First Union Bank fee (currently
$7.50) will be deducted from your proceeds. Bank information must be on file
before you request a wire redemption.
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawarefunds.com. For more information about how to
sign up for these services, call our Shareholder Service Center at 800.523.1918.
19
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will deduct any applicable contingent deferred sales charges.
You may also have to pay taxes on the proceeds from your sale of shares. We will
send you a check, normally the next business day, but no later than seven days
after we receive your request to sell your shares. If you purchased your shares
by check, we will wait until your check has cleared, which can take up to 15
days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, the Fund may redeem your account
after 60 days' written notice to you.
20
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly investments
directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for similar shares in other
funds, your new shares will be subject to the same contingent deferred sales
charge as the shares you originally purchased. The holding period for the CDSC
will also remain the same, with the amount of time you held your original shares
being credited toward the holding period of your new shares. You don't pay sales
charges on shares that you acquired through the reinvestment of dividends. You
may have to pay taxes on your exchange. When you exchange shares, you are
purchasing shares in another fund so you should be sure to get a copy of the
fund's prospectus and read it carefully before buying shares through an
exchange.
21
<PAGE>
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
22
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The portfolio manager and
investment professionals of the Fund consider Year 2000 compliance in the
securities selection and investment process. However, there can be no guarantee
that, even with their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
23
<PAGE>
Financial highlights
Financial highlights are not shown for the Fund since it commenced operations
after the close of the fiscal year end.
24
<PAGE>
How to use this glossary
Words found in the glossary are printed in boldface only the first time they
appear in the prospectus. So if you would like to know the meaning of a word
that isn't in boldface, you might still find it in the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Corporate bond
A debt security issued by a corporation. See bond.
Depreciation
A decline in an investment's value.
25
<PAGE>
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service
(Moody's), Standard & Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and
Fitch Investor Services, Inc. (Fitch).
26
<PAGE>
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
S&P 500 Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
27
<PAGE>
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
28
<PAGE>
Mid-Cap Value Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawarefunds.com
- ---------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions
and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4997
Class A CUSIP Number: 24610B503
DELAWARE
INVESTMENTS
Philadelphia * London
P-002 [--] PP 3/99
<PAGE>
DELAWARE
INVESTMENTS
Philadelphia * London
Mid-Cap Value Fund
Institutional Class
Prospectus
March 30, 1999
Growth of Capital Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
[inside front cover]
Table of Contents
Fund profile page
Mid-Cap Value Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Dividends, distributions and taxes
Certain management considerations
Financial highlights page
Glossary page
2
<PAGE>
Profile: Mid-Cap Value Fund
What are the Fund's goals?
Mid-Cap Value Fund seeks to provide long-term capital growth. Although the Fund
will strive to meet its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of medium size companies, typically those with
market capitalizations between $1 billion and $9 billion at the time of
purchase. We look for stocks whose stock prices appear low relative to their
underlying value or future potential. Among other factors, we consider the
financial strength of a company, its management, the prospects for its industry
and any anticipated changes within the company, which might suggest a more
favorable outlook going forward.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock prices. In addition, the companies that
Mid-Cap Value Fund invests in may involve slightly more risk than large
companies due to their size, narrow product lines and limited financial
resources. For a more complete discussion of risk, please turn to page 8.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of medium
size companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
3
<PAGE>
What are Mid-Cap Value Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
- -----------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or redemption price,
whichever is lower
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
- -----------------------------------------------------------------
Redemption fees none
- -----------------------------------------------------------------
Exchange Fees(1) none
- -----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses.
- -----------------------------------------------------------------
Management fees 0.75%
- -----------------------------------------------------------------
Distribution and service (12b-1) fees None
- -----------------------------------------------------------------
Other expenses(2) 0.57%
- -----------------------------------------------------------------
Total operating expenses(3) 1.32%
- -----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown. (4)This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ---------------------------
1 year $134
- ---------------------------
3 years $418
- ---------------------------
1. Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
2. Other expenses are based on estimated amounts for the current fiscal year.
3. The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through May 31, 1999, in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees and extraordinary expenses) from exceeding 0.75% of average daily net
assets.
4. The Fund's actual rate of return may be greater or less than the hypothetical
5% return we use here. Also, this example assumes that the Fund's total
operating expenses remain unchanged in each of the periods we show. This
example does not reflect the voluntary expense cap described in footnote 3.
4
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Mid Cap Value Fund. Following is a description of how the
portfolio manager pursues the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify medium size companies that offer above-average
opportunities for long-term price appreciation because their current stock price
does not accurately reflect the companies' underlying value or future earning
potential.
We will use a selection model which we developed ourselves, to help identify
companies that meet our investment guidelines. Our search will focus on several
key characteristics including price-to-sales ratio, price-to-cash flow ratio and
price-to-earnings ratio.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will carefully evaluate the financial strength of the company, the nature of
its management, any developments affecting the company or its industry,
anticipated new products or services, possible management changes, projected
takeovers or technological breakthroughs. Using this extensive analysis, our
goal is to pinpoint the companies within the universe of undervalued stocks,
whose true value is likely to be recognized and rewarded with a rising stock
price in the future.
Because there is added risk when investing in medium size companies, which may
not have fully matured, we maintain a well-diversified portfolio, typically
holding 55 to 80 different stocks, representing a wide array of industries.
5
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- --------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Fund
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares Generally, we invest 90% to 100% of net assets in common
of ownership in a corporation. stock of medium size companies that we believe are selling
Stockholders participate in the corporation's for less than their true value.
profits and losses, proportionate to the
number of shares they own.
- --------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts: A The Fund is permitted to invest in REITs and would
company, usually traded publicly, that typically do so when this sector or specific companies
manages a portfolio of real estate to earn within the sector appeared to offer opportunities for
profits for shareholders. price appreciation.
- --------------------------------------------------------------------------------------------------------------------------
Foreign Securities and American Although the Fund may invest up to 5% of its net assets
Depositary Receipts in foreign securities, the manager has no present
Securities of foreign entities issued directly intention of doing so. We may invest without limit in
or, in the case of American Depositary ADRs and will do so when we believe they offer greater
Receipts, through a U.S. bank. ADRs are issued value and greater appreciation potential than U.S.
by a U.S. bank and represent the bank's holding securities.
of a stated number of shares of a foreign
corporation. An ADR entitles the holder to all
dividends and capital gains earned by the
underlying foreign shares. ADRs are bought and
sold the same as U.S. securities.
- --------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement Typically,we use repurchase agreements as a short-term
between a buyer and seller of securities in investment for the Fund's cash position. In order to
which the seller agrees to buy the securities enter into these repurchase agreements, the Fund must
back within a specified time at the same have collateral of at least 102% of the repurchase price.
price the buyer paid for them, plus an The Fund may not have more than 15% of its total assets
amount equal to an agreed upon interest in repurchase agreements with maturities of over seven
rate. Repurchase agreements are often days.
viewed as equivalent to cash.
- --------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed We may invest without limitation in privately placed
securities whose resale is restricted under securities that are eligible for resale only among certain
securities law. institutional buyers without registration. These are
commonly known as Rule 144A Securities. Other restricted
securities must be limited to 15% of total fund assets.
- --------------------------------------------------------------------------------------------------------------------------
Illiquid Securities: Securities that do no We may invest up to 15% of net assets in illiquid
have a ready market, and cannot be easily securities.
sold, if at approximately the price that the
Fund has valued them.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and
investors for their use in security transactions.
6
<PAGE>
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover will be less than 100%.
A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year.
7
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment in it to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in the Fund. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- --------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Fund
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of We maintain a long-term investment approach and focus on
the securities in a certain market -- like the stocks we believe can appreciate over an extended time
stock or bond market -- will decline in value frame regardless of interim market fluctuations. We do not
because of factors such as economic try to predict overall stock market movements and because
because of factors such as economic future of factors such as economic do not trade for short-term
expectations or investor confidence. purposes.
We may hold a substantial part of the Fund's assets in cash
or cash equivalents as a temporary, defensive strategy.
- --------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that We limit the amount of the Fund's assets invested in
the value of securities in a particular industry any one industry and in any individual security.
or the value of an individual stock or bond We also follow a rigorous selection process before
will decline because of changing choosing securities and continuously monitor them
expectations for the performance of that while they remain in the portfolio.
industry or for the individual company issuing
the stock.
- --------------------------------------------------------------------------------------------------------------------------
Smaller company risk is the risk that prices The Fund maintains a well-diversified portfolio, selects
of medium size or smaller companies may be stocks carefully and monitors them continuously. And,
more volatile than larger companies because because we focus on stocks that are already selling
of limited resources or dependence at relatively low prices, we believe we may financial
on narrow product lines. experience less price volatility than small or mid-cap
funds that do not use a value-oriented strategy.
- --------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities We analyze each company's financial situation and its
will decrease in value if interest rates rise. cashflow to determine the company's ability to finance
The risk is generally associated with bonds; future expansion and operations. The potential affect that
however, because smaller companies often rising interest rates might have on a stock is taken into
borrow money to finance their operations, consideration before the stock is purchased.
they may be adversely affected by rising
interest rates.
- --------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign securities We typically invest only a small portion of the Fund's portfolio
may be adversely affected by political in foreign securities. When we do purchase foreign securities,
instability, changes in currency exchange they are often denominated in U.S. dollars. To the extent we
rates, foreign economic conditions or invest in foreign securities, we invest primarily in issuers of
inadequate regulatory and accounting developed countries, which are less likely to encounter these
standards. foreign risks than issuers in developing countries. The Fund may
use hedging techniques to help offset potential foreign currency
losses.
- --------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold, or can only be sold at a
price lower than the price that the Fund has
valued them.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Who manages the Fund
Investment Manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the Manager is paid an annual fee
equal to on an annual basis: 0.75% on the first $500 million of average daily
net assets; 0.70% on the next $500 million; 0.65% on the next $1.5 billion; and
0.60% on the average daily net assets in excess of $2.5 billion.
Portfolio managers
Christopher S. Beck, Vice President/Senior Portfolio Manager, 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 18 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 Delaware Investments in May 1997,
he managed the Small Cap 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.
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 Delaware Investments in 1996, she was an account officer in the
Leveraged Capital Group with Citibank.
Christopher Driver, Research Analyst for the Fund, holds a BS in Finance from
the University of Delaware. Prior to joining Delaware Investments in 1998, he
was a Research Analyst in the Equity Value group at Blackrock, Inc. Prior to
Blackrock, he was a partner at Cashman Farrell & Associates. Mr. Driver is a CFA
charterholder.
9
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
<TABLE>
<CAPTION>
<S> <C>
Board of Directors
Investment manager The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio manager Distributor Service agent
(see page 9 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Shareholders
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
10
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the
following:
o retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts
o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee
o registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if
the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services
11
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800-510-4015 so we can assign you an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800-510-4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
12
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently, the Exchange is closed when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
13
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. You can also fax
your written request to 215-255-8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
14
<PAGE>
About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends, and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains, unless you elect to have them
reinvested in another Delaware Investment fund.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from this Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
15
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The portfolio manager and
investment professionals of the Fund consider Year 2000 compliance in the
securities selection and investment process. However, there can be no guarantee
that, even with their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
16
<PAGE>
Financial highlights
Financial highlights are not shown for the Fund since it commenced operations
after the close of the fiscal year end.
17
<PAGE>
How to use this glossary
Words found in the glossary are printed in boldface only the first time they
appear in the prospectus. So if you would like to know the meaning of a word
that isn't in boldface, you might still find it in the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Corporate bond
A debt security issued by a corporation. See bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
18
<PAGE>
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
19
<PAGE>
S&P 500 Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
20
<PAGE>
Mid-Cap Value Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in this Fund, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawarefunds.com
- ---------------------
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
Investment Company Act file number: 811-4997
Institutional Class CUSIP Number: 24610B800
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 3/99
<PAGE>
DELAWARE
INVESTMENTS
Philadelphia * London
Retirement Income Fund
Class A * Class B* Class C
Prospectus
March 30, 1999
Total Return Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
-1-
<PAGE>
[inside front cover]
Table of Contents
Fund profile page
Retirement Income Fund
How we manage the Fund page
Our investment strategies
The securities we invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge How to buy shares Retirement plans How to
redeem shares Account minimums Special services
Dividends, distributions and taxes
Other investment policies
and risk considerations page
Certain management considerations page
Financial highlights page
Glossary page
Appendix A-Ratings
-2-
<PAGE>
Profile: Retirement Income Fund
What are the Fund's goals?
Retirement Income Fund seeks to provide the high current income and an
investment that has the potential for capital appreciation. Although the Fund
will strive to achieve its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in income generating securities of large, well-established
companies and in debt securities including high yield, high risk corporate
bonds, investment grade fixed income securities and U.S. government securities.
Retirement Income Fund may invest up to 45% of its net assets in high-yield,
higher risk corporate bonds, commonly known as junk bonds. These bonds involve
the risk that the issuing company may be unable to pay interest or repay
principal. However, they can offer high income potential which we believe can
make a positive contribution to the Fund's performance.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock and high-yield bond prices, which could be
caused by a drop in the stock market, economic recession or poor performance
from particular companies or sectors. For a more complete discussion of risk,
please turn to page 11.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for growth potential combined with regular income.
o Investors looking for supplemental monthly income from an investment
that also offers possible protection against inflation.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors seeking an investment primarily in fixed income securities.
-3-
<PAGE>
How has Retirement Income Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Class A shares have varied over
the past two calendar years, as well as the average annual returns of these
shares for the past year and since inception. The Fund's past performance is not
necessarily an indication of how it will perform in the future. The returns
reflect voluntary expense caps and a waiver of 12b-1 fees by the distributor.
The returns would be lower without the voluntary caps and 12b-1 fee waiver.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)]
Year-by-year total return (Class A)
Retirement Income Fund
Class A
34.28%
1998 2.13%
The Fund's Class A shares had a -1.64% year-to-date return as of February 28,
1999. During the periods illustrated in this bar chart, Class A's highest return
was 13.03% for the quarter ended September 30, 1997 and its lowest return was
- -9.47% for the quarter ended September 30, 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown below do include the sales charge.
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/98
CLASS A S&P 500
<S> <C> <C>
1 year -3.76% 28.60%
Since inception 15.78% 30.95%
(12/2/96)
</TABLE>
The Fund's returns are compared to the performance of the S&P 500 Index. You
should remember that unlike the Fund, the index is unmanaged and doesn't include
the costs of operating a mutual fund, such as the costs of buying, selling and
holding the securities.
-4-
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund. The Fund may waive or reduce sales charges; please see the
Statement of Additional Information for details.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ------------ ---------- ----------
Class A B C
- -------------------------------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price 5.75% none none
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
Redemption price, whichever is lower none(1) 5%(2) 1%(3)
- -------------------------------------------------------------- ------------ ---------- ----------
Maximum sales charge (load) imposed on
Reinvested dividends none none none
- -------------------------------------------------------------- ------------ ---------- ----------
Redemption fees none none none
- -------------------------------------------------------------- ------------ ---------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
<TABLE>
- -------------------------------------------------------- ----------- ---------- ----------
<S> <C> <C> <C>
Management fees 0.65% 0.65% 0.65%
- -------------------------------------------------------- ----------- ---------- ----------
Distribution and service (12b-1) fees(4) 0.30% 1.00% 1.00%
- -------------------------------------------------------- ----------- ---------- ----------
Other expenses 0.67% 0.67% 0.67%
- -------------------------------------------------------- ----------- ---------- ----------
Total operating expenses(5) 1.62% 2.32% 2.32%
- -------------------------------------------------------- ----------- ---------- ----------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(6) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
-------------- --------------- ------------ ------------------ ---------- --------------------
CLASS(7) A B B (if redeemed) C C (if redeemed)
-------------- --------------- ------------ ------------------ ---------- --------------------
<S> <C> <C> <C> <C> <C>
1 year $730 $235 $735 $235 $335
-------------- --------------- ------------ ------------------ ---------- --------------------
3 years $1,057 $724 $1,024 $724 $724
-------------- --------------- ------------ ------------------ ---------- --------------------
5 years $1,406 $1,240 $1,440 $1,240 $1,240
-------------- --------------- ------------ ------------------ ---------- --------------------
10 years $2,386 $2,481 $2,481 $2,656 $2,656
-------------- --------------- ------------ ------------------ ---------- --------------------
</TABLE>
-5-
<PAGE>
(1) A purchase of Class A shares of $1 million or more may be made at net
asset value. However, if you buy the shares through a financial adviser
who is paid a commission, a contingent deferred sales charge will apply
to certain redemptions. Additional Class A purchase options that
involve a contingent deferred sales charge may be permitted from time
to time and will be disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them,
you will pay a contingent deferred sales charge of 5%, which declines
to 4% during the second year, 3% during the third and fourth years, 2%
during the fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Class A shares are subject to a 12b-1 fee of 0.30% of average daily
net assets and Class B and C shares are each subject to a 12b-1 fee of
1.00% of average daily net assets. The distributor has agreed to waive
these 12b-1 fees through May 31, 1999.
(5) The investment manager has agreed to waive fees and pay expenses from
the commencement of the Fund's operations through May 31, 1999 in order
to prevent total operating expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) from exceeding
0.75% of average daily net assets.
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. This example does not reflect the voluntary expense cap
described in footnote 5.
(7) The Class B example reflects the conversion of Class B shares to Class
A shares after approximately eight years. Information for the ninth and
tenth years reflects expenses of the Class A shares.
-6-
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Retirement Income Fund. Following is a description of how the
portfolio manager pursues the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
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.
The manager will seek to achieve the Fund's investment 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 noted 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.
Portfolio turnover
The Fund anticipates that its annual portfolio turnover will be less than 100%.
A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year.
The securities we invest in
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.
-7-
<PAGE>
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. or "BB" or lower by Standard & Poor's
Ratings Group 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 that
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 the Fund, 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.
-8-
<PAGE>
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., 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.
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.
-9-
<PAGE>
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.
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 (1) cash, (2) debt securities
issued by the U.S. government, its agencies or instrumentalities, (3) commercial
paper, (4) 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.
See Other investment policies 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.
The remaining investment policies of the Fund not identified above or in
Statement of Additional Information are not fundamental and may be changed by
the Fund's Board of Directors without a shareholder vote.
-10-
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Retirement Income
Fund, you should consider an investment in it to be a long-term investment that
typically provides the best results when held for a number of years. The
following are the chief risks you assume when investing in the Fund. Please see
the Statement of Additional Information for further discussion of these risks
and the other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------- --------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------- --------------------------------------------------------------------------------
Retirement Income Fund
- ------------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We invest in several different asset classes including both equity and fixed
of the securities in a certain market -- like income, which tend to increase and decline in different economic and
the stock or bond market -- will decline in investment conditions. We also maintain a long-term investment approach and
value because of factors such as economic focus on securities, which we believe can perform well over an extended time
conditions, future expectations or investor frame regardless of interim market fluctuations.
confidence.
- ------------------------------------------------- --------------------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of the Fund's assets invested in any one industry and in
value of securities in a particular industry or any individual security or issuer. We also follow a rigorous selection
the value of an individual stock or bond will process when choosing securities for the portfolio.
decline because of changing expectations for
the performance of that industry or for the
individual company issuing the stock or bond.
- ------------------------------------------------- --------------------------------------------------------------------------------
Interest rate risk is the risk that securities We do not try to increase return by predicting and aggressively capitalizing
will decrease in value if interest rates rise. on interest rate moves. We monitor economic conditions and make adjustments as
The risk is greater for bonds with longer necessary to guard against undue risk from interest rate changes.
maturities than for those with shorter
maturities.
