DELAWARE GROUP EQUITY FUNDS V INC, 485APOS, 1999-11-24

DELAWARE GROUP EQUITY FUNDS V INC
485APOS, 1999-11-24

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
File No. 33-11419
File No. 811-4997

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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 25 X
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AND

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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 25
--

DELAWARE GROUP EQUITY FUNDS V
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

1818 Market Street, Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (215) 255-1255
--------------

Eric E Miller, Esq., 1818 Market Street, Philadelphia, PA 19103
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)

Approximate Date of Public Offering: January 31, 2000
----------------

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
----
on (date) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(1)
----
X on January 31, 2000 pursuant to paragraph (a)(1)
----
75 days after filing pursuant to paragraph (a)(2)
----
on (date) pursuant to paragraph (a)(2) of Rule 485
----

<PAGE>

--- C O N T E N T S ---

This Post-Effective Amendment No. 25 to Registration File No. 33-11419
includes the following:

1. Facing Page

2. Contents Page

3. Part A - Prospectuses

4. Part B - Statement of Additional Information

5. Part C - Other Information

6. Signatures

<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London

Delaware Small Cap Value Fund

Class A * Class B * Class C

Prospectus
January 31, 2000

Growth of Capital Fund

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.

<PAGE>

Table of Contents

Fund profile page
Delaware 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 highlights page

<PAGE>

Profile: Delaware Small Cap Value Fund

What are the Fund's goals?
Delaware 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
the 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 x.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of 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.

You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.

<PAGE>

How has the Fund performed?

This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show returns for the Fund's Class A shares for 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

- ------------------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -13.15% 50.97% 14.78% 18.82% -6.98% 23.51% 22.12% 33.03% -5.10% 0.00%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

During the periods illustrated in this bar chart, Class A's highest quarterly
return was 0.00% for the quarter ended ________________ and its lowest quarterly
return was 0.00% for the quarter ended _______________.

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 12/31/99
<TABLE>
<CAPTION>

CLASS A B (if redeemed)* C (if redeemed)* Russell 2000 Index**
(Inception 6/24/87) (Inception 9/6/94) (Inception 11/29/95)

<S> <C> <C> <C> <C>
1 year 0.00% 0.00% 0.00% 0.00%
5 years 0.00% 0.00% N/A 0.00%
10 years or Lifetime 0.00% 0.00% 0.00% 0.00%
</TABLE>

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 shares were not redeemed, the returns for Class B would be 0.00% and 0.00%,
respectively, for the one-year, five-year and lifetime periods. Returns for
Class C would be 0.00% and 0.00%, 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 returns are for 10 years. Index returns for Class B and
Class C lifetime periods were 0.00% and 0.00%, respectively. Maximum sales
charges are included in the Fund returns shown in the table above.

5
<PAGE>

What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------
CLASS A B C
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases as 5.75% none none
a percentage of offering price
----------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none(1) 5%(2) 1%(3)
percentage of original purchase price or redemption
price, whichever is lower
----------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none none none
dividends
----------------------------------------------------------------------------------------
Redemption fees none none none
----------------------------------------------------------------------------------------
</TABLE>

Annual fund operating expenses are deducted from the Fund's assets.

----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.00% 0.00% 0.00%
----------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
----------------------------------------------------------------------------------------
Other expenses 0.00% 0.00% 0.00%
----------------------------------------------------------------------------------------
Total operating expenses 0.00% 0.00% 0.00%
----------------------------------------------------------------------------------------
</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>

---------------------------------------------------------------------------------------------------
CLASS5 A B B C C
(if redeemed) (if redeemed)
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $000 $000 $000 $000 $000
---------------------------------------------------------------------------------------------------
3 years $000 $000 $000 $000 $000
---------------------------------------------------------------------------------------------------
5 years $000 $000 $000 $000 $000
---------------------------------------------------------------------------------------------------
10 years $000 $000 $000 $000 $000
---------------------------------------------------------------------------------------------------
</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 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.
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.

