<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 33-11419
File No. 811-4997
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 __X__
Pre-Effective Amendment No. _____
Post-Effective Amendment No. 26 __X__
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 __X__
Amendment No. 26
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)
__X__ on January 31, 2000 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 26 to Registration File No. 33-11419 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.
1
<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 managers
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
2
<PAGE>
Profile: Delaware Small Cap Value Fund
What is the Fund's goal?
Delaware Small Cap Value Fund seeks capital appreciation. Although the Fund will
strive to meet its goal, 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.
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.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of small
companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
3
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show 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 or lifetime 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
<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% 14.78% 18.82% -6.98% 23.51% 22.12% 33.03% -5.10% -5.66%
- -------------- ----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------ -----------
</TABLE>
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 18.18% for the quarter ended September 30, 1991 and its lowest
quarterly return was - 16.40% for the quarter ended September 30, 1990.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns shown below do include the sales charge.
<TABLE>
<CAPTION>
Average annual returns for the period ending 12/31/99
- ------------------- ---------------------- --------------------- --------------------- --------------------------
<S> <C> <C> <C> <C>
CLASS A B (if redeemed)* C (if redeemed)*
(Inception (Inception (Inception Russell 2000
6/24/87) 9/6/94) 11/29/95) Index
- -----------------------------------------------------------------------------------------------------------------
1 year -11.07% -10.95% -7.25% 21.26%
====== ======= ======= ====== ======
- ---------------------- ---------------------- --------------------- --------------------- -----------------------
5 years 11.11% 11.39% N/A 16.69%
======= ====== ====== === ======
- ---------------------- ---------------------- --------------------- --------------------- -----------------------
10 years or 10.91% 9.71% 9.76% 13.40%
====== ===== ===== ======
Lifetime **
- ---------------------- ---------------------- --------------------- --------------------- -----------------------
</TABLE>
The Fund's returns are compared to the performance of the Russell 2000 Index.
You should remember that unlike the Fund, the indexes are unmanaged and don'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 - 6.32%, 11.65%
and 9.83%, respectively, for the one-year, five-year and lifetime periods.
Returns for Class C would be - 6.33% and 9.76%, 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 Index returns are for 10 years. Russell 2000 Index returns
for Class B and Class C lifetime periods were 15.43% and 14.36%, respectively.
Maximum sales charges are included in the Fund returns shown in the table above.
4
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
------------------------------------------------------ ----------- ---------- ----------
CLASS A B C
------------------------------------------------------ ----------- ---------- ----------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on purchases as 5.75% none none
a percentage of offering price
------------------------------------------------------ ----------- ---------- ----------
Maximum contingent deferred sales charge (load) as a none(1) 5%(2) 1%(3)
percentage of original purchase price or redemption
price, whichever is lower
------------------------------------------------------ ----------- ---------- ----------
Maximum sales charge (load) imposed on reinvested none none none
dividends
------------------------------------------------------ ----------- ---------- ----------
Redemption fees none none none
------------------------------------------------------ ----------- ---------- ----------
Annual fund operating expenses are deducted from the Fund's assets.
------------------------------------------------------ ----------- ---------- ----------
Management fees 0.75% 0.75% 0.75%
====== ====== =====
------------------------------------------------------ ----------- ---------- ----------
Distribution and service (12b-1) fees 0.30% 1.00% 1.00%
------------------------------------------------------ ----------- ---------- ----------
Other expenses 0.55% 0.55% 0.55%
===== ===== ====
------------------------------------------------------ ----------- ---------- ----------
Total operating expenses 1.60% 2.30% 2.30%
===== ===== ====
------------------------------------------------------ ----------- ---------- ----------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(4)This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
-------------- ------------- -------------- -------------------- ------------ ---------------------
CLASS(5) A B B C C
(if redeemed) (if redeemed)
--------------- ------------ -------------- -------------------- ------------ ---------------------
<S> <C> <C> <C> <C> <C>
1 year $728 $233 $733 $233 $333
==== ==== ==== ==== ===
--------------- ------------ -------------- -------------------- ------------ ---------------------
3 years $1,051 $718 $1,018 $718 $718
======= ====== ==== ====== ==== ====
--------------- ------------ -------------- -------------------- ------------ ---------------------
5 years $1,396 $1,230 $1,430 $1,230 $1,230
======= ====== ====== ====== ====== ======
--------------- ------------ -------------- -------------------- ------------ ---------------------
R>
10 years $2,366 $2,461 $2,461 $2,636 $2,636
======== ====== ====== ====== ====== ======
--------------- ------------ -------------- -------------------- ------------ ---------------------
</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
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the prospectus if they are
available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
(5) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
5
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we believe are the
best investments for the Fund. Following is a description of how the portfolio
managers pursue 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 appreciate accurately to reflect the companies' underlying value or
future earning potential.
Under normal conditions, at least 65% of the Fund's net assets will be invested
in the common stock of small cap companies, those having a market capitalization
generally less than $1.5 billion. Our focus will be on value stocks, defined as
stocks whose price is historically low based on a given financial measure such
as profit, 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.
The Fund's investment objective is non-fundamental. This means that the Board of
Trustees may change the objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders before the change in the
objective became effective.
6
<PAGE>
The securities we typically invest in
Stocks 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, believe are selling for less than their true value. Generally, we
proportionate to the number of shares they own. invest 90% to 100% of net assets in these stocks.
- ------------------------------------------------------ -----------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, Typically, we use repurchase agreements as a short-term investment
such as the Fund, and seller of securities in for a Fund's cash position. In order to enter into these repurchase
which the seller agrees to buy the securities back agreements, the Fund must have collateral of at least 102% of the
within a specified time at the same price the buyer repurchase price. Repurchase agreements with maturities of over seven
paid for them, plus an amount equal to an agreed days will be considered illiquid. The Fund will only enter into
upon interest rate. Repurchase agreements are often repurchase agreements in which the collateral is composed of U.S.
viewed as equivalent to cash. government securities.
- ------------------------------------------------------ -----------------------------------------------------------------------
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 convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions on these securities as well as those
listed in the table above. You can find additional information about the
investments in the Fund's portfolio in the annual or semi-annual shareholder
report.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and institutional
investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. The Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover will be less than 100%.
A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year.
7
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Fund. Please see the Statement of Additional
Information for further discussion of these risks and other risks not discussed
here.
<TABLE>
<CAPTION>
- ---------------------------------------------- -----------------------------------------------------------------------------------
Risks How we strive to manage them
- ---------------------------------------------- -----------------------------------------------------------------------------------
Delaware Small Cap Value Fund
- ---------------------------------------------- -----------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we believe can
of the securities in a certain market -- like appreciate over an extended time frame regardless of interim market
the stock or bond market -- will decline in fluctuations. We do not try to predict overall stock market movements and
value because of factors such as economic generally do not trade for short-term purposes.
conditions, future expectations or investor
confidence. We may hold a substantial part of the Fund's assets in cash or cash equivalents
as a temporary, defensive strategy.
- ---------------------------------------------- -----------------------------------------------------------------------------------
Industry and security risk is the risk that We limit the amount of the Fund's assets invested in any one industry and in any
the value of securities in a particular individual security. We also follow a rigorous selection process before choosing
industry or the value of an individual stock securities and continuously monitor them while they remain in the portfolio.
or bond will decline because of changing
expectations for the performance of that
industry or for the individual company issuing
the stock.
- ---------------------------------------------- -----------------------------------------------------------------------------------
Small company risk is the risk that prices of The Fund maintains a well-diversified portfolio, selects stocks carefully and
smaller companies may be more volatile than monitors them continuously. And, because we focus on stocks that are already
larger companies because of limited financial selling at relatively low prices, we believe we may experience less price
resources or dependence on narrow product volatility than small cap funds that do not use a value-oriented strategy.
lines.
- ---------------------------------------------- -----------------------------------------------------------------------------------
Interest rate risk is the risk that securities We analyze each company's financial situation and its cashflow to determine the
will decrease in value if interest rates rise. company's ability to finance future expansion and operations. The potential
The risk is generally associated with bonds; affect that rising interest rates might have on a stock is taken into
however, because smaller companies often consideration before the stock is purchased.
borrow money to finance their operations, they
may be adversely affected by rising interest
rates.
- ---------------------------------------------- -----------------------------------------------------------------------------------
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>
8
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager was paid 0.75% as a
percentage of average daily net assets for the last fiscal year.
Portfolio managers
Christopher S. Beck, Vice President/Senior Portfolio Manager, has had primary
responsibility for making day-to-day investment decisions for the Fund since May
1997. 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 Andrea Giles.
Andrea Giles, 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.
9
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
Board of Trustees
<TABLE>
<CAPTION>
<S> <C> <C>
Investment manager The Fund Custodian
The Chase Manhattan Bank
Delaware Management Company 4 Chase Metrotech Center
One Commerce Square Brooklyn, NY 11245
Philadelphia, PA 19103
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
Financial advisers
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
10
<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% 6.10% 5.00%
- ------------------------------------------------------------------------------------------------------------------------
$50,000 but 4.75% 4.99% 4.00%
under $100,000
- ------------------------------------------------------------------------------------------------------------------------
$100,000 but 3.75% 3.90% 3.00%
under $250,000
- ------------------------------------------------------------------------------------------------------------------------
$250,000 but 2.50% 2.56% 2.00%
under $500,000
- ------------------------------------------------------------------------------------------------------------------------
$500,000 but 2.00% 2.04% 1.60%
under $1 million
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you will 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 unless a specific waiver of the charge
applies.
<TABLE>
<CAPTION>
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount of purchase Sales charge as % Sales charge as % of amount Dealer's commission as %
of offering price invested of offering price
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
<S> <C> <C> <C>
$1 million up to $5 none none 1.00%
million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Next $20 million none none 0.50%
Up to $25 million
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
Amount over $25 million none none 0.25%
- -------------------------- ----------------------- ----------------------------------- ---------------------------------
</TABLE>
11
<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.
12
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- --------------------------- ---------------------------------------------- ---------------------------------------------------------
Program How it works Share class
A B C
- --------------------------- ---------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C>
Letter of Intent Through a Letter of Intent you agree to X Although the Letter of Intent and
invest a certain amount in Delaware Rights of Accumulation do not apply
Investments Funds (except money market to the purchase of Class B and C
funds with no sales charge) over a shares, you can combine your
13-month period to qualify for reduced purchase of Class A shares with your
front-end sales charges. purchase of Class 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
Profit Sharing, purchases of all members of the group. shares for group purchases by
Pension, 401(k), Members of these groups may also qualify retirement 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>
13
<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.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service, or through our web site, www.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.
14
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities, we use methods approved by the Board of Trustees that are designed
to price securities at their fair market value.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
15
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
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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, a bank wire fee may be deducted from
your proceeds. Bank information must be on file before you request a wire
redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawareinvestments.com. For more information about
how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
16
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares, not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, 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.
17
<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.
18
<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.
19
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund has taken steps to obtain satisfactory assurances that
its major service providers have taken steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. Consistent with the investment
process utilized for the selection of securities for the Fund, the portfolio
managers focus solely on the quantitative characteristics of the equity
securities in which the Fund invests. This process assumes that the effect of
the Year 2000 problem on each company is already reflected in those
characteristics. Accordingly, except for surveying the widely reported
information regarding the companies in which the Fund invests, no additional
Year 2000 due diligence is performed. However, there can be no guarantees that,
even with these efforts, they will be able to predict the effect of Year 2000 on
any company or the performance of its securities.
Investments by fund of funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds. From time to time, the Fund may experience
large investments or redemptions due to allocations or rebalancings by
Foundation Funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management.
For example, the Fund may be required to sell securities or invest cash at times
when it would not otherwise do so. These transactions could also have tax
consequences if sales of securities result in gains, and could also increase
transaction costs or portfolio turnover. The manager will monitor transactions
by Foundation Funds and will attempt to minimize any adverse effects on both the
Fund and Foundation Funds as a result of these transactions.
20
<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> <C> <C>
Net asset value, beginning of period $25.480 $29.790 $25.780 $22.760 $19.320 $25.140 $29.460 $25.570 $22.590 $19.300
Income (loss) from investment
operations:
Net investment income (loss)(2) 0.098 0.215 0.131 0.122 0.253 (0.081) 0.052 (0.042) (0.041) 0.141
Net realized and unrealized gain (loss)
on investments and foreign currencies (0.735) (2.285) 7.914 4.028 3.597 (0.719) (2.272) 7.832 4.006 3.549
------- ------- ----- ----- ----- ------- ------- ----- ----- -----
Total from investment operations (0.637) (2.070) 8.045 4.150 3.850 (0.800) (2.220) 7.790 3.965 3.690
------- ------- ----- ----- ----- ------- ------- ----- ----- -----
Less dividends and distributions:
Dividends from net investment income (0.163) (0.140) (0.135) (0.240) (0.160) none none none (0.095) (0.150)
Distributions from net realized gain
on investments none (2.100) (3.900) (0.890) (0.250) none (2.100) (3.900) (0.890) (0.250)
------- ------- ------- ------- ------- ---- ------- ------- ------- -------
Total dividends and distributions (0.163) (2.240) (4.035) (1.130) (0.410) none (2.100) (3.900) (0.985) (0.400)
------- ------- ------- ------- ------- ---- ------- ------- ------- -------
Net asset value, end of period $24.680 $25.480 $29.790 $25.780 $22.760 $24.340 $25.140 $29.460 $25.570 $22.590
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total return(3) (2.51%) (7.47%) 36.38% 19.08% 20.39% (3.18%) (8.08%) 35.36% 18.26% 19.55%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) $209,886 $271,192 $268,266 $192,297 $177,011 $76,894 $83,899 $39,733 $12,730 $5,788
Ratio of expenses to average net assets 1.60% 1.39% 1.39% 1.45% 1.48% 2.30% 2.09% 2.09% 2.15% 2.18%
Ratio of net investment income to
average net assets 0.38% 0.81% 0.51% 0.51% 1.18% (0.32%) 0.11% (0.19%) (0.19%) 0.48%
Portfolio turnover 37% 38% 53% 87% 65% 37% 38% 53% 87% 65%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Period
11/29/95(1)
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> <C>
Net asset value, beginning of period $25.120 $29.440 $25.550 $22.760 $22.510
Income (loss) from investment
operations:
Net investment income (loss)(2) (0.081) 0.036 (0.033) (0.043) none
Net realized and unrealized gain (loss)
on investments and foreign currencies (0.719) (2.256) 7.823 4.003 0.250
------- ------- ----- ----- -----
Total from investment operations (0.800) (2.220) 7.790 3.960 0.250
------- ------- ----- ----- -----
Less dividends and distributions:
Dividends from net investment income none none none (0.280) none
Distributions from net realized gain
on investments none (2.100) (3.900) (0.890) none
---- ------- ------- ------- ----
Total dividends and distributions none (2.100) (3.900) (1.170) none
---- ------- ------- ------- ----
Net asset value, end of period $24.320 $25.120 $29.440 $25.550 $22.760
======= ======= ======= ======= =======
Total return(3) (3.19%) (8.08%) 35.40% 18.23% 4
Ratios and supplemental data:
Net assets, end of period
(000 omitted) $25,818 $31,041 $12,547 $3,360 $5
Ratio of expenses to average net assets 2.30% 2.09% 2.09% 2.15% 4
Ratio of net investment income to
average net assets (0.32%) 0.11% (0.19%) (0.19%) 4
Portfolio turnover 37% 38% 53% 87% 4
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Date of initial public offering.
(2) Per share information for the years ended November 30, 1996 , 1997 and 1999
was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(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.
22
<PAGE>
How to read the Financial highlights
Net investment income
Net investment income includes dividend and interest income earned from a fund's
securities; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments and foreign currencies
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 a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment 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.
23
<PAGE>
Glossary
[Runs along the bottom of the pages]
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.
24
<PAGE>
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See 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.
25
<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.
26
<PAGE>
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
27
<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.delawareinvestments.com
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4997
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
28
<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.
<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 managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Exchanges
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
2
<PAGE>
Profile: Delaware Small Cap Value Fund
- --------------------------------------
What is the Fund's goal?
Delaware Small Cap Value Fund seeks capital appreciation. Although the Fund will
strive to meet its goal, 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 (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of small
companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
3
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Institutional Class shares have
varied over the past ten calendar years, as well as the average annual returns
for one-, five- and ten-year periods. The 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 the Fund's 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% -5.36%
- -------------- ---------- ------------ ----------- ----------- ------------ ----------- ------------ ----------- ------------
</TABLE>
During the ten years illustrated in this bar chart, the Institutional Class'
highest return was 18.18% for the quarter ended September 30, 1991 and its
lowest return was -16.40% for the quarter ended September 30, 1990.
Average annual returns for the period ending 12/31/99
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Institutional Class Russell 2000 Index
- ------------------------------------------------------------------
<S> <C> <C>
1 year -5.36% 21.26%
- ---------------------------------------- -------------------------
5 years 12.77% 16.69%
- ------------------------------------------------------------------
10 years 11.81% 13.40%
- ------------------------------------------------------------------
</TABLE>
The Fund's returns are compared to the performance of the Russell 2000 Index.
You should remember that unlike the Fund, the indexes are unmanaged and don't
include the costs of operating a mutual fund, such as the costs of buying,
selling and holding the securities.
4
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
------------------------------------------------------ ----------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
------------------------------------------------------ ----------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or
redemption price, whichever is lower
------------------------------------------------------ ----------
Maximum sales charge (load) imposed on reinvested none
dividends
------------------------------------------------------ ----------
Redemption fees none
------------------------------------------------------ ----------
Exchange fees(1) none
------------------------------------------------------ ----------
Annual fund operating expenses are deducted from the Fund's assets.
------------------------------------------------------ -----------
Management fees 0.75%
-----
------------------------------------------------------ -----------
Distribution and service (12b-1) fees none
------------------------------------------------------ -----------
Other expenses 0.55%
-----
------------------------------------------------------ -----------
Total operating expenses 1.30%
-----
------------------------------------------------------ -----------
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.
<PAGE>
---------------------------
1 year $132
----
---------------------------
3 years $412
----
---------------------------
5 years $713
----
---------------------------
10 years $1,568
------
---------------------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
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
managers pursue 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.
5
<PAGE>
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 appreciate accurately to reflect the companies' underlying value or
future earning potential.
Under normal conditions, at least 65% of the Fund's net assets will be invested
in the common stock of small cap companies, those having a market capitalization
generally less than $1.5 billion. Our focus will be on value stocks, defined as
stocks whose price is historically low based on a given financial measure such
as profit, 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.
The Fund's investment objective is non-fundamental. This means that the Board of
Trustees may change the objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders before the change in the
objective became effective.
6
<PAGE>
The securities we typically invest in
Stocks 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 Fund's
ownership in a corporation. Stockholders participate net assets in common stock of small companies that we believe are
in the corporation's profits and losses, proportionate selling for less than their true value. Generally, we invest 90% to
to the number of shares they own. 100% of net assets in these stocks.
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, Typically, we use repurchase agreements as a short-term investment for
such as the Fund, and seller of securities in which a Fund's cash position. In order to enter into these repurchase
the seller agrees to buy the securities back within agreements, the Fund must have collateral of at least 102% of the
a specified time at the same price the buyer paid for repurchase price. Repurchse agreements with maturities of over seven
them, plus an amount equal to an agreed upon interest days will be considered illiquid. The Fund will only enter into
rate. Repurchase agreements are often viewed as repuchase agreements in which the collaerial is composed of U.S.
equivalent to cash. government securities.
- ------------------------------------------------------------------------------------------------------------------------------------
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 convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions on these securities as well as those
listed in the table above. You can find additional information about the
investments in the Fund's portfolio in the annual or semi-annual shareholder
report.
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and institutional
investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. The Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
Portfolio turnover
We anticipate that the Fund's annual portfolio turnover will be less than 100%.
A turnover rate of 100% would occur if a Fund sold and replaced securities
valued at 100% of its net assets within one year.
7
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in the Fund typically provides the
best results when held for a number of years. The following are the chief risks
you assume when investing in the Fund. Please see the Statement of Additional
Information for further discussion of these risks and other risks not
discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on
securities in a certain market -- like the stock or bond stocks we believe can appreciate over an extended time frame
market -- will decline in value because of factors such as regardless of interim market fluctuations. We do not try to
economic conditions, future expectations or investor predict overall stock market movements and generally do not
confidence. trade for short-term purposes.
We may hold a substantial part of the Fund's assets in cash
or cash equivalents as a temporary, defensive strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the value of We limit the amount of the Fund's assets invested in any one
securities in a particular industry or the value of an industry and in any individual security. We also follow a
individual stock or bond will decline because of changing rigorous selection process before choosing securities and
expectations for the performance of that industry or for the continuously monitor them while they remain in the
individual company issuing the stock. portfolio.
- ------------------------------------------------------------------------------------------------------------------------------------
Small company risk is the risk that prices of smaller The Fund maintains a well-diversified portfolio, selects
companies may be more volatile than larger companies because stocks carefully and monitors them continuously. And,
of limited financial resources or dependence on narrow because we focus on stocks that are already selling at
product lines. relatively low prices, we believe we may experience less
price volatility than small cap funds that do not use a
value-oriented strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities will decrease We analyze each company's financial situation and its
in value if interest rates rise. The risk is generally cashflow to determine the company's ability to finance
associated with bonds; however, because smaller companies future expansion and operations. The potential affect that
often borrow money to finance their operations, they may be rising interest rates might have on a stock is taken into
adversely affected by rising interest rates. consideration before the stock is purchased.
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price
that the Fund has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager was paid 0.75% as a
percentage of average daily net assets for the last fiscal year.
Portfolio managers
Christopher S. Beck, Vice President/Senior Portfolio Manager, has had primary
responsibility for making day-to-day investment decisions for the Fund since May
1997. 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 Andrea Giles.
Andrea Giles, 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.
9
<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>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
</TABLE>
Shareholders
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
10
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the following:
o retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans;
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts;
o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee; 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.
11
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
12
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities , we use methods approved by the Board of Trustees that are designed
to price securities at their fair market value.
13
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also
fax your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
14
<PAGE>
About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from 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.
15
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund has taken steps to obtain satisfactory assurances that
its major service providers have taken steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. Consistent with the investment
process utilized for the selection of securities for the Fund, the portfolio
managers focus solely on the quantitative characteristics of the equity
securities in which the Fund invests. This process assumes that the effect of
the Year 2000 problem on each company is already reflected in those
characteristics. Accordingly, except for surveying the widely reported
information regarding the companies in which the Fund invests, no additional
Year 2000 due diligence is performed. However, there can be no guarantees that,
even with these efforts, they will be able to predict the effect of Year 2000 on
any company or the performance of its securities.
Investments by fund of funds
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.
16
<PAGE>
Financial highlights
The Financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------- ------------------------------------------------------------
Institutional Class
Year Ended 11/30
------------------------------------------------------------
Delaware Small Cap Value Fund 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $25.640 $29.950 $25.910 $22.860 $19.400
Income (loss)from investment operations:
Net investment income(1) 0.174 0.160 0.209 0.193 0.297
Net realized and net unrealized gain (loss) on investments and
foreign currencies (0.741) (2.150) 7.936 4.047 3.628
------- ------- ------ ------ ------
Total from investment operations (0.567) (1.990) 8.145 4.240 3.925
------- ------- ------ ------ ------
Less dividends and distributions:
Dividends from net investment income (0.243) (0.220) (0.205) (0.300) (0.215)
Distributions from realized gain on investments none (2.100) (3.900) (0.890) (0.250)
---- ------- ------ ------ ------
Total dividends and distributions (0.243) (2.320) (4.105) (1.190) (0.465)
------- ------- ------ ------ ------
Net asset value, end of period $24.830 $25.640 $29.950 $25.910 $22.860
======= ======= ======= ======= =======
Total return(2) (2.23%) (7.16%) 36.73% 19.45% 20.76%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $10,936 $113,930 $14,878 $16,373 $7,294
Ratio of expenses to average net assets 1.30% 1.09% 1.09% 1.15% 1.18%
Ratio of net investment income to average net assets 0.68% 1.11% 0.81% 0.81% 1.48%
Portfolio turnover 37% 38% 53% 87% 65%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Per share for the years ended November 30, 1996, 1997 and 1999 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.
17
<PAGE>
How to read the Financial highlights
Net investment income
Net investment income includes dividend and interest income earned from a fund's
securities; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments and foreign currencies
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 a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment 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.
18
<PAGE>
Glossary
[Runs along the bottom of the pages]
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.
19
<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.
20
<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.
21
<PAGE>
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
22
<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 this Fund, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
Investment Company Act file number: 811-4997
Delaware Small Cap Value Fund Symbols
CUSIP NASDAQ
Institutional Class 246097208 DEVIX
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 1/00
<PAGE>
DELAWARE(SM)
INVESTMENTS
-----------
Philadelphia * London
Delaware Small Cap Contrarian 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 Contrarian Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Exchanges
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
Glossary page
2
<PAGE>
Profile: Delaware Small Cap Contrarian Fund
What is the Fund's goal?
Delaware Small Cap Contrarian Fund seeks long-term capital appreciation.
Although the Fund will strive to meet its goal, 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. The companies that the Fund
invests in may involve greater risk due to their size, narrow product lines and
limited financial resources. In addition, the Fund may have large investments in
particular industries at any given time (although never more than 25% of its
assets at the time of purchase), a strategy that may increase volatility. For a
more complete discussion of risk, please turn to page __.
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.
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.
3
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
CLASS A B C
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases as a percentage of offering price 5.75% none none
- ------------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 5%(2) 1%(3)
- ------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
reinvested dividends none none none
- ------------------------------------------------------------------------------------------------
Redemption fees none none none
- ------------------------------------------------------------------------------------------------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.75% 0.75% 0.75%
- ------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees(4) 0.30% 1.00% 1.00%
- ------------------------------------------------------------------------------------------------
Other expenses 1.09% 1.09% 1.09%
- ------------------------------------------------------------------------------------------------
Total operating expenses(5) 2.14% 2.84% 2.84%
- ------------------------------------------------------------------------------------------------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(6) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
CLASS(7) A B B C C
(if redeemed) (if redeemed)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $780 $287 $787 $287 $387
- ------------------------------------------------------------------------------------------------
3 years $1,206 $880 $1,180 $880 $880
- ------------------------------------------------------------------------------------------------
5 years $1,658 $1,499 $1,699 $1,499 $1,499
- ------------------------------------------------------------------------------------------------
10 years $2,905 $3,000 $3,000 $3,166 $3,166
- ------------------------------------------------------------------------------------------------
</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
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the prospectus if they are
available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Class A shares are subject to a 12b-1 fee of 0.30% of average daily net
assets and Class B and C shares are each subject to a 12b-1 fee of 1.00% of
average daily net assets. The distributor has agreed to waive these 12b-1
fees through May 31, 2000.
(5) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through May 31, 2000 in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees, extraordinary expenses and 12b-1 fees) from exceeding 0.75% of
average daily net assets. The fees and expenses shown in the table above do
not reflect the voluntary expense caps by the manager and by the
distributor noted in footnote 4. The following table shows operating
expenses which are based on the most recently completed fiscal year and
reflect the manager's and distributor's current fee waivers and payments. 5
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Fund operating expenses including voluntary expense caps in effect until May 31, 2000
CLASS A B C
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------
Other expenses 0.75% 0.75% 0.75%
- -----------------------------------------------------------------------------------------------------
Total operating expenses 0.75% 0.75% 0.75%
- -----------------------------------------------------------------------------------------------------
</TABLE>
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense caps described in
footnotes 4 and 5.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares..
6
<PAGE>
How we manage the Fund
Our investment strategies
We 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
managers pursue 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 with a given financial
measure such as profits, book value or cashflow.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will use a selection model which we developed ourselves, to help identify
companies that meet our investment guidelines. Our initial search will focus on
several key characteristics including price-to-sales ratio, price-to-cash flow
ratio and price-to-earnings ratio.
We will then carefully evaluate the financial strength of the company, the
nature of its management, any developments affecting the company or its
industry, anticipated new products or services, possible management changes,
projected takeovers or technological breakthroughs. Using this extensive
analysis, our goal is to pinpoint the companies within the universe of
undervalued stocks, whose true value is likely to be recognized and rewarded
with a rising stock price in the future.
Because there is added risk when investing in smaller companies, which may still
be in their early developmental stages, we maintain a well-diversified
portfolio, typically holding a mix of different stocks, representing a wide
array of industries.
The Fund's investment objective is non-fundamental. This means that the Board of
Trustees may change the objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders before the change in the
objective became effective.
7
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
How we use them
Securities Delaware Small Cap Contrarian Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of ownership in Under normal market conditions we will hold at least
a corporation. Stockholders participate in the corporation's 65% of the Fund's net assets in common stock of small
profits and losses, proportionate to the number of shares they companies that we believe are selling for less than their
own. true value. Generally, we invest 90% to 100% of net
assets in these stocks.
- ------------------------------------------------------------------------------------------------------------------------------------
American Depositary Receipts (ADRs): Securities of foreign The Fund may hold an unlimited amount of ADRs that are
entities issued through a U.S. bank representing the bank's actively traded in the U.S. when we believe they offer
holdings of a stated number of shares of a foreign corporation. greater value and greater appreciation potential than
An ADR entitles the holder to all dividends and capital gains U.S. securities.
earned by the underlying foreign shares. ADRs are bought and
sold the same as U.S. securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such as Typically, we use repurchase agreements as a short-term
the Fund, and a seller of securities in which the seller investment for a Fund's cash position. In order to enter
agrees to buy the securities back within a specified time at the into these repurchase agreements, the Fund must have
same price the buyer paid for them, plus an amount equal to an collateral of at least 102% of the repurchase price.
agreed upon interest rate. Repurchase agreements are often Repurchase agreements with maturities of over seven days
viewed as equivalent to cash. will be considered illiquid. The Fund will only enter
into repurchase agreements in which the collateral is
composed of U.S. government securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities whose resale We may invest in privately placed securities that are
is restricted under securities law. eligible for 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 15% limit on illiquid securities
which is described below.
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready market, We may invest up to 15% of net assets in illiquid
and cannot be easily sold within seven days at approximately the securities.
price that the Fund has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
Options represent a right to buy or sell a security at an agreed The Fund may write call options and purchase put options
upon price at a future date. The purchaser of an option may or on a covered basis only, and will not engage in option
may not choose to go through with the transaction. writing strategies for speculative purposes.
Certain options may be considered to be derivative securities.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
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.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
9
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment in it to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in Delaware Small Cap Contrarian Fund.
Please see the Statement of Additional Information for further discussion of
these risks and other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap Contrarian Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we believe can
of the securities in a certain market -- like appreciate over an extended time frame regardless of interim market fluctuations.
the stock or bond market -- will decline in We do not try to predict overall stock market movements and generally do not
value because of factors such as economic trade for short-term purposes.
conditions, future expectations or investor
confidence. We may hold a substantial part of the Fund's assets in cash or cash equivalents
as a temporary, defensive strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the We follow a rigorous selection process before choosing securities and
value of securities in a particular industry or continuously monitor them while they remain in the portfolio.
the value of an individual stock or bond will
decline because of changing expectations for The Fund is a diversified portfolio with investments in companies representing
the performance of that industry or for the many different industries. We do not make additional investments in a stock if
individual company issuing the stock. that stock represents 5% of net assets, nor in an industry if that industry
represents 25% of net assets. However, it is likely that our holdings will be
more concentrated in certain industries if the industry as a whole has strong
value characteristics. This could increase volatility.
- ------------------------------------------------------------------------------------------------------------------------------------
Small company risk is the risk that prices of The Fund maintains a well-diversified portfolio, selects stocks carefully and
smaller companies may be more volatile than monitors them continuously. And, because we focus on stocks that are already
larger companies because of limited financial selling at relatively low prices, we believe we may experience less price
resources or dependence on narrow product lines. volatility than small cap funds that do not use a value-oriented strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities We analyze each company's financial situation and its cashflow to determine the
will decrease in value if interest rates rise. company's ability to finance future expansion and operations. The potential
The risk is generally associated with bonds; affect that rising interest rates might have on a stock is taken into
however, because smaller companies often borrow consideration before the stock is purchased.
money to finance their operations, they may be
adversely affected by rising interest rates.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest only a small portion of the Fund's portfolio in foreign
securities may be adversely affected by securities. When we do purchase foreign securities, they are often denominated
political instability, changes in currency in U.S. dollars. To the extent we invest in foreign securities, we invest
exchange rates, foreign economic conditions or primarily in issuers of developed countries, which are less likely to encounter
inadequate regulatory and accounting standards. 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
values them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager will be paid the
following fee as a percentage of average daily net assets:
0.75% on the first $500 million;
0.70% on the next $500 million;
0.65% on the next $1,500 million; and
0.60% on assets in excess of $2,500 million.
Portfolio managers
Andrea Giles, Vice President/Portfolio Manager, has had primary responsibility
for making day-to-day investment decisions for the Fund since January 2000. She
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. When
making investment decisions for the Fund, Ms. Giles consults with Christopher S.
Beck.
Christopher S. Beck, Vice President/Senior Portfolio Manager, 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.
11
<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>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
12
<PAGE>
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
CLASS A
o Class A shares have an up-front sales charge of up to 5.75% that you pay when
you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class A shares are also subject to an annual 12b-1
fee no greater than 0.30% of average daily net assets, which is lower than the
12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales charge
except in the limited circumstances described in the table below.
Class A Sales Charges
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge Sales charge as % of amount Dealer's commission as %
as % invested of offering price
of offering price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
- ------------------------------------------------------------------------------------------------------------------------------------
$50,000 but under $100,000 4.75% 4.99% 4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
$100,000 but under $250,000 3.75% 3.90% 3.00%
- ------------------------------------------------------------------------------------------------------------------------------------
$250,000 but under $500,000 2.50% 2.56% 2.00%
- ------------------------------------------------------------------------------------------------------------------------------------
$500,000 but under $1 million 2.00% 2.04% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
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 will 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 unless a specific waiver of
the charge applies.
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge as % Sales charge as % Dealer's commission as %
of offering price of amount invested of offering price
- ------------------------------------------------------------------------------------------------------------------------------------
$1,000,000 up to $5 million none none 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Next $20 million
Up to $25 million none none 0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Amount over $25 million none none 0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
CLASS B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge if you redeem your shares within six years after you buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth year,
and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, absent 12b-1
fee waivers, they are subject to annual 12b-1 fees no greater than 1% of
average daily net assets, of which 0.25% are service fees paid to the
distributor, dealers or others for providing services and maintaining
accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and any
dividends paid on these shares are lower than dividends on Class A shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%, which is
currently being waived. Conversion may occur as late as three months after the
eighth anniversary of purchase, during which time Class B's higher 12b-1 fees
apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
CLASS C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge of 1% if you redeem your shares within 12 months after you buy
them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class C shares are subject to an annual 12b-1 fee
which may not be greater than 1% of average daily net assets, of which 0.25%
are service fees paid to the distributor, dealers or others for providing
services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and pay
lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any one
time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
14
<PAGE>
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Program How it works Share class
A B C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you 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 You can combine your holdings or X Rights ofAccumulation.
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 by 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>
15
<PAGE>
How to buy shares
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service. For more information about how to sign up for this service, call our
Shareholder Service Center at 800.523.1918.
16
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities , we use methods approved by the Board of Trustees that are designed
to price securities at their fair market value.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
17
<PAGE>
How to redeem shares
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit a bank wire fee may be deducted from your
proceeds. Bank information must be on file before you request a wire redemption.
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service. For
more information about how to sign up for this service, call our Shareholder
Service Center at 800.523.1918.
18
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares, not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, 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>
About your account (continued)
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly or quarterly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for the same class of shares
in other funds, your new shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased. The holding period for the
CDSC will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You don't
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions. We will send you a statement each year
by January 31 detailing the amount and nature of all dividends and capital gains
that you were paid for the prior year.
20
<PAGE>
Certain management considerations
Year 2000 As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund has taken steps to obtain
satisfactory assurances that its major service providers have taken steps
reasonably designed to address the Year 2000 Problem on the computer systems
that the service providers use. However, there can be no assurance that these
steps will be sufficient to avoid any adverse impact on the business of the
Fund. The Year 2000 Problem may also adversely affect the issuers of securities
in which the Funds invest. Consistent with the investment process utilized for
the selection of securities for the Fund, the portfolio managers focus solely on
the quantitative characteristics of the equity securities in which the Fund
invests. This process assumes that the effect of the Year 2000 problem on each
company is already reflected in those characteristics. Accordingly, except for
surveying the widely reported information regarding the companies in which the
Fund invests, no additional Year 2000 due diligence is performed. However, there
can be no guarantees that, even with these efforts, they will be able to predict
the effect of Year 2000 on any company or the performance of its securities.
21
<PAGE>
Financial highlights
Class A shares were initially offered on December 28, 1998. On March 16, 1999,
the A Class sold shares which were subsequently repurchased, leaving a balance
of 1 share, which is the initial seed purchase, as of November 30, 1999. This
shareholder data is not being disclosed because the data is not believed to be
meaningful. Financial highlights are not shown for Class B and Class C shares
because these shares were not operating as of the close of the fiscal year.
22
<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.
23
<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.
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).
24
<PAGE>
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred 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.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
25
<PAGE>
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
26
<PAGE>
Delaware Small Cap Contrarian 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.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement
plan accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24
hours a day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4997
- ----------------------------------------------------------------------------
Delaware Small Cap Contrarian Fund Symbol CUSIP
- ----------------------------------------------------------------------------
Class A 24610B883
- ----------------------------------------------------------------------------
DELAWARE(SM)
INVESTMENTS
-----------
Philadelphia * London
P-002[--] PP 1/00
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware Small Cap Contrarian 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.
<PAGE>
Table of Contents
Fund profile page
Delaware Small Cap Contrarian Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Exchanges
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
Glossary page
2
<PAGE>
Profile: Delaware Small Cap Contrarian Fund
What is the Fund's goal?
Delaware Small Cap Contrarian Fund seeks long-term capital appreciation.
Although the Fund will strive to meet its goal, 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. The companies that the Fund
invests in may involve greater risk due to their size, narrow product lines and
limited financial resources. In addition, the Fund may have large investments in
particular industries at any given time (although never more than 25% of its
assets at the time of purchase), a strategy that may increase volatility. For a
more complete discussion of risk, please turn to page __.
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.
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.
3
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show the return for the Fund's Institutional Class shares for
the past calendar year as well as the average annual return of these shares for
the one-year and lifetime periods. The Fund's past performance does not
necessarily indicate how it will perform in the future. The returns reflect
expense caps and would be lower without the caps.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (INSTITUTIONAL CLASS)]
Total return
- ---------------
1999
- ---------------
8.24%
- ---------------
During the period illustrated in this bar chart, the Institutional Class'
highest quarterly return was 20.69% for the quarter ended June 30, 1999 and its
lowest quarterly return was -10.51% for the quarter ended September 30, 1999.
Average annual return for the period ending 12/31/99
Institutional Class Russell 2000 Index
(Inception 12/29/98)
1 year 8.24% 21.26%
Lifetime 12.72% 21.26%
The Fund's returns are compared to the performance of the Russell 2000 Index.
You should remember that unlike the Fund, the index is unmanaged and doesn't
include the costs of operating a mutual fund, such as the costs of buying,
selling and holding the securities.
4
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
-----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
-----------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
-----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested
dividends none
-----------------------------------------------------------------
Redemption fees none
-----------------------------------------------------------------
Exchange Fees(1) none
-----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets.
-----------------------------------------------------------------
Management fees 0.75%
-----------------------------------------------------------------
Distribution and service (12b-1) fees none
-----------------------------------------------------------------
Other expenses 1.09%
-----------------------------------------------------------------
Total operating expenses(2) 1.84%
-----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(4) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
----------------------------
1 year $187
----------------------------
3 years $579
----------------------------
5 years $995
- -----------------------------
10 years $2,159
- -----------------------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through May 31, 2000, in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees and extraordinary expenses) from exceeding 0.75% of average daily net
assets. The following table shows operating expenses which are based on the
most recently completed fiscal year and reflect the manager's current fee
waivers and payments.
---------------------------------------------------------------------------
Fund operating expenses including voluntary
expense caps in effect until May 31, 2000
CLASS Institutional Class
---------------------------------------------------------------------------
Management fees 0.00%
---------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.00%
---------------------------------------------------------------------------
Other expenses 0.75%
---------------------------------------------------------------------------
Total operating expenses 0.75%
---------------------------------------------------------------------------
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense cap described in
footnote 2.
5
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we believe are the
best investments for the Fund. Following is a description of how the portfolio
managers pursue 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 with a given financial
measure such as profits, book value or cashflow.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will use a selection model which we developed ourselves, to help identify
companies that meet our investment guidelines. Our initial search will focus on
several key characteristics including price-to-sales ratio, price-to-cash flow
ratio and price-to-earnings ratio.
We will then carefully evaluate the financial strength of the company, the
nature of its management, any developments affecting the company or its
industry, anticipated new products or services, possible management changes,
projected takeovers or technological breakthroughs. Using this extensive
analysis, our goal is to pinpoint the companies within the universe of
undervalued stocks, whose true value is likely to be recognized and rewarded
with a rising stock price in the future.
Because there is added risk when investing in smaller companies, which may still
be in their early developmental stages, we maintain a well-diversified
portfolio, typically holding a mix of different stocks, representing a wide
array of industries.
The Fund's investment objective is non-fundamental. This means that the Board of
Trustees may change the objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders before the change in the
objective became effective.
6
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
How we use them
Securities Delaware Small Cap Contrarian Fund
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of ownership in Under normal market conditions we will hold at least
a corporation. Stockholders participate in the corporation's 65% of the Fund's net assets in common stock of small
profits and losses, proportionate to the number of shares they companies that we believe are selling for less than
own. their true value. Generally, we invest 90% to 100% of
net assets in these stocks.
- ------------------------------------------------------------------------------------------------------------------------------
American Depositary Receipts (ADRs): Securities of foreign The Fund may hold an unlimited amount of ADRs that are
entities issued through a U.S. bank representing the bank's actively traded in the U.S. when we believe they offer
holdings of a stated number of shares of a foreign corporation. greater value and greater appreciation potential than
An ADR entitles the holder to all dividends and capital gains U.S. securities.
earned by the underlying foreign shares. ADRs are bought and
sold the same as U.S. securities.
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such as a Typically, we use repurchase agreements as a short-term
fund, and a seller of securities in which the seller agrees to investment for a Fund's cash position. In order to enter
buy the securities back within a specified time at the same into these repurchase agreements, the Fund must have
price the buyer paid for them, plus an amount equal to an agreed collateral of at least 102% of the repurchase price.
upon interest rate. Repurchase agreements are often viewed as Repurchase agreements with maturities of over seven days
equivalent to cash. will be considered illiquid. The Fund will only enter
into repurchase agreements in which the collateral is
composed of U.S. government securities.
- ------------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities whose resale We may invest in privately placed securities that are
is restricted under securities law. eligible for 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 15% limit on
illiquid securities which is described below.
- ------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready market, We may invest up to 15% of net assets in illiquid
and cannot be easily sold within seven days at approximately the securities.
price that the Fund has valued them.
- ------------------------------------------------------------------------------------------------------------------------------
Options represent a right to buy or sell a security at an agreed The Fund may write call options and purchase put options
upon price at a future date. The purchaser of an option may or on a covered basis only, and will not engage in option
may not choose to go through with the transaction. writing strategies for speculative purposes.
Certain options may be considered to be derivative securities.
- ------------------------------------------------------------------ -----------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
7
<PAGE>
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and 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.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
8
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment in it to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in Delaware Small Cap Contrarian Fund.
Please see the Statement of Additional Information for further discussion of
these risks and other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap Contrarian Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we believe can
of the securities in a certain market -- like appreciate over an extended time frame regardless of interim market fluctuations.
the stock or bond market -- will decline in We do not try to predict overall stock market movements and generally do not
value because of factors such as economic trade for short-term purposes.
conditions, future expectations or investor
confidence. We may hold a substantial part of the Fund's assets in cash or cash equivalents
as a temporary, defensive strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the We follow a rigorous selection process before choosing securities and
value of securities in a particular industry or continuously monitor them while they remain in the portfolio.
the value of an individual stock or bond will
decline because of changing expectations for The Fund is a diversified portfolio with investments in companies representing
the performance of that industry or for the many different industries. We do not make additional investments in a stock if
individual company issuing the stock. that stock represents 5% of net assets, nor in an industry if that industry
represents 25% of net assets. However, it is likely that our holdings will be more
concentrated in certain industries if the industry as a whole has strong value
characteristics. This could increase volatility.
- ------------------------------------------------------------------------------------------------------------------------------------
Small company risk is the risk that prices of The Fund maintains a well-diversified portfolio, selects stocks carefully and
smaller companies may be more volatile than monitors them continuously. And, because we focus on stocks that are already
larger companies because of limited financial selling at relatively low prices, we believe we may experience less price
resources or dependence on narrow product lines. volatility than small cap funds that do not use a value-oriented strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities We analyze each company's financial situation and its cashflow to determine the
will decrease in value if interest rates rise. company's ability to finance future expansion and operations. The potential
The risk is generally associated with bonds; affect that rising interest rates might have on a stock is taken into
however, because smaller companies often borrow consideration before the stock is purchased.
money to finance their operations, they may be
adversely affected by rising interest rates.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest only a small portion of the Fund's portfolio in foreign
securities may be adversely affected by securities. When we do purchase foreign securities, they are often denominated
political instability, changes in currency in U.S. dollars. To the extent we invest in foreign securities, we invest
exchange rates, foreign economic conditions or primarily in issuers of developed countries, which are less likely to encounter
inadequate regulatory and accounting standards. 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
values them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager will be paid the
following fee as a percentage of average daily net assets.
0.75% on the first $500 million;
0.70% on the next $500 million;
0.65% on the next $1,500 million; and
0.60% on assets in excess of $2,500 million.