- ------------------------------------------------- --------------------------------------------------------------------------------
Credit Risk is the possibility that a bond's We carefully evaluate the financial situation of each entity whose bonds are
issuer (or an entity that insures the bond) held in the portfolio. We also hold a relatively large number of different
will be unable to make timely payments of bonds to minimize the risk should any individual issuer be unable to pay its
interest and principal. interest or repay principal.
- ------------------------------------------------- --------------------------------------------------------------------------------
Real Estate Risk is the risk that real estate We may invest a substantial portion of the portfolio in real estate investment
investment trusts held in the portfolio will be trusts, which generally offer high income potential. We carefully select
affected by declines in the value of real REITs based on the quality of their management and their ability to generate
estate, unfavorable national or regional substantial cashflow, which we believe can help to shield them from some of
economic conditions, lack of mortgage the risks involved with real estate investing.
availability, overbuilding, declining rents and
changes in interest rates.
- ------------------------------------------------- --------------------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest not more than 20% of the Fund's portfolio in foreign
securities may be adversely affected by corporations often through American Depositary Receipts. ADRs are generally
political instability, changes in currency denominated in U.S. dollars and traded on a U.S. exchange. To the extent we
exchange rates, foreign economic conditions or invest in foreign securities, we invest primarily in issuers of developed
inadequate regulatory and accounting standards. countries, which are less likely to encounter these foreign risks than issuers
in developing countries. The Fund may use hedging techniques to help offset
potential foreign currency losses.
- ------------------------------------------------- --------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, or can only
be sold at a price lower than the price that
the Fund has valued them.
- ------------------------------------------------- --------------------------------------------------------------------------------
</TABLE>
-11-
<PAGE>
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
-12-
<PAGE>
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.
-13-
<PAGE>
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.
-14-
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services For its services to the Fund, the manager was paid
0.07%, as a percentage of average daily net assets, after considering the effect
of the voluntary fee waiver.
Portfolio managers
Babak Zenouzi, Vice President/Senior Portfolio Manager of the Fund, 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 has been a member of the Fund's management team
since its inception. He holds a BS in Finance and Economics from Babson College
in Wellesley, Massachusetts, and an MS in Finance from Boston College. Prior to
joining Delaware Investments 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, Vice President/Senior Portfolio Manager, has primary
responsibility for making day-to-day investment decisions for the Fund regarding
its investments in debt securities. Mr. Nichols has been a member of the Fund's
management team since its inception. He is a graduate of the University of
Kansas, where he received a BS in Business Administration and an MS in Finance.
Prior to joining Delaware Investments, 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.
-15-
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
Board of Directors
<TABLE>
<CAPTION>
Investment manager The Fund Custodian
<S> <C> <C>
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 15 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Financial advisers
Shareholders
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
-16-
<PAGE>
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
-17-
<PAGE>
About your account
Investing in the Funds
You can choose from a number of share classes for each Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you
pay when you buy the shares. The offering price for Class A shares
includes the front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be
reduced.
o You may qualify for other reduced sales charges, as described in "How
to reduce your sales charge," and under certain circumstances the sales
charge may be waived; please see the Statement of Additional
Information.
o Absent 12b-1 fee waivers, Class A shares are also subject to an annual
12b-1 fee no greater than 0.30% of average daily net assets, which is
lower than the 12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge.
-18-
<PAGE>
Class A Sales Charges
<TABLE>
<CAPTION>
------------------------------ ------------------- ---------------------- ------------------------------
<S> <C> <C> <C>
Amount of purchase Sales charge Sales charge as % of Dealer's commission as %
as % amount invested Of offering price
of offering price
------------------------------ ------------------- ---------------------- ------------------------------
Less than $50,000 5.75% 6.10% 5.00%
--------------------------------------------------------------------------------------------------------
$50,000 but 4.75% 5.02% 4.00%
Under $100,000
--------------------------------------------------------------------------------------------------------
$100,000 but 3.75% 3.94% 3.00%
Under $250,000
--------------------------------------------------------------------------------------------------------
$250,000 but 2.50% 2.56% 2.00%
Under $500,000
--------------------------------------------------------------------------------------------------------
$500,000 but 2.00% 2.07% 1.60%
Under $1 million
--------------------------------------------------------------------------------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1
million or more of Class A shares. However, if your financial adviser
is paid a commission on your purchase, you may have to pay a limited
contingent deferred sales charge of 1% if you redeem these shares
within the first year and 0.50% if you redeem them within the second
year.
<TABLE>
<CAPTION>
------------------------------ ------------------- ---------------------- ------------------------------
Amount of purchase Sales charge as % Sales charge as % Dealer's commission as %
of offering price of amount invested of offering price
------------------------------ ------------------- ---------------------- ------------------------------
<S> <C> <C> <C>
$1,000,000 up to $5 million none none 1.00%
------------------------------ ------------------- --------------------- -------------------------------
Next $20 million none none 0.50%
up to $25 million
------------------------------ ------------------- --------------------- -------------------------------
Amount over $25 million none none 0.25%
------------------------------ ------------------- --------------------- -------------------------------
</TABLE>
-19-
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within six
years after you buy them.
o If you redeem Class B shares during the first year after you buy them,
the shares will be subject to a contingent deferred sales charge of 5%.
The contingent deferred sales charge is 4% during the second year, 3%
during the third and fourth years, 2% during the fifth year, 1% during
the sixth year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, absent
12b-1 fee waivers, they are subject to annual 12b-1 fees no greater
than 1% of average daily net assets, of which 0.25% are service fees
paid to the distributor, dealers or others for providing services and
maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses
and any dividends paid on these shares are lower than dividends on
Class A shares.
o Approximately eight years after you buy them, Class B shares
automatically convert into Class A shares with a 12b-1 fee of no more
than 0.30%, which is currently being waived. Conversion may occur as
late as three months after the eighth anniversary of purchase, during
which time Class B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
-20-
<PAGE>
Class C
o Class C shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within 12
months after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class C shares are subject to an annual 12b-1
fee which may not be greater than 1% of average daily net assets, of
which 0.25% are service fees paid to the distributor, dealers or others
for providing services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses
and pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at
any one time. The limitation on maximum purchases varies for retirement
plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
-21-
<PAGE>
About your account continued
How to reduce your sales charge We offer a number of ways to reduce or eliminate
the sales charge on shares. Please refer to the Statement of Additional
Information for detailed information and eligibility requirements. You can also
get additional information from your financial adviser. You or your financial
adviser must notify us at the time you purchase shares if you are eligible for
any of these programs.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Program How it works Share class
A B C
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of
agree to invest a certain Intent and Rights of
amount in Delaware Investment Accumulation do not apply
Funds (except money market to the purchase of Class
funds with no sales charge) B and C shares, you can
over a 13-month period to combine your purchase of
qualify for reduced front-end Class A shares with your
sales charges. purchase of B and C
- ------------------------------------------------------------------------------------------------ shares to fulfill your
Rights of accumulation You can combine your holdings X Letter of Intent or
or purchases of all funds in qualify for Rights of
the Delaware Investments family Accumulation.
(except money market funds with
no sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end
sales charges.
- ------------------------------------------------------------------------------------------------------------------------------
Reinvestment of redeemed shares Up to 12 months after you X Not available.
redeem shares, you can reinvest
the proceeds without paying a
front-end sales charge.
- ------------------------------------------------------------------------------------------------------------------------------
SIMPLE IRA, SEP IRA, SARSEP, Prototype These investment plans may X Not available.
Profit Sharing, Pension, 401(k), SIMPLE qualify for reduced sales
401(k), 403(b)(7), and 457 Retirement charges by combining the
Plans purchases of all members of the
group. Members of these groups
may also qualify to purchase
shares without a front-end sales
charge and a waiver of any
contingent deferred sales
charges.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-22-
<PAGE>
How to buy shares
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service. For more information about how to sign up for this service, call our
Shareholder Service Center at 800.523.1918.
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About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000--and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently the Exchange is closed when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
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How to redeem shares
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, the First Union Bank fee (currently
$7.50) will be deducted from your proceeds. Bank information must be on file
before you request a wire redemption.
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service. For
more information about how to sign up for this service, call our Shareholder
Service Center at 800.523.1918.
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About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will deduct any applicable contingent deferred sales charges.
You may also have to pay taxes on the proceeds from your sale of shares. We will
send you a check, normally the next business day, but no later than seven days
after we receive your request to sell your shares. If you purchased your shares
by check, we will wait until your check has cleared, which can take up to 15
days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, the Fund may redeem your account
after 60 days' written notice to you.
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Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly investments
directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for similar shares in other
funds, your new shares will be subject to the same contingent deferred sales
charge as the shares you originally purchased. The holding period for the CDSC
will also remain the same, with the amount of time you held your original shares
being credited toward the holding period of your new shares. You don't pay sales
charges on shares that you acquired through the reinvestment of dividends. You
may have to pay taxes on your exchange. When you exchange shares, you are
purchasing shares in another fund so you should be sure to get a copy of the
fund's prospectus and read it carefully before buying shares through an
exchange.
Dividends, distributions and taxes
Dividends, if any, will be paid monthly. Capital gains, if any, will be paid
once a year. We automatically reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
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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.
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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
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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:
o the frequency of trades and trading volume for the security
o whether at least three dealers are willing to purchase or sell the
security and the number of potential purchasers
o whether at least two dealers are making a market in the security
o 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
o own more than 3% of the voting stock of another investment company
o invest more than 5% of the Fund's total assets in the shares of any one
investment company
o invest more than 10% of the Fund's total assets in shares of other
investment companies.
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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
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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.
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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.
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. Statement of Additional Information lists other more specific
investment restrictions of the Fund which may not be changed without a majority
shareholder vote.
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Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The portfolio managers and
investment professionals of the Fund consider Year 2000 compliance in the
securities selection and investment process. However, there can be no guarantee
that, even with their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
-34-
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800-523-1918.
Financial highlights are not shown for Class B and Class C shares because these
shares were not operating as of the close of the fiscal year.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Class A Shares
-------------------------
Year Period
Ended 12/2/96(1)
11/30 through
Retirement Income Fund 1998 11/30/97
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $11.700 $8.500
Income from investment operations
Net investment income(2) 0.632 0.558
Net realized and unrealized gain (loss) on investments (0.402) 2.685
------- -------
Total from investment operations 0.230 3.243
------- -------
Less dividends and distributions
Dividends from net investment income (0.570) (0.043)
Distributions from net realized gain on investments (1.200) none
------- -------
Total dividends and distributions (1.770) (0.043)
------- -------
Net asset value, end of period $10.160 $11.700
======= =======
Total return(3) 2.22% 38.31%
Ratios and supplemental data
Net assets, end of period (000 omitted) $ 23 $ 9
Ratio of expenses to average net assets 0.75% 0.75%
Ratio of expenses to average net assets
prior to expense limitation 1.62% 2.18%
Ratio of net investment income to average net assets 6.01% 5.48%
Ratio of net investment income to average net assets
prior to expense limitation 5.14% 4.05%
Portfolio turnover 91% 196%
- ----------------------------------------------------------------------------------------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge. Total return
reflects the expense limitations in effect for the Fund.
-35-
<PAGE>
How to read the financial highlights
Net investment income
Net investment income includes dividend and interest income earned from the
Fund's securities; it is after expenses have been deducted.
Net realized and unrealized gains (losses) on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investments at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less dividends and distributions-Distributions from net realized
gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average daily net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average daily net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
-36-
<PAGE>
How to use this glossary
Words found in the glossary are printed in boldface only the first time they
appear in the prospectus. So if you would like to know the meaning of a word
that isn't in boldface, you might still find it in the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
-37-
<PAGE>
Corporate bond
A debt security issued by a corporation. See bond.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
-38-
<PAGE>
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service
(Moody's), Standard & Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and
Fitch Investor Services, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
S&P 500 Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
-39-
<PAGE>
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
-40-
<PAGE>
APPENDIX A--RATINGS
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
-41-
<PAGE>
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.
-42-
<PAGE>
BB, B, Preferred stocks rated "BB," "B" and "CCC" are regarded, on
CCC 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.
-43-
<PAGE>
"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.
-44-
<PAGE>
Retirement Income Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawarefunds.com
- ---------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions
and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4997
Class A CUSIP Number: 24610B107
DELAWARE
INVESTMENTS
Philadelphia * London
P-002 [--] PP 3/99
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Retirement Income Fund
Institutional Class
Prospectus
March 30, 1999
Total Return Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
[inside front cover]
Table of Contents
Fund profile page
Retirement Income Fund
How we manage the Fund page
Our investment strategies
The securities we invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Dividends, distributions and taxes
Other investment policies
and risk considerations page
Certain management considerations
Financial highlights page
Glossary
Appendix A-Ratings
<PAGE>
Profile: Retirement Income Fund
What are the Fund's goals?
Retirement Income Fund seeks to provide the high current income and an
investment that has the potential for capital appreciation. Although the Fund
will strive to achieve its goals, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in income generating securities of large, well-established
companies and in debt securities including high yield, high risk corporate
bonds, investment grade fixed income securities and U.S. government securities.
Retirement Income Fund may invest up to 45% of its net assets in high-yield,
higher risk corporate bonds, commonly known as junk bonds. These bonds involve
the risk that the issuing company may be unable to pay interest or repay
principal. However, they can offer high income potential which we believe can
make a positive contribution to the Fund's performance.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock and high-yield bond prices, which could be
caused by a drop in the stock market, economic recession or poor performance
from particular companies or sectors. For a more complete discussion of risk,
please turn to page 8.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for growth potential combined with regular income.
o Investors looking for supplemental monthly income from an investment
that also offers possible protection against inflation.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors seeking an investment primarily in fixed income securities.
-1-
<PAGE>
How has Retirement Income Fund performed?
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Institutional Class shares have varied
over the past two calendar years, as well as the average annual returns of these
shares for the past year and since inception. The Fund's past performance is not
necessarily an indication of how it will perform in the future. The returns
reflect voluntary expense caps. The returns would be lower without the voluntary
caps.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (INSTITUTIONAL CLASS)]
Total return (Institutional Class)
Retirement Income Fund
Institutional Class
1998 2.14%
1997 33.86%
The Institutional Class had a -1.65% year-to-date return as of February 28,
1999. During the periods illustrated in this bar chart, the Institutional Class'
highest return was 12.94% for the quarter ended September 30, 1997 and its
lowest return was -9.48% for the quarter ended September 30, 1998.
Average annual return as of 12/31/98
Institutional S&P 500
Class
1 year 2.14% 28.60%
Since inception 19.08% 30.95%
(12/2/96)
The Fund's returns are compared to the performance of the S&P 500 Index. You
should remember that unlike the Fund, the index is unmanaged and doesn't include
the costs of operating a mutual fund, such as the costs of buying, selling and
holding the securities.
-2-
<PAGE>
What are Retirement Income Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
----------------------------------------------------------------
Maximum contingent deferred sales charge none
(load) as a percentage of original purchase
price or redemption price, whichever is lower
----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
----------------------------------------------------------------
Redemption fees none
----------------------------------------------------------------
Exchange Fees(1) none
----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
-----------------------------------------------------------------
Management fees 0.65%
-----------------------------------------------------------------
Distribution and service (12b-1) fees none
-----------------------------------------------------------------
Other expenses 0.67%
-----------------------------------------------------------------
Total operating expenses(2) 1.32%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(3) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
---------------------------
1 year $134
---------------------------
3 years $418
---------------------------
5 years $723
---------------------------
10 years $1,590
---------------------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange
your shares into a fund that has a front-end sales charge.
(2) The investment manager has agreed to waive fees and pay expenses from
the commencement of the Fund's operations through May 31, 1999, in
order to prevent total operating expenses (excluding any taxes,
interest, brokerage fees and extraordinary expenses) from exceeding
0.75% of average daily net assets.
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show. This example does not reflect the voluntary expense cap
described in footnote 2.
-3-
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Retirement Income Fund. Following is a description of how the
portfolio manager pursues the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
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.
The manager will seek to achieve the Fund's investment 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 noted 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.
Portfolio turnover
The Fund anticipates that its annual portfolio turnover will be less than 100%.
A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year.
-4-
<PAGE>
The securities we invest in
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. or "BB" or lower by Standard & Poor's
Ratings Group 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 that
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 the Fund, 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.
-5-
<PAGE>
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., 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.
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.
-6-
<PAGE>
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.
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 (1) cash, (2) debt securities
issued by the U.S. government, its agencies or instrumentalities, (3) commercial
paper, (4) 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.
See Other investment policies 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.
The remaining investment policies of the Fund not identified above or in
Statement of Additional Information are not fundamental and may be changed by
the Fund's Board of Directors without a shareholder vote.
-7-
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Retirement Income
Fund, you should consider an investment in it to be a long-term investment that
typically provides the best results when held for a number of years. The
following are the chief risks you assume when investing in the Fund. Please see
the Statement of Additional Information for further discussion of these risks
and the other risks not discussed here.
<TABLE>
<CAPTION>
Risks How we strive to manage them
- ------------------------------------------------- --------------------------------------------------------------------------------
Retirement Income Fund
- ------------------------------------------------- --------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We invest in several different asset classes including both equity and fixed
of the securities in a certain market -- like income, which tend to increase and decline in different economic and
the stock or bond market -- will decline in investment conditions. We also maintain a long-term investment approach and
value because of factors such as economic focus on securities, which we believe can perform well over an extended time
conditions, future expectations or investor frame regardless of interim market fluctuations.
confidence.
- ------------------------------------------------- --------------------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of the Fund's assets invested in any one industry and in
value of securities in a particular industry or any individual security or issuer. We also follow a rigorous selection
the value of an individual stock or bond will process when choosing securities for the portfolio.
decline because of changing expectations for
the performance of that industry or for the
individual company issuing the stock or bond.
- ------------------------------------------------- --------------------------------------------------------------------------------
Interest rate risk is the risk that securities We do not try to increase return by predicting and aggressively capitalizing
will decrease in value if interest rates rise. on interest rate moves. We monitor economic conditions and make adjustments as
The risk is greater for bonds with longer necessary to guard against undue risk from interest rate changes.
maturities than for those with shorter
maturities.
- ------------------------------------------------- --------------------------------------------------------------------------------
Credit Risk is the possibility that a bond's We carefully evaluate the financial situation of each entity whose bonds are
issuer (or an entity that insures the bond) held in the portfolio. We also hold a relatively large number of different
will be unable to make timely payments of bonds to minimize the risk should any individual issuer be unable to pay its
interest and principal. interest or repay principal.
- ------------------------------------------------- --------------------------------------------------------------------------------
Real Estate Risk is the risk that real estate We may invest a substantial portion of the portfolio in real estate investment
investment trusts held in the portfolio will be trusts, which generally offer high income potential. We carefully select
affected by declines in the value of real REITs based on the quality of their management and their ability to generate
estate, unfavorable national or regional substantial cashflow, which we believe can help to shield them from some of
economic conditions, lack of mortgage the risks involved with real estate investing.
availability, overbuilding, declining rents and
changes in interest rates.
- ------------------------------------------------- --------------------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest not more than 20% of the Fund's portfolio in foreign
securities may be adversely affected by corporations often through American Depositary Receipts. ADRs are generally
political instability, changes in currency denominated in U.S. dollars and traded on a U.S. exchange. To the extent we
exchange rates, foreign economic conditions or invest in foreign securities, we invest primarily in issuers of developed
inadequate regulatory and accounting standards. countries, which are less likely to encounter these foreign risks than issuers
in developing countries. The Fund may use hedging techniques to help offset
potential foreign currency losses.
- ------------------------------------------------- --------------------------------------------------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid securities.
securities cannot be readily sold, or can only
be sold at a price lower than the price that
the Fund has valued them.
- ------------------------------------------------- --------------------------------------------------------------------------------
</TABLE>
-8-
<PAGE>
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
-9-
<PAGE>
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.
-10-
<PAGE>
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.