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 believe are the
best investments for the 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 we believe offer above-average
opportunities for long-term price appreciation because their current stock price
does not appear to 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 when compared to 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 a mix of different stocks, representing a wide
array of industries.

7
<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
- ---------------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap Value Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of Under normal market conditions we will hold at least 65% of the
ownership in a corporation. Stockholders participate Fund's net assets in common stock of small companies that we
in the corporation's profits and losses, proportionate believe are selling for less than their true value. Generally, we
to the number of shares they own. invest 90% to 100% of 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
estate to earn profits for shareholders. to offer opportunities for price appreciation.
- ---------------------------------------------------------------------------------------------------------------------------------
Foreign securities and American Depositary Receipts: Although the Fund may invest up to 25% of its net assets in
Securities of foreign entities issued directly or, foreign securities or depositary receipts, the manager has no
in the case of American Depositary Receipts, through present intention of doing so. We may hold ADRs when we believe
a U.S. bank. ADRs are issued by a U.S. bank and they offer greater value and greater appreciation potential than
represent the bank's holdings of a stated number of 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 U.S. government securities in which the for a Fund's cash position. In order to enter into these
seller agrees to buy the securities back within a repurchase agreements, the Fund must have collateral of at least
specified time at the same price the buyer paid for 102% of the repurchase price. Repurchase agreements with maturities
them, plus an amount equal to an agreed upon interest of over seven days will be considered illiquid.
rate. Repurchase agreements are often viewed as
equivalent to cash.
- ---------------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest in privately placed securities that are eligible for
whose resale is restricted under securities law. resale only among certain institutional buyers without
registration, including Rule 144A Securities. Restricted
securities that are determined to be illiquid may not exceed the
Fund's 10% limit on illiquid securities, which is described below.
- ---------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a We may invest up to 10% of net assets in illiquid securities.
ready market, and cannot be easily sold within seven
days at approximately the price that the Fund has
valued them.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Fund may also invest in other securities including Please see the Statement
of Additional Information for well as those listed in the table above. You can
find in the annual or semi-annual shareholder report.

8
<PAGE>

Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and institutional
investors for their use in security transactions.

Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. The Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.

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.

9
<PAGE>

- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on stocks we
securities in a certain market -- like the stock or believe can appreciate over an extended time frame regardless of
bond market -- will decline in value because of interim market fluctuations. We do not try to predict overall
factors such as economic conditions, future stock market movements and do not trade for short-term purposes.
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 We limit the amount of the Fund's assets invested in any one
the value of securities in a particular industry and in any individual security. We also follow a rigorous
industry or the value of an individual stock selection process before choosing securities and continuously
or bond will decline because of changing monitor them while they remain in the portfolio.
expectations for the performance of that
industry or for the individual company
issuing the stock.
- ---------------------------------------------------------------------------------------------------------------------------------
Small company risk is the risk that prices The Fund maintains a well-diversified portfolio, selects stocks
of smaller companies may be more volatile carefully and monitors them continuously. And, because we focus on
than larger companies because of limited stocks that are already selling at relatively low prices, we
financial resources or dependence on narrow believe we may experience less price volatility than small-cap
product lines. 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 cashflow to
decrease in value if interest rates rise. The risk is determine the company's ability to finance future expansion and
generally associated with bonds; however, because operations. The potential affect that rising interest rates might
smaller companies often borrow money to finance their have on a stock is taken into consideration before the stock is
operations, they may be adversely affected by rising purchased.
interest rates.
- ---------------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign securities may We typically invest only a small portion of the Fund's portfolio
be adversely affected by political instability, in foreign securities. When we do purchase foreign securities,
changes in currency exchange rates, foreign economic they are often denominated in U.S. dollars. To the extent we
conditions or inadequate regulatory and accounting invest in foreign securities, we invest primarily in issuers of
standards. 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 within
seven days at approximately the price that
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 0.00% as a
percentage of average daily net assets for the last fiscal year.

