U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/X/ Pre-Effective Amendment No. 1
/ / Post-Effective Amendment No. ____
(Check appropriate box or boxes)
DELAWARE GROUP ADVISER FUNDS
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
(800) 523-1918
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
2005 Market Street, Philadelphia, PA 19103-7094
- --------------------------------------------------------------------------------
Address of Principal Executive Offices: (Number, Street, City, State, Zip Code)
David F. Connor, Esq., 2005 Market Street, Philadelphia, PA 19103-7094
- --------------------------------------------------------------------------------
Name and Address of Agent for Service: (Number, Street, City, State, Zip Code)
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective under
the Securities Act of 1933, as amended.
Title of the securities being registered:
Class A, Class B, Class C, and Institutional Class shares of beneficial
interest, no par value, of Delaware U.S. Growth Fund, one series of the
Registrant. No filing fee is due because Registrant is relying on Section 24(f)
of the Investment Company Act of 1940, as amended.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to such Section
8(a), shall determine.
--- C O N T E N T S ---
This Registration Statement includes the following:
1. Facing Page
2. Contents Page
3. Part A - Proxy Statement/Prospectus
4. Part B - Statement of Additional Information
5. Part C - Other Information
6. Signatures
7. Exhibits
Delaware Investments(R)
A member of Lincoln Financial Group(R)
PROXY MATERIALS
Delaware Large Cap Growth Fund
Dear Shareholder:
I am writing to let you know that a meeting of shareholders of Delaware Large
Cap Growth Fund (the "Fund") will be held on January 25, 2008. The purpose of
the meeting is to vote on an important proposal that affects the Fund and your
investment in it. As a shareholder, you have the opportunity to voice your
opinion on certain matters that affect your Fund. This package contains
information about the proposal and the materials to use when voting by mail, by
telephone, or through the Internet.
Please read the enclosed materials and cast your vote. Please vote your shares
promptly. Your vote is extremely important, no matter how large or small your
holdings may be.
The proposal has been carefully reviewed by the Fund's Board of Trustees. The
Trustees, most of whom are not affiliated with Delaware Investments, are
responsible for protecting your interests as a shareholder. The Trustees believe
the proposal is in the best interests of shareholders. They recommend that you
vote FOR the proposal.
The enclosed Q&A is provided to assist you in understanding the proposal. The
proposal is described in greater detail in the enclosed Proxy
Statement/Prospectus.
Voting is quick and easy. Everything you need is enclosed. To cast your vote,
simply complete the proxy card enclosed in this package. Be sure to sign the
card before mailing it in the postage-paid envelope. You may also vote your
shares by touch-tone telephone or through the Internet. Simply call the
toll-free number or visit the Web site indicated on your proxy card, and follow
the recorded or online instructions.
If you have any questions before you vote, please call Computershare Fund
Services, Inc. ("Computershare"), the Fund's proxy solicitor, at 866 436-0835.
Computershare will be glad to help you get your vote in quickly. You may also
receive a telephone call from Computershare reminding you to vote your shares.
Thank you for your participation in this important initiative.
Sincerely,
/s/ Patrick P. Coyne
Patrick P. Coyne
Chairman, President and Chief Executive Officer
IMPORTANT INFORMATION TO HELP YOU UNDERSTAND
AND VOTE ON THE PROPOSAL
Below is a brief overview of the proposal to be voted upon. Your vote is
important. Please read the full text of the Proxy Statement/Prospectus, which
you should retain for future reference. If you need another copy of the Proxy
Statement/Prospectus, please call Delaware Investments at 800 523-1918.
We appreciate you placing your trust in Delaware Investments and we look forward
to helping you achieve your financial goals.
What proposal am I being asked to vote on?
You are being asked to vote to approve an Agreement and Plan of Reorganization
between Delaware Group Equity Funds IV, on behalf of Delaware Large Cap Growth
Fund (the "Large Cap Growth Fund"), and Delaware Group Adviser Funds, on behalf
of Delaware U.S. Growth Fund (the "U.S. Growth Fund").
Proposal: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION
What reorganization is the Board proposing?
Shareholders of the Large Cap Growth Fund are being asked to consider and
approve a reorganization ("Transaction") that will have the effect of
reorganizing the Large Cap Growth Fund with and into the U.S. Growth Fund.
Why has the Board proposed this reorganization?
o Large Cap Growth Fund and U.S. Growth Fund are both managed by the
Focus Growth team, seek capital appreciation, have similar investment
strategies, and had substantially similar holdings as of June 30,
2007.
o The U.S. Growth Fund's assets have grown significantly over the last
two years while the Large Cap Growth Fund's assets have diminished. It
is likely that the proposed reorganization would benefit shareholders
of the Large Cap Growth Fund by providing greater distribution
opportunities which may increase fund assets and ultimately could lead
to economies of scale.
How will the Transaction benefit shareholders?
The Funds' Boards of Trustees (each, a "Board" and collectively, the "Boards")
considered a number of factors before approving the Transaction. After
considering these factors, the Boards concluded that shareholders will
potentially benefit from the Transaction in the following ways:
o The investment strategies and policies of the Large Cap Growth Fund
are substantially similar, but not identical to, the investment
strategies and policies of the U.S. Growth Fund.
o The portfolio of the Large Cap Growth Fund has historically been
managed in substantially the same manner (and has substantially
similar holdings) as the portfolio of the U.S. Growth Fund, which
should allow for a relatively smooth transition for shareholders of
the Large Cap Growth Fund should the Transaction be approved.
o The U.S. Growth Fund offers a stronger track record compared to the
Large Cap Growth Fund over the trailing one-, three-, and 10-year
periods. (Past performance is not a guarantee of future results.)
o Shareholders of the Large Cap Growth Fund and the U.S. Growth Fund
potentially could benefit by the growth in assets realized by
combining the Funds because a larger fund can potentially realize cost
savings due to economies of scale from the spreading of fixed costs
over a larger asset base and by reaching or utilizing, to a greater
extent, breakpoints in investment management fees. (There can be no
assurance, however, that such savings will be realized.)
o The Transaction will be structured as a tax-free reorganization so
that for federal income tax purposes: (i) shareholders of the Large
Cap Growth Fund will not recognize any gain or loss as a result of the
exchange of their shares of the Large Cap Growth Fund for shares of
the U.S. Growth Fund; and (ii) the U.S. Growth Fund and its
shareholders will not recognize any gain or loss upon receipt of the
Large Cap Growth Fund's assets.
o The Transaction will not result in any limitation on the use by the
U.S. Growth Fund of its capital loss carryforwards and as a result,
shareholders of the U.S. Growth Fund, including former Large Cap
Growth Fund shareholders, may benefit from these capital loss
carryforwards, which may be used to offset future capital gains.
How will the Transaction work?
The U.S. Growth Fund will acquire substantially all of the assets of the Large
Cap Growth Fund in exchange for shares of the U.S. Growth Fund. The Large Cap
Growth Fund will then distribute the U.S. Growth Fund shares on a pro rata basis
to its shareholders. At the time of the Transaction, any shares you own of the
Large Cap Growth Fund will be cancelled and you will receive new shares in the
same class of the U.S. Growth Fund that will have an aggregate value equal to
the value of your shares in the Large Cap Growth Fund. More detailed information
about the transfer of assets by the Large Cap Growth Fund and the issuance of
shares by the U.S. Growth Fund can be found in the Proxy Statement/Prospectus.
Will Portfolio Management change?
No, the Focus Growth team will remain the management team of the U.S. Growth
Fund.
2
What is the anticipated timetable for the Transaction?
The shareholder meeting is scheduled for January 25, 2008. It is currently
anticipated that the Transaction, if approved by shareholders, will take place
in February 2008. Whether or not you plan to attend the Meeting, please vote
your shares by mail, by telephone, or through the Internet. If you determine at
a later date that you wish to attend this Meeting, you may revoke your proxy and
vote in person, as provided in the attached Proxy Statement/Prospectus.
COMMON QUESTIONS AND GENERAL INFORMATION
Has the Board of Trustees approved the proposal?
Yes. The Large Cap Growth Fund's Board has unanimously approved the proposal and
recommends that you vote to approve it.
How many votes am I entitled to cast?
As a shareholder, you are entitled to one vote for each full share and a
fractional vote for each fractional share of the Large Cap Growth Fund that you
own on the record date. The record date is September 21, 2007.
How do I vote my shares?
You can vote your shares by completing and signing the enclosed proxy card and
mailing it in the enclosed postage-paid envelope. You may also vote by
touch-tone telephone by calling the toll-free number printed on your proxy card
and following the recorded instructions. In addition, you may also vote through
the Internet by visiting www.proxyweb.com and following the on-line
instructions. If you need any assistance, or have any questions regarding the
proposal or how to vote your shares, please call Computershare Fund Services,
Inc. ("Computershare"), the Large Cap Growth Fund's proxy solicitor, at 866
436-0835.
How do I sign the proxy card?
Individual Accounts: Shareholders should sign exactly as their names appear on
the account registration shown on the card.
Joint Accounts: Either owner may sign, but the name of the person
signing should conform exactly to a name shown in
the registration.
All Other Accounts: The person signing must indicate his or her capacity. For
example, if Ms. Ann B. Collins serves as a trustee for a
trust account or other type of entity, she should sign,
"Ann B. Collins, Trustee."
3
How can I find more information on the Proposal?
You should read the Proxy Statement/Prospectus that provides details regarding
the proposal. If you have any questions, please call Computershare Fund, the
Large Cap Growth Fund's proxy solicitor, at 866 436-0835.
DELAWARE LARGE CAP GROWTH FUND
(a series of Delaware Group Equity Funds IV)
2005 Market Street
Philadelphia, Pennsylvania 19103-7094
NOTICE OF MEETING OF SHAREHOLDERS
To be held on January 25, 2008
To the Shareholders:
NOTICE IS HEREBY GIVEN that a meeting (the "Meeting") of Shareholders of
Delaware Large Cap Growth Fund (the "Large Cap Growth Fund" or "Acquired Fund"),
a series of Delaware Group Equity Funds IV, has been called by the Board of
Trustees of Delaware Group Equity Funds IV and will be held at the offices of
Delaware Investments located at 2001 Market Street, 2nd Floor Auditorium,
Philadelphia, PA 19103, on January 25, 2008 at 3:00 p.m., Eastern Time. The
Meeting is being called for the following reasons:
1. To approve an Agreement and Plan of Reorganization between Delaware
Group Equity Funds IV, on behalf of the Large Cap Growth Fund, and
Delaware Group Adviser Funds, on behalf of Delaware U.S. Growth Fund
(the "U.S. Growth Fund" or "Acquiring Fund"), which provides for: (i)
the acquisition by the Acquiring Fund of substantially all of the
assets of the Acquired Fund, in exchange for shares of the Acquiring
Fund; (ii) the pro rata distribution of shares of the Acquiring Fund
to the shareholders of the Acquired Fund; and (iii) the liquidation
and dissolution of the Acquired Fund.