-11-
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services For its services to the Fund, the manager was paid
0.07%, as a percentage of average daily net assets, after considering the effect
of the voluntary fee waiver.
Portfolio managers
Babak Zenouzi, Vice President/Senior Portfolio Manager of the Fund, 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 has been a member of the Fund's management team
since its inception. He holds a BS in Finance and Economics from Babson College
in Wellesley, Massachusetts, and an MS in Finance from Boston College. Prior to
joining Delaware Investments 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, Vice President/Senior Portfolio Manager, has primary
responsibility for making day-to-day investment decisions for the Fund regarding
its investments in debt securities. Mr. Nichols has been a member of the Fund's
management team since its inception. He is a graduate of the University of
Kansas, where he received a BS in Business Administration and an MS in Finance.
Prior to joining Delaware Investments, 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.
-12-
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
Board of Directors
<TABLE>
<S> <C> <C>
Investment manager The Funds Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page 12 for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Shareholders
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
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About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the
following:
o retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts
o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee
o registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if
the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services
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How to buy shares
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By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
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By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
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By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
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Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
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About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receives your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently, the Exchange is closed when the
following holidays are observed: New Year's Day, Martin Luther King, Jr.'s
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
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How to redeem shares
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By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. You can also fax
your written request to 215-255-8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
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By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
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By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
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Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
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About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends, if any, will be paid monthly. Capital gains, if any, will be paid
once a year. We automatically reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from this Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
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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.
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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
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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:
o the frequency of trades and trading volume for the security
o whether at least three dealers are willing to purchase or
sell the security and the number of potential purchasers
o whether at least two dealers are making a market in the
security
o 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
o own more than 3% of the voting stock of another investment
company
o invest more than 5% of the Fund's total assets in the shares
of any one investment company
o 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.
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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.
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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.
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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.
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. Statement of Additional Information lists other more specific
investment restrictions of the Fund which may not be changed without a majority
shareholder vote.
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Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The portfolio managers and
investment professionals of the Fund consider Year 2000 compliance in the
securities selection and investment process. However, there can be no guarantee
that, even with their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
-25-
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800-523-1918.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Institutional Class
---------------------------------------
Year Period
Ended 12/2/96(1)
11/30 through
Retirement Income Fund 1998 11/30/97
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $11.690 $8.500
Income from investment operations
Net investment income(2) 0.632 0.558
Net realized and unrealized gain (loss) on investments (0.402) 2.675
------- -------
Total from investment operations 0.230 3.233
------- -------
Less dividends and distributions
Dividends from net investment income (0.570) (0.043)
Distributions from net realized gain on investments (1.200) none
------- -------
Total dividends and distributions (1.770) (0.043)
------- -------
Net asset value, end of period $10.150 $11.690
======= =======
Total return(3) 2.22% 38.19%
Ratios and supplemental data
Net assets, end of period (000 omitted) $2,840 $2,763
Ratio of expenses to average net assets 0.75% 0.75%
Ratio of expenses to average net assets prior to expense limitation 1.32% 1.88%
Ratio of net investment income to average net assets 6.01% 5.48%
Ratio of net investment income to average net assets prior to expense limitation 5.44% 4.35%
Portfolio turnover 91% 196%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total return reflects the expense limitations in effect for the Fund.
-26-
<PAGE>
How to read the financial highlights
Net investment income
Net investment income includes dividend and interest income earned from the
Fund's securities; it is after expenses have been deducted.
Net realized and unrealized gains (losses) on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investments at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less dividends and distributions-Distributions from net realized
gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers and assume the shareholder has
reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
-27-
<PAGE>
How to use this glossary
Words found in the glossary are printed in boldface only the first time they
appear in the prospectus. So if you would like to know the meaning of a word
that isn't in boldface, you might still find it in the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Corporate bond
A debt security issued by a corporation. See bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
-28-
<PAGE>
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
-29-
<PAGE>
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
S&P 500 Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
-30-
<PAGE>
APPENDIX A--RATINGS
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
-31-
<PAGE>
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.
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<PAGE>
BB, B, Preferred stocks rated "BB," "B" and "CCC" are regarded, on
CCC 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.
-33-
<PAGE>
"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.
-34-
<PAGE>
Retirement Income Fund Institutional simplified final March 30 1999 compare
Retirement Income Fund
Additional information about the Fund's investments will be available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in this Fund, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawarefunds.com
- ---------------------
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Investment Company Act file number: 811-4997
Institutional Class CUSIP Number: 24610B404
P-002 [--] PP 3/99
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MARCH 30, 1999
DELAWARE GROUP EQUITY FUNDS V, INC.
SMALL CAP VALUE FUND
SMALL CAP CONTRARIAN FUND
MID-CAP VALUE FUND
RETIREMENT INCOME FUND
1818 Market Street
Philadelphia, PA 19103
For more information about the Institutional Classes:
800-510-4015
For Prospectus, Performance and Information on
Existing Accounts of Class A Shares, Class B
Shares and Class C Shares:
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) Nationwide 800-362-7500
Delaware Group Equity Funds V, Inc. ("Equity Funds V, Inc.") is a
professionally-managed mutual fund of the series type which currently offers
five series of shares: Small Cap Value Fund series ("Small Cap Value Fund"),
Small Cap Contrarian Fund series ("Small Cap Contrarian Fund"), Mid-Cap Value
Fund series ("Mid-Cap Value Fund") and Retirement Income Fund series
("Retirement Income Fund") (individually, a "Fund", and collectively, the
"Funds").
Each Fund offers Class A Shares, Class B Shares and Class C Shares
(together referred to as the "Fund Classes"). Each Fund also offers an
Institutional Class (together referred to the "Institutional Classes"). All
references to "shares" in this Part B refer to all Classes of shares of Equity
Funds V, Inc., except where noted.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectuses for
the Fund Classes dated March 30, 1999 and the current Prospectuses for the
Institutional Classes dated March 30, 1999, as they may be amended from time to
time. Part B should be read in conjunction with the respective Class'
Prospectus. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into each Class' Prospectus. Prospectus relating to
the Fund Classes and prospectuses relating to the Institutional Classes may be
obtained by writing or calling your investment dealer or by contacting each
Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"), at
the above address or by calling the above phone numbers. The Funds' financial
statements, the notes relating thereto, the financial highlights and the report
of independent auditors are incorporated by reference from the Annual Report
into this Part B. The Annual Report will accompany any request for Part B. The
Annual Report can be obtained, without charge, by calling 800-523-1918.
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<PAGE>
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 Exchange
Dividends and Realized Securities Profits Distributions
Taxes
Investment Management Agreements
Officers and Directors
General Information
Financial Statements
Appendix A--Description of Ratings
Appendix A-- Investment Objectives of the Other Funds in the Delaware
Investments Family
-3-
<PAGE>
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.
-4-
<PAGE>
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.
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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.
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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:
Mid-Cap Value Fund and Small Cap Contrarian Fund each has adopted the
following restrictions which cannot be changed without approval by the holders
of a "majority" of a Fund's outstanding shares, which is a vote by the holders
of the lesser of a) 67% or more of the voting securities 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.
Mid-Cap Value Fund and Small Cap Contrarian Fund shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the 1940 Act, any rule or other thereunder, or U.S. Securities
and Exchange Commission ("SEC") staff interpretation thereof) of its investments
in the securities of issuers primarily engaged in the same industry, provided
that this restriction does not limit the Fund from investing in obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
or in certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Fund may
engage in transactions involving the acquisition, disposition or resale of its
portfolio securities, under circumstances where it may be considered to be an
underwriter under the Securities Act of 1933.
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
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6. Make loans, provided that this restriction does not prevent the Fund
from purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker/dealers or institutional investors and investing in loans,
including assignments and participation interests.
In applying the Fund=s fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
In addition to the fundamental policies and investment restrictions described
above, and the various general investment policies described in the prospectus,
the Mid-Cap Value Fund and Small Cap Contrarian Fund will be subject to the
following investment restrictions, which are considered non-fundamental and may
be changed by the Board of Directors without shareholder approval.
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1. The Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, the Fund may not operate as a "fund of funds"
which invests primarily in the shares of other investment companies as permitted
by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
2. The Fund may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued the
investment.
Investment Policies
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 Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Investments funds jointly to invest cash balances. The Funds may invest
cash balances in a joint repurchase agreement in accordance with the terms of
the Order and subject generally to the conditions described below.
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.
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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.
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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 Small Cap Contrarian Fund, Mid-Cap
Value Fund and Retirement Income Fund have no more than 15% of their respective
net assets invested in illiquid securities.
Options
Small Cap Value Fund, Small Cap Contrarian Fund and Mid-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, Small Cap Contrarian
Fund and Mid-Cap Value Fund may write covered call options from time to time on
such portion of its respective 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.
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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.
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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
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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% and Small Cap Contrarian Fund and
Mid-Cap Value Fund will not purchase more than 5% of the value of its respective
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.
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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
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<PAGE>
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, Small Cap Contrarian Fund and Mid-Cap Value Fund
will not ordinarily purchase securities rated below Baa by Moody's or BBB by
S&P. However, these Funds may do so if the Manager believes that capital
appreciation is likely. None of these Funds will 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.
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
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:
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<PAGE>
(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:
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<PAGE>
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Fund actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Fund's net investment company taxable income, which, in turn, will affect
the amount of income to be distributed to you by a Fund.
If a Fund's Section 988 losses exceed a Fund's other 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
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<PAGE>
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. This simplified procedure was not 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.
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PERFORMANCE INFORMATION
From time to time, each Fund may state its Classes' total return in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over the most recent one-, five-
and ten-year or life- of-fund periods, as applicable. Each Fund may also
advertise aggregate and average total return information for its Classes over
additional periods of time.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1 + T) = ERV
Where: P = a hypothetical initial purchase order of
$1,000 from which, in the case of only Class
A Shares, the maximum front-end sales charge
is deducted;
T = Average annual total return;
n = Number of years;
ERV = Redeemable value of the hypothetical
$1,000 purchase at the end of the period
after the deduction of the applicable CDSC,
if any, with respect to Class B Shares and
Class C Shares.
In presenting performance information for Class A Shares, the Limited
CDSC, applicable to only certain redemptions of those shares, will not be
deducted from any computations of total return. See the Prospectuses for the
Fund Classes for a description of the Limited CDSC and the limited instances in
which it applies. All references to a CDSC in this Performance Information
section will apply to Class B Shares or Class C Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares, and that all
distributions are reinvested at net asset value, and, with respect to Class B
Shares and Class C Shares, reflects the deduction of the CDSC that would be
applicable upon complete redemption of such shares. In addition, each Fund may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.
The performance of Small Cap Value Fund and Retirement Income Fund, as
shown below, is the average annual total return quotations through November 30,
1998. The average annual total return for Class A Shares at offer reflects the
maximum front-end sales charge of 5.75% paid on the purchase of shares. The
average annual total return for Class A Shares at net asset value (NAV) does not
reflect the payment of any front-end sales charge. Pursuant to applicable
regulation, total return shown for 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 A Class and adjusting it to
reflect the elimination of all sales charges. However, for those periods, no
adjustment has been made to eliminate the impact of 12b-1 payments, and
performance would have been affected had such an adjustment been made. The
average annual total return for Class B Shares and Class C Shares including
deferred sales charge reflects the deduction of the applicable CDSC that would
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be paid if the shares were redeemed at November 30, 1998. The average annual
total return for Class B Shares and Class C Shares excluding deferred sales
charge reflects the deduction of the applicable CDSC that would be paid if the
shares were redeemed at November 30, 1998. Securities prices fluctuated during
the periods covered and past results should not be considered as representative
of future performance.
Small Cap Contrarian Fund, Mid-Cap Value Fund and the Class B and
Class C Shares of Retirement Income Fund had not commenced operations as of the
close of Equity Funds V, Inc.'s fiscal year and, therefore, returns are not
shown for those Funds and Classes.
Average Annual Total Return
Small Cap Value Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Small Cap Small Cap Small Cap Small Cap Small Cap Small Cap Small Cap
Value Fund Value Fund Value Fund Value Fund Value Fund Value Fund Value Fund
Class A Class A Institutional Class B Shares Class B Class C Class C
Shares(1) Shares Class (Including Shares Shares Shares
(at Offer) (at NAV) Deferred Sales (Excluding (Including (Excluding
Charge)(2) Deferred Deferred Deferred
Sales Sales Charge) Sales Charge)
Charge)
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 year ended -12.80% -7.47% -7.16% -12.34% -8.08% -8.94% -8.08%
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
3 years ended 12.30% 14.54% 14.88% 12.96% 13.74% 13.74% 13.74%
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
5 years ended 10.64% 11.95% 12.29% N/A N/A N/A N/A
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
10 years ended 14.69% 15.37% 15.59% N/A N/A N/A N/A
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
Life of 13.69% 14.28% 14.46% 12.62% 12.94% 14.13% 14.13%
Fund(3)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Prior to November 2, 1998, the maximum front-end sales charge was
4.75%. Effective November 2, 1998, the maximum front-end sales charge
was increased to 5.75% and the above performance numbers are calculated
using 5.75% as the applicable sales charge.
(2) Effective November 2, 1998, the CDSC schedule for Class B Shares
increased as follows: (i) 5% if shares are redeemed within one year of
purchase (ii) 4% if shares are redeemed with two years of purchase;
(iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth
year following purchase; (v) 1% if shares are redeemed during the sixth
year following purchase; and (v) 0% thereafter. The above figures have
been calculated using this new schedule.
(3) Date of initial public offering of Small Cap Value Fund A Class was
June 24, 1987; date of initial public offering of Small Cap Value Fund
Institutional Class shares was November 9, 1992; date of initial public
offering of Small Cap Value Fund Class B Shares was September 6, 1994;
date of initial public offering of Small Cap Value Fund Class C Shares
was November 29, 1995.
-24-
<PAGE>
Average Annual Total Return
Retirement Income Fund(1)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Retirement Income Fund Retirement Income Fund
Class A Shares Class A Shares Retirement Income Fund
(at Offer)(2)(3) (at NAV)(3) Institutional Class
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 year ended 11/30/98 -3.63% 2.22% 2.22%
- -----------------------------------------------------------------------------------------------------------
Life of Fund 15.45% 18.93% 18.88%
(12/2/96)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain expenses of this Fund have been waived and reimbursed by the
Manager during the periods shown. In the absence of such waiver and
reimbursement, performance would have been affected negatively.
(2) Prior to March 30, 1999, the maximum front-end sales charge was 4.75%.
Effective March 30, 1999, the maximum front-end sales charge was
increased to 5.75% and the above performance numbers are calculated
using 5.75% as the applicable sales charge.
(3) The Distributor has agreed to waive 12b-1 Plan expenses during the
periods shown. In the absence of such waiver and reimbursement,
performance would have been affected negatively.
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. For the 30-day period ended
November 30, 1998, the yield of Retirement Income Fund's Class A Shares was
5.12% and for the Institutional Class was 5.44%.
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.
-25-
<PAGE>
From time to time, each Fund may also quote its Classes' actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be compared to
that of other mutual funds with similar investment objectives and to stock, bond
and other relevant indices or to rankings prepared by independent services or
other financial or industry publications that monitor the performance of mutual
funds. For example, the performance of a Fund (or Fund Class) may be compared to
data prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or to the
S&P 500 Index or the Dow Jones Industrial Average.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. 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 Brothers and Lehman
Brothers may be combined to create a blended performance result for comparative
performances. Generally, the indices selected will be representative of the
types of securities in which 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
-26-
<PAGE>
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 Small Cap Value Fund and Retirement
Income Fund through November 30, 1998. 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. Past performance is no
guarantee of future results. Performance shown for short periods of time may not
be representative of longer term results.
-27-
<PAGE>
Cumulative Total Return
Small Cap Value Fund
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Small Cap Small Cap Small Cap Small Cap Small Cap Small Cap Small Cap
Value Fund Value Fund Value Fund Value Fund Value Fund Value Fund Value Fund
Class A Class A Institutional Class B Shares Class B Class C Class C
Shares(1) Shares Class (Including Shares Shares Shares
(at Offer) (at NAV) Deferred Sales (Excluding (Including (Excluding
Charge)(2) Deferred Deferred Deferred
Sales Sales Charge) Sales Charge)
Charge)
- -------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
3 months ended 11.36% 18.18% 18.27% 12.97% 17.97% 16.99% 17.99%
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
6 months ended -16.62% -11.53% -11.40% -16.23% -11.82% -12.71% -11.83%
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
9 months ended -16.79% -11.71% -11.50% -16.55% -12.16% -13.05% -12.17%
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
1 year ended -12.80% -7.47% -7.16% -12.34% -8.08% -8.94% -8.08%
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
3 years ended 41.61% 50.26% 51.63% 44.15% 47.15% 47.15% 47.15%
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
5 years ended 65.80% 75.87% 78.51% N/A N/A N/A N/A
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
10 years ended 293.74% 317.89% 325.62% N/A N/A N/A N/A
11/30/98
- -------------------------------------------------------------------------------------------------------------------------
Life of 333.73% 360.13% 368.66% 65.42% 67.42% 48.79% 48.79%
Fund(3)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Prior to November 2, 1998, the maximum front-end sales charge was
4.75%. Effective November 2, 1998, the maximum front-end sales charge
was increased to 5.75% and the above performance numbers are calculated
using 5.75% as the applicable sales charge.
(2) Effective November 2, 1998, the CDSC schedule for Class B Shares
increased as follows: (i) 5% if shares are redeemed within one year of
purchase (ii) 4% if shares are redeemed with two years of purchase;
(iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth
year following purchase; (v) 1% if shares are redeemed during the sixth
year following purchase; and (v) 0% thereafter. The above figures have
been calculated using this new schedule.
(3) Date of initial public offering of Small Cap Value Fund A Class was
June 24, 1987; date of initial public offering of Small Cap Value Fund
Institutional Class shares was November 9, 1992; date of initial public
offering of Small Cap Value Fund Class B Shares was September 6, 1994;
date of initial public offering of Small Cap Value Fund Class C Shares
was November 29, 1995.
-28-
<PAGE>
Cumulative Total Return
Retirement Income Fund (1)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Retirement Income Fund Retirement Income Fund
Class A Shares Class A Shares Retirement Income Fund
(at Offer)(2)(3) (at NAV)(3) Institutional Class
- ----------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
3 months ended 11/30/98 0.90% 7.07% 7.08%
- ----------------------------------------------------------------------------------------------------------------
6 months ended 11/30/98 -10.02% -4.52% -4.52%
- ----------------------------------------------------------------------------------------------------------------
9 months ended 11/30/98 -9.05% -3.52% -3.52%
- ----------------------------------------------------------------------------------------------------------------
1 year ended 11/30/98 -3.63% 2.22% 2.22%
- ----------------------------------------------------------------------------------------------------------------
Life of Fund (12/2/96) 33.23% 41.38% 41.26%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain expenses of this Fund have been waived and reimbursed by the
Manager during the periods shown. In the absence of such waiver and
reimbursement, performance would have been affected negatively.
(2) Prior to March 30, 1999, the maximum front-end sales charge was 4.75%.
Effective March 30, 1999, the maximum front-end sales charge was
increased to 5.75% and the above performance numbers are calculated
using 5.75% as the applicable sales charge.
(3) The Distributor has agreed to waive 12b-1 Plan expenses during the
periods shown. In the absence of such waiver and reimbursement,
performance would have been affected negatively.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for each Fund and the other mutual funds in the
Delaware Investments family, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's overriding investment
philosophy and how that philosophy impacts a Fund's, and other Delaware
Investments funds', investment disciplines employed in seeking their objectives.
The Distributor may also from time to time cite general or specific information
about the institutional clients of Delaware Investment Advisers, an affiliate of
the Manager, including the number of such clients serviced by the Delaware
Investment Advisers.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Investments offers three services -- Automatic Investing Program, Direct Deposit
Program and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan 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.