Portfolio manager

Christopher S. Beck, Vice President/Senior Portfolio Manager, has had primary
responsibility for making day-to-day investment decisions for the Fund since its
inception. Mr. Beck has been in the investment business for 19 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, Assistant Vice President/Portfolio Manager, 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.

<PAGE>

Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.

<TABLE>
<CAPTION>
Board of Trustees

<S> <C> <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 __ 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 Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.

Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.

Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.

Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.

Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.

Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.

Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.

Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect 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 Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.

Choosing a share class

Class A

o Class A shares have an up-front sales charge of up to 5.75% that you pay when
you buy the shares. The offering price for Class A shares includes the
front-end sales charge.

o If you invest $50,000 or more, your front-end sales charge will be reduced.

o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.

o Class A shares are also subject to an annual 12b-1 fee no greater than 0.30%
of average daily net assets, which is lower than the 12b-1 fee for Class B and
Class C shares.

o Class A shares generally are not subject to a contingent deferred sales charge
except in the limited circumstances described in the table below.

Class A Sales Charges
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Amount of 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% 0.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------------
$50,000 but 4.75% 0.00% 4.00%
under $100,000
- ------------------------------------------------------------------------------------------------------------------------
$100,000 but 3.75% 0.00% 3.00%
under $250,000
- ------------------------------------------------------------------------------------------------------------------------
$250,000 but 2.50% 0.00% 2.00%
under $500,000
- ------------------------------------------------------------------------------------------------------------------------
$500,000 but 2.00% 0.00% 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>
$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>
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, they are
subject to annual 12b-1 fees no greater than 1% of average daily net assets,
of which 0.25% are service fees paid to the distributor, dealers or others for
providing services and maintaining accounts.

o Because of the higher 12b-1 fees, Class B shares have higher expenses and any
dividends paid on these shares are lower than dividends on Class A shares.

o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%. Conversion
may occur as late as three months after the eighth anniversary of purchase,
during which time Class B's higher 12b-1 fees apply.

o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.

Class C

o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge of 1% if you redeem your shares within 12 months after you buy
them.

o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.

o Class C shares are subject to an annual 12b-1 fee which may not be greater
than 1% of average daily net assets, of which 0.25% are service fees paid to
the distributor, dealers or others for providing services and maintaining
shareholder accounts.

o Because of the higher 12b-1 fees, Class C shares have higher expenses and pay
lower dividends than Class A shares.

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.

<PAGE>

About your account (continued)

<TABLE>
<CAPTION>
- --------------------------- -------------------------------------------- ---------------------------------------------------------
Program How it works Share class
A B C
- --------------------------- -------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you agree to X Although the Letter of Intent and
invest a certain amount in Delaware Rights of Accumulation do not apply
Investment Funds (except money market to the purchase of Class B and C
funds with no sales charge) over a shares, you can combine your purchase
13-month period to qualify for reduced of Class A shares with your purchase
front-end sales charges. 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 or X
purchases of all funds in the Delaware
Investments family (except money market
funds with no sales charge) as well as
the holdings and purchases of your
spouse and children under 21 to qualify
for reduced front-end sales charges.
- --------------------------- -------------------------------------------- ------------------ ------------------------ -------------
Reinvestment of Up to 12 months after you redeem shares, For Class A, For Class B, your Not
redeemed shares you can reinvest the proceeds with no you will not account will be available
additional sales charge. have to pay an credited with the
additional contingent
front-end deferred sales
sales charge. charge you
previously paid on
the amount you are
reinvesting. Your
schedule for
contingent
deferred sales
charges and
conversion to
Class A will not
start over again;
it will pick up
from the point at
which you redeemed
your shares.
- --------------------------- -------------------------------------------- ------------------ --------------------------------------
SIMPLE IRA, SEP IRA, These investment plans may qualify for X There is no reduction in sales
SARSEP, Prototype reduced sales charges by combining the charges for Class B or Class C shares
Profit Sharing, purchases of all members of the group. for group purchases for retirement
Pension, 401(k), Members of these groups may also qualify plans.
SIMPLE 401(k), to purchase shares without a front-end
403(b)(7), and 457 sales charge and a waiver of any
Retirement Plans contingent deferred sales charges.
- --------------------------- -------------------------------------------- ------------------ --------------------------------------
</TABLE>