2. To vote upon any other business as may properly come before the
Meeting or any adjournment thereof.
Shareholders of record of the Acquired Fund as of the close of business on
September 21, 2007 are entitled to notice of, and to vote at, the Meeting or any
adjournment thereof. Whether or not you plan to attend the Meeting, please vote
your shares by returning the proxy card by mail in the enclosed postage-paid
envelope provided, or by voting by telephone or over the Internet. Your vote is
important.
By Order of the Board of Trustees,
/s/ Patrick P. Coyne
Patrick P. Coyne
Chairman, President and Chief Executive Officer
[October 24, 2007]
To secure the largest possible representation and to save the expense of further
mailings, please mark your proxy card, sign it, and return it in the enclosed
envelope, which requires no postage if mailed in the United States. If you
prefer, you may instead vote by telephone or the Internet. You may revoke your
proxy at any time at or before the Meeting or vote in person if you attend the
Meeting, as provided in the attached Proxy Statement/Prospectus.
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
Page
Proposal: To Approve an Agreement and Plan of Reorganization...................x
Summary x
What is the purpose of the Proposal?........................................x
How do the investment objectives, strategies, and policies of the
Acquired Fund and the Acquiring Fund compare?............................x
What are the principal risks associated with investments in the Funds?......x
What are the general tax consequences of the Transaction?...................x
Who manages the Funds?......................................................x
What are the fees and expenses of each Fund and what might they
be after the Transaction?................................................x
How do the performance records of the Funds compare?........................x
Where can I find more financial information about the Funds?................x
What are other key features of the Funds?...................................x
Reasons for the Transaction....................................................x
Information About the Transaction and the Plan.................................x
How will the Transaction be carried out? ...................................x
Who will pay the expenses of the Transaction? ..............................x
What are the tax consequences of the Transaction? ..........................x
What should I know about shares of the Acquiring Fund? .....................x
What are the capitalizations of the Funds and what might the
capitalizations be after the Transaction? ...............................x
Comparison of Investment Objectives, Strategies, Policies, and Risk............x
Are there any significant differences between the investment
objectives of the Acquired Fund and the Acquiring Fund? .................x
Are there any significant differences between the investment
strategies and policies of the Acquired Fund and the Acquiring Fund? ....x
How do the fundamental investment restrictions of the
Funds differ? ...........................................................x
What are the risk factors associated with investments in
the Funds? ..............................................................x
What vote is necessary to approve the Plan? ................................x
More Information About the Funds...............................................x
Voting Information.............................................................x
Principal Holders of Shares....................................................x
EXHIBITS
Exhibit A - Form of Agreement and Plan of Reorganization
Exhibit B - Principal Holders of Shares as of September 21, 2007
PROXY STATEMENT/PROSPECTUS
Dated [October 24, 2007]
Acquisition of Substantially All of the Assets of:
DELAWARE LARGE CAP GROWTH FUND
(a series of Delaware Group Equity Funds IV)
By and in exchange for shares of
DELAWARE U.S. GROWTH FUND
(a series of Delaware Group Adviser Funds)
This proxy statement/prospectus (the "Proxy Statement/Prospectus") solicits
proxies to be voted at a meeting (the "Meeting") of shareholders of Delaware
Large Cap Growth Fund (the "Large Cap Growth Fund" or "Acquired Fund"), a series
of Delaware Group Equity Funds IV. The Meeting has been called by the Board of
Trustees of Delaware Group Equity Funds IV (the "Board") to vote on the approval
of the Plan (as more fully described below).
The principal offices of Delaware Group Equity Funds IV and Delaware Group
Adviser Funds (each, a "Trust" and collectively, the "Trusts") are located at
2005 Market Street, Philadelphia, PA 19103. You can reach the offices of each
Trust by telephone by calling 800 523-1918.
The Meeting will be held at the offices of Delaware Investments located at
2001 Market Street, 2nd Floor Auditorium, Philadelphia, PA 19103, on January 25,
2008 at 3:00 p.m., Eastern Time. The Board, on behalf of the Large Cap Growth
Fund, is soliciting these proxies. This Proxy Statement/Prospectus will first be
sent to shareholders on or about [October 30, 2007].
This Proxy Statement/Prospectus gives you information about an investment
in the Delaware U.S. Growth Fund (the "U.S. Growth Fund" or "Acquiring Fund")
and about other matters that you should know before voting and investing. You
should retain it for future reference. A statement of additional information
dated [October 24, 2007] (the "Statement of Additional Information"), relating
to this Proxy Statement/Prospectus, contains more information about the
Acquiring Fund and the Acquired Fund (each, a "Fund" and collectively, the
"Funds") and the proposed transaction, and has been filed with the U.S.
Securities and Exchange Commission (the "SEC"), and is incorporated herein by
reference.
The Prospectus of the Acquiring Fund dated February 28, 2007, as amended to
date (the "Fund Prospectus"), and the semiannual report of the Acquiring Fund
for the period ended April 30, 2007 (the "Acquiring Fund Semiannual Report") are
included with and are considered a part of this Proxy Statement/Prospectus, and
are intended to provide you with information about the Acquiring Fund.
You can request a free copy of the Statement of Additional Information, the
Fund Prospectus, or the annual report to shareholders of the U.S. Growth Fund
for the fiscal year ended October 31, 2006 (or for the fiscal year ended October
31, 2007, when available) or the Acquiring Fund Semiannual Report, by calling
800 523-1918, or by writing to the Trust at Attention: Account Services, P.O.
Box 219656, Kansas City, MO 64121-9656 by regular mail or 430 W. 7th Street,
Kansas City, MO 64105 by overnight courier service.
Like all mutual funds, the SEC has not approved or disapproved these
securities or passed upon the adequacy of this Proxy Statement/Prospectus. Any
representation to the contrary is a criminal offense.
Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other U.S. government agency.
Mutual fund shares involve investment risks, including the possible loss of
principal.
PROPOSAL: TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION
Shareholders of the Acquired Fund are being asked to consider and approve
an Agreement and Plan of Reorganization (the "Plan") that will have the effect
of reorganizing the Acquired Fund with and into the Acquiring Fund as summarized
below.
The Plan provides for: (i) the acquisition by the Acquiring Fund of
substantially all of the property, assets, and goodwill of the Acquired Fund in
exchange for shares of the Acquiring Fund; (ii) the pro rata distribution of
shares of the Acquiring Fund to shareholders of the Acquired Fund; and (iii) the
liquidation and dissolution of the Acquired Fund. If the shareholders of the
Acquired Fund vote to approve the Plan, as a shareholder of the Acquired Fund,
you will receive Acquiring Fund shares equal in total value to, and of the same
class as, your investment in the Acquired Fund. The Acquired Fund will then be
liquidated.
SUMMARY
This is only a summary of certain information contained in the Proxy
Statement/Prospectus. You should read the more complete information in the rest
of this Proxy Statement/Prospectus, including the Plan (attached as Exhibit A),
and the Fund Prospectus and Acquiring Fund Semiannual Report, which are included
with this Proxy Statement/Prospectus.
What is the purpose of the Proposal?
The Board approved the Plan for the Acquired Fund and recommends that
shareholders of the Acquired Fund approve the Plan. If shareholders of the
Acquired Fund approve the Plan, substantially all of the Acquired Fund's assets
will be transferred to the Acquiring Fund in exchange for the Acquiring Fund's
shares equal in value to the assets of the Acquired Fund that are transferred to
the Acquiring Fund. The Acquiring Fund shares will then be distributed pro rata
to the Acquired Fund's shareholders and the Acquired Fund will be liquidated and
dissolved.
2
The proposed transaction for the Acquired Fund is referred to in this Proxy
Statement/Prospectus as the "Transaction."
The Transaction, if approved for the Acquired Fund, will result in your
shares of the Acquired Fund being exchanged for Acquiring Fund shares of the
same class equal in value (but having a different price per share) to your
shares of the Acquired Fund. This means that you will cease to be a shareholder
of the Acquired Fund and will become a shareholder of the Acquiring Fund. This
exchange will occur on a date agreed to by the parties to the Plan (hereafter,
the "Closing Date"), which is currently expected to be in February 2008.
For the reasons set forth below under "Reasons for the Transaction," the
Boards of Trustees of each Trust (the "Boards") have concluded that the
Transaction is in the best interests of the Acquired Fund and the Acquiring
Fund. The Boards have also concluded that no dilution in value would result to
the shareholders of the Acquired Fund and the Acquiring Fund as a result of the
Transaction.
How do the investment objectives, strategies, and policies of the Acquired Fund
and the Acquiring Fund compare?
Like the Acquired Fund, the Acquiring Fund is a mutual fund within the
Delaware Investments(R) Family of Funds (the "Delaware Companies") that is
managed by Delaware Management Company ("DMC"), a series of Delaware Management
Business Trust. The investment objective of the Acquired Fund is substantially
similar, but not identical, to the investment objective of the Acquiring Fund.
The Acquired Fund seeks capital appreciation whereas the Acquiring Fund seeks
long-term capital appreciation by investing in equity securities of companies
DMC believes to have the potential for sustainable free cash flow growth.
However, both Funds invest primarily in companies that DMC believes to have
long-term capital appreciation potential and are expected to grow faster than
the U.S. economy. Each Fund's investment objective is non-fundamental, which
means that it may be changed without prior shareholder approval.
In addition, the investment strategies and policies of the Acquired Fund
are substantially similar, but not identical, to the investment strategies and
policies of the Acquiring Fund. The Acquired Fund has adopted a non-fundamental
investment policy to invest, under normal circumstances, at least 80% of the
Acquired Fund's net assets in investments of large capitalization companies. The
Acquiring Fund has adopted a non-fundamental investment policy to invest, under
normal circumstances, at least 80% of the Acquiring Fund's net assets in U.S.
investments. Although the Acquiring Fund may invest in companies of all sizes,
the Fund generally focuses on medium- and large-capitalization companies. In
addition, the Acquiring Fund may invest up to 20% of the Acquiring Fund's assets
in debt securities and bonds. The Acquiring Fund may also invest in convertible
bonds, preferred stocks, and convertible preferred stocks, provided that these
investments, when aggregated with the Acquiring Fund's debt securities and
bonds, do not exceed 35% of the Acquiring Fund's assets. In addition, both Funds
may engage in futures and options transactions and invest up to 20% of their net
assets in securities of foreign issuers. Also, each Fund may invest up to 15%
(10% for the Acquiring Fund) of its net assets in illiquid securities.