-29-
<PAGE>
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 10
Month 4 $100 $10.00 20
--------------------------------------------------------------------------
$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
Investments family.
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 include illustrations showing the power
of compounding in advertisements and other types of literature.
-30-
<PAGE>
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, 1996, 1997 and 1998, the
aggregate dollar amounts of brokerage commissions paid by Small Cap Value Fund
were $515,711, $440,318 and $976,757, 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 and for the fiscal year
ended November 30, 1998 such amount was $2,787.
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, 1998, portfolio transactions
of Small Cap Value Fund in the amount of $306,205,108, resulting in brokerage
commissions of $858,739, were directed to brokers for brokerage and research
services provided. During the fiscal year ended November 30, 1998, portfolio
transactions of Retirement Income Fund in the amount of $1,201,574, resulting in
brokerage commissions of $2,787, were directed to brokers for brokerage and
research services provided.
-31-
<PAGE>
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.
-32-
<PAGE>
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 53% for 1997 and 38% for 1998. For the period December 2,
1996 (date of initial public offering) through November 30, 1997, Retirement
Income Fund's portfolio turnover rate was 196%(annualized) and for the fiscal
year ended November 30, 1998, its portfolio turnover rate was 91%.
-33-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's
shares and has agreed to use its best efforts to sell shares of each Fund. See
the Prospectuses for information on how to invest. Shares of 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 of such Classes
generally must be at least $100. The initial and subsequent investment minimums
for Class A Shares will be waived for purchases by officers, directors and
employees of any Delaware Investments fund, the Manager or any of the Manager's
affiliates if the purchases are made pursuant to a payroll deduction program.
Shares purchased pursuant to the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act and shares purchased in connection with an Automatic
Investing Plan are subject to a minimum initial purchase of $250 and a minimum
subsequent purchase of $25. Accounts opened under the Delaware Investments Asset
Planner service are subject to a minimum initial investment of $2,000 per Asset
Planner Strategy selected. There are no minimum purchase requirements for the
Institutional 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. In doing so, an investor should keep in mind, however,
that reduced front-end sales charges apply to investments of $50,000 or more in
Class A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B Shares and Class C Shares and generally are not subject to
a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Equity Funds 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. If a purchase is canceled because your check is
returned unpaid, you are responsible for any loss incurred. A Fund can redeem
shares from your account(s) to reimburse itself for any loss, and you may be
restricted from making future purchases in any of the funds in the Delaware
Investments family. Each Fund reserves the right to reject purchase orders paid
by third-party checks or checks that are not drawn on a domestic branch of a
United States financial institution. If a check drawn on a foreign financial
institution is accepted, you may be subject to additional bank charges for
clearance and currency conversion.
Each Fund also reserves the right, following shareholder notification,
to charge a service fee on non-retirement accounts that, as a result of
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, 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.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
-34-
<PAGE>
The NASD has adopted amendments to its Conduct Rules, as amended,
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 5.75%; however, lower front-end sales charges
apply for larger purchases. See the table in the Fund Classes' Prospectuses.
Absent applicable fee waivers, Class A Shares are also subject to annual 12b-1
Plan expenses for the life of the investment.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 5% if shares are redeemed within one year of purchase; (ii) 4% if
shares are redeemed within two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if shares
are redeemed during the fifth year following purchase; and (v) 1% if shares are
redeemed during the sixth year following purchase. Absent applicable fee
waivers, Class B Shares are also subject to annual 12b-1 Plan expenses which are
higher than those to which Class A Shares are subject and are assessed against
Class B Shares for approximately eight years after purchase. See Automatic
Conversion of Class B Shares, below.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Absent
applicable fee waivers, Class C Shares are also subject to annual 12b-1 Plan
expenses for the life of the investment which are equal to those to which Class
B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Plans Under Rule 12b-1 for the Fund Classes under
Purchasing Shares, and Determining Offering Price and Net Asset Value 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 Class A,
Class B and Class C Shares, of any expenses under that Fund's 12b-1 Plans.
The Distributor has voluntarily elected to waive the payment of 12b-1
Plan expenses by Small Cap Contrarian Fund, Mid-Cap Value Fund and Retirement
Income Fund from the commencement of the public offering through May 31, 1999.
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 a Fund for further information. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
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<PAGE>
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and Class C Shares permit investors to choose the method of purchasing shares
that is most suitable for their needs given the amount of their purchase, the
length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and incur a
front-end sales charge and annual 12b-1 Plan expenses of up to a maximum of
0.30% of the average daily net assets of Class A Shares, or to purchase either
Class B or Class C Shares and have the entire initial purchase amount invested
in the Fund with the investment thereafter subject to a CDSC and annual 12b-1
Plan expenses. Class B Shares are subject to a CDSC if the shares are redeemed
within six years of purchase, and Class C Shares are subject to a CDSC if the
shares are redeemed within 12 months of purchase. Class B and Class C Shares are
each subject to annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of
which are service fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder accounts) of average
daily net assets of the respective Class. Class B Shares will automatically
convert to Class A Shares at the end of approximately eight years after purchase
and, thereafter, be subject to annual 12b-1 Plan expenses of up to a maximum of
0.30% of average daily net assets of such shares. Unlike Class B Shares, Class C
Shares do not convert to another Class.
The higher 12b-1 Plan expenses on Class B Shares and Class C Shares
will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Funds, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A Shares, Class B Shares and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the CDSCs
applicable to Class B Shares and Class C Shares are the same as those of the
12b-1 Plan and the front-end sales charge applicable to Class A Shares in that
such fees and charges are used to finance the distribution of the respective
Classes. See Plans Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except that the additional amount of 12b-1
Plan expenses relating to Class B Shares and Class C Shares will be borne
exclusively by such shares. See Determining Offering Price and Net Asset Value.
Class A Shares
Purchases of $50,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the Fund Classes'
Prospectuses, and may include a series of purchases over a 13-month period under
a Letter of Intention signed by the purchaser. See Special Purchase Features -
Class A Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may reallow to dealers up to the full amount of the front-end sales.
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<PAGE>
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectuses, for initial purchases of Class A
Shares of $1,000,000 or more, a dealer's commission may be paid by the
Distributor to financial advisers through whom such purchases are effected.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies (see Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) may be aggregated with those of the Class A Shares of a
Fund. Financial advisers also may be eligible for a dealer's commission in
connection with certain purchases made under a Letter of Intention or pursuant
to an investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of a Fund, even if those shares are later exchanged for shares of another
Delaware Investments fund. In the event of an exchange of the shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares that were acquired in the exchange. See Waiver of Contingent
Deferred Sales Charge--Class B Shares and Class C Shares under Redemption and
Exchange for the Fund Classes for a list of the instances in which the CDSC is
waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the same
Fund. See Automatic Conversion of Class B Shares below. Such conversion will
constitute a tax-free exchange for federal income tax purposes. See Taxes.
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<PAGE>
Investors are reminded that the Class A Shares into which Class B Shares will
convert are subject to ongoing annual 12b-1 Plan expenses of up to a maximum of
0.30% of average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class B Shares at the time of purchase from its
own assets in an amount equal to no more than 5% of the dollar amount purchased.
In addition, from time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may pay additional compensation to dealers or brokers for selling
Class B Shares at the time of purchase. As discussed below, however, Class B
Shares are subject to annual 12b-1 Plan expenses and, if redeemed within six
years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for a Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the 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.
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<PAGE>
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, Class C Shares are subject to annual 12b-1 Plan expenses
and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Equity Funds V, Inc. has
adopted a separate plan for each of Class A Shares, Class B Shares and 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 of shares to which the Plan applies. The Plans do not apply to
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 Institutional Classes. Shareholders of 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 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, 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, each 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 Plan expenses relating to 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 maximum aggregate fee payable by a Fund under the Plans, and a
Fund's Distribution Agreement, is on an annual basis, up to 0.30% of average
daily net assets of Class A Shares, and up to 1% (0.25% of which are service
fees to be paid to the Distributor, dealers and others for providing personal
service and/or maintaining shareholder accounts) of each of the Class B Shares'
and Class C Shares' average daily net assets for the year. Equity Funds V,
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<PAGE>
Inc.'s Board of Directors may reduce these amounts at any time. The Distributor
has elected voluntarily to waive all payments under the 12b-1 Plan for the Class
A Shares, Class B Shares and Class C Shares of the Small Cap Contrarian Fund,
the Mid-Cap Value Fund and the Retirement Income Fund during the commencement of
each Fund through May 31, 1999.
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 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.
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 Shares, Class B Shares and Class C Shares would be borne by such persons
without any reimbursement from such Fund Classes. Subject to seeking best price
and execution, a Fund may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreements, as amended, have all 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 of each Fund and that there is a reasonable
likelihood of the Plan relating to a 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 relevant Class'
outstanding voting securities. Any amendment materially increasing the
percentage payable under the Plans must likewise be approved by a majority vote
of the relevant Class' outstanding voting securities, as well as by a majority
vote of those directors who are not "interested persons." With respect to each
Class A Shares' Plan, any material increase in the maximum percentage payable
thereunder must also be approved by a majority of the outstanding voting
securities of the respective Fund's B Class. 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.
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<PAGE>
For the fiscal year ended November 30, 1998, payments from Class A
Shares, Class B Shares and Class C Shares of Small Cap Value Fund amounted to
$845,989, $633,056 and $213,494, respectively. Such amounts were used for the
following purposes:
<TABLE>
<CAPTION>
Small Cap Value Fund Small Cap Value Fund Small Cap Value Fund
A Class B Class C Class
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Advertising $15,287 none none
Annual/Semi-Annual Reports 11,472 none none
Broker Trails 514,126 $159,428 $47,408
Broker Sales Charges 163,551 232,866 102,117
Dealer Service Expenses none none none
Interest on Broker Sales Charges none 210,508 7,759
Commissions to Wholesalers 71,983 30,027 50,161
Promotional-Broker Meetings 4,444 227 1,232
Promotional-Other 35,814 none none
Prospectus Printing 28,497 none none
Telephone none none none
Wholesaler Expenses 815 none 4,817
Other none none none
</TABLE>
Other Payments to Dealers - Class A Shares, Class B Shares and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain, have
sold or may sell certain amounts of shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
Subject to pending amendments to the NASD's Conduct Rules, in
connection with the promotion of Delaware Investments fund shares, the
Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, reimburse dealers for expenses incurred in connection
with preapproved seminars, conferences and advertising and may, from time to
time, pay or allow additional promotional incentives to dealers, which shall
include non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Conduct Rules will be amended such that the ability
of the Distributor to pay non-cash compensation as described above will be
restricted in some fashion. The Distributor intends to comply with the NASD's
Conduct Rules as they may be amended.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
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 Investments family,
certain of their agents and registered representatives and employees of
authorized investment dealers and by employee benefit plans for such entities.
Individual purchases, including those in retirement accounts, must be for
accounts in the name of the individual or a qualifying family member. Class A
Shares may also be purchased at net asset value by current and former officers,
directors and employees (and members of their families) of the Dougherty
Financial Group LLC.
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<PAGE>
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, 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 a Fund; any group retirement plan (excluding defined benefit pension plans),
or such plans of the same employer, for which plan participant records are
maintained on the Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of funds in the Delaware Investments family and any stable value account
available to investment advisory clients of the Manager or its affiliates; or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented to, and
received written confirmation back from, Retirement Financial Services, Inc. in
writing that it has the requisite number of employees. See Group Investment
Plans for information regarding the applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares or purchase interests in a collective trust as a result of a change
in distribution arrangements.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds in the Delaware Investments family 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 fund account
in connection with loans originated from accounts previously maintained by
another investment firm will also be invested at net asset value.
Equity Funds V, Inc. must be notified in advance that the trade
qualifies for purchase at net asset value.
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
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<PAGE>
Shares of designated Delaware Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares. See Combined
Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments fund shares to which a
sales charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on which a
sales charge was already paid or through the reinvestment of dividends. See
Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated. See Class A Shares.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
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 Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
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purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of the Funds and of any class of
any of the other mutual funds in Delaware Investments (except shares of any
Delaware Investments fund which do not carry a front-end sales charge, CDSC or
Limited CDSC other than shares of Delaware Group Premium Fund, Inc. beneficially
owned in connection with the ownership of variable insurance products, unless
they were acquired through an exchange from a Delaware Investments fund which
carried a front-end sales charge, CDSC or Limited CDSC) previously purchased and
still held as of the date of their Letter of Intention toward the completion of
such Letter.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in Delaware Investments funds that are offered with a front-end
sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent
reserves the right to adjust the signed Letter of Intention based on this
acceptance criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments exceed the
anticipated level and equal an amount that would qualify the plan for further
discounts, any front-end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the 13-month period, the
plan level will be adjusted (without completing another Letter of Intention) and
the employer will be billed for the difference in front-end sales charges due,
based on the plan's assets under management at that time. Employers may also
include the value (at offering price at the level designated in their Letter of
Intention) of all their shares intended for purchase that are offered with a
front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares and
Class C Shares of a Fund and other Delaware Investments funds which offer
corresponding classes of shares may also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class 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 Investments funds (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of the Manager or its affiliates in a stable value account may be
combined with other Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund, as
well as shares of any other class of any of the other Delaware Investments funds
which offer such classes (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). If, for example, any such purchaser has
previously purchased and still holds Class A Shares and/or shares of any other
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of the classes described in the previous sentence with a value of $40,000 and
subsequently purchases $10,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $10,000 purchase would currently be 4.75%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer to
the table of sales charges for Class A Shares to determine the applicability of
the Right of Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of a Fund (and of Institutional Classes
holding shares which were acquired through an exchange from one of the other
mutual funds in Delaware Investments offered with a front-end sales charge) who
redeem such shares have one year from the date of redemption to reinvest all or
part of their redemption proceeds in Class A Shares of that Fund or in Class A
Shares of any of the other funds in the Delaware Investments family, 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 Investments family offered without a front-end sales charge will be
required to pay the applicable sales charge when purchasing Class A Shares. The
reinvestment privilege does not extend to a redemption of 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 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, based on total plan assets. If a company has
more than one plan investing in the Delaware Investments family of funds, then
the total amount invested in all plans would be used in determining the
applicable front-end sales charge reduction upon each purchase, both initial and
subsequent, upon notification to the Fund in which the investment is being made
at the time of each such purchase. Employees participating in such Group
Investment Plans may also combine the investments made in their plan account
when determining the applicable front-end sales charge on purchases to
non-retirement Delaware Investments investment accounts if they so notify the
Fund in which they are investing in connection with each purchase. See
Retirement Plans for the Fund Classes under Investment Plans for information
about Retirement Plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
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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, an affiliate of the Manager, or its other
affiliates and their corporate sponsors, as well as subsidiaries and related
employee benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar financial
institution investing for its own account or for the account of its trust
customers for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the investment is
part of a program that requires payment of the financial institution of a Rule
12b-1 Plan fee; and (e) registered investment advisers investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
Shares of 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.
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INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of Small Cap Contrarian
Fund, Mid-Cap Value Fund and Retirement Income Fund as well as the Institutional
Class of Small Cap Value Fund are reinvested in the accounts of the holders of
such shares (based on the net asset value in effect on the reinvestment date). A
confirmation of each dividend payment from net investment income will be mailed
to shareholders quarterly. A confirmation of any distributions from realized
securities profits will be mailed to shareholders in the first quarter of the
fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Fund and Class in which shares are being purchased. Such purchases, which must
meet the minimum subsequent purchase requirements set forth in the Prospectuses
and this Part B, are made for Class A Shares at the public offering price, and
for Class B Shares, Class C Shares and Institutional Classes at the net asset
value, at the end of the day of receipt. A reinvestment plan may be terminated
at any time. This plan does not assure a profit nor protect against depreciation
in a declining market.
Reinvestment of Dividends in Other Delaware Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, including
the Funds, in states where their shares may be sold. Such investments will be at
net asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of 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.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of the Funds,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends from Class B Shares
may only be directed to other Class B Shares and dividends from Class C Shares
may only be directed to other Class C Shares.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
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Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of a Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase requirements set
forth in each fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
Holders of Class A Shares of a Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Investments
family, including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of the Fund or of any other fund in
the Delaware Investments family. Holders of Class B Shares of a Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C Shares
of a Fund are permitted to exchange all or part of their Class C Shares only
into Class C Shares of other Delaware Investments funds. Class B Shares of a
Fund and Class C Shares of a Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of a Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of that Fund.
Permissible exchanges into Class A Shares of a Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of a Fund will be made without the imposition of a CDSC
by the fund from which the exchange is being made at the time of the exchange.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for either Fund to
accept for investment in Class A Shares, Class B Shares or Class C Shares,
through an agent bank, preauthorized government or private recurring payments.
This method of investment assures the timely credit to the shareholder's account
of payments such as social security, veterans' pension or compensation benefits,
federal salaries, Railroad Retirement benefits, private payroll checks,
dividends, and disability or pension fund benefits. It also eliminates lost,
stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A Shares, Class B
Shares and Class C Shares may make automatic investments by authorizing, in
advance, monthly payments directly from their checking account for deposit into
their Fund account. This type of investment will be handled in either of the
following ways. (1) If the shareholder's bank is a member of the National
Automated Clearing House Association ("NACHA"), the amount of the investment
will be electronically deducted from his or her account by Electronic Fund
Transfer ("EFT"). The shareholder's checking account will reflect a debit each
month at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA, deductions
will be made by preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
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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.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be withdrawn from (for
share purchases) your predesignated bank account. Your request will be processed
the same day if you call prior to 4 p.m., Eastern time. There is a $25 minimum
and $50,000 maximum limit for MoneyLine (SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Funds do not charge a fee
for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. If in connection with the election of
the Wealth Builder Option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select. All
investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in the
Fund Classes' Prospectus. The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the next business day) at
the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month if
the value of the shareholder's account is less than the amount specified for
investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
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in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation in Wealth Builder at
any time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Classes.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange. Also see
Buying Class A Shares at Net Asset Value. The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of a Fund and of other funds in the
Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Retirement Plans for the Fund Classes
An investment in the Funds may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement Account
("IRA") and the new Roth IRA and Education IRA.
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Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange for a list of the instances in
which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such Plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class
shares. See Institutional 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 described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class C
Shares.
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Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year; however, participation
may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10
or more years;
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(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
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Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC upon
redemption of Class B Shares and Class C Shares, see Contingent Deferred Sales
Charge - Class B Shares and Class C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
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Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware Investments family. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge applicable
to Class A Shares as set forth in the table the Prospectuses for the Fund
Classes.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectuses
for the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of the Fund. Although investors may use their
own plan, there is available a Delaware Investments 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. Purchases under the Plan may be combined
for purposes of computing the reduced front-end sales charge applicable to Class
A Shares as set forth in the table in the Prospectuses for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
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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 or its agent. 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 in
which shares are being purchased or its agent. See Distribution and Service
under Investment Management Agreement. Selling dealers have the responsibility
of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset value
are computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for days when the following holidays are observed: New Year's Day,
Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock
Exchange is closed, the Funds will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in a
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 Fund's portfolio, deducting any
liabilities of the Fund, and dividing by the number of Fund shares outstanding.