Portfolio managers
Andrea Giles, Vice President/Portfolio Manager, has had primary responsibility
for making day-to-day investment decisions for the Fund since January 2000. She
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. When
making investment decisions for the Fund, Ms. Giles consults with Christopher S.
Beck.
Christopher S. Beck, Vice President/Senior Portfolio Manager, 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.
10
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
Board of Trustees
<TABLE>
<S> <C> <C> <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>
Shareholders
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
11
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the following:
o retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans;
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts;
o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee; 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.
12
<PAGE>
How to buy shares
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
13
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities, we use methods approved by the Board of Trustees that are designed
to price securities at their fair market value.
14
<PAGE>
About your account (continued)
How to redeem shares
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
15
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will send you a check, normally the
next business day, but no later than seven days after we receive your request to
sell your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from this Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions. We will send you a statement each year
by January 31 detailing the amount and nature of all dividends and capital gains
that you were paid for the prior year.
16
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund has taken steps to obtain satisfactory assurances that
its major service providers have taken steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Funds invest. Consistent
with the investment process utilized for the selection of securities for the
Fund, the portfolio managers focus solely on the quantitative characteristics of
the equity securities in which the Fund invests. This process assumes that the
effect of the Year 2000 problem on each company is already reflected in those
characteristics. Accordingly, except for surveying the widely reported
information regarding the companies in which the Fund invests, no additional
Year 2000 due diligence is performed. However, there can be no guarantees that,
even with these efforts, they will be able to predict the effect of Year 2000 on
any company or the performance of its securities.
17
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
- --------------------------------------------------------------------------------
Delaware Small Cap Contrarian Fund Institutional Class
Period
12/29/98(1)
through
11/30/99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net asset value, beginning of period $8.500
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Income from investment operations
- --------------------------------------------------------------------------------
Net investment income(2) 0.104
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 0.326
- --------------------------------------------------------------------------------
Total from investment operations 0.430
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Less dividends and distributions
- --------------------------------------------------------------------------------
Dividends from net investment income none
- --------------------------------------------------------------------------------
Distributions from net realized gain on investments none
- --------------------------------------------------------------------------------
Total dividends and distributions none
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net asset value, end of period $8.930
- --------------------------------------------------------------------------------
Total return(3) 5.06%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------
Net assets, end of period
(000 omitted) $2,101
- --------------------------------------------------------------------------------
Ratio of expenses to average daily net assets 0.80%
- --------------------------------------------------------------------------------
Ratio of expenses to average daily net assets prior to
expense limitation and expenses paid indirectly 1.84%
- --------------------------------------------------------------------------------
Ratio of net investment income to average daily net assets 1.27%
- --------------------------------------------------------------------------------
Ratio of net investment income to average daily net assets
prior to expense limitation and expenses paid indirectly 0.18%
- --------------------------------------------------------------------------------
Portfolio turnover 63%
- --------------------------------------------------------------------------------
(1) Date of commencement of trading; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(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 reflects the manager's expense caps.
18
<PAGE>
How to read the Financial highlights
Net investment income
Net investment income includes dividend and interest income earned from a 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 a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of the fund.
Ratio of expenses to average daily net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average daily net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
19
<PAGE>
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.
20
<PAGE>
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See 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.
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.
21
<PAGE>
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.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
22
<PAGE>
Delaware Small Cap Contrarian 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 this Fund, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone service.
Investment Company Act file number: 811-4997
- --------------------------------------------------------------------------
Delaware Small Cap Contrarian Fund Symbol CUSIP
- --------------------------------------------------------------------------
Institutional Class 24610B859
- --------------------------------------------------------------------------
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 1/00
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware Mid-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 Mid-Cap Value Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Exchanges
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
Glossary page
2
<PAGE>
Profile: Delaware Mid-Cap Value Fund
What is the Fund's goal?
Delaware Mid-Cap Value Fund seeks to provide long-term capital growth. Although
the Fund will strive to meet its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of medium size companies, typically those with
market capitalizations between $1 billion and $9 billion at the time of
purchase. We look for stocks whose stock prices appear low relative to their
underlying value or future potential. Among other factors, we consider the
financial strength of a company, its management, the prospects for its industry
and any anticipated changes within the company 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 more risk than large companies due to their
size, narrow product lines and limited financial resources. For a more complete
discussion of risk, please turn to page __.
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.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of medium
size companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
3
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- -------------------------------------------------------------- ----------- ----------- ----------
CLASS A B C
- -------------------------------------------------------------- ----------- ----------- ----------
<S> <C> <C> <C>
- -------------------------------------------------------------- ----------- ----------- ----------
Maximum sales charge (load) imposed on
purchases as a percentage of offering price 5.75% none none
- -------------------------------------------------------------- ----------- ----------- ----------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 5%(2) 1%(3)
- -------------------------------------------------------------- ----------- ----------- ----------
Maximum sales charge (load) imposed on
reinvested dividends none none none
- -------------------------------------------------------------- ----------- ----------- ----------
Redemption fees none none none
- -------------------------------------------------------------- ----------- ----------- ----------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -------------------------------------------------------------- ----------- ---------- -----------
Management fees 0.75% 0.75% 0.75%
- -------------------------------------------------------------- ----------- ---------- -----------
Distribution and service (12b-1) fees(4) 0.30% 1.00% 1.00%
- -------------------------------------------------------------- ----------- ---------- -----------
Other expenses 0.58% 0.58% 0.58%
- -------------------------------------------------------------- ----------- ---------- -----------
Total operating expenses(5) 1.63% 2.33% 2.33%
- -------------------------------------------------------------- ----------- ---------- -----------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(6) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- -------------- ----------- ----------- ------------------- -------------- ----------------------
CLASS(7) A B B C C
(if redeemed) (if redeemed)
<S> <C> <C> <C> <C> <C>
- -------------- ----------- ----------- ------------------- -------------- ----------------------
1 year $731 $236 $736 $236 $336
- -------------- ----------- ----------- ------------------- -------------- ----------------------
3 years $1,060 $727 $1,027 $727 $727
- -------------- ----------- ----------- ------------------- -------------- ----------------------
5 years $1,411 $1,245 $1,445 $1,245 $1,245
- -------------- ----------- ----------- ------------------- -------------- ----------------------
10 years $2,397 $2,491 $2,491 $2,666 $2,666
- -------------- ----------- ----------- ------------------- -------------- ----------------------
</TABLE>
<PAGE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to certain
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the prospectus if they are
available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Class A shares are subject to a 12b-1 fee of 0.30% of average daily net
assets and Class B and C shares are each subject to a 12b-1 fee of 1.00% of
average daily net assets. The distributor has agreed to waive these 12b-1
fees through May 31, 2000.
(5) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through May 31, 2000 in order to
prevent total operating expenses (excluding any taxes, interest,
brokerage fees, extraordinary expenses and 12b-1 fees) from exceeding
0.75% of average daily net assets. The fees and expenses shown in the
table above do not reflect the voluntary expense caps by the manager and
by the distributor noted in footnote 4. The following table shows
operating expenses which are based on the most recently completed fiscal
year and reflect the manager's and distributor's current fee waivers and
payments.
5
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Fund operating expenses including
voluntary expense caps in
effect until May 31, 2000
- ------------------------------------------------ ------------------- -------------------- -------------------
CLASS A B C
<S> <C> <C> <C>
- ------------------------------------------------ ------------------- -------------------- -------------------
Management fees 0.17% 0.17% 0.17%
- ------------------------------------------------ ------------------- -------------------- -------------------
Distribution and service (12b-1) fees 0.00% 0.00% 0.00%
- ------------------------------------------------ ------------------- -------------------- -------------------
Other expenses 0.58% 0.58% 0.58%
- ------------------------------------------------ ------------------- -------------------- -------------------
Total operating expenses 0.75% 0.75% 0.75%
- ------------------------------------------------ ------------------- -------------------- -------------------
</TABLE>
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense caps described in
footnotes 4 and 5.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
6
<PAGE>
How we manage the Fund
Our investment strategies
We 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
managers pursue the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify medium size companies that we believe offer above-average
opportunities for long-term price appreciation because their current stock
price, in our opinion, does not accurately reflect the companies' underlying
value or future earning potential.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will use a selection model which we developed ourselves, to help identify
companies that meet our investment guidelines. Our search will focus on several
key characteristics, including price-to-sales ratio, price-to-cash flow ratio
and price-to-earnings ratio.
We will carefully evaluate the financial strength of the company, the nature of
its management, any developments affecting the company or its industry,
anticipated new products or services, possible management changes, projected
takeovers or technological breakthroughs. Using this extensive analysis, our
goal is to pinpoint the companies within the universe of undervalued stocks,
whose true value is likely to be recognized and rewarded with a rising stock
price in the future.
Because there is added risk when investing in medium size companies, which may
not have fully matured, we maintain a well-diversified portfolio, typically
holding a mix of different stocks, representing a wide array of industries.
The Fund's investment objective is non-fundamental. This means that the Board of
Trustees may change the objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders before the change in the
objective became effective.
7
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- -------------------------------------------------------- ---------------------------------------------------------------------------
How we use them
Securities Delaware Mid-Cap Value Fund
<S> <C>
- -------------------------------------------------------- ---------------------------------------------------------------------------
Common stocks: Securities that represent shares Generally, we invest 90% to 100% of net assets in common stocks of
of ownership in a corporation. Stockholders medium sized companies that we believe arfe selling for less than their
participate in the corporation's profits and true value.
losses, proportionate to the number of shares
they own.
- -------------------------------------------------------- ---------------------------------------------------------------------------
Foreign securities and American Depositary The Fund may invest up to 15% of its net assets in foreign securities.
Receipts (ADRs): Securities of foreign entities We have no present intention of investing directly in foreign securities;
issued directly or, in the case of American however, we may hold an unlimited amount of ADRs which are actively
Depositary Receipts, through a U.S. bank. ADRs traded in the U.S. when we believe they offer greater value and greater
are issued by a U.S. bank and represent the appreciation potential than U.S. securities.
bank's holdings of a stated number of shares of
a foreign corporation. An ADR entitles the
holder to all dividends and capital gains
earned by the underlying foreign shares. ADRs
are bought and sold the same as U.S.
securities.
- -------------------------------------------------------- ---------------------------------------------------------------------------
Repurchase agreements: An agreement between a Typically, we use repurchase agreements as a short-term investment for a
buyer, such as a fund, and a seller of Fund's cash position. In order to enter into these repurchase agreements,
securities in which the seller agrees to buy the Fund must have collateral of at least 102% of the repurchase price.
the securities back within a specified time at Repurchase agreements with maturities of over seven days will be
the same price the buyer paid for them, plus an considered illiquid. The Fund will only enter into repurchase agreements
amount equal to an agreed upon interest rate. in which the collateral is composed of U.S. government securities.
Repurchase agreements are often repurchase
agreements in which the collateral is composed
of U.S. viewed as equivalent to cash.
- -------------------------------------------------------- ---------------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest in privately placed securities that are eligible for resale
whose resale is restricted under securities law. 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 15% limit on illiquid securities,
which is described below.
- -------------------------------------------------------- ---------------------------------------------------------------------------
Illiquid securities: Securities that do not We may invest up to 15% of net assets in illiquid securities.
have a ready market, and cannot be easily sold
within seven days at approximately the price
that the Fund has valued them.
- -------------------------------------------------------- ---------------------------------------------------------------------------
Options represent a right to buy or sell a The Fund may write call options and purchase put options on a covered
security at an agreed upon price at a future basis only, and will not engage in option writing strategies for
date. The purchaser of an option may or may not speculative purposes.
choose to go through with the transaction.
Certain options may be considered to be
derivative securities.
- -------------------------------------------------------- ---------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
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.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
9
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment in it to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in Delaware Mid-Cap Value Fund. Please see
the Statement of Additional Information for further discussion of these risks
and other risks not discussed here.
<TABLE>
<CAPTION>
- -------------------------------------------------------- ---------------------------------------------------------------------------
How we strive to manage them
Risks Delaware Mid-Cap Value Fund
<S> <C>
- -------------------------------------------------------- ---------------------------------------------------------------------------
Market risk is the risk that all or a majority We maintain a long-term investment approach and focus on stocks we
of the securities in a certain market -- like believe can appreciate over an extended time frame regardless of interim
the stock or bond market -- will decline in market fluctuations. We do not try to predict overall stock market
value because of factors such as economic movements and generally do not trade for short-term purposes.
conditions, future expectations or investor
confidence. We may hold a substantial part of the Fund's assets in cash or cash
equivalents as a temporary, defensive strategy.
- -------------------------------------------------------- ---------------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of the Fund's assets invested in any one industry and
value of securities in a particular industry or in any individual security. We also follow a rigorous selection process
the value of an individual stock or bond will before choosing securities and continuously monitor them while they
decline because of changing expectations for remain in the portfolio.
the performance of that industry or for the
individual company issuing the stock.
- -------------------------------------------------------- ---------------------------------------------------------------------------
Smaller company risk is the risk that prices of The Fund maintains a well-diversified portfolio, selects stocks carefully
medium size or smaller companies may be more monitors them continuously. And, because we focus on stocks that are
and volatile than larger companies because of already selling at relatively low prices, we believe we may experience
limited financial resources or dependence on less price volatility than small or mid-cap funds that do not use a
narrow product lines. value-oriented strategy.
- -------------------------------------------------------- ---------------------------------------------------------------------------
Interest rate risk is the risk that securities We analyze each company's financial situation and its cashflow to
will decrease in value if interest rates rise. determine the company's ability to finance future expansion and
The risk is generally associated with bonds; operations. The potential affect that rising interest rates might have on
however, because smaller companies often borrow a stock is taken into consideration before the stock is purchased.
money to finance their operations, they may be
adversely affected by rising interest rates.
- -------------------------------------------------------- ---------------------------------------------------------------------------
Foreign risk is the risk that foreign We typically invest only a small portion of the Fund's portfolio in
securities may be adversely affected by foreign securities. When we do purchase foreign securities, they are
political instability, changes in currency often denominated in U.S. dollars. To the extent we invest in foreign
exchange rates, foreign economic conditions or securities, we invest primarily in issuers of developed countries, which
inadequate regulatory and accounting standards. 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
values them.
- -------------------------------------------------------- ---------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager will be paid the
following fee as a percentage of average daily net assets.
0.75% on first $500 million;
0.70% on next $500 million;
0.65% on next $1,500 million; and
0.60% on assets in excess of $2,500 million.
Portfolio managers
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 Andrea Giles.
Andrea Giles, 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.
11
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
<TABLE>
<CAPTION>
<S> <C> <C>
Board of Trustees
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio manager 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
Financial advisers
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
12
<PAGE>
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you pay when
you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class A shares are also subject to an annual 12b-1
fee no greater than 0.30% of average daily net assets, which is lower than
the 12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.
Class A Sales Charges
<TABLE>
<CAPTION>
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
Amount of purchase Sales charge as % Sales charge as % of amount Dealer's commission as %
of offering price invested of offering price
<S> <C> <C> <C>
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
Less than $50,000 5.75% 6.10% 5.00%
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
$50,000 but under $100,000 4.75% 4.99% 4.00%
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
$100,000 but under $250,000 3.75% 3.90% 3.00%
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
$250,000 but under $500,000 2.50% 2.56% 2.00%
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
$500,000 but under $1 million 2.00% 2.04% 1.60%
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you will 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 unless a specific waiver of the charge
applies.
<TABLE>
<CAPTION>
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
Amount of purchase Sales charge as % Sales charge as % Dealer's commission as %
of offering price of amount invested of offering price
<S> <C> <C> <C>
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
$1,000,000 up to $5 million none none 1.00%
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
Next $20 million
Up to $25 million none none 0.50%
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
Amount over $25 million none none 0.25%
- ---------------------------------- ---------------------------- ------------------------------- ---------------------------------
</TABLE>
13
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge if you redeem your shares within six years after you buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during the
third and fourth years, 2% during the fifth year, 1% during the sixth year,
and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, absent 12b-1
fee waivers, they are subject to annual 12b-1 fees no greater than 1% of
average daily net assets, of which 0.25% are service fees paid to the
distributor, dealers or others for providing services and maintaining
accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and any
dividends paid on these shares are lower than dividends on Class A shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%, which is
currently being waived. Conversion may occur as late as three months after
the eighth anniversary of purchase, during which time Class B's higher 12b-1
fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent deferred
sales charge of 1% if you redeem your shares within 12 months after you buy
them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class C shares are subject to an annual 12b-1 fee
which may not be greater than 1% of average daily net assets, of which 0.25%
are service fees paid to the distributor, dealers or others for providing
services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and pay
lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any one
time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
14
<PAGE>
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- --------------------------- ---------------------------------------------- ---------------------------------------------------------
Program How it works Share class
A B C
<S> <C> <C> <C>
- --------------------------- ---------------------------------------------- ------------------ --------------------------------------
Letter of Intent Through a Letter of Intent you 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 You can combine your holdings or X
Accumulation 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 by 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>
15
<PAGE>
How to buy shares
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service. For more information about how to sign up for this service, call our
Shareholder Service Center at 800.523.1918.
16
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities , we use methods approved by the Board of Trustees that are designed
to price securities at their fair market value.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
17
<PAGE>
About your Account (continued)
How to redeem shares
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit a bank wire fee may be deducted from your
proceeds. Bank information must be on file before you request a wire redemption.
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service. For
more information about how to sign up for this service, call our Shareholder
Service Center at 800.523.1918.
18
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares, not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, 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>
About your Account (continued)
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly or quarterly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for the same class of shares
in other funds, your new shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased. The holding period for the
CDSC will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You don't
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions. We will send you a statement each year
by January 31 detailing the amount and nature of all dividends and capital gains
that you were paid for the prior year.
20
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund has taken steps to obtain satisfactory assurances that
its major service providers have taken steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. Consistent with the investment
process utilized for the selection of securities for the Fund, the portfolio
managers focus solely on the quantitative characteristics of the equity
securities in which the Fund invests. This process assumes that the effect of
the Year 2000 problem on each company is already reflected in those
characteristics. Accordingly, except for surveying the widely reported
information regarding the companies in which the Fund invests, no additional
Year 2000 due diligence is performed. However, there can be no guarantees that,
even with these efforts, they will be able to predict the effect of Year 2000 on
any company or the performance of its securities.
21
<PAGE>
Financial highlights
Class A shares were initially offered on December 29, 1998. On May 3, 1999, the
A Class sold shares which were subsequently repurchased, leaving a balance of 1
share, which is the initial seed purchase, as of November 30, 1999. This
shareholder data is not being disclosed because the data is not believed to be
meaningful. Financial highlights are not shown for Class B and Class C shares
because these shares were not operating as of the close of the fiscal year.
22
<PAGE>
How to read the financial highlights
Net investment income
Net investment income includes dividend and interest income earned from a 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 a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of the fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment 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.
23
<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.
24
<PAGE>
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See 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.
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.
25
<PAGE>
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.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as equities. Total return An investment performance
measurement, expressed as a percentage, based on the combined earnings from
dividends, capital gains and change in price over a given period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
26
<PAGE>
Delaware Mid-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.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions
and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4997
- ------------------------------------------------- ----------------
Delaware Mid-Cap Value Fund Symbol CUSIP
- ------------------------------------------------- ----------------
Class A 24610B503
- ------------------------------------------------- ----------------
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 1/00
27
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware Mid-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.
<PAGE>
Table of Contents
Fund profile page
Delaware Mid-Cap Value Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Exchanges
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
Glossary page
2
<PAGE>
Profile: Delaware Mid-Cap Value Fund
What is the Fund's goal?
Delaware Mid-Cap Value Fund seeks to provide long-term capital growth. Although
the Fund will strive to meet its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in stocks of medium size companies, typically those with
market capitalizations between $1 billion and $9 billion at the time of
purchase. We look for stocks whose stock prices appear low relative to their
underlying value or future potential. Among other factors, we consider the
financial strength of a company, its management, the prospects for its industry
and any anticipated changes within the company 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 more risk than large companies due to their
size, narrow product lines and limited financial resources. For a more complete
discussion of risk, please turn to page __.
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.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors seeking an investment primarily in common stocks.
o Investors seeking exposure to the capital appreciation opportunities of medium
size companies.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors whose primary goal is current income.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly over the short term.
3
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show returns for the Fund's Institutional Class shares for the
past calendar year as well as the average annual returns of these shares for the
one-year and lifetime periods. The Fund's past performance does not necessarily
indicate how it will perform in the future. The returns reflect expense caps and
would be lower without the caps.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (INSTITUTIONAL CLASS)]
Total return (Institutional Class)
- ---------
1999
- ---------
-7.30%
- ---------
During the period illustrated in this bar chart, the Institutional Class'
highest quarterly return was 11.78% for the quarter ended June 30, 1999 and its
lowest quarterly return was - 10.21% for the quarter ended September 30, 1999.
Average annual return for the period ending 12/31/99
CLASS Institutional Russell 2000 Index
(Inception 12/29/98)
1 year -7.30% 21.03%
Lifetime -2.92% 21.03%
The Fund's returns are compared to the performance of the Russell 2000 Index.
You should remember that unlike the Fund, the index is unmanaged and doesn't
include the costs of operating a mutual fund, such as the costs of buying,
selling and holding the securities.
4
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on purchases as
a percentage of offering price none
- -----------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
- -----------------------------------------------------------------
Maximum sales charge (load) imposed on reinvested
dividends none
- -----------------------------------------------------------------
Redemption fees none
- -----------------------------------------------------------------
Exchange Fees(1) none
- -----------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets.
- -----------------------------------------------------------------
Management fees 0.75%
- -----------------------------------------------------------------
Distribution and service (12b-1) fees none
- -----------------------------------------------------------------
Other expenses 0.58%
- -----------------------------------------------------------------
Total operating expenses(2) 1.33%
- -----------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(3) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
- ----------------------------
1 year $135
- ----------------------------
3 years $421
- ----------------------------
5 years $729
- ----------------------------
10 years $1,601
- ----------------------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through May 31, 2000, in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees and extraordinary expenses) from exceeding 0.75% of average daily net
assets. The following table shows operating expenses which are based on the
most recently completed fiscal year and reflect the manager's and
distributor's current fee waivers and payments.
- --------------------------------------------------------------------------------
Fund operating expenses including voluntary expense caps in effect
until May 31, 2000
CLASS Institutional Class
- --------------------------------------------------------------------------------
Management fees 0.17%
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees none
- --------------------------------------------------------------------------------
Other expenses 0.58%
- --------------------------------------------------------------------------------
Total operating expenses 0.75%
- --------------------------------------------------------------------------------
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense cap described in
footnote 2.
5
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we believe are the
best investments for the Fund. Following is a description of how the portfolio
managers pursue the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
We strive to identify medium size companies that we believe offer above-average
opportunities for long-term price appreciation because their current stock
price, in our opinion, does not accurately reflect the companies' underlying
value or future earning potential.
Companies may be undervalued for many reasons. They may be unknown to stock
analysts, they may have experienced poor earnings or their industry may be in
the midst of a period of weak growth.
We will use a selection model which we developed ourselves, to help identify
companies that meet our investment guidelines. Our search will focus on several
key characteristics, including price-to-sales ratio, price-to-cash flow ratio
and price-to-earnings ratio.
We will carefully evaluate the financial strength of the company, the nature of
its management, any developments affecting the company or its industry,
anticipated new products or services, possible management changes, projected
takeovers or technological breakthroughs. Using this extensive analysis, our
goal is to pinpoint the companies within the universe of undervalued stocks,
whose true value is likely to be recognized and rewarded with a rising stock
price in the future.
Because there is added risk when investing in medium size companies, which may
not have fully matured, we maintain a well-diversified portfolio, typically
holding a mix of different stocks, representing a wide array of industries.
The Fund's investment objective is non-fundamental. This means that the Board of
Trustees may change the objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders before the change in the
objective became effective.
6
<PAGE>
The securities we typically invest in
Stocks offer investors the potential for capital appreciation, and may pay
dividends as well.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
How we use them
Securities Delaware Mid-Cap Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stocks: Securities that represent shares of Generally, we invest 90% to 100% of net assets in
ownership in a corporation. Stockholders participate common stock of medium sized companies that we
in the corporation's profits and losses, believe are selling for less than their true value.
proportionate to the number of shares they own.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign securities and American Depositary Receipts The Fund may invest up to 15% of its net assets in foreign
(ADRs): Securities of foreign entities issued securities . We have no present intention of investing directly in
directly or, in the case of American Depositary foreign securities; however, we may hold an unlimited amount of
Receipts, through a U.S. bank. ADRs are issued by a ADRs which are actively traded in the U.S. when we believe they offer
U.S. bank and represent the bank's holdings of a greater value and greater appreciation potential than U.S. 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 between a buyer, Typically, we use repurchase agreements as a short-term investment
such as a fund, and a seller of securities in for a Fund's cash position. In order to enter into these repurchase
which the seller agrees to buy the securities back agreements, the Fund must have collateral of at least 102% of the
within a specified time at the same price the buyer repurchase price. Repurchase agreements with maturities of over seven
paid for them, plus an amount equal to an agreed days will be considered illiquid. The Fund will only enter into
upon interest rate. Repurchase agreements are often repurchase agreements in which the collateral is composed of U.S.
viewed as equivalent to cash. government securities.
- ------------------------------------------------------------------------------------------------------------------------------------
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 15% limit on illiquid securities,
which is described below.
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a We may invest up to 15% of net assets in illiquid securities.
ready market, and cannot be easily sold within seven
days at approximately the price that the Fund has
valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
Options represent a right to buy or sell a security The Fund may write call options and purchase put options on a covered
at an agreed upon price at a future date. The basis only, and will not engage in option writing strategies for
purchaser of an option may or may not choose to go speculative purposes.
through with the transaction.
Certain options may be considered to be derivative
securities.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including convertible securities,
warrants, preferred stocks, and bonds. Please see the Statement of Additional
Information for additional descriptions and risk information on these securities
as well as those listed in the table above. You can find additional information
about the investments in the Fund's portfolio in the annual or semi-annual
shareholder report.
7
<PAGE>
Lending securities
The Fund may lend up to 25% of its assets to qualified dealers and 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.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. Borrowing money could result in the Fund being unable
to meet its investment objective.
8
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider an investment in it to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in Delaware Mid-Cap Value Fund. Please see
the Statement of Additional Information for further discussion of these risks
and other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
How we strive to manage them
Risks Delaware Mid-Cap Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of We maintain a long-term investment approach and focus on stocks we believe
the securities in a certain market -- like the can appreciate over an extended time frame regardless of interim market
stock or bond market -- will decline in value fluctuations. We do not try to predict overall stock market movements and
because of factors such as economic conditions, generally do not trade for short-term purposes.
future expectations or investor confidence.
We may hold a substantial part of the Fund's assets in cash or cash
equivalents as a temporary, defensive strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Industry and security risk is the risk that the We limit the amount of the Fund's assets invested in any one industry and
value of securities in a particular industry or the in any individual security. We also follow a rigorous selection process
value of an individual stock or bond will decline before choosing securities and continuously monitor them while they remain
because of changing expectations for the in the portfolio.
performance of that industry or for the individual
company issuing the stock.
- ------------------------------------------------------------------------------------------------------------------------------------
Smaller company risk is the risk that prices of The Fund maintains a well-diversified portfolio, selects stocks carefully
medium size or smaller companies may be more and monitors them continuously. And, because we focus on stocks that are
volatile than larger companies because of limited already selling at relatively low prices, we believe we may experience less
financial resources or dependence on narrow product price volatility than small or mid-cap funds that do not use a value-oriented
lines. strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities will We analyze each company's financial situation and its cashflow to determine
decrease in value if interest rates rise. The risk the company's ability to finance future expansion and operations. The
is generally associated with bonds; however, potential affect that rising interest rates might have on a stock is taken
because smaller companies often borrow money to into consideration before the stock is purchased.
finance their operations, they may be adversely
affected by rising interest rates.
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign risk is the risk that foreign securities We typically invest only a small portion of the Fund's portfolio in foreign
may be adversely affected by political instability, securities. When we do purchase foreign securities, they are often
changes in currency exchange rates, foreign denominated in U.S. dollars. To the extent we invest in foreign securities,
economic conditions or inadequate regulatory and we invest primarily in issuers of developed countries, which are less
accounting standards. likely to encounter these foreign risks than issuers in developing
countries. The Fund may use hedging techniques to help offset potential
foreign currency losses.
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold within seven days at
approximately the price that the Fund values them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager will be paid the
following fee as a percentage of average daily net assets:
0.75% on the first $500 million;
0.70% on the next $500 million;
0.65% on the next $1,500 million; and
0.60% on assets in excess of $2,500 million.
Portfolio managers
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 Andrea Giles.
Andrea Giles, 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.
10
<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
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
<S> <C> <C>
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
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
11
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the following:
o retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans;
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate of
the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts;
o a bank, trust company and similar financial institution investing for its own
account or for the account of its trust customers for whom such financial
institution is exercising investment discretion in purchasing shares of the
Class, except where the investment is part of a program that requires payment
to the financial institution of a Rule 12b-1 Plan fee; 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.
12
<PAGE>
How to buy shares
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 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 at 800.510.4015 so we can assign you an
account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
13
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities , we use methods approved by the Board of Trustees that are designed
to price securities at their fair market value.
14
<PAGE>
About your account (continued)
How to redeem shares
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
15
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will send you a check, normally the
next business day, but no later than seven days after we receive your request to
sell your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends and capital gains, if any, are paid annually. We automatically
reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from this Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions. We will send you a statement each year
by January 31 detailing the amount and nature of all dividends and capital gains
that you were paid for the prior year.
16
<PAGE>
Certain management considerations
Year 2000 As with other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." The Fund is taking steps to obtain
satisfactory assurances that its major service providers are taking steps
reasonably designed to address the Year 2000 Problem on the computer systems
that the service providers use. However, there can be no assurance that these
steps will be sufficient to avoid any adverse impact on the business of the
Fund. Consistent with the investment process utilized for the selection of
securities for the Fund, the portfolio managers focus solely on the quantitative
characteristics of the equity securities in which the Fund invests. This process
assumes that the effect of the Year 2000 problem on each company is already
reflected in those characteristics. Accordingly, except for surveying the widely
reported information regarding the companies in which the Fund invests, no
additional Year 2000 due diligence is performed. However, there can be no
guarantees that, even with these efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
17
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
- ----------------------------------------------------------------------
Institutional
Class Shares
Period
12/29/98(1)
through
11/30/99
-----------------
Delaware Mid-Cap Value Fund
- ----------------------------------------------------------------------
Net asset value, beginning of period $ 8.500
Income (loss) from investment operations:
Net investment income 0.073
Net realized and unrealized gain (loss) on
investments (0.533)
-------
Total from investment operations (0.460)
-------
Less dividends and distributions:
Dividends from net investment income none
Distributions from net realized gain on investments none
-------
Total dividends and distributions none
-------
Net asset value, end of period: $8.040
=======
Total return(2) (5.41%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 1,891
Ratio of expenses to net assets 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.33%
Ratio of net investment income to average net
assets 0.92%
Net investment income prior to expense limitation
and expenses paid indirectly 0.34%
Portfolio turnover 37%
- ----------------------------------------------------------------------
(1) Date of commencement of trading; ratios have been annualized but
total return has not been annualized.
(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 reflects the manager's
expense caps.
18
<PAGE>
How to read the financial highlights
Net investment income
Net investment income includes dividend and interest income earned from a 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 a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of the fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment 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.
19
<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.
20
<PAGE>
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See 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.
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.
21
<PAGE>
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.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
22
<PAGE>
Delaware Mid-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 this Fund, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone service.
Investment Company Act file number: 811-4997
- --------------------------------------------------------------------------------
Delaware Mid-Cap Value Fund Symbol CUSIP
Institutional Class 24610B800
- --------------------------------------------------------------------------------
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware Retirement Income Fund
Class A * Class B* Class C
Prospectus
January 31, 2000
Total Return Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
1
<PAGE>
Table of Contents
Fund profile page
Delaware Retirement Income Fund
How we manage the Fund page
Our investment strategies
The securities we invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Exchanges
Dividends, distributions and taxes
Other investment policies
and risk considerations page
Certain management considerations page
Financial highlights page
Glossary page
2
<PAGE>
Profile: Delaware Retirement Income Fund
What is the Fund's goal?
Delaware Retirement Income Fund seeks to provide high current income and an
investment that has the potential for capital appreciation. Although the Fund
will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in income generating securities of large, well-established
companies and in debt securities including high-yield, high risk corporate
bonds, investment grade fixed income securities and U.S. government securities.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock and bond prices, which could be caused by
a drop in the stock market, economic recession or poor performance from
particular companies or sectors, or increases in interest rates. For a more
complete discussion of risk, please turn to page __.
Delaware Retirement Income Fund may invest up to 45% of its net assets in
high-yield, higher risk corporate bonds, commonly known as junk bonds. These
bonds involve the risk that the issuing company may be unable to pay interest or
repay principal. Although high-yield bonds have credit quality ratings which are
below investment grade, they can offer high income potential which we believe
can make a positive contribution to the Fund's performance.
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.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for growth potential combined with regular income.
o Investors looking for supplemental monthly income from an investment that
also offers possible protection against inflation.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors seeking an investment primarily in fixed income securities.
3
<PAGE>
How has Delaware Retirement Income 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 three
calendar years as well as the average annual returns for these shares for the
one-year and lifetime periods. Returns for Class B and Class C shares are not
shown because these shares have not commenced operations. The Fund's past
performance does not necessarily indicate how it will perform in the future. The
returns reflect voluntary expense caps and would be lower without the voluntary
caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (CLASS A)]
Year-by-year total return
- -------------------------------
1997 1998 1999
- -------------------------------
34.28% 2.13% 4.73%
- -------------------------------
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 13.03% for the quarter ended September 30, 1997 and its lowest
quarterly return was -9.47% for the quarter ended September 30, 1998.
The maximum Class A sales charge of 5.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above. If this fee were
included, the returns would be less than those shown above. The average annual
returns shown below do include the sales charge.
Average annual return for period ending 12/31/99
Class A S&P 500 Composite
(Inception 12/2/96) Stock Index
1 year -1.31% 21.03%
Lifetime 12.07% 27.56%
The Fund's returns are compared to the performance of the S&P 500 Composite
Stock Index. You should remember that unlike the Fund, the index is unmanaged
and doesn't include the costs of operating a mutual fund, such as the costs of
buying, selling and holding the securities.
4
<PAGE>
What are the Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
CLASS A B C
- -----------------------------------------------------------------------------------------
<S> <C>
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price 5.75% none none
- -----------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
Redemption price, whichever is lower none(1) 5%(2) 1%(3)
- -----------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
Reinvested dividends none none none
- -----------------------------------------------------------------------------------------
Redemption fees none none none
- -----------------------------------------------------------------------------------------
</TABLE>
Annual fund operating expenses are deducted from the Fund's assets.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.65% 0.65% 0.65%
- -----------------------------------------------------------------------------------------
Distribution and service (12b-1) fees(4) 0.30% 1.00% 1.00%
- -----------------------------------------------------------------------------------------
Other expenses 0.22% 0.22% 0.22%
- -----------------------------------------------------------------------------------------
Total operating expenses(5) 1.17% 1.87% 1.87%
- -----------------------------------------------------------------------------------------
</TABLE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(6) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
CLASS(7) A B B C C
(if redeemed) (if redeemed)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 year $688 $190 $690 $190 $290
- -----------------------------------------------------------------------------------------
3 years $925 $588 $888 $588 $588
- -----------------------------------------------------------------------------------------
5 years $1,182 $1,011 $1,211 $1,011 $1,011
- -----------------------------------------------------------------------------------------
10 years $1,914 $2,008 $2,008 $2,190 $2,190
- -----------------------------------------------------------------------------------------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to
redemptions made within two years. Additional Class A purchase options that
involve a contingent deferred sales charge may be permitted from time to
time and will be disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 5%, which declines to 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Class A shares are subject to a 12b-1 fee of 0.30% of average daily net
assets and Class B and C shares are each subject to a 12b-1 fee of 1.00% of
average daily net assets. The distributor has agreed to waive these 12b-1
fees through May 31, 2000.
5
<PAGE>
(5) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through May 31, 2000 in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees, extraordinary expenses and 12b-1 fees) from exceeding 0.75% of
average daily net assets. The fees and expenses shown in the table above do
not reflect the voluntary expense caps by the manager and by the
distributor noted in footnote 4. The following table shows operating
expenses which are based on the most recently completed fiscal year and
reflect the manager's and distributor's current fee waivers and payments.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Fund operating expenses including voluntary expense caps in effect until May 31, 2000
CLASS A B C
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.53% 0.53% 0.53%
-------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.00% 0.00% 0.00%
-------------------------------------------------------------------------------------------------------------
Other expenses 0.22% 0.22% 0.22%
-------------------------------------------------------------------------------------------------------------
Total operating expenses 0.75% 0.75% 0.75%
-------------------------------------------------------------------------------------------------------------
</TABLE>
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense cap described in
footnotes 4 and 5.
(7) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
6
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Delaware Retirement Income Fund. Following is a description of
how the portfolio managers pursue the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
The manager will seek to achieve the Fund's investment objective by investing in
a combination of income generating equity securities and debt securities
including, but not limited to, dividend paying common stocks, securities of real
estate investment trusts, preferred stocks, warrants, rights, convertible
securities, non-convertible debt securities, high-yield, high risk securities,
investment grade fixed-income securities, U.S. government securities and foreign
equity and fixed-income securities. Under normal circumstances, at least 50% of
the Fund's total assets will be invested in income generating equity securities.
In making investments in income generating equity securities, the Fund may
invest an unlimited portion of its total assets in convertible securities
without regard to credit quality. While debt securities may comprise up to 50%
of the Fund's total assets, no more than 45% of the Fund's total assets will be
invested in high-yield, high risk debt securities. No more than 25% of the
Fund's total assets will be invested in any one industry sector nor, as to 75%
of the Fund's total assets, will more than 5% be invested in securities of any
one issuer. The Fund may invest up to 20% of its total assets in foreign equity
and debt securities. The Fund will not, however, invest more than 5% of its
total assets in securities of issuers principally located or principally
operating in markets of emerging countries.
Within the percentage guidelines noted above, the manager will determine the
proportion of the Fund's assets that will be allocated to income generating
equity securities and equity equivalents and to debt securities, based on its
analysis of economic and market conditions and its assessment of the income and
potential for appreciation that can be achieved from investment in such asset
classes. It is expected that the proportion of the Fund's total assets invested
in income generating equity securities and equity equivalent securities will
vary from 50% to 100% of the Fund's total assets. The proportion of the Fund's
total assets in debt securities will correspondingly vary from 0% to 50% of the
Fund's total assets.
The Fund's investment objective is non-fundamental. This means that the Board of
Trustees may change the objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders before the change in the
objective became effective.
Portfolio turnover
The Fund anticipates that its annual portfolio turnover will generally be less
than 100%. A turnover rate of 100% would occur if a Fund sold and replaced
securities valued at 100% of its net assets within one year.
The securities we invest in
The following is a more detailed description of some of the securities in which
the Fund may invest.
Common stock
Common stock is generally considered to be shares of a corporation that entitle
the holder to a pro-rata share of the profits of the corporation, if any,
without a preference over any other shareholder or class of shareholders,
including holders of the corporation's preferred stock and other senior equity.
Common stock usually carries with it the right to vote and frequently an
exclusive right to do so. Holders of common stock also have the right to
participate in the remaining assets of the corporation after all other claims
are paid, including those of debt securities and preferred stock. In selecting
common stocks for investment, the manager will focus primarily on a security's
dividend-paying capacity rather than on its potential for appreciation.
7
<PAGE>
Preferred stock
Generally, preferred stock receives dividends prior to distributions on common
stock and usually has a priority of claim over common stockholders if the issuer
of the stock is liquidated. Unlike common stock, preferred stock does not
usually have voting rights; preferred stock, in some instances, is convertible
into common stock. Dividends on typical preferred stock are cumulative, causing
dividends to accrue even if not declared by the issuer's Board of Trustees.
There is, however, no assurance that dividends will be declared by the Boards of
Trustees of issuers of the preferred stocks in which the Fund invests.
Convertible securities
Traditional convertible securities include corporate bonds, notes and preferred
stocks that may be converted into or exchanged for common stock, and other
securities that also provide an opportunity for equity participation. These
securities are generally convertible either at a stated price or a stated rate
(that is, for a specific number of shares of common stock or other security). As
with other fixed-income securities, the price of a convertible security to some
extent varies inversely with interest rates. While providing a fixed-income
stream (generally higher in yield than the income derivable from a common stock
but lower than that afforded by a non-convertible debt security), a convertible
security also affords the investor an opportunity, through its conversion
feature, to participate in the capital appreciation of the common stock into
which it is convertible. As the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield basis and
so may not experience market value declines to the same extent as the underlying
common stock. When the market price of the underlying common stock increases,
the price of a convertible security tends to rise as a reflection of the value
of the underlying common stock. To obtain such a higher yield, the Fund may be
required to pay for a convertible security an amount in excess of the value of
the underlying common stock. Common stock acquired by the Fund upon conversion
of a convertible security will generally be held for so long as the manager
anticipates such stock will provide the Fund with opportunities which are
consistent with the Fund's investment objectives and policies. Convertible
securities in which the Fund may invest may be rated below investment grade
(i.e., "Ba" or lower by Moody's or "BB" or lower by S&P or similarly rated by
other comparable rating agencies) or, if unrated, determined to be of comparable
quality by the manager. Because the Fund treats convertible securities as an
equity equivalent security, it will not consider credit quality of convertible
securities in making its investment decisions.
Real estate investment trust securities
Real Estate Investment Trusts ("REITs") are pooled investment vehicles that
invest primarily in income-producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Like investment companies such as the Fund, REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code (the "Code"). REITs are subject to
substantial cash flow dependency, defaults by borrowers, self-liquidation, and
the risk of failing to qualify for tax-free pass-through of income under the
Code, and/or maintain exemptions from the Investment Company Act of 1940 (the
"1940 Act"). Equity REITs may be affected by changes in the value of the
underlying property owned by the REITs, while mortgage REITs may be affected by
the quality of any credit extended.
REITs invest all of their assets in the real estate and real estate related
sectors of the economy, and are subject to the risks of financing projects.
REITs may have limited financial resources, may trade less frequently and in a
limited volume, and are more volatile than the high-yield, high risk securities
in which the Fund may also invest.
<PAGE>
High-yield, high risk securities
High-yield, high risk debt securities, like all debt securities, represent money
borrowed that must be repaid and has a fixed amount, a specific maturity or
maturities and usually a specific rate of interest or original purchase
discount. Unlike common and preferred stock, debt securities, including
high-yield, high risk debt securities, do not represent an equity interest in
the issuer. However, debt securities have a priority claim over stockholders if
the issuer is liquidated. The Fund may invest in a wide variety of debt
securities, although it is anticipated that under normal market conditions, the
Fund primarily will invest in high-yield corporate debt obligations, including
zero coupon bonds and pay-in-kind securities ("PIKs"), debentures, convertible
debentures, corporate notes (including convertible notes) and units consisting
of bonds with stock or warrants to buy stock attached. See Zero coupon bonds and
Pay-in-kind bonds under Other investment policies and risk considerations.
The Fund will invest in both rated and unrated bonds. The rated bonds that the
Fund may purchase in this sector of its portfolio will be rated BBB or lower by
S&P or Fitch IBCA, Inc., Baa or lower by Moody's, or similarly rated by another
nationally recognized statistical rating organization. See Appendix A to the
Statement of Additional Information for more rating information and High-yield
securities under Special risk considerations for a description of the risks
associated with investing in lower-rated fixed-income securities. Unrated bonds
may be more speculative in nature than rated bonds.
8
<PAGE>
Foreign securities
The Fund may invest up to 20% of its total assets in securities of issuers
organized or having a majority of their assets or deriving a majority of their
operating income in foreign countries. These income generating equity securities
and debt securities include foreign government securities, equity securities and
debt obligations of foreign companies, and securities issued by supranational
entities. A supranational entity is an entity established or financially
supported by the national governments of one or more countries to promote
reconstruction or development. Examples of supranational entities include, among
others, the International Bank for Reconstruction and Development (more commonly
known as the World Bank), the European Economic Community, the European Coal and
Steel Community, the European Investment Bank, the Inter-Development Bank, the
Export-Import Bank and the Asian Development Bank.
The Fund may invest in sponsored and unsponsored American Depositary Receipts,
European Depositary Receipts, or Global Depositary Receipts ("Depositary
Receipts"). Depositary Receipts are receipts typically issued by a bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. "sponsored" Depositary Receipts are issued jointly by the issuer of
the underlying security and a depository, and "unsponsored" Depositary Receipts
are issued without the participation of the issuer of the deposited security.
The Fund may also invest in Brady Bonds, which are described more fully under
the Other Investment policies and risk considerations section of this
Prospectus.
The Fund may invest in securities issued in any currency and may hold foreign
currencies. Securities of issuers within a given country may be denominated in
the currency of another country or in multinational currency units, such as the
Euro. The Fund may, from time to time, purchase or sell foreign currencies
and/or engage in forward foreign currency transactions in order to expedite
settlement of Fund transactions and to minimize currency value fluctuations. See
Other investment policies and risk considerations for a further description of
the Fund's foreign currency transactions.
While the Fund may purchase securities of issuers in any foreign country,
developed and underdeveloped, no more than 5% of the Fund's assets may be
invested in direct obligations or equity securities of issuers located in
emerging market countries. See Emerging market securities under Special risk
considerations.
The Fund will invest in both rated and unrated foreign securities. The rated
securities that the Fund may purchase in the international sector of its
portfolio may include those rated BBB or lower by S&P or Fitch, Baa or lower by
Moody's, or similarly rated by another nationally reorganized statistical rating
organization. See Appendix A to the Statement of Additional Information for more
rating information and Foreign securities and High-yield securities under
Special risk considerations for a description of the risks associated with
investing in foreign securities and lower-rated securities.