3
The most significant differences between the Acquired Fund's and the
Acquiring Fund's stated investment policies are that: (1) the Acquired Fund must
invest at least 80% of the Acquired Fund's net assets in investments of large
capitalization companies; and (2) the Acquiring Fund must invest at least 80% of
its net assets in U.S. investments. Historically, however, both Funds have
utilized similar investment strategies. DMC seeks to select securities of
companies that it believes have attractive end market potential, dominant
business models, and strong free cash flow generation, whose securities are
attractively priced compared to their intrinsic value. DMC also considers a
company's operational efficiencies, management's plans for capital allocation,
and the company's shareholder orientation.
For further information about the investment objectives and policies of the
Funds, see "Comparison of Investment Objectives, Strategies, Policies, and
Risks" below.
What are the principal risks associated with investments in the Funds?
As with most investments, investments in the Funds involve certain risks.
There can be no guarantee against losses resulting from an investment in either
Fund, nor can there be any assurance that either Fund will achieve its
investment objective. Investments in the Funds involve risks such as market
risk, industry and security risk, futures and options risk, foreign risk, and
liquidity risk. To the extent that a Fund invests its assets in debt securities
and bonds, investments in the Fund also are subject to credit risk. The risks
associated with an investment in the Acquired Fund are substantially identical
to the risks associated with an investment in the Acquiring Fund.
For further information about the risks of investing in the Funds, see
"Comparison of Investment Objectives, Strategies, Policies, and Risks" below.
What are the general tax consequences of the Transaction?
It is expected that shareholders of the Acquired Fund will not recognize
any gain or loss for federal income tax purposes as a result of the exchange of
their shares in the Acquired Fund for shares of the Acquiring Fund pursuant to
the Transaction. You should, however, consult your tax adviser regarding the
effect, if any, of the Transaction in light of your individual circumstances.
You should also consult your tax adviser about other state and local tax
consequences of the Transaction, if any, because the information about tax
consequences in this document relates to the federal income tax consequences of
the Transaction only. For further information about the federal income tax
consequences of the Transaction, see "Information About the Transaction - What
are the tax consequences of the Transaction?"
Who manages the Funds?
The management of the business and affairs of each Fund is the
responsibility of the Board of the applicable Trust. The Boards and senior
management select officers who are responsible for the day-to-day operations of
the Funds.
4
DMC manages the assets of each Fund and makes each Fund's investment
decisions. DMC is a series of Delaware Management Business Trust, which is a
subsidiary of Delaware Management Holdings, Inc., and is located at 2005 Market
Street, Philadelphia, Pennsylvania 19103. DMC and its predecessors have been
managing the assets of the Delaware Companies since 1938. As of June 30, 2007,
DMC and its affiliates within Delaware Investments were managing, in the
aggregate, more than $164 billion in assets in various institutional or
separately managed investment company and insurance accounts.
A discussion of the basis for the Boards' approval of each Fund's
respective investment advisory contract is available in the Acquired Fund's
annual report to shareholders for the fiscal year ended September 30, 2006 and
the Acquiring Fund's annual report to shareholders for the fiscal year ended
October 31, 2006.
In addition, the portfolio managers for the Acquired Fund and the Acquiring
Fund are the same. There will be no management changes involved with the
proposed Transaction. As a result, the following individuals will continue to
manage the Acquiring Fund after the completion of the Transaction:
Jeffrey S. Van Harte has primary responsibility for making day-to-day
investment decisions for the Acquiring Fund. In making investment decisions for
the Acquiring Fund, Mr. Van Harte regularly consults with Christopher J.
Bonavico, Daniel J. Prislin, and Christopher M. Ericksen.
Jeffrey S. Van Harte, CFA, Senior Vice President, Chief Investment Officer
- - Focus Growth Equity
Mr. Van Harte joined Delaware Investments in April 2005. He is the chief
investment officer for the Focus Growth Equity team, responsible for large-cap
growth, all-cap growth, and one smid-cap growth portfolio. Most recently, he was
a principal and executive vice president at Transamerica Investment Management.
Mr. Van Harte has been managing portfolios and separate accounts for more than
20 years. Before becoming a portfolio manager, Mr. Van Harte was a securities
analyst and trader for Transamerica Investment Services, which he joined in
1980. Mr. Van Harte received his bachelor's degree in finance from California
State University at Fullerton.
Christopher J. Bonavico, CFA, Vice President, Senior Portfolio Manager,
Equity Analyst
Mr. Bonavico, who joined Delaware Investments in April 2005, is a senior
portfolio manager on the firm's Focus Growth Equity team. This team is
responsible for large-cap growth, all-cap growth, and one smid-cap growth
portfolio. He was most recently a principal and portfolio manager at
Transamerica Investment Management, where he managed sub-advised funds and
institutional separate accounts. Before joining Transamerica in 1993, he was a
research analyst for Salomon Brothers. Mr. Bonavico received his bachelor's
degree in economics from the University of Delaware.
5
Daniel J. Prislin, CFA, Vice President, Senior Portfolio Manager, Equity
Analyst
Mr. Prislin joined Delaware Investments in April 2005 as a senior portfolio
manager on the firm's Focus Growth Equity team, which is responsible for
large-cap growth, all-cap growth, and one smid-cap portfolio. He was most
recently a principal and portfolio manager at Transamerica Investment
Management, where he also managed sub-advised funds and institutional separate
accounts. Prior to joining Transamerica in 1998, he was a portfolio manager with
The Franklin Templeton Group. Mr. Prislin received an MBA and bachelor's degree
in business administration from the University of California at Berkeley.
Christopher M. Ericksen, CFA, Vice President, Portfolio Manager, Equity
Analyst
Mr. Ericksen joined Delaware Investments in April 2005 as a portfolio
manager on the firm's Focus Growth Equity team, which is responsible for
large-cap growth, all-cap growth, and one smid-cap product. He was most recently
a portfolio manager at Transamerica Investment Management, where he also managed
institutional separate accounts. Before joining Transamerica in 2004, he was a
vice president at Goldman Sachs. During his 10 years there, he worked in
investment banking as well as investment management. Mr. Ericksen received his
bachelor's degree from Carnegie Mellon University, with majors in industrial
management, economics, and political science.
What are the fees and expenses of each Fund and what might they be after the
Transaction?
The following tables describe the fees and expenses that you may pay if you
buy and hold shares of the Funds. The sales charge structure for each Fund is
identical and the operating expenses shown are based on expenses incurred during
the Acquired Fund's fiscal year ended September 30, 2006, and the Acquiring
Fund's fiscal year ended October 31, 2006, restated to reflect contractual
expense changes.
FEE TABLES FOR
THE LARGE CAP GROWTH FUND AND THE U.S. GROWTH FUND
A. Class A Shares
Actual Pro forma
----------------------------- -------------
Large Cap U.S. U.S. Growth
Growth Growth Fund -
Fund - Fund - Class A After
Class A Class A Transaction
----------------------------- -------------
Shareholder Fees
(paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
offering price)............................... 5.75% 5.75% 5.75%
Maximum Contingent Deferred Sales Charge
(Load) imposed on redemptions (as a percentage
of original purchase price or redemption
price, whichever is lower)................... None(1) None(1) None(1)
6
Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees............................ 0.65%(2) 0.64%(3) 0.64%(3)
Distribution and Service (12b-1) Fees...... 0.30%(4) 0.30%(5) 0.30%(5)
Total Other Expenses....................... 0.19% 0.23% 0.20%(6)
-------- -------- --------
Total Annual Fund Operating Expenses....... 1.14% 1.17% 1.14%
Fee Waiver/Expense Reimbursement........... (0.05%) (0.17%) (0.14%)
-------- -------- --------
Net Expenses............................... 1.09% 1.00% 1.00%
======== ======== ========
B. Class B Shares
Actual Pro forma
----------------------------- -------------
Large Cap U.S. U.S. Growth
Growth Growth Fund -
Fund - Fund - Class B After
Class B Class B Transaction
----------------------------- -------------
Shareholder Fees
(paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
offering price)............................... None None None
Maximum Contingent Deferred Sales Charge
(Load) imposed on redemptions (as a percentage
of original purchase price or redemption
price, whichever is lower)................... 4.00%(7) 4.00%(7) 4.00%(7)
Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees............................ 0.65%(2) 0.64%(3) 0.64%(3)
Distribution and Service (12b-1) Fees...... 1.00% 1.00% 1.00%
Total Other Expenses....................... 0.19% 0.23% 0.20%(6)
-------- -------- --------
Total Annual Fund Operating Expenses....... 1.84% 1.87% 1.84%
Fee Waiver/Expense Reimbursement........... (0.00%) (0.12%) (0.09%)
-------- -------- --------
Net Expenses............................... 1.84% 1.75% 1.75%
======== ======== ========
C. Class C Shares
Actual Pro forma
----------------------------- -------------
Large Cap U.S. U.S. Growth
Growth Growth Fund -
Fund - Fund - Class C After
Class C Class C Transaction
----------------------------- -------------
Shareholder Fees
(paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
offering price)............................... None None None
Maximum Contingent Deferred Sales Charge
(Load) imposed on redemptions (as a percentage
of original purchase price or redemption
price, whichever is lower)................... 1.00%(8) 1.00%(8) 1.00%(8)
Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees............................ 0.65%(2) 0.64%(3) 0.64%(3)
7
Distribution and Service (12b-1) Fees...... 1.00% 1.00% 1.00%
Total Other Expenses....................... 0.19% 0.23% 0.20%(6)
-------- -------- --------
Total Annual Fund Operating Expenses....... 1.84% 1.87% 1.84%
Fee Waiver/Expense Reimbursement........... (0.00%) (0.12%) (0.09%)
-------- -------- --------
Net Expenses............................... 1.84% 1.75% 1.75%
======== ======== ========
D. Institutional Class Shares
Actual Pro forma
----------------------------- -------------
Large Cap U.S. U.S. Growth
Growth Growth Fund -
Fund - Fund - Institutional
Institutional Institutional Class After
Class Class Transaction
----------------------------- -------------
Shareholder Fees
(paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
offering price)............................... None None None
Maximum Contingent Deferred Sales Charge
(Load) imposed on redemptions (as a percentage
of original purchase price or redemption
price, whichever is lower)................... None None None
Annual Fund Operating Expenses
(deducted from Fund assets)
Management Fees............................ 0.65%(2) 0.64%(3) 0.64%(3)
Distribution and Service (12b-1) Fees...... 0.00% 0.00% 0.00%
Total Other Expenses....................... 0.19% 0.23% 0.20%(6)
-------- -------- --------
Total Annual Fund Operating Expenses....... 0.84% 0.87% 0.84%
Fee Waiver/Expense Reimbursement........... (0.00%) (0.12%) (0.09%)
-------- -------- --------
Net Expenses............................... 0.84% 0.75% 0.75%
======== ======== ========
8
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value ("NAV"). However, if you buy the shares through a financial advisor
who is paid a commission, a contingent deferred sales charge ("CDSC") will
apply to redemptions made within two years of purchase. Additional Class A
purchase options that involve a CDSC may be permitted from time to time and
will be disclosed in the Prospectus if they are available.