<PAGE>

How to buy shares

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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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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 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.

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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 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.

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Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service, or through our web site, www.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.

16
<PAGE>

About your account (continued)

How to buy shares (continued)

Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.

The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of 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. 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 trustees. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at fair market value using a method approved by the board of
trustees.

Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.

17
<PAGE>

How to redeem shares

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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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By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.

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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. 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.

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Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawareinvestments.com. For more information about
how to sign up for these services, call our Shareholder Service Center at
800.523.1918.

<PAGE>

About your account (continued)

How to redeem shares (continued)

If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.

When you send us a properly completed request to redeem or exchange shares
before the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern Time), you will receive the net asset value as determined on the
business day we receive your request. We will deduct any applicable contingent
deferred sales charges. You may also have to pay taxes on the proceeds from your
sale of shares. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.

If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares, not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.

Account minimums

If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, 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.

19
<PAGE>

Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.

Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly or quarterly
investments directly from your checking account.

Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.

Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.

Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.

Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for the same class of shares
in other funds, your new shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased. The holding period for the
CDSC will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You don't
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange.

<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. Delaware Investments does not charge a fee for this
service; however, your bank may assess one.

MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.

Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.

Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains, unless you tell us otherwise.

Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.

We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.

<PAGE>

Certain management considerations

Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Funds could be adversely affected if the computer systems
used by their 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." Each 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 Funds. The
portfolio managers and investment professionals of the Fund consider Year 2000
compliance (including, but not limited to, any or all of the following: impact
on business, cost of compliance plan review and contingency planning, and vendor
compliance) in the securities selection and investment process. However, there
can be no guarantees that, even with their due diligence efforts, they will be
able to predict the affect of Year 2000 on any company or the performance of its
securities.

Investments by fund of funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds. From time to time, the Fund may experience
large investments or redemptions due to allocations or rebalancings by
Foundation Funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management.
For example, the Fund may be required to sell securities or invest cash at times
when it would not otherwise do so. These transactions could also have tax
consequences if sales of securities result in gains, and could also increase
transaction costs or portfolio turnover. The manager will monitor transactions
by Foundation Funds and will attempt to minimize any adverse effects on both the
Fund and Foundation Funds as a result of these transactions.

22
<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 Class B Shares
Year Ended 11/30 Year Ended 11/30
Delaware Small Cap Value Fund 1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
- ---------------------------------------- --------- --------- --------- -------- --------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $29.790 $25.780 $22.760 $19.320 $29.460 $25.570 $22.590 $19.300

Income (loss) from investment
operations
Net investment income(1) 0.215 0.131 0.122 0.253 0.052 (0.042) (0.041) 0.141
Net realized and unrealized gain
(loss) on investments (2.285) 7.914 4.028 3.597 (2.272) 7.832 4.006 3.549
------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations (2.070) 8.045 4.150 3.850 (2.220) 7.790 3.965 3.690
------- ------- ------- ------- ------- ------- ------- -------

Less dividends and distributions
Dividends from net investment income (0.140) (0.135) (0.240) (0.160) none none (0.095) (0.150)
Distributions from net realized gain
on investments (2.100) (3.900) (0.890) (0.250) (2.100) (3.900) (0.890) (0.250)
------- ------- ------- ------- ------- ------- ------- -------
Total dividends and distributions (2.240) (4.035) (1.130) (0.410) (2.100) (3.900) (0.985) (0.400)
------- ------- ------- ------- ------- ------- ------- -------