The Fund may also invest in zero coupon bonds, purchase shares of other
investment companies and may engage in short sales. See Zero coupon bonds and
Pay-in-kind bonds and Investment company securities under Other investment
polices and risk considerations.
In unusual market conditions, in order to meet redemption requests, for
temporary defensive purposes, and pending investment or at such other times when
suitable income generating equity or debt securities are not available, the Fund
may hold a substantial portion of its assets in (1) cash, (2) debt securities
issued by the U.S. government, its agencies or instrumentalities, (3) commercial
paper, (4) certificates of deposit and bankers' acceptances or repurchase
agreements with respect to any of the foregoing investments. The Fund will only
invest in commercial paper of companies rated "A-2" or better by S&P or "P-2" or
better by Moody's or similarly rated by another comparable rating agency or, if
not so rated, of equivalent investment quality as determined by the manager. See
Appendix A to the Statement of Additional Information for more rating
information.
9
<PAGE>
See Other investment policies and risk considerations for a description of the
Fund's other investment policies and for a further description of some of the
policies described above.
The remaining investment policies of the Fund not identified above or in
Statement of Additional Information are not fundamental and may be changed by
the Fund's Board of Trustees without a shareholder vote.
10
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Delaware Retirement
Income Fund, you should consider an investment in it to be a long-term
investment that typically provides the best results when held for a number of
years. The following are the chief risks you assume when investing in Delaware
Retirement Income Fund. Please see the Statement of Additional Information for
further discussion of these risks and the other risks not discussed here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- ------------------------------------------------------------------
How we strive to manage them
Risks Delaware Retirement Income Fund
- ---------------------------------------------------------------- ------------------------------------------------------------------
<S> <C> <C>
Market risk is the risk that all or a majority of the We invest in several different asset classes including both
securities in a certain market -- like the stock or bond equity and fixed income, which tend to increase and decline in
market -- will decline in value because of factors such as different economic and investment conditions. We also maintain
economic conditions, future expectations or investor a long-term investment approach and focus on securities, which
confidence. we believe can perform well over an extended time frame
regardless of interim market fluctuations.
- ---------------------------------------------------------------- ------------------------------------------------------------------
Industry and security risk is the risk that the value of We limit the amount of each Fund's assets invested in any one
securities in a particular industry or the value of an industry and in any individual security or issuer. We also
individual stock or bond will decline because of changing follow a rigorous selection process when choosing securities for
expectations for the performance of that industry or for the the portfolio.
individual company issuing the stock or bond.
- ---------------------------------------------------------------- ------------------------------------------------------------------
Interest rate risk is the risk that securities will decrease We do not try to increase return by predicting and aggressively
in value if interest rates rise. The risk is greater for bonds capitalizing on interest rate moves. We monitor economic
with longer maturities than for those with shorter maturities. conditions and make adjustments as necessary to guard against
undue risk from interest rate changes.
- ---------------------------------------------------------------- ------------------------------------------------------------------
Credit risk is the possibility that a bond's issuer (or an We carefully evaluate the financial situation of each entity
entity that insures the bond) will be unable to make timely whose bonds are held in the portfolio. We also hold a
payments of interest and principal. relatively large number of different bonds to minimize the risk
should any individual issuer be unable to pay its interest or
repay principal. This is a substantial risk of the Fund because it
may invest up to 45% in fixed income securities rated below
investment grade.
- ---------------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- ------------------------------------------------------------------
How we strive to manage them
Risks Delaware Retirement Income Fund
- ---------------------------------------------------------------- ------------------------------------------------------------------
<S> <C> <C>
Real estate risk is the risk that real estate investment We may invest a substantial portion of the portfolio in real
trusts held in the portfolio will be affected by declines in estate investment trusts, which generally offer high income
the value of real estate, unfavorable national or regional potential. We carefully select REITs based on the quality of
economic conditions, lack of mortgage availability, their management and their ability to generate substantial
overbuilding, declining rents and changes in interest rates. cashflow, which we believe can help to shield them from some of
the risks involved with real estate investing.
- ---------------------------------------------------------------- ------------------------------------------------------------------
Foreign risk is the risk that foreign securities may be We typically invest not more than 20% of the Fund's portfolio in
adversely affected by political instability, changes in foreign corporations often through American Depositary Receipts.
currency exchange rates, foreign economic conditions or ADRs are generally denominated in U.S. dollars and trade on a
inadequate regulatory and accounting standards. U.S. exchange. To the extent we invest in foreign securities, we
invest primarily in issuers of developed countries, which are less
likely to encounter these foreign risks than issuers in developing
countries. The Fund may use hedging techniques to help offset
potential foreign currency losses.
- ---------------------------------------------------------------- ------------------------------------------------------------------
Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price
that the Fund values them.
- ---------------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
12
<PAGE>
SPECIAL RISK CONSIDERATIONS
Generally
The Fund may invest a substantial portion of its assets in fixed-income
securities. The market values of fixed-income securities generally fall when
interest rates rise and, conversely, rise when interest rates fall. Lower-rated
and unrated fixed-income securities tend to reflect short-term corporate and
market developments to a greater extent than higher-rated fixed-income
securities, which react primarily to fluctuations in the general level of
interest rates. These lower-rated or unrated securities generally have higher
yields, but, as a result of factors such as reduced creditworthiness of issuers,
increased risk of default and a more limited and less liquid secondary market,
are subject to greater volatility and risk of loss of income and principal than
are higher-rated securities. The manager will attempt to reduce such risk
through portfolio diversification, credit analysis, and attention to trends in
the economy, industries and financial markets.
High-yield securities
The Fund may invest up to 45% of its total assets in bonds rated BBB or lower by
S&P or Fitch, Baa or lower by Moody's, or similarly rated by another rating
organization, and in unrated corporate bonds. See Appendix A to the Statement of
Additional Information for more rating information. Investing in these so-called
"junk" or "high-yield" bonds entails certain risks, including the risk of loss
of principal and default on interest payments, which may be greater than the
risks involved in investment grade bonds, and which should be considered by
investors contemplating an investment in the Fund. Such bonds are sometimes
issued by companies whose earnings at the time of issuance are less than the
projected debt service on the junk bonds. In addition to the considerations
discussed elsewhere in this Prospectus, those risks include the following:
Youth and volatility of the high-yield market. Although the market for
high-yield bonds has been in existence for many years, including periods of
economic downturns, the high-yield market grew rapidly during the long economic
expansion which took place in the United States during the 1980s. During that
economic expansion, the use of high-yield debt securities to fund highly
leveraged corporate acquisitions and restructurings increased dramatically. As a
result, the high-yield market grew substantially during that economic expansion.
Although experts disagree on the impact recessionary periods have had and will
have on the high-yield market, some analysts believe a protracted economic
downturn would severely disrupt the market for high-yield bonds, would adversely
affect the value of outstanding bonds and would adversely affect the ability of
high-yield issuers to repay principal and interest. Those analysts cite
volatility experienced in the high-yield market in the past as evidence for
their position. It is likely that protracted periods of economic uncertainty
would result in increased volatility in the market prices of high-yield bonds,
an increase in the number of high-yield bond defaults and corresponding
volatility in a Class' net asset value.
Redemptions. If, as a result of volatility in the high-yield market or other
factors, the Fund experiences substantial net redemptions of the Fund's shares
for a sustained period of time (i.e., more shares of the Fund are redeemed than
are purchased), the Fund may be required to sell certain of its high-yield
securities without regard to the investment merits of the securities to be sold.
If the Fund sells a substantial number of securities to generate proceeds for
redemptions, the asset base of the Fund will decrease and the Fund's expense
ratios may increase.
Liquidity and valuation. The secondary market for high-yield securities is
currently dominated by institutional investors, including mutual funds, and
certain financial institutions. There is generally no established retail
secondary market for high-yield securities. As a result, the secondary market
for high-yield securities is more limited and less liquid than other secondary
securities markets. The high-yield secondary market is particularly susceptible
to liquidity problems when the institutions that dominate it temporarily cease
buying bonds for regulatory, financial or other reasons, such as the savings and
loan crisis. A less liquid secondary market may have an adverse effect on the
Fund's ability to dispose of particular issues, when necessary, to meet the
Fund's liquidity needs or in response to a specific economic event, such as the
deterioration in the creditworthiness of the issuer. In addition, a less liquid
secondary market makes it more difficult for the Fund to obtain precise
valuations of the high-yield securities in its portfolio. During periods
involving such liquidity problems, judgment plays a greater role in valuing
high-yield securities than is normally the case. The secondary market for
high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. The privately placed high-yield
securities that the Fund may purchase are particularly susceptible to the
liquidity and valuation risks outlined above.
<PAGE>
Lower rated convertible securities and preferred stock
The Fund may invest in lower rated convertible securities and preferred stock
(i.e., "Ba" or lower for convertible securities or "ba" or lower for preferred
stock by Moody's or "BB" or lower for convertible securities or preferred stock
by S&P or similarly rated by other comparable rating agencies) or, if unrated,
determined to be of comparable quality by the manager. Investing in lower rated
convertible securities and preferred stock entails certain risks, including the
risk of loss of principal which may be greater than the risks involved in
investing in higher rated securities, and which should be considered by
investors contemplating an investment in the Fund. The Fund may have difficulty
13
<PAGE>
disposing of such securities because the trading market for such securities may
be thinner than the market for higher rated convertible securities and preferred
stock. To the extent a secondary trading market for these securities does exist,
it generally is not as liquid as the secondary trading market for higher rated
securities. The lack of a liquid secondary market as well as adverse publicity
with respect to these securities, may have an adverse impact on market price and
the Fund's ability to dispose of particular issues in response to a specific
economic event such as a deterioration in the creditworthiness of the issuer.
The lack of a liquid secondary market for certain securities also may make it
more difficult for the Fund to obtain accurate market quotations for purposes of
pricing the Fund's portfolio and calculating its net asset value. The market
behavior of convertible securities and preferred stocks in lower rating
categories is often more volatile than that of higher quality securities. Lower
quality convertible securities and preferred stocks are judged by Moody's and
S&P to have speculative elements or characteristics; their future cannot be
considered as well assured and earnings and asset protection may be moderate or
poor in comparison to investment grade securities. In addition, such lower
quality securities face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions, which could lead to inadequate
capacity to meet timely payments. A description of the ratings used by Moody's
and S&P for such securities is set forth in Appendix A to the Statement of
Additional Information. See also Special risk considerations--High-yield
securities.
Foreign Securities
The Fund has the ability to purchase income generating equity securities and
debt securities in any foreign country. Investors should consider carefully the
substantial risks involved in investing in securities issued by companies and
governments of foreign nations. These risks are in addition to the usual risks
inherent in domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations or other taxes imposed with respect to investments in foreign nations,
foreign exchange controls (which may include suspension of the ability to
transfer currency from a given country), default in foreign government
securities, political or social instability or diplomatic developments which
could affect investments in securities of issuers in those nations.
In addition, in many countries, there is substantially less publicly available
information about issuers than is available in reports about companies in the
United States. Foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, and auditing practices and requirements may
not be comparable to those applicable to United States companies. Consequently,
financial data about foreign companies may not accurately reflect the real
condition of those issuers and securities markets.
Further, the Fund may encounter difficulty or be unable to pursue legal remedies
and obtain judgments in foreign courts. Commission rates on securities
transactions in foreign countries, which are sometimes fixed rather than subject
to negotiation as in the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign markets may be longer
than in domestic markets, and may be subject to administrative uncertainties. In
many foreign countries, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States, and capital requirements for brokerage firms are
generally lower. The foreign securities markets of many of the countries in
which the Fund may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States.
<PAGE>
Emerging market securities. The Fund may invest up to 5% of its assets in income
generating equity securities and debt securities of issuers located in emerging
market nations. Compared to the United States and other developed countries,
emerging countries may have volatile social conditions, relatively unstable
governments and political systems, economies based on only a few industries and
economic structures that are less diverse and mature, and securities markets
that trade a small number of securities, which can result in a low or
nonexistent volume of trading. Prices in these securities markets tend to be
volatile and, in the past, securities in these countries have offered greater
potential for gain (as well as loss) than securities of companies located in
developed countries. Until recently, there has been an absence of a capital
market structure or market-oriented economy in certain emerging countries.
Further, investments and opportunities for investments by foreign investors are
subject to a variety of national policies and restrictions in many emerging
countries. Also, the repatriation of both investment income and capital from
several foreign countries is restricted and controlled under certain
regulations, including, in some cases, the need for certain governmental
consents. Countries such as those in which the Fund may invest may have
historically experienced and may continue to experience, substantial, and in
some periods extremely high rates of inflation for many years, high interest
rates, exchange rate fluctuations or currency depreciation, large amounts of
external debt, balance of payments and trade difficulties and extreme poverty
and unemployment. Other factors which may influence the ability or willingness
to service debt include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of its debt service burden to the economy as a whole,
its government's policy towards the International Monetary Fund, the World Bank
and other international agencies and the political constraints to which a
government debtor may be subject. The manager currently considers countries such
as Argentina, Brazil, Chile, China, Mexico, India, Portugal, Poland and Thailand
to be emerging markets. This list is not intended to be exhaustive, but rather
representative of the types of countries now considered by the manager to
present special investment risks.
14
<PAGE>
See Other investment policies and risk considerations for a further description
of certain risks associated with certain of the Fund's investments, including
the risks associated with investments in foreign government securities and
engaging in foreign currency transactions and options.
15
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services For its services to the Fund, the manager was paid
0.53%, as a percentage of average daily net assets which includes a reduction
due to expense caps.
Portfolio managers
Michael J. Dugan, Vice President/Senior Portfolio Manager, has primary
responsibility for making day-to-day investment decisions for Delaware
Retirement Income Fund. Mr.Dugan has been a member of the Fund's management team
since May 1999. Mr. Dugan earned a bachelors degree in Business administration
and a Masters degree in Finance from Loyola College in Baltimore. He rejoined
Delaware Investments in 1997 after serving as a Vice President at Thompson,
Siegel and Walmsley, where he managed value-oriented equity and balanced
portfolios. He initially joined Delaware Investments in 1985. He previously held
positions at Capitoline Investment Services, First National Bank of Maryland,
Mercantile Safe Deposit and Trust Company, and Bache and Company.
Gerald T. Nichols, Vice President/Senior Portfolio Manager, has primary
responsibility for making day-to-day investment decisions for the Fund regarding
its investments in debt securities. Mr. Nichols has been a member of the Fund's
management team since its inception. He is a graduate of the University of
Kansas, where he received a BS in Business Administration and an MS in Finance.
Prior to joining Delaware Investments, he was a high-yield credit analyst at
Waddell & Reed, Inc. and subsequently the investment officer for a private
merchant banking firm. He is a CFA charterholder.
16
<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>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
About your account
Investing in the Funds
17
<PAGE>
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 5.75% that you pay
when you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $50,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class A shares are also subject to an annual
12b-1 fee no greater than 0.30% of average daily net assets, which is lower
than the 12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.
Class A Sales Charges
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------ --------------------------
Sales charge
as % Sales charge as % of Dealer's commission as %
Amount of purchase of offering price amount invested Of offering price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
- ---------------------------------------------------------------------------------------------------------------
$50,000 but 4.75% 4.99% 4.00%
Under $100,000
- ---------------------------------------------------------------------------------------------------------------
$100,000 but 3.75% 3.90% 3.00%
Under $250,000
- ---------------------------------------------------------------------------------------------------------------
$250,000 but 2.50% 2.56% 2.00%
Under $500,000
- ---------------------------------------------------------------------------------------------------------------
$500,000 but 2.00% 2.04% 1.60%
Under $1 million
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you will 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 unless a specific waiver of the charge
applies.
<TABLE>
<CAPTION>
- ------------------------------ -------------------------- -------------------------- --------------------------
Sales charge
as % Sales charge as % of Dealer's commission as %
Amount of purchase of offering price amount invested of offering price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
$1,000,000 up to $5 million none none 1.00%
- ------------------------------ -------------------------- -------------------------- --------------------------
Next $20 million none none 0.50%
up to $25 million
- ------------------------------ -------------------------- -------------------------- --------------------------
Amount over $25 million none none 0.25%
- ------------------------------ -------------------------- -------------------------- --------------------------
</TABLE>
18
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge if you redeem your shares within six years after you
buy them.
o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 5%. The
contingent deferred sales charge is 4% during the second year, 3% during
the third and fourth years, 2% during the fifth year, 1% during the sixth
year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, absent
12b-1 fee waivers, they are subject to annual 12b-1 fees no greater than 1%
of average daily net assets, of which 0.25% are service fees paid to the
distributor, dealers or others for providing services and maintaining
accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and
any dividends paid on these shares are lower than dividends on Class A
shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%, which
is currently being waived. Conversion may occur as late as three months
after the eighth anniversary of purchase, during which time Class B's
higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge of 1% if you redeem your shares within 12 months
after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Absent 12b-1 fee waivers, Class C shares are subject to an annual 12b-1 fee
which may not be greater than 1% of average daily net assets, of which
0.25% are service fees paid to the distributor, dealers or others for
providing services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and
pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any
one time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
19
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Program How it works Share class
A B C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you 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 by 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>
20
<PAGE>
How to buy shares
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service. For more information about how to sign up for this service, call our
Shareholder Service Center at 800.523.1918.
21
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities , we use methods approved by the Board of Trustees that are designed
to price securities at their fair market value.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
22
<PAGE>
How to redeem shares
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000 you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit a bank wire fee may be deducted from your
proceeds. Bank information must be on file before you request a wire redemption.
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service. For
more information about how to sign up for this service, call our Shareholder
Service Center at 800.523.1918.
23
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares, not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
24
<PAGE>
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.
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 similar shares in other
funds, your new shares will be subject to the same contingent deferred sales
charge as the shares you originally purchased. The holding period for the CDSC
will also remain the same, with the amount of time you held your original shares
being credited toward the holding period of your new shares. You don't pay sales
charges on shares that you acquired through the reinvestment of dividends. You
may have to pay taxes on your exchange. When you exchange shares, you are
purchasing shares in another fund so you should be sure to get a copy of the
fund's prospectus and read it carefully before buying shares through an
exchange.
Dividends, distributions and taxes
Dividends, if any, will be paid monthly. Capital gains, if any, will be paid
twice a year. We automatically reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions. We will send you a statement each year
by January 31 detailing the amount and nature of all dividends and capital gains
that you were paid for the prior year.
25
<PAGE>
Other investment policies and risk considerations
U.S. government securities
U.S. Treasury securities are backed by the "full faith and credit" of the United
States. Securities issued or guaranteed by federal agencies and U.S. government
sponsored instrumentalities may or may not be backed by the full faith and
credit of the United States. In the case of securities not backed by the full
faith and credit of the United States, investors in such securities look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, the Federal Housing Administration, the Maritime
Administration, the Small Business Administration, and others. Certain agencies
and instrumentalities, such as the Government National Mortgage Association
("GNMA"), are, in effect, backed by the full faith and credit of the United
States through provisions in their charters that they may make "indefinite and
unlimited" drawings on the Treasury, if needed to service its debt. Debt from
certain other agencies and instrumentalities, including the Federal Home Loan
Bank and Federal National Mortgage Association, are not guaranteed by the United
States, but those institutions are protected by the discretionary authority for
the U.S. Treasury to purchase certain amounts of their securities to assist the
institutions in meeting their debt obligations. Finally, other agencies and
instrumentalities, such as the Farm Credit System, the Tennessee Valley
Authority and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under U.S. government supervision, but their debt
securities are backed only by the creditworthiness of those institutions, not
the U.S. government.
An instrumentality of a U.S. government agency is a government agency organized
under Federal charter with government supervision. Instrumentalities issuing or
guaranteeing securities include, among others, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate Credit
Banks and the Federal National Mortgage Association.
The maturities of such securities usually range from three months to thirty
years. While such securities are guaranteed as to principal and interest by the
U.S. government or its instrumentalities, their market values may fluctuate and
are not guaranteed, which may, along with the other securities in the Fund's
portfolio, cause a Class' daily net asset value to fluctuate.
Brady bonds
Among the foreign fixed-income securities in which the Fund may invest are Brady
Bonds. Brady Bonds are debt securities issued under the framework of the Brady
Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F.
Brady in 1989 as a mechanism for debtor nations to restructure their outstanding
external indebtedness (generally commercial bank debt). Brady Bonds are not
direct or indirect obligations of the U.S. government or any of its agencies or
instrumentalities and are not guaranteed by the U.S. government or any of its
agencies or instrumentalities. In so restructuring its external debt, a debtor
nation negotiates with its existing bank lenders, as well as multilateral
institutions such as the World Bank and the International Monetary Fund, to
exchange its commercial bank debt for newly issued bonds (Brady Bonds). The
Manager believes that economic reforms undertaken by countries in connection
with the issuance of Brady Bonds make the debt of countries which have issued or
have announced plans to issue Brady Bonds an attractive opportunity for
investment. Investors, however, should recognize that the Brady Plan only sets
forth general guiding principles for economic reform and debt reduction,
emphasizing that solutions must be negotiated on a case-by-case basis between
debtor nations and their creditors. In addition, Brady Bonds have been issued
only recently and, accordingly, do not have a long payment history.
<PAGE>
Foreign government securities
With respect to investment in debt issues of foreign governments, including
Brady Bonds, the ability of a foreign government or government-related issuer to
make timely and ultimate payments on its external debt obligations will also be
strongly influenced by the issuer's balance of payments, including export
performance, its access to international credits and investments, fluctuations
in interest rates and the extent of its foreign reserves. A country whose
exports are concentrated in a few commodities or whose economy depends on
certain strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. If foreign government or
government-related issuers cannot generate sufficient earnings from foreign
trade to service its external debt, they may need to depend on continuing loans
and aid from foreign governments, commercial banks and multilateral
organizations, and inflows of foreign investment. The commitment on the part of
these foreign governments, multilateral organizations and others to make such
disbursements may be conditioned on the government's implementation of economic
reforms and/or economic performance and the timely service of its obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due may curtail the willingness of such
third parties to lend funds, which may further impair the issuer's ability or
willingness to service its debts in a timely manner. The cost of servicing
external debt generally will also be adversely affected by rising international
interest rates because many external debt obligations bear interest at rates
which are adjusted based upon international interest rates. The ability to
service external debt will also depend on the level of the relevant government's
international currency reserves and its access to foreign exchange. Currency
devaluations may affect the ability of a government issuer to obtain sufficient
foreign exchange to service its external debt. If a foreign governmental issuer
defaults on its obligations, the Fund may have limited legal recourse against
the issuer and/or guarantor.
26
<PAGE>
Zero coupon bonds and pay-in-kind bonds
Although the Fund does not intend to purchase a substantial amount of zero
coupon bonds or PIK bonds, from time to time, the Fund may acquire zero coupon
bonds and, to a lesser extent, PIK bonds. Zero coupon bonds are debt obligations
which do not entitle the holder to any periodic payments of interest prior to
maturity or a specified date when the securities begin paying current interest,
and therefore are issued and traded at a discount from their face amounts or par
value. PIK bonds pay interest through the issuance to holders of additional
securities. Zero coupon bonds and PIK bonds are generally considered to be more
interest-sensitive than income bearing bonds, to be more speculative than
interest-bearing bonds, and to have certain tax consequences which could, under
certain circumstances, be adverse to the Fund. For example, with zero coupon
bonds, the Fund accrues, and is required to distribute to shareholders, income
on such bonds. However, the Fund may not receive the cash associated with this
income until the bonds are sold or mature. If the Fund did not have sufficient
cash to make the required distribution of accrued income, the Fund could be
required to sell other securities in its portfolio or to borrow to generate the
cash required.
Borrowings
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. The Fund will not borrow money in excess of one-third
of the value of its net assets. The Fund has no intention of increasing its net
income through borrowing. Any borrowing will be done from a bank and, to the
extent that such borrowing exceeds 5% of the value of the Fund's net assets,
asset coverage of at least 300% is required. In the event that such asset
coverage shall at any time fall below 300%, the Fund shall, within three days
thereafter (not including Sundays or holidays, or such longer period as the
Securities and Exchange Commission may prescribe by rules and regulations),
reduce the amount of its borrowings to such an extent that the asset coverage of
such borrowings shall be at least 300%. The Fund will not pledge more than 10%
of its net assets, or issue senior securities as defined in the 1940 Act, except
for notes to banks. Investment securities will normally not be purchased while
the Fund has an outstanding borrowing.
When-issued and delayed delivery securities
The Fund may purchase securities on a when-issued or delayed delivery basis. In
such transactions, instruments are purchased with payment and delivery taking
place in the future in order to secure what is considered to be an advantageous
yield or price at the time of the transaction. Delivery of and payment for these
securities may take as long as a month or more after the date of the purchase
commitment. The Fund will designate cash or securities in amounts sufficient to
cover its obligations, and will value the designated assets daily. The payment
obligation and the interest rates that will be received are each fixed at the
time the Fund enters into the commitment and no interest accrues to the Fund
until settlement. Thus, it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general level
of interest rates has changed.
Portfolio loan transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers or
institutional investors.
The major risk to which the Fund would be exposed on a loan transaction is the
risk that the borrower would become bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the manager, subject to overall
supervision by the Board of Trustees, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the manager.
Rule 144A securities
The Fund may invest in restricted securities, including privately placed
securities, some of which may be eligible for resale without registration
pursuant to Rule 144A ("Rule 144A Securities") under the Securities Act of 1933.
Rule 144A permits many privately placed and legally restricted securities to be
freely traded among certain institutional buyers such as the Fund. The Fund may
invest no more than 15% of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Trustees has delegated to the manager
the day-to-day function of determining whether or not individual Rule 144A
Securities are liquid for purposes of the Fund's 15% limitation on investments
in illiquid securities. The Board has instructed the manager to consider the
following factors in determining the liquidity of a Rule 144A Security:
o the frequency of trades and trading volume for the security
o whether at least three dealers are willing to purchase or sell the security
and the number of potential purchasers
27
<PAGE>
o whether at least two dealers are making a market in the security
o the nature of the security and the nature of the marketplace trades (e.g.,
the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer)
If the manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Fund's
holdings of illiquid securities exceed the Fund's 15% limit on investments in
such securities, the manager will determine what action to take to ensure that
the Fund continues to adhere to such limitation.
Investment company securities
Any investments that the Fund makes in either closed-end or open-end investment
companies will be limited by the 1940 Act, and would involve an indirect payment
of a portion of the expenses, including advisory fees, of such other investment
companies. Under the 1940 Act's current limitations, the Fund may not
o own more than 3% of the voting stock of another investment company
o invest more than 5% of the Fund's total assets in the shares of any one
investment company
o invest more than 10% of the Fund's total assets in shares of other
investment companies.
If the Fund elects to limit its investment in other investment companies to
closed-end investment companies, the 3% limitation described above is increased
to 10%. These percentage limitations also apply to the Fund's investments in
unregistered investment companies.
Repurchase agreements
In order to invest its short-term cash reserves or when in a temporary defensive
posture, the Fund may enter into repurchase agreements with banks or
broker/dealers deemed to be creditworthy by the manager, under guidelines
approved by the Board of Trustees. A repurchase agreement is a short-term
investment in which the purchaser (i.e. the Fund) acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, thereby determining the yield during the purchaser's holding period.
Generally, repurchase agreements are of short duration, often less than one week
but on occasion for longer periods. Not more than 15% of the Fund's assets may
be invested in illiquid assets of which no more than 10% may be invested in
repurchase agreements of over seven days' maturity . Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to the
Fund, if any, would be the difference between the repurchase price and the
market value of the security. The Fund will limit its investments in repurchase
agreements to those which the manager under guidelines of the Board of Trustees
determines to present minimal credit risks and which are of high quality. In
addition, the Fund must have collateral of at least 102% of the repurchase
price, including the portion representing the Fund's yield under such
agreements, which is monitored on a daily basis. The Fund will only enter in
repurchase agreements in which the collateral is comprised of U.S. government
securities.
28
<PAGE>
Foreign currency transactions
Although the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund will, however, from time to time, purchase or sell foreign
currencies and/or engage in forward foreign currency transactions in order to
expedite settlement of portfolio transactions and to minimize currency value
fluctuations. The Fund may conduct its foreign currency exchange transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into contracts to purchase or sell foreign
currencies at a future date (i.e., a "forward foreign currency" contract or
"forward" contract). A forward contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract, agreed upon by the parties, at a price set at the
time of the contract. The Fund will convert currency on a spot basis from time
to time, and investors should be aware of the costs of currency conversion.
The Fund may enter into forward contracts to "lock in" the price of a security
it has agreed to purchase or sell, in terms of U.S. dollars or other currencies
in which the transaction will be consummated. By entering into a forward
contract for the purchase or sale, for a fixed amount of U.S. dollars or foreign
currency, of the amount of foreign currency involved in the underlying security
transaction, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in currency exchange rates during the period
between the date the security is purchased or sold and the date on which payment
is made or received.
When the manager believes that the currency of a particular country may suffer a
significant decline against the U.S. dollar or against another currency, the
Fund may enter into a forward foreign currency contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the amount of foreign
currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency.
The Fund will not enter into forward contracts or maintain a net exposure to
such contracts where the consummation of the contracts would obligate the Fund
to deliver an amount of foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency.
At the maturity of a forward contract, the Fund may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions. With respect to forward foreign currency contracts, the precise
matching of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain.
It is impossible to forecast the market value of Fund securities at the
expiration of the contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of a security if its market value exceeds the amount of foreign
currency the Fund is obligated to deliver.
Options
The manager may employ options techniques in an attempt to protect appreciation
attained and to increase shareholder return by seeking to take advantage of the
liquidity available in the options market. The Fund may purchase call options on
foreign or U.S. securities and indices and enter into related closing
transactions and the Fund may write covered call options on such securities. The
Fund may also purchase put options on such securities and indices and enter into
related closing transactions.
A call option enables the purchaser, in return for the premium paid, to purchase
securities from the writer of the option at an agreed price up to an agreed
date. A covered call option obligates the writer, in return for the premium
received, to sell the securities subject to the option to the purchaser of the
option for an agreed upon price up to an agreed date. The advantage is that the
purchaser may hedge against an increase in the price of securities it ultimately
wishes to buy or take advantage of a rise in a particular index. The Fund will
only purchase call options to the extent that premiums paid on all outstanding
call options do not exceed 2% of its total assets. The Fund may write covered
call options in an amount not to exceed 10% of its total assets.
<PAGE>
A put option enables the purchaser of the option, in return for the premium
paid, to sell the security underlying the option to the writer at the exercise
price during the option period, and the writer of the option has the obligation
to purchase the security from the purchaser of the option. The Fund will only
purchase put options to the extent that the premiums on all outstanding put
options do not exceed 2% of its total assets. The advantage is that the
purchaser can be protected should the market value of the security decline or
should a particular index decline.
29
<PAGE>
An option on a securities index gives the purchaser of the option, in return for
the premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of the
option.
Closing transactions essentially let the Fund offset put options or call options
prior to exercise or expiration. If the Fund cannot effect closing transactions,
it may have to hold a security it would otherwise sell or deliver a security it
might want to hold.
In purchasing put and call options, the premium paid by the Fund plus any
transaction costs will reduce any benefit realized by the Fund upon exercise of
the option. With respect to writing covered call options, the Fund may lose the
potential market appreciation of the securities subject to the option, if the
manager's judgment is wrong and the price of the security moves in the opposite
direction from what was anticipated.
The Fund may use both Exchange-traded and over-the-counter options. Certain
over-the-counter options may be illiquid. The Fund will only invest in such
options to the extent consistent with its 15% limitation on investment in
illiquid securities. The Fund will comply with Securities and Exchange
Commission asset segregation and coverage requirements when engaging in these
types of transactions.
Futures
Futures contracts are agreements for the purchase or sale for future delivery of
securities. When a futures contract is sold, the Fund incurs a contractual
obligation to deliver the securities underlying the contract at a specified
price on a specified date during a specified future month. A purchase of a
futures contract means the acquisition of a contractual right to obtain delivery
to the Fund of the securities called for by the contract at a specified price
during a specified future month.
While futures contracts provide for the delivery of securities, deliveries
usually do not occur. Contracts are generally terminated by entering into an
offsetting transaction. When the Fund enters into a futures transaction, it must
deliver to the futures commission merchant selected by the Fund an amount
referred to as "initial margin." This amount is held by the futures commission
merchant or in an account at the Fund's custodian bank. Thereafter, a "variation
margin" may be paid by the Fund to, or drawn by the Fund from, such account in
accordance with controls set for such account, depending upon changes in the
price of the underlying securities subject to the futures contract.
30
<PAGE>
The Fund may also purchase and write options to buy or sell futures contracts.
Options on futures are similar to options on securities except that options on
futures give the purchaser the right, in return for the premium paid, to assume
a position in a futures contract, rather than actually to purchase or sell the
futures contract, at a specified exercise price at any time during the period of
the option.
The purpose of the purchase or sale of futures contracts with respect to a
certain security is to protect the Fund against the adverse effects of
fluctuations in interest rates without actually buying or selling that security.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to hedge in anticipation of subsequent purchases of
securities at higher prices.
Foreign currency futures contracts operate similarly to futures contracts
related to securities. When the Fund sells a futures contract on a foreign
currency it is obligated to deliver that foreign currency at a specified future
date. Similarly, a purchase by the Fund gives it a contractual right to receive
a foreign currency. This enables the Fund to "lock-in" exchange rates.
The Fund's designation as an open-end investment company and as a diversified
fund may not be changed unless authorized by the vote of a majority of the
Fund's outstanding voting securities. A "majority vote of the outstanding voting
securities" is the vote by the holders of the lesser of a) 67% or more of the
Fund's voting securities present in person or represented by proxy if the
holders of more than 50% of the outstanding voting securities of the Fund are
present or represented by proxy; or b) more than 50% of the outstanding voting
securities. The Statement of Additional Information lists other more specific
investment restrictions of the Fund which may not be changed without a majority
shareholder vote.
31
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund has taken steps to obtain satisfactory assurances that
its major service providers have taken steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. Consistent with the investment
process utilized for the selection of securities for the Fund, the portfolio
managers focus solely on the quantitative characteristics of the equity
securities in which the Fund invests. This process assumes that the effect of
the Year 2000 problem on each company is already reflected in those
characteristics. Accordingly, except for surveying the widely reported
information regarding the companies in which the Fund invests, no additional
Year 2000 due diligence is performed. However, there can be no guarantees that,
even with these efforts, they will be able to predict the effect of Year 2000 on
any company or the performance of its securities.
32
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
Financial highlights are not shown for Class B and Class C shares because these
shares were not operating as of the close of the fiscal year.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------- -----------------------------------------
Class A Shares
-----------------------------------------
Year Year Period
Ended Ended 12/2/96(1)
11/30 11/30 through
Delaware Retirement Income Fund 1999 1998 11/30/97
- ----------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.160 $11.700 $8.500
Income (loss) from investment operations:
Net investment income(2) 0.431 0.632 0.558
Net realized and unrealized gain (loss) on investments (0.156) (0.402) 2.685
------- ------- -----
Total from investment operations 0.275 0.230 3.243
----- ----- -----
Less dividends and distributions:
Dividends from net investment income (0.620) (0.570) (0.043)
Distributions from net realized gain on investments (0.385) (1.200) none
------- ------- -------
Total dividends and distributions (1.005) (1.770) (0.043)
------- ------- -------
Net asset value, end of period $9.430 $10.160 $11.700
====== ======= =======
Total return(3) 3.14% 2.22% 38.31%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $22 $23 $9
Ratio of expenses to average net assets 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.17% 1.62% 2.18%
Ratio of net investment income to average net assets 4.46% 6.01% 5.48%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 4.03% 5.14% 4.05%
Portfolio turnover 42% 91% 196%
- ----------------------------------------------------------------------- ------------- ------------- -------------
</TABLE>
(1) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at
net asset value and does not reflect the impact of a sales charge.
Total return reflects the expense limitations in effect for the Fund.
33
<PAGE>
How to read the financial highlights
Net investment income
Net investment income includes dividend and interest income earned from a 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 investments at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less dividends and distributions-Distributions from net realized
gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of a fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income 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.
34
<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.
35
<PAGE>
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See 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.
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.
36
<PAGE>
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.
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.
S&P 500 Composite Stock Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
37
<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.
38
<PAGE>
Delaware Retirement Income 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.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement
plan accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24
hours a day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4997
- ---------------------------------------------------------- -----------------
Delaware Retirement Income Fund Symbol CUSIP
- ---------------------------------------------------------- -----------------
Class A 24610B107
- ---------------------------------------------------------- -----------------
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002[--]PP 1/00
39
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware Retirement Income Fund
Institutional Class
Prospectus
January 31, 2000
Total Return Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
Fund profile page
Delaware Retirement Income Fund
How we manage the Fund page
Our investment strategies
The securities we invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Exchanges
Dividends, distributions and taxes
Other investment policies and risk considerations page
Certain management considerations page
Financial highlights page
Glossary page
2
<PAGE>
Profile: Delaware Retirement Income Fund
What is the Fund's goal?
Delaware Retirement Income Fund seeks to provide high current income and an
investment that has the potential for capital appreciation. Although the Fund
will strive to achieve its goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in income generating securities of large, well-established
companies and in debt securities including high-yield, high risk corporate
bonds, investment grade fixed income securities and U.S. government securities.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by declines in stock and bond prices, which could be caused by
a drop in the stock market, economic recession or poor performance from
particular companies or sectors, or increases in interest rates. For a more
complete discussion of risk, please turn to page __.
Delaware Retirement Income Fund may invest up to 45% of its net assets in
high-yield, higher risk corporate bonds, commonly known as junk bonds. These
bonds involve the risk that the issuing company may be unable to pay interest or
repay principal. Although high-yield bonds have credit quality ratings which are
below investment grade, they can offer high income potential which we believe
can make a positive contribution to the Fund's performance.
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.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
Who should invest in the Fund
o Investors with long-term financial goals.
o Investors looking for growth potential combined with regular income.
o Investors looking for supplemental monthly income from an investment that
also offers possible protection against inflation.
Who should not invest in the Fund
o Investors with short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors seeking an investment primarily in fixed income securities.
3
<PAGE>
How has Delaware Retirement Income Fund performed?
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show returns for the Fund's Institutional Class shares for the past
three calendar years, as well as the average annual returns of these shares for
the one-year and lifetime periods. The Fund's past performance is not
necessarily an indication of how it will perform in the future. The returns
reflect voluntary expense caps. The returns would be lower without the voluntary
caps.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN
(INSTITUTIONAL CLASS)]
Year-by-year total return
- --------------- ------------ ------------
1997 1998 1999
- --------------- ------------ ------------
33.86% 2.14% 4.74%
- --------------- ------------ ------------
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 12.93% for the quarter ended September 30, 1997 and its lowest
quarterly return was - 9.48% for the quarter ended September 30, 1998.
<TABLE>
<CAPTION>
Average annual return for period ending 12/31/99
<S> <C> <C>
Institutional Class S&P 500 Composite
(Inception 12/2/96) Stock Index
1 year 4.74% 21.03%
Lifetime 14.22% 27.56%
</TABLE>
The Fund's returns are compared to the performance of the S&P 500 Index. You
should remember that unlike the Fund, the index is unmanaged and doesn't include
the costs of operating a mutual fund, such as the costs of buying, selling and
holding the securities.
4
<PAGE>
What are Delaware Retirement Income Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
------------------------------------------------------ ----------
Maximum sales charge (load) imposed on
purchases as a percentage of offering price none
------------------------------------------------------ ----------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
- ------------------------------------------------------ ----------
Maximum sales charge (load) imposed on
reinvested dividends none
------------------------------------------------------ ----------
Redemption fees none
------------------------------------------------------ ----------
Exchange Fees(1) none
------------------------------------------------------ ----------
Annual fund operating expenses are deducted from the Fund's assets.
------------------------------------------------------ -----------
Management fees 0.65%
------------------------------------------------------ -----------
Distribution and service (12b-1) fees None
====
------------------------------------------------------ -----------
Other expenses 0.22%
------------------------------------------------------ -----------
Total operating expenses(2) 0.87%
------------------------------------------------------ -----------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(3) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
--------------- ------------
1 year $89
--------------- ------------
3 years $278
--------------- ------------
5 years $482
--------------- ------------
10 years $1,073
--------------- ------------
<PAGE>
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The investment manager has agreed to waive fees and pay expenses from the
commencement of the Fund's operations through May 31, 2000, in order to
prevent total operating expenses (excluding any taxes, interest, brokerage
fees and extraordinary expenses) from exceeding 0.75% of average daily net
assets. The fees and expenses shown in the table above do not reflect the
voluntary expense caps by the manager. The following table shows operating
expenses which are based on the most recently completed fiscal year and
reflect the manager's current fee waivers and payments.
-----------------------------------------------------------------------
Fund operating expenses including voluntary expense caps in effect
until May 31, 2000
CLASS Institutional Class
------------------------------------------------ ----------------------
Management fees 0.53%
------------------------------------------------ ----------------------
Distribution and service (12b-1) fees 0.00%
------------------------------------------------ ----------------------
Other expenses 0.22%
------------------------------------------------ ----------------------
Total operating expenses 0.75%
------------------------------------------------ ----------------------
(3) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show. This example does not reflect the voluntary expense cap described in
footnote 2.
5
<PAGE>
How we manage the Fund
Our investment strategies
We research individual companies and analyze economic and market conditions,
seeking to identify the securities or market sectors that we think are the best
investments for Delaware Retirement Income Fund. Following is a description of
how the portfolio managers pursue the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
The manager will seek to achieve the Fund's investment objective by investing in
a combination of income generating equity securities and debt securities
including, but not limited to, dividend paying common stocks, securities of real
estate investment trusts, preferred stocks, warrants, rights, convertible
securities, non-convertible debt securities, high-yield, high risk securities,
investment grade fixed-income securities, U.S. government securities and foreign
equity and fixed-income securities. Under normal circumstances, at least 50% of
the Fund's total assets will be invested in income generating equity securities.
In making investments in income generating equity securities, the Fund may
invest an unlimited portion of its total assets in convertible securities
without regard to credit quality. While debt securities may comprise up to 50%
of the Fund's total assets, no more than 45% of the Fund's total assets will be
invested in high-yield, high risk debt securities. No more than 25% of the
Fund's total assets will be invested in any one industry sector nor, as to 75%
of the Fund's total assets, will more than 5% be invested in securities of any
one issuer. The Fund may invest up to 20% of its total assets in foreign equity
and debt securities. The Fund will not, however, invest more than 5% of its
total assets in securities of issuers principally located or principally
operating in markets of emerging countries.
Within the percentage guidelines noted above, the manager will determine the
proportion of the Fund's assets that will be allocated to income generating
equity securities and equity equivalents and to debt securities, based on its
analysis of economic and market conditions and its assessment of the income and
potential for appreciation that can be achieved from investment in such asset
classes. It is expected that the proportion of the Fund's total assets invested
in income generating equity securities and equity equivalent securities will
vary from 50% to 100% of the Fund's total assets. The proportion of the Fund's
total assets in debt securities will correspondingly vary from 0% to 50% of the
Fund's total assets.
The Fund's investment objective is non-fundamental. This means that the Board of
Trustees may change the objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders before the change in the
objective became effective.
Portfolio turnover
The Fund anticipates that its annual portfolio turnover will generally be less
than 100%. A turnover rate of 100% would occur if a Fund sold and replaced
securities valued at 100% of its net assets within one year.
The securities we invest in
The following is a more detailed description of some of the securities in which
the Fund may invest.
Common stock
Common stock is generally considered to be shares of a corporation that entitle
the holder to a pro-rata share of the profits of the corporation, if any,
without a preference over any other shareholder or class of shareholders,
including holders of the corporation's preferred stock and other senior equity.
Common stock usually carries with it the right to vote and frequently an
exclusive right to do so. Holders of common stock also have the right to
participate in the remaining assets of the corporation after all other claims
are paid, including those of debt securities and preferred stock. In selecting
common stocks for investment, the manager will focus primarily on a security's
dividend-paying capacity rather than on its potential for appreciation.
6
<PAGE>
Preferred stock
Generally, preferred stock receives dividends prior to distributions on common
stock and usually has a priority of claim over common stockholders if the issuer
of the stock is liquidated. Unlike common stock, preferred stock does not
usually have voting rights; preferred stock, in some instances, is convertible
into common stock. Dividends on typical preferred stock are cumulative, causing
dividends to accrue even if not declared by the issuer's Board of Trustees.
There is, however, no assurance that dividends will be declared by the Boards of
Trustees of issuers of the preferred stocks in which the Fund invests.
Convertible securities
Traditional convertible securities include corporate bonds, notes and preferred
stocks that may be converted into or exchanged for common stock, and other
securities that also provide an opportunity for equity participation. These
securities are generally convertible either at a stated price or a stated rate
(that is, for a specific number of shares of common stock or other security). As
with other fixed-income securities, the price of a convertible security to some
extent varies inversely with interest rates. While providing a fixed-income
stream (generally higher in yield than the income derivable from a common stock
but lower than that afforded by a non-convertible debt security), a convertible
security also affords the investor an opportunity, through its conversion
feature, to participate in the capital appreciation of the common stock into
which it is convertible. As the market price of the underlying common stock
declines, convertible securities tend to trade increasingly on a yield basis and
so may not experience market value declines to the same extent as the underlying
common stock. When the market price of the underlying common stock increases,
the price of a convertible security tends to rise as a reflection of the value
of the underlying common stock. To obtain such a higher yield, the Fund may be
required to pay for a convertible security an amount in excess of the value of
the underlying common stock. Common stock acquired by the Fund upon conversion
of a convertible security will generally be held for so long as the manager
anticipates such stock will provide the Fund with opportunities which are
consistent with the Fund's investment objectives and policies. Convertible
securities in which the Fund may invest may be rated below investment grade
(i.e., "Ba" or lower by Moody's or "BB" or lower by S&P or similarly rated by
other comparable rating agencies) or, if unrated, determined to be of comparable
quality by the manager. Because the Fund treats convertible securities as an
equity equivalent security, it will not consider credit quality of convertible
securities in making its investment decisions.