(2) DMC has agreed to voluntarily waive all or a portion of its investment
advisory fees and/or reimburse expenses through January 31, 2008 in order
to prevent total annual fund operating expenses (excluding any 12b-1 plan
expenses, taxes, interest, inverse floater program expenses, brokerage
fees, certain insurance costs, and non-routine expenses or costs,
including, but not limited to, those relating to reorganizations,
litigation, certain Trustee retirement plan expenses, conducting
shareholder meetings, and liquidations (collectively, "non-routine
expenses")) from exceeding, in an aggregate amount, 0.75% of the Fund's
average daily net assets. For purposes of these waivers and reimbursements,
non-routine expenses may also include such additional costs and expenses as
may be agreed upon from time to time by the Fund's Board and DMC. These
expense waivers and reimbursements apply only to expenses paid directly by
the Fund. The Net Expenses figure in the tables above do not reflect this
voluntary waiver. With this voluntary waiver, the Net Expenses for Class A
shares, Class B shares, Class C shares and Institutional Class shares would
be 1.00%, 1.75%, 1.75% and 0.75%, respectively.
(3) DMC has contracted to waive all or a portion of its investment advisory
fees and/or reimburse expenses from March 1, 2007 through February 28, 2009
in order to prevent total annual fund operating expenses (excluding any
12b-1 plan expenses, taxes, interest, inverse floater program expenses,
brokerage fees, certain insurance costs, and non-routine expenses (as
defined above)) from exceeding, in an aggregate amount, 0.75% of the Fund's
average daily net assets. For purposes of these waivers and reimbursements,
non-routine expenses may also include such additional costs and expenses as
may be agreed upon from time to time by the Fund's Board and DMC. These
expense waivers and reimbursements apply only to expenses paid directly by
the Fund.
(4) Delaware Distributors, L.P. ("DDLP") has contracted to limit the Class A
shares' 12b-1 fees through January 31, 2008 to no more than 0.25% of the
Fund's average daily net assets.
(5) Effective September 1, 2007, the Fund's 12b-1 fees for Class A shares has
been permanently reduced to 0.30%. In addition, DDLP has contracted to
limit the Class A shares' 12b-1 fees from September 1, 2007 through
February 28, 2009 to no more than 0.25% of the Fund's average daily net
assets.
(6) Included in "Total Other Expenses" are the one-time estimated costs of the
reorganization, which are anticipated to total $88,897, of which $26,669 is
applicable to the Acquiring Fund. The costs of the Transaction are not
subject to the fee waiver described in footnote 3 above.
(7) If you redeem Class B shares during the first year after you buy them, you
will pay a CDSC of 4.00%, which declines to 3.25% during the second year,
2.75% during the third year, 2.25% during the fourth and fifth years, 1.50%
during the sixth year, and 0% thereafter.
(8) Class C shares redeemed within one year of purchase are subject to a 1.00%
CDSC.
Examples
These examples are intended to help you compare the costs of investing in
Large Cap Growth Fund shares with the cost of investing in U.S. Growth Fund
shares of the comparable class, both before and after the Transaction. You can
also use these examples to compare the costs of these Funds with the costs of
other mutual funds with similar investment objectives. The cumulative amount of
Fund expenses
9
is shown on a hypothetical investment of $10,000 in the Large Cap Growth Fund
and the U.S. Growth Fund for the time periods indicated and then the sale of
your shares at the end of those periods. The examples assume a 5% return each
year.(1) These are examples only and do not represent future expenses, which may
be greater or less than those shown below. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
Class A Shares 1 Year 3 Years 5 Years 10 Years
- -------------------------- ------ ------- ------- --------
Large Cap Growth Fund $680 $902 $1,141 $1,827
U.S. Growth Fund $671 $898 $1,166 $1,930
Pro forma U.S. Growth Fund
(after the Transaction) $671 $890 $1,140 $1,857
Class B Shares(2) 1 Year 3 Years 5 Years 10 Years
- -------------------------- ------ ------- ------- --------
Large Cap Growth Fund $587 $854 $1,221 $1,962
U.S. Growth Fund $578 $839 $1,213 $2,000
Pro forma U.S. Growth Fund
(after the Transaction) $578 $836 $1,203 $1,960
Class C Shares 1 Year 3 Years 5 Years 10 Years
- -------------------------- ------ ------- ------- --------
Large Cap Growth Fund $287 $579 $996 $2,159
U.S. Growth Fund $278 $564 $988 $2,170
Pro forma U.S. Growth Fund
(after the Transaction) $278 $561 $978 $2,143
Institutional Class Shares 1 Year 3 Years 5 Years 10 Years
- -------------------------- ------ ------- ------- --------
Large Cap Growth Fund $86 $268 $465 $1,037
U.S. Growth Fund $77 $253 $458 $1,050
Pro forma U.S. Growth Fund
(after the Transaction) $77 $250 $448 $1,020
You would pay the following expenses on the same investment if you did not sell
your shares:
Class B Shares(2) 1 Year 3 Years 5 Years 10 Years
- -------------------------- ------ ------- ------- --------
Large Cap Growth Fund $187 $579 $996 $1,962
U.S. Growth Fund $178 $564 $988 $2,000
Pro forma U.S. Growth Fund
(after the Transaction) $178 $561 $978 $1,960
Class C Shares 1 Year 3 Years 5 Years 10 Years
- -------------------------- ------ ------- ------- --------
Large Cap Growth Fund $187 $579 $996 $2,159
U.S. Growth Fund $178 $564 $988 $2,170
Pro forma U.S. Growth Fund
(after the Transaction) $178 $561 $978 $2,143
(1) Each Fund's actual rate of return may be greater or less than the
hypothetical 5% return we used here. This example reflects the net
operating expenses with the contractual fee waivers and expense limits for
the periods during which such waivers and expense limits are in effect and
the total operating expenses without the fee waivers and expense limits
thereafter.
10
(2) The Class B example reflects the conversion of Class B shares to Class A
shares after eight years. Information for the ninth and tenth years
reflects expenses of the Class A shares.
These are just examples. They do not represent past or future expenses or
returns. Each of the Funds pays its own operating expenses. The effects of these
expenses are reflected in the net asset value and are not directly charged to
your account. The expenses of each of the Funds are comprised of expenses
attributable to each Fund, respectively, as well as expenses not attributable to
any particular series of that Trust that are allocated among the various series
of the Trust.
How do the performance records of the Funds compare?
As described under the section "Reasons for the Transaction," the Boards
considered a number of factors when reviewing the Plan and considering the
proposed Transaction. The performance history of the Funds (before taxes and
without sales charges) as of June 30, 2007 is shown below:
Average Annual Total Returns
----------------------------
10 Years
or Since
Fund and Class 1 Year 3 Years 5 Years Inception(1)
- ------------------------------- ------ ------- ------- -----------
Large Cap Growth Fund--Class A 8.71% 6.04% 7.02% 0.32%
U.S. Growth Fund--Class A 9.71% 8.87% 6.10% 4.48%
Large Cap Growth Fund--Class B 8.01% 5.28% 6.25% N/A
U.S. Growth Fund--Class B 8.96% 8.11% 5.37% 3.88%
Large Cap Growth Fund--Class C 8.00% 5.27% 6.28% N/A
U.S. Growth Fund--Class C 8.98% 8.11% 5.36% 3.78%
Large Cap Growth Fund-- 9.15% 6.32% 7.32% 0.46%
Institutional Class
U.S. Growth Fund--Institutional
Class 10.08% 9.21% 6.42% 4.79%
(1) Since inception returns are shown if the class existed for less than 10
years. The Large Cap Growth Fund's Class A shares and Institutional Class shares
and U.S. Growth Fund's Class A shares, Class B shares, Class C shares, and
Institutional Class shares commenced operations more than 10 years ago. The
inception date for the Large Cap Growth Fund's Class B shares and Class C shares
was April 30, 2002.
11
Where can I find more financial information about the Funds?
Each Fund's annual report, which is included with the Statement of
Additional Information, contains a discussion of each Fund's performance during
the past fiscal year and show per share information for each of the past five
fiscal years. In addition, the Acquired Fund's semiannual report is included
with the Statement of Additional Information and the Acquiring Fund Semiannual
Report accompanies this Proxy Statement/Prospectus. These documents also are
available upon request. (See "More Information About the Funds" below.) The Fund
Prospectus also contains further financial information about the Acquiring Fund.
What are other key features of the Funds?
Investment Management Fees. DMC is the investment manager of each Fund. DMC
has entered into separate investment management agreements relating to each Fund
that provide for reductions in the fee rate for a Fund as the assets of the Fund
increase. The Funds have the same investment management fee schedule, which is:
-----------------------------------------------------
Investment Management Fee
-----------------------------------------------------
0.65% on the first $500 million;
0.60% on the next $500 million;
0.55% on the next $1.5 billion; and
0.50% on assets in excess of $2.5 billion
-----------------------------------------------------
DMC has contracted to waive that portion, if any, of the annual management
fees payable by each Fund and to pay certain expenses of each Fund for the
period through January 31, 2008 (for the Acquired Fund) and February 28, 2009
(for the Acquiring Fund) to the extent necessary to limit the total operating
expenses of each Fund to the levels described in the Fee Tables above.
Distribution Services. Pursuant to underwriting agreements relating to the
Funds, Delaware Distributors, L.P. ("DDLP"), 2005 Market Street, Philadelphia,
Pennsylvania 19103, serves as the national distributor for the shares of the
Funds. DDLP pays the expenses of the promotion and distribution of the Funds'
shares, except for payments by the Funds on behalf of Class A shares, Class B
shares, and Class C shares shares under their respective 12b-1 Plans. DDLP is an
indirect, wholly-owned subsidiary of Delaware Management Holdings, Inc. and an
affiliate of DMC.
Pursuant to a contractual arrangement with DDLP, Lincoln Financial
Distributors, Inc. ("LFD"), 2001 Market Street, Philadelphia, Pennsylvania
19103-7055, is primarily responsible for promoting the sale of Fund shares
through broker/dealers, financial advisors, and other financial intermediaries.
LFD is also an affiliate of DDLP and DMC.
Rule 12b-1 Plans. The Funds have adopted a separate distribution plan or
"Rule 12b-1 Plan" for each of its Class A shares, Class B shares, and Class C
shares (collectively, the "Rule 12b-1 Plans" and, each individually, a "Rule
12b-1 Plan").