Expenses and fees are accrued daily. In determining a Fund's total net assets,
portfolio securities primarily listed or traded on a national or foreign
securities exchange, except for bonds, are valued at the last sale price on that
exchange. Exchange traded options are valued at the last reported sale price or,
if no sales are reported, at the mean between bid and asked prices. Non-exchange
traded options are valued at fair value using a mathematical model. Futures
contracts are valued at their daily quoted settlement price. For valuation
purposes, foreign currencies and foreign securities denominated in foreign
currency values will be converted into U.S. dollar values at the mean between
the bid and offered quotations of such currencies against U.S. dollars based on
rates in effect that day. Securities not traded on a particular day,
over-the-counter securities, and government and agency securities are valued at
the mean value between bid and asked prices. Money market instruments having a
maturity of less than 60 days are valued at amortized cost. Debt securities
(other than short-term obligations) are valued on the basis of valuations
provided by a pricing service when such prices are believed to reflect the fair
value of such securities. Foreign securities and the prices of foreign
securities denominated in foreign currencies are translated to U.S. dollars
based on rates in effect as of 12 p.m., Eastern time. 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 Institutional Classes will not incur any of the expenses under
Equity Funds V, Inc.'s 12b-1 Plans and Class A Shares, Class B Shares and Class
C Shares alone will bear the 12b-1 Plan expenses payable under their respective
Plans. Due to the specific distribution expenses and other costs that will be
allocable to each Class, the net asset value of each Class of a Fund will vary.
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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. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See the Prospectuses. A shareholder
submitting a redemption request may indicate that he or she wishes to receive
redemption proceeds of a specific dollar amount. In the case of such a request,
and in the case of certain redemptions from retirement plan accounts, a Fund
will redeem the number of shares necessary to deduct the applicable CDSC in the
case of Class B Shares and Class C Shares, and, if applicable, the Limited CDSC
in the case of Class A Shares and tender to the shareholder the requested
amount, assuming the shareholder holds enough shares in his or her account for
the redemption to be processed in this manner. Otherwise, the amount tendered to
the shareholder upon redemption will be reduced by the amount of the applicable
CDSC or Limited CDSC. Redemption proceeds will be distributed promptly, as
described below, but not later than seven days after receipt of a redemption
request.
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. Each Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
In addition to redemption of Fund shares, the Distributor, acting as
agent of 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 authorized persons, subject to applicable CDSC or Limited
CDSC. This is computed and effective at the time the offering price and net
asset value are determined. See Determining Offering Price and Net Asset Value.
The Funds and the Distributor end their business days at 5 p.m., Eastern time.
This offer is discretionary and may be completely withdrawn without further
notice by the Distributor.
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Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by the Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreements); provided, however, that
each commitment to mail or wire redemption proceeds by a certain time, as
described below, is modified by the qualifications described in the next
paragraph.
Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. Each 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 purchase check has cleared, which may take up
to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. Each Fund reserves the right to reject
a written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, 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 SEC has provided for such suspension for the protection of
shareholders, a Fund may postpone payment or suspend the right of redemption or
repurchase. In such case, the shareholder may withdraw the request for
redemption or leave it standing as a request for redemption at the net asset
value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Equity Funds
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.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value, below.
Class B Shares are subject to a CDSC of: (i) 5% if shares are redeemed within
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one year of purchase; (ii) 4% if shares are redeemed during the second year
after purchase (iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth year
following purchase; and (v) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Purchasing Shares. Except for
the applicable CDSC or Limited CDSC and, with respect to the expedited payment
by wire described below for which, in the case of the Fund Classes, there 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.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (in
each case, "New Shares") in a permitted exchange, will not be subject to a CDSC
that might otherwise be due upon redemption of the Original Shares. However,
such shareholders will continue to be subject to the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the Original Shares as
described in this Part B and any CDSC assessed upon redemption will be charged
by the fund from which the Original Shares were exchanged. In an exchange of
Class B Shares from a 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 a Fund for a longer period of time than if the investment in New
Shares were made directly.
Written Redemption
You can write to each 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 Funds require a signature by all owners of the
account and a signature guarantee for each owner. A signature guarantee can be
obtained from a commercial bank, a trust company or a member of a Securities
Transfer Association Medallion Program ("STAMP"). Each Fund reserves the right
to reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Funds 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 each Fund (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into another
mutual fund in Delaware Investments, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
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The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you have your account
in writing that you do not wish to have such services available with respect to
your account. Each Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Funds by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, 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 the
Fund Classes are generally tape recorded, and a written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. If the
proceeds are wired to the shareholder's account at a bank which is not a member
of the Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account. First Union National Bank's fee
(currently $7.50) will be deducted from Fund Class redemption proceeds. If you
ask for a check, it will normally be mailed the next business day after receipt
of your redemption request to your predesignated bank account. There are no
separate fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call the Shareholder Service Center prior
to the time the offering price and net asset value are determined, as noted
above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
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funds in the Delaware Investments family. 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.
MoneyLine (SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine (SM) On Demand transactions. See
MoneyLine (SM) On Demand under Investment Plans.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Funds will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. A Fund reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Decatur Income Fund, (2) Decatur Total Return Fund, (3) Small Cap Value Fund,
(4) Limited-Term Government Fund, (5) USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware
Investments funds are available for timed exchanges. Assets redeemed or
exchanged out of Timing Accounts in Delaware Investments funds not listed above
may not be reinvested back into that Timing Account. Each Fund reserves the
right to apply these same restrictions to the account(s) of any person whose
transactions seem to follow a time pattern (as described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may establish
a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Funds do not recommend any
specific amount of withdrawal. This is particularly useful to shareholders
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living on fixed incomes, since it can provide them with a stable supplemental
amount. This $5,000 minimum does not apply for a Fund's prototype retirement
plans. Shares purchased with the initial investment and through reinvestment of
cash dividends and realized securities profits distributions will be credited to
the shareholder's account and sufficient full and fractional shares will be
redeemed at the net asset value calculated on the third business day preceding
the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in Delaware Investments funds which do not
carry a sales charge. Redemptions of Class A Shares pursuant to a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the purchase was made at net
asset value and a dealer's commission has been paid on that purchase. The
applicable 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 Shares and Class C Shares, below.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Funds reserve the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine (SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
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redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. The Funds do not charge a
fee for any this service; however, your bank may charge a fee. This service is
not available for retirement plans.
The Systematic Withdrawal Plan is not available for Small Cap
Contrarian Fund, Mid-Cap Value Fund or Retirement Income Fund or Small Cap Value
Fund Institutional Class. Shareholders should consult with their financial
advisers to determine whether a Systematic Withdrawal Plan would be suitable for
them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser of : (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the two-year
holding period. The Limited CDSC is assessed if such two year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of a Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
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respect to that retirement plan; (iv) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; 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 Purchasing Shares).
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from a
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of 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 a Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of 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 Shares and Class C
Shares redeemed in accordance with a Systematic Withdrawal Plan if the annual
amount selected to be withdrawn under the Plan does not exceed 12% of the value
of the account on the date that the Systematic Withdrawal Plan was established
or modified.
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DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
Each Fund will normally make payments from net investment income on a
quarterly basis. Any payments from net realized securities profits will be made
during the first quarter of the next fiscal year.
Each Class of shares of each Fund will share proportionately in the
investment income and expenses of that Fund, except that Class A Shares, Class B
Shares and Class C Shares alone will incur distribution fees under their
respective 12b-1 Plans.
Dividends are automatically reinvested in additional shares at the net
asset value of the ex-dividend date unless, in the case of shareholders in the
Fund Classes, an election to receive dividends in cash has been made. 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. See Systematic Withdrawal Plans above.
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. Each Fund may deduct from a shareholder's account the costs of
that Fund's effort to locate a shareholder if a shareholder's mail is returned
by the Post Office or such 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.
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TAXES
Each Fund has qualified or intends to qualify, 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.
Each Fund intends to pay out substantially all of its net investment
income and net realized capital gains. Such payments for Small Cap Value Fund,
Small Cap Contrarian Fund and Mid-Cap Value Fund, 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"), as revised by
the 1998 Act, a Fund is required to track its sales of portfolio securities and
to report its capital gain distributions to you according to the following
categories of holding periods:
"Mid-term capital gains" or "28 percent rate gain": securities sold by
the 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 the 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. As revised
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by the 1998 Act, this rate applies to securities held for more than 12
months for tax years beginning after December 31, 1997. These gains
will be taxable to individual investors at a maximum rate of 20% for
investors in the 28% or higher federal income tax brackets, and at a
maximum rate of 10% for investors in the 15% federal income tax
bracket.
"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 individuals 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 (any loss is disallowed) in order to
qualify such shares as qualified 5-year property as though purchased
after December 31, 2000. These gains will be taxable to individual
investors at a maximum rate of 18% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 8% for investors
in the 15% federal income tax bracket when sold after the 5 year
holding period.
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, 1998,
60.40% and 51.67% 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.
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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 Investments family since 1938. On November 30 1998, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $44 billion in assets in
the various institutional or separately managed (approximately $25,968,120,000)
and investment company (approximately $18,438,870,000) 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. The
Investment Management Agreements for Mid-Cap Value Fund and Small Cap Contrarian
Fund are dated December 24, 1998 and were approved by the initial shareholder on
December 24, 1998. 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.
On November 30, 1998, the total net assets of Small Cap Value Fund were
$500,062,380 and of Retirement Income Fund were $2,862,895.
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. Under the general supervision of the Board of Directors,
the Manager makes all investment decisions that are implemented by the Fund.
Investment management fees paid by Small Cap Value Fund for the fiscal years
ended November 30, 1996, 1997 and 1998 amounted to $1,513,474, $2,012,899 and
$3,203,530, 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 period December 12, 1996 (date of
commencement of operations) through November 30, 1997 were $15,939 and no fee
was paid and $15,939 was waived due to the voluntary waiver of fees by the
Manager. For the fiscal year ended November 30, 1998, investment management fees
paid by Retirement Income Fund were $18,686 and $1,984 was paid and $16,702 was
waived due to the voluntary waiver of fees by the Manager.
The compensation paid by Small Cap Contrarian Fund and Mid-Cap Value
Fund for investment management services equal to on an annual basis: 0.75% on
the first $500 million of average daily net assets; 0.70% on the next $500
million; 0.65% on the next $1.5 billion; and 0.60% on the average daily net
assets in excess of $2.5 billion. 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.
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The Manager has agreed to waive its management fee payable by Small Cap
Contrarian Fund, Mid-Cap Value Fund and Retirement Income Fund and pay certain
expenses of the Retirement Income Fund to the extent necessary to limit total
operating expenses to 0.75% (exclusive of taxes, interest, brokerage
commissions, extraordinary expenses and applicable 12b-1 fees) from the
commencement of operations through May 31, 1999.
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 separate Distribution Agreements dated April 3, 1995, as amended on
November 29, 1995 for Small Cap Value Fund, November 29, 1996 for Retirement
Income Fund and December 28, 1998 for Small Cap Contrarian Fund and Mid-Cap
Value 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. The Distributor is an indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
each Funds' shareholder servicing, dividend disbursing and transfer agent of
Small Cap Value Fund shares pursuant to a Shareholders Services Agreement dated
December 28, 1998. 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 directors annually review fees paid to the Distributor and the
Transfer Agent.
Each 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 Fund. For purposes of pricing, the Fund
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
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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 February 28,
1999, Equity Funds 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 February 28, 1999, 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.
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ -----------
<S> <C> <C> <C>
Small Cap Value Fund A Class MLPF&S for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246 645,801 6.37%
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 520,040 15.39%
Small Cap Value Fund C Class MLPF&S for the sole benefit of its customers
Attn: Fund Administration
4800 Deer Lake Drive East - 2nd Floor
Jacksonville, FL 32246 473,822 39.79%
Small Cap Value Fund Bankers Trust as Trustee for
Institutional Class Coopers & Lybrand MAP Svgs. Plan
100 Plaza One, Mail Stop 3048
Jersey City, NJ 07811 4,120,783 90.70%
</TABLE>
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<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ -----------
<S> <C> <C> <C>
Retirement Income Fund John P. Finnegan
A Class 213 Memorial Ave.
Haddon Twp, NJ 08033 2,353 94.43%
Spencer J. Fleming
65 Winding Way Rd.
Stratford, NJ 08084 137 5.51%
Retirement Income Fund Chicago Trust Co.
Institutional Class FBO Lincoln National Corp.
Employee Retirement Plan
c/o Marshall & Ilsley Trust Co.
P.O. Box 2977
Milwaukee, WI 53201 309,353 99.61%
Mid Cap Value Fund Delaware Management Business Trust
A Class Attn: Joseph H. Hastings
1818 Market Street, 16th Floor
Philadelphia, PA 19103 1 100%
Mid Cap Value Fund Lincoln National Life Insurance Company
Institutional Class 1300 S. Clinton Street
Fort Wayne, IN 46802 235,294 100%
Small Cap Contrarian Fund Delaware Management Business Trust
A Class Attn: Joseph H. Hastings
1818 Market Street, 16th Floor
Philadelphia, PA 19103 1 100%
Small Cap Contrarian Fund Lincoln National Life Insurance Company
Institutional Class 1300 S. Clinton Street
Fort Wayne, IN 46802 235,294 99.99%
</TABLE>
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DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc. and Retirement
Financial Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
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.
-72-
<PAGE>
*Jeffrey J. Nick (45) Chairman of the Board, President, Chief Executive
Officer and Director and/or Trustee of Equity
Funds V, Inc., each of the other 33 investment
companies in the Delaware Investments family,
Delaware Management Business Trust, Delvoy, Inc.,
DMH Corp. Delaware Management Company, Inc. and
Founders Holdings, Inc.
Chairman of the Board, Chief Executive Officer and
Director of Delaware Distributors, Inc., Delaware
International Holdings Ltd., Delaware
International Advisers Ltd.
Chairman of the Board and Chief Executive Officer
of Delaware Management Company (a series of
Delaware Management Business Trust) Chairman of
the Board and Director of Delaware Capital
Management, Inc. and Retirement Financial
Services, Inc.
Chairman of Delaware Investment Advisers (a series
of Delaware Management Business Trust) and
Delaware Distributors, L.P.
President, Chief Executive Officer and Director of
Delaware Management Holdings, Inc. and Lincoln
National Investment Companies, Inc.
Director of Delaware Service Company, Inc.
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 Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
-73-
<PAGE>
*Wayne A. Stork (61) Director and/or Trustee of Equity Funds V, Inc.
and each of the other 33 investment companies in
the Delaware Investments family.
Chairman and Director of Delaware Management
Holdings, Inc.
Prior to January 1, 1999, Mr. Stork was Chairman
and Director and/or Trustee of Equity Funds V,
Inc. and each of the other 33 investment companies
in the Delaware Investments family and Delaware
Capital Management, Inc.; Chairman, President,
Chief Executive Officer and Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings,
Inc.; Chairman, President, Chief Executive
Officer, Chief Investment Officer and
Director/Trustee of Delaware Management Company,
Inc. and Delaware Management Business Trust;
Chairman, President, Chief Executive Officer and
Chief Investment Officer of Delaware Management
Company (a series of Delaware Management Business
Trust); Chairman, Chief Executive Officer and
Chief Investment Officer of Delaware Investment
Advisers (a series of Delaware Management Business
Trust); Chairman, Chief Executive Officer and
Director of Delaware International Advisers Ltd.,
Delaware International Holdings Ltd. and Delaware
Management Holdings, Inc.; President and Chief
Executive Officer of Delvoy, Inc.; Chairman of
Delaware Distributors, L.P.; Director of Delaware
Service Company, Inc. and Retirement Financial
Services, Inc.
In addition, during the five years prior to
January 1, 1999, Mr. Stork has served in various
executive capacities at different times within the
Delaware organization.
Richard G. Unruh, Jr. (59) Executive Vice President and Chief Investment
Officer, Equities of Equity Funds V, Inc., each of
the other 33 investment companies in the Delaware
Investments family and Delaware Management Company
(a series of Delaware Management Business Trust)
Executive Vice President of Delaware Management
Holdings, Inc. and Delaware Capital Management,
Inc. and Delaware Management Business Trust
Executive Vice President/Chief Investment Officer,
Equities and Director of Delaware Management
Company, Inc.
Chief Executive Officer/Chief Investment Officer,
Equities of Delaware Investment Advisers (a series
of Delaware Management Business Trust);
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served
in various executive capacities at different times
within the Delaware organization.
- ----------------------
* Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
-74-
<PAGE>
Paul E. Suckow (51) Executive Vice President/Chief Investment Officer,
Fixed Income of Equity Funds V, Inc. and each of
the other 33 investment companies in the Delaware
Investments family; Delaware Management Company,
Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware
Management Business Trust)
Executive Vice President and Director of Founders
Holdings, Inc.
Executive Vice President of Delaware Management
Holdings, Inc., Delaware Capital Management, Inc.
and Delaware Management Business Trust; and
Director of Founders CBO Corporation
Director of HYPPCO Finance Company Ltd.
Before returning to Delaware Investments in 1993,
Mr. Suckow was Executive Vice President and
Director of Fixed Income for Oppenheimer
Management Corporation, New York, NY from 1985 to
1992. Prior to that, Mr. Suckow was a fixed-income
portfolio manager for Delaware Investments.
-75-
<PAGE>
David K. Downes (59) Executive Vice President, Chief Operating Officer
and Chief Financial Officer of Equity Funds V,
Inc. and each of the other 33 investment companies
in the Delaware Investments family, Delaware
Management Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust) and Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
Management Company, Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.; Executive Vice President, Chief
Financial Officer, Chief Administrative Officer
and Trustee of Delaware Management Business Trust
President, Chief Executive Officer, Chief
Financial Officer and Director of Delaware Service
Company, Inc.
President, Chief Operating Officer, Chief
Financial Officer and Director of Delaware
International Holdings Ltd.
Chairman, Chief Executive Officer and Director of
Retirement Financial Services, Inc.
Chairman and Director of Delaware Management
Trust Company
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served
in various executive capacities at different times
within the Delaware organization.
Richard J. Flannery (41) Executive Vice President of Equity Funds V, Inc.
and each of the other 33 investment companies in
the Delaware Investments family
Executive Vice President and General Counsel of
Delaware Management Holdings, Inc., Delaware
Distributors, L.P., Delaware Management Trust
Company, Delaware Capital Management, Inc.,
Delaware Service Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business
Trust) and Founders CBO Corporation
Executive Vice President/General Counsel and
Director of DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, Inc.,
Delaware International Holdings Ltd., Founders
Holdings, Inc., Delvoy, Inc. and Retirement
Financial Services, Inc.
Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has
served in various executive capacities at
different times within the Delaware organization.
-76-
<PAGE>
Walter P. Babich (71) Director and/or Trustee of Equity Funds V, Inc.
and each of the other 33 investment companies in
the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of
Irwin & Leighton and from 1988 to 1991, he was a
partner of I&L Investors.
John H. Durham (61) Director and/or Trustee of Equity Funds V, Inc.
and 18 other investment companies in the Delaware
Investments family.
Partner, Complete Care Services.
120 Gilbraltar Road, Horsham, PA 19044.
Mr. Durham served as Chairman of the Board of each
fund in the Delaware Investments family from 1986
to 1991; President of each fund from 1977 to 1990;
and Chief Executive Officer of each fund from 1984
to 1990. Prior to 1992, with respect to Delaware
Management Holdings, Inc., Delaware Management
Company, Delaware Distributors, Inc. and Delaware
Service Company, Inc., Mr. Durham served as a
director and in various executive capacities at
different times.
Anthony D. Knerr (60) Director and/or Trustee of Equity Funds V, Inc.
and each of the 33 other investment companies in
the Delaware Investments family
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr &
Associates
From 1982 to 1988, Mr. Knerr was Executive Vice
President/Finance and Treasurer of Columbia
University, New York. From 1987 to 1989, he was
also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing
Group, Inc., New York, from 1988 to 1990. Mr.
Knerr founded The Publishing Group, Inc. in 1988.
Ann R. Leven (58) Director and/or Trustee of Equity Funds V, Inc.
and each of the other 33 other investment
companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and
Chief Fiscal Officer of the Smithsonian
Institution, Washington, DC, and from 1975 to
1992, she was Adjunct Professor of Columbia
Business School.