Real estate investment trust securities
Real Estate Investment Trusts ("REITs") are pooled investment vehicles that
invest primarily in income-producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Like investment companies such as the Fund, REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code (the "Code"). REITs are subject to
substantial cash flow dependency, defaults by borrowers, self-liquidation, and
the risk of failing to qualify for tax-free pass-through of income under the
Code, and/or maintain exemptions from the Investment Company Act of 1940 (the
"1940 Act"). Equity REITs may be affected by changes in the value of the
underlying property owned by the REITs, while mortgage REITs may be affected by
the quality of any credit extended.
REITs invest all of their assets in the real estate and real estate related
sectors of the economy, and are subject to the risks of financing projects.
REITs may have limited financial resources, may trade less frequently and in a
limited volume, and are more volatile than the high-yield, high risk securities
in which the Fund may also invest.
High-yield, high risk securities
High-yield, high risk debt securities, like all debt securities, represent money
borrowed that must be repaid and has a fixed amount, a specific maturity or
maturities and usually a specific rate of interest or original purchase
discount. Unlike common and preferred stock, debt securities, including
high-yield, high risk debt securities, do not represent an equity interest in
the issuer. However, debt securities have a priority claim over stockholders if
the issuer is liquidated. The Fund may invest in a wide variety of debt
securities, although it is anticipated that under normal market conditions, the
Fund primarily will invest in high-yield corporate debt obligations, including
zero coupon bonds and pay-in-kind securities ("PIKs"), debentures, convertible
debentures, corporate notes (including convertible notes) and units consisting
of bonds with stock or warrants to buy stock attached. See Zero coupon bonds and
Pay-in-kind bonds under Other investment policies and risk considerations. The
Fund will invest in both rated and unrated bonds. The rated bonds that the Fund
may purchase in this sector of its portfolio will be rated BBB or lower by S&P
or Fitch IBCA, Inc., Baa or lower by Moody's, or similarly rated by another
nationally recognized statistical rating organization. See Appendix A to the
Statement of Additional Information for more rating information and High-yield
securities under Special risk considerations for a description of the risks
associated with investing in lower-rated fixed-income securities. Unrated bonds
may be more speculative in nature than rated bonds.
7
<PAGE>
Foreign securities
The Fund may invest up to 20% of its total assets in securities of issuers
organized or having a majority of their assets or deriving a majority of their
operating income in foreign countries. These income generating equity securities
and debt securities include foreign government securities, equity securities and
debt obligations of foreign companies, and securities issued by supranational
entities. A supranational entity is an entity established or financially
supported by the national governments of one or more countries to promote
reconstruction or development. Examples of supranational entities include, among
others, the International Bank for Reconstruction and Development (more commonly
known as the World Bank), the European Economic Community, the European Coal and
Steel Community, the European Investment Bank, the Inter-Development Bank, the
Export-Import Bank and the Asian Development Bank.
The Fund may invest in sponsored and unsponsored American Depositary Receipts,
European Depositary Receipts, or Global Depositary Receipts ("Depositary
Receipts"). Depositary Receipts are receipts typically issued by a bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. "sponsored" Depositary Receipts are issued jointly by the issuer of
the underlying security and a depository, and "unsponsored" Depositary Receipts
are issued without the participation of the issuer of the deposited security.
The Fund may also invest in Brady Bonds, which are described more fully under
the Other Investment policies and risk considerations section of this
Prospectus.
The Fund may invest in securities issued in any currency and may hold foreign
currencies. Securities of issuers within a given country may be denominated in
the currency of another country or in multinational currency units, such as the
Euro. The Fund may, from time to time, purchase or sell foreign currencies
and/or engage in forward foreign currency transactions in order to expedite
settlement of Fund transactions and to minimize currency value fluctuations. See
Other investment policies and risk considerations for a further description of
the Fund's foreign currency transactions.
While the Fund may purchase securities of issuers in any foreign country,
developed and underdeveloped, no more than 5% of the Fund's assets may be
invested in direct obligations or equity securities of issuers located in
emerging market countries. See Emerging market securities under Special risk
considerations.
The Fund will invest in both rated and unrated foreign securities. The rated
securities that the Fund may purchase in the international sector of its
portfolio may include those rated BBB or lower by S&P or Fitch, Baa or lower by
Moody's, or similarly rated by another nationally reorganized statistical rating
organization. See Appendix A to the Statement of Additional Information for more
rating information and Foreign securities and High-yield securities under
Special risk considerations for a description of the risks associated with
investing in foreign securities and lower-rated securities.
The Fund may also invest in zero coupon bonds, purchase shares of other
investment companies and may engage in short sales. See Zero coupon bonds and
Pay-in-kind bonds and Investment company securities under Other investment
polices and risk considerations.
In unusual market conditions, in order to meet redemption requests, for
temporary defensive purposes, and pending investment or at such other times when
suitable income generating equity or debt securities are not available, the Fund
may hold a substantial portion of its assets in (1) cash, (2) debt securities
issued by the U.S. government, its agencies or instrumentalities, (3) commercial
paper, (4) certificates of deposit and bankers' acceptances or repurchase
agreements with respect to any of the foregoing investments. The Fund will only
invest in commercial paper of companies rated "A-2" or better by S&P or "P-2" or
better by Moody's or similarly rated by another comparable rating agency or, if
not so rated, of equivalent investment quality as determined by the manager. See
Appendix A to the Statement of Additional Information for more rating
information.
8
<PAGE>
See Other investment policies and risk considerations for a description of the
Fund's other investment policies and for a further description of some of the
policies described above.
The remaining investment policies of the Fund not identified above or in
Statement of Additional Information are not fundamental and may be changed by
the Fund's Board of Trustees without a shareholder vote.
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. Because of the nature of the Delaware Retirement
Income Fund, you should consider an investment in it to be a long-term
investment that typically provides the best results when held for a number of
years. The following are the chief risks you assume when investing in Delaware
Retirement Income Fund. Please see the Statement of Additional Information for
further discussion of these risks and the other risks not discussed here.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- ------------------------------------------------------------------
Risks How we strive to manage them
Delaware Retirement Income Fund
- ---------------------------------------------------------------- ------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the securities We invest in several different asset classes including both equity
in a certain market -- like the stock or bond market -- will and fixed income, which tend to increase and decline in different
decline in value because of factors such as economic economic and investment conditions. We also maintain a long-
conditions, future expectations or investor confidence. term investment approach and focus on securities, which we
believe can perform well over an extended time frame regardless
of interim market fluctuations.
- ---------------------------------------------------------------- ------------------------------------------------------------------
Industry and security risk is the risk that the value of We limit the amount of each Fund's assets invested in any one
securities in a particular industry or the value of an industry and in any individual security or issuer. We also follow
individual stock or bond will decline because of changing a rigorous selection process when choosing securities for the
expectations for the performance of that industry or for the portfolio.
individual company issuing the stock or bond.
- ---------------------------------------------------------------- ------------------------------------------------------------------
Interest rate risk is the risk that securities will decrease in We do not try to increase return by predicting and aggressively
value if interest rates rise. The risk is greater for bonds capitalizing on interest rate moves. We monitor economic
with longer maturities than for those with shorter maturities. conditions and make adjustments as necessary to guard against
undue risk from interest rate changes.
- ---------------------------------------------------------------- ------------------------------------------------------------------
Credit risk is the possibility that a bond's issuer (or an We carefully evaluate the financial situation of each entity whose
entity that insures the bond) will be unable to make timely bonds are held in the portfolio. We also hold a relatively large
payments of interest and principal. number of different bonds to minimize the risk should any in-
dividual issuer be unable to pay its interest or repay principal.
This is a substantial risk of the Fund because it may invest up to
45% in fixed income securities rated below investment grade.
- ---------------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------- ------------------------------------------------------------------
Risks How we strive to manage them
Delaware Retirement Income Fund
- ---------------------------------------------------------------- ------------------------------------------------------------------
<S> <C>
Real estate risk is the risk that real estate investment trusts We may invest a substantial portion of the portfolio in real
held in the portfolio will be affected by declines in the value estate investment trusts, which generally offer high income
of real estate, unfavorable national or regional economic potential. We carefully select REITs based on the quality of their
conditions, lack of mortgage availability, overbuilding, management and their ability to generate substantial cashflow,
declining rents and changes in interest rates. which we believe can help to shield them from some of the risks
involved with real estate investing.
- ---------------------------------------------------------------- ------------------------------------------------------------------
Foreign risk is the risk that foreign securities may be We typically invest not more than 20% of the Fund's portfolio in
adversely affected by political instability, changes in foreign corporations often through American Depositary
currency exchange rates, foreign economic conditions or Receipts. ADRs are generally denominated in U.S. dollars and
inadequate regulatory and accounting standards. trade on a U.S. exchange. To the extent we invest in foreign
securities, we invest primarily in issuers of developed countries,
which are less likely to encounter these foreign risks than issuers
in developing countries. The Fund may use hedging techniques
to help offset potential foreign currency losses.
- ---------------------------------------------------------------- ------------------------------------------------------------------
Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price
that the Fund values them.
- ---------------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
10
<PAGE>
SPECIAL RISK CONSIDERATIONS
Generally
The Fund may invest a substantial portion of its assets in fixed-income
securities. The market values of fixed-income securities generally fall when
interest rates rise and, conversely, rise when interest rates fall. Lower-rated
and unrated fixed-income securities tend to reflect short-term corporate and
market developments to a greater extent than higher-rated fixed-income
securities, which react primarily to fluctuations in the general level of
interest rates. These lower-rated or unrated securities generally have higher
yields, but, as a result of factors such as reduced creditworthiness of issuers,
increased risk of default and a more limited and less liquid secondary market,
are subject to greater volatility and risk of loss of income and principal than
are higher-rated securities. The manager will attempt to reduce such risk
through portfolio diversification, credit analysis, and attention to trends in
the economy, industries and financial markets.
High-yield securities
The Fund may invest up to 45% of its total assets in bonds rated BBB or lower by
S&P or Fitch, Baa or lower by Moody's, or similarly rated by another rating
organization, and in unrated corporate bonds. See Appendix A to the Statement of
Additional Information for more rating information. Investing in these so-called
"junk" or "high-yield" bonds entails certain risks, including the risk of loss
of principal and default on interest payments, which may be greater than the
risks involved in investment grade bonds, and which should be considered by
investors contemplating an investment in the Fund. Such bonds are sometimes
issued by companies whose earnings at the time of issuance are less than the
projected debt service on the junk bonds. In addition to the considerations
discussed elsewhere in this Prospectus, those risks include the following:
Youth and volatility of the high-yield market. Although the market for
high-yield bonds has been in existence for many years, including periods of
economic downturns, the high-yield market grew rapidly during the long economic
expansion which took place in the United States during the 1980s. During that
economic expansion, the use of high-yield debt securities to fund highly
leveraged corporate acquisitions and restructurings increased dramatically. As a
result, the high-yield market grew substantially during that economic expansion.
Although experts disagree on the impact recessionary periods have had and will
have on the high-yield market, some analysts believe a protracted economic
downturn would severely disrupt the market for high-yield bonds, would adversely
affect the value of outstanding bonds and would adversely affect the ability of
high-yield issuers to repay principal and interest. Those analysts cite
volatility experienced in the high-yield market in the past as evidence for
their position. It is likely that protracted periods of economic uncertainty
would result in increased volatility in the market prices of high-yield bonds,
an increase in the number of high-yield bond defaults and corresponding
volatility in a Class' net asset value.
Redemptions. If, as a result of volatility in the high-yield market or other
factors, the Fund experiences substantial net redemptions of the Fund's shares
for a sustained period of time (i.e., more shares of the Fund are redeemed than
are purchased), the Fund may be required to sell certain of its high-yield
securities without regard to the investment merits of the securities to be sold.
If the Fund sells a substantial number of securities to generate proceeds for
redemptions, the asset base of the Fund will decrease and the Fund's expense
ratios may increase.
Liquidity and valuation. The secondary market for high-yield securities is
currently dominated by institutional investors, including mutual funds, and
certain financial institutions. There is generally no established retail
secondary market for high-yield securities. As a result, the secondary market
for high-yield securities is more limited and less liquid than other secondary
securities markets. The high-yield secondary market is particularly susceptible
to liquidity problems when the institutions that dominate it temporarily cease
buying bonds for regulatory, financial or other reasons, such as the savings and
loan crisis. A less liquid secondary market may have an adverse effect on the
Fund's ability to dispose of particular issues, when necessary, to meet the
Fund's liquidity needs or in response to a specific economic event, such as the
deterioration in the creditworthiness of the issuer. In addition, a less liquid
secondary market makes it more difficult for the Fund to obtain precise
valuations of the high-yield securities in its portfolio. During periods
involving such liquidity problems, judgment plays a greater role in valuing
high-yield securities than is normally the case. The secondary market for
high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. The privately placed high-yield
securities that the Fund may purchase are particularly susceptible to the
liquidity and valuation risks outlined above.
<PAGE>
Lower rated convertible securities and preferred stock
The Fund may invest in lower rated convertible securities and preferred stock
(i.e., "Ba" or lower for convertible securities or "ba" or lower for preferred
stock by Moody's or "BB" or lower for convertible securities or preferred stock
by S&P or similarly rated by other comparable rating agencies) or, if unrated,
determined to be of comparable quality by the manager. Investing in lower rated
convertible securities and preferred stock entails certain risks, including the
risk of loss of principal which may be greater than the risks involved in
investing in higher rated securities, and which should be considered by
investors contemplating an investment in the Fund. The Fund may have difficulty
disposing of such securities because the trading
11
<PAGE>
market for such securities may be thinner than the market for higher rated
convertible securities and preferred stock. To the extent a secondary trading
market for these securities does exist, it generally is not as liquid as the
secondary trading market for higher rated securities. The lack of a liquid
secondary market as well as adverse publicity with respect to these securities,
may have an adverse impact on market price and the Fund's ability to dispose of
particular issues in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of pricing the Fund's
portfolio and calculating its net asset value. The market behavior of
convertible securities and preferred stocks in lower rating categories is often
more volatile than that of higher quality securities. Lower quality convertible
securities and preferred stocks are judged by Moody's and S&P to have
speculative elements or characteristics; their future cannot be considered as
well assured and earnings and asset protection may be moderate or poor in
comparison to investment grade securities. In addition, such lower quality
securities face major ongoing uncertainties or exposure to adverse business,
financial or economic conditions, which could lead to inadequate capacity to
meet timely payments. A description of the ratings used by Moody's and S&P for
such securities is set forth in Appendix A to the Statement of Additional
Information. See also Special risk considerations--High-yield securities.
Foreign Securities
The Fund has the ability to purchase income generating equity securities and
debt securities in any foreign country. Investors should consider carefully the
substantial risks involved in investing in securities issued by companies and
governments of foreign nations. These risks are in addition to the usual risks
inherent in domestic investments. There is the possibility of expropriation,
nationalization or confiscatory taxation, taxation of income earned in foreign
nations or other taxes imposed with respect to investments in foreign nations,
foreign exchange controls (which may include suspension of the ability to
transfer currency from a given country), default in foreign government
securities, political or social instability or diplomatic developments which
could affect investments in securities of issuers in those nations.
In addition, in many countries, there is substantially less publicly available
information about issuers than is available in reports about companies in the
United States. Foreign companies are not subject to uniform accounting, auditing
and financial reporting standards, and auditing practices and requirements may
not be comparable to those applicable to United States companies. Consequently,
financial data about foreign companies may not accurately reflect the real
condition of those issuers and securities markets.
Further, the Fund may encounter difficulty or be unable to pursue legal remedies
and obtain judgments in foreign courts. Commission rates on securities
transactions in foreign countries, which are sometimes fixed rather than subject
to negotiation as in the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign markets may be longer
than in domestic markets, and may be subject to administrative uncertainties. In
many foreign countries, there is less government supervision and regulation of
business and industry practices, stock exchanges, brokers and listed companies
than in the United States, and capital requirements for brokerage firms are
generally lower. The foreign securities markets of many of the countries in
which the Fund may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States.
12
<PAGE>
Emerging market securities. The Fund may invest up to 5% of its assets in income
generating equity securities and debt securities of issuers located in emerging
market nations. Compared to the United States and other developed countries,
emerging countries may have volatile social conditions, relatively unstable
governments and political systems, economies based on only a few industries and
economic structures that are less diverse and mature, and securities markets
that trade a small number of securities, which can result in a low or
nonexistent volume of trading. Prices in these securities markets tend to be
volatile and, in the past, securities in these countries have offered greater
potential for gain (as well as loss) than securities of companies located in
developed countries. Until recently, there has been an absence of a capital
market structure or market-oriented economy in certain emerging countries.
Further, investments and opportunities for investments by foreign investors are
subject to a variety of national policies and restrictions in many emerging
countries. Also, the repatriation of both investment income and capital from
several foreign countries is restricted and controlled under certain
regulations, including, in some cases, the need for certain governmental
consents. Countries such as those in which the Fund may invest may have
historically experienced and may continue to experience, substantial, and in
some periods extremely high rates of inflation for many years, high interest
rates, exchange rate fluctuations or currency depreciation, large amounts of
external debt, balance of payments and trade difficulties and extreme poverty
and unemployment. Other factors which may influence the ability or willingness
to service debt include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of its debt service burden to the economy as a whole,
its government's policy towards the International Monetary Fund, the World Bank
and other international agencies and the political constraints to which a
government debtor may be subject. The manager currently considers countries such
as Argentina, Brazil, Chile, China, Mexico, India, Portugal, Poland and Thailand
to be emerging markets. This list is not intended to be exhaustive, but rather
representative of the types of countries now considered by the manager to
present special investment risks.
See Other investment policies and risk considerations for a further description
of certain risks associated with certain of the Fund's investments, including
the risks associated with investments in foreign government securities and
engaging in foreign currency transactions and options.
13
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services For its services to the Fund, the manager was paid
0.53%, as a percentage of average daily net assets which includes a reduction
due to expense caps.
Portfolio managers
Michael J. Dugan, Vice President/Senior Portfolio Manager, has primary
responsibility for making day-to-day investment decisions for Delaware
Retirement Income Fund. Mr.Dugan has been a member of the Fund's management team
since May 1999. Mr. Dugan earned a bachelors degree in Business administration
and a Masters degree in Finance from Loyola College in Baltimore. He rejoined
Delaware Investments in 1997 after serving as a Vice President at Thompson,
Siegel and Walmsley, where he managed value-oriented equity and balanced
portfolios. He initially joined Delaware Investments in 1985. He previously held
positions at Capitoline Investment Services, First National Bank of Maryland,
Mercantile Safe Deposit and Trust Company, and Bache and Company.
Gerald T. Nichols, Vice President/Senior Portfolio Manager, has primary
responsibility for making day-to-day investment decisions for the Fund regarding
its investments in debt securities. Mr. Nichols has been a member of the Fund's
management team since its inception. He is a graduate of the University of
Kansas, where he received a BS in Business Administration and an MS in Finance.
Prior to joining Delaware Investments, he was a high-yield credit analyst at
Waddell & Reed, Inc. and subsequently the investment officer for a private
merchant banking firm. He is a CFA charterholder.
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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>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
15
<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.
16
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How to buy shares
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
17
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in the Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the Board of Trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities, we use methods approved by the Board of Trustees that are designed
to price securities at their fair market value.
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<PAGE>
About your account (continued)
How to redeem shares
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
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<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time), you will receive the net asset value as determined on
the business day we receive your request. We will send you a check, normally the
next business day, but no later than seven days after we receive your request to
sell your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends, if any, will be paid monthly. Capital gains, if any, will be paid
twice a year. We automatically reinvest all dividends and any capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from this Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions. We will send you a statement each year
by January 31 detailing the amount and nature of all dividends and capital gains
that you were paid for the prior year.
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<PAGE>
Other investment policies and risk considerations
U.S. government securities
U.S. Treasury securities are backed by the "full faith and credit" of the United
States. Securities issued or guaranteed by federal agencies and U.S. government
sponsored instrumentalities may or may not be backed by the full faith and
credit of the United States. In the case of securities not backed by the full
faith and credit of the United States, investors in such securities look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, the Federal Housing Administration, the Maritime
Administration, the Small Business Administration, and others. Certain agencies
and instrumentalities, such as the Government National Mortgage Association
("GNMA"), are, in effect, backed by the full faith and credit of the United
States through provisions in their charters that they may make "indefinite and
unlimited" drawings on the Treasury, if needed to service its debt. Debt from
certain other agencies and instrumentalities, including the Federal Home Loan
Bank and Federal National Mortgage Association, are not guaranteed by the United
States, but those institutions are protected by the discretionary authority for
the U.S. Treasury to purchase certain amounts of their securities to assist the
institutions in meeting their debt obligations. Finally, other agencies and
instrumentalities, such as the Farm Credit System, the Tennessee Valley
Authority and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under U.S. government supervision, but their debt
securities are backed only by the creditworthiness of those institutions, not
the U.S. government.
An instrumentality of a U.S. government agency is a government agency organized
under Federal charter with government supervision. Instrumentalities issuing or
guaranteeing securities include, among others, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate Credit
Banks and the Federal National Mortgage Association.
The maturities of such securities usually range from three months to thirty
years. While such securities are guaranteed as to principal and interest by the
U.S. government or its instrumentalities, their market values may fluctuate and
are not guaranteed, which may, along with the other securities in the Fund's
portfolio, cause a Class' daily net asset value to fluctuate.
Brady bonds
Among the foreign fixed-income securities in which the Fund may invest are Brady
Bonds. Brady Bonds are debt securities issued under the framework of the Brady
Plan, an initiative announced by former U.S. Treasury Secretary Nicholas F.
Brady in 1989 as a mechanism for debtor nations to restructure their outstanding
external indebtedness (generally commercial bank debt). Brady Bonds are not
direct or indirect obligations of the U.S. government or any of its agencies or
instrumentalities and are not guaranteed by the U.S. government or any of its
agencies or instrumentalities. In so restructuring its external debt, a debtor
nation negotiates with its existing bank lenders, as well as multilateral
institutions such as the World Bank and the International Monetary Fund, to
exchange its commercial bank debt for newly issued bonds (Brady Bonds). The
Manager believes that economic reforms undertaken by countries in connection
with the issuance of Brady Bonds make the debt of countries which have issued or
have announced plans to issue Brady Bonds an attractive opportunity for
investment. Investors, however, should recognize that the Brady Plan only sets
forth general guiding principles for economic reform and debt reduction,
emphasizing that solutions must be negotiated on a case-by-case basis between
debtor nations and their creditors. In addition, Brady Bonds have been issued
only recently and, accordingly, do not have a long payment history.
Foreign government securities
With respect to investment in debt issues of foreign governments, including
Brady Bonds, the ability of a foreign government or government-related issuer to
make timely and ultimate payments on its external debt obligations will also be
strongly influenced by the issuer's balance of payments, including export
performance, its access to international credits and investments, fluctuations
in interest rates and the extent of its foreign reserves. A country whose
exports are concentrated in a few commodities or whose economy depends on
certain strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. If foreign government or
government-related issuers cannot generate sufficient earnings from foreign
trade to service its external debt, they may need to depend on continuing loans
and aid from foreign governments, commercial banks and multilateral
organizations, and inflows of foreign investment. The commitment on the part of
these foreign governments, multilateral organizations and others to make such
disbursements may be conditioned on the government's implementation of economic
reforms and/or economic performance and the timely service of its obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due may curtail the willingness of such
third parties to lend funds, which may further impair the issuer's ability or
willingness to service its debts in a timely manner. The cost of servicing
external debt generally will also be adversely affected by rising international
interest rates because many external debt obligations bear interest at rates
which are adjusted based upon international interest rates. The ability to
service external debt will also depend on the level of the relevant government's
international currency reserves and its access to foreign exchange. Currency
devaluations may affect the ability of a
21
<PAGE>
government issuer to obtain sufficient foreign exchange to service its external
debt. If a foreign governmental issuer defaults on its obligations, the Fund may
have limited legal recourse against the issuer and/or guarantor.
Zero coupon bonds and pay-in-kind bonds
Although the Fund does not intend to purchase a substantial amount of zero
coupon bonds or PIK bonds, from time to time, the Fund may acquire zero coupon
bonds and, to a lesser extent, PIK bonds. Zero coupon bonds are debt obligations
which do not entitle the holder to any periodic payments of interest prior to
maturity or a specified date when the securities begin paying current interest,
and therefore are issued and traded at a discount from their face amounts or par
value. PIK bonds pay interest through the issuance to holders of additional
securities. Zero coupon bonds and PIK bonds are generally considered to be more
interest-sensitive than income bearing bonds, to be more speculative than
interest-bearing bonds, and to have certain tax consequences which could, under
certain circumstances, be adverse to the Fund. For example, with zero coupon
bonds, the Fund accrues, and is required to distribute to shareholders, income
on such bonds. However, the Fund may not receive the cash associated with this
income until the bonds are sold or mature. If the Fund did not have sufficient
cash to make the required distribution of accrued income, the Fund could be
required to sell other securities in its portfolio or to borrow to generate the
cash required.
Borrowings
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. The Fund will not borrow money in excess of one-third
of the value of its net assets. The Fund has no intention of increasing its net
income through borrowing. Any borrowing will be done from a bank and, to the
extent that such borrowing exceeds 5% of the value of the Fund's net assets,
asset coverage of at least 300% is required. In the event that such asset
coverage shall at any time fall below 300%, the Fund shall, within three days
thereafter (not including Sundays or holidays, or such longer period as the
Securities and Exchange Commission may prescribe by rules and regulations),
reduce the amount of its borrowings to such an extent that the asset coverage of
such borrowings shall be at least 300%. The Fund will not pledge more than 10%
of its net assets, or issue senior securities as defined in the 1940 Act, except
for notes to banks. Investment securities will normally not be purchased while
the Fund has an outstanding borrowing.
When-issued and delayed delivery securities
The Fund may purchase securities on a when-issued or delayed delivery basis. In
such transactions, instruments are purchased with payment and delivery taking
place in the future in order to secure what is considered to be an advantageous
yield or price at the time of the transaction. Delivery of and payment for these
securities may take as long as a month or more after the date of the purchase
commitment. The Fund will designate cash or securities in amounts sufficient to
cover its obligations, and will value the designated assets daily. The payment
obligation and the interest rates that will be received are each fixed at the
time the Fund enters into the commitment and no interest accrues to the Fund
until settlement. Thus, it is possible that the market value at the time of
settlement could be higher or lower than the purchase price if the general level
of interest rates has changed.
Portfolio loan transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers or
institutional investors.
The major risk to which the Fund would be exposed on a loan transaction is the
risk that the borrower would become bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the manager, subject to overall
supervision by the Board of Trustees, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the manager.
Rule 144A securities
The Fund may invest in restricted securities, including privately placed
securities, some of which may be eligible for resale without registration
pursuant to Rule 144A ("Rule 144A Securities") under the Securities Act of 1933.
Rule 144A permits many privately placed and legally restricted securities to be
freely traded among certain institutional buyers such as the Fund. The Fund may
invest no more than 15% of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Trustees has delegated to the manager
the day-to-day function of determining whether or not individual Rule 144A
Securities are liquid for purposes of the Fund's 15% limitation on investments
in illiquid securities. The Board has instructed the manager to consider the
following factors in determining the liquidity of a Rule 144A Security:
o the frequency of trades and trading volume for the security
o whether at least three dealers are willing to purchase or sell the security
and the number of potential purchasers
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<PAGE>
o whether at least two dealers are making a market in the security
o the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer)
If the manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Fund's
holdings of illiquid securities exceed the Fund's 15% limit on investments in
such securities, the manager will determine what action to take to ensure that
the Fund continues to adhere to such limitation.
Investment company securities
Any investments that the Fund makes in either closed-end or open-end investment
companies will be limited by the 1940 Act, and would involve an indirect payment
of a portion of the expenses, including advisory fees, of such other investment
companies. Under the 1940 Act's current limitations, the Fund may not
o own more than 3% of the voting stock of another investment company
o invest more than 5% of the Fund's total assets in the shares of any one
investment company o invest more than 10% of the Fund's total assets in
shares of other investment companies.
If the Fund elects to limit its investment in other investment companies to
closed-end investment companies, the 3% limitation described above is increased
to 10%. These percentage limitations also apply to the Fund's investments in
unregistered investment companies.
Repurchase agreements
In order to invest its short-term cash reserves or when in a temporary defensive
posture, the Fund may enter into repurchase agreements with banks or
broker/dealers deemed to be creditworthy by the manager, under guidelines
approved by the Board of Trustees. A repurchase agreement is a short-term
investment in which the purchaser (i.e. the Fund) acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, thereby determining the yield during the purchaser's holding period.
Generally, repurchase agreements are of short duration, often less than one week
but on occasion for longer periods. Not more than 15% of the Fund's assets may
be invested in illiquid assets of which no more than 10% may be invested in
repurchase agreements of over seven days' maturity . Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to the
Fund, if any, would be the difference between the repurchase price and the
market value of the security. The Fund will limit its investments in repurchase
agreements to those which the manager under guidelines of the Board of Trustees
determines to present minimal credit risks and which are of high quality. In
addition, the Fund must have collateral of at least 102% of the repurchase
price, including the portion representing the Fund's yield under such
agreements, which is monitored on a daily basis. The Fund will only enter in
repurchase agreements in which the collateral is comprised of U.S. government
securities.
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Foreign currency transactions
Although the Fund values its assets daily in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. The Fund will, however, from time to time, purchase or sell foreign
currencies and/or engage in forward foreign currency transactions in order to
expedite settlement of portfolio transactions and to minimize currency value
fluctuations. The Fund may conduct its foreign currency exchange transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or through entering into contracts to purchase or sell foreign
currencies at a future date (i.e., a "forward foreign currency" contract or
"forward" contract). A forward contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract, agreed upon by the parties, at a price set at the
time of the contract. The Fund will convert currency on a spot basis from time
to time, and investors should be aware of the costs of currency conversion.
The Fund may enter into forward contracts to "lock in" the price of a security
it has agreed to purchase or sell, in terms of U.S. dollars or other currencies
in which the transaction will be consummated. By entering into a forward
contract for the purchase or sale, for a fixed amount of U.S. dollars or foreign
currency, of the amount of foreign currency involved in the underlying security
transaction, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in currency exchange rates during the period
between the date the security is purchased or sold and the date on which payment
is made or received.
When the manager believes that the currency of a particular country may suffer a
significant decline against the U.S. dollar or against another currency, the
Fund may enter into a forward foreign currency contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the amount of foreign
currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency.
The Fund will not enter into forward contracts or maintain a net exposure to
such contracts where the consummation of the contracts would obligate the Fund
to deliver an amount of foreign currency in excess of the value of the Fund's
securities or other assets denominated in that currency.
At the maturity of a forward contract, the Fund may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions. With respect to forward foreign currency contracts, the precise
matching of forward contract amounts and the value of the securities involved is
generally not possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency strategy is highly
uncertain.
It is impossible to forecast the market value of Fund securities at the
expiration of the contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of a security if its market value exceeds the amount of foreign
currency the Fund is obligated to deliver.
Options
The manager may employ options techniques in an attempt to protect appreciation
attained and to increase shareholder return by seeking to take advantage of the
liquidity available in the options market. The Fund may purchase call options on
foreign or U.S. securities and indices and enter into related closing
transactions and the Fund may write covered call options on such securities. The
Fund may also purchase put options on such securities and indices and enter into
related closing transactions.
A call option enables the purchaser, in return for the premium paid, to purchase
securities from the writer of the option at an agreed price up to an agreed
date. A covered call option obligates the writer, in return for the premium
received, to sell the securities subject to the option to the purchaser of the
option for an agreed upon price up to an agreed date. The advantage is that the
purchaser may hedge against an increase in the price of securities it ultimately
wishes to buy or take advantage of a rise in a particular index. The Fund will
only purchase call options to the extent that premiums paid on all outstanding
call options do not exceed 2% of its total assets. The Fund may write covered
call options in an amount not to exceed 10% of its total assets.
A put option enables the purchaser of the option, in return for the premium
paid, to sell the security underlying the option to the writer at the exercise
price during the option period, and the writer of the option has the obligation
to purchase the security from the purchaser of the option. The Fund will only
purchase put options to the extent that the premiums on all outstanding
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put options do not exceed 2% of its total assets. The advantage is that the
purchaser can be protected should the market value of the security decline or
should a particular index decline.
An option on a securities index gives the purchaser of the option, in return for
the premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of the
option.
Closing transactions essentially let the Fund offset put options or call options
prior to exercise or expiration. If the Fund cannot effect closing transactions,
it may have to hold a security it would otherwise sell or deliver a security it
might want to hold.
In purchasing put and call options, the premium paid by the Fund plus any
transaction costs will reduce any benefit realized by the Fund upon exercise of
the option. With respect to writing covered call options, the Fund may lose the
potential market appreciation of the securities subject to the option, if the
manager's judgment is wrong and the price of the security moves in the opposite
direction from what was anticipated.
The Fund may use both Exchange-traded and over-the-counter options. Certain
over-the-counter options may be illiquid. The Fund will only invest in such
options to the extent consistent with its 15% limitation on investment in
illiquid securities. The Fund will comply with Securities and Exchange
Commission asset segregation and coverage requirements when engaging in these
types of transactions.
Futures
Futures contracts are agreements for the purchase or sale for future delivery of
securities. When a futures contract is sold, the Fund incurs a contractual
obligation to deliver the securities underlying the contract at a specified
price on a specified date during a specified future month. A purchase of a
futures contract means the acquisition of a contractual right to obtain delivery
to the Fund of the securities called for by the contract at a specified price
during a specified future month.
While futures contracts provide for the delivery of securities, deliveries
usually do not occur. Contracts are generally terminated by entering into an
offsetting transaction. When the Fund enters into a futures transaction, it must
deliver to the futures commission merchant selected by the Fund an amount
referred to as "initial margin." This amount is held by the futures commission
merchant or in an account at the Fund's custodian bank. Thereafter, a "variation
margin" may be paid by the Fund to, or drawn by the Fund from, such account in
accordance with controls set for such account, depending upon changes in the
price of the underlying securities subject to the futures contract.
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<PAGE>
The Fund may also purchase and write options to buy or sell futures contracts.
Options on futures are similar to options on securities except that options on
futures give the purchaser the right, in return for the premium paid, to assume
a position in a futures contract, rather than actually to purchase or sell the
futures contract, at a specified exercise price at any time during the period of
the option.
The purpose of the purchase or sale of futures contracts with respect to a
certain security is to protect the Fund against the adverse effects of
fluctuations in interest rates without actually buying or selling that security.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to hedge in anticipation of subsequent purchases of
securities at higher prices.
Foreign currency futures contracts operate similarly to futures contracts
related to securities. When the Fund sells a futures contract on a foreign
currency it is obligated to deliver that foreign currency at a specified future
date. Similarly, a purchase by the Fund gives it a contractual right to receive
a foreign currency. This enables the Fund to "lock-in" exchange rates.
The Fund's designation as an open-end investment company and as a diversified
fund may not be changed unless authorized by the vote of a majority of the
Fund's outstanding voting securities. A "majority vote of the outstanding voting
securities" is the vote by the holders of the lesser of a) 67% or more of the
Fund's voting securities present in person or represented by proxy if the
holders of more than 50% of the outstanding voting securities of the Fund are
present or represented by proxy; or b) more than 50% of the outstanding voting
securities. The Statement of Additional Information lists other more specific
investment restrictions of the Fund which may not be changed without a majority
shareholder vote.
26
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund has taken steps to obtain satisfactory assurances that
its major service providers have taken steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. Consistent with the investment
process utilized for the selection of securities for the Fund, the portfolio
managers focus solely on the quantitative characteristics of the equity
securities in which the Fund invests. This process assumes that the effect of
the Year 2000 problem on each company is already reflected in those
characteristics. Accordingly, except for surveying the widely reported
information regarding the companies in which the Fund invests, no additional
Year 2000 due diligence is performed. However, there can be no guarantees that,
even with these efforts, they will be able to predict the effect of Year 2000 on
any company or the performance of its securities.
27
<PAGE>
Financial highlights
The Financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Delaware Retirement Income Fund
Institutional Class
---------------- ----------------- -----------------
Year Year Period
Ended Ended 12/2/96(1)
11/30 11/30 through
1999 1998 11/30/97
- -------------------------------------------------------------------------- ---------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.150 $11.690 $8.500
Income (loss) from investment operations:
Net investment income(2) 0.431 0.632 0.558
Net realized and unrealized gain (loss) on investments (0.156) (0.402) 2.675
------- ------- -----
Total from investment operations 0.275 0.230 3.233
----- ----- -----
Less dividends and distributions:
Dividends from net investment income (0.620) (0.570) (0.043)
------
Distributions from net realized gain on investments (0.385) (1.200) none
------ ------- ----
Total dividends and distributions (1.005) (1.770) (0.043)
------ ------- -------
Net asset value, end of period $9.420 $10.150 $11.690
====== ======= =======
Total return(3) 3.15% 2.22% 38.19%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,924 $2,840 $2,763
Ratio of expenses to average net assets 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 0.87% 1.32% 1.88%
Ratio of net investment income to average net assets 4.46% 6.01% 5.48%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.33% 5.44% 4.35%
Portfolio turnover 42% 91% 196%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of commencement of operations; ratios have been annualized but total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a
share during the peirod and assumes reinvestment of distributions at net
asset value.
28
<PAGE>
How to read the Financial highlights
Net investment income
Net investment income includes dividend and interest income earned from a 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 investments at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders is
listed under "Less dividends and distributions-Distributions from net realized
gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of a fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income 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.
29
<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.
30
<PAGE>
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See 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.
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.
31
<PAGE>
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.
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.
S&P 500 Composite Stock Index
The Standard & Poor's 500 Composite Stock Index; an unmanaged index of 500
widely held common stocks that is often used to represent performance of the
U.S. stock market.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
32
<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.
33
<PAGE>
Delaware Retirement Income 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 this Fund, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone service.
Investment Company Act file number: 811-4997
- ---------------------------------------------------------- -----------------
Delaware Retirement Income Fund Symbol CUSIP
- ---------------------------------------------------------- -----------------
Institutional Class 24610B404
- ---------------------------------------------------------- -----------------
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
P-002 [--] PP 1/00
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Delaware Investments includes funds with a wide range of ----------------------------------------------------
investment objectives. Stock funds, income funds,
national and state-specific tax-exempt funds, money DELAWARE GROUP EQUITY FUNDS V
market funds, global and international funds and
closed-end funds give investors the ability to create a Delaware Small Cap Value Fund
portfolio that fits their personal financial goals. For Delaware Small Cap Contrarian Fund
more information, shareholders of the Fund Classes Delaware Mid-Cap Value Fund
should contact their financial adviser or call Delaware Delaware Retirement Income Fund
Investments at 800-523-1918 and shareholders of the
Institutional Classes should contact Delaware A CLASS
Investments at 800-510-4015. B CLASS
C CLASS
INSTITUTIONAL CLASS
---------------------------------------------------
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING, PART B
DIVIDEND DISBURSING,
ACCOUNTING SERVICES STATEMENT OF
AND TRANSFER AGENT ADDITIONAL INFORMATION
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103 January 31, 2000
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN DELAWARE
The Chase Manhattan Bank INVESTMENTS
4 Chase Metrotech Center ------------------
Brooklyn, NY 11245
</TABLE>
-2-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
January 31, 2000
DELAWARE GROUP EQUITY FUNDS V
DELAWARE SMALL CAP VALUE FUND
DELAWARE SMALL CAP CONTRARIAN FUND
DELAWARE MID-CAP VALUE FUND
DELAWARE RETIREMENT INCOME FUND
1818 Market Street
Philadelphia, PA 19103
For more information about the Institutional Classes:
800-510-4015
For Prospectus, Performance and Information on Existing Accounts of
Class A Shares, Class B Shares and Class C Shares:
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) Nationwide 800-362-7500
Delaware Group Equity Funds V ("Equity Funds V") is a
professionally-managed mutual fund of the series type which currently offers
five series of shares: Delaware Small Cap Value Fund series ("Small Cap Value
Fund"), Delaware Small Cap Contrarian Fund series ("Small Cap Contrarian Fund"),
Delaware Mid-Cap Value Fund series ("Mid-Cap Value Fund") and Delaware
Retirement Income Fund series ("Retirement Income Fund") (individually, a
"Fund", and collectively, the "Funds").
Each Fund offers Class A Shares, Class B Shares and Class C Shares
(together referred to as the "Fund Classes"). Each Fund also offers an
Institutional Class (together referred to the "Institutional Classes"). All
references to "shares" in this Part B refer to all Classes of shares of Equity
Funds V, except where noted.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectuses for
the Fund Classes dated January 31, 2000 and the current Prospectuses for the
Institutional Classes dated January 31, 2000, as they may be amended from time
to time. Part B should be read in conjunction with the respective Class'
Prospectus. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into each Class' Prospectus. Prospectus relating to
the Fund Classes and prospectuses relating to the Institutional Classes may be
obtained by writing or calling your investment dealer or by contacting each
Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"), at
the above address or by calling the above phone numbers. The Funds' financial
statements, the notes relating thereto, the financial highlights and the report
of independent auditors are incorporated by reference from the Annual Report
into this Part B. The Annual Report will accompany any request for Part B. The
Annual Report can be obtained, without charge, by calling 800-523-1918.
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS
Cover Page Dividends and Realized Securities Profits Distributions
Investment Policies Taxes
Accounting and Tax Issues Investment Management Agreement
Performance Information Officers and Trustees
Trading Practices and Brokerage General Information
Purchasing Shares Financial Statements
Investment Plans Appendix A--Description of Ratings
Determining Offering Price and Net Asset Value Appendix B--Investment Objectives of the Other
Redemption and Exchange Funds in the Delaware Investments Family
INVESTMENT POLICIES
</TABLE>
-3-
<PAGE>
Investment Restrictions
Fundamental Investment Restrictions--Each Fund each has adopted the
following restrictions which cannot be changed without approval by the holders
of a "majority" of a Fund's outstanding shares, which is a vote by the holders
of the lesser of a) 67% or more of the voting securities of a Fund present in
person or by proxy at a meeting, if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy or b) more
than 50% of the outstanding voting securities of a Fund. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time of purchase of securities.
Each Fund shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the Investment Company Act of 1940 (the "1940 Act"), any rule
or order thereunder, or U.S. Securities and Exchange Commission ("SEC") staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does not
limit a Fund from investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in tax-exempt obligations or
certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that a Fund may
engage in transactions involving the acquisition, disposition or resale of its
portfolio securities, under circumstances where it may be considered to be an
underwriter under the Securities Act of 1933 (the "1933 Act").
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent a Fund from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent a Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent a Fund
from purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker/dealers or institutional investors and investing in loans,
including assignments and participation interests.
Non-Fundamental Investment Restrictions--In addition to the fundamental
policies and investment restrictions described above, and the various general
investment policies described in the prospectus, each Fund will be subject to
the following investment restrictions, which are considered non-fundamental and
may be changed by the Board of Trustees without shareholder approval.
1. Each Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, a Fund may not operate as a "Li.(stop) " fund of
funds which invests primarily in the shares of other investment companies as
permitted by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are
utilized as investments by such a "fund of funds".
2. Each Fund may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which a Fund has valued the
investment.
-4-
<PAGE>
The Small Cap Value Fund shall not:
1. Invest more than 5% of the market or other fair value of its assets
in the securities of any one issuer (other than obligations of, or guaranteed
by, the U.S. government, its agencies or instrumentalities).
2. Invest in securities of other investment companies except as part of
a merger, consolidation or other acquisition.
3. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements), in accordance with the Fund's investment
objective and policies, are considered loans and except that the Fund may loan
up to 25% of its assets to qualified broker/dealers or institutional investors
for their use relating to short sales or other security transactions.
4. Purchase or sell real estate but this shall not prevent the Fund
from investing in securities secured by real estate or interests therein.
5. Purchase more than 10% of the outstanding voting and nonvoting
securities of any issuer, or invest in companies for the purpose of exercising
control or management.
6. Engage in the underwriting of securities of other issuers, except
that in connection with the disposition of a security, the Fund may be deemed to
be an "underwriter" as that term is defined in the Securities Act of 1933.
7. Make any investment which would cause more than 25% of the market or
other fair value of its total assets to be invested in the securities of issuers
all of which conduct their principal business activities in the same industry.
This restriction does not apply to obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
8. Write or purchase puts, calls or combinations thereof, except that
the Fund may write covered call options with respect to any or all parts of its
portfolio securities and purchase put options if the Fund owns the security
covered by the put option at the time of purchase, and that premiums paid on all
put options outstanding do not exceed 2% of its total assets. The Fund may sell
put options previously purchased and enter into closing transactions with
respect to covered call and put options. In addition, the Fund may write call
options and purchase put options on stock indices and enter into closing
transactions with respect to such options.
9. Purchase securities on margin, make short sales of securities or
maintain a net short position.
10. Invest more than 5% of the value of its total assets in securities
of companies less than three years old. Such three-year period shall include the
operation of any predecessor company or companies.
11. Invest in warrants valued at lower of cost or market exceeding 5%
of the Fund's net assets. Included in that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York Stock Exchange or
American Stock Exchange.
12. Purchase or retain the securities of any issuer which has an
officer, trustee or security holder who is a trustee or officer of the Fund or
of its investment manager if or so long as the trustees and officers of the Fund
and of its investment manager together own beneficially more than 5% of any
class of securities of such issuer.
13. Invest in interests in oil, gas or other mineral exploration or
development programs.
-5-
<PAGE>
14. Invest more than 10% of the Fund's net assets in repurchase
agreements maturing in more than seven days and other illiquid assets.