Each Rule 12b-1 Plan permits the relevant Fund to pay out of the assets of
the Class A shares, Class B shares, and Class C shares, as applicable, monthly
fees to DDLP
12
for its services and expenses in distributing and promoting shares of such
classes. These expenses may include, among others, preparing and distributing
advertisements, sales literature and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, and paying distribution
and maintenance fees to securities brokers and dealers who enter into dealer
agreements with DDLP. The Rule 12b-1 Plan expenses relating to Class B shares
and Class C shares are also used to pay DDLP for advancing the commission costs
to dealers with respect to the initial sale of such Class B and Class C shares.
In addition, each Fund's Rule 12b-1 Plan permits the relevant Fund to make
payments out of the assets of the Class A shares, Class B shares, and Class C
shares to other unaffiliated parties, such as banks, who either aid in the
distribution of shares of, or provide services to, such Classes.
The maximum aggregate annual fee payable by a Fund under its Rule 12b-1
Plans and a Fund's Distribution Agreement is, on an annual basis: up to 0.30%
(currently contractually limited by DDLP to 0.25% through January 31, 2008) of
the Large Cap Growth Fund's average daily net assets of Class A shares and up to
0.30% (currently contractually limited by DDLP to 0.25% through February 28,
2009) of the U.S. Growth Fund's average daily net assets of Class A shares; and
up to 1.00% (0.25% of which are service fees to be paid to DDLP, dealers, and
others for providing personal service and/or maintaining shareholder accounts)
of Class B shares' and Class C shares' average daily net assets. The Boards may
reduce these amounts at any time.
Purchase, Exchange, and Redemption Procedures. Procedures for the purchase,
exchange and redemption of each Fund's shares are identical. You may refer to
the Fund Prospectus under the section entitled "About Your Account" for the
purchase, exchange, and redemption procedures applicable to the purchases,
exchanges, and redemptions of the Acquiring Fund's shares.
Dividends, Distributions, and Taxes. Each Fund expects to declare and
distribute all of its net investment income, if any, to shareholders as
dividends annually. Each Fund will also distribute net realized capital gains,
if any, at least annually. For more information about dividends, distributions
and the tax implications of investing in the Acquiring Fund, please see the Fund
Prospectus under the section entitled "About Your Account--Dividends,
distributions, and taxes."
REASONS FOR THE TRANSACTION
Based on the considerations described below, the Boards, including the
trustees who are deemed to be independent trustees (each, an "Independent
Trustee" and, collectively, the "Independent Trustees") under the Investment
Company Act of 1940, as amended (the "1940 Act"), on behalf of the Acquired Fund
and the Acquiring Fund, have determined that the Transaction would be in the
best interests of the Acquired Fund and the Acquiring Fund and that the
interests of the Acquired Fund's and the Acquiring Fund's existing shareholders
would not be diluted as a result of the Transaction.
13
At a meeting of the Boards for the Trusts held on August 15-16, 2007, DMC
presented the Plan to the Trustees and provided the Trustees with data and
analysis regarding the proposed Transaction. At the meeting, the Boards
considered a number of factors, including the following:
o The compatibility of the Acquired Fund's investment objective,
policies, and restrictions with the investment objective,
policies, and restrictions of the Acquiring Fund;
o The relative investment performance of the Funds;
o The relative size of the Acquired Fund as compared to the
Acquiring Fund both before and after the Transaction;
o The relative past and current growth in assets of the Funds and
the anticipated future inability of the Acquired Fund to achieve
satisfactory asset growth as analyzed by DDLP as the Fund's
distributor;
o The relative expense ratios of the Funds and the anticipated
impact of the proposed Transaction on the expense ratios of the
Acquiring Fund both before and after expense caps and fee
waivers;
o The proposal of DMC to waive all or a portion of its investment
advisory fees and/or reimburse expenses through February 28, 2009
in order to prevent total annual fund operating expenses
(excluding certain expenses as described below) from exceeding
0.75% of the Acquiring Fund's average daily net assets.
o The proposal of DDLP to limit 12b-1 fees for the Acquiring Fund's
Class A to no more than 0.25% through February 28, 2009.
o The anticipated federal income tax consequences of the
Transaction with respect to each Fund and its shareholders;
o The Transaction will not result in any limitation on the use by
the Acquiring Fund of its capital loss carryforwards and as a
result, shareholders of the Acquiring Fund, including former
Acquired Fund shareholders, may benefit from these capital loss
carryforwards, which may be used to offset future capital gains.
o The portfolio management team that manages the Acquired Fund and
Acquiring Fund are identical;
o The estimated costs of the Transaction and the extent to which
the Funds would bear such costs; and
14
o The potential benefits of the proposed Transaction for the
shareholders of the Acquired Fund and the Acquiring Fund.
The Boards noted that the investment objective for the Acquired Fund is
substantially similar to the investment objective of the Acquiring Fund. The
Boards considered that the portfolio of the Acquired Fund has historically been
managed in substantially the same manner (and has substantially similar
holdings) as the portfolio of the Acquiring Fund, which should allow for a
relatively smooth transition for shareholders of the Acquired Fund should the
proposed Transaction be approved. The materials provided to the Boards also
explained that the investment strategies and policies of the Acquired Fund are
substantially similar to the investment strategies and policies of the Acquiring
Fund.
With respect to performance, the materials provided to the Boards showed
that the Acquired Fund's Class A shares had stronger performance than the
Acquiring Fund's Class A shares over the trailing five-year period; however, the
Acquiring Fund's Class A shares had a stronger performance record for the
trailing one-, three-, and 10-year periods (through June 30, 2007). In addition,
over the trailing one-, three-, and 10-year periods, the Acquiring Fund had a
stronger performance percentile rank relative to its Lipper peer group (Large
Cap Growth Funds) than the Acquired Fund.
The Boards also considered sales and redemption data and relative asset
growth for each Fund as presented by DDLP. The information provided to the
Boards indicated that the Acquired Fund had positive net cash flow for the year
ended December 31, 2005, but experienced negative net cash flows during the year
ended December 31, 2006 and the year to date as of May 31, 2007, while the
Acquiring Fund had positive net cash flows during the same periods.
In deciding whether to recommend approval of the Transaction to
shareholders, the Boards also considered the fees and expense ratios of the
Acquiring Fund and the Acquired Fund and the impact of existing and proposed
contractual fee waivers on such expense ratios. The Boards considered the
potential benefits afforded by a larger fund through economies of scale from the
spreading of fixed costs over a larger asset base and by reaching or utilizing,
to a greater extent, breakpoints in investment management fees, although there
can be no assurance that operational savings will be realized. At the Board
meeting, DMC informed the Boards that, with the contractual fee waivers and
expense limitations currently in place at that time, the net expenses for the
Acquiring Fund are equal to the net expenses of the Acquired Fund on Class B,
Class C, and Institutional Class shares, however, the Acquired Fund's net
expenses are lower than the Acquiring Fund's net expenses on Class A shares. The
Boards also considered the proposal of DMC to waive all or a portion of its
investment advisory fees and/or reimburse expenses through February 28, 2009 in
order to prevent total annual fund operating expenses (excluding any 12b-1 plan
expenses, taxes, interest, inverse floater program expenses, brokerage fees,
certain insurance costs, and non-routine expenses (as defined above), from
exceeding 0.75% of the Acquiring Fund's average daily net assets. In addition,
the Boards considered the proposal of DDLP to limit 12b-1 fees for the Acquiring
Fund's Class A shares to no more than 0.25% through February 28, 2009. As a
result of DMC's and DDLP's proposed waivers, reimbursements and/or limitations,
as the case may be, the Board
15
noted that the pro forma net expenses of the Acquiring Fund after the
Transaction will be equal to the net expenses of the Acquired Fund for all share
classes.
DMC informed the Boards that the Transaction will be structured as a
tax-free reorganization. DMC also informed the Boards as to the cost of the
Transaction, including the costs associated with the solicitation of proxies.
The Boards considered that the expenses of the Transaction would be shared as
follows: 40% by DMC, 30% by the Acquired Fund, and 30% by the Acquiring Fund.
The Boards approved the Plan, concluding that the Transaction is in the
best interests of the Acquired Fund and the Acquiring Fund and that no dilution
of value would result to the shareholders of either Fund from the Transaction.
The Board of Delaware Group Equity Funds IV then decided to recommend that
shareholders of the Acquired Fund vote to approve the Transaction. The Trustees
approving the Plan and making the foregoing determinations included all of the
Independent Trustees.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF TRUSTEES OF
DELAWARE GROUP EQUITY FUNDS IV, ON BEHALF OF THE ACQUIRED FUND,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
If the shareholders of the Acquired Fund do not approve the Plan, the Board
of Delaware Group Equity Funds IV may consider other possible courses of action
for the Acquired Fund, including liquidation and dissolution.
INFORMATION ABOUT THE TRANSACTION AND THE PLAN
This is only a summary of the Plan. You should read the actual Plan
relating to the Transaction, which is attached as Exhibit A to this Proxy
Statement/Prospectus and is incorporated herein by reference.
How will the Transaction be carried out?
If the shareholders of the Acquired Fund approve the Plan, the Transaction
will take place after the parties to the Plan satisfy various conditions.
If the shareholders of the Acquired Fund approve the Plan, the Acquired
Fund will deliver to the Acquiring Fund substantially all of its property,
assets, and goodwill on the Closing Date. In exchange, Delaware Group Equity
Funds IV, on behalf of the Acquired Fund, will receive the Acquiring Fund's
shares to be distributed pro rata to the Acquired Fund's shareholders. The value
of the assets to be delivered to the Acquiring Fund shall be the value of such
assets computed as of the close of business of the New York Stock Exchange
("NYSE") (normally 4:00 p.m., Eastern Time) on the last business day prior to
the Closing Date. A business day is any day that the NYSE is open for business
("Business Day").
If the Transaction is approved, the stock transfer books of the Acquired
Fund will be permanently closed as of the close of business of the NYSE on the
Business Day before the
16
Closing Date. The Acquired Fund will accept requests for redemption only if
received in proper form before that time. Requests received after that time will
be considered requests to redeem shares of the Acquiring Fund.
To the extent permitted by law, the Plan may be amended without shareholder
approval at the direction of the Boards. The respective Board may also agree to
terminate and abandon the Transaction at any time before or after the approval
of shareholders of the Acquired Fund or may terminate and abandon the
Transaction if certain conditions required under the Plan have not been
satisfied.
Who will pay the expenses of the Transaction?