Net asset value, end of period $25.480 $29.790 $25.780 $22.760 $25.140 $29.460 $25.570 $22.590
======= ======= ======= ======= ======= ======= ======= =======

Total return(2) (7.47%) 36.38% 19.08% 20.39% (8.08%) 35.36% 18.26% 19.55%

Ratios and supplemental data
Net assets, end of period
(000 omitted) $271,192 $268,266 $192,297 $177,011 $83,899 $39,733 $12,730 $5,788
Ratio of expenses to average net assets 1.39% 1.39% 1.45% 1.48% 2.09% 2.09% 2.15% 2.18%
Ratio of net investment income to
average net assets 0.81% 0.51% 0.51% 1.18% 0.11% (0.19%) (0.19%) 0.48%
Portfolio turnover 38% 53% 87% 65% 38% 53% 87% 65%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>
[RESTUBBED]

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Period
11/29/95(3)
Class C Shares through
Year Ended 11/30 11/30/95
Delaware Small Cap Value Fund 1999 1998 1997 1996
- ----------------------------------------- -------- -------- -------- ------- ------------
<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(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 net 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 to
average net assets 0.11% (0.19%) (0.19%) 4
Portfolio turnover 38% 53% 87% 4
- -----------------------------------------------------------------------------------------
</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.

(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.

23
<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 net assets

We determine this ratio by dividing net investment income by average net assets.

Portfolio turnover

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.

24
<PAGE>

Glossary

How to use this glossary

The glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.

Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.

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 Bond.

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.

NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.

<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,
Inc. (Moody's), Standard & Poor's Ratings Group (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.

Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stock 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.

27
<PAGE>

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.

<PAGE>

Delaware Small Cap Value Fund

Additional information about the Fund's investments is available in the Fund's
annual and semi-annual report 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.delawareinvestemtns.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
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Investment Company Act file number: 811-4997

Delaware Small Cap Value Fund Symbols

CUSIP NASDAQ
Class A 246097109 DEVLX
Class B 246097307 DEVBX
Class C 246097406 DEVCX

DELAWARE
INVESTMENTS
---------------------
Philadelphia * London

P-002 [--] PP 1/00

<PAGE>

DELAWARE
INVESTMENTS
-----------
Philadelphia * London

Delaware Small Cap Value Fund

Institutional Class

Prospectus
January 31, 2000

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.

2
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Table of Contents

Fund profile page
Delaware 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
Exchanges

Dividends, distributions and taxes

Certain management considerations page

Financial highlights page

3
<PAGE>

Profile: Delaware Small Cap Value Fund

What are the Fund's goals?
Delaware Small Cap Value Fund seeks capital appreciation. Although the Fund will
strive to meet its goals, there is no assurance that it will.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

4
<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 returns for the Fund's Institutional Class shares for the
past ten calendar years, as well as the average annual returns for one-, five-
and ten-year periods. Delaware 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 Delaware 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)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------ -----------
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -13.15% 50.97% 14.85% 19.18% -6.70% 23.84% 22.49% 33.48% -4.82% 0.00%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

During the ten years illustrated in this bar chart, the Institutional Class'
highest return was 0.00% for the quarter ended ________________ and its lowest
return was 0.00% for the quarter ended _____________.

Average annual return as of 12/31/99

Institutional Class Russell 2000 Index
(Inception 6/24/87)

1 year 0.00% 0.00%
5 years 0.00% 0.00%
10 years 0.00% 0.00%

<PAGE>

What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.

- -----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
- -----------------------------------------------------------------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or redemption
price, whichever is lower
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested none
dividends
- -----------------------------------------------------------------
Redemption fees none
- -----------------------------------------------------------------
Exchange Fees(1) none
- -----------------------------------------------------------------

Annual fund operating expenses are deducted from the Fund's assets.