15. Borrow money in excess of one-third of the value of its net assets
and then only as a temporary measure for extraordinary purposes or to facilitate
redemptions. The Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing exceeds 5% of the value of the Fund's net assets, asset coverage of at
least 300% is required. In the event that such asset coverage shall at any time
fall below 300%, the Fund shall, within three days thereafter (not including
Sunday or holidays) or such longer period as the SEC may prescribe by rules and
regulations, reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. The Fund will not
pledge more than 10% of its net assets. The Fund will not issue senior
securities as defined in the 1940 Act, except for notes to banks. Investment
securities will not normally be purchased while the Fund has an outstanding
borrowing.
Small Cap Value Fund has a policy that it will not invest in
commodities, however, the Fund reserves the right to invest in financial futures
and options thereon, including stock index futures, to the extent these
instruments are considered commodities.
In addition, although not a fundamental investment restriction, Small
Cap Value Fund currently does not invest its assets in real estate limited
partnerships.
Retirement Income Fund shall not:
1. With respect to 75% of its total assets, invest more than 5% of the
value of its assets in securities of any one issuer (except obligations issued,
or guaranteed by, the U.S. government, its agencies or instrumentalities or
certificates of deposit for any such securities, and cash and cash items) or
purchase more than 10% of the outstanding voting securities of any one company.
2. Invest in securities of other investment companies, except that the
Fund may invest in securities of open-end, closed-end and unregistered
investment companies, in accordance with the limitations contained in the 1940
Act.
3. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements), in accordance with the Fund's investment
objectives and policies, are considered loans and except that the Fund may loan
up to 25% of its assets to qualified broker/dealers or institutional investors
for their use relating to short sales or other security transactions.
4. Purchase or sell real estate. This restriction shall not preclude
the Fund's purchase of securities issued by real estate investment trusts, the
purchase of securities issued by companies that deal in real estate, or the
investment in securities secured by real estate or interests therein.
5. Invest in companies for the purpose of exercising control or
management.
6. Engage in the underwriting of securities of other issuers, except
that the Fund may acquire restricted or not readily marketable securities under
circumstances where, if such securities are sold, the Fund might be deemed to be
an underwriter for purposes of the 1933 Act.
7. Make any investment which would cause more than 25% of the market or
other fair value of its total assets to be invested in securities of issuers all
of which conduct their principal business activities in the same industry. This
restriction does not apply to obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
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8. Buy or sell commodities or commodity contracts, except that the Fund
may invest in financial futures and options thereon, including stock index
futures, to the extent these instruments are considered commodities.
9. Invest in interests in oil, gas or other mineral exploration or
development programs.
10. Purchase securities on margin, except that the Fund may satisfy
margin requirements with respect to futures transactions.
11. Borrow money in excess of one-third of the value of its net assets
and then only as a temporary measure for extraordinary purposes or to facilitate
redemptions. The Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing exceeds 5% of the value of the Fund's net assets, asset coverage of at
least 300% is required. In the event that such asset coverage shall at any time
fall below 300%, the Fund shall, within three days thereafter (not including
Sunday or holidays) or such longer period as the SEC may prescribe by rules and
regulations, reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. The Fund shall not
issue senior securities as defined by the 1940 Act, except for notes to banks.
Investment securities will not normally be purchased while the Fund has an
outstanding borrowing.
12. Retirement Income Fund will not purchase or retain securities of a
company which has an officer or trustee who is an officer or trustee of Equity
Funds V, or an officer, trustee or partner Manager if, to the knowledge of the
Fund, one or more of such persons beneficially owns more than 1/2 of 1% of the
shares of the company, and in the aggregate more than 5% thereof.
13. Other than securities of real estate investment trusts, Retirement
Income Fund will not invest in the securities of companies which have a record
of less than three years' continuous operation, including any predecessor
company or companies, if such investment at the time of purchase would cause
more than 5% of the Fund's total assets to be invested in the securities of such
company or companies.
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Concentration
In applying a Fund's fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
Investment Policies
Repurchase Agreements
A repurchase agreement is a short-term investment by which the
purchaser acquires ownership of a debt security and the seller agrees to
repurchase the obligation at a future time and set price, thereby determining
the yield during the purchaser's holding period. Should an issuer of a
repurchase agreement fail to repurchase the underlying security, the loss to the
Funds, if any, would be the difference between the repurchase price and the
market value of the security. Each Fund will limit its investments in repurchase
agreements to those which the Manager, under the guidelines of the Board of
Trustees, determines to present minimal credit risks and which are of high
quality. In addition, each Fund must have collateral of at least 102% of the
repurchase price, including the portion representing such Fund's yield under
such agreements which is monitored on a daily basis. While the Funds are
permitted to do so, they normally do not invest in repurchase agreements, except
to invest cash balances.
The funds in Delaware Investments have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the 1940 Act to allow the
Delaware Investments funds jointly to invest cash balances. The Funds may invest
cash balances in a joint repurchase agreement in accordance with the terms of
the Order and subject generally to the conditions described below.
Portfolio Loan Transactions
Each Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of the Manager that the staff of the SEC
permits portfolio lending by registered investment companies if certain
conditions are met. These conditions are as follows: 1) each transaction must
have 100% collateral in the form of cash, short-term U.S. government securities,
or irrevocable letters of credit payable by banks acceptable to a Fund from the
borrower; 2) this collateral must be valued daily and should the market value of
the loaned securities increase, the borrower must furnish additional collateral
to the Funds; 3) the Funds must be able to terminate the loan after notice, at
any time; 4) the Funds must receive reasonable interest on any loan, and any
dividends, interest or other distributions on the lent securities, and any
increase in the market value of such securities; 5) the Funds may pay reasonable
custodian fees in connection with the loan; and 6) the voting rights on the lent
securities may pass to the borrower; however, if the trustees of Equity Funds V
know that a material event will occur affecting a loan, they must either
terminate the loan in order to vote the proxy or enter into an alternative
arrangement with the borrower to enable the trustees to vote the proxy.
The major risk to which a Fund would be exposed on a loan transaction
is the risk that a borrower would go bankrupt at a time when the value of the
security goes up. Therefore, each Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, under the supervision of
the Board of Trustees, including the creditworthiness of the borrowing broker,
dealer or institution and then only if the consideration to be received from
such loans would justify the risk. Creditworthiness will be monitored on an
ongoing basis by the Manager.
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Non-Traditional Equity Securities
Retirement Income Fund may invest in convertible preferred stocks that
offer enhanced yield features, such as Preferred Equity Redemption Cumulative
Stock ("PERCS"), which provide an investor, such as the Funds, with the
opportunity to earn higher dividend income than is available on a company's
common stock. A PERCS is a preferred stock which generally features a mandatory
conversion date, as well as a capital appreciation limit which is usually
expressed in terms of a stated price. Upon the conversion date, most PERCS
convert into common stock of the issuer (PERCS are generally not convertible
into cash at maturity). Under a typical arrangement, if after a predetermined
number of years the issuer's common stock is trading at a price below that set
by the capital appreciation limit, each PERCS would convert to one share of
common stock. If, however, the issuer's common stock is trading at a price above
that set by the capital appreciation limit, the holder of the PERCS would
receive less than one full share of common stock. The amount of that fractional
share of common stock received by the PERCS holder is determined by dividing the
price set by the capital appreciation limit of the PERCS by the market price of
the issuer's common stock. PERCS can be called at any time prior to maturity,
and hence do not provide call protection. However, if called early, the issuer
may pay a call premium over the market price to the investor. This call premium
declines at a preset rate daily, up to the maturity date of the PERCS.
Retirement Income Fund may also invest in other enhanced convertible
securities. These include but are not limited to ACES (Automatically Convertible
Equity Securities), PEPS (Participating Equity Preferred Stock), PRIDES
(Preferred Redeemable Increased Dividend Equity Securities), SAILS (Stock
Appreciation Income Linked Securities), TECONS (Term Convertible Notes), QICS
(Quarterly Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS, and DECS all have the
following features: they are company-issued convertible preferred stock; unlike
PERCS, they do not have capital appreciation limits; they seek to provide the
investor with high current income, with some prospect of future capital
appreciation; they are typically issued with three to four-year maturities; they
typically have some built-in call protection for the first two to three years;
investors have the right to convert them into shares of common stock at a preset
conversion ratio or hold them until maturity; and upon maturity, they will
automatically convert to either cash or a specified number of shares of common
stock.
Restricted Securities
Each Fund may invest in restricted securities, including unregistered
securities eligible for resale without registration pursuant to Rule 144A ("Rule
144A Securities") under the 1933 Act. Rule 144A Securities may be freely traded
among qualified institutional investors without registration under the 1933 Act.
All of the Funds' option activities will be engaged in a manner that is
consistent with the Securities and Exchange Commission's position concerning
segregation of assets with a Fund's custodian bank.
While maintaining oversight, the Board of Trustees has delegated to the
Manager the day-to-day function of determining whether or not individual Rule
144A Securities are liquid for purposes of the Fund's 15% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
Investing in Rule 144A Securities could have the effect of increasing
the level of a Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. After
the purchase of a Rule 144A Security, however, the Board of Trustees and the
Manager will continue to monitor the liquidity of that security to ensure that
Small Cap Value Fund has no more than 10% and Small Cap Contrarian Fund, Mid-Cap
Value Fund and Retirement Income Fund have no more than 15% of their respective
net assets invested in illiquid securities.
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Foreign Securities
Each Fund may invest in securities of foreign companies. However, Small
Cap Value Fund will not invest more than 25% , Mid-Cap Value Fund will invest
more than 15% and Small Cap Contrarian Fund will not invest more than 5% of the
value of their respective assets, at the time of purchase, in foreign securities
(other than securities of Canadian issuers registered under the Securities
Exchange Act of 1934 or American Depositary Receipts ("ADRs"), on which there
are no such limits). Although Small Cap Value Fund may invest up to 25% of its
net assets in foreign securities the Manager typically invests only a small
portion of the Fund's portfolio in such securities. Retirement Income Fund may,
in addition to investing in securities of foreign companies, invest in foreign
government securities. No more than 20% of the value of Retirement Income Fund's
total assets, at the time of purchase, will be invested in foreign securities
(other than securities of Canadian issuers registered under the Securities
Exchange Act of 1934 or ADRs, on which there are no such limits).
ADRs are receipts typically issued by a U.S. bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. Sponsored ADRs are issued jointly by the issuer of the underlying
security and a depository, and unsponsored ADRs are issued without the
participation of the issuer of the deposited security. Holders of unsponsored
ADRs generally bear all the costs of such facilities and the depository of an
unsponsored ADR facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited security or
to pass through voting rights to the holders of such receipts in respect of the
deposited securities. Therefore, there may not be a correlation between
information concerning the issuer of the security and the market value of an
unsponsored ADR.
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by the Funds. Payment of
such interest equalization tax, if imposed, would reduce a Fund's rate of return
on its investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to the Funds by United States
corporations.
Investors should recognize that investing in foreign corporations
involves certain considerations, including those set forth below, which are not
typically associated with investing in United States corporations. Foreign
corporations are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to United
States corporations. There may also be less supervision and regulation of
foreign stock exchanges, brokers and listed corporations than exist in the
United States. The Funds may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange as between the currencies of
different nations and control regulations. Furthermore, there may be the
possibility of expropriation or confiscatory taxation, political, economic or
social instability or diplomatic developments which could affect assets of the
Funds held in foreign countries.
The Funds will, from time to time, conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to purchase
or sell foreign currencies at a future date (i.e., a "forward foreign currency"
contract or "forward" contract). Investors should be aware that there are costs
and risks associated with such currency transactions. The Funds may enter into
forward contracts to "lock in" the price of a security it has agreed to purchase
or sell, in terms of U.S. dollars or other currencies in which the transaction
will be consummated. When the Manager believes that the currency of a particular
foreign country may suffer a decline against the U.S. dollar or against another
currency, a Fund may enter into a forward contract to sell, for a fixed amount
of U.S. dollars or other appropriate currency, the amount of foreign currency
approximating the value of some or all of that Fund's securities denominated in
such foreign currency. It is impossible to predict precisely the market value of
portfolio securities at the expiration of the forward contract. Accordingly, it
may be necessary for a Fund to purchase or sell additional foreign currency on
the spot market (and bear the expense of such purchase or sale) if
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the market value of the security is less than or greater than the amount of
foreign currency the Fund is obligated to deliver.
The Funds may incur gains or losses from currency transactions. No type
of foreign currency transaction will eliminate fluctuations in the prices of the
Funds' foreign securities or will prevent loss if the prices of such securities
should decline.
Each Fund's Custodian for its foreign securities is The Chase Manhattan
Bank, 4 Chase Metrotech Center, Brooklyn, NY 11245.
U.S. Government Securities
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies and U.S.
government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, investors in such securities
look principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, the Federal Housing Administration, the Maritime
Administration, the Small Business Administration, and others. Certain agencies
and instrumentalities, such as the Government National Mortgage Association
("GNMA"), are, in effect, backed by the full faith and credit of the United
States through provisions in their charters that they may make "indefinite and
unlimited" drawings on the Treasury, if needed to service its debt. Debt from
certain other agencies and instrumentalities, including the Federal Home Loan
Bank and Federal National Mortgage Association, are not guaranteed by the United
States, but those institutions are protected by the discretionary authority for
the U.S. Treasury to purchase certain amounts of their securities to assist the
institutions in meeting their debt obligations. Finally, other agencies and
instrumentalities, such as the Farm Credit System, the Tennessee Valley
Authority and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under U.S. government supervision, but their debt
securities are backed only by the creditworthiness of those institutions, not
the U.S. government.
An instrumentality of a U.S. government agency is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal
Intermediate Credit Banks and the Federal National Mortgage Association.
The maturities of such securities usually range from three months to
thirty years. While such securities are guaranteed as to principal and interest
by the U.S. government or its instrumentalities, their market values may
fluctuate and are not guaranteed, which may, along with the other securities in
a Fund's portfolio, cause a Class' daily net asset value to fluctuate.
Brady Bonds
Among the foreign fixed-income securities in which Retirement Income
Fund may invest are Brady Bonds. Brady Bonds are debt securities issued under
the framework of the Brady Plan, an initiative announced by former U.S. Treasury
Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to
restructure their outstanding external indebtedness (generally commercial bank
debt). Brady Bonds are not direct or indirect obligations of the U.S. government
or any of its agencies or instrumentalities and are not guaranteed by the U.S.
government or any of its agencies or instrumentalities. In so restructuring its
external debt, a debtor nation negotiates with its existing bank lenders, as
well as multilateral institutions such as the World Bank and the International
Monetary Fund, to exchange its commercial bank debt for newly issued bonds
(Brady Bonds). The Manager believes that economic reforms undertaken by
countries in connection with the issuance of Brady Bonds make the debt of
countries which have issued or have announced plans to issue Brady Bonds a
viable opportunity for investment. Investors, however, should recognize that the
Brady Plan only sets forth general
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guiding principles for economic reform and debt reduction, emphasizing that
solutions must be negotiated on a case-by-case basis between debtor nations and
their creditors. In addition, Brady Bonds have been issued only recently and,
accordingly, do not have a long payment history.
Zero Coupon Bonds and Pay-In-Kind Bonds
Although Retirement Income Fund does not intend to purchase a
substantial amount of zero coupon bonds or PIK bonds, from time to time, the
Fund may acquire zero coupon bonds and, to a lesser extent, PIK bonds. Zero
coupon bonds are debt obligations which do not entitle the holder to any
periodic payments of interest prior to maturity or a specified date when the
securities begin paying current interest, and therefore are issued and traded at
a discount from their face amounts or par value. PIK bonds pay interest through
the issuance to holders of additional securities. Zero coupon bonds and PIK
bonds are generally considered to be more interest-sensitive than income bearing
bonds, to be more speculative than interest-bearing bonds, and to have certain
tax consequences which could, under certain circumstances, be adverse to the
Fund. For example, with zero coupon bonds, the Fund accrues, and is required to
distribute to shareholders, income on such bonds. However, the Fund may not
receive the cash associated with this income until the bonds are sold or mature.
If the Fund did not have sufficient cash to make the required distribution of
accrued income, the Fund could be required to sell other securities in its
portfolio or to borrow to generate the cash required.
When-Issued and Delayed Delivery Securities
Retirement Income Fund may purchase securities on a when-issued or
delayed delivery basis. In such transactions, instruments are purchased with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous yield or price at the time of the transaction.
Delivery of and payment for these securities may take as long as a month or more
after the date of the purchase commitment. The Fund will designate cash or
securities in amounts sufficient to cover its obligations, and will value the
designated assets daily. The payment obligation and the interest rates that will
be received are each fixed at the time the Fund enters into the commitment and
no interest accrues to the Fund until settlement. Thus, it is possible that the
market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed.
Investment Company Securities
Any investments that Retirement Income Fund makes in either closed-end
or open-end investment companies will be limited by the 1940 Act, and would
involve an indirect payment of a portion of the expenses, including advisory
fees, of such other investment companies. Under the 1940 Act's current
limitations, the Fund may not (1) own more than 3% of the voting stock of
another investment company; (2) invest more than 5% of the Fund's total assets
in the shares of any one investment company; nor (3) invest more than 10% of the
Fund's total assets in shares of other investment companies. If the Fund elects
to limit its investment in other investment companies to closed-end investment
companies, the 3% limitation described above is increased to 10%. These
percentage limitations also apply to the Fund's investments in unregistered
investment companies.
Options
Small Cap Value Fund, Small Cap Contrarian Fund and Mid-Cap Value Fund
may write call options and purchase put options on a covered basis only, and
will not engage in option writing strategies for speculative purposes.
Retirement Income Fund may purchase call and put options and write call options
on a covered basis only. The Funds will not engage in option strategies for
speculative purposes.
A. Covered Call Writing--Small Cap Value Fund, Small Cap Contrarian
Fund and Mid-Cap Value Fund may write covered call options from time to time on
such portion of its respective portfolio, without limit, as the Manager
determines is appropriate in seeking to obtain that Fund's investment objective.
Retirement Income Fund may write covered call options in an amount not to exceed
10% of its total assets. A call option gives the purchaser of such option the
right to buy, and the writer, in this case a Fund, has the obligation to sell
the underlying security at the exercise price during the option period. The
advantage to a Fund of writing covered calls is that the Fund receives
additional income, in the form of a premium, which may offset
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any capital loss or decline in market value of the security. However, if the
security rises in value, a Fund may not fully participate in the market
appreciation.
During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to both options on actual portfolio securities owned by
the Funds and options on stock indices, the Funds may enter into closing
purchase transactions. A closing purchase transaction is one in which a Fund,
when obligated as a writer of an option, terminates its obligation by purchasing
an option of the same series as the option previously written.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable a Fund
to write another call option on the underlying security with either a different
exercise price or expiration date or both. A Fund may realize a net gain or loss
from a closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, a Fund will realize a short-term
capital gain in the amount of the premium on the option, less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
a Fund will realize a gain or loss from the sale of the underlying security
equal to the difference between the cost of the underlying security, and the
proceeds of the sale of the security plus the amount of the premium on the
option, less the commission paid.
The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.
A Fund will write call options only on a covered basis, which means
that the Fund will own the underlying security subject to a call option at all
times during the option period or securities convertible or exchangeable into
the securities subject to the call option at no additional consideration or a
Fund owns a call option on the relevant securities with an exercise price no
higher than the exercise price on the call option written or subject to any
regulatory restrictions, an amount of cash or liquid high grade debt obligations
at least equal to the current underlying securities. Unless a closing purchase
transaction is effected, a Fund would be required to continue to hold a security
which it might otherwise wish to sell, or deliver a security it would want to
hold. Options written by a Fund will normally have expiration dates between one
and nine months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.
B. Purchasing Call Options--Retirement Income Fund may purchase call
options in an amount not to exceed 2% of its total assets. When Retirement
Income Fund purchases a call option, in return for a premium paid by the Fund to
the writer of the option, the Fund obtains the right to buy the security
underlying the option at a specified exercise price at any time during the term
of the option. The advantage of purchasing
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call options is that the Fund may alter its portfolio's characteristics and
modify portfolio maturities without incurring the cost associated with portfolio
transactions.
Retirement Income Fund may, following the purchase of a call option,
liquidate its position by effecting a closing sale transaction. This is
accomplished by selling an option of the same series as the option previously
purchased. The Fund will realize a profit from a closing sale transaction if the
price received on the transaction is more than the premium paid to purchase the
original call option; the Fund will realize a loss from a closing sale
transaction if the price received on the transaction is less than the premium
paid to purchase the original call option. There is no assurance, however, that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that the Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Fund may expire without any value
to the Fund.
C. Purchasing Put Options--Each Fund may invest up to 2% of its total
assets in the purchase of put options. The Funds will, at all times during which
they hold a put option, own the security covered by such option.
The Funds intend to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow the Funds to protect an unrealized gain in an
appreciated security in their portfolios without actually selling the security.
If the security does not drop in value, the Funds will lose the value of the
premium paid. Each Fund may sell a put option which it has previously purchased
prior to the sale of the securities underlying such option. Such sales will
result in a net gain or loss depending on whether the amount received on the
sale is more or less than the premium and other transaction costs paid on the
put option which is sold.
The Funds may enter into closing sale transactions. A closing sale
transaction is one in which a Fund, when it is the holder of an outstanding
option, liquidates its position by selling an option of the same series as the
option previously purchased.
Options on Stock Indices
A stock index assigns relative values to the common stocks included in
the index with the index fluctuating with changes in the market values of the
underlying common stock.
Options on stock indices are similar to options on stocks but have
different delivery requirements. Stock options provide the right to take or make
delivery of the underlying stock at a specified price. A stock index option
gives the holder the right to receive a cash "exercise settlement amount" equal
to (i) the amount by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Gain or loss to a Fund on
transactions in stock index options will depend on price movements in the stock
market generally (or in a particular industry or segment of the market) rather
than price movements of individual securities.
As with stock options, the Funds may offset their positions in stock
index options prior to expiration by entering into closing transactions, on an
Exchange or they may let the options expire unexercised.
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A stock index fluctuates with changes in the market values of the stock
so included. Some stock index options are based on a broad market index such as
the Standard & Poor's 500 (R) Composite Stock Price Index ("S&P 500") or the New
York Stock Exchange Composite Index, or a narrower market index such as the
Standard & Poor's 100 ("S&P 100"). Indices are also based on an industry or
market segment such as the AMEX Oil and Gas Index or the Computer and Business
Equipment Index. Options on stock indices are currently traded on the following
Exchanges among others: The Chicago Board Options Exchange, New York Stock
Exchange and American Stock Exchange.
The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in a
Fund's portfolio correlate with price movements of the stock index selected.
Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular stock, whether a Fund will realize a
gain or loss from the purchase or writing of options on an index depends upon
movements in the level of stock prices in the stock market generally or, in the
case of certain indices, in an industry or market segment, rather than movements
in the price of a particular stock. Since each Fund's portfolio will not
duplicate the components of an index, the correlation will not be exact.
Consequently, a Fund bears the risk that the prices of the securities being
hedged will not move in the same amount as the hedging instrument. It is also
possible that there may be a negative correlation between the index or other
securities underlying the hedging instrument and the hedged securities which
would result in a loss on both such securities and the hedging instrument.
Accordingly, successful use by the Funds of options on stock indices will be
subject to the Manager's ability to predict correctly movements in the direction
of the stock market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual stocks.
Positions in stock index options may be closed out only on an Exchange
which provides a secondary market. There can be no assurance that a liquid
secondary market will exist for any particular stock index option. Thus, it may
not be possible to close such an option. The inability to close options
positions could have an adverse impact on a Fund's ability to effectively hedge
its securities. Each Fund will enter into an option position only if there
appears to be a liquid secondary market for such options.
The Funds will not engage in transactions in options on stock indices
for speculative purposes but only to protect appreciation attained, to offset
capital losses and to take advantage of the liquidity available in the option
markets.
Futures and Options on Futures
Retirement Income Fund may enter into contracts for the purchase or
sale for future delivery of securities. While futures contracts provide for the
delivery of securities, deliveries usually do not occur. Contracts are generally
terminated by entering into an offsetting transaction. When Retirement Income
Fund enters into a futures transaction, it must deliver to the futures
commission merchant selected by the Fund an amount referred to as "initial
margin." This amount is maintained by the futures commission merchant in an
account at the Fund's Custodian Bank. Thereafter, a "variation margin" may be
paid by the Fund to, or drawn by the Fund from, such account in accordance with
controls set for such account, depending upon changes in the price of the
underlying securities subject to the futures contract.
Retirement Income Fund may enter into such futures contracts to protect
against the adverse effects of fluctuations in interest rates without actually
buying or selling securities. For example, if interest rates are expected to
increase, the Fund might enter into futures contracts for the sale of debt
securities. Such a sale would have much the same effect as selling an equivalent
value of the debt securities owned by the Fund. If interest rates did increase,
the value of the debt securities in the portfolio would decline, but the value
of the futures contracts to the Fund would increase at approximately the same
rate, thereby keeping the net asset value of the Fund from declining as much as
it otherwise would have. Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to hedge in anticipation of
subsequent purchases of securities
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at higher prices. Because the fluctuations in the value of futures contracts
should be similar to those of debt securities, the Fund could take advantage of
the anticipated rise in value of debt securities without actually buying them
until the market had stabilized. At that time, the futures contracts could be
liquidated and the Fund could then buy debt securities on the cash market.
With respect to options on futures contracts, when the Fund is not
fully invested, it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The purchase of a call
option on a futures contract is similar in some respects to the purchase of a
call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based, or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities.
The writing of a call option on a futures contract constitutes a
partial hedge against the declining price of the security which is deliverable
upon exercise of the futures contract. If the futures price at the expiration of
the option is below the exercise price, the Fund will retain the full amount of
the option premium which provides a partial hedge against any decline that may
have occurred in the Fund's holdings. The writing of a put option on a futures
contract constitutes a partial hedge against the increasing price of the
security which is deliverable upon exercise of the futures contract. If the
futures price at the expiration of the option is higher than the exercise price,
the Fund will retain the full amount of option premium which provides a partial
hedge against any increase in the price of securities which the Fund intends to
purchase.
If a put or call option that the Fund has written is exercised, the
Fund will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value of
its portfolio securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The purchase of a
put option on a futures contract is similar in some respects to the purchase of
protective puts on portfolio securities. For example, the Fund will purchase a
put option on a futures contract to hedge the Fund's securities against the risk
of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Fund may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize a loss. For example, if the Fund is hedged
against the possibility of an increase in interest rates which would adversely
affect the price of securities held in its portfolio and interest rates decrease
instead, the Fund will lose part or all of the benefit of the increased value of
its securities which it has because it will have offsetting losses in its
futures position. In addition, in such situations, if the Fund had insufficient
cash, it may be required to sell securities from its portfolio to meet daily
variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market. The Fund
may be required to sell securities at a time when it may be disadvantageous to
do so.
Further, with respect to options on futures contracts, the Fund may
seek to close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot be
assured.
High-Yield, High Risk Securities
Investing in so-called "high-yield" or "high risk" securities entails
certain risks, including the risk of loss of principal, which may be greater
than the risks involved in investment grade securities, and which should be
considered by investors contemplating an investment in the Funds. Such
securities are sometimes issued by companies whose earnings at the time of
issuance are less than the projected debt service on the high-yield securities.
The risks include the following:
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A. Youth and Volatility of the High-Yield Market--Although the market
for high-yield securities has been in existence for many years, including
periods of economic downturns, the high-yield market grew rapidly during the
long economic expansion which took place in the United States during the 1980s.
During that economic expansion, the use of high-yield debt securities to fund
highly leveraged corporate acquisitions and restructurings increased
dramatically. As a result, the high-yield market grew substantially during that
economic expansion. Although experts disagree on the impact recessionary periods
have had and will have on the high-yield market, some analysts believe a
protracted economic downturn would severely disrupt the market for high-yield
securities, would adversely affect the value of outstanding bonds and would
adversely affect the ability of high-yield issuers to repay principal and
interest. Those analysts cite volatility experienced in the high-yield market in
the past as evidence for their position. It is likely that protracted periods of
economic uncertainty would result in increased volatility in the market prices
of high-yield securities, an increase in the number of high-yield bond defaults
and corresponding volatility in a Fund's net asset value.
Small Cap Value Fund, Small Cap Contrarian Fund and Mid-Cap Value Fund
will not ordinarily purchase securities rated below Baa by Moody's or BBB by
S&P. However, these Funds may do so if the Manager believes that capital
appreciation is likely. None of these Funds will invest more than 25% of its
assets in such securities. While Retirement Income Fund will not invest more
than 45% of its assets in high-yield, high risk debt securities, it has the
authority to invest up to all of its net assets in lower rated securities, which
would include income generating equity securities such as convertible securities
and preferred stocks.
B. Liquidity and Valuation--The secondary market for high-yield
securities is currently dominated by institutional investors, including mutual
funds and certain financial institutions. There is generally no established
retail secondary market for high-yield securities. As a result, the secondary
market for high-yield securities is more limited and less liquid than other
secondary securities markets. The high-yield secondary market is particularly
susceptible to liquidity problems when the institutions which dominate it
temporarily cease buying such securities for regulatory, financial or other
reasons, such as the savings and loan crisis. A less liquid secondary market may
have an adverse effect on a Fund's ability to dispose of particular issues, when
necessary, to meet a Fund's liquidity needs or in response to a specific
economic event, such as the deterioration in the creditworthiness of the issuer.
In addition, a less liquid secondary market makes it more difficult for a Fund
to obtain precise valuations of the high-yield securities in its portfolio.
During periods involving such liquidity problems, judgment plays a greater role
in valuing high-yield securities than is normally the case. The secondary market
for high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. Privately placed high-yield securities
are particularly susceptible to the liquidity and valuation risks outlined
above.
C. Legislative and Regulatory Action and Proposals--There are a variety
of legislative actions which have been taken or which are considered from time
to time by the United States Congress which could adversely affect the market
for high-yield bonds. For example, Congressional legislation limited the
deductibility of interest paid on certain high-yield bonds used to finance
corporate acquisitions. Also, Congressional legislation has, with some
exceptions, generally prohibited federally-insured savings and loan institutions
from investing in high-yield securities. Regulatory actions have also affected
the high-yield market. For example, many insurance companies have restricted or
eliminated their purchases of high-yield bonds as a result of, among other
factors, actions taken by the National Association of Insurance Commissioners.
If similar legislative and regulatory actions are taken in the future, they
could result in further tightening of the secondary market for high-yield issues
and could reduce the number of new high-yield securities being issued.
Short Sales
Retirement Income Fund may make short sales in an attempt to protect
against market declines. Typically, short sales are transactions in which the
Fund sells a security it does not own in anticipation of a decline in the market
value of that security. At the time a short sale is effected, the Fund incurs an
obligation to replace the security borrowed at whatever its price may be at the
time the Fund purchases it for delivery to the
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lender. The price at such time may be more or less than the price at which the
security was sold by the Fund. When a short sale transaction is closed out by
delivery of the security, any gain or loss on the transaction is taxable as
short-term capital gain or loss. Until the security is replaced, the Fund is
required to pay to the lender amounts equal to any dividends or interest which
accrue during the period of the loan. To borrow the security, the Fund also may
be required to pay a premium, which would increase the cost of the security
sold. The proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is closed
out.
Until the Fund replaces a borrowed security in connection with a short
sale, the Fund will be required to maintain daily a segregated account,
containing cash or U.S. government securities, at such a level that (i) the
amount deposited in the account plus the amount deposited with the broker as
collateral will at all times be equal to at least 100% of the current value of
the security sold short, and (ii) the amount deposited in the segregated account
plus the amount deposited with the broker as collateral will not be less than
the market value of the security at the time it was sold short.
The Fund will incur a loss as a result of a short sale if the price of
the security sold short increases between the date of the short sale and the
date on which the Fund replaces the borrowed security; conversely, the Fund will
realize a gain if the security declines in price between those dates. This
result is the opposite of what one would expect from a cash purchase of a long
position in a security. The amount of any gain will be decreased, and the amount
of any loss increased, by the amount of any premium or amounts in lieu of
interest the Fund may be required to pay in connection with a short sale.
In addition to the short sales discussed above, the Fund also may make
short sales "against the box," a transaction in which the Fund enters into a
short sale of a security which the Fund owns. The proceeds of the short sale are
held by a broker until the settlement date, at which time the Fund delivers the
security to close the short position. The Fund receives the net proceeds from
the short sale.
The ability of the Fund to effect short sales may be limited because of
certain requirements the Fund must satisfy to maintain its status as a regulated
investment company. See Accounting and Tax Issues - Other Tax Requirements.
Concentration
In applying a Fund's fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
ACCOUNTING AND TAX ISSUES
When a Fund writes a call, or purchases a put option, an amount equal
to the premium received or paid by it is included in the section of the Fund's
assets and liabilities as an asset and as an equivalent liability.
In writing a call, the amount of the liability is subsequently "marked
to market" to reflect the current market value of the option written. The
current market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which the Fund has written
expires on its stipulated expiration date, the Fund reports a realized gain. If
the Fund enters into a closing purchase transaction with respect to an option
which the Fund has written, the Fund realizes a gain (or loss if the cost of the
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. Any such gain or loss is a
short-term capital gain or loss for
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federal income tax purposes. If a call option which the Fund has written is
exercised, the Fund realizes a capital gain or loss (long-term or short-term,
depending on the holding period of the underlying security) from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received.
The premium paid by the Fund for the purchase of a put option is
recorded in the section of the Fund's assets and liabilities as an investment
and subsequently adjusted daily to the current market value of the option. For
example, if the current market value of the option exceeds the premium paid, the
excess would be unrealized appreciation and, conversely, if the premium exceeds
the current market value, such excess would be unrealized depreciation. The
current market value of a purchased option is the last sale price on the
principal Exchange on which such option is traded or, in the absence of a sale,
the mean between the last bid and asked prices. If an option which the Fund has
purchased expires on the stipulated expiration date, the Fund realizes a
short-term or long-term capital loss for federal income tax purposes in the
amount of the cost of the option. If the Fund sells the put option, it realizes
a short-term or long-term capital gain or loss, depending on whether the
proceeds from the sale are greater or less than the cost of the option. If the
Fund exercises a put option, it realizes a capital gain or loss (long-term or
short-term, depending on the holding period of the underlying security) from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. However, since the purchase of a put
option is treated as a short sale for federal income tax purposes, the holding
period of the underlying security will be affected by such a purchase.
Options on Certain Stock Indices--Accounting for options on certain
stock indices will be in accordance with generally accepted accounting
principles. The amount of any realized gain or loss on closing out such a
position will result in a realized capital gain or loss for tax purposes. Such
options held by the Fund at the end of each fiscal year will be required to be
marked to market for federal income tax purposes. Sixty percent of any net gain
or loss recognized on such deemed sales or on any actual sales will be treated
as long-term capital gain or loss, and the remainder will be treated as
short-term capital gain or loss.
Other Tax Requirements--Each Fund has qualified and intends to continue
to qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). As such, a Fund will not be
subject to federal income tax, or to any excise tax, to the extent its earnings
are distributed as provided in the Code and it satisfies other requirements
relating to the sources of its income and diversification of its assets.
In order to qualify as a regulated investment company for federal
income tax purposes, each Fund must meet certain specific requirements,
including:
(i) The Fund must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of the Fund's total assets,
and, with respect to 50% of the Fund's total assets, no investment (other than
cash and cash items, U.S. Government securities and securities of other
regulated investment companies) can exceed 5% of the Fund's total assets;
(ii) The Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) The Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years, and
(iv) The Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by the Fund for less than three months ("short-short income").
The Taxpayer Relief Act of 1997 (the "1997 Act") repealed the 30% short-short
income test for
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tax years of regulated investment companies beginning after August 5, 1997;
however, this rule may have continuing effect in some states for purposes of
classifying the Fund as a regulated investment company.
The Code requires the Funds to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the 12 month period ending November 30 (in addition to
amounts from the prior year that were neither distributed nor taxed to a Fund)
to you by December 31 of each year in order to avoid federal excise taxes. The
Funds intend as a matter of policy to declare and pay sufficient dividends in
December or January (which are treated by you as received in December) but does
not guarantee and can give no assurances that its distributions will be
sufficient to eliminate all such taxes.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Fund must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. The Fund will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.
Investment in Foreign Currencies and Foreign Securities--The Funds are
authorized to invest certain limited amounts in foreign securities. Such
investments, if made, will have the following additional tax consequences to
each Fund:
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income
(including dividends), or accrues expenses which are denominated in a foreign
currency, and the time a Fund actually collects such income or pays such
expenses generally are treated as ordinary income or loss. Similarly, on the
disposition of debt securities denominated in a foreign currency and on the
disposition of certain options, futures, forward contracts, gain or loss
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of its disposition are
also treated as ordinary gain or loss. These gains or losses, referred to under
the Code as "Section 988" gains or losses, may increase or decrease the amount
of a Fund's net investment company taxable income, which, in turn, will affect
the amount of income to be distributed to you by a Fund.
If a Fund's Section 988 losses exceed a Fund's other investment company
taxable income during a taxable year, a Fund generally will not be able to make
ordinary dividend distributions to you for that year, or distributions made
before the losses were realized will be recharacterized as return of capital
distributions for federal income tax purposes, rather than as an ordinary
dividend or capital gain distribution. If a distribution is treated as a return
of capital, your tax basis in your Fund shares will be reduced by a like amount
(to the extent of such basis), and any excess of the distribution over your tax
basis in your Fund shares will be treated as capital gain to you.
The 1997 Act generally requires that foreign income be translated into
U.S. dollars at the average exchange rate for the tax year in which the
transactions are conducted. Certain exceptions apply to taxes paid more than two
years after the taxable year to which they relate. This new law may require a
Fund to track and record adjustments to foreign taxes paid on foreign securities
in which it invests. Under a Fund's current reporting procedure, foreign
security transactions are recorded generally at the time of each transaction
using the
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foreign currency spot rate available for the date of each transaction. Under the
new law, a Fund will be required to record at fiscal year end (and at calendar
year end for excise tax purposes) an adjustment that reflects the difference
between the spot rates recorded for each transaction and the year-end average
exchange rate for all of a Fund's foreign securities transactions. There is a
possibility that the mutual fund industry will be given relief from this new
provision, in which case no year-end adjustments will be required.
The Funds may be subject to foreign withholding taxes on income from
certain of its foreign securities. If more than 50% of the total assets of a
Fund at the end of its fiscal year are invested in securities of foreign
corporations, a Fund may elect to pass-through to you your pro rata share of
foreign taxes paid by a Fund. If this election is made, you will be: (i)
required to include in your gross income your pro rata share of foreign source
income (including any foreign taxes paid by a Fund); and (ii) entitled to either
deduct your share of such foreign taxes in computing your taxable income or to
claim a credit for such taxes against your U.S. income tax, subject to certain
limitations under the Code. You will be informed by a Fund at the end of each
calendar year regarding the availability of any such foreign tax credits and the
amount of foreign source income (including any foreign taxes paid by a Fund). If
a Fund elects to pass-through to you the foreign income taxes that it has paid,
you will be informed at the end of the calendar year of the amount of foreign
taxes paid and foreign source income that must be included on your federal
income tax return. If a Fund invests 50% or less of its total assets in
securities of foreign corporations, it will not be entitled to pass-through to
you your pro-rata shares of foreign taxes paid by a Fund. In this case, these
taxes will be taken as a deduction by a Fund, and the income reported to you
will be the net amount after these deductions. The 1997 Act also simplifies the
procedures by which investors in funds that invest in foreign securities can
claim tax credits on their individual income tax returns for the foreign taxes
paid by a Fund. These provisions will allow investors who pay foreign taxes of
$300 or less on a single return or $600 or less on a joint return during any
year (all of which must be reported on IRS Form 1099-DIV from a Fund to the
investor) to claim a tax credit against their U.S. federal income tax for the
amount of foreign taxes paid by a Fund. This process will allow you, if you
qualify, to bypass the burdensome and detailed reporting requirements on the
foreign tax credit schedule (Form 1116) and report your foreign taxes paid
directly on page 2 of Form 1040. This simplified procedure was not available
until calendar year 1998.
Investment in Passive Foreign Investment Company securities--The Funds
may invest in shares of foreign corporations which may be classified under the
Code as passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. If a Fund receives an "excess distribution" with respect
to PFIC stock, the Fund itself may be subject to U.S. federal income tax on a
portion of the distribution, whether or not the corresponding income is
distributed by a Fund to you. In general, under the PFIC rules, an excess
distribution is treated as having been realized ratably over the period during
which a Fund held the PFIC shares. A Fund itself will be subject to tax on the
portion, if any, of an excess distribution that is so allocated to prior Fund
taxable years, and an interest factor will be added to the tax, as if the tax
had been payable in such prior taxable years. In this case, you would not be
permitted to claim a credit on your own tax return for the tax paid by a Fund.
Certain distributions from a PFIC as well as gain from the sale of PFIC shares
are treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
distribution might have been classified as capital gain. This may have the
effect of increasing Fund distributions to you that are treated as ordinary
dividends rather than long-term capital gain dividends.
A Fund may be eligible to elect alternative tax treatment with respect
to PFIC shares. Under an election that currently is available in some
circumstances, a Fund generally would be required to include in its gross income
its share of the earnings of a PFIC on a current basis, regardless of whether
distributions are received from the PFIC during such period. If this election
were made, the special rules, discussed above, relating to the taxation of
excess distributions, would not apply. In addition, the 1997 Act provides for
another election that would involve marking-to-market the Fund's PFIC shares at
the end of each taxable year (and on certain other dates as prescribed in the
Code), with the result that unrealized gains would be treated as though they
were realized. The Fund would also be allowed an ordinary deduction for the
excess, if any, of the adjusted basis of
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its investment in the PFIC stock over its fair market value at the end of the
taxable year. This deduction would be limited to the amount of any net
mark-to-market gains previously included with respect to that particular PFIC
security. If a Fund were to make this second PFIC election, tax at the Fund
level under the PFIC rules would generally be eliminated.
The application of the PFIC rules may affect, among other things, the
amount of tax payable by a Fund (if any), the amounts distributable to you by a
Fund, the time at which these distributions must be made, and whether these
distributions will be classified as ordinary income or capital gain
distributions to you.
You should be aware that it is not always possible at the time shares
of a foreign corporation are acquired to ascertain that the foreign corporation
is a PFIC, and that there is always a possibility that a foreign corporation
will become a PFIC after a Fund acquires shares in that corporation. While a
Fund will generally seek to avoid investing in PFIC shares to avoid the tax
consequences detailed above, there are no guarantees that it will do so and it
reserves the right to make such investments as a matter of its fundamental
investment policy.
Most foreign exchange gains are classified as ordinary income which
will be taxable to you as such when distributed. Similarly, you should be aware
that any foreign exchange losses realized by a Fund, including any losses
realized on the sale of foreign debt securities, are generally treated as
ordinary losses for federal income tax purposes. This treatment could increase
or reduce a Fund's income available for distribution to you, and may cause some
or all of a Fund's previously distributed income to be classified as a return of
capital.
PERFORMANCE INFORMATION
From time to time, each Fund may state its Classes' total return in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over the most recent one-, five-
and ten-year or life- of-fund periods, as applicable. Each Fund may also
advertise aggregate and average total return information for its Classes over
additional periods of time.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1 + T) = ERV
Where: P = a hypothetical initial purchase order of $1,000
from which, in the case of only Class A Shares,
the maximum front-end sales charge is deducted;
T = Average annual total return;
n = Number of years;
ERV = Redeemable value of the hypothetical $1,000
purchase at the end of the period after the
deduction of the applicable CDSC, if any, with
respect to Class B Shares and Class C Shares.
In presenting performance information for Class A Shares, the Limited
CDSC, applicable to only certain redemptions of those shares, will not be
deducted from any computations of total return. See the Prospectuses for the
Fund Classes for a description of the Limited CDSC and the limited instances in
which it applies. All references to a CDSC in this Performance Information
section will apply to Class B Shares or Class C Shares.
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Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares, and that all
distributions are reinvested at net asset value, and, with respect to Class B
Shares and Class C Shares, reflects the deduction of the CDSC that would be
applicable upon complete redemption of such shares. In addition, each Fund may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.
The performance of Small Cap Value Fund and Retirement Income Fund, as
shown below, is the average annual total return quotations through November 30,
1999. The average annual total return for Class A Shares at offer reflects the
maximum front-end sales charge of 5.75% paid on the purchase of shares. The
average annual total return for Class A Shares at net asset value (NAV) does not
reflect the payment of any front-end sales charge. Pursuant to applicable
regulation, total return shown for Small Cap Value Fund Institutional Class for
the periods prior to the commencement of operations of such Class is calculated
by taking the performance of Small Cap Value Fund A Class and adjusting it to
reflect the elimination of all sales charges. However, for those periods, no
adjustment has been made to eliminate the impact of 12b-1 payments, and
performance would have been affected had such an adjustment been made. The
average annual total return for Class B Shares and Class C Shares including
deferred sales charge reflects the deduction of the applicable CDSC that would
be paid if the shares were redeemed at November 30, 1999. The average annual
total return for Class B Shares and Class C Shares excluding deferred sales
charge reflects the deduction of the applicable CDSC that would be paid if the
shares were redeemed at November 30, 1999. Securities prices fluctuated during
the periods covered and past results should not be considered as representative
of future performance.
Class B and Class C Shares of Small Cap Contrarian Fund, Mid-Cap Value
Fund and Retirement Income Fund had not commenced operations as of the close of
Equity Funds V's fiscal year and, therefore, returns are not shown for those
Classes.