The expenses resulting from the Acquired Fund's participation in the
Transaction, including solicitation of proxies, will be shared by the following
parties in the percentages indicated: 30% by the Acquired Fund, 30% by the
Acquiring Fund, and 40% by DMC. The Funds will bear these Transaction costs
without regard to any of the expense limits noted above.
What are the tax consequences of the Transaction?
The Transaction is intended to qualify as a tax-free reorganization for
federal income tax purposes under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"). Based on certain assumptions made and
representations to be made on behalf of the Acquired Fund and the Acquiring
Fund, it is expected that Stradley Ronon Stevens & Young, LLP will provide a
legal opinion that, for federal income tax purposes:(i) shareholders of the
Acquired Fund will not recognize any gain or loss as a result of the exchange of
their shares of the Acquired Fund for shares of the Acquiring Fund; and (ii) the
Acquiring Fund and its shareholders will not recognize any gain or loss upon
receipt of the Acquired Fund's assets.
Capital losses can generally be carried forward to each of the eight (8)
years succeeding the loss year to offset future capital gains. The Acquired Fund
did not have any capital loss carryforwards as of September 30, 2006, its latest
fiscal year end; however, the Acquiring Fund had capital loss carryforwards
totaling $93,211,996, as of October 31, 2006, its latest fiscal year end. The
Transaction will not result in any limitation on the use by the Acquiring Fund
of its capital loss carryforwards. Shareholders of the Acquiring Fund, including
former Acquired Fund shareholders, may benefit from these capital loss
carryforwards, which may be used to offset future capital gains.
After the Transaction, you will continue to be responsible for tracking the
adjusted tax basis and holding period for your shares for federal income tax
purposes. You should consult your tax adviser regarding the effect, if any, of
the Transaction in light of your individual circumstances. You should also
consult your tax adviser about the state and local tax consequences, if any, of
the Transaction because this discussion only relates to the federal income tax
consequences.
17
What should I know about shares of the Acquiring Fund?
If the Transaction is approved for the Acquired Fund, full and fractional
shares of the Acquiring Fund will be distributed to shareholders of the Acquired
Fund in accordance with the procedures described above. When issued, each share
will be validly issued and fully paid and non-assessable. The shares of the
Acquiring Fund will be recorded electronically in each shareholder's account.
The Acquiring Fund will then send a confirmation to each shareholder. As of the
Closing Date, any outstanding certificates, if any, representing shares of the
Acquired Fund will be cancelled.
The Acquiring Fund shares to be issued in the Transaction have the same
rights and privileges as your Acquired Fund shares. For example, all shares have
non-cumulative voting rights. This gives holders of more than 50% of the shares
voting the ability to elect all of the members of the Board. If this happens,
holders of the remaining shares voting will not be able to elect any trustees.
Like the Acquired Fund, the Acquiring Fund does not routinely hold annual
meetings of shareholders. The Acquiring Fund may hold special meetings for
matters requiring shareholder approval. A meeting of the Acquiring Fund's
shareholders may also be called at any time by the Board or by the chairperson
of the Board or by the president.
For purposes of calculating any applicable contingent deferred sales
charges, the period you have held your shares in the Acquired Fund will be
counted toward, and carried over as, the holding period of the shares you
receive in the Acquiring Fund as part of the Transaction.
What are the capitalizations of the Funds and what might the capitalization be
after the Transaction?
The following table sets forth, as of September 30, 2007, the separate
capitalizations of the Acquiring Fund and the Acquired Fund, and the estimated
capitalization of the Acquiring Fund as adjusted to give effect to the proposed
Transaction. The capitalization of the Acquiring Fund is likely to be different
if and when the Transaction is actually consummated.
Acquiring
Pro Forma Fund after
Adjustments to Transaction
Acquired Fund Acquiring Fund Capitalization(1) (estimated)*
------------- -------------- ----------------- ------------
(unaudited) (unaudited) (unaudited)
Net assets (all classes) $41,370,080 $881,284,525 ($53,338) $922,601,267
Total shares outstanding 5,298,990 55,877,918
Class A net assets $8,355,065 $189,390,380 ($11,117) $197,734,328
Class A shares outstanding 1,069,033 12,415,831 12,963,226
Class A net asset value per
share $7.82 $15.25 $15.25
Class B net assets $1,679,804 $18,988,430 ($1,658) $20,666,576
Class B shares outstanding 222,474 1,393,154 1,516,323
Class B net asset value per
share $7.55 $13.63 $13.63
Class C net assets $4,068,999 $23,448,210 ($3,332) $27,513,877
Class C shares outstanding 538,350 1,587,262 1,862,532
Class C net asset value per
share $7.56 $14.77 $14.77
Class R net assets(2) $0 $1,243,724 ($38) $1,243,686
Class R shares outstanding(2) - 82,339 82,339
Class R net asset value per
share(2) - $15.10 $15.10
Institutional Class net
assets $27,266,212 $648,213,781 ($37,193) $675,442,800
Institutional Class shares
outstanding 3,469,133 40,399,332 42,097,630
Institutional Class net
asset value per share $7.86 $16.05 $16.04
(1) The adjustments reflect the costs of the Transaction incurred by each Fund.
(2) Class R shares of the Acquiring Fund will not be issued in connection with
the Transaction because the Acquired Fund currently has no Class R shares
outstanding.
COMPARISON OF INVESTMENT OBJECTIVES, STRATEGIES, POLICIES, AND RISKS
This section describes the investment objectives, principal investment
strategies, and the key investment policies of the Funds, and certain noteworthy
differences between such objectives, strategies, and policies, as well as the
risks associated with such objectives, strategies, and policies. For a complete
description of the Acquiring Fund's investment strategies, policies, and risks,
you should read the Fund Prospectus, which is included with this Proxy
Statement/Prospectus.
Are there any significant differences between the investment objectives of the
Acquired Fund and the Acquiring Fund?
The investment objective of the Acquired Fund is substantially similar, but
not identical, to the investment objective of the Acquiring Fund. The Acquired
Fund seeks capital appreciation whereas the Acquiring Fund seeks long-term
capital appreciation by investing in
19
equity securities of companies believed to have the potential for sustainable
free cash flow growth. Each Fund's investment objective is non-fundamental and
may be changed without prior shareholder approval.
Are there any significant differences between the investment strategies and
policies of the Acquired Fund and the Acquiring Fund?
The investment strategies and policies of the Acquired Fund are
substantially similar, but not identical, to the investment strategies and
policies of the Acquiring Fund. The Acquired Fund has adopted a non-fundamental
investment policy to invest, under normal circumstances, at least 80% of the
Acquired Fund's net assets in investments of large capitalization companies (the
"80% policy").
The Acquired Fund invests primarily in common stocks of growth-oriented
companies that DMC believes have long-term capital appreciation potential and
are expected to grow faster than the U.S. economy. For purposes of the Acquired
Fund, DMC currently defines large capitalization companies as those that, at the
time of investment, have market capitalizations within the range of market
capitalizations of companies in the Russell 1000(R) Growth Index. While the
market capitalization of companies in the Russell 1000(R) Growth Index ranged
from approximately $1.16 billion to approximately $482.94 billion as of August
31, 2007, DMC will normally invest in common stocks of companies with market
capitalizations of at least $3 billion at the time of purchase. With respect to
the Acquired Fund, using a bottom up approach, DMC seeks to select securities of
companies that it believes have attractive end market potential, dominant
business models, and strong free cash flow generation, whose securities are
attractively priced compared to their intrinsic value. DMC also considers a
company's operational efficiencies, management's plans for capital allocation,
and the company's shareholder orientation. In addition, the Acquired Fund may
engage in futures and options transactions and invest up to 20% of its net
assets in securities of foreign issuers. Also, the Acquired Fund may invest up
to 15% of its net assets in illiquid securities.
The Acquiring Fund has adopted a non-fundamental investment policy to
invest, under normal circumstances, at least 80% of the Acquiring Fund's net
assets in U.S. investments (the "80% policy"). Although the Acquiring Fund may
invest in companies of all sizes, the Fund generally focuses on medium- and
large-capitalization companies. In addition, the Acquiring Fund may also invest
up to 20% of the Acquiring Fund's assets in debt securities and bonds. The
Acquiring Fund may also invest in convertible bonds, preferred stocks, and
convertible preferred stocks, provided that these investments, when aggregated
with the Acquiring Fund's debt securities and bonds, do not exceed 35% of the
Acquiring Fund's assets. In addition, the Acquiring Fund may engage in futures
and options transactions and invest up to 20% of its net assets in securities of
foreign issuers. Also, the Acquiring Fund may invest up to 10% of its net assets
in illiquid securities.
The Acquiring Fund invests primarily in common stocks. The Fund invests
primarily in companies that DMC believes have long-term capital appreciation
potential and are expected to grow faster than the U.S. economy. Using a bottom
up approach, DMC seeks to select securities it believes have large-end market
potential, dominant business models, and strong free cash flow generation, whose
securities are attractively priced compared to their intrinsic value. DMC also
20
consider a company's operational efficiencies, management's plans for capital
allocation, and the company's shareholder orientation. All of these factors give
DMC insight into the outlook for a company, helping identify companies poised
for sustainable free cash flow growth. DMC believes that sustainable free cash
flow growth, if it occurs, may result in price appreciation for the company's
stock. Whether companies provide dividend income and the amount of income they
provide will not be a primary factor in the Acquiring Fund's selection
decisions. DMC may sell a security if it no longer believes that security is
likely to contribute to meeting the investment objective of the Acquiring Fund
or if there are other opportunities that appear more attractive.
Each Fund's 80% policy described above is not a fundamental investment
policy and can be changed without shareholder approval. However, shareholders
will be given notice at least 60 days prior to any such change.
The most significant differences between the Acquired Fund's and the
Acquiring Fund's stated investment policies are that: (1) the Acquired Fund must
invest at least 80% of the Acquired Fund's net assets in investments of large
capitalization companies; and (2) the Acquiring Fund must invest at least 80% of
its net assets in U.S. investments. Historically, however, both Funds have
utilized similar investment strategies. DMC seeks to select securities of
companies that it believes have attractive end market potential, dominant
business models, and strong free cash flow generation, whose securities are
attractively priced compared to their intrinsic value. It also considers a
company's operational efficiencies, management's plans for capital allocation,
and the company's shareholder orientation.
Finally, both Funds are managed by the same portfolio management team.
How do the fundamental investment restrictions of the Funds differ?
The Funds have adopted substantially similar fundamental investment
restrictions. A Fund may not change any of its fundamental investment
restrictions without a prior Majority Vote (as defined below) of its
shareholders. The Acquiring Fund's fundamental investment restrictions are
listed in the Acquiring Fund's Statement of Additional Information dated
February 28, 2007 related to the Fund Prospectus, which is incorporated by
reference into the Statement of Additional Information relating to this
Prospectus/Proxy Statement and is available upon request.