-77-
<PAGE>
W. Thacher Longstreth (78) Director and/or Trustee of Equity Funds V, Inc.
each of the other 33 other investment companies in
the Delaware Investments family
City Hall, Philadelphia, PA 19107
Philadelphia City Councilman
Thomas F. Madison (62) Director and/or Trustee of Equity Funds V, Inc.
and each of the other 33 investment companies in
the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis,
Minnesota 55402
President and Chief Executive Officer, MLM
Partners, Inc.
Mr. Madison has also been Chairman of the Board of
Communications Holdings, Inc. since 1996. From
February to September 1994, Mr. Madison served as
Vice Chairman--Office of the CEO of The Minnesota
Mutual Life Insurance Company and from 1988 to
1993, he was President of U.S. WEST
Communications--Markets.
Charles E. Peck (73) Director and/or Trustee of Equity Funds V, Inc.
and each of the other 33 investment companies in
the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc. From
1981 to 1990, Mr. Peck was Chairman and Chief
Executive Officer of The Ryland Group, Inc.,
Columbia, MD.
George M. Chamberlain,
Jr. (51) Senior Vice President, Secretary and General
Counsel of Equity Funds V, Inc. and each of the
other 33 investment companies in the Delaware
Investments family
Senior Vice President and Secretary of
Delaware Distributors, L.P., Delaware Management
Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors,
Inc., Delaware Service Company, Inc., Retirement
Financial Services, Inc., Delaware Capital
Management, Inc., Delvoy, Inc. and Delaware
Management Business Trust
Senior Vice President, Secretary and Director of
Founders Holdings, Inc.
Executive Vice President, Secretary and Director
of Delaware Management Trust Company
Senior Vice President of Delaware International
Holdings Ltd.
During the past five years, Mr. Chamberlain has
served in various executive capacities at
different times within the Delaware organization.
-78-
<PAGE>
Joseph H. Hastings (49) Senior Vice President/Corporate Controller of
Equity Funds V, Inc. and each of the other 33
investment companies in the Delaware Investments
family and Founders Holdings, Inc.
Senior Vice President/Corporate Controller and
Treasurer of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware
Service Company, Inc., Delaware Capital
Management, Inc., Delaware International Holdings
Ltd., Delvoy, Inc. and Delaware Management
Business Trust.
Chief Financial Officer/Treasurer of Retirement
Financial Services, Inc.
Executive Vice President/Chief Financial
Officer/Treasurer of Delaware Management Trust
Company
Senior Vice President/Assistant Treasurer of
Founders CBO Corporation
During the past five years, Mr. Hastings has
served in various executive capacities at
different times within the Delaware organization.
Michael P. Bishof (36) Senior Vice President and Treasurer of Equity
Funds V, Inc. and each of the other 33 investment
companies in the Delaware Investments family and
Founders Holdings, Inc.
Senior Vice President/Investment Accounting of
Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware
Management Business Trust) and Delaware Service
Company, Inc.;
Senior Vice President and Treasurer/Manager,
Investment Accounting of Delaware Distributors,
L.P. and Delaware Investment Advisers (a series of
Delaware Management Business Trust)
Senior Vice President and Assistant Treasurer of
Founders CBO Corporation
Senior Vice President and Manager of Investment
Accounting of Delaware International Holdings Ltd.
Before joining Delaware Investments in 1995, Mr.
Bishof was a Vice President for Bankers Trust, New
York, NY from 1994 to 1995, a Vice President for
CS First Boston Investment Management, New York,
NY from 1993 to 1994 and an Assistant Vice
President for Equitable Capital Management
Corporation, New York, NY from 1987 to 1993.
-79-
<PAGE>
Christopher S. Beck (41) Vice President/Senior Portfolio Manager of Equity
Funds V, Inc., the other 33 investment companies
in the Delaware Investments family, Delaware
Capital Management, Inc., Delaware Management
Company (a series of Delaware Management Business
Trust) and Delaware Investment Advisers (a series
of Delaware Management Business Trust)
Before joining Delaware Investments in 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.
-80-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from the
Fund and the total compensation received from all investment companies in the
Delaware Investments family for which he or she serves as a director or trustee
for the fiscal year ended November 30, 1998 and an estimate of annual benefits
to be received upon retirement under the Delaware Investments Retirement Plan
for Directors/Trustees as of November 30, 1998. Only the independent directors
of the Fund receive compensation from the Fund.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total
Accrued Estimated Compensation
Aggregate as Part of Annual from
Compensation Equity Benefits Delaware
from Equity Funds V, Inc. Upon Investments
Name Funds V, Inc. Expenses Retirement(1) Companies(2)
-------------------- -------------------- ------------------- ----------------------------
<S> <C> <C> <C> <C>
Walter P. Babich $1,586 None $38,500 $65,424
John H. Durham(3) $1,035 None $31,180 $30,394
Anthony D. Knerr $1,586 None $38,500 $65,424
Ann R. Leven $1,607 None $38,500 $66,538
W. Thacher Longstreth $1,481 None $38,500 $65,423
Thomas F. Madison $1,534 None $38,500 $62,924
Charles E. Peck $1,481 None $38,500 $65,423
</TABLE>
(1) Under the terms of the Delaware Investments Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the
time of his or her retirement from the Board, has attained the age of
70 and served on the Board for at least five continuous years, is
entitled to receive payments from each investment company in the
Delaware Investments family for which he or she serves as a director or
trustee for a period equal to the lesser of the number of years that
such person served as a director or trustee or the remainder of such
person's life. The amount of such payments will be equal, on an annual
basis, to the amount of the annual retainer that is paid to
directors/trustees of each investment company at the time of such
person's retirement. If an eligible director/trustee retired as of
November 30, 1998 he or she would be entitled to annual payments
totaling the amount noted above, in the aggregate, from all of the
investment companies in the Delaware Investments family for which he or
she served as director or trustee, based on the number of investment
companies in the Delaware Investments family as of that date.
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,500 for serving as a
director or trustee for all 34 investment companies in Delaware
Investments, plus $3,145 for each Board Meeting attended. John H.
Durham currently receives a total annual retainer fee of $31,180 for
serving as a director or trustee for 19 investment companies in
Delaware Investments, plus $1,757.50 for each Board Meeting attended.
Ann R. Leven, Walter P. Babich, Anthony D. Knerr and Thomas F. Madison
serve on the Fund's audit committee; Ms. Leven is the chairperson.
Members of the audit committee currently receive additional annual
compensation of $5,000 from all investment companies, in the aggregate,
with the exception of the chairperson, who receives $6,000.
(3) John H. Durham joined the Board of Directors of Equity Funds V, Inc.
and 18 other investment companies in Delaware Investments on April 16,
1998.
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<PAGE>
GENERAL INFORMATION
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 Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of the other funds in the
Delaware Investments family. An affiliate of the Manager also manages private
investment accounts. While investment decisions of the Funds are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Funds.
The Manager 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 various investment series
ranging from domestic equity funds, international equity and bond funds and
domestic fixed income funds. Each investment series available through Medallion
utilizes an investment strategy and discipline the same as or similar to one of
the Delaware Investments mutual funds available outside the annuity. See
Delaware Group Premium Fund, Inc. in Appendix B.
Access persons and advisory persons of the Delaware Investments family
of funds, as those terms are defined in SEC Rule 17j-1 under the 1940 Act, who
provide services to the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for each Fund and for the
other mutual funds in the Delaware Investments family. The Distributor received
net commissions from each Fund on behalf of Class A Shares, after reallowances
to dealers, as follows:
Small Cap Value Fund
Class A Shares
- -------------------------------------------------------------------------------
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers To Distributor
- -------- --------------- ------------ --------------
11/30/98 $1,652,031 $1,380,024 $272,007
11/30/97 787,817 654,991 132,826
11/30/96 402,194 335,756 66,438
-82-
<PAGE>
Retirement Income Fund
Class A Shares
Total
Fiscal Amount of Amounts Net
Year Underwriting Reallowed Commission
Ended Commissions to Dealers To Distributor
- -------- ------------ ---------- --------------
11/30/98 None None None
11/30/97 None None None
The Distributor received in the aggregate Limited CDSC payments with
respect to Class A Shares of Small Cap Value Fund and Retirement Income Fund as
follows:
Small Cap Value Retirement Income
Fiscal Year Ended Fund A Class Fund A Class
- ----------------- ---------------- -----------------
11/30/98 $7,814 None
11/30/97 None None
11/30/96 None None
The Distributor received in the aggregate CDSC payments with respect to
Class B and C Shares of Small Cap Value Fund as follows:
Small Cap Value Fund B Small Cap Value Fund C
Fiscal Year Ended Class Class*
- ----------------- -------------------------- -----------------------
11/30/98 $157,481 $13,542
11/30/97 38,699 4,799
11/30/96 30,116 56
*Date of initial public offering was November 29, 1995.
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 Investments family. 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 disinterested 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 the related accounting services. For its services, the Transfer
Agent is paid a fee based on total assets of all funds in the Delaware
Investments family for which it provides such accounting services. Such fee is
equal to 0.25% multiplied by the total amount of assets in the complex for which
the Transfer Agent furnishes accounting services, where such aggregate complex
assets are $10 billion or less, and 0.20% of assets if such aggregate complex
assets exceed $10 billion. The fees are charged to 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.
-83-
<PAGE>
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:
<TABLE>
<CAPTION>
<S> <C>
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
Mid-Cap Value Fund
Mid-Cap Value Fund A Class 100 million
Mid-Cap Value Fund B Class 25 million
Mid-Cap Value Fund C Class 25 million
Mid-Cap Value Fund Institutional Class 50 million
Small Cap Contrarian Fund
Small Cap Contrarian Fund A Class 100 million
Small Cap Contrarian Fund B Class 25 million
Small Cap Contrarian Fund C Class 25 million
Small Cap Contrarian Fund Institutional Class 50 million
</TABLE>
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.
-84-
<PAGE>
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. and effective as of that date Equity
Funds V, Inc. began offering the Retirement Income Fund. 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. The
Registration Statements of the Small Cap Contrarian Fund and Mid-Cap Value Fund
and Classes of these Funds became effective on December 18, 1998.
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 SEC.
-85-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditor for Equity Funds V,
Inc. and, in its capacity as such, audits the annual financial statements of
each of the Funds. The Small Cap Value Fund's and Retirement Income Fund's
Statements of Net Assets, Statements of Operations, Statements of Changes in Net
Assets, Financial Highlights, and Notes to Financial Statements, as well as the
reports of Ernst & Young LLP, independent auditors, for the fiscal year ended
November 30, 1998, are included in the Funds' Annual Reports to shareholders.
The financial statements, the notes relating thereto, the financial highlights
and the reports of Ernst & Young LLP listed above are incorporated by reference
from the Annual Reports into this Part B. The Small Cap Contrarian Fund and the
Mid-Cap Value Fund commenced operations after the close of Equity Funds V,
Inc.'s fiscal year.
-86-
<PAGE>
APPENDIX A--DESCRIPTION OF RATINGS
Commercial Paper
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.
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.
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.
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<PAGE>
APPENDIX B--INVESTMENT OBJECTIVES OF THE OTHER FUNDS IN THE DELAWARE
INVESTMENTS FAMILY
Following is a summary of the investment objectives of the funds in the
Delaware Investments family:
Delaware Balanced Fund seeks long-term growth by a balance of 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.
Small Cap Value Fund seeks capital appreciation by investing primarily
in common stocks whose market values appear low relative to their underlying
value or future potential.
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 Equity Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Growth and Income Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
Blue Chip Fund seeks to achieve long-term capital appreciation. Current income
is a secondary objective. It seeks to achieve these objectives by investing
primarily in equity securities and any securities that are convertible into
equity securities. Social Awareness Fund seeks to achieve long-term capital
appreciation. It seeks to achieve this objective by investing primarily in
equity securities of medium- to large-sized companies expected to grow over time
that meet the Fund's "Social Criteria" strategy.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Strategic Income Fund seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Corporate Bond Fund seeks to provide investors with total return by investing
primarily in corporate bonds. Extended Duration Bond Fund seeks to provide
investors with total return by investing primarily in corporate bonds
U.S. Government Fund seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short-and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
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<PAGE>
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
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 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 Pennsylvania Fund seeks a high level of current interest
income exempt from federal and, to the extent possible, certain Pennsylvania
state and local taxes, consistent with the preservation of capital. 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.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds"). Foundation
Funds Income Portfolio seeks a combination of current income and preservation of
capital with capital appreciation by investing primarily in a mix of fixed
income and domestic equity securities, including fixed income and domestic
equity Underlying Funds. Foundation Funds Balanced Portfolio seeks capital
appreciation with current income as a secondary objective by investing primarily
in domestic equity and fixed income securities, including domestic equity and
fixed income Underlying Funds. Foundation Funds Growth Portfolio seeks long-term
capital growth by investing primarily in equity securities, including equity
Underlying Funds, and, to a lesser extent, in fixed income securities, including
fixed-income Underlying Funds.
International Equity Fund seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation. Global Equity Fund seeks to achieve
long-term total return by investing in global securities that provide the
potential for capital appreciation and income. Emerging Markets Fund seeks
long-term capital appreciation by investing primarily in equity securities of
issuers located or operating in emerging countries.
U.S. Growth Fund seeks to maximize capital appreciation by investing
in companies of all sizes which have low dividend yields, strong balance sheets
and high expected earnings growth rates relative to their industry. Overseas
Equity Fund seeks to maximize total return (capital appreciation and income),
principally through investments in an internationally diversified portfolio of
equity securities. New Pacific Fund seeks long-term capital appreciation by
investing primarily in companies which are domiciled in or have their principal
business activities in the Pacific Basin.
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<PAGE>
Delaware Group Premium Fund, Inc. offers the following 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. Small Cap Value Series seeks
capital appreciation by investing primarily in small-cap common stocks whose
market values appear low relative to their underlying value or future earnings
and growth potential. Emphasis will also be placed on securities of companies
that may be temporarily out of favor or whose value is not yet recognized by the
market. Trend Series seeks long-term capital appreciation by investing primarily
in small-cap common stocks and convertible securities of emerging and other
growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry.
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.
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<PAGE>
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 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.
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<PAGE>
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 funds in the Delaware
Investments family, including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Delaware Investments includes funds with a wide -----------------------------------------------
range of investment objectives. Stock funds, income
funds, national and state-specific tax-exempt funds, DELAWARE GROUP EQUITY FUNDS V, INC.
money market funds, global and international funds and
closed-end funds give investors the ability to create a Small Cap Value Fund
portfolio that fits their personal financial goals. For Small Cap Contrarian Fund
more information, shareholders of the Fund Classes Mid-Cap Value Fund
should contact their financial adviser or call Delaware Retirement Income Fund
Investments at 800-523-1918 and shareholders of the
Institutional Classes should contact Delaware A CLASS
Investments at 800-510-4015. B CLASS
C CLASS
INSTITUTIONAL CLASS
-----------------------------------------------
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
PART B
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P. STATEMENT OF
1818 Market Street ADDITIONAL INFORMATION
Philadelphia, PA 19103
March 30, 1999
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 DELAWARE INVESTMENTS
4 Chase Metrotech Center ------------------------------------------------------
Brooklyn, NY 11245
</TABLE>
<PAGE>
PART C
Other Information
Item 23. Exhibits.
(a) Articles of Incorporation.
(1) 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.
(2) 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.
(3) Executed Articles of Amendment (November 27, 1996)
incorporated into this filing by reference to
Post-Effective Amendment No. 17 filed January 28,
1997.
(4) Executed Articles Supplementary (December 1998)
incorporated into this filing by reference to Post-
Effective Amendment No. 22 filed January 29, 1999.
(b) 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.
(c) Copies of all Instruments Defining the Rights of Holders.
(1) 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.
(iii) Article Second of Articles Supplementary
(December 1998) incorporated into this
filing by reference to Post-Effective
Amendment No. 22 filed January 29, 1999.
(2) 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.
<PAGE>
PART C - Other Information
(Continued)
(d) Investment Management Agreement.
(1) 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.
(2) 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.
(3) Form of Investment Management Agreement (December
1998) between Delaware Management Company and the
Registrant on behalf of Mid-Cap Value Fund and Small
Cap Contrarian Fund incorporated into this filing by
reference to Post-Effective Amendment No. 21 filed
October 2, 1998.
(e) (1) 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.
(iii) Form of Distribution Agreement (December
1998) between Delaware Distributors, L.P.
and the Registrant on behalf of Mid-Cap
Value Fund and Small Cap Contrarian Fund
incorporated into this filing by reference
to Post-Effective Amendment No. 21 filed
October 2, 1998.
(2) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended
November 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 15 filed
January 29, 1996.
(3) 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.
(4) Mutual Fund Agreement. Mutual Fund Agreement for the
Delaware Group of Funds (as amended November 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed January 29,
1996.
(f) 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.
<PAGE>
PART C - Other Information
(Continued)
(g) Custodian Agreement.
(1) Executed Custodian Agreement (May 1, 1996) between
The Chase Manhattan Bank and the Registrant (Module)
incorporated into this filing by reference to
Post-Effective Amendment No. 16 filed September 13,
1996.
(2) Executed Letter (November 29, 1996) to add the
Retirement Income Fund to the Custodian Agreement
between The Chase Manhattan Bank and the Registrant
incorporated into this filing by reference to
Post-Effective Amendment No. 18 filed April 30, 1997.
(3) Form of Letter (December 1998) to add Mid-Cap Value
Fund and Small Cap Contrarian Fund to the Custodian
Agreement between The Chase Manhattan Bank and the
Registrant incorporated into this filing by reference
to Post-Effective Amendment No. 21 filed October 2,
1998.
(4) Form of Securities Lending Agreement between The
Chase Manhattan Bank and the Registrant incorporated
into this filing by reference to Post-Effective
Amendment No. 16 filed September 13, 1996.
(5) Amendment to Executed Custodian Agreement (November
20, 1997) between The Chase Manhattan Bank and the
Registrant incorporated into this filing by reference
to Post-Effective Amendment No. 20 filed February 3,
1998.
(h) Other Material Contracts.
(1) 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.
(2) Form of Amended and Restated Shareholders Services
Agreement (December 1998) between Delaware Service
Company, Inc. and the Registrant on behalf of each
Fund incorporated into this filing by reference to
Post-Effective Amendment No. 21 filed October 2,
1998.
(3) Executed Delaware Group of Funds Fund Accounting
Agreement (August 19, 1996) between Delaware Service
Company, Inc. and the Registrant on behalf of Small
Cap
<PAGE>
PART C - Other Information
(Continued)
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) Executed Amendment No. 10 (August 31, 1998)
to Delaware Group of Funds Fund Accounting
Agreement incorporated into this filing by
reference to Post- Effective Amendment No.
22 filed January 29, 1999.
(ii) Executed Amendment No. 11 (September 14,
1998) to Delaware Group of Funds Fund
Accounting Agreement incorporated into this
filing by reference to Post- Effective
Amendment No. 22 filed January 29, 1999.
(iii) Executed Amendment No.12 (September 14,
1998) to Delaware Group of Funds Fund
Accounting Agreement incorporated into this
filing by reference to Post- Effective
Amendment No. 22 filed January 29, 1999.
(iv) Executed Amendment No. 13 (December 18,
1998) to Delaware Group of Funds Fund
Accounting Agreement incorporated into this
filing by reference to Post- Effective
Amendment No. 22 filed January 29, 1999.
(v) Form of Amendment No. 14 (March 1999) to
Delaware Group of Funds Fund Accounting
Agreement attached as Exhibit.
(i) Opinion of Counsel. Incorporated into this filing by reference
to Post-Effective Amendment No. 22 filed
January 29, 1999.
(j) Consent of Auditors. Attached as Exhibit.