Average Annual Total Return
Small Cap Value Fund
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Small Cap Small Cap Small Cap Small Cap Small Cap Small Cap
Value Fund Value Fund Value Fund Value Fund Value Fund Value Fund Value Fund
Class A Class A Institutional Class B Shares Class B Class C Class C
Shares(1) Shares Class (Including Shares Shares Shares
(at Offer) (at NAV) Deferred Sales (Excluding (Including (Excluding
Charge)(2) Deferred Deferred Deferred
Sales Sales Charge) Sales Charge)
Charge)
<S> <C> <C> <C> <C> <C> <C> <C>
1 year ended -8.10% -2.51% -2.23% -8.02% -3.18% -4.15% -3.19%
11/30/99
- ------------------------------------------------------------------------------------------------------------------------------------
3 years ended 5.06% 7.15% 7.46% 5.56% 6.40% 6.41% 6.41%
11/30/99
- ------------------------------------------------------------------------------------------------------------------------------------
5 years ended 10.69% 12.01% 12.35% 10.98% 11.24% N/A N/A
11/30/99
- ------------------------------------------------------------------------------------------------------------------------------------
10 years 11.04% 11.69% 11.93% N/A N/A N/A N/A
ended
11/30/99
- ------------------------------------------------------------------------------------------------------------------------------------
Life of 12.29% 12.82% 13.02% 9.53% 9.66% 9.54% 9.54%
Fund(3)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-23-
<PAGE>
(1) Prior to November 2, 1998, the maximum front-end sales charge was 4.75%.
Effective November 2, 1998, the maximum front-end sales charge was increased
to 5.75% and the above performance numbers are calculated using 5.75% as the
applicable sales charge.
(2) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(3) Date of initial public offering of Small Cap Value Fund A Class was June 24,
1987; date of initial public offering of Small Cap Value Fund Institutional
Class shares was November 9, 1992; date of initial public offering of Small
Cap Value Fund Class B Shares was September 6, 1994; date of initial public
offering of Small Cap Value Fund Class C Shares was November 29, 1995.
-24-
<PAGE>
Average Annual Total Return
Retirement Income Fund(1)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Retirement Income Fund Retirement Income Fund
Class A Shares Class A Shares Retirement Income Fund
(at Offer)(2)(3) (at NAV)(3) Institutional Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 year ended 11/30/99 -2.79% 3.14% 3.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Life of Fund 11.19% 13.41% 13.38%
(12/2/96)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain expenses of this Fund have been waived and reimbursed by the Manager
during the periods shown. In the absence of such waiver and reimbursement,
performance would have been affected negatively.
(2) Prior to March 30, 1999, the maximum front-end sales charge was 4.75%.
Effective March 30, 1999, the maximum front-end sales charge was increased
to 5.75% and the above performance numbers are calculated using 5.75% as the
applicable sales charge.
(3) The Distributor has agreed to waive 12b-1 Plan expenses during the periods
shown. In the absence of such waiver and reimbursement, performance would
have been affected negatively.
Retirement Income Fund may also quote the current yield of each of its
Classes in advertisements and investor communications.
The yield computation is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the resulting figure,
according to the following formula.
a-b 6
YIELD = 2[( ---- + 1) - 1]
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends;
d = the maximum offering price per share on the last day of
the period.
The above formula will be used in calculating quotations of yield,
based on specific 30-day periods identified in advertising by Retirement Income
Fund. Yield assumes the maximum front-end sales charge, if any, and does not
reflect the deduction of any CDSC or Limited CDSC. Actual yield may be affected
by variations in sales charges on investments. For the 30-day period ended
November 30, 1999, the yield of Retirement Income Fund's Class A Shares was
5.12% and for the Institutional Class was 5.44%.
Past performance, such as reflected in quoted yields, should not be
considered as representative of the results which may be realized from an
investment in any class of the Funds in the future. Investors should note that
the income earned and dividends paid by Retirement Income Fund will vary with
the fluctuation of interest rates and performance of the portfolio to the extent
of a Fund's investments in debt securities.
From time to time, each Fund may also quote its Classes' actual total
return performance, dividend results and other performance information in
advertising and other types of literature. This information may be compared to
that of other mutual funds with similar investment objectives and to stock, bond
and other relevant
-25-
<PAGE>
indices or to rankings prepared by independent services or other financial or
industry publications that monitor the performance of mutual funds. For example,
the performance of a Fund (or Fund Class) may be compared to data prepared by
Lipper Analytical Services, Inc., Morningstar, Inc. or to the S&P 500 Index or
the Dow Jones Industrial Average.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Ranking that compare a Fund's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The S&P 500
Stock Index and the Dow Jones Industrial Average are industry-accepted unmanaged
indices of generally-conservative securities used for measuring general market
performance. The Russell 2000 Index TR is a total return weighted index which is
comprised of 2,000 of the smallest stocks (on the basis of capitalization) in
the Russell 3000 Index and is calculated on a monthly basis. The NASDAQ
Composite Index is a market capitalization price only index that tracks the
performance of domestic common stocks traded on the regular NASDAQ market as
well as National Market System traded foreign common stocks and American
Depository Receipts. The total return performance reported for these indices
will reflect the reinvestment of all distributions on a quarterly basis and
market price fluctuations. The indices do not take into account any sales charge
or other fees. A direct investment in an unmanaged index is not possible. In
seeking its investment objective, Small Cap Value Fund's portfolio primarily
includes common stocks considered by the Manager to be more aggressive than
those tracked by these indices.
Total return performance of each Class will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will not reflect any income taxes payable by
shareholders on the reinvested distributions included in the calculation.
Because securities prices fluctuate, past performance should not be considered
as a representation of the results which may be realized from an investment in
the Fund in the future.
In addition, the performance of multiple indices compiled and
maintained by statistical research firms, such as Salomon Brothers and Lehman
Brothers may be combined to create a blended performance result for comparative
performances. Generally, the indices selected will be representative of the
types of securities in which the Funds may invest and the assumptions that were
used in calculating the blended performance will be described.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. The Funds may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Funds. The Funds may also compare performance to that of other
compilations or indices that may be developed and made available in the future.
The Funds may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of a Fund (such as value investing, market timing, dollar
cost averaging, asset allocation, constant ratio transfer, automatic account
rebalancing, the advantages and disadvantages of investing in tax-deferred
-26-
<PAGE>
and taxable investments), economic and political conditions, the relationship
between sectors of the economy and the economy as a whole, the effects of
inflation and historical performance of various asset classes, including but not
limited to, stocks, bonds and Treasury bills. From time to time advertisements,
sales literature, communications to shareholders or other materials may
summarize the substance of information contained in shareholder reports
(including the investment composition of a Fund), as well as the views as to
current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to a Fund. In addition, selected indices may be used
to illustrate historic performance of selected asset classes. The Funds may also
include in advertisements, sales literature, communications to shareholders or
other materials, charts, graphs or drawings which illustrate the potential risks
and rewards of investment in various investment vehicles, including but not
limited to, stocks, bonds, treasury bills and shares of a Fund. In addition,
advertisements, sales literature, communications to shareholders or other
materials may include a discussion of certain attributes or benefits to be
derived by an investment in a Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning (such as information on Roth IRAs and
Educational IRAs) and investment alternative to certificates of deposit and
other financial instruments. Such sales literature, communications to
shareholders or other materials may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of the Funds and may
illustrate how to find the listings of the Funds in newspapers and periodicals.
Materials may also include discussions of other Funds, products, and services.
The Funds may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Funds may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. A Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to a Fund may include information
regarding the background and experience of its portfolio managers.
The following tables are examples, for purposes of illustration only,
of cumulative total return performance for each through November 30, 1999. For
these purposes, the calculations assume the reinvestment of any realized
securities profits distributions and income dividends paid during the period,
but does not reflect any income taxes payable by shareholders on the reinvested
distributions. The performance of Class A Shares reflects the maximum front-end
sales charge paid on the purchase of shares but may also be shown without
reflecting the impact of any front-end sales charge. The performance of Class B
Shares and Class C Shares is calculated both with the applicable CDSC included
and excluded. Past performance is no guarantee of future results. Performance
shown for short periods of time may not be representative of longer term
results.
-27-
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return
Small Cap Value Fund
- ---------------------------------------------------------------------------------------------------------------------------
Small Cap Small Cap Small Cap Small Cap Small Cap Small Cap Small Cap
Value Fund Value Fund Value Fund Value Fund Value Fund Value Fund Value Fund
Class A Class A Institutional Class B Class B Class C Class C
Shares(1) Shares Class Shares Shares Shares Shares
(at Offer) (at NAV) (Including (Excluding (Including (Excluding
Deferred Deferred Deferred Deferred
Sales Sales Sales Charge) Sales Charge)
Charge)(2) Charge)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3 months ended
11/30/99 -10.12% -4.64% -4.57% -9.53% -4.77% -5.73% -4.78%
- ---------------------------------------------------------------------------------------------------------------------------
6 months ended
11/30/99 -13.01% -7.70% -7.56% -12.61% -8.01% -8.94% -8.02%
- ---------------------------------------------------------------------------------------------------------------------------
9 months ended
11/30/99 -2.76% 3.18% 3.41% -2.34% 2.66% 1.66% 2.66%
- ---------------------------------------------------------------------------------------------------------------------------
1 year ended
11/30/99 -8.10% -2.51% -2.23% -8.02% -3.18% -4.15% -3.19%
- ---------------------------------------------------------------------------------------------------------------------------
3 years ended
11/30/99 15.95% 23.02% 24.11% 17.62% 20.47% 20.50% 20.50%
- ---------------------------------------------------------------------------------------------------------------------------
5 years ended
11/30/99 66.20% 76.35% 79.01% 68.32% 70.32% N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
10 years ended
11/30/99 184.90% 202.22% 208.72% N/A N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------------
Life of
Fund(3) 322.83% 348.56% 358.21% 61.10% 62.10% 44.05% 44.05%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Prior to November 2, 1998, the maximum front-end sales charge was 4.75%.
Effective November 2, 1998, the maximum front-end sales charge was increased
to 5.75% and the above performance numbers are calculated using 5.75% as the
applicable sales charge.
(2) Effective November 2, 1998, the CDSC schedule for Class B Shares increased
as follows: (i) 5% if shares are redeemed within one year of purchase (ii)
4% if shares are redeemed with two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if
shares are redeemed during the fifth year following purchase; (v) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. The above figures have been calculated using this new schedule.
(3) Date of initial public offering of Small Cap Value Fund A Class was June 24,
1987; date of initial public offering of Small Cap Value Fund Institutional
Class shares was November 9, 1992; date of initial public offering of Small
Cap Value Fund Class B Shares was September 6, 1994; date of initial public
offering of Small Cap Value Fund Class C Shares was November 29, 1995.
-28-
<PAGE>
Cumulative Total Return
Small Cap Contrarian Fund (1)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Small Cap Contrarian Fund Small Cap Contrarian Fund Small Cap Contrarian Fund
Class A Shares Class A Shares Institutional Class
(at Offer)(2) (at NAV)(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3 months ended 11/30/99 -11.06% -5.60% -5.60%
- -----------------------------------------------------------------------------------------------------------------
6 months ended 11/30/99 -13.13% -7.84% -7.84%
- -----------------------------------------------------------------------------------------------------------------
9 months ended 11/30/99 3.48% 9.84% 9.84%
- -----------------------------------------------------------------------------------------------------------------
Life of Fund (12/29/98) -1.00% 5.06% 5.06%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain expenses of this Fund have been waived and reimbursed by the Manager
during the periods shown. In the absence of such waiver and reimbursement,
performance would have been affected negatively.
(2) The Distributor has agreed to waive 12b-1 Plan expenses during the periods
shown. In the absence of such waiver and reimbursement, performance would
have been affected negatively.
Cumulative Total Return
Mid-Cap Value Fund (1)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Mid-Cap Value Fund Mid-Cap Value Fund Mid-Cap Value Fund
Class A Shares Class A Shares Institutional Class
(at Offer)(2) (at NAV)(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3 months ended 11/30/99 -10.96% -5.52% -5.52%
- -----------------------------------------------------------------------------------------------------------------
6 months ended 11/30/99 -14.10% -8.84% -8.84%
- -----------------------------------------------------------------------------------------------------------------
9 months ended 11/30/99 -5.30% 0.50% 0.50%
- -----------------------------------------------------------------------------------------------------------------
Life of Fund (12/29/98) -10.87% -5.41% -5.41%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain expenses of this Fund have been waived and reimbursed by the Manager
during the periods shown. In the absence of such waiver and reimbursement,
performance would have been affected negatively.
(2) The Distributor has agreed to waive 12b-1 Plan expenses during the periods
shown. In the absence of such waiver and reimbursement, performance would
have been affected negatively.
-29-
<PAGE>
Cumulative Total Return
Retirement Income Fund (1)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Retirement Income Fund Retirement Income Fund
Class A Shares Class A Shares Retirement Income Fund
(at Offer)(2)(3) (at NAV)(3) Institutional Class
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3 months ended 11/30/99 -7.64% -1.98% -1.98%
- -----------------------------------------------------------------------------------------------------------------
6 months ended 11/30/99 -10.19% -4.75% -4.66%
- -----------------------------------------------------------------------------------------------------------------
9 months ended 11/30/99 -4.65% 1.18% 1.18%
- -----------------------------------------------------------------------------------------------------------------
1 year ended 11/30/99 -2.79% 3.14% 3.15%
- -----------------------------------------------------------------------------------------------------------------
Life of Fund (12/2/96) 37.42% 45.82% 45.71%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain expenses of this Fund have been waived and reimbursed by the Manager
during the periods shown. In the absence of such waiver and reimbursement,
performance would have been affected negatively.
(2) Prior to March 30, 1999, the maximum front-end sales charge was 4.75%.
Effective March 30, 1999, the maximum front-end sales charge was increased
to 5.75% and the above performance numbers are calculated using 5.75% as the
applicable sales charge.
(3) The Distributor has agreed to waive 12b-1 Plan expenses during the periods
shown. In the absence of such waiver and reimbursement, performance would
have been affected negatively.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for each Fund and the other mutual funds in the
Delaware Investments family, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's overriding investment
philosophy and how that philosophy impacts a Fund's, and other Delaware
Investments funds', investment disciplines employed in seeking their objectives.
The Distributor may also from time to time cite general or specific information
about the institutional clients of Delaware Investment Advisers, an affiliate of
the Manager, including the number of such clients serviced by the Delaware
Investment Advisers.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
-30-
<PAGE>
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Investments offers three services -- Automatic Investing Program, Direct Deposit
Program and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan and Automatic Investing Plan under Investment Plans and
Wealth Builder Option under Investment Plans for a complete description of these
services, including restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 10
Month 4 $100 $10.00 20
--------------------------------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of any stock or bond fund in the Delaware
Investments family.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding. Each Fund may include illustrations showing the power
of compounding in advertisements and other types of literature.
TRADING PRACTICES AND BROKERAGE
Each Fund selects brokers or dealers to execute transactions for the
purchase or sale of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary consideration is to
have brokers or dealers execute transactions at best execution. Best execution
refers to many factors, including the price paid or received for a security, the
commission charged, the promptness and reliability of execution, the
confidentiality and placement accorded the order and other factors affecting the
overall benefit obtained by the account on the transaction. A number of trades
are made on a net basis where a Fund either buys the securities directly from
the dealer or sells them to the dealer. In these instances, there is no direct
commission charged but there is a spread (the difference between the buy and
sell price) which is the equivalent of a commission. When a commission is paid,
a Fund pays reasonably competitive brokerage commission rates based upon the
professional knowledge of the Manager's trading department as to rates paid and
charged for similar transactions throughout the securities industry. In some
instances, a Fund pays a minimal share transaction cost when the transaction
presents no difficulty.
-31-
<PAGE>
During the fiscal years ended November 30, 1997, 1998 and 1999, the
aggregate dollar amounts of brokerage commissions paid by Small Cap Value Fund
were $440,318, $976,757 and $797,806 respectively. During the period December
29, 1998 through November 30, 1999, the aggregate dollar amount of brokerage
commissions paid by Small Cap Contrarian Fund was $8,336. During the period
December 29, 1998 through November 30, 1999, the aggregate dollar amount of
brokerage commissions paid by Mid-Cap Value Fund was $5,218. During the
period December 2, 1996 through November 30, 1997, the aggregate dollar amount
of brokerage commissions paid by Retirement Income Fund was $6,272 and for the
fiscal year ended November 30, 1998 and 1999 such amounts were $2,787 and
$1,772, respectively.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
During the fiscal year ended November 30, 1999, portfolio transactions
of Small Cap Value Fund in the amount of $215,438,420, resulting in brokerage
commissions of $614,005, were directed to brokers for brokerage and research
services provided. During the period December 29, 1998 through November 30,
1999, portfolio transactions of Small Cap Contrarian Fund in the amount of
$516,224, resulting in brokerage commissions of $1,476, were directed to
brokers for brokerage and research services provided. During the period
December 29, 1998 through November 30, 1999, portfolio transactions of Mid-Cap
Value Fund in the amount of $687,535, resulting in brokerage commissions of
$1,280, were directed to brokers for brokerage and research services
provided. During the fiscal year ended November 30, 1999, portfolio transactions
of Retirement Income Fund in the amount of $761,206, resulting in brokerage
commissions of $1,124, were directed to brokers for brokerage and research
services provided.
As provided in the Securities Exchange Act of 1934 and each Fund's
Investment Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Funds believe that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager which constitute in some part brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to a Fund and to other funds in the Delaware
Group. Subject to best execution, commissions allocated to brokers providing
such pricing services may or may not be generated by the funds receiving the
pricing service.
-32-
<PAGE>
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and Equity Funds
V's Board of Trustees that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Conduct Rules of NASD Regulation, Inc. (the
"NASD"), and subject to seeking best execution, the Funds may place orders with
broker/dealers that have agreed to defray certain expenses of the funds in the
Delaware Group of funds, such as custodian fees, and may, at the request of the
Distributor, give consideration to sales of shares of a such funds as a factor
in the selection of brokers and dealers to execute Fund portfolio transactions.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish each
Fund's objective in relation to anticipated movements in the general level of
interest rates. Each Fund is free to dispose of portfolio securities at any
time, subject to complying with the Code and the 1940 Act, when changes in
circumstances or conditions make such a move desirable in light of the
investment objective. A Fund will not attempt to achieve or be limited to a
predetermined rate of portfolio turnover, such a turnover always being
incidental to transactions undertaken with a view to achieving a Fund's
investment objective.
Under certain market conditions, a Fund may experience high rates of
portfolio turnover which could exceed 100%. The portfolio turnover rate of a
Fund is calculated by dividing the lesser of purchases or sales of portfolio
securities for the particular fiscal year by the monthly average of the value of
the portfolio securities owned by the Fund during the particular fiscal year,
exclusive of securities whose maturities at the time of acquisition are one year
or less.
The degree of portfolio activity may affect brokerage costs of a Fund
and taxes payable by a Fund's shareholders to the extent of any net realized
capital gains. A turnover rate of 100% would occur, for example, if all the
investments in a Fund's portfolio at the beginning of the year were replaced by
the end of the year. Portfolio turnover will also be increased if a Fund writes
a large number of call options which are subsequently exercised. The turnover
rate also may be affected by cash requirements from redemptions and repurchases
of Fund shares. Total brokerage costs generally increase with higher portfolio
turnover rates. In investing for capital appreciation, Small Cap Value Fund may
hold securities for any period of time.
During the past two fiscal years, Small Cap Value Fund's portfolio
turnover rates were 38% for 1998 and 37% for 1999. For the period December
29, 1998 (date of initial public offering) through November 30, 1999, Small Cap
Contrarian Fund's portfolio turnover rate was 63% (annualized). For the
period December 29, 1998 (date of initial public offering) through November
30, 1999, Mid-Cap Value Fund's portfolio turnover rate was 37% (annualized).
During the past two fiscal years, Retirement Income Fund's portfolio turnover
rates were 91% for 1998 and 42% for 1999.
PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's
shares and has agreed to use its best efforts to sell shares of each Fund. See
the Prospectuses for information on how to invest. Shares of each Fund are
offered on a continuous basis and may be purchased through authorized investment
dealers or directly by contacting Equity Funds V or the Distributor.
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The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such Classes
generally must be at least $100. The initial and subsequent investment minimums
for Class A Shares will be waived for purchases by officers, trustees and
employees of any Delaware Investments fund, the Manager or any of the Manager's
affiliates if the purchases are made pursuant to a payroll deduction program.
Shares purchased pursuant to the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act and shares purchased in connection with an Automatic
Investing Plan are subject to a minimum initial purchase of $250 and a minimum
subsequent purchase of $25. Accounts opened under the Delaware Investments Asset
Planner service are subject to a minimum initial investment of $2,000 per Asset
Planner Strategy selected. There are no minimum purchase requirements for the
Institutional Classes, but certain eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Equity Funds V will reject any purchase order
for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. In doing so, an investor should keep in mind, however,
that reduced front-end sales charges apply to investments of $50,000 or more in
Class A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan
expenses than Class B Shares and Class C Shares and generally are not subject to
a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Equity Funds V reserves the right to reject any order for the purchase of its
shares of either Fund if in the opinion of management such rejection is in such
Fund's best interest. If a purchase is canceled because your check is returned
unpaid, you are responsible for any loss incurred. A Fund can redeem shares from
your account(s) to reimburse itself for any loss, and you may be restricted from
making future purchases in any of the funds in the Delaware Investments family.
Each Fund reserves the right to reject purchase orders paid by third-party
checks or checks that are not drawn on a domestic branch of a United States
financial institution. If a check drawn on a foreign financial institution is
accepted, you may be subject to additional bank charges for clearance and
currency conversion.
Each Fund also reserves the right, following shareholder notification,
to charge a service fee on non-retirement accounts that, as a result of
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
The NASD has adopted amendments to its Conduct Rules, as amended,
relating to investment company sales charges. Equity Funds V and the Distributor
intend to operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 5.75%; however, lower front-end sales charges
apply for larger purchases. See the table in the Fund Classes' Prospectuses.
Absent applicable fee waivers, Class A Shares are also subject to annual 12b-1
Plan expenses for the life of the investment.
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Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 5% if shares are redeemed within one year of purchase; (ii) 4% if
shares are redeemed within two years of purchase; (iii) 3% if shares are
redeemed during the third or fourth year following purchase; (iv) 2% if shares
are redeemed during the fifth year following purchase; and (v) 1% if shares are
redeemed during the sixth year following purchase. Absent applicable fee
waivers, Class B Shares are also subject to annual 12b-1 Plan expenses which are
higher than those to which Class A Shares are subject and are assessed against
Class B Shares for approximately eight years after purchase. See Automatic
Conversion of Class B Shares, below.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Absent
applicable fee waivers, Class C Shares are also subject to annual 12b-1 Plan
expenses for the life of the investment which are equal to those to which Class
B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Plans Under Rule 12b-1 for the Fund Classes under
Purchasing Shares, and Determining Offering Price and Net Asset Value in this
Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Fund's assets and will receive a
proportionate interest in that Fund's income, before application, as to Class A,
Class B and Class C Shares, of any expenses under that Fund's 12b-1 Plans.
The Distributor has voluntarily elected to waive the payment of 12b-1
Plan expenses by Small Cap Contrarian Fund, Mid-Cap Value Fund and Retirement
Income Fund from the commencement of the public offering through May 31, 2000.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares or in the case of any retirement plan
account including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Equity Funds V for any certificate issued. A shareholder may be subject to
fees for replacement of a lost or stolen certificate, under certain conditions,
including the cost of obtaining a bond covering the lost or stolen certificate.
Please contact a Fund for further information. Investors who hold certificates
representing any of their shares may only redeem those shares by written
request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements--Class A, B and C Shares
The alternative purchase arrangements of Class A Shares, Class B Shares
and Class C Shares permit investors to choose the method of purchasing shares
that is most suitable for their needs given the amount of their purchase, the
length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and incur a
front-end sales charge and annual 12b-1 Plan expenses of up to a maximum of
0.30% of the average daily net assets of Class A Shares, or to purchase either
Class B or Class C Shares and have the entire initial purchase amount invested
in the Fund with the investment thereafter subject to a CDSC and annual 12b-1
Plan expenses. Class B Shares are subject to a CDSC if the shares are redeemed
within six years of purchase, and Class C Shares are subject to a CDSC if the
shares are redeemed within 12 months of purchase. Class B and Class C Shares are
each subject to annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of
which are service fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder accounts) of average
daily net assets of the respective Class. Class B Shares will automatically
convert to Class A Shares at the end of approximately eight years after purchase
and, thereafter, be subject to annual 12b-1 Plan expenses of up to a maximum of
0.30% of average daily net assets of such shares. Unlike Class B Shares, Class C
Shares do not convert to another Class.
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The higher 12b-1 Plan expenses on Class B Shares and Class C Shares
will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Funds, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A Shares, Class B Shares and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the CDSCs
applicable to Class B Shares and Class C Shares are the same as those of the
12b-1 Plan and the front-end sales charge applicable to Class A Shares in that
such fees and charges are used to finance the distribution of the respective
Classes. See Plans Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on each Fund's Class A Shares, Class B Shares,
Class C Shares and Institutional Class Shares will be calculated in the same
manner, at the same time and on the same day and will be in the same amount,
except that the additional amount of 12b-1 Plan expenses relating to Class B
Shares and Class C Shares will be borne exclusively by such shares. See
Determining Offering Price and Net Asset Value.
Class A Shares
Purchases of $50,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the Fund Classes'
Prospectuses, and may include a series of purchases over a 13-month period under
a Letter of Intention signed by the purchaser. See Special Purchase Features -
Class A Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may reallow to dealers up to the full amount of the front-end sales.
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectuses, for initial purchases of Class A
Shares of $1,000,000 or more, a dealer's commission may be paid by the
Distributor to financial advisers through whom such purchases are effected.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
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funds as to which a Limited CDSC applies (see Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) may be aggregated with those of the Class A Shares of a
Fund. Financial advisers also may be eligible for a dealer's commission in
connection with certain purchases made under a Letter of Intention or pursuant
to an investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of a Fund, even if those shares are later exchanged for shares of another
Delaware Investments fund. In the event of an exchange of the shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares that were acquired in the exchange. See Waiver of Contingent
Deferred Sales Charge--Class B Shares and Class C Shares under Redemption and
Exchange for the Fund Classes for a list of the instances in which the CDSC is
waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the same
Fund. See Automatic Conversion of Class B Shares below. Such conversion will
constitute a tax-free exchange for federal income tax purposes. Investors are
reminded that the Class A Shares into which Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% of
average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class B Shares at the time of purchase from its
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own assets in an amount equal to no more than 5% of the dollar amount purchased.
In addition, from time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may pay additional compensation to dealers or brokers for selling
Class B Shares at the time of purchase. As discussed below, however, Class B
Shares are subject to annual 12b-1 Plan expenses and, if redeemed within six
years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for a Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the 18th day or next
business day of March, June, September and December (each, a "Conversion Date").
If the eighth anniversary after a purchase of Class B Shares falls on a
Conversion Date, an investor's Class B Shares will be converted on that date. If
the eighth anniversary occurs between Conversion Dates, an investor's Class B
Shares will be converted on the next Conversion Date after such anniversary.
Consequently, if a shareholder's eighth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B Shares for as long
as three additional months after the eighth anniversary of purchase before the
shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, the Delaware Cash Reserve Fund Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes.
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Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, Class C Shares are subject to annual 12b-1 Plan expenses
and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Equity Funds V has adopted a
separate plan for each of Class A Shares, Class B Shares and Class C Shares of
each Fund (the "Plans"). Each Plan permits a Fund to pay for certain
distribution, promotional and related expenses involved in the marketing of only
the Class of shares to which the Plan applies. The Plans do not apply to
Institutional Classes of shares. Such shares are not included in calculating the
Plans' fees, and the Plans are not used to assist in the distribution and
marketing of shares of Institutional Classes. Shareholders of Institutional
Classes may not vote on matters affecting the Plans.
The Plans permit a Fund, pursuant to its Distribution Agreements, to
pay out of the assets of Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature, and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified periods of time
and paying distribution and maintenance fees to brokers, dealers and others. In
connection with the promotion of shares of the Classes, the Distributor may,
from time to time, pay to participate in dealer-sponsored seminars and
conferences, and reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising. The Distributor may pay or
allow additional promotional incentives to dealers as part of preapproved sales
contests and/or to dealers who provide extra training and information concerning
a Class and increase sales of the Class. In addition, each Fund may make
payments from the 12b-1 Plan fees of its respective Classes directly to others,
such as banks, who aid in the distribution of Class shares or provide services
in respect of a Class, pursuant to service agreements with Equity Funds V The
Plan expenses relating to Class B Shares and Class C Shares are also used to pay
the Distributor for advancing the commission costs to dealers with respect to
the initial sale of such shares.
The maximum aggregate fee payable by a Fund under the Plans, and a
Fund's Distribution Agreements, is on an annual basis, up to 0.30% of average
daily net assets of Class A Shares, and up to 1% (0.25% of which are service
fees to be paid to the Distributor, dealers and others for providing personal
service and/or maintaining shareholder accounts) of each of the Class B Shares'
and Class C Shares' average daily net assets for the year. Equity Funds V's
Board of Trustees may reduce these amounts at any time. The Distributor has
elected voluntarily to waive all payments under the 12b-1 Plan for the Class A
Shares, Class B Shares and Class C Shares of the Small Cap Contrarian Fund, the
Mid-Cap Value Fund and the Retirement Income Fund during the commencement of
each Fund through May 31, 2000.
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While payments pursuant to the Plans may not exceed 0.30% annually with
respect to Class A Shares, and 1% annually with respect to each of the Class B
Shares and Class C Shares, the Plans do not limit fees to amounts actually
expended by the Distributor. It is therefore possible that the Distributor may
realize a profit in any particular year. However, the Distributor currently
expects that its distribution expenses will likely equal or exceed payments to
it under the Plans. The Distributor may, however, incur such additional expenses
and make additional payments to dealers from its own resources to promote the
distribution of shares of the Classes. The monthly fees paid to the Distributor
under the Plans are subject to the review and approval of Equity Funds V's
unaffiliated trustees, who may reduce the fees or terminate the Plans at any
time.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A Shares, Class B Shares and Class C Shares would be borne by such persons
without any reimbursement from such Fund Classes. Subject to seeking best
execution, a Fund may, from time to time, buy or sell portfolio securities from
or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreements, as amended, have all been
approved by the Board of Trustees of Equity Funds V, including a majority of the
trustees who are not "interested persons" (as defined in the 1940 Act) of Equity
Funds V and who have no direct or indirect financial interest in the Plans by
vote cast in person at a meeting duly called for the purpose of voting on the
Plans and such Agreement. Continuation of the Plans and the Distribution
Agreements, as amended, must be approved annually by the Board of Trustees in
the same manner as specified above.
Each year, the trustees must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares of each Fund and that there is a reasonable
likelihood of the Plan relating to a Class providing a benefit to that Class.
The Plans and the Distribution Agreements, as amended, may be terminated with
respect to a Class at any time without penalty by a majority of those trustees
who are not "interested persons" or by a majority vote of the relevant Class'
outstanding voting securities. Any amendment materially increasing the
percentage payable under the Plans must likewise be approved by a majority vote
of the relevant Class' outstanding voting securities, as well as by a majority
vote of those trustees who are not "interested persons." With respect to each
Class A Shares' Plan, any material increase in the maximum percentage payable
thereunder must also be approved by a majority of the outstanding voting
securities of the respective Fund's B Class. Also, any other material amendment
to the Plans must be approved by a majority vote of the trustees including a
majority of the noninterested trustees of Equity Funds V having no interest in
the Plans. In addition, in order for the Plans to remain effective, the
selection and nomination of trustees who are not "interested persons" of Equity
Funds V must be effected by the trustees who themselves are not "interested
persons" and who have no direct or indirect financial interest in the Plans.
Persons authorized to make payments under the Plans must provide written reports
at least quarterly to the Board of Trustees for their review.
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For the fiscal year ended November 30, 1999, payments from Class A
Shares, Class B Shares and Class C Shares of Small Cap Value Fund amounted to
$751,922, $842,419 and $323,115, respectively. Such amounts were used for the
following purposes:
<TABLE>
<CAPTION>
Small Cap Value Fund Small Cap Value Fund Small Cap Value Fund C
A Class B Class Class
<S> <C>
Advertising $2,601 -- --
Annual/Semi-Annual Reports $37,241 -- --
Broker Trails $597,753 $210,319 $134,242
Broker Sales Charges -- $260,118 $157,278
Dealer Service Expenses -- -- --
Interest on Broker Sales Charges -- $329,576 $1,089
Commissions to Wholesalers $106,562 $42,406 $20,867
Promotional-Broker Meetings $411 -- $325
Promotional-Other $2,137 -- --
Prospectus Printing $1,109 -- --
Telephone -- -- --
Wholesaler Expenses $4,108 -- $9,314
Other -- -- --
</TABLE>
Other Payments to Dealers - Class A Shares, Class B Shares and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain, have
sold or may sell certain amounts of shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
Purchases of Class A Shares may be made at net asset value by current
and former officers, trustees and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Investments family,
certain of their agents and registered representatives and employees of
authorized investment dealers and by employee benefit plans for such entities.
Individual purchases, including those in retirement accounts, must be for
accounts in the name of the individual or a qualifying family member. Class A
Shares may also be purchased at net asset value by current and former officers,
trustees and employees (and members of their families) of the Dougherty
Financial Group LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, trustees and key employees of
institutional clients of the Manager or any of its affiliates may purchase Class
A Shares at net asset value. Moreover, purchases may be effected at net asset
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value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs. Investors may be charged a fee when effecting transactions in Class A
Shares through a broker or agent that offers these special investment products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional Class
of a Fund; any group retirement plan (excluding defined benefit pension plans),
or such plans of the same employer, for which plan participant records are
maintained on the Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of funds in the Delaware Investments family and any stable value account
available to investment advisory clients of the Manager or its affiliates; or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented to, and
received written confirmation back from, Retirement Financial Services, Inc. in
writing that it has the requisite number of employees. See Group Investment
Plans for information regarding the applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares or purchase interests in a collective trust as a result of a change
in distribution arrangements.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a fund account
in connection with loans originated from accounts previously maintained by
another investment firm will also be invested at net asset value.
Equity Funds V must be notified in advance that the trade qualifies for
purchase at net asset value.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares. See Combined
Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments fund shares to which a
sales charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on which a
sales charge was already paid or through the reinvestment of dividends. See
Investing by Exchange.
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A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated. See Class A Shares.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Equity Funds V which provides for the holding in escrow by the
Transfer Agent, of 5% of the total amount of Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of the Funds and of any class of
any of the other mutual funds in Delaware Investments (except shares of any
Delaware Investments fund which do not carry a front-end sales charge, CDSC or
Limited CDSC other than shares of Delaware Group Premium Fund beneficially owned
in connection with the ownership of variable insurance products, unless they
were acquired through an exchange from a Delaware Investments fund which carried
a front-end sales charge, CDSC or Limited CDSC) previously purchased and still
held as of the date of their Letter of Intention toward the completion of such
Letter.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in Delaware Investments funds that are offered with a front-end
sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent
reserves the right to adjust the signed Letter of Intention based on this
acceptance criteria. The 13-month period will begin on the date this Letter of
Intention is accepted by the Transfer Agent. If actual investments exceed the
anticipated level and equal an amount that would qualify the plan for further
discounts, any front-end sales charges will be automatically adjusted. In the
event this Letter of Intention is not fulfilled within the 13-month period, the
plan level will be adjusted (without completing another Letter of Intention) and
the employer will be billed for the difference in front-end sales charges due,
based on the plan's assets under management at that time. Employers may also
include the value (at offering price at the level designated in their Letter of
Intention) of all their shares intended for purchase that are offered with a
front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares and
Class C Shares of a Fund and other Delaware Investments funds which offer
corresponding classes of shares may also be aggregated for this purpose.
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Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Funds, as well as shares of any other class of any of the other
Delaware Investments funds (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of the Manager or its affiliates in a stable value account may be
combined with other Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund, as
well as shares of any other class of any of the other Delaware Investments funds
which offer such classes (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). If, for example, any such purchaser has
previously purchased and still holds Class A Shares and/or shares of any other
of the classes described in the previous sentence with a value of $40,000 and
subsequently purchases $10,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $10,000 purchase would currently be 4.75%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer to
the table of sales charges for Class A Shares to determine the applicability of
the Right of Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of a Fund (and of Institutional Classes
holding shares which were acquired through an exchange from one of the other
mutual funds in Delaware Investments offered with a front-end sales charge) who
redeem such shares have one year from the date of redemption to reinvest all or
part of their redemption proceeds in Class A Shares of that Fund or in Class A
Shares of any of the other funds in the Delaware Investments family, subject to
applicable eligibility and minimum purchase requirements, in states where shares
of such other funds may be sold, at net asset value without the payment of a
front-end sales charge. This privilege does not extend to Class A Shares where
the redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware Investments family offered without a front-end sales charge will be
required to pay the applicable sales charge when purchasing Class A Shares. The
reinvestment privilege does not extend to a redemption of either Class B Shares
or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
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Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Funds' shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) in connection with the features described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales charges
for investments in Class A Shares, based on total plan assets. If a company has
more than one plan investing in the Delaware Investments family of funds, then
the total amount invested in all plans would be used in determining the
applicable front-end sales charge reduction upon each purchase, both initial and
subsequent, upon notification to the Fund in which the investment is being made
at the time of each such purchase. Employees participating in such Group
Investment Plans may also combine the investments made in their plan account
when determining the applicable front-end sales charge on purchases to
non-retirement Delaware Investments investment accounts if they so notify the
Fund in which they are investing in connection with each purchase. See
Retirement Plans for the Fund Classes under Investment Plans for information
about Retirement Plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
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Institutional Classes
The Institutional Class of each Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, an affiliate of the Manager, or its other
affiliates and their corporate sponsors, as well as subsidiaries and related
employee benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar financial
institution investing for its own account or for the account of its trust
customers for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the investment is
part of a program that requires payment of the financial institution of a Rule
12b-1 Plan fee; and (e) registered investment advisers investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
Shares of Institutional Classes are available for purchase at net asset
value, without the imposition of a front-end or contingent deferred sales charge
and are not subject to Rule 12b-1 expenses.
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of Small Cap Contrarian
Fund, Mid-Cap Value Fund and Retirement Income Fund as well as the Institutional
Class of Small Cap Value Fund are reinvested in the accounts of the holders of
such shares (based on the net asset value in effect on the reinvestment date). A
confirmation of each dividend payment from net investment income will be mailed
to shareholders quarterly. A confirmation of any distributions from realized
securities profits will be mailed to shareholders in the first quarter of the
fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Fund and Class in which shares are being purchased. Such purchases, which must
meet the minimum subsequent purchase requirements set forth in the Prospectuses
and this Part B, are made for Class A Shares at the public offering price, and
for Class B Shares, Class C Shares and Institutional Classes at the net asset
value, at the end of the day of receipt. A reinvestment plan may be terminated
at any time. This plan does not assure a profit nor protect against depreciation
in a declining market.
Reinvestment of Dividends in Other Delaware Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, including
the Funds, in states where their shares may be sold. Such investments will be at
net asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses.
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Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of the Funds,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends from Class B Shares
may only be directed to other Class B Shares and dividends from Class C Shares
may only be directed to other Class C Shares.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of a Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase requirements set
forth in each fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
Holders of Class A Shares of a Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Investments
family, including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of the Fund or of any other fund in
the Delaware Investments family. Holders of Class B Shares of a Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C Shares
of a Fund are permitted to exchange all or part of their Class C Shares only
into Class C Shares of other Delaware Investments funds. Class B Shares of a
Fund and Class C Shares of a Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of a Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of that Fund.
Permissible exchanges into Class A Shares of a Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of a Fund will be made without the imposition of a CDSC
by the fund from which the exchange is being made at the time of the exchange.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for either Fund to
accept for investment in Class A Shares, Class B Shares or Class C Shares,
through an agent bank, preauthorized government or private recurring payments.
This method of investment assures the timely credit to the shareholder's account
of payments such as social security, veterans' pension or compensation benefits,
federal salaries, Railroad Retirement benefits, private payroll checks,
dividends, and disability or pension fund benefits. It also eliminates lost,
stolen and delayed checks.
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Automatic Investing Plan--Shareholders of Class A Shares, Class B
Shares and Class C Shares may make automatic investments by authorizing, in
advance, monthly or quarterly payments directly from their checking account for
deposit into their Fund account. This type of investment will be handled in
either of the following ways. (1) If the shareholder's bank is a member of the
National Automated Clearing House Association ("NACHA"), the amount of the
investment will be electronically deducted from his or her account by Electronic
Fund Transfer ("EFT"). The shareholder's checking account will reflect a debit
each month at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA, deductions
will be made by preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
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Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
a Fund may liquidate sufficient shares from a shareholder's account to reimburse
the government or the private source. In the event there are insufficient shares
in the shareholder's account, the shareholder is expected to reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. Either Fund will accept
these investments, such as bank-by-phone, annuity payments and payroll
allotments, by mail directly from the third party. Investors should contact
their employers or financial institutions who in turn should contact Equity
Funds V for proper instructions.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be withdrawn from (for
share purchases) your predesignated bank account. Your request will be processed
the same day if you call prior to 4 p.m., Eastern time. There is a $25 minimum
and $50,000 maximum limit for MoneyLine (SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Funds do not charge a fee
for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. If in connection with the election of
the Wealth Builder Option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select. All
investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in the
Fund Classes' Prospectuses. The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the next business day) at
the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month if
the value of the shareholder's account is less than the amount specified for
investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
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automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. Shareholders can terminate their participation in Wealth Builder at any
time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Classes.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange. Also see
Buying Class A Shares at Net Asset Value. The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of a Fund and of other funds in the
Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
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Retirement Plans for the Fund Classes
An investment in the Funds may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement Account
("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange for a list of the instances in
which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such Plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class
shares. See Institutional Classes, above. For additional information on any of
the plans and Delaware's retirement services, call the Shareholder Service
Center telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year; however, participation
may be restricted based on certain income limits.
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IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10
or more years;
(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
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Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
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Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC upon
redemption of Class B Shares and Class C Shares, see Contingent Deferred Sales
Charge - Class B Shares and Class C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
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Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware Investments family. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge applicable
to Class A Shares as set forth in the table the Prospectuses for the Fund
Classes.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectuses
for the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of the Fund. Although investors may use their
own plan, there is available a Delaware Investments 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. Purchases under the Plan may be combined
for purposes of computing the reduced front-end sales charge applicable to Class
A Shares as set forth in the table in the Prospectuses for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund or its agent. Orders for purchases of Class B
Shares, Class C Shares and the Institutional Classes are effected at the net
asset value per share next calculated after receipt of the order by the Fund in
which shares are being purchased or its agent or certain authorized persons. See
Distribution and Service under Investment Management Agreement. Selling dealers
have the responsibility of transmitting orders promptly.
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The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset value
are computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for days when the following holidays are observed: New Year's Day,
Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock
Exchange is closed, the Funds will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in a
Fund's financial statements which are incorporated by reference into this Part
B.
Each Fund's net asset value per share is computed by adding the value
of all the securities and other assets in the Fund's portfolio, deducting any
liabilities of the Fund, and dividing by the number of Fund shares outstanding.
Expenses and fees are accrued daily. In determining a Fund's total net assets,
portfolio securities primarily listed or traded on a national or foreign
securities exchange, except for bonds, are valued at the last sale price on that
exchange. Exchange traded options are valued at the last reported sale price or,
if no sales are reported, at the mean between bid and asked prices. Non-exchange
traded options are valued at fair value using a mathematical model. Futures
contracts are valued at their daily quoted settlement price. For valuation
purposes, foreign currencies and foreign securities denominated in foreign
currency values will be converted into U.S. dollar values at the mean between
the bid and offered quotations of such currencies against U.S. dollars based on
rates in effect that day. Securities not traded on a particular day,
over-the-counter securities, and government and agency securities are valued at
the mean value between bid and asked prices. Money market instruments having a
maturity of less than 60 days are valued at amortized cost. Debt securities
(other than short-term obligations) are valued on the basis of valuations
provided by a pricing service when such prices are believed to reflect the fair
value of such securities. Foreign securities and the prices of foreign
securities denominated in foreign currencies are translated to U.S. dollars at
the mean between the bid and offer quotations of such currencies based on rates
in effect as of the close of the London Stock Exchange. Use of a pricing service
has been approved by the Board of Trustees. Prices provided by a pricing service
take into account appropriate factors such as institutional trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data. Subject to the foregoing,
securities for which market quotations are not readily available and other
assets are valued at fair value as determined in good faith and in a method
approved by the Board of Trustees.
Each Class of a Fund will bear, pro-rata, all of the common expenses of
that Fund. The net asset values of all outstanding shares of each Class of a
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in that Fund represented by the value of shares
of that Class. All income earned and expenses incurred by a Fund, will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in that Fund represented by the value of shares of such Classes,
except that Institutional Classes will not incur any of the expenses under
Equity Funds V's 12b-1 Plans and Class A Shares, Class B Shares and Class C
Shares alone will bear the 12b-1 Plan expenses payable under their respective
Plans. Due to the specific distribution expenses and other costs that will be
allocable to each Class, the net asset value of each Class of a Fund will vary.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, tax-advantaged funds, bond
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See the Prospectuses. A shareholder
submitting a redemption request may indicate that he or she wishes to receive
redemption proceeds of a specific dollar amount. In the case of such a request,
and in the case of certain redemptions from retirement plan accounts, a Fund
will redeem the number of shares necessary to deduct the applicable CDSC in the
case of Class B Shares and Class C Shares, and, if applicable, the Limited CDSC
in the case of Class A Shares and tender to the shareholder the requested
amount, assuming the shareholder holds enough shares in his or her account for
the redemption to be processed in this manner. Otherwise, the amount tendered to
the shareholder upon redemption will be reduced by the amount of the applicable
CDSC or Limited CDSC. Redemption proceeds will be distributed promptly, as
described below, but not later than seven days after receipt of a redemption
request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. Each Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
In addition to redemption of Fund shares, the Distributor, acting as
agent of the Funds, offers to repurchase Fund shares from broker/dealers acting
on behalf of shareholders. The redemption or repurchase price, which may be more
or less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by the respective Fund,
its agent, or certain authorized persons, subject to applicable CDSC or Limited
CDSC. This is computed and effective at the time the offering price and net
asset value are determined. See Determining Offering Price and Net Asset Value.
The Funds and the Distributor end their business days at 5 p.m., Eastern time.