What are the risk factors associated with investments in the Funds?
Like all investments, an investment in each Fund involves risk. There is no
assurance that a Fund will meet its investment objective. A Fund's ability to
achieve its investment objective will depend, among other things, on the
portfolio managers' analytical and portfolio management skills. As with most
investments in mutual funds, the best results are achieved when investments in
the Funds are held for a number of years.
Investments in the Funds are subject to several risks, which are summarized
below.
21
Market risk. Market risk is the risk that all or a majority of the
securities in a certain market - like the stock or bond market - will decline in
value because of economic conditions, future expectations, or investor
confidence.
Industry and security risk. Industry risk is the risk that the value of the
securities in a particular industry will decline because of changing
expectations for the performance of that industry. Security risk is the risk
that the value of an individual stock or bond will decline because of changing
expectations for the performance of the individual company issuing the stock or
bond.
Futures and options risk. Futures and options risk is the possibility that
a Fund may experience a loss if it employs an options or futures strategy
related to a security or a market index and that security or index moves in the
opposite direction from what DMC anticipated. Futures and options also involve
additional expenses, which could reduce any benefit or increase any loss that a
Fund gains from using the strategy.
Foreign risk. Foreign risk is the risk that foreign securities may be
adversely affected by political instability, changes in currency exchange rates,
foreign economic conditions, or inadequate regulatory and accounting standards.
Liquidity risk. Liquidity risk is the possibility that securities cannot be
readily sold, within seven days, at approximately the price at which a Fund has
valued them.
Credit risk. Credit risk is the possibility that a bond's issuer (or an
entity that insures the bond) will be unable to make timely payments of interest
and principal. Bonds rated below investment grade are particularly subject to
this risk.
What vote is necessary to approve the Plan?
Required Vote. Provided that "Quorum" requirements (as defined below) have
been satisfied, the Plan must be approved by a Majority Vote, meaning the
affirmative vote of the lesser of: (1) more than 50% of the outstanding voting
securities of the Acquired Fund; or (2) 67% or more of the voting securities of
the Acquired Fund present at the Meeting if the holders of more than 50% of the
Acquired Fund's outstanding voting securities are present or represented by
proxy. With respect to the Acquired Fund, "Quorum" means one-third (33 1/3%) of
the shares entitled to vote at the Meeting are present in person or represented
by proxy at the Meeting.
MORE INFORMATION ABOUT THE FUNDS
Administration and Transfer Agency Services. Delaware Service Company, Inc.
("DSC"), 2005 Market Street, Philadelphia, Pennsylvania 19103, an affiliate of
DMC, acts as the administrator and shareholder servicing, dividend disbursing,
and transfer agent for each Fund and for other mutual funds in the Delaware
Companies. For its transfer agency, shareholder servicing, and dividend
disbursing services, DSC is paid an annual per account charge of $27.00 for each
open account and $10.00 for each closed account on its records and each account
held
22
on a sub-accounting system maintained by firms that hold accounts on an omnibus
basis. These fees are charged to each Fund on a pro rata basis.
Custodial Services. Mellon Bank, N.A. ("Mellon"), is the custodian of the
securities and other assets of the Funds. The main office of Mellon is One
Mellon Center, Pittsburgh, PA 15285.
Fund Accounting Services. DSC currently also provides fund accounting
services to each Fund. Those services include performing or overseeing all
functions related to calculating each Fund's net asset value and providing all
financial reporting services, regulatory compliance testing and other related
accounting services.
Additional Information. More information about the Acquiring Fund is
included in: (i) the Fund Prospectus, which is included with and considered a
part of this Proxy Statement/Prospectus; (ii) its Statement of Additional
Information dated February 28, 2007, as amended to date, related to the Fund
Prospectus; (iii) the Statement of Additional Information dated [October 24,
2007] (relating to this Proxy Statement/Prospectus), which is incorporated by
reference herein; (iv) the Acquiring Fund's annual report to shareholders for
the year ended October 31, 2006 (and October 31, 2007, when available) ("Annual
Report"); and (v) the Acquiring Fund Semiannual Report, which is included with
and considered a part of this Proxy Statement/Prospectus. You may request free
copies of the Statements of Additional Information (including any supplements),
the Annual Report, and/or Acquiring Fund Semiannual Report, which have been (or
will be) filed with the SEC, by calling 800 523-1918 or by writing to the Trust
at Attention: Account Services, P.O. Box 219656, Kansas City, MO 64121-9656 by
regular mail or 430 W. 7th Street, Kansas City, MO 64105 by overnight courier
service.
This Proxy Statement/Prospectus, which constitutes part of a Registration
Statement filed by the Acquiring Fund with the SEC under the Securities Act of
1933, as amended, omits certain information contained in such Registration
Statement. Reference is hereby made to the Registration Statement and to the
exhibits and amendments thereto for further information with respect to the
Acquiring Fund and the shares it offers. Statements contained herein concerning
the provisions of documents are necessarily summaries of such documents, and
each such statement is qualified in its entirety by reference to the copy of the
applicable document filed with the SEC.
Each Fund also files proxy materials, reports, and other information with
the SEC in accordance with the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act. These
materials can be inspected and copied at the public reference facilities
maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549.
Also, copies of such material can be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, SEC, Washington, D.C.
20549, at prescribed rates or from the SEC's Web site at www.sec.gov. To request
information regarding the Funds, you may also send an e-mail to the SEC at
publicinfo@sec.gov.
VOTING INFORMATION
23
How will the shareholder voting be handled?
Only shareholders of record of the Acquired Fund at the close of business
on September 21, 2007 (the "Record Date"), will be entitled to notice of and to
vote at the Meeting on the matters described in this Proxy Statement/Prospectus,
and will be entitled to one vote for each full share and a fractional vote for
each fractional share that they hold. If sufficient votes to approve the
Proposal are not received by the date of the Meeting, the Meeting may be
adjourned to permit further solicitations of proxies. A majority of the votes
cast by shareholders of the Acquired Fund present in person or by proxy at the
Meeting (whether or not sufficient to constitute a Quorum) may adjourn the
Meeting. The Meeting may also be adjourned by the Chairperson of the Meeting. It
is anticipated that the persons named as proxies on the enclosed proxy cards
will use the authority granted to them to vote on adjournment in their
discretion.
Abstentions and broker non-votes will be included for purposes of
determining whether a Quorum is present at the Meeting for a particular matter,
and will have the same effect as a vote "against" the Proposal. Broker non-votes
are proxies from brokers or nominees indicating that such persons have not
received voting instructions from the beneficial owner or other person entitled
to vote shares on a particular matter with respect to which the brokers or
nominees do not have discretionary power. The Acquired Fund does not expect to
receive any broker non-votes.
How do I ensure my vote is accurately recorded?
You may attend the Meeting and vote in person. You may also vote by
completing, signing, and returning the enclosed proxy card in the enclosed
postage paid envelope, or by telephone or through the Internet. If you return
your signed proxy card or vote by telephone or through the Internet, your vote
will be officially cast at the Meeting by the persons appointed as proxies. A
proxy card is, in essence, a ballot. If you simply sign and date the proxy card
but give no voting instructions, your shares will be voted in favor of the
Proposal and in accordance with the views of management upon any unexpected
matters that come before the Meeting or adjournment of the Meeting. If your
shares are held of record by a broker/dealer and you wish to vote in person at
the Meeting, you should obtain a legal proxy from your broker of record and
present it at the Meeting.
May I revoke my proxy?
Shareholders may revoke their proxy at any time before it is voted by
sending a written notice to Delaware Group Equity Funds IV expressly revoking
their proxy, by signing and forwarding to Delaware Group Equity Funds IV a
later-dated proxy, or by attending the Meeting and voting in person. If your
shares are held in the name of your broker, you will have to make arrangements
with your broker to revoke a previously executed proxy.
What other matters will be voted upon at the Meeting?
The Board of Delaware Group Equity Funds IV does not intend to bring any
matters before the Meeting with respect to the Acquired Fund other than those
described in this Proxy
24
Statement/Prospectus. The Board of Delaware Group Equity Funds IV is not aware
of any other matters to be brought before the Meeting with respect to the
Acquired Fund by others. If any other matter legally comes before the Meeting,
proxies for which discretion has been granted will be voted in accordance with
the views of management.
Who is entitled to vote?
Only shareholders of record on the Record Date will be entitled to vote at
the Meeting. There were [__________] outstanding shares of the Acquired Fund
entitled to vote as of the Record Date.
What other solicitations will be made?
This proxy solicitation is being made by the Board of Delaware Group Equity
Funds IV for use at the Meeting. The cost of this proxy solicitation will be
shared as set forth below. In addition to solicitation by mail, solicitations
also may be made by advertisement, telephone, telegram, facsimile transmission
or other electronic media, or personal contacts. Delaware Group Equity Funds IV
will request broker/dealer firms, custodians, nominees, and fiduciaries to
forward proxy materials to the beneficial owners of the shares of record.
Delaware Group Equity Funds IV may reimburse broker/dealer firms, custodians,
nominees, and fiduciaries for their reasonable expenses incurred in connection
with such proxy solicitation. In addition to solicitations by mail, officers and
employees of Delaware Group Equity Funds IV, Delaware Management Business Trust
and their affiliates, without extra pay, may conduct additional solicitations by
telephone, telecopy, and personal interviews. Delaware Group Equity Funds IV has
engaged Computershare Fund Services, Inc. ("Computershare") to solicit proxies
from brokers, banks, other institutional holders and individual shareholders at
an anticipated cost of $6,652, including out of pocket expenses, which will be
borne as described below. Fees and expenses may be greater depending on the
effort necessary to obtain shareholder votes. Delaware Group Equity Funds IV has
also agreed to indemnify Computershare against certain liabilities and expenses,
including liabilities under the federal securities laws. Delaware Group Equity
Funds IV expects that the solicitations will be primarily by mail, but also may
include telephone, telecopy, or oral solicitations.
As the Meeting date approaches, certain shareholders of the Acquired Fund
may receive a telephone call from a representative of Computershare if their
votes have not yet been received. Proxies that are obtained telephonically will
be recorded in accordance with the procedures described below. These procedures
are designed to ensure that both the identity of the shareholder casting the
vote and the voting instructions of the shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the Computershare
representative is required to ask for each shareholder's full name and address,
or the zip code or employer identification number, and to confirm that the
shareholder has received the proxy materials in the mail. If the shareholder is
a corporation or other entity, the Computershare representative is required to
ask for the person's title and confirmation that the person is authorized to
direct the voting of the shares. If the information solicited agrees with the
information provided to
25
Computershare, then the Computershare representative has the responsibility to
explain the process, read the Proposal listed on the proxy card and ask for the
shareholder's instructions on the Proposal. Although the Computershare
representative is permitted to answer questions about the process, he or she is
not permitted to recommend to the shareholder how to vote, other than to read
any recommendation set forth in this Proxy Statement/Prospectus. Computershare
will record the shareholder's instructions on the card. Within 72 hours, the
shareholder will be sent a letter or mailgram to confirm his or her vote and
asking the shareholder to call Computershare immediately if his or her
instructions are not correctly reflected in the confirmation.