(k) Inapplicable.
(l) Undertaking of Initial Shareholder. Incorporated into this
filing by reference to Pre-Effective Amendment No. 2 filed
June 17, 1987.
(m) Plans under Rule 12b-1.
(1) 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.
(2) 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.
(3) 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.
(4) 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.
<PAGE>
PART C - Other Information
(Continued)
(5) 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.
(6) 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.
(7) Form of Plan under Rule 12b-1 for Class A (December
1998) on behalf of Mid-Cap Value Fund and Small Cap
Contrarian Fund incorporated into this filing by
reference to Post-Effective Amendment No. 21 filed
October 2, 1998.
(8) Form of Plan under Rule 12b-1 for Class B (December
1998) on behalf of Mid-Cap Value Fund and Small Cap
Contrarian Fund incorporated into this filing by
reference to Post-Effective Amendment No. 21 filed
October 2, 1998.
(9) Form of Plan under Rule 12b-1 for Class C (December
1998) on behalf of Mid-Cap Value Fund and Small Cap
Contrarian Fund incorporated into this filing by
reference to Post-Effective Amendment No. 21 filed
October 2, 1998.
(n) Financial Data Schedules. Attached as Exhibit.
(o) Plan under Rule 18f-3.
(1) Amended Rule 18f-3 Plan incorporated into this filing
by reference to Post-Effective Amendment No. 19 filed
November 28, 1997.
(2) Amended Appendix A (December 18, 1997) to Rule 18f-3
Plan incorporated into this filing by reference to
Post-Effective Amendment No. 20 filed February 3,
1998.
(3) Form of Amended Appendix A (December 1998) to Rule
18f-3 Plan incorporated into this filing by reference
to Post-Effective Amendment No. 21 filed October 2,
1998.
(p) Other: Directors' Power of Attorney.
(1) Directors' Power of Attorney (December 18, 1997)
incorporated into this filing by reference to
Post-Effective No. 20 filed February 3, 1998 and
Post-Effective No. 21 filed October 2, 1998.
Item 24. Persons Controlled by or under Common Control with Registrant. None.
Item 25. 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.
<PAGE>
PART C - Other Information
(Continued)
Item 26. Business and Other Connections of Investment Adviser.
(a) Delaware Management Company, a series of Delaware Management
Business Trust, (the "Manager") serves as investment manager to the Registrant
and also serves as investment manager or sub- adviser to certain of the other
funds in the Delaware Investments family (Delaware Group Equity Funds I, Inc.,
Delaware Group Equity Funds II, Inc., Delaware Group Equity Funds III, Inc.,
Delaware Group Equity Funds IV, Inc., Delaware Group Government Fund, Inc.,
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 Foundation Funds, 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.) In addition, certain
directors of the Manager also serve as directors/trustees of the other funds in
the Delaware Investments family and certain officers are also officers of these
other funds. A company owned by the Manager's parent company acts as principal
underwriter to the mutual funds in the Delaware Investments family (see Item 29
below) and another such company acts as the shareholder servicing, dividend
disbursing, accounting servicing and transfer agent for all of the mutual funds
in the Delaware Investments family.
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
-----------------------------------------------
<S> <C>
Jeffrey J. Nick(1) Chairman of the Board, President, Chief Executive Officer and
Director/Trustee of the Registrant and each of the other investment
companies in the Delaware Investments family, Delaware Management
Company, Inc., Delaware Management Business Trust, Delvoy, Inc., DMH
Corp. and Founders Holdings, Inc.; Chairman and Chief Executive Officer
and Director of Delaware Management Company (a series of Delaware
Management Business Trust); Chairman and Director of Delaware Capital
Management, Inc. and Retirement Financial Services, Inc.; Chairman of
Delaware Investment Advisers (a series of Delaware Management
Business Trust) and Delaware Distributors, L.P.; Director of Delaware
Service Company, Inc.,
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc. and Delaware Management Holdings, Inc.;
Director of Vantage Global Advisors, Inc. and Lynch & Mayer Inc.
</TABLE>
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
<S> <C>
Wayne A. Stork Director and/or Trustee of the Registrant and each of the other investment
companies in the Delaware Investments family and Delaware International Advisers
Ltd., Chairman of the Board and Director of Delaware Management Holdings, Inc.
David K. Downes Executive Vice President, Chief Operating Officer and Chief Financial
Officer of the Registrant and each of the other funds in the Delaware
Investments family, Delaware Management Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust)
and Delaware Distributors, L.P.; Executive Vice President, Chief
Operating Officer, Chief Financial Officer and Director of Delaware
Management Company, Inc., DMH Corp, Delaware Distributors, Inc.,
Founders Holdings, Inc. and Delvoy, Inc.; Executive Vice President, Chief
Financial Officer, Chief Administrative Officer and Trustee of Delaware
Management Business Trust; President, Chief Executive Officer, Chief
Financial Officer and Director of Delaware Service Company, Inc.;
President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware International Holdings Ltd.; Chairman, Chief Executive Officer
and Director of Retirement Financial Services, Inc.; Chairman and Director
of Delaware Management Trust Company; and Director of Delaware
International Advisers Ltd.
</TABLE>
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- ------------------------------------------------
<S> <C>
Richard G. Unruh, Jr. Executive Vice President and Chief Investment Officer, Equities of the
Registrant, each of the other funds in the Delaware Investments family and
Delaware Management Company (a series of Delaware Management Business
Trust); Executive Vice President of Delaware Management Holdings, Inc. and
Delaware Capital Management, Inc. and Delaware Management Business
Trust; Executive Vice President/Chief Investment Officer, Equities and
Director/Trustee of Delaware Management Company, Inc.; Chief Executive
Officer/Chief Investment Officer, Equities of Delaware Investment Advisers
(a series of Delaware Management Business Trust); and Director of Delaware
International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company
since 1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman
of Finance Committee, AAA Mid Atlantic, Inc. since 1989, 2040 Market Street,
Philadelphia, PA; Board of Directors, Metron, Inc. since 1995, 11911 Freedom
Drive, Reston, VA
Paul E. Suckow Executive Vice President/Chief Investment Officer, Fixed Income of the
Registrant and each of the other investment companies in the Delaware
Investments family; Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Executive Vice President and Director of Founders Holdings, Inc.;
Executive Vice President of Delaware Management Holdings, Inc., Delaware
Capital Management, Inc. and Delaware Management Business Trust; and
Director of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- ------------------------------------------------
<S> <C>
Richard J. Flannery Executive Vice President and General Counsel of Delaware Management
Holdings, Inc., Delaware Distributors, L.P., Delaware Management Trust
Company, Delaware Capital Management, Inc., Delaware Service Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Founders CBO Corporation; Executive
Vice President/General Counsel and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware
International Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc. and
Retirement Financial Services, Inc.; Executive Vice President of the
Registrant and each of the other funds in the Delaware Investments family;
Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton,
PA; Director and Member of Executive Committee of Stonewall Links, Inc.
since 1991, Bulltown Rd., Elverton, PA
George M. Senior Vice President/Secretary and General Counsel of the Registrant and
Chamberlain, Jr. each of the investment companies in the Delaware Investments family; Senior
Vice President and Secretary of Delaware Distributors, L.P., Delaware Management
Company (a series of Delaware Management Business Trust) and Delaware Management
Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Service Company, Inc., Retirement Financial
Services, Inc., Delaware Capital Management, Inc. and Delvoy, Inc.; Executive
Vice President, Secretary and Director of Delaware Management Trust Company;
Senior Vice President and Director of Founders Holdings, Inc.; Senior Vice
President of Delaware International Holdings Ltd.
Michael P. Bishof Senior Vice President/Investment Accounting of Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware Service Company, Inc.; Senior
Vice President and Treasurer of the Registrant, each of the other funds in the
Delaware Investments family and Founders Holdings, Inc.; Senior Vice
President and Treasurer/Manager, Investment Accounting of Delaware
Distributors, L.P. and Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President and Assistant Treasurer
of Founders CBO Corporation; and Senior Vice President and Manager of
Investment Accounting of Delaware International Holdings Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- ------------------------------------------------
<S> <C>
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company,
Inc., Delaware Distributors, Inc., Delaware Capital Management, Inc.,
Delaware Distributors, L.P., Delaware Service Company, Inc., Delaware
International Holdings Ltd., Delaware Management Company (a series of
Delaware Management Business Trust) and Delvoy, Inc.; Senior Vice
President/Corporate Controller of the Registrant, each of the other funds in
the Delaware Investments family and Founders Holdings, Inc.; Chief
Financial Officer and Treasurer of Retirement Financial Services, Inc.; and
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company,
Inc., Delaware Management Holdings, Inc., Delaware Investment Advisers (a
series of Delaware Management Business Trust), Delaware Distributors, Inc.,
Delaware Distributors, L.P., Delaware Service Company, Inc., the Registrant,
each of the other funds in the Delaware Investments family, Delvoy, Inc. and
Delaware Management Company (a series of Delaware Management Business
Trust)
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and Delaware Capital Management,
Inc.
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), Delaware Capital Management, Inc.
and each of the equity investment companies in the Delaware Investments
family, and Trustee of Delaware Management Business Trust
Susan L. Hanson Senior Vice President/Global Marketing & Client Services of Delaware Management
Company (a series of Delaware Management Business Trust) and Delaware Investment
Advisers (a series of Delaware Management Business Trust).
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- ------------------------------------------------
<S> <C>
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Retirement Financial Services, Inc. and Delaware Service Company,
Inc.; Senior Vice President/ Operations and Director of Delaware
Management Trust Company
James L. Shields Senior Vice President/Chief Information Officer of Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Service Company, Inc. and
Retirement Financial Services, Inc.
Eric E. Miller Senior Vice President, Assistant Secretary and Deputy General Counsel of the
Registrant and each of the other funds in the Delaware Investments family,
Delaware Management Company, Inc., Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust), Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors Inc., Delaware Service Company, Inc., Founders
Holdings, Inc., Delaware Capital Management, Inc. and Retirement Financial
Services, Inc.; and Senior Vice President, Assistant Secretary and Deputy
General Counsel of Delvoy, Inc.
Richelle S. Maestro Senior Vice President, Assistant Secretary and Deputy General Counsel of the
Registrant, each of the other funds in the Delaware Investments family, Delaware
Management Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Management Holdings, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
DMH Corp., Delaware Capital Management, Inc., Retirement Financial Services,
Inc., Founders Holdings, Inc. and Delvoy, Inc.; Senior Vice President, Deputy
General Counsel and Secretary of Delaware International Holdings Ltd.; and
Secretary of Founders CBO Corporation
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane,
Philadelphia, PA.
Michael T. Taggart Vice President/Facilities Management and Administrative Services of Delaware
Management Company, Inc. and Delaware Management Company (a series of Delaware
Management Business Trust)
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- ------------------------------------------------
<S> <C>
Richard Salus Vice President/Assistant Controller of Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware
Management Trust Company
Bruce A. Ulmer Vice President/Year 2000 of the Registrant, each of the other funds in the
Delaware Investments family, Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Management Holdings,
Inc. and Retirement Financial Services, Inc., Delvoy, Inc. and Delaware
Management Trust Company
Joel A. Ettinger(2) Vice President/Taxation of the Registrant, each of the other funds in the
Delaware Investments family, Delaware Management Company, Inc.,
Delaware Investment Advisers (a series of Delaware Management Business
Trust), Delaware Management Company (a series of Delaware Management
Business Trust) and Delaware Management Holdings, Inc., Founders
Holdings, Inc., Delaware Distributors, Inc., Delaware Distributors, L.P.,
Delaware Service Company, Inc., Retirement Financial Services, Inc.,
Delaware Capital Management, Inc., Delvoy, Inc. and Founders CBO
Corporation
Christopher Adams Vice President/Business Manager, Equity Department of Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Delaware Management Company (a series of Delaware Management Business
Trust)
Scott Metzger Vice President/Business Development of Delaware Distributors, L.P. and
Delaware Service Company, Inc.
Lisa O. Brinkley Vice President/Compliance Director of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Investments
family, Delaware Management Company (a series of Delaware Management
Business Trust), DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Delvoy, Inc., Retirement Financial Services, Inc. and
Delaware Management Business Trust; and Vice President/Compliance
Director and Assistant Secretary of Delaware Management Trust Company
Mary Ellen Carrozza Vice President/Client Services of Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and each of the other investment companies
in the Delaware Investments family
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- ------------------------------------------------
<S> <C>
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant, and of the fixed-income
investment companies in the Delaware Investments family; Vice President of
Founders Holdings, Inc.; and Treasurer, Assistant Secretary and Director of
Founders CBO Corporation
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), and of the fixed-income investment companies
in the Delaware Investments family; Vice President of Founders Holdings,
Inc.; and President and Director of Founders CBO Corporation
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust),
Delaware Capital Management, Inc. and of the fixed-income investment companies
in the Delaware Investments family
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust),
Delaware Capital Management, Inc. and of the fixed-income investment companies
in the Delaware Investments family
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust),
the Registrant, and of the fixed-income investment companies in the Delaware
Investments family
Mitchell L. Conery(3) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust),
Delaware Capital Management, Inc. and of the fixed-income investment companies
in the Delaware Investments family
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- ------------------------------------------------
<S> <C>
Gerald S. Frey Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust)
and each of the equity investment companies in the Delaware Investments family
Christopher Beck(4) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust)
and each of the investment companies in the Delaware Investments family
Trustee of New Castle County Pension Board since October 1992, Wilmington DE.
Elizabeth H. Howell(5) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust)
and each of the fixed-income investment companies in the Delaware Investments
family
Andrew M. McCullagh, Jr.(6) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust) the
Registrant and each of the fixed-income investment companies in the Delaware
Investments family
Babak Zenouzi Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust)
and each of the equity investment companies in the Delaware Investments family
J. Paul Dokas(7) Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and each of
the equity investment companies in the Delaware Investments family
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- ------------------------------------------------
<S> <C>
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust) and of the
fixed-income investment companies in the Delaware Investments family; and Vice
President/Senior Trader of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust), and the
fixed-income investment companies in the Delaware Investments family
Marshall T. Bassett(8) Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust), and each
of the equity investment companies in the Delaware Investments family
John A. Heffern(9) Vice President/Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust) and each of the funds in the Delaware Investments family
Lori P. Wachs Vice President/Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust) and each of the equity investment companies in the Delaware
Investments family
Richard E. Beister Vice President/Trading Operations of and Delaware Management Company
(a series of Delaware Management Business Trust)
Jeffrey W. Hynoski Vice President/Research Analyst of Delaware Management Company (a
series of Delaware Management Business Trust)
Audrey E. Kohart Vice President/Assistant Controller/Corporate Accounting of Delaware
Management Company (a series of Delaware Management Business Trust)
Steven T. Lampe Vice President/Research Analyst of Delaware Management Company (a
series of Delaware Management Business Trust)
Richard D. Seidel Vice President/Assistant Controller/Manager, Payroll of Delaware
Management Company (a series of Delaware Management Business Trust)
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- ------------------------------------------------
<S> <C>
Karina J. Istvan Vice President/Strategic Planning of Delaware Management Company (a
series of Delaware Management Business Trust)
Steven R. Cianci Vice President/Portfolio Manager of the fixed income investment companies in the
Delaware Investments family.
Michael D. Mabry(10) Vice President/Associate General Counsel/Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust)
David P. O'Connor Vice President/Associate General Counsel/Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust)
Philip Y. Lin Vice President/Associate General Counsel/Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust)
</TABLE>
<TABLE>
<S> <C>
(1) MANAGING DIRECTOR, Lincoln National UK plc prior to 1996.
(2) TAX PRINCIPAL, Ernst & Young LLP prior to April 1998.
(3) INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
(4) SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
(5) SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May 1997.
(6) SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset
Management LLC prior to May 1997.
(7) DIRECTOR OF TRUST INVESTMENTS, Bell Atlantic Corporation prior to February 1997.
(8) VICE PRESIDENT, Morgan Stanley Asset Management prior to March 1997.
(9) SENIOR VICE PRESIDENT, EQUITY RESEARCH, NatWest Securities Corporation prior to
March 1997.
(10) ATTORNEY, Ballard, Spahr, Andrews & Ingersoll prior to January 1997.
</TABLE>
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter
for all the mutual funds in the Delaware Investments family.
(b) Information with respect to each director, officer or partner
of principal underwriter:
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- --------------------- -----------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Investment Advisers Limited Partner None
Delaware Capital
Management, Inc. Limited Partner None
Jeffrey J. Nick Chairman Chairman
Wayne A. Stork None Director
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Executive Vice President, Executive Vice President,
Chief Operating Officer Chief Operating Officer
and Chief Financial Officer and Chief Financial
Officer
Richard J. Flannery Executive Vice President/General Executive Vice President
Counsel
George M. Chamberlain, Jr. Senior Vice President/Secretary Senior Vice President/
Secretary/General Counsel
Joseph H. Hastings Senior Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller
Terrence P. Cunningham Senior Vice President/Financial None
Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
J. Chris Meyer Senior Vice President/ None
Director, Product Management
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- --------------------- -----------------------
<S> <C> <C>
William M. Kimbrough Senior Vice President/Wholesaler None
Daniel J. Brooks Senior Vice President/Wholesaler None
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager
Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice
Manager, Investment Accounting President/Treasurer
Stephen J. DeAngelis Senior Vice President/National None
Director/Managed Account Services
Joanne O. Hutcheson Senior Vice President/Human Senior Vice President/Human
Resources Resources
Holly W. Reimel Senior Vice President/National None
Accounts
Eric E. Miller Senior Vice President/Assistant Senior Vice President
Assistant Secretary/Deputy Assistant Secretary/Deputy
General Counsel General Counsel
Richelle S. Maestro Senior Vice President/Assistant Senior Vice President
Assistant Secretary/Deputy Assistant Secretary/Deputy
General Counsel General Counsel
Diane M. Anderson Senior Vice President/ None
Retirement Operations
James L. Shields Senior Vice President/ None
Chief Information Officer
Stephen C. Nell Senior Vice President/National None
Retirement Sales
Christopher H. Price Senior Vice President/Channel None
Manager
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- --------------------- -----------------------
<S> <C> <C>
Lisa O. Brinkley Vice President/Compliance Vice President/Compliance
Daniel H. Carlson Vice President/Marketing Services None
Courtney S. West Vice President/Institutional Sales None
Gordon E. Searles Vice President/Client Services None
Julia R. Vander Els Vice President/Retirement Plan None
Contributions
Scott Metzger Vice President/Business Development None
Larry Carr Vice President/Variable Annuity None
Sales Manager
James R. Searles Vice President/Variable Annuity None
Sales Manager
Gregory J. McMillan Vice President/National Accounts None
Christopher W. Moore Vice President/Variable Annuity None
Wholesaler
Daniel J. O'Brien Vice President/Insurance Products None
Andrew W. Whitaker Vice President/Wholesaler None
Financial Institutions
Jessie Emery Vice President/Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales Director
Dinah J. Huntoon Vice President/Product None
Manager, Equities
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- --------------------- ----------------------
<S> <C> <C>
Soohee Lee Vice President/Fixed Income None
and International Product
Management
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
Michael J. Woods Vice President/National None
Sales Manager
Susan T. Friestedt Vice President/Retirement Services None
Ellen M. Krott Vice President/Marketing None
John A. Wells Vice President/Marketing Technology None
Theodore V. Wood, III Vice President/Technical Systems None
Officer
Linda Finnerty Vice President/Corporate Vice President/Corporate
Communications Communications
Matthew Coldren Vice President/National Accounts None
Patrick A. Connelly Vice President/RIA Sales None
Karina J. Istvan Vice President/Strategic Planning Vice President/Strategic
Planning
Michael D. Mabry Vice President/Associate General Vice President/Associate
Counsel/Assistant Secretary General Counsel/Assistant
Secretary
David P. O'Connor Vice President/Associate General Vice President/Associate
Counsel/Assistant Secretary General Counsel/Assistant
Secretary
Philip Y. Lin Vice President/Associate General Vice President/Associate
Counsel/Assistant Secretary General Counsel/Assistant
Secretary
Catherine A. Seklecki Vice President/Retirement Sales None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- --------------------- ----------------------
<S> <C> <C>
Michael T. Taggart Vice President/Facilities and None
Administrative Services
Bruce A. Ulmer Vice President/Year 2000 Vice President/Year 2000
Richard P. Allen Vice President/Wholesaler, None
Midwest Region
David P. Anderson, Jr. Vice President/Wholesaler None
Jeffrey H. Arcy Vice President/Wholesaler, None
Southeast Region
Patrick A. Bearss Vice President/Wholesaler, None
Midwest Region
Gabriella Bercze Vice President/Financial None
Institution Wholesaler
Larry D. Bridwell Vice President/Financial None
Institution Wholesaler
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Edward J. Hecker Vice President/Wholesaler None
John R. Herron Vice President/Variable None
Annuity Wholesaler
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- --------------------- ----------------------
Carolyn Kelly Vice President/Wholesaler None
Richard M. Koerner Vice President/Wholesaler None
Theodore T. Malone Vice President/IPI Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
Andrew F. Morris Vice President/Wholesaler, None
East Division
Patrick L. Murphy Vice President/Wholesaler None
Scott E. Naughton Vice President/IPI Wholesaler None
Julia A. Nye Vice President/Wholesaler None
Joseph T. Owczarek Vice President/Wholesaler None
Otis S. Page Vice President/Wholesaler None
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
Mark A. Pletts Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
Robert A. Rosso Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
John C. Shalloe Vice President/Wrap Fee None
Wholesaler, Western Region
Edward B. Sheridan Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- --------------------- ----------------------
<S> <C> <C>
Robert E. Stansbury Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
Scott Whitehouse Vice President/Wholesaler None
Denise D. Bradley Vice President/Variable None
Annuity Wholesaler
Rhonda J. Guido Vice President/Wholesaler None
John M. Leboeuf Vice President/Variable Annuity None
Wholesaler
John R. Logan Vice President/Wholesaler/ None
Financial Institutions
</TABLE>
(c) Not Applicable.