This offer is discretionary and may be completely withdrawn without further
notice by the Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
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Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by the Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreement); provided, however, that each
commitment to mail or wire redemption proceeds by a certain time, as described
below, is modified by the qualifications described in the next paragraph.
Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. Each Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the purchase check has cleared, which may take up
to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. Each Fund reserves the right to reject
a written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund involved will automatically redeem from the shareholder's account the
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to a Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a Fund fairly to value its assets, or in
the event that the SEC has provided for such suspension for the protection of
shareholders, a Fund may postpone payment or suspend the right of redemption or
repurchase. In such case, the shareholder may withdraw the request for
redemption or leave it standing as a request for redemption at the net asset
value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Equity Funds
V has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which
each Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of such Fund during any 90-day period for
any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value, below.
Class B Shares are subject to a CDSC of: (i) 5% if shares are redeemed within
one year of purchase; (ii) 4% if shares are redeemed during the second year
after purchase (iii) 3% if shares are redeemed during the third or fourth year
following purchase; (iv) 2% if shares are redeemed during the fifth year
following purchase; and (v) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Purchasing Shares. Except for
the applicable CDSC or Limited CDSC and, with respect to the expedited payment
by wire described below for which, in the case of the Fund Classes, there is
currently a $7.50 bank wiring cost, neither the Funds nor the Distributor
charges a fee for redemptions or repurchases, but such fees could be charged at
any time in the future.
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Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (in
each case, "New Shares") in a permitted exchange, will not be subject to a CDSC
that might otherwise be due upon redemption of the Original Shares. However,
such shareholders will continue to be subject to the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the Original Shares as
described in this Part B and any CDSC assessed upon redemption will be charged
by the fund from which the Original Shares were exchanged. In an exchange of
Class B Shares from a Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares is added to
the period of time that an investor held the New Shares. With respect to Class B
Shares, the automatic conversion schedule of the Original Shares may be longer
than that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor to the higher 12b-1 fees applicable to Class B
Shares of a Fund for a longer period of time than if the investment in New
Shares were made directly.
Written Redemption
You can write to each Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be signed by all
owners of the account or your investment dealer of record. For redemptions of
more than $50,000, or when the proceeds are not sent to the shareholder(s) at
the address of record, the Funds require a signature by all owners of the
account and a signature guarantee for each owner. A signature guarantee can be
obtained from a commercial bank, a trust company or a member of a Securities
Transfer Association Medallion Program ("STAMP"). Each Fund reserves the right
to reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Funds may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
Written Exchange
You may also write to each Fund (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into another
mutual fund in Delaware Investments, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.
The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in which you have your account
in writing that you do not wish to have such services available with respect to
your account. Each Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Funds by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by the
Fund Classes are generally tape
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recorded, and a written confirmation will be provided for all purchase, exchange
and redemption transactions initiated by telephone. By exchanging shares by
telephone, you are acknowledging prior receipt of a prospectus for the fund into
which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. If the
proceeds are wired to the shareholder's account at a bank which is not a member
of the Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account. First Union National Bank's fee
(currently $7.50) will be deducted from Fund Class redemption proceeds. If you
ask for a check, it will normally be mailed the next business day after receipt
of your redemption request to your predesignated bank account. There are no
separate fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call the Shareholder Service Center prior
to the time the offering price and net asset value are determined, as noted
above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and each Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
MoneyLine(SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine(SM) On Demand. When you authorize a Fund to accept such
requests from you or your investment dealer, funds will be deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine(SM) On Demand transactions. See
MoneyLine(SM) On Demand under Investment Plans.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Funds will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. A Fund reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a
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timing pattern who: (i) makes an exchange request out of the Fund within two
weeks of an earlier exchange request out of the Fund, or (ii) makes more than
two exchanges out of the Fund per calendar quarter, or (iii) exchanges shares
equal in value to at least $5 million, or more than 1/4 of 1% of the Fund's net
assets. Accounts under common ownership or control, including accounts
administered so as to redeem or purchase shares based upon certain predetermined
market indicators, will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Delaware Decatur Equity Income Fund, (2) Decatur Growth and Income Fund, (3)
Delaware Balanced Fund, (4) Delaware Limited-Term Government Fund, (5) Delaware
USA Fund, (6) Delaware Cash Reserve, (7) Delaware Delchester Fund and (8)
Delaware Tax-Free Pennsylvania Fund. No other Delaware Investments funds are
available for timed exchanges. Assets redeemed or exchanged out of Timing
Accounts in Delaware Investments funds not listed above may not be reinvested
back into that Timing Account. Each Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
time pattern (as described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may establish
a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Funds do not recommend any
specific amount of withdrawal. This is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. This $5,000 minimum does not apply for a Fund's prototype retirement
plans. Shares purchased with the initial investment and through reinvestment of
cash dividends and realized securities profits distributions will be credited to
the shareholder's account and sufficient full and fractional shares will be
redeemed at the net asset value calculated on the third business day preceding
the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
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Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a Fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in Delaware Investments funds which do not
carry a sales charge. Redemptions of Class A Shares pursuant to a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the purchase was made at net
asset value and a dealer's commission has been paid on that purchase. The
applicable Limited CDSC for Class A Shares and CDSC for Class B and C Shares
redeemed via a Systematic Withdrawal Plan will be waived if the annual amount
withdrawn in each year is less than 12% of the account balance on the date that
the Plan is established. If the annual amount withdrawn in any year exceeds 12%
of the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subjected to the applicable
contingent deferred sales charge, including an assessment for previously
redeemed amounts under the Plan. Whether a waiver of the contingent deferred
sales charge is available or not, the first shares to be redeemed for each
Systematic Withdrawal Plan payment will be those not subject to a contingent
deferred sales charge because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. See Waiver of
Contingent Deferred Sales Charges, below.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Funds reserve the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine(SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. The Funds do not charge a
fee for any this service; however, your bank may charge a fee. This service is
not available for retirement plans.
The Systematic Withdrawal Plan is not available for Small Cap
Contrarian Fund, Mid-Cap Value Fund or Retirement Income Fund or Small Cap Value
Fund Institutional Class. Shareholders should consult with their financial
advisers to determine whether a Systematic Withdrawal Plan would be suitable for
them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser of : (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
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Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the two-year
holding period. The Limited CDSC is assessed if such two year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of a Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waivers of Contingent Deferred Sales Charges
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; (viii) distributions form an account if the redemption results
from a death of a registered owner, or a registered joint owner, of the account
(in the case of accounts established under the Uniform Gifts to Minors or
Uniform transfers to Minors Acts or trust accounts, the waiver applies upon the
death of all beneficial owners) or a total disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed; and (ix) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying Class A Shares at Net Asset Value under Purchasing Shares).
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Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from a
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of a registered owner, or a registered joint owner, of the account (in the
case of accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the death of
all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase of
the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from a Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of a registered owner, or a
registered joint owner, of the account (in the case of accounts established
under the Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust
accounts, the waiver applies upon the death of all beneficial owners) or a total
and permanent disability (as defined in Section 72 of the Code) of all
registered owners occurring after the purchase of the shares being redeemed.
* * *
In addition, the CDSC will be waived on Class A Shares, Class B Shares
and Class C Shares redeemed in accordance with a Systematic Withdrawal Plan if
the annual amount selected to be withdrawn under the Plan does not exceed 12% of
the value of the account on the date that the Systematic Withdrawal Plan was
established or modified.
DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
Small Cap Value Fund, Small Cap Contrarian Fund and Mid-Cap Value Fund
will normally make payments from net investment income once a year. Retirement
Income Fund will normally make such payments monthly. Any payments from net
realized securities profits will be made during the first quarter of the next
fiscal year.
Each Class of shares of each Fund will share proportionately in the
investment income and expenses of that Fund, except that Class A Shares, Class B
Shares and Class C Shares alone will incur distribution fees under their
respective 12b-1 Plans.
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Dividends are automatically reinvested in additional shares at the net
asset value of the ex-dividend date unless, in the case of shareholders in the
Fund Classes, an election to receive dividends in cash has been made. If you
elect to take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may choose the MoneyLine (SM)
Direct Deposit Service and have such payments transferred from your Fund account
to your predesignated bank account. See Systematic Withdrawal Plans above.
Dividend payments of $1.00 or less will be automatically reinvested,
notwithstanding a shareholder's election to receive dividends in cash. If such a
shareholder's dividends increase to greater than $1.00, the shareholder would
have to file a new election in order to begin receiving dividends in cash again.
Any check in payment of dividends or other distributions which cannot be
delivered by the United States Post Office or which remains uncashed for a
period of more than one year may be reinvested in the shareholder's account at
the then-current net asset value and the dividend option may be changed from
cash to reinvest. Each Fund may deduct from a shareholder's account the costs of
that Fund's effort to locate a shareholder if a shareholder's mail is returned
by the Post Office or such Fund is otherwise unable to locate the shareholder or
verify the shareholder's mailing address. These costs may include a percentage
of the account when a search company charges a percentage fee in exchange for
their location services.
TAXES
Each Fund has qualified or intends to qualify, and intends to continue
to qualify, as a regulated investment company under Subchapter M of the Code. As
such, a Fund will not be subject to federal income tax on net investment income
and net realized capital gains which are distributed to shareholders.
Each Class of shares of a Fund will share proportionately in the
investment income and expenses of that Fund, except that, absent any applicable
fee waiver, Class A Shares, Class B Shares and Class C Shares alone will incur
distribution fees under their respective 12b-1 Plans.
Each Fund intends to pay out substantially all of its net investment
income and net realized capital gains. Such payments for Small Cap Value Fund,
Small Cap Contrarian Fund and Mid-Cap Value Fund, if any, will be made once a
year during the first quarter of the following fiscal year. Retirement Income
Fund expects to declare and pay dividends from net investment income monthly to
shareholders of each Class of the Fund's shares. All dividends and any capital
gains distributions will be automatically credited to the shareholder's account
in additional shares of the same class of the Fund at net asset value unless, in
the case of shareholders in the Fund Classes of Small Cap Value Fund, the
shareholder requests in writing that such dividends and/or distributions be paid
in cash. Dividend payments of $1.00 or less will be automatically reinvested,
notwithstanding a shareholder's election to receive dividends in cash. If such a
shareholder's dividends increase to greater than $1.00, the shareholder would
have to file a new election in order to begin receiving dividends in cash again.
Any check in payment of dividends or other distributions which cannot
be delivered by the United States Post Office or which remains uncashed for a
period of more than one year may be reinvested in the shareholder's account at
the then-current net asset value and the dividend option may be changed from
cash to reinvest. Small Cap Value Fund may deduct from a shareholder's account
the costs of the Fund's effort to locate a shareholder if a shareholder's mail
is returned by the United States Post Office or the Fund is otherwise unable to
locate the shareholder or verify the shareholder's mailing address. These costs
may include a percentage of the account when a search company charges a
percentage fee in exchange for their location services.
Dividends from investment income and short-term capital gains
distributions are treated by shareholders as ordinary income for federal income
tax purposes. Distributions of long-term capital gains, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of time an
investor has held such shares, and these gains are currently taxed at long-term
capital gain rates. The tax status of dividends and distributions paid
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to shareholders will not be affected by whether they are paid in cash or in
additional shares. Persons not subject to tax will not be required to pay taxes
on distributions.
Under the Taxpayer Relief Act of 1997 (the "1997 Act"), as revised by the
Internal Revenue Service Restructuring and Reform Act of 1998 (the "1998 Act")
and the Omnibus Consolidated and Emergency Supplemental Appropriations Act, a
Fund is required to track its sales of portfolio securities and to report its
capital gain distributions to you according to the following categories:
"Long-term capital gains": gains on securities sold after December 31,
1997 and held for more than 12 months as capital assets in the hands of
the holder are taxed at the 20% rate when distributed to shareholders
(10% for individual investors in the 15% tax bracket.)
"Short -term capital gains": Gains on securities sold by a Fund that do
not meet the long-term holdings period are considered short term
capital gains and are taxable as ordinary income.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individuals who are
subject to tax at higher rate brackets, qualified five-year gains are
net gains on securities which are purchased after December 31, 2000 and
are held for more than five years. Taxpayers subject to tax at a higher
rate brackets may also make an election for shares held on January 1,
2001 to recognize gain on their shares in order to qualify such shares
as qualified five-year property. These gains will be taxable to
individual investors at a maximum rate of 18% for investors in the 28%
or higher federal income tax brackets, and at a maximum rate of 8% for
investors in the 15% federal income tax bracket when sold after the
five-year holding period.
Any loss incurred on the redemption or exchange of shares held for six
months or less will be disallowed to the extent of any exempt-interest dividends
distributed to you with respect to your Fund shares and any remaining loss will
be treated as a long-term capital loss to the extent of any long-term capital
gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of
your Fund shares will be disallowed to the extent that you buy other shares in
the Fund (through reinvestment of dividends or otherwise) within 30 days before
or after your share redemption. Any loss disallowed under these rules will be
added to your tax basis in the new shares you buy.
If you redeem some or all of yours shares in a Fund, and then reinvest
the sales proceeds in such Fund or in another Delaware Investments fund within
90 days of buying the original shares, the sales charge that would otherwise
apply to your reinvestment may be reduced or eliminated. The IRS will require
you to report gain or loss on the redemption of your original shares in a Fund.
In doing so, all or a portion of the sales charge that you paid for your
original shares in a Fund will be excluded from your tax basis in the shares
sold (for the purpose of determining gain or loss upon the sale of such shares).
The portion of the sales charge excluded will equal the amount that the sales
charge is reduced on your reinvestment. Any portion of the sales charge excluded
from your tax basis in the shares sold will be added to the tax basis of the
shares you acquire from your reinvestment.
A portion of each Fund's dividends may qualify for the
dividends-received deduction for corporations provided in the federal income tax
law. The portion of dividends paid by each Fund that so qualifies will be
designated each year in a notice to that Fund's shareholders, and cannot exceed
the gross amount of dividends received by the Fund from domestic (U.S.)
corporations that would have qualified for the dividends-received deduction in
the hands of the Fund if the Fund was a regular corporation. The availability of
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the dividends-received deduction is subject to certain holding period and debt
financing restrictions imposed under the Code on the corporation claiming the
deduction. Under the 1997 Act, the amount that a Fund may designate as eligible
for the dividends-received deduction will be reduced or eliminated if the shares
on which the dividends earned by the Fund were debt-financed or held by the Fund
for less than a 46-day period during a 90-day period beginning 45 days before
the ex-dividend date and ending 45 days after the ex-dividend date. Similarly,
if your Fund shares are debt-financed or held by you for less than a 46-day
period during a 90-day period beginning 45 days before the ex-dividend date and
ending 45 days after the ex-dividend date, then the dividends-received deduction
for Fund dividends on your shares may also be reduced or eliminated. Even if
designated as dividends eligible for the dividends-received deduction, all
dividends (including any deducted portion) must be included in your alternative
minimum taxable income calculation. For the fiscal year ended November 30, 1998,
60.40% and 51.67% of the dividends from net investment income of Small Cap Value
Fund and Retirement Income Fund, respectively, were eligible for this deduction.
Shareholders will be notified annually by Equity Funds V as to the
federal income tax status of dividends and distributions.
Distributions may also be subject to state and local taxes;
shareholders are advised to consult with their tax advisers in this regard.
Shares of each Fund will be exempt from Pennsylvania county personal property
taxes.
See also Other Tax Requirements under Accounting and Tax Issues in this
Part B.
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INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to each Fund, subject to the
supervision and direction of Equity Funds V's Board of Trustees.
The Manager and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On November 30 1999, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $45 billion in assets in
the various institutional or separately managed (approximately $18,776,030,000)
and investment company (approximately $27,091,300,000) accounts.
The Investment Management Agreement for each Fund is dated November 23,
1999, and was approved by the initial shareholder on that date. The Agreement
has an initial term of two years and may be renewed each year only so long as
such renewal and continuance are specifically approved at least annually by the
Board of Trustees or by vote of a majority of the outstanding voting securities
of a Fund, and only if the terms of and the renewal thereof have been approved
by the vote of a majority of the trustees of Equity Funds V who are not parties
thereto or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. Each Agreement is terminable
without penalty on 60 days' notice by the trustees of Equity Funds V or by the
Manager. Each Agreement will terminate automatically in the event of its
assignment.
The management fee rate schedule for each Fund is as follows:
- --------------------------------------------------------------------------------
Management Fee Schedule
(as a percentage of average daily net assets)
Fund Name Annual Rate
- --------------------------------------------------------------------------------
Delaware Small Cap Value Fund 0.75% on first $500 million;
0.70% on next $500 million;
0.65% on next $1,500 million; and
0.60% on assets in excess of $2,500 million.
- --------------------------------------------------------------------------------
Delaware Small Cap Contrarian Fund 0.75% on first $500 million;
0.70% on next $500 million;
0.65% on next $1,500 million; and
0.60% on assets in excess of $2,500 million.
- --------------------------------------------------------------------------------
Delaware Mid-Cap Value Fund 0.75% on first $500 million;
0.70% on next $500 million;
0.65% on next $1,500 million; and
0.60% on assets in excess of $2,500 million.
- --------------------------------------------------------------------------------
Delaware Retirement Income Fund 0.65% on first $500 million;
0.60% on next $500 million;
0.55% on next $1,500 million; and
0.50% on assets in excess of $2,500 million.
- --------------------------------------------------------------------------------
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On November 30, 1999, the total net assets of Equity Funds V were
$335,473,372, broken down as follows:
Delaware Small Cap Value Fund $328,534,694
Delaware Small Cap Contrarian Fund $2,100,943
Delaware Mid-Cap Value Fund $1,891,098
Delaware Retirement Income Fund $2,946,637
Under the general supervision of the Board of Trustees, the Manager makes all
investment decisions that are implemented by the Fund. On November 30, 1999, the
investment management fees paid for each Fund for the past three fiscal years
were as follows:
<TABLE>
<CAPTION>
Fund November 30 , 1999 November 30 , 1998 November 30 , 1997
- ---- ------------------ ------------------ ------------------
<S> <C> <C> <C>
Small Cap Value Fund $3,203,991 paid $3,170,471 paid $2,012,899 paid
Small Cap Contrarian Fund(1) $14,693 earned N/A N/A
$-0- paid N/A N/A
$14,693 waived N/A N/A
Mid-Cap Value Fund(2) $13,663 earned N/A N/A
$2,855 paid N/A N/A
$10,808 waived N/A N/A
Retirement Income Fund(3) $19,528 earned $18,686 earned $15,939 earned
$15,763 paid $1,984 paid $-0- paid
$3,765 waived $16,702 waived $15,939 waived
</TABLE>
(1) Commenced operations on December 29, 1998.
(2) Commenced operations on December 29, 1998.
(3) Commenced operations on December 2, 1996.
The Manager has agreed to waive its management fee payable by Small Cap
Contrarian Fund, Mid-Cap Value Fund and Retirement Income Fund and pay certain
expenses of the Retirement Income Fund to the extent necessary to limit total
operating expenses to 0.75% (exclusive of taxes, interest, brokerage
commissions, extraordinary expenses and applicable 12b-1 fees) from the
commencement of operations through May 31, 2000.
The trustees of Equity Funds V annually review fees paid to the
Manager.
The Manager pays the salaries of all trustees, officers and employees
who are affiliated with both the Manager and Equity Funds V. Except for those
expenses borne by the Manager under the Investment Management Agreement and the
Distributor under the Distribution Agreements, each Fund is responsible for all
of its own expenses. Among others, these include each Fund's proportionate share
of rent and certain other administrative expenses; the investment management
fees; transfer and dividend disbursing agent fees and costs; custodian expenses;
federal and state securities registration fees; proxy costs; and the costs of
preparing prospectuses and reports sent to shareholders.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of each Fund's shares
under separate Distribution Agreements dated November 23, 1999. The Distributor
is an affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by each Fund on behalf of Class A Shares,
Class B Shares and Class C Shares under their respective 12b-1 Plans. The
Distributor is an indirect, wholly owned subsidiaries of Delaware Management
Holdings, Inc.
-69-
<PAGE>
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
each Funds' shareholder servicing, dividend disbursing and transfer agent
pursuant to a Shareholders Services Agreement dated November 23, 1999. The
Transfer Agent also provides accounting services to the Funds pursuant to the
terms of a separate Fund Accounting Agreement. The Transfer Agent is also an
indirect, wholly owned subsidiary of Delaware Management Holdings, Inc.
The trustees annually review fees paid to the Distributor and the
Transfer Agent.
Each Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Fund. For purposes of pricing, the Fund
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
-70-
<PAGE>
OFFICERS AND TRUSTEES
The business and affairs of Equity Funds V are managed under the
direction of its Board of Trustees.
Certain officers and trustees of Equity Funds V hold identical
positions in each of the other funds in the Delaware Group. On December 31,
1999, Equity Funds V's officers and trustees owned less than 1% of the
outstanding shares of the Class A Shares, Class B Shares, Class C Shares and
Institutional Class of Small Cap Value Fund, Mid-Cap Value Fund, Small Cap
Contrarian and Retirement Income Fund, respectively.
As of December 31, 1999, management believes the following accounts
held 5% or more of the outstanding shares of the Class A Shares, Class B Shares,
Class C Shares and Institutional Class of Small Cap Value Fund, Mid-Cap Value
Fund, Small Cap Contrarian and Retirement Income Fund, respectively.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Class Name and Address of Account Share Amount Percentage
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Delaware Small Cap MLPF&S for the sole benefit of its customers 515,794.000 6.05%
Value Fund A Class Attention: Fund Administration SEC #973J6
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
- --------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap MLPF&S for the sole benefit of its customers 485,084.730 15.34%
Value Fund B Class Attention: Fund Administration SEC #97E98
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
- --------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap MLPF&S for the sole benefit of its customers 361,365.040 34.02%
Value Fund C Class Attention: Fund Administration SEC #97HY5
4800 Deer Lake Drive East, 2nd Floor
Jacksonville, FL 32246-6484
- --------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap RS DMC Employee Profit Sharing Plan 99,703.260 22.82%
Value Fund Delaware Management Company
Institutional Class Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103-3638
- --------------------------------------------------------------------------------------------------------------------------
Chase Manhattan Bank C/F 35,812.550 8.19%
Delaware Group Foundation Funds Growth Portfolio
Attn: Marisol Gordon - Global Investment Services
3 Metrotech Center 8th Floor
Brooklyn, NY 11201-3800
- --------------------------------------------------------------------------------------------------------------------------
Chase Manhattan Bank C/F 32,881.290 7.52%
Delaware Group Foundation Funds Balanced Portfolio
Attn: Marisol Gordon - Global Investment Services
3 Metrotech Center 8th Floor
Brooklyn, NY 11201-3800
- --------------------------------------------------------------------------------------------------------------------------
RS DMTC 401(k) Plan 30,413.120 6.96%
Mac Equipment 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
- --------------------------------------------------------------------------------------------------------------------------
RS Non Trust 401(k) Plan 29,208.430 6.68%
National Elevator Industries
401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
-71-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Class Name and Address of Account Share Amount Percentage
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Delaware Small Cap RS DMTC 401(k) Plan 28,844.250 6.14%
Value Fund Aloha Air Iam Clrk
Institutional Class c/o Delpac 16th Floor
1818 Market Street
Philadelphia, PA 19103-3638
- --------------------------------------------------------------------------------------------------------------------------
DMTC R/S 401(k) 22,559.620 5.16%
First Sierra Financial 401(k) Plan
Attn: Retirement Plans
1818 Market Street
Philadelphia, PA 19103-3638
- --------------------------------------------------------------------------------------------------------------------------
Delaware Mid-Cap Delaware Management Business Trust - DIA 1.000 100.00%
Value Fund A Class Attn: Joseph Hastings
1818 Market Street 16th Floor
Philadelphia, PA 19103-3638
- --------------------------------------------------------------------------------------------------------------------------
Delaware Mid-Cap Lincoln National Life Insurance Company 235,294.120 99.99%
Value Fund 1300 S. Clinton St.
Institutional Class Fort Wayne, IN 46802-3518
- --------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap Delaware Management Business Trust - DIA 1.000 100.00%
Contrarian Fund A Attn: Joseph Hastings
Class 1818 Market Street 16th Floor
Philadelphia, PA 19103-3638
- --------------------------------------------------------------------------------------------------------------------------
Delaware Small Cap Lincoln National Life Insurance Company 235,294.120 99.99%
Contrarian Fund 1300 S. Clinton St.
Institutional Class Fort Wayne, IN 46802-3518
- --------------------------------------------------------------------------------------------------------------------------
Delaware Retirement John P. Finnegan 2,352.890 99.94%
Income Fund A Class 213 Memorial Ave.
Haddon Township, NJ 08033-2955
- --------------------------------------------------------------------------------------------------------------------------
Delaware Retirement Chicago Trust Co. 309,353.220 99.61%
Income Fund FBO Lincoln National Corp. Employee Retirement Plan
Institutional Class c/o Marshall & Isley Trust Co.
P.O. Box 2977
Milwaukee, WI 53201-2977
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc. and Retirement
Financial Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
-72-
<PAGE>
Trustees and principal officers of Equity Funds V are noted below along
with their ages and their business experience for the past five years. Unless
otherwise noted, the address of each officer and trustee is One Commerce Square,
Philadelphia, PA 19103.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Trustee and/or Officer Business Experience
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
*Wayne A. Stork (62) Chairman, Trustee/Director of Equity Funds V and each of the other 32 investment
companies in the Delaware Investments family.
Prior to January 1, 1999, Mr. Stork was Director of Delaware Capital Management,
Inc.; Chairman, President and Chief Executive Officer and Director/Trustee of DMH
Corp., Delaware Distributors, Inc. and Founders Holdings, Inc.; Chairman,
President, Chief Executive Officer, Chief Investment Officer and Director/Trustee
of Delaware Management Company, Inc. and Delaware Management Business Trust;
Chairman, President, Chief Executive Officer and Chief Investment Officer of
Delaware Management Company (a series of Delaware Management Business Trust);
Chairman, Chief Executive Officer and Chief Investment Officer of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Chairman
and Chief Executive Officer of Delaware International Advisers Ltd.; Chairman,
Chief Executive Officer and Director of Delaware International Holdings Ltd.;
Chief Executive Officer of Delaware Management Holdings, Inc.; President and
Chief Executive Officer of Delvoy, Inc.; Chairman of Delaware Distributors, L.P.;
Director of Delaware Service Company, Inc. and Retirement Financial Services,
Inc. Priot to January 1, 2000, Mr. Stork was Chairman and Director of Delaware
Management Holdings, Inc. and Director of Delaware International Advisers Ltd.
In addition, during the five years prior to January 1, 2000, Mr. Stork has served
in various executive capacities at different times within the Delaware
organization.
- -------------------------------------------------------------------------------------------------------------------------------
- ----------------------
* Trustee affiliated with Equity Funds V's investment manager and considered an "interested person" as defined in the 1940 Act.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-73-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Trustee and/or Officer Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
*David K. Downes (60) President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and Trustee/Director of Equity Funds V and each of the other 32
investment companies in the Delaware Investments family.
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a series of Delaware Management
Business Trust)
President, Chief Executive Officer and Director of Delaware Capital Management,
Inc.
Chairman, President, Chief Executive Officer and Director of Delaware Service
Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware International Holdings Ltd.
Chairman and Director of Delaware Management Trust Company and Retirement
Financial Services, Inc.
Executive Vice President, Chief Operating Officer, Chief Financial Officer of
Delaware Management Holdings, Inc., Founders CBO Corporation, Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware
Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Director of DMH Corp., Delaware Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.
Executive Vice President and Trustee of Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive capacities
at different times within the Delaware organization.
- -------------------------------------------------------------------------------------------------------------------------------
- ----------------------
* Trustee affiliated with Equity Funds V's investment manager and considered an "interested person" as defined in the 1940 Act.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-74-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Trustee Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Walter P. Babich (72) Trustee/Director Equity Funds V and each of the other 32 investment companies
in the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988 to
1991, he was a partner of I&L Investors.
- -------------------------------------------------------------------------------------------------------------------------------
John H. Durham (62) Trustee/Director of Equity Funds V and 18 other investment companies in the
Delaware Investments family
Private Investor.
P.O. Box 819, Gwynedd Valley, PA 19437
Mr. Durham served as Chairman of the Board of each fund in the Delaware
Investments family from 1986 to 1991; President of each fund from 1977 to 1990;
and Chief Executive Officer of each fund from 1984 to 1990. Prior to 1992, with
respect to Delaware Management Holdings, Inc., Delaware Management Company,
Delaware Distributors, Inc. and Delaware Service Company, Inc., Mr. Durham served
as a director and in various executive capacities at different times. He was also
a Partner of Complete Care Services from 1995 to 1999.
- -------------------------------------------------------------------------------------------------------------------------------
Anthony D. Knerr (61) Trustee/Director of Equity Funds V and each of the 32 other investment
companies in the Delaware Investments family.
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and Treasurer
of Columbia University, New York. From 1987 to 1989, he was also a lecturer in
English at the University. In addition, Mr. Knerr was Chairman of The Publishing
Group, Inc., New York, from 1988 to 1990. Mr. Knerr founded The Publishing Group,
Inc. in 1988.
- -------------------------------------------------------------------------------------------------------------------------------
Ann R. Leven (59) Trustee/Director of Equity Funds V and each of the other 32 other investment
companies in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Retired Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1992, she was Adjunct
Professor of Columbia Business School.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-75-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Trustee Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Thomas F. Madison (63) Trustee/Director of Equity Funds V and each of the other 32 investment
companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications Holdings, Inc.
since 1996. From February to September 1994, Mr. Madison served as Vice
Chairman--Office of the CEO of The Minnesota Mutual Life Insurance Company and
from 1988 to 1993, he was President of U.S. WEST Communications--Markets.
- -------------------------------------------------------------------------------------------------------------------------------
Charles E. Peck (74) Trustee/Director of Equity Funds V and each of the other 32 investment
companies in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.
- -------------------------------------------------------------------------------------------------------------------------------
Janet L. Yeomans (51) Trustee/Director of Equity Funds V and 32 other investment companies in the
Delaware Investments family.
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
From 1987-1994, Ms. Yeomans was Director of Benefit Funds and Financial Markets
for the 3M Corporation; Manager of Benefit Fund Investments for the 3M
Corporation, 1985-1987; Manager of Pension Funds for the 3M Corporation,
1983-1985; Consultant--Investment Technology Group of Chase Econometrics,
1982-1983; Consultant for Data Resources, 1980-1982; Programmer for the Federal
Reserve Bank of Chicago, 1970-1974.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-76-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard G. Unruh, Jr. (60) Executive Vice President and Chief Investment Officer, Equity of the Fund,
each of the other 32 investment companies in the Delaware Investments family
Chief Executive Officer/Chief Investment Officer of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Executive Vice President of Delaware Management Holdings, Inc. and Delaware
Capital Management, Inc.
Executive Vice President/Chief Investment Officer of Delaware Management
Company (a series of Delaware Management Business Trust)
Executive Vice President and Trustee of Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive capacities
at different times within the Delaware organization.
- -------------------------------------------------------------------------------------------------------------------------------
H. Thomas McMeekin (46) Executive Vice President and Chief Investment Officer, Fixed Income of Equity
Funds V and each of the other 32 investment companies in the Delaware
Investments family.
Director of Delaware Management Holdings, Inc. and Founders CBO Corporation.
Executive Vice President/Chief Investment Officer, DMC-Fixed Income of
Delaware Management Company (a series of Delaware Management Business Trust)
Executive Vice President/Chief Investment Officer, DIA-Fixed Income of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Management Business Trust and Delaware
Capital Management, Inc.
Mr. McMeekin joined Delaware Investments in 1999. During the past five years,
he has also served in various executive capacities for Lincoln National
Corporation.
- -------------------------------------------------------------------------------------------------------------------------------
Richard J. Flannery (42) Executive Vice President/General Counsel of Equity Funds V and each of the
other 32 investment companies in the Delaware Investments family, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Founders CBO Corporation.
Executive Vice President/General Counsel and Director of Delaware International
Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Retirement Financial Services, Inc., Delaware Distributors,
Inc. and Delaware Management Trust Company.
Executive Vice President and Trustee of Delaware Management Business Trust.
Director of Delaware International Advisers Ltd.
Director of HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various executive
capacities at different times within the Delaware organization.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Eric E. Miller (46) Senior Vice President/Deputy General Counsel and Secretary of Equity Funds V
and each of the other 32 investment companies in Delaware Investments.
Senior Vice President/Deputy General Counsel and Assistant Secretary of
Delaware Management Holdings, Inc., DMH Corp., Delvoy, Inc., Delaware
Management Company, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust), Delaware
Service Company, Inc., Delaware Capital Management, Inc., Retirement Financial
Services, Inc., Delaware Distributors, Inc., Delaware Distributors, L.P. and
Founders Holdings, Inc.
During the past five years, Mr. Miller has served in various executive capacities
at different times within Delaware Investments.
- -------------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings (50) Senior Vice President/Corporate Controller of Equity Funds V and each of the
other 32 investment companies in the Delaware Investments family and Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Senior Vice President/Corporate Controller and Treasurer of Delaware Management
Holdings, Inc., DMH Corp., Delvoy , Inc., Delaware Management Company, Inc.,
Delaware Management Business Trust, Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Capital Management,
Inc., Delaware International Holdings Ltd., Founders Holdings, Inc. and Delaware
Management Business Trust
Executive Vice President/Chief Financial Officer/Treasurer of Delaware Management
Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
Chief Financial Officer of Retirement Financial Services, Inc.
During the past five years, Mr. Hastings has served in various executive
capacities at different times within the Delaware organization.
- -------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof (37) Senior Vice President and Treasurer of Equity Funds V and each of the other
32 investment companies in the Delaware Investments family.
Senior Vice President/Investment Accounting of Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Service Company, Inc. and
Delaware Capital Management, Inc. and Founders Holdings, Inc.
Senior Vice President and Treasurer/ Investment Accounting of Delaware
Distributors, L.P. and Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Senior Vice President/Manager of Investment Accounting of Delaware International
Holdings, Inc.
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice President for
Bankers Trust, New York, NY from 1994 to 1995, a Vice President for CS First
Boston Investment Management, New York, NY from 1993 to 1994 and an Assistant
Vice President for Equitable Capital Management Corporation, New York, NY from
1987 to 1993.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-77-
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
Officer Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Christopher S. Beck (42) Vice President/Senior Portfolio Manager of Equity Funds V, the other 32
investment companies in the Delaware Investments family, Delaware Capital
Management, Inc., Delaware Management Company (a series of Delaware Management
Business Trust) and Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Before joining Delaware Investments in 1997, Mr. Beck managed the small cap value
fund for two years at Pitcairn Trust Company. Prior to 1995, he was Director of
Research at Cypress Capital Management in Wilmington and Chief Investment Officer
of the University of Delaware Endowment Fund.
- -------------------------------------------------------------------------------------------------------------------------------
Gerald T. Nichols (41) Vice President/Senior Portfolio Manager of Equity Funds V, 32 investment
companies in the Delaware Investments family, Delaware Management Company and
Delaware Investment Advisers.
Vice President/Senior Portfolio Manager of Founders Holdings, Inc.
Assistant Secretary, Treasurer and Director of Founders FBO Corporation.
Director of HYPPCO Finance Company Ltd.
During the past five years, Mr. Nichols has served in various capacities at
different times within the Delaware organization.
- -------------------------------------------------------------------------------------------------------------------------------
Michael Dugan (00) Vice President/Senior Portfolio Manager of Equity Funds V, 32 investment
companies in the Delaware Investments family, Delaware Management Company and
Delaware Investment Advisers.
Before rejoining Delaware Investments in 1997, Mr. Dugan served as Vice President
at Thompson, Siegel and Walmsley, where he managed value-oriented equity and
balanced portfolios. He initially joined Delaware Investments in 1985.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-78-
<PAGE>
The following is a compensation table listing for each trustee entitled
to receive compensation, the aggregate compensation received from the Fund and
the total compensation received from all investment companies in the Delaware
Investments family for which he or she serves as a trustee or director for the
fiscal year ended November 30, 1999 and an estimate of annual benefits to be
received upon retirement under the Delaware Investments Retirement Plan for
Trustees/Directors as of November 30, 1999. Only the independent trustees of the
Fund receive compensation from the Fund.
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Estimated from all
Aggregate Accrued Annual Investment
Compensation as Part of Benefits Companies
from Equity Equity Funds V Upon in Delaware
Name (3) Funds V Expenses Retirement(1) Investments(2)
<S> <C> <C> <C>
Walter P. Babich $1,635 None $38,000 $58,150
John H. Durham $1,603 None $32,180 $43,006
Anthony D. Knerr $1,834 None $38,000 $65,043
Ann R. Leven $1,862 None $38,000 $66,043
Thomas F. Madison $1,834 None $38,000 $65,043
Charles E. Peck $1,802 None $38,000 $63,793
Janet L. Yeomans(4) $1,270 None $38,000 $44,191
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Trustees/Directors, each disinterested trustee/director who, at the time of
his or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each investment company in the Delaware Investments family for
which he or she serves as a trustee or director for a period equal to the
lesser of the number of years that such person served as a trustee or
director or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer that
is paid to trustees/directors of each investment company at the time of such
person's retirement. If an eligible trustee/director retired as of November
30, 1999, he or she would be entitled to annual payments totaling the amount
noted above, in the aggregate, from all of the investment companies in the
Delaware Investments family for which he or she served as trustee or
director, based on the number of investment companies in the Delaware
Investments family as of that date.
(2) Each independent trustee/director (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a
trustee/director for all 33 investment companies in Delaware Investments,
plus $3,145 for each Board Meeting attended. John H. Durham currently
receives a total annual retainer fee of $32,180 for serving as a
trustee/director for 19 investment companies in Delaware Investments, plus
$1,810 for each Board Meeting attended. Ann R. Leven, Charles E. Peck,
Anthony D. Knerr and Thomas F. Madison serve on the Fund's audit committee;
Ms. Leven is the chairperson. Members of the audit committee currently
receive additional annual compensation of $5,000 from all investment
companies, in the aggregate, with the exception of the chairperson, who
receives $6,000.
(3) W. Thacher Longstreth served as an independent trustee of Equity Funds V
during its last fiscal year for the period December 1, 1998 through March
17, 1999, the date on which he retired. For this period, Mr. Longstreth
received $523 from Equity Funds V and $18,994 for all investment companies
in the Delaware Investments family.
(4) Janet L. Yeomans joined the Boards of all investment companies in the
Delaware Investments family in March 1999 for some funds and in April 1999
for other funds.
-79-
<PAGE>
GENERAL INFORMATION
Equity Funds V was organized as a Maryland corporation on January 16,
1987 and reorganized as a Delaware business trust on November 24, 1999. It is an
open-end management investment company. The Fund's portfolio of assets is
diversified as defined by the Investment Company Act of 1940.
The Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of the other funds in the
Delaware Investments family. An affiliate of the Manager also manages private
investment accounts. While investment decisions of the Funds are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Funds.
The Manager and its affiliate Delaware International Advisers Ltd.,
manage the investment options for Delaware-Lincoln Choice Plus and Delaware
Medallion (SM) III Variable Annuities. Choice Plus is issued and distributed by
Lincoln National Life Insurance Company. Choice Plus offers a variety of
different investment styles managed by leading money managers. Medallion is
issued by Allmerica Financial Life Insurance and Annuity Company (First
Allmerica Financial Life Insurance Company in New York and Hawaii). Delaware
Medallion offers various investment series ranging from domestic equity funds,
international equity and bond funds and domestic fixed income funds. Each
investment series available through Choice Plus and Medallion utilizes an
investment strategy and discipline the same as or similar to one of the Delaware
Investments mutual funds available outside the annuity. The Manager or Delaware
International Advisers Ltd. also manages many of the investment options for the
Delaware-Lincoln Choice Plus Variable Annuity. Choice Plus is issued and
distributed by Lincoln National Life Insurance Company. Choice Plus offers a
variety of different investment styles managed by ten leading money managers.
See Delaware Group Premium Fund, in Appendix B.
Access persons and advisory persons of the Delaware Investments family
of funds, as those terms are defined in SEC Rule 17j-1 under the 1940 Act, who
provide services to the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance is received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions by certain covered persons in certain securities may only
be closed-out at a profit after a 60-day holding period has elapsed; and (5) the
Compliance Officer must be informed periodically of all securities transactions
and duplicate copies of brokerage confirmations and account statements must be
supplied to the Compliance Officer.
The Distributor acts as national distributor for each Fund and for the
other mutual funds in the Delaware Investments family. The Distributor received
net commissions from each Fund on behalf of Class A Shares, after reallowances
to dealers, as follows:
<TABLE>
<CAPTION>
Small Cap Value Fund Class A Shares
Fiscal Year Total Amount of Amounts Reallowed Net Commission
Ended Underwriting Commissions to Dealers To Distributor
- ----- ------------------------ ---------- --------------
<S> <C> <C> <C>
11/30/99 $740,410 $646,124 $94,286
11/30/98 1,652,031 1,380,024 272,007
11/30/97 787,817 654,991 132,826
</TABLE>
-80-
<PAGE>
<TABLE>
<CAPTION>
Small Cap Contrarian Fund Class A Shares
Fiscal Year Total Amount of Amounts Reallowed Net Commission
Ended Underwriting Commissions to Dealers To Distributor
- ----- ------------------------ ---------- --------------
<S> <C> <C> <C>
11/30/99* none none none
</TABLE>
* Date of initial public offering was December 29, 1998.
<TABLE>
<CAPTION>
Mid-Cap Value Fund Class A Shares
Fiscal Year Total Amount of Amounts Reallowed Net Commission
Ended Underwriting Commissions to Dealers To Distributor
- ----- ------------------------ ---------- --------------
<S> <C> <C> <C>
11/30/99* none none none
* Date of initial public offering was December 29, 1998.
</TABLE>
<TABLE>
<CAPTION>
Retirement Income Fund Class A Shares
Fiscal Year Total Amount of Amounts Reallowed Net Commission
Ended Underwriting Commissions to Dealers To Distributor
- ----- ------------------------ ---------- --------------
<S> <C> <C> <C>
11/30/99 none none none
11/30/98 none none none
11/30/97 none none none
</TABLE>
The Distributor received in the aggregate Limited CDSC payments with
respect to Class A Shares of each Fund as follows:
<TABLE>
<CAPTION>
Fiscal Year Small Cap Value Small Cap Contrarian Mid-Cap Value Retirement Income
Ended Fund A Class Fund A Class* Fund A Class* Fund A Class
<S> <C> <C> <C> <C>
11/30/99 $49,584 None None None
11/30/98 7,814 N/A N/A None
11/30/97 None N/A N/A None
</TABLE>
* Date of initial public offering was December 29, 1998 for Small Cap Contrarian
Fund and December 29, 1998 for Mid-Cap Value Fund.
The Distributor received in the aggregate CDSC payments with respect to
Class B and C Shares of Small Cap Value Fund as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Small Cap Value Fund B Class Small Cap Value Fund C Class
<S> <C> <C>
11/30/99 $422,567 $29,037
11/30/98 157,481 13,542
11/30/97 38,699 4,799
</TABLE>
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The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for each Fund and for the
other mutual funds in the Delaware Investments family. The Transfer Agent is
paid a fee by each Fund for providing these services consisting of an annual per
account charge of $5.50 plus transaction charges for particular services
according to a schedule. Compensation is fixed each year and approved by the
Board of Trustees, including a majority of the disinterested trustees. The
Transfer Agent also provides accounting services to each Fund. Those services
include performing all functions related to calculating each Fund's net asset
value and providing all financial reporting services, regulatory compliance
testing and the related accounting services. For its services, the Transfer
Agent is paid a fee based on total assets of all funds in the Delaware
Investments family for which it provides such accounting services. Such fee is
equal to 0.25% multiplied by the total amount of assets in the complex for which
the Transfer Agent furnishes accounting services, where such aggregate complex
assets are $10 billion or less, and 0.20% of assets if such aggregate complex
assets exceed $10 billion. The fees are charged to each fund, including each
Fund, on an aggregate pro-rata basis. The asset-based fee payable to the
Transfer Agent is subject to a minimum fee calculated by determining the total
number of investment portfolios and associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Equity Funds V's advisory
relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Equity Funds V to delete
the words "Delaware Group" from Equity Funds V's name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245 is custodian of each Fund's securities and cash. As custodian for a
Fund, Chase maintains a separate account or accounts for the Fund; receives,
holds and releases portfolio securities on account of the Fund; receives and
disburses money on behalf of the Fund; and collects and receives income and
other payments and distributions on account of the Fund's portfolio securities.
EURO
Several European countries are participating in the European Economic
and Monetary Union, which established a common European currency for
participating countries. This currency is commonly known as the "Euro." Each
participating country replaced its previous currency with the Euro on January 1,
1999. Additional European countries may elect to participate after that date. In
addition, full implementation of the Euro will extend over a period of several
years. Initial implementation of the Euro occurred on January 1, 1999 without
disruption of services provided to each Fund. Each Fund's service providers
cooperated over the implementation weekend and following weeks to reconcile
their records and procedures. Going forward, if a Fund is invested in securities
of participating countries or countries that elect to participate at a later
date, it could be adversely affected if the computer systems used by its
applicable service providers are not properly prepared to handle the
implementation of this single currency through completion of the process or the
adoption of the Euro by additional countries in the future.
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Capitalization
Equity Funds V has an unlimited authorized number of shares of
beneficial interest with no par value allocated to each Class. Each Class of
each Fund represents a proportionate interest in the assets of that Fund, and
each has the same voting and other rights and preferences as the other classes
except that shares of an Institutional Class may not vote on any matter
affecting a Fund Classes' Plans under Rule 12b-1. Similarly, as a general
matter, shareholders of Class A Shares, Class B Shares and Class C Shares may
vote only on matters affecting the 12b-1 Plan that relates to the class of
shares that they hold. However, Class B Shares of each Fund may vote on any
proposal to increase materially the fees to be paid by a Fund under the Rule
12b-1 Plan relating to Class A Shares. General expenses of a Fund will be
allocated on a pro-rata basis to the classes according to asset size, except
that expenses of the Rule 12b-1 Plans of that Fund's Class A, Class B and Class
C Shares will be allocated solely to those classes. While shares of Equity Funds
V have equal voting rights on matters effecting both Funds, each Fund would vote
separately on any matter which it is directly affected by, such as any change in
its own investment objective and policy or action to dissolve the Fund and as
otherwise prescribed by the 1940 Act. Shares of each Fund have a priority in
that Fund's assets, and in gains on and income from the portfolios of that Fund.