- -----------------------------------------------------------------
Management fees 0.00%

- -----------------------------------------------------------------
Distribution and service (12b-1) fees none
- -----------------------------------------------------------------
Other expenses 0.00%

- -----------------------------------------------------------------
Total operating expenses 0.00%

- -----------------------------------------------------------------

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 $000
- ----------------------------
3 years $000
- ----------------------------
5 years $000
- ----------------------------
10 years $000
- ----------------------------

(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.

<PAGE>

How we manage the Fund

We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.

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.

<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
- -------------------------------------------------------------------------------------------------------
Delaware Small Cap Value Fund
- -------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent Under normal market conditions we will hold at least
shares of ownership in a corporation. 65% of the Fund's net assets in common stock of
Stockholders participate in the small companies that we believe are selling for less
corporation's profits and losses, than their true value. Generally, we invest 90% to
proportionate to the number of shares they 100% of net assets in these stocks.
own.
- -------------------------------------------------------------------------------------------------------
Real estate investment trusts: A company, The Fund is permitted to invest in REITs and would
usually traded publicly, that manages a typically do so when this sector or specific
portfolio of real estate to earn profits companies within the sector appeared to offer
for shareholders. opportunities for price appreciation.

- -------------------------------------------------------------------------------------------------------
Foreign securities and American Depositary Although the Fund may invest up to 25% of its net
Receipts: Securities of foreign entities assets in foreign securities or depositary receipts,
issued directly or, in the case of the manager has no present intention of doing so. We
American Depositary Receipts, through a may hold ADRs when we believe they offer greater
U.S. bank. ADRs are issued by a U.S. bank value and greater appreciation potential than U.S.
and represent the bank's holdings of a securities.
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
between a buyer and a seller of U.S. short-term investment for a Fund's cash position. In
government securities in which the seller order to enter into these repurchase agreements, the
agrees to buy the securities back within Fund must have collateral of at least 102% of the
a specified time at the same price the repurchase price. Repurchase agreements with
buyer paid for them, plus an amount maturities of over seven days will be considered
equal to an agreed upon interest rate. illiquid.
Repurchase agreements are often viewed
as equivalent to cash.
- -------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed We may invest in privately placed securities that
securities whose resale is restricted are eligible for resale only among certain
under securities law. institutional buyers without registration, including
Rule 144A Securities. Restricted securities that are
determined to be illiquid may not exceed the Fund's
10% limit on illiquid securities, which is described
below.

- -------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do We may invest up to 10% of net assets in illiquid
not have a ready market, and cannot be securities.
easily sold within seven days at
approximately the price that the Fund has
valued them.

- -------------------------------------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including Please see the Statement
of Additional Information for well as those listed in the table above. You can
find in the annual or semi-annual shareholder report.

8
<PAGE>

Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and institutional
investors for their use in security transactions.

<PAGE>

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- -------------------------------------------------------------------------------------------------------
Delaware Small Cap Value Fund

- -------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a We maintain a long-term investment approach and
majority of the securities in a certain focus on stocks we believe can appreciate over an
market -- like the stock or bond market extended time frame regardless of interim market
- -- will decline in value because of fluctuations. We do not try to predict overall stock
factors such as economic conditions, market movements and do not trade for short-term
future expectations or investor purposes.
confidence.

We may hold a substantial part of the Fund's assets
in cash or cash equivalents as a temporary,
defensive strategy.

- -------------------------------------------------------------------------------------------------------
Industry and security risk is the risk We limit the amount of the Fund's assets invested in
that the value of securities in a any one industry and in any individual security. We
particular industry or the value of an also follow a rigorous selection process before
individual stock or bond will decline choosing securities and continuously monitor them
because of changing expectations for while they remain in the portfolio.
the performance of that industry or for
the individual company issuing the
stock.