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818 Market
Street, Philadelphia, PA 19103 or One Commerce Square, Philadelphia, PA
19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders, upon request and without
charge.
(d) Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia, Commonwealth of Pennsylvania on this
22nd day of March, 1999.
DELAWARE GROUP EQUITY FUNDS V, INC.
By/s/Jeffrey J. Nick
------------------
Jeffrey J. Nick
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------ ------------------------------ --------------
<S> <C> <C>
/s/Jeffrey J. Nick Chairman and Director March 22, 1999
- ------------------------------
Jeffrey J. Nick
/s/David K. Downes Executive Vice President/Chief Operating
- ------------------------------ Officer/Chief Financial Officer (Principal
David K. Downes Financial Officer and Principal Accounting
Officer) March 22, 1999
/s/Wayne A. Stork * Director March 22, 1999
- ------------------------------
Wayne A. Stork
/s/ John H. Durham * Director March 22, 1999
- ------------------------------
John H. Durham
/s/Walter P. Babich * Director March 22, 1999
- ------------------------------
Walter P. Babich
/s/Charles E. Peck * Director March 22, 1999
- ------------------------------
Charles E. Peck
/s/Ann R. Leven * Director March 22, 1999
- ------------------------------
Ann R. Leven
/s/Thomas F. Madison * Director March 22, 1999
- ------------------------------
Thomas F. Madison
/s/Anthony D. Knerr * Director March 22, 1999
- ------------------------------
Anthony D. Knerr
</TABLE>
*By /s/Jeffrey J. Nick
------------------
Jeffrey J. Nick
as Attorney-in-Fact for
each of the persons indicated
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
EX-99.H3V Form of Amendment No. 14 (March 1999) to Delaware Group of
Funds Fund Accounting Agreement
EX-99.J Consent of Auditors
EX-99.N Financial Data Schedules
<PAGE>
EX-99.H3V
Exhibit 23(h)(3)(v)
AMENDMENT NO. 14
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Balanced Fund (formerly Delaware Fund)
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Equity Income Fund (formerly Decatur Income Fund)
Growth and Income Fund (formerly Decatur Total Return Fund)
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
Mid-Cap Value Fund (New)
Small Cap Contrarian Fund (New)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Equity Fund (formerly Global Assets Fund)
Global Bond Fund
International Equity Fund
Global Opportunities Fund (formerly Global Equity Fund) (New)
International Small Cap Fund (New)
New Europe Fund (New)
Latin America Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Corporate Bond Fund (New)
Extended Duration Bond Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund (liquidated December 18, 1998)
Delaware Pooled Trust, Inc.
The Mid-Cap Growth Equity Portfolio (formerly The Aggressive Growth
Portfolio)
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Mid-Cap Value Equity Portfolio (formerly The Small/Mid-Cap Value
Equity Portfolio and The Defensive Equity Small/Mid-Cap
Portfolio)(New)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
2
<PAGE>
The Aggregate Fixed Income Portfolio (New)
The Small-Cap Growth Equity Portfolio (New)
The Growth and Income Portfolio (New)
The Small Cap Value Equity Portfolio (New)
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly Value Series)
Aggressive Growth Series (New)
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur US Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New) (liquidated November 18, 1998)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of March 1, 1999
DELAWARE SERVICE COMPANY, INC.
By: ___________________________________________________
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: _____________________________________________________
Jeffrey J. Nick
Chairman
<PAGE>
EX-99.J
Exhibit 23(j)
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 Statements of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 21 to the Registration Statement (Form N-1A) (No.
33-11419) of Delaware Group Equity Funds V, Inc. of our reports dated January 8,
1999, included in the 1998 Annual Reports to shareholders.
/s/Ernst & Young LLP
- -------------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
March 26, 1999
<PAGE>
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 statement of net assets of Delaware Group
Equity Funds V, Inc. - Small Cap Value Fund (the "Fund") as of November 30,
1998, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of November 30, 1998, by correspondence with the Fund's
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Equity Funds V, Inc. - Small Cap Value Fund at November 30, 1998,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and its financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
- -------------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
January 8, 1999
<PAGE>
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 (the "Fund") as of November 30,
1998, and the related statement of operations for the year then ended, and the
statements of changes in net assets and financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of November 30, 1998, by correspondence with the Fund's
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Equity Funds V, Inc. - Retirement Income Fund at November 30,
1998, and the results of its operations for the year then ended, and the changes
in its net assets and its financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
January 8, 1999
<PAGE>
[ARTICLE] 6
[CIK] 0000809821
[NAME] DELAWARE GROUP EQUITY FUNDS V, INC.
[SERIES]
[NUMBER] 011
[NAME] SMALL CAP VALUE FUND A CLASS
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] NOV-30-1998
[PERIOD-END] NOV-30-1998
[INVESTMENTS-AT-COST] 456,386,306
[INVESTMENTS-AT-VALUE] 497,948,799
[RECEIVABLES] 4,620,143
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 95,615
[TOTAL-ASSETS] 502,664,557
[PAYABLE-FOR-SECURITIES] 2,602,177
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 2,602,177
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 457,985,097
[SHARES-COMMON-STOCK] 10,642,988
[SHARES-COMMON-PRIOR] 9,006,178
[ACCUMULATED-NII-CURRENT] 2,360,998
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,845,182)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 41,561,467
[NET-ASSETS] 500,062,380
[DIVIDEND-INCOME] 7,292,607
[INTEREST-INCOME] 1,890,926
[OTHER-INCOME] 0
[EXPENSES-NET] 6,392,069
[NET-INVESTMENT-INCOME] 2,791,464
[REALIZED-GAINS-CURRENT] (1,782,359)
[APPREC-INCREASE-CURRENT] (46,031,653)
[NET-CHANGE-FROM-OPS] (45,022,548)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1,285,317
[DISTRIBUTIONS-OF-GAINS] 19,279,760
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 7,335,761
[NUMBER-OF-SHARES-REDEEMED] 6,419,595
[SHARES-REINVESTED] 720,644
[NET-CHANGE-IN-ASSETS] 164,638,473
[ACCUMULATED-NII-PRIOR] 1,119,661
[ACCUMULATED-GAINS-PRIOR] 24,090,528
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,170,471
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,392,069
[AVERAGE-NET-ASSETS] 282,011,881
[PER-SHARE-NAV-BEGIN] 29.79
[PER-SHARE-NII] 0.215
[PER-SHARE-GAIN-APPREC] (2.285)
[PER-SHARE-DIVIDEND] 0.140
[PER-SHARE-DISTRIBUTIONS] 2.100
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 25.480
[EXPENSE-RATIO] 1.390
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000809821
[NAME] DELAWARE GROUP EQUITY FUNDS V, INC.
[SERIES]
[NUMBER] 012
[NAME] SMALL CAP VALUE FUND B CLASS
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] NOV-30-1998
[PERIOD-END] NOV-30-1998
[INVESTMENTS-AT-COST] 456,386,306
[INVESTMENTS-AT-VALUE] 497,948,799
[RECEIVABLES] 4,620,143
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 95,615
[TOTAL-ASSETS] 502,664,557
[PAYABLE-FOR-SECURITIES] 2,602,177
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 2,602,177
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 457,985,097
[SHARES-COMMON-STOCK] 3,337,773
[SHARES-COMMON-PRIOR] 1,348,488
[ACCUMULATED-NII-CURRENT] 2,360,998
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,845,182)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 41,561,467
[NET-ASSETS] 500,062,380
[DIVIDEND-INCOME] 7,292,607
[INTEREST-INCOME] 1,890,926
[OTHER-INCOME] 0
[EXPENSES-NET] 6,392,069
[NET-INVESTMENT-INCOME] 2,791,464
[REALIZED-GAINS-CURRENT] (1,782,359)
[APPREC-INCREASE-CURRENT] (46,031,653)
[NET-CHANGE-FROM-OPS] (45,022,548)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 3,029,492
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,368,089
[NUMBER-OF-SHARES-REDEEMED] 484,073
[SHARES-REINVESTED] 105,269
[NET-CHANGE-IN-ASSETS] 164,638,473
[ACCUMULATED-NII-PRIOR] 1,119,661
[ACCUMULATED-GAINS-PRIOR] 24,090,528
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,170,471
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,392,069
[AVERAGE-NET-ASSETS] 66,763,442
[PER-SHARE-NAV-BEGIN] 29.46
[PER-SHARE-NII] 0.052
[PER-SHARE-GAIN-APPREC] (2.272)
[PER-SHARE-DIVIDEND] 0.000
[PER-SHARE-DISTRIBUTIONS] 2.100
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 25.140
[EXPENSE-RATIO] 2.090
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000809821
[NAME] DELAWARE GROUP EQUITY FUNDS V, INC.
[SERIES]
[NUMBER] 013
[NAME] SMALL CAP VALUE FUND C CLASS
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] NOV-30-1998
[PERIOD-END] NOV-30-1998
[INVESTMENTS-AT-COST] 456,386,306
[INVESTMENTS-AT-VALUE] 497,948,799
[RECEIVABLES] 4,620,143
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 95,615
[TOTAL-ASSETS] 502,664,557
[PAYABLE-FOR-SECURITIES] 2,602,177
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 2,602,177
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 457,985,097
[SHARES-COMMON-STOCK] 1,235,783
[SHARES-COMMON-PRIOR] 426,136
[ACCUMULATED-NII-CURRENT] 2,360,998
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,845,182)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 41,561,467
[NET-ASSETS] 500,062,380
[DIVIDEND-INCOME] 7,292,607
[INTEREST-INCOME] 1,890,926
[OTHER-INCOME] 0
[EXPENSES-NET] 6,392,069
[NET-INVESTMENT-INCOME] 2,791,464
[REALIZED-GAINS-CURRENT] (1,782,359)
[APPREC-INCREASE-CURRENT] (46,031,653)
[NET-CHANGE-FROM-OPS] (45,022,548)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 944,203
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 954,136
[NUMBER-OF-SHARES-REDEEMED] 177,569
[SHARES-REINVESTED] 33,080
[NET-CHANGE-IN-ASSETS] 164,638,473
[ACCUMULATED-NII-PRIOR] 1,119,661
[ACCUMULATED-GAINS-PRIOR] 24,090,528
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,170,471
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,392,069
[AVERAGE-NET-ASSETS] 23,949,865
[PER-SHARE-NAV-BEGIN] 29.44
[PER-SHARE-NII] 0.032
[PER-SHARE-GAIN-APPREC] (2.256)
[PER-SHARE-DIVIDEND] 0.000
[PER-SHARE-DISTRIBUTIONS] 2.100
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 25.120
[EXPENSE-RATIO] 2.090
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000809821
[NAME] DELAWARE GROUP EQUITY FUNDS V, INC.
[SERIES]
[NUMBER] 014
[NAME] SMALL CAP VALUE FUND INSTITUTIONAL CLASS
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] NOV-30-1998
[PERIOD-END] NOV-30-1998
[INVESTMENTS-AT-COST] 456,386,306
[INVESTMENTS-AT-VALUE] 497,948,799
[RECEIVABLES] 4,620,143
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 95,615
[TOTAL-ASSETS] 502,664,557
[PAYABLE-FOR-SECURITIES] 2,602,177
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 2,602,177
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 457,985,097
[SHARES-COMMON-STOCK] 4,444,211
[SHARES-COMMON-PRIOR] 496,730
[ACCUMULATED-NII-CURRENT] 2,360,998
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1,845,182)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 41,561,467
[NET-ASSETS] 500,062,380
[DIVIDEND-INCOME] 7,292,607
[INTEREST-INCOME] 1,890,926
[OTHER-INCOME] 0
[EXPENSES-NET] 6,392,069
[NET-INVESTMENT-INCOME] 2,791,464
[REALIZED-GAINS-CURRENT] (1,782,359)
[APPREC-INCREASE-CURRENT] (46,031,653)
[NET-CHANGE-FROM-OPS] (45,022,548)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 110,446
[DISTRIBUTIONS-OF-GAINS] 1,054,260
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,539,218
[NUMBER-OF-SHARES-REDEEMED] 633,955
[SHARES-REINVESTED] 42,218
[NET-CHANGE-IN-ASSETS] 164,638,473
[ACCUMULATED-NII-PRIOR] 1,119,661
[ACCUMULATED-GAINS-PRIOR] 24,090,528
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,170,471
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 6,392,069
[AVERAGE-NET-ASSETS] 54,465,494
[PER-SHARE-NAV-BEGIN] 29.95
[PER-SHARE-NII] 0.160
[PER-SHARE-GAIN-APPREC] (2.150)
[PER-SHARE-DIVIDEND] 0.220
[PER-SHARE-DISTRIBUTIONS] 2.100
[RETURNS-OF-CAPITAL] 0.000
[PER-SHARE-NAV-END] 25.640
[EXPENSE-RATIO] 1.090
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000809821
[NAME] DELAWARE GROUP EQUITY FUNDS V, INC.
[SERIES]
[NUMBER] 021
[NAME] RETIREMENT INCOME FUND A CLASS
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1998
[PERIOD-END] NOV-30-1998
[INVESTMENTS-AT-COST] 2,854,360
[INVESTMENTS-AT-VALUE] 2,982,583
[RECEIVABLES] 166,735
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,149,318
[PAYABLE-FOR-SECURITIES] 225,968
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 60,455
[TOTAL-LIABILITIES] 286,423
[SENIOR-EQUITY] 2,819
[PAID-IN-CAPITAL-COMMON] 2,460,585
[SHARES-COMMON-STOCK] 2,245
[SHARES-COMMON-PRIOR] 742
[ACCUMULATED-NII-CURRENT] 162,737
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 108,532
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 128,222
[NET-ASSETS] 22,811
[DIVIDEND-INCOME] 90,915
[INTEREST-INCOME] 106,568
[OTHER-INCOME] 0
[EXPENSES-NET] 21,519
[NET-INVESTMENT-INCOME] 175,964
[REALIZED-GAINS-CURRENT] 108,694
[APPREC-INCREASE-CURRENT] (219,218)
[NET-CHANGE-FROM-OPS] 65,440
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 263
[DISTRIBUTIONS-OF-GAINS] 553
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,120
[NUMBER-OF-SHARES-REDEEMED] 701
[SHARES-REINVESTED] 82
[NET-CHANGE-IN-ASSETS] 91,152
[ACCUMULATED-NII-PRIOR] 121,801
[ACCUMULATED-GAINS-PRIOR] 284,110
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 18,686
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 38,221
[AVERAGE-NET-ASSETS] 19,220
[PER-SHARE-NAV-BEGIN] 11.700
[PER-SHARE-NII] 0.631
[PER-SHARE-GAIN-APPREC] (0.401)
[PER-SHARE-DIVIDEND] 0.570
[PER-SHARE-DISTRIBUTIONS] 1.200
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.160
[EXPENSE-RATIO] 0.750
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000809821
[NAME] DELAWARE GROUP EQUITY FUNDS V, INC.
[SERIES]
[NUMBER] 022
[NAME] RETIREMENT INCOME FUND B CLASS
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1998
[PERIOD-END] NOV-30-1998
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 0
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 0
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000809821
[NAME] DELAWARE GROUP EQUITY FUNDS V, INC.
[SERIES]
[NUMBER] 023
[NAME] RETIREMENT INCOME FUND C CLASS
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1998
[PERIOD-END] NOV-30-1998
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 0
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 0
[TOTAL-LIABILITIES] 0
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 0
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 0
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 0
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK] 0000809821
[NAME] DELAWARE GROUP EQUITY FUNDS V, INC.
[SERIES]
[NUMBER] 024
[NAME] RETIREMENT INCOME FUND INSTITUTIONAL CLASS
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1998
[PERIOD-END] NOV-30-1998
[INVESTMENTS-AT-COST] 2,854,360
[INVESTMENTS-AT-VALUE] 2,982,583
[RECEIVABLES] 166,735
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 3,149,318
[PAYABLE-FOR-SECURITIES] 225,968
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 60,455
[TOTAL-LIABILITIES] 286,423
[SENIOR-EQUITY] 2,819
[PAID-IN-CAPITAL-COMMON] 2,460,585
[SHARES-COMMON-STOCK] 279,684
[SHARES-COMMON-PRIOR] 236,432
[ACCUMULATED-NII-CURRENT] 162,737
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 108,532
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 128,222
[NET-ASSETS] 2,840,084
[DIVIDEND-INCOME] 90,915
[INTEREST-INCOME] 106,568
[OTHER-INCOME] 0
[EXPENSES-NET] 21,519
[NET-INVESTMENT-INCOME] 175,964
[REALIZED-GAINS-CURRENT] 108,694
[APPREC-INCREASE-CURRENT] (219,218)
[NET-CHANGE-FROM-OPS] 65,440
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 134,766
[DISTRIBUTIONS-OF-GAINS] 283,718
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,251
[NUMBER-OF-SHARES-REDEEMED] 185
[SHARES-REINVESTED] 42,186
[NET-CHANGE-IN-ASSETS] 91,152
[ACCUMULATED-NII-PRIOR] 121,801
[ACCUMULATED-GAINS-PRIOR] 284,110
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 18,686
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 38,221
[AVERAGE-NET-ASSETS] 2,855,513
[PER-SHARE-NAV-BEGIN] 11.690
[PER-SHARE-NII] 0.631
[PER-SHARE-GAIN-APPREC] (0.401)
[PER-SHARE-DIVIDEND] 0.570
[PER-SHARE-DISTRIBUTIONS] 1.200
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.150
[EXPENSE-RATIO] 0.750
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