Prior to November 9, 1992, Equity Funds V offered only one series, now
known as Value Fund, and one class of shares, Value Fund A Class. Beginning
November 9, 1992, Equity Funds V began offering Value Fund Institutional Class,
beginning September 6, 1994, Equity Funds V began offering Value Fund B Class,
and beginning November 29, 1995, Equity Funds V began offering Value Fund C
Class. Prior to September 6, 1994, Value Fund A Class was known as the Value
Fund class and Value Fund Institutional Class was known as the Value Fund
(Institutional) class. Effective as of the close of business November 29, 1996,
the name Delaware Group Value Fund, Inc. was changed to Delaware Group Equity
Funds V and effective as of that date Equity Funds V began offering the
Retirement Income Fund. Effective as of the close of business on July 31, 1997,
the name of the Value Fund series changed to Small Cap Value Fund series and the
names of the Value Fund A Class, Value Fund B Class, Value Fund C Class and
Value Fund Institutional Class changed to Small Cap Value Fund A Class, Small
Cap Value Fund B Class, Small Cap Value Fund C Class and Small Cap Value Fund
Institutional Class, respectively. The Registration Statements of the Small Cap
Contrarian Fund and Mid-Cap Value Fund and Classes of these Funds became
effective on December 18, 1998.
As of August 16, 1999, Small Cap Value Fund, Small Cap Contrarian Fund,
Mid-Cap Value Fund and Retirement Income Fund changed their respective names to
Delaware Small Cap Value Fund, Delaware Small Cap Contrarian Fund, Delaware
Mid-Cap Value Fund and Delaware Retirement Income Fund. The names of their
classes also changed on that date.
As of November 23, 1999, Delaware Group Equity Funds V, Inc. changed
its name to Delaware Group Equity Funds V.
All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above, have
equal voting rights.
Noncumulative Voting
Equity Funds V shares have noncumulative voting rights which means that
the holders of more than 50% of the shares of Equity Funds V voting for the
election of trustees can elect all the trustees if they choose to do so, and, in
such event, the holders of the remaining shares will not be able to elect any
trustees.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
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<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Equity Funds V
and, in its capacity as such, audits the annual financial statements of the
Funds. Each Fund's Statement of Net Assets, Statement of Operations, Statement
of Changes in Net Assets, Financial Highlights, and Notes to Financial
Statements, as well as the report of Ernst & Young LLP for the fiscal year ended
November 30, 1999, are included in each Funds' Annual Report to shareholders.
The financial statements and financial highlights, the notes relating thereto
and the reports of Ernst & Young LLP, listed above are incorporated by reference
from the Annual Reports into this Part B.
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<PAGE>
APPENDIX A--DESCRIPTION OF RATINGS
Commercial Paper
Excerpts from S&P's description of its two highest commercial paper
ratings: A-1--judged to be the highest investment grade category possessing the
highest relative strength; A-2--investment grade category possessing less
relative strength than the highest rating.
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to
be the best quality. They carry the smallest degree of investment risk;
Aa--judged to be of high quality by all standards; A--possess favorable
attributes and are considered "upper medium" grade obligations; Baa--considered
as medium grade obligations. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.
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APPENDIX B--INVESTMENT OBJECTIVES OF THE OTHER FUNDS IN THE DELAWARE INVESTMENTS
FAMILY
Following is a summary of the investment objectives of the funds in the
Delaware Investments family:
Delaware Balanced Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Delaware Devon
Fund seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
Delaware Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong capital
appreciation potential.
Delaware Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential.
Delaware DelCap Fund seeks long-term capital growth by investing in
common stocks and securities convertible into common stocks of companies that
have a demonstrated history of growth and have the potential to support
continued growth.
Delaware Decatur Equity Income Fund seeks the highest possible current
income by investing primarily in common stocks that provide the potential for
income and capital appreciation without undue risk to principal. Delaware Growth
and Income Fund seeks long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation without undue risk to
principal. Delaware Blue Chip Fund seeks to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks to achieve these
objectives by investing primarily in equity securities and any securities that
are convertible into equity securities. Delaware Social Awareness Fund seeks to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to large-sized companies
expected to grow over time that meet the Fund's "Social Criteria" strategy.
Delaware Delchester Fund seeks as high a current income as possible by
investing principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Delaware Strategic Income Fund seeks
to provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. Delaware High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Delaware Corporate Bond Fund seeks to provide investors with total return by
investing primarily in corporate bonds. Delaware Extended Duration Bond Fund
seeks to provide investors with total return by investing primarily in corporate
bonds.
Delaware Limited-Term Government Fund seeks high, stable income by
investing primarily in a portfolio of short- and intermediate-term securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities
and instruments secured by such securities.
Delaware American Government Bond Fund seeks high current income by
investing primarily in long-term debt obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
Delaware Cash Reserve Fund seeks the highest level of income consistent
with the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
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REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
Delaware Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of geographically-diverse
issuers. Delaware Tax-Free Insured Fund invests in these same types of
securities but with an emphasis on municipal bonds protected by insurance
guaranteeing principal and interest are paid when due. Delaware Tax-Free USA
Intermediate Fund seeks a high level of current interest income exempt from
federal income tax, consistent with the preservation of capital by investing
primarily in municipal bonds.
Delaware Tax-Free Money Fund seeks high current income, exempt from
federal income tax, by investing in short-term municipal obligations, while
maintaining a stable net asset value.
Delaware Tax-Free New Jersey Fund seeks a high level of current
interest income exempt from federal income tax and New Jersey state and local
taxes, consistent with preservation of capital. Delaware Tax-Free Ohio Fund
seeks a high level of current interest income exempt from federal income tax and
Ohio state and local taxes, consistent with preservation of capital. Delaware
Tax-Free Pennsylvania Fund seeks a high level of current interest income exempt
from federal income tax and Pennsylvania state and local taxes, consistent with
the preservation of capital.
Delaware Foundation Funds are "fund of funds" which invest in other
funds in the Delaware Investments family (referred to as "Underlying Funds").
Delaware Foundation Funds Income Portfolio seeks a combination of current income
and preservation of capital with capital appreciation by investing primarily in
a mix of fixed income and domestic equity securities, including fixed income and
domestic equity Underlying Funds. Delaware Foundation Funds Balanced Portfolio
seeks capital appreciation with current income as a secondary objective by
investing primarily in domestic equity and fixed income securities, including
domestic equity and fixed income Underlying Funds. Delaware Foundation Funds
Growth Portfolio seeks long term capital growth by investing primarily in equity
securities, including equity Underlying Funds, and, to a lesser extent, in fixed
income securities, including fixed-income Underlying Funds.
Delaware International Equity Fund seeks to achieve long-term growth
without undue risk to principal by investing primarily in international
securities that provide the potential for capital appreciation and income.
Delaware Global Bond Fund seeks to achieve current income consistent with the
preservation of principal by investing primarily in global fixed-income
securities that may also provide the potential for capital appreciation.
Delaware Global Equity Fund seeks to achieve long-term total return by investing
in global securities that provide the potential for capital appreciation and
income. Delaware Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers located or operating in
emerging countries.
Delaware U.S. Growth Fund seeks to maximize capital appreciation by
investing in companies of all sizes which have low dividend yields, strong
balance sheets and high expected earnings growth rates relative to their
industry. Delaware Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an internationally
diversified portfolio of equity securities. Delaware New Pacific Fund seeks
long-term capital appreciation by investing primarily in companies which are
domiciled in or have their principal business activities in the Pacific Basin.
Delaware Group Premium Fund, Inc. offers various funds available
exclusively as funding vehicles for certain insurance company separate accounts.
Growth and Income Series seeks the highest possible total rate of return by
selecting issues that exhibit the potential for capital appreciation while
providing higher than average dividend income. Delchester Series seeks as high a
current income as possible by investing in rated and unrated corporate bonds,
U.S. government securities and commercial paper. Capital Reserves Series seeks a
high stable level of current income while minimizing fluctuations in principal
by investing in a diversified portfolio of short- and intermediate-term
securities. Cash Reserve Series seeks the highest level of income consistent
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with preservation of capital and liquidity through investments in short-term
money market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Balanced Series seeks a balance of
capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Small Cap Value
Series seeks capital appreciation by investing primarily in small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth. U.S.
Growth Series seeks to maximize capital appreciation. The Series seeks to
achieve its investment objective by investing in companies of all sizes which
have low dividend yields, strong balance sheets and high expected earnings
growth rates relative to their industry.
Delaware U. S. Government Securities Fund seeks to provide a high level
of current income consistent with the prudent investment risk by investing in
U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware Tax-Free Arizona Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Minnesota Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Minnesota personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Minnesota Intermediate Fund seeks to provide a high
level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware Tax-Free California Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the California personal
income tax, consistent with the preservation of capital. Delaware Tax-Free
Florida Insured Fund seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital. The Fund will
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seek to select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. Delaware Tax-Free Florida Fund seeks
to provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to select
investments that will enable its shares to be exempt from the Florida intangible
personal property tax. Delaware Tax-Free Kansas Fund seeks to provide a high
level of current income exempt from federal income tax, the Kansas personal
income tax and the Kansas intangible personal property tax, consistent with the
preservation of capital. Delaware Tax-Free Missouri Insured Fund seeks to
provide a high level of current income exempt from federal income tax and the
Missouri personal income tax, consistent with the preservation of capital.
Delaware Tax-Free New Mexico Fund seeks to provide a high level of current
income exempt from federal income tax and the New Mexico personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Oregon Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Oregon personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Arizona Fund seeks to provide a high level of current
income exempt from federal income tax and the Arizona personal income tax,
consistent with the preservation of capital. Delaware Tax-Free California Fund
seeks to provide a high level of current income exempt from federal income tax
and the California personal income tax, consistent with the preservation of
capital. Delaware Tax-Free Iowa Fund seeks to provide a high level of current
income exempt from federal income tax and the Iowa personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Idaho Fund seeks
to provide a high level of current income exempt from federal income tax and the
Idaho personal income tax, consistent with the preservation of capital. Delaware
Minnesota High-Yield Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax primarily through investment in medium and lower grade municipal
obligations. Delaware National High-Yield Municipal Fund seeks to provide a high
level of income exempt from federal income tax, primarily through investment in
medium and lower grade municipal obligations. Delaware Tax-Free New York Fund
seeks to provide a high level of current income exempt from federal income tax
and the personal income tax of the state of New York and the city of New York,
consistent with the preservation of capital. Delaware Tax-Free Wisconsin Fund
seeks to provide a high level of current income exempt from federal income tax
and the Wisconsin personal income tax, consistent with the preservation of
capital. Delaware Montana Municipal Bond Fund seek as high a level of current
income exempt from federal income tax and from the Montana personal income tax,
as is consistent with preservation of capital.
Delaware Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Delaware Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware Tax-Free North Dakota
Fund seeks to provide a high level of current income exempt from federal income
tax and the North Dakota personal income tax, consistent with the preservation
of capital.
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(EQ1-SAI/PART B)
Delaware Select Growth Fund seeks long-term capital appreciation, which
the Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the Fund, in
seeking its objective, may receive current income from dividends and interest,
income is only an incidental consideration in the selection of the Fund's
investments. Delaware Growth Stock Fund has an objective of long-term capital
appreciation. The Fund seeks to achieve its objective from equity securities
diversified among individual companies and industries. Delaware Tax-Efficient
Equity Fund seeks to obtain for taxable investors a high total return on an
after-tax basis. The Fund will attempt to achieve this objective by seeking to
provide a high long-term after-tax total return through managing its portfolio
in a manner that will defer the realization of accrued capital gains and
minimize dividend income.
For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
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PART C
Other Information
Item 23. Exhibits.
(a) Agreement and Declaration of Trust.
(1) Agreement and Declaration of Trust (December 17, 1998)
incorporated into this filing by reference to Post-Effective
Amendment No. 24 filed November 22, 1999.
(2) Certificate of Trust (December 17, 1998) incorporated into
this filing by reference to Post-Effective Amendment No. 24
filed November 22, 1999.
(b) By-Laws. By-Laws (December 17, 1998) incorporated into this
filing by reference to Post-Effective Amendment No. 24 filed
November 22, 1999.
(c) Copies of All Instruments Defining the Rights of Holders.
(1) Agreement and Declaration of Trust. Articles III, V and VI
of Agreement and Declaration of Trust incorporated into
this filing by reference to Post-Effective Amendment No. 24
filed November 22, 1999.
(2) By-Laws. Article II of By-Laws incorporated into this
filing by reference to Post-Effective Amendment No. 24
filed November 22, 1999.
(d) Investment Management Agreement. Form of Investment Management
Agreement (November 1999) between Delaware Management Company and
the Registrant on behalf of each Fund incorporated into this
filing by reference to Post-Effective Amendment No. 24 filed
November 22, 1999.
(e) (1) Distribution Agreement. Form of Distribution Agreement
(November 1999) between Delaware Distributors, L.P. and the
Registrant on behalf of each Fund incorporated into this
filing by reference to Post-Effective Amendment No. 21
filed October 2, 1998.
(2) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended November
1995) incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed January 29, 1996.
(3) Dealer's Agreement. Form of Dealer's Agreement (as amended
November 1995) incorporated into this filing by reference
to Post-Effective Amendment No. 15 filed January 29, 1996.
(4) Mutual Fund Agreement. Form of Mutual Fund Agreement for
the Delaware Group of Funds (as amended November 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 15 filed January 29, 1996.
(f) Inapplicable.
<PAGE>
(g) Custodian Agreement.
(1) Form of Custodian Agreement (November 1999) between The
Chase Manhattan Bank and the Registrant (Module)
incorporated into this filing by reference to
Post-Effective Amendment No. 16 filed September 13, 1996,
Post-Effective Amendment No. 18 filed April 30, 1997,
Post-Effective Amendment No. 20 filed February 3, 1998 and
Post-Effective Amendment No. 21 filed October 2, 1998.
(h) Other Material Contracts.
(1) Form of Shareholders Services Agreement (November 1999)
between Delaware Service Company, Inc. and the Registrant
on behalf of each Fund incorporated into this filing by
reference to Post-Effective Amendment No. 21 filed October
2, 1998.
(2) Form of Delaware Group of Funds Fund Accounting Agreement
(November 1999) between Delaware Service Company, Inc. and
the Registrant incorporated into this filing by reference
to Post-Effective Amendment No. 17 filed January 28, 1997.
(i) Opinion of Counsel. Incorporated into this filing by reference to
Post-Effective Amendment No. 24 filed November 22, 1999.
(j) Consent of Auditors. Attached as Exhibit.
(k) Inapplicable.
(l) Undertaking of Initial Shareholder. Incorporated into this filing
by reference to Pre-Effective Amendment No.2 filed June 17, 1987.
(m) Plans under Rule 12b-1.
(1) Form of Plan under Rule 12b-1 for Class A (November 1999)
incorporated into this filing by reference to
Post-Effective Amendment No. 21 filed October 2, 1998.
(2) Form of Plan under Rule 12b-1 for Class B (November 1999)
incorporated into this filing by reference to
Post-Effective Amendment No. 21 filed October 2, 1998.
(3) Form of Plan under Rule 12b-1 for Class C (November 1999)
on behalf of Mid Cap Value Fund and Small Cap Contrarian
Fund incorporated into this filing by reference to
Post-Effective Amendment No. 21 filed October 2, 1998.
(n) Plan under Rule 18f-3.
(1) Form of Rule 18f-3 Plan incorporated into this filing by
reference to Post-Effective Amendment No. 19 filed November
28, 1997.
(o) Other: Trustees' Power of Attorney. Incorporated into this filing
by reference to Post-Effective Amendment No. 24 filed November
22, 1999.
<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant. None.
Item 25. Indemnification. Article VI of the By-Laws incorporated into this
filing by reference to Post-Effective Amendment No. 24 filed
November 22, 1999.
Item 26. Business and Other Connections of Investment Adviser.
Delaware Management Company (the "Manager"), a series of Delaware Management
Business Trust, serves as investment manager to the Registrant and also serves
as investment manager or sub-adviser to certain of the other funds in the
Delaware Investments family (Delaware Group Equity Funds I, Delaware Group
Equity Funds II, Delaware Group Equity Funds III, Delaware Group Equity Funds
IV, Delaware Group Government Fund, Delaware Group Income Funds, Delaware Group
Limited-Term Government Funds, Delaware Group Cash Reserve, Delaware Group
Tax-Free Fund, Delaware Group State Tax-Free Income Trust, Delaware Group
Tax-Free Money Fund, Delaware Group Premium Fund, Delaware Group Global &
International Funds, Delaware Pooled Trust, Delaware Group Adviser Funds,
Delaware Group Dividend and Income Fund, Delaware Group Global Dividend and
Income Fund, Delaware Group Foundation Funds, Voyageur Intermediate Tax-Free
Funds, Voyageur Tax-Free Funds, Voyageur Funds, Voyageur Insured Funds, Voyageur
Investment Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur
Mutual Funds III, Voyageur Arizona Municipal Income Fund, Inc., Voyageur
Colorado Insured Municipal Income Fund, Inc., Voyageur Florida Insured Municipal
Income Fund, Inc., Voyageur Minnesota Municipal Fund, Inc., Voyageur Minnesota
Municipal Fund II, Inc. and Voyageur Minnesota Municipal Fund III, Inc.). In
addition, certain officers of the Manager also serve as trustees/directors of
the other funds in the Delaware Investments family, and certain officers are
also officers of these other funds. A company indirectly owned by the Manager's
indirect parent company acts as principal underwriter to the mutual funds in the
Delaware Investments family (see Item 27 below) and another such company acts as
the shareholder services, dividend disbursing, accounting servicing and transfer
agent for all of the mutual funds in the Delaware Investments family.
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
David K. Downes President of Delaware Management Company (a series of Delaware Management
Business Trust); President, Chief Executive Officer and Director of Delaware
Capital Management, Inc.; Director of Delaware International Advisers Ltd.;
President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and Director/Trustee of the Registrant and each of the other
investment companies in the Delaware Investments family; President and
Director of Delaware Management Company, Inc.; Chairman, President, Chief
Executive Officer and Director of Delaware Service Company, Inc.; President,
Chief Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.; Chairman and Director of Delaware Management
Trust Company and Retirement Financial Services, Inc.; Executive Vice
President, Chief Operating Officer, Chief Financial Officer of Delaware
Management Holdings, Inc., Founders CBO Corporation, Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware
Distributors, L.P.; Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director of DMH Corp., Delaware Distributors, Inc.,
Founders Holdings, Inc. and Delvoy, Inc.; Executive Vice President and
Trustee of Delaware Management Business Trust
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8
Clayton Place, Newtown Square, PA
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------------------------------------------------------
Name and Principal Business Address* Positions and Offices with Delaware Management Company and its affiliates
and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Richard J. Flannery Executive Vice President/General Counsel of the Registrant and each of the
other investment companies in the Delaware Investments family, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Founders CBO Corporation; Director of Delaware International Advisers Ltd.;
Executive Vice President/General Counsel and Director of Delaware
International Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc., DMH
Corp., Delaware Management Company, Inc., Delaware Service Company, Inc.,
Delaware Capital Management, Inc., Retirement Financial Services, Inc.,
Delaware Distributors, Inc. and Delaware Management Trust Company.;
Executive Vice President and Trustee of Delaware Management Business Trust;
Director of HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton,
PA; Director and Member of Executive Committee of Stonewall Links, Inc.
since 1991, Bulltown Rd., Elverton, PA
- ------------------------------------------------- ------------------------------------------------------------------------------
Richard G. Unruh Executive Vice President/Chief Investment Officer of Delaware Management
Company (a series of Delaware Management Business Trust); Director of
Delaware International Advisers Ltd.; Executive Vice President and Chief
Investment Officer, Equity of the Registrant and each of the other
investment companies in the Delaware Investments family; Chief Executive
Officer/Chief Investment Officer of Delaware Investment Advisers (a series
of Delaware Management Business Trust); Executive Vice President of Delaware
Management Holdings, Inc. and Delaware Capital Management, Inc.; Executive
Vice President and Trustee of Delaware Management Business Trust
Board of Directors, Chairman of Finance Committee, Keystone Insurance
Company since 1989, 2040 Market Street, Philadelphia, PA; Board of
Directors, Chairman of Finance Committee, AAA Mid Atlantic, Inc. since 1989,
2040 Market Street, Philadelphia, PA; Board of Directors, Metron, Inc. since
1995, 11911 Freedom Drive, Reston, VA
- ------------------------------------------------- ------------------------------------------------------------------------------
H. Thomas McMeekin(1) Executive Vice President of Delaware Management Business Trust; Executive
Vice President/Chief Investment Officer DMC-Fixed Income of Delaware
Management Company (a series of Delaware Management Business Trust);
Executive Vice President/Chief Investment Officer DIA-Fixed Income of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Executive Vice President of Delaware Capital Management, Inc.;
Executive Vice President and Director of Delaware Management Holdings, Inc.;
Executive Vice President and Chief Investment Officer, Fixed Income of the
Registrant and each of the other investment companies in the Delaware
Investments family.
- ------------------------------------------------- ------------------------------------------------------------------------------
William E. Dodge(2) Executive Vice President/Chief Investment Officer, DMC-Equity of Delaware
Management Company (a series of Delaware Management Trust Company);
Executive Vice President of Delaware Management Business Trust;
President/Chief Investment Officer, DIA-Equity of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company (a series of
Delaware Management Business Trust; Senior Vice President/Operations of
Delaware Service Company, Inc.; Senior Vice President/Operations of
Retirement Financial Services, Inc.; Senior Vice President/Operations of
Delaware Management Trust Company.
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President/Investment Accounting of Delaware Management Company
(a series of Delaware Management Business Trust), Delaware Service Company,
Inc. and Delaware Capital Management, Inc. and Founders Holdings, Inc.;
Senior Vice President and Treasurer of the Registrant and each of the other
investment companies in the Delaware Investments family; Senior Vice
President and Treasurer/ Investment Accounting of Delaware Distributors,
L.P. and Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President/Manager of Investment Accounting of
Delaware International Holdings, Inc.; Senior Vice President and Assistant
Treasurer of Founders CBO Corporation
- ------------------------------------------------- ------------------------------------------------------------------------------
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company
(a series of Delaware Management Business Trust); Senior Vice President/Head
of Equity Trading of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President/Head of Equity Trading of
Delaware Capital Management, Inc.
- ------------------------------------------------- ------------------------------------------------------------------------------
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management
Company (a series of Delaware Management Business Trust); Trustee of
Delaware Management Business Trust; Senior Vice President/Senior Portfolio
Manager of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Senior Vice President/Senior Portfolio Manager of Delaware
Capital Management, Inc.; Senior Vice President/Senior Portfolio Manager of
the Registrant and each of the other investment companies in the Delaware
Investments family.
- ------------------------------------------------- ------------------------------------------------------------------------------
Gerald S. Frey Senior Vice President/Senior Portfolio Manager of the Registrant and each
of the other investment companies in the Delaware Investments family,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management
Business Trust) and Delaware Capital Management, Inc.
- ------------------------------------------------- ------------------------------------------------------------------------------
Susan L. Hanson Senior Vice President/Global Marketing and Client Services of Delaware
Management Company (a series of Delaware Management Business Trust); Senior
Vice President/Global Marketing and Client Services of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delvoy , Inc., Delaware Management
Company, Inc., Delaware Management Business Trust, Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Capital Management, Inc., Delaware International Holdings
Ltd., Founders Holdings, Inc. and Delaware Management Business Trust; Senior
Vice President/Corporate Controller of the Registrant and each of the other
investment companies in the Delaware Investments family and Delaware
Investment Advisers (a series of Delaware Management Business Trust);
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company; Senior Vice President/Assistant Treasurer of
Founders CBO Corporation; Chief Financial Officer of Retirement Financial
Services, Inc.
- ------------------------------------------------- ------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President/Human
Resources of Delaware Management Holdings, Inc.; Senior Vice President/Human
Resources of DMH Corp.; Senior Vice President/Human Resources of Delvoy,
Inc.; Senior Vice President/Human Resources of Delaware Management Company,
Inc.; Senior Vice President/Human Resources of Delaware Management Business
Trust; Senior Vice President/Human Resources of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Senior Vice President/Human
Resources of
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Delaware Service Company, Inc.; Senior Vice President/Human Resources of
Delaware Capital Management, Inc.; Senior Vice President/Human Resources of
Delaware Retirement Financial Services, Inc.; Senior Vice President/Human
Resources of Delaware Management Trust Company; Senior Vice President/Human
Resources of Delaware Distributors, Inc.; Senior Vice President/Human Resources
of Delaware Distributors, L.P.; Senior Vice President/Human Resources of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President, Deputy General Counsel and Secretary of Delaware
Management Company (a series of Delaware Management Business Trust); Senior
Vice President, Deputy General Counsel and Secretary of Delaware Management
Holdings, Inc.; Senior Vice President, Deputy General Counsel and Secretary
of DMH Corp.; Senior Vice President, Deputy General Counsel and Secretary of
Delaware Management Business Trust; Senior Vice President, Deputy General
Counsel and Secretary of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Senior Vice President, Deputy General Counsel
and Secretary of Retirement Financial Services, Inc.; Senior Vice President,
Deputy General Counsel and Secretary of Delaware Distributors, Inc.; Senior
Vice President, Deputy General Counsel and Assistant Secretary of Delaware
Distributors, L.P.; Senior Vice President, Secretary and Deputy General
Counsel of Delaware Management Trust Company; Senior Vice President,
Secretary and Deputy General Counsel of Delaware International Holdings
Ltd.; Senior Vice President, Secretary and Deputy General Counsel of Delvoy,
Inc.; Senior Vice President, Secretary and Deputy General Counsel of
Delaware Management Company, Inc.; Senior Vice President, Secretary and
Deputy General Counsel of Delaware Service Company, Inc.; Senior Vice
President, Secretary and Deputy General Counsel of Delaware Capital
Management, Inc.; Secretary of Founders CBO Corporation; Senior Vice
President, Deputy General Counsel and Secretary of Founders Holdings, Inc.;
Senior Vice President, Deputy General Counsel and Assistant Secretary of the
Registrant and each of the other investment companies in the Delaware
Investments family
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane,
Philadelphia, PA.
- ------------------------------------------------- ------------------------------------------------------------------------------
Eric E. Miller Senior Vice President, Deputy General Counsel and Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business
Trust); Senior Vice President, Deputy General Counsel and Assistant
Secretary of Delaware Management Holdings, Inc.; Senior Vice President,
Deputy General Counsel and Assistant Secretary of DMH Corp.; Senior Vice
President, Deputy General Counsel and Assistant Secretary of Delvoy, Inc.;
Senior Vice President, Deputy General Counsel and Assistant Secretary of
Delaware Management Company, Inc.; Senior Vice President, Deputy General
Counsel and Assistant Secretary of Delaware Management Business Trust;
Senior Vice President, Deputy General Counsel and Assistant Secretary of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Senior Vice President, Deputy General Counsel and Assistant
Secretary of Delaware Service Company, Inc.; Senior Vice President, Deputy
General Counsel and Assistant Secretary of Delaware Capital Management,
Inc.; Senior Vice President, Deputy General Counsel and Assistant Secretary
of Retirement Financial Services, Inc.; Senior Vice President, Deputy
General Counsel and Assistant Secretary of Delaware Distributors, Inc.;
Senior Vice President, Deputy General Counsel and Assistant Secretary of
Delaware Distributors, L.P.; Senior Vice President, Deputy General Counsel
and Assistant Secretary of Founders Holdings, Inc.; Senior Vice President,
Deputy General Counsel and Secretary of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
James L. Shields Senior Vice President, Chief Information Officer of Delaware Management
Company (a series of Delaware Management Business Trust); Senior Vice
President, Chief Information Officer of Delaware Investment Advisers (a
series of Delaware Management Business Trust); Senior Vice President, Chief
Information Officer of Delaware Service Company, Inc.; Senior Vice
President, Chief Information Officer of Delaware Capital Management Company,
Inc.; Senior Vice President, Chief Information Officer of Retirement
Financial Services, Inc.; Senior Vice President, Chief Information Officer
of Delaware Distributors, L.P.
- ------------------------------------------------- ------------------------------------------------------------------------------
Gary T. Abrams Vice President/Equity Trading of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Equity Trading of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Christopher S. Adams Vice President/Equity Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Equity Analyst of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Robert L. Arnold Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Capital Management, Inc.; Vice President/Senior Portfolio Manager
of the Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Marshall T. Bassett Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of each fund in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Christopher S. Beck Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of each
fund in the Delaware Investments family.
Trustee of New Castle County Pension Board since October 1992, Wilmington DE.
- ------------------------------------------------- ------------------------------------------------------------------------------
Richard E. Beister Vice President/Trading Operations of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Trading Operations of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Lisa O. Brinkley Vice President/Compliance Director of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Compliance Director
of Delaware Management Holdings, Inc.; Vice President/Compliance Director of
DMH Corp.; Vice President/Compliance Director of Delvoy, Inc.; Vice
President/Compliance Director of Delaware Management Company, Inc.; Vice
President/Compliance Director of Delaware Management Business Trust; Vice
President/Compliance Director of Delaware Investment Advisers (a series of
Delaware Management Business Trust);Vice President/Compliance Director of
Delaware Service Company, Inc.; Vice President/Compliance Director of
Delaware Capital Management, Inc.; Vice President/Compliance Director of
Retirement Financial Services, Inc.; Vice President/Compliance
Director/Assistant Secretary of Delaware Management Business Trust; Vice
President/Compliance Director of Delaware Distributors, Inc.; Vice
President/Compliance Director of Delaware Distributors, L.P.; Vice
President/Compliance Director of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Michael P. Buckley Vice President/Portfolio Manager/Senior Municipal Analyst of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager/Senior Municipal Analyst of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice
President/Portfolio Manager/Senior Municipal Analyst of the Registrant and
each of the other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
MaryEllen M. Carrozza Vice President/Client Services of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Client Services of
Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President/Client Services of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Stephen R. Cianci Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Mitchell L. Conery Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Timothy G. Connors Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Delaware Capital Management, Inc.; Vice President/Senior Portfolio Manager
of the Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
George E. Deming Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
James P. Dokas Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Portfolio
Manager of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Vice President/ Portfolio Manager of the Registrant and
each of the other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Michael J. Dugan Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation of Delaware Management Company (a series of Delaware
Management Business Trust);Vice President/Taxation of Delaware Management
Holdings, Inc.; Vice President/Taxation of DMH Corp.; Vice
President/Taxation of Delvoy, Inc.; Vice President/Taxation of Delaware
Management Company, Inc.; Vice President/Taxation of Delaware Management
Business Trust; Vice President/Taxation of Delaware Investment Advisers (a
series of Delaware Management Business Trust);Vice President/Taxation of
Delaware Service Company, Inc.; Vice President/Taxation of Delaware Capital
Management, Inc.; Vice President/Taxation of Retirement Financial Services,
Inc.; Vice President/Taxation of Delaware Distributors, Inc.; Vice
President/Taxation of Delaware Distributors, L.P.; Vice President/Taxation
of Founders Holdings, Inc.; Vice President/Taxation of Founders CBO
Corporation; Vice President/Taxation of the Registrant and each of the other
investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Joseph Fiorilla Vice President/Performance Analyst of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Performance Analyst
of Delaware Investment Advisers (a series of Delaware Management Business
Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
James A. Furgele Vice President/Investment Accounting of Delaware Management Company (a
series of Delaware Management Business Trust);Vice President/Investment
Accounting of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Vice President/Investment Accounting of Delaware Service
Company, Inc.; Vice President/Investment Accounting of the Registrant and
each of the other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Thomas C. Gariepy(3) Vice President/Director of Corporate Communications of Delaware Management
Company (a series of Delaware Management Business Trust); Vice
President/Director of Corporate Communications of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Stuart M. George Vice President/Equity Trading of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Equity Trading of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Barry Gladstein Vice President/Business Manager of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Business Manager of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Brian T. Hannon Vice President of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of the Registrant and each of the other investment
companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
John A. Heffern Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Elizabeth H. Howell Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Jeffrey W. Hynoski Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust);Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Karina J. Ivstan Vice President/Strategic Planning of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Strategic Planning of
Delaware Management Holdings, Inc.; Vice President/Strategic Planning of
Delaware Management Business Trust; Vice President/Strategic Planning of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Strategic Planning of Delaware Service Company, Inc.;
Vice President/Strategic Planning of Delaware Capital Management, Inc.; Vice
President/Strategic Planning of Retirement Financial Services, Inc.; Vice
President/Strategic Planning of Delaware Management Trust Company; Vice
President/Strategic of Delaware Distributors, L.P.; Vice President/Strategic
Planning of the Registrant and each of the other investment companies in the
Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Audrey E. Kohart Vice President/Assistant Controller/Corporate Accounting of Delaware
Management Company (a series of Delaware Management Business Trust); Vice
President/Assistant Controller/Corporate Accounting of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Steven T. Lampe Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/ Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Philip Y. Lin Vice President, Associate General Counsel and Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business
Trust); Vice President, Associate General Counsel and Assistant Secretary of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President, Associate General Counsel and Assistant Secretary of
Delaware Service Company, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Delaware Capital Management, Inc.; Vice
President, Associate General Counsel and Assistant Secretary of Retirement
Financial Services, Inc.; Vice President, Associate General Counsel and
Assistant Secretary of Delaware Management Trust Company; Vice President,
Associate General Counsel and Assistant Secretary of Delaware Distributors,
L.P.; Vice President, Associate General Counsel and Assistant Secretary of
the Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Michael D. Mabry Vice President, Associate General Counsel and Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business
Trust); Vice President, Associate General Counsel and Assistant Secretary of
Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President, Associate General Counsel and Assistant Secretary of
Delaware Service Company, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Delaware Capital Management, Inc.; Vice
President, Associate General Counsel and Assistant Secretary of Retirement
Financial Services, Inc.; Vice President, Associate General Counsel and
Assistant Secretary of Delaware Distributors, L.P.; Vice President,
Associate General Counsel and Assistant Secretary of the Registrant and each
of the other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Founders Holdings, Inc., President and Director of Founders CBO Corporation;
Vice President/Senior Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family.
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Andrew M. McCullagh, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Francis X. Morris Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of
Founders Holdings, Inc., Treasurer, Assistant Secretary and Director of
Founders CBO Corporation; Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Robert A. Norton, Jr. Vice President/Research Analyst of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Research Analyst of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
David P. O'Connor Vice President, Associate General Counsel and Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business
Trust); Vice President, Associate General Counsel and Assistant Secretary of
Delaware Investment Advisers (a series of Delaware Management Business
Trust);Vice President, Associate General Counsel and Assistant Secretary of
Delaware Service Company, Inc.; Vice President, Associate General Counsel
and Assistant Secretary of Delaware Capital Management, Inc.; Vice
President, Associate General Counsel and Assistant Secretary of Retirement
Financial Services, Inc.; Vice President, Associate General Counsel and
Assistant Secretary of Delaware Distributors, L.P.; Vice President,
Associate General Counsel and Assistant Secretary of the Registrant and each
of the other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Senior Portfolio Manager of the
Registrant and each of the other investment companies in the Delaware
Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------- ------------------------------------------------------------------------------
Positions and Offices with Delaware Management Company and its affiliates
Name and Principal Business Address* and other Positions and Offices Held
<S> <C>
- ------------------------------------------------- ------------------------------------------------------------------------------
Richard Salus Vice President/Assistant Controller of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/Assistant Controller
of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Assistant Controller of Delaware Management Trust
Company; Vice President/Assistant Controller of Delaware International
Holdings Ltd.
- ------------------------------------------------- ------------------------------------------------------------------------------
Richard D. Siedel Vice President/Assistant Controller/Manager, Payroll of Delaware Management
Company (a series of Delaware Management Business Trust); Vice
President/Assistant Controller/Manager, Payroll of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------- ------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and Administration Services of Delaware Management
Company (a series of Delaware Management Business Trust); Vice
President/Facilities and Administration Services of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice
President/Facilities and Administration Services of Delaware Service
Company, Inc.; Vice President/Facilities and Administration Services of
Delaware Distributors, L.P.
- ------------------------------------------------- ------------------------------------------------------------------------------
Thomas J. Trotman Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
Lori P. Wachs Vice President/ Portfolio Manager of Delaware Management Company (a series
of Delaware Management Business Trust); Vice President/ Portfolio Manager of
Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/ Portfolio Manager of the Registrant and each of the
other investment companies in the Delaware Investments family
- ------------------------------------------------- ------------------------------------------------------------------------------
</TABLE>
*Business Address is 1818 Market Street, Philadelphia, PA 19103.
- --------------------------------------------------------------------------------
1 PRESIDENT AND DIRECTOR, Lincoln Investment Management, Inc. 1987 to present.
EXECUTIVE VICE PRESIDENT/CHIEF INVESTMENT OFFICER of Lincoln National
Corporation 1992 to present.
2 PRESIDENT, DIRECTOR OF MARKETING AND SENIOR PORTFOLIO MANAGER, Marvin &
Palmer Associates, Wilmington, DE 1996-1998.
3 VICE PRESIDENT/DIRECTOR OF PUBLIC RELATIONS, Liberty Funds Distributor,
Inc., Boston, MA, 1996-1998.
- --------------------------------------------------------------------------------
<PAGE>
PART C - Other Information
(Continued)
Item 27. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter for
all the mutual funds in the Delaware Investments family.
(b) Information with respect to each director, officer or partner of
principal underwriter:
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
<S> <C> <C>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Delaware Distributors, Inc. General Partner None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Delaware Investment Advisers Limited Partner None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Delaware Capital Management, Inc. Limited Partner None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Bruce D. Barton President and Chief Executive Officer None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
David K. Downes Executive Vice President/Chief Operating President and Chief Executive
Officer/Chief Financial Officer Officer/Chief Financial Officer/Chief
Operating Officer and Trustee
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard J. Flannery Executive Vice President/General Counsel Executive Vice President/General Counsel
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Diane M. Anderson Senior Vice President/Retirement None
Operations
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael P. Bishof Senior Vice President/Treasurer/ Senior Vice President/Treasurer
Investment Accounting
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Daniel J. Brooks III Senior Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Terrence P. Cunningham Senior Vice President/National Sales None
Director, Financial Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/ Senior Vice President/Corporate
Corporate Controller Controller
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources Senior Vice President/Human Resources
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Bradley L. Kolstoe Senior Vice President/Western Division None
Sales, Independent Planner and Insurance
Channel
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richelle S. Maestro Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/ Secretary Counsel/ Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Mac Macaulliffe Senior Vice President/Divisional Sales None
Manager
- --------------------------------------------- ------------------------------------------- -----------------------------------------
J. Chris Meyer Senior Vice President/Director, Product None
Management
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Eric E. Miller Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Stephen C. Nell Senior Vice President/National Retirement None
Sales
- --------------------------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
<S> <C> <C>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Henry W. Orvin Senior Vice President/Eastern Divisional None
Sales Manager
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Christopher H. Price Senior Vice President/Channel Manager, None
Insurance
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Thomas E. Sawyer Senior Vice President/Director, National None
Sales
- --------------------------------------------- ------------------------------------------- -----------------------------------------
James L. Shields Senior Vice President/Chief Information None
Officer
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Steven Sorenson Senior Vice President/National Director,
Independent Planner Channel None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard P. Allen Vice President/Wholesaler, Midwest None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
David P. Anderson, Jr. Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Jeffrey H. Arcy Vice President/Wholesaler, None
South East Region
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Patrick A. Bearss Vice President/Wholesaler - Midwest None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Gabriella Bercze Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Larry D. Bridwell Vice President/Financial Institutions None
Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Lisa O. Brinkley Vice President/Compliance Director Vice President/Compliance Director
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Terrance L. Bussard Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Daniel H. Carlson Vice President/Marketing Services None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Larry Carr Vice President/Variable Annuity Sales None
Manager
- --------------------------------------------- ------------------------------------------- -----------------------------------------
William S. Carroll Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Matthew Coldren Vice President/National Accounts None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Patrick A Connelly Vice President/Registered Investment None
Adviser Sales
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Jessie V. Emery Vice President/Marketing Communications None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Edward A. Foley Vice President/Marketing Communications None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Susan T. Friestedt Vice President/Retirement Services None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Douglas R. Glennon Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Darryl S. Grayson Vice President/Director, Internal Sales None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Rhonda J. Guido Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
<S> <C> <C>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Ronald A. Haimowitz Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Edward J. Hecker Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John R. Herron Vice President/Variable Annuity Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Steven N. Horton Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Dinah J. Huntoon Vice President/Product Manager, Equities None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Karina J. Istvan Vice President/Strategic Planning Vice President/Strategic Planning
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Christopher L. Johnston Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael J. Jordan Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Carolyn Kelly Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard M. Koerner Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Ellen M. Krott Vice President/Marketing None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John LeBoeuf Vice President/Independent Planner and None
Insurance Sales-East
- --------------------------------------------- ------------------------------------------- -----------------------------------------
SooHee Lee Vice President/Fixed Income & None
International Product Management
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Philip Y. Lin Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John R. Logan Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael D. Mabry Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Theodore T. Malone Vice President/ Independent Planner and None
Insurance Sales Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Debbie Marler Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Raymond G. McCarthy Vice President/National Accounts,
Independent Planner & Insurance Channel None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joanne C. McCranie Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Gregory J. McMillan Vice President/National Accounts None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Nathan W. Medin Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Scott L. Metzger Vice President/Business Development None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Jamie L. Meyer Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Roger J. Miller Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
<S> <C> <C>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Christopher W. Moore Vice President/Variable Annuity Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Andrew F. Morris Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Patrick L. Murphy Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Scott E. Naughton Vice President/Independent Planner & None
Insurance Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Julie Nusbaum Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Julie A. Nye Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Daniel J. O'Brien Vice President/Insurance Products None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Joseph T. Owczarek Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Otis S. Page Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Eric Preus Vice President/Wrap Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Philip G. Rickards Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Laura E. Roman Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Robert A. Rosso Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Terri Lynn Sabby Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Richard Salus Vice President/Assistant Controller None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Linda D. Shulz Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Gordon E. Searles Vice President/Client Services None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Catherine A. Seklecki Vice President/Retirement Sales None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John C. Shalloe Vice President/Wrap Fee Wholesaler, None
Western Region
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Edward B. Sheridan Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Kimberly Spangler Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Robert E. Stansbury Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Stephanie R. Szabo Vice President/Retirement Marketing None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Michael T. Taggart Vice President/Facilities and None
Administration Services
- --------------------------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Name and Principal Business Address* Positions and Offices with Underwriter Positions and Offices with Registrant
<S> <C> <C>
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Julia R. Vander Els Vice President/Retirement Plan None
Communications
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Wayne W. Wagner Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
John A. Wells Vice President/Marketing Technology None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Courtney S. West Vice President/Institutional Sales None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Andrew J. Whitaker Vice President/Wholesaler, Financial None
Institutions
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Scott Whitehouse Vice President/Wholesaler None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Wesley Williams Vice President/Wholesaler
- --------------------------------------------- ------------------------------------------- -----------------------------------------
Theodore V. Wood Vice President/Technical Systems Officer None
- --------------------------------------------- ------------------------------------------- -----------------------------------------
</TABLE>
*
(c) Inapplicable.
Item 28. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818
Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103.
Item 29. Management Services. None.
Item 30. Undertakings, Inapplicable.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia, Commonwealth of Pennsylvania on this
25th day of January, 2000.
DELAWARE GROUP EQUITY FUNDS V
By /s/David K. Downes
-------------------
David K. Downes
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ---------------------------------------- ------------------------------ ----------------
<S> <C> <C>
/s/David K. Downes President/Chief Executive Officer/ January 25, 2000
- ---------------------------------------- Chief Operating Officer/Chief Financial
David K. Downes Officer (Principal Executive Officer,
Principal Financial Officer and Principal
Accounting Officer) and Trustee
/s/Wayne A. Stork * Trustee January 25, 2000
- ----------------------------------------
Wayne A. Stork
/s/Walter P. Babich * Trustee January 25, 2000
- ----------------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Trustee January 25, 2000
- ----------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Trustee January 25, 2000
- ----------------------------------------
Ann R. Leven
/s/Thomas F. Madison * Trustee January 25, 2000
- ----------------------------------------
Thomas F. Madison
/s/ John H. Durham * Trustee January 25, 2000
- ----------------------------------------
John H. Durham
/s/Charles E. Peck * Trustee January 25, 2000
- ----------------------------------------
Charles E. Peck
/s/Janet L. Yeomans * Trustee January 25, 2000
- ----------------------------------------
Janet L. Yeomans
*By /s/David K. Downes
--------------------------------------
David K. Downes
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
EX-99.J Consent of Auditors
1
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 26 to the Registration Statement (Form N-1A) (No.
33-11419) of Delaware Group Equity Funds V of our reports dated January 7, 2000,
included in the 1999 Annual Reports to shareholders.
/s/Ernst & Young LLP
-----------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
January 26, 2000
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Trustees
Delaware Group Equity Funds V - Delaware Small Cap Value Fund
We have audited the accompanying statement of net assets of Delaware Small Cap
Value Fund (the "Fund") as of November 30, 1999, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of November 30, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Small Cap Value Fund at November 30, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the periods indicated therein, in conformity with generally accepted accounting
principles.
/s/Ernst & Young LLP
-----------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
January 7, 2000
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Trustees
Delaware Group Equity Funds V
We have audited the accompanying statements of net assets of Delaware Group
Equity Funds V (Delaware Mid-Cap Value Fund, Delaware Retirement Income Fund and
Delaware Small Cap Contrarian Fund) (the "Funds") as of November 30, 1999, and
the related statements of operations, statements of changes in net assets and
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of November 30, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above listed funds of Delaware Group Equity Funds V at November 30, 1999,
and the results of their operations, the changes in their net assets and their
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/Ernst & Young LLP
-----------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
January 7, 2000