- -------------------------------------------------------------------------------------------------------
Small company risk is the risk that The Fund maintains a well-diversified portfolio,
prices of smaller companies may be selects stocks carefully and monitors them
more volatile than larger companies continuously. And, because we focus on stocks that
because of limited financial resources are already selling at relatively low prices, we
or dependence on narrow product believe we may experience less price volatility than
lines. small-cap funds that do not use a value-oriented
strategy.

- -------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that We analyze each company's financial situation and
securities will decrease in value if its cashflow to determine the company's ability to
interest rates rise. The risk is generally finance future expansion and operations. The
associated with bonds; however, potential affect that rising interest rates might
because smaller companies often have on a stock is taken into consideration before
borrow money to finance their the stock is purchased.
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
securities may be adversely affected Fund's portfolio in foreign securities. When we do
by political instability, changes in purchase foreign securities, they are often
currency exchange rates, foreign denominated in U.S. dollars. To the extent we invest
economic conditions or inadequate in foreign securities, we invest primarily in
regulatory and accounting standards. 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 within
seven days at approximately the price
that the Fund has valued them.

- -------------------------------------------------------------------------------------------------------
</TABLE>

10
<PAGE>

Who manages the Fund

Portfolio manager

<PAGE>

Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.

<TABLE>
<CAPTION>
Board of Trustees

<S> <C> <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

Shareholders

Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.

Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.

<PAGE>

About your account

Investing in the Fund
Institutional Class shares are available for purchase only by the
following:

o retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans;

o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;

o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate of
the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts;

o a bank, trust company and similar financial institution investing for its own
account or for the account of its trust customers for whom such financial
institution is exercising investment discretion in purchasing shares of the
Class, except where the investment is part of a program that requires payment
to the financial institution of a Rule 12b-1 Plan fee; and

o registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if the
adviser is not affiliated or associated with a broker or dealer and derives
compensation for its services exclusively from its clients for such advisory
services.

13
<PAGE>

How to buy shares

[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]

[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.

<PAGE>

About your account (continued)

How to buy shares (continued)

<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]

[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.

<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.

<PAGE>

Certain management considerations

Investments by fund of funds
Delaware 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 the Fund and Foundation Funds as a result of these
transactions.

<PAGE>

Financial highlights

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Institutional Class
Year Ended 11/30
-----------------------------------------------------------
Delaware Small Cap Value Fund 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 29.950 $25.910 $22.860 $19.400

Income (loss)from investment operations
Net investment income(1) 0.160 0.209 0.193 0.297
Net realized and net unrealized gain (loss) on investments (2.150) 7.936 4.047 3.628
-------- ------- ------- -------
Total from investment operations (1.990) 8.145 4.240 3.925
-------- ------- ------- -------

Less dividends and distributions
Dividends from net investment income (0.220) (0.205) (0.300) (0.215)
Distributions from realized gain on investments (2.100) (3.900) (0.890) (0.250)
-------- ------- ------- -------
Total dividends and distributions (2.320) (4.105) (1.190) (0.465)
-------- ------- ------- -------

Net asset value, end of period $ 25.640 $29.950 $25.910 $22.860
======== ======= ======= =======

Total return(2) (7.16%) 36.73% 19.45% 20.76%

Ratios and supplemental data:
Net assets, end of period (000 omitted) $113,930 $14,878 $16,373 $7,294
Ratio of expenses to average net assets 1.09% 1.09% 1.15% 1.18%
Ratio of net investment income to average net assets 1.11% 0.81% 0.81% 1.48%
Portfolio turnover 38% 53% 87% 65%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)Per share 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.

<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.

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
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.

<PAGE>

Glossary

How to use this glossary

Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.

Capital
The amount of money you invest.

Capital appreciation
An increase in the value of an investment.

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.

Corporate bond
A debt security issued by a corporation. See Bond.

21
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