Who will pay the expenses of the Proposal?
The total costs of the Transaction are estimated to be approximately
$88,897. The costs of the Transaction, including the costs of soliciting proxies
in connection with the Meeting, will be shared by the following parties in the
percentages indicated: 30% by the Acquired Fund, 30% by the Acquiring Fund, and
40% by DMC.
How do I submit a shareholder proposal?
Delaware Group Equity Funds IV is not required to, and does not intend to,
hold regular annual shareholders' meetings. A shareholder wishing to submit a
proposal for consideration for inclusion in a proxy statement for the next
shareholders' meeting should send his or her written proposal to the offices of
Delaware Group Equity Funds IV, directed to the attention of its Secretary, at
the address of its principal executive office printed on the first page of this
Proxy Statement/Prospectus, so that it is received within a reasonable time
before any such meeting. The inclusion and/or presentation of any such proposal
is subject to the applicable requirements of the proxy rules under the 1934 Act.
Submission of a proposal by a shareholder does not guarantee that the proposal
will be included in Delaware Group Equity Funds IV's proxy statement or
presented at the meeting.
PRINCIPAL HOLDERS OF SHARES
[On the Record Date, the officers and Trustees of each Trust, as a group,
owned less than 1% of the outstanding voting shares of any Fund, or class
thereof.
To the best knowledge of the Trusts, as of the Record Date, no person,
except as set forth in the table at Exhibit B, owned of record 5% or more of the
outstanding shares of any class of the Acquired Fund or the Acquiring Fund.
Except as noted therein, the Trusts have no knowledge of beneficial ownership.]
26
EXHIBITS TO
PROXY STATEMENT/PROSPECTUS
Exhibit
A Form of Agreement and Plan of Reorganization between Delaware Group Equity
Funds IV, on behalf of the Large Cap Growth Fund, and Delaware Group
Adviser Funds, on behalf of the U.S. Growth Fund
B Principal Holders of Shares
OTHER DOCUMENTS INCLUDED WITH
THIS PROXY STATEMENT/PROSPECTUS
o Prospectus of U.S. Growth Fund dated February 28, 2007, as
supplemented to date.
o Semiannual Report of U.S. Growth Fund for the period ended April 30,
2007.
27
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), made as of
this ____ day of _____ 200_, by and between Delaware Group Adviser Funds, a
statutory trust created under the laws of the State of Delaware, with its
principal place of business at 2005 Market Street, Philadelphia, Pennsylvania
19103, on behalf of its series, Delaware U.S. Growth Fund ("Acquiring Fund"),
and Delaware Group Equity Funds IV, a statutory trust created under the laws of
the State of Delaware, with its principal place of business also at 2005 Market
Street, Philadelphia, Pennsylvania 19103, on behalf of its series, Delaware
Large Cap Growth Fund ("Acquired Fund").
PLAN OF REORGANIZATION
The reorganization (hereinafter referred to as the "Plan") will consist of:
(i) the acquisition by Delaware Group Adviser Funds on behalf of Acquiring Fund
of substantially all of the property, assets and goodwill of Acquired Fund in
exchange solely for (a) shares of beneficial interest, without par value, of
Acquiring Fund - Class A ("Acquiring Fund Class A Shares"), (b) shares of
beneficial interest, without par value, of Acquiring Fund - Class B ("Acquiring
Fund Class B Shares"), (c) shares of beneficial interest, without par value, of
Acquiring Fund - Class C ("Acquiring Fund Class C Shares"), and (d) shares of
beneficial interest, without par value, of Acquiring Fund - Institutional Class
("Acquiring Fund Institutional Class Shares") ; (ii) the distribution of (a)
Acquiring Fund Class A shares to the holders of Acquired Fund - Class A shares
("Acquired Fund Class A Shares"), (b) Acquiring Fund Class B Shares to the
holders of Acquired Fund - Class B shares ("Acquired Fund Class B Shares"), (c)
Acquiring Fund Class C Shares to the holders of Acquired Fund - Class C shares
("Acquired Fund Class C Shares"), and (d) Acquiring Fund Institutional Class
shares to the holders of Acquired Fund - Institutional Class shares ("Acquired
Fund Institutional Class Shares"), according to their respective interests in
complete liquidation of Acquired Fund; and (iii) the dissolution of Acquired
Fund as soon as practicable after the closing (as referenced in Section 3
hereof, hereinafter called the "Closing"), all upon and subject to the terms and
conditions of this Agreement hereinafter set forth.
AGREEMENT
In order to consummate the Plan and in consideration of the premises
and of the covenants and agreements hereinafter set forth, and intending to be
legally bound, the parties hereto covenant and agree as follows:
1. Sale and Transfer of Assets, Liquidation and Dissolution of Acquired
Fund
(a) Subject to the terms and conditions of this Agreement, and in
reliance on the representations and warranties of Delaware Group Adviser Funds
herein contained, and in
A-1
consideration of the delivery by Delaware Group Adviser Funds of the number of
its shares of beneficial interest of Acquiring Fund hereinafter provided,
Delaware Group Equity Funds IV, on behalf of Acquired Fund, agrees that it will
sell, convey, transfer and deliver to Delaware Group Adviser Funds, on behalf of
Acquiring Fund, at the Closing provided for in Section 3, all of the then
existing assets of Acquired Fund as of the close of business (which hereinafter
shall be, unless otherwise noted, the regular close of business of the New York
Stock Exchange, Inc. ("NYSE")) ("Close of Business") on the valuation date (as
defined in Section 3 hereof, hereinafter called the "Valuation Date"), free and
clear of all liens, encumbrances, and claims whatsoever (other than
shareholders' rights of redemption and such restrictions as might arise under
the Securities Act of 1933, as amended (the "1933 Act"), with respect to
privately placed or otherwise restricted securities that Acquired Fund may have
acquired in the ordinary course of business), except for cash, bank deposits, or
cash equivalent securities in an estimated amount necessary (1) to pay Acquired
Fund's costs and expenses of carrying out this Agreement (including, but not
limited to, fees of counsel and accountants, and expenses of its liquidation and
dissolution contemplated hereunder), which costs and expenses shall be
established on the books of Acquired Fund as liability reserves, (2) to
discharge all of Acquired Fund's Liabilities (as defined below) on its books at
the Close of Business on the Valuation Date including, but not limited to, its
income dividends and capital gains distributions, if any, payable for any period
prior to, and through, the Close of Business on the Valuation Date, and (3) to
pay such contingent liabilities as the trustees of Delaware Group Equity Funds
IV shall reasonably deem to exist against Acquired Fund, if any, at the Close of
Business on the Valuation Date, for which contingent and other appropriate
liability reserves shall be established on the books of Acquired Fund
(hereinafter "Net Assets"). Delaware Group Equity Funds IV, on behalf of
Acquired Fund, shall also retain any and all rights that it may have over and
against any person that may have accrued up to and including the Close of
Business on the Valuation Date. Delaware Group Equity Funds IV agrees to use
commercially reasonable efforts to identify all of Acquired Fund's liabilities,
debts, obligations and duties of any nature, whether accrued, absolute,
contingent or otherwise ("Liabilities") prior to the Valuation Date and to
discharge all such known Liabilities on or prior to the Valuation Date. In no
event will Acquiring Fund assume or otherwise be responsible for any Liabilities
of Acquired Fund.
(b) Subject to the terms and conditions of this Agreement, and in
reliance on the representations and warranties of Delaware Group Equity Funds IV
on behalf of Acquired Fund herein contained, and in consideration of such sale,
conveyance, transfer, and delivery, Delaware Group Adviser Funds agrees at the
Closing to deliver to Delaware Group Equity Funds IV, on behalf of Acquired
Fund: (i) the number of Acquiring Fund Class A Shares determined by dividing the
net asset value per share of Acquired Fund Class A Shares as of the Close of
Business on the Valuation Date by the net asset value per share of Acquiring
Fund Class A Shares as of Close of Business on the Valuation Date, and
multiplying the result by the number of outstanding Acquired Fund Class A Shares
as of Close of Business on the Valuation Date; (ii) the number of Acquiring Fund
Class B Shares determined by dividing the net asset value per share of Acquired
Fund Class B Shares as of Close of Business on the Valuation Date by the net
asset value per share of Acquiring Fund Class B Shares as of Close of Business
on the Valuation Date, and multiplying the result by the number of outstanding
Acquired Fund Class B Shares as of Close of Business on the Valuation Date;
(iii) the number of Acquiring Fund Class C Shares determined by dividing the net
asset value per share of Acquired Fund
A-2
Class C Shares as of Close of Business on the Valuation Date by the net asset
value per share of Acquiring Fund Class C Shares as of Close of Business on the
Valuation Date, and multiplying the result by the number of outstanding Acquired
Fund Class C Shares as of Close of Business on the Valuation Date; and (iv) the
number of Acquiring Fund Institutional Class Shares determined by dividing the
net asset value per share of Acquired Fund Institutional Class Shares as of
Close of Business on the Valuation Date by the net asset value per share of
Acquiring Fund Institutional Class Shares as of Close of Business on the
Valuation Date, and multiplying the result by the number of outstanding Acquired
Fund Institutional Class Shares as of Close of Business on the Valuation Date.
All such values shall be determined in the manner and as of the time set forth
in Section 2 hereof.
(c) As soon as practicable following the Closing, Delaware Group
Equity Funds IV shall dissolve Acquired Fund and distribute pro rata to Acquired
Fund's shareholders of record as of the Close of Business on the Valuation Date,
the shares of beneficial interest of Acquiring Fund received by Acquired Fund
pursuant to this Section 1. Such dissolution and distribution shall be
accomplished by the establishment of accounts on the share records of Acquiring
Fund of the type and in the amounts due such shareholders pursuant to this
Section 1 based on their respective holdings of shares of Acquired Fund as of
the Close of Business on the Valuation Date. Fractional shares of beneficial
interest of Acquiring Fund shall be carried to the third decimal place. No
certificates representing shares of beneficial interest of Acquiring Fund will
be issued to shareholders of Acquired Fund shares irrespective of whether such
shareholders hold their shares in certificated form.
(d) At the Closing, each outstanding certificate that, prior to
Closing, represented shares of beneficial interest of Acquired Fund, shall be
cancelled and shall no longer evidence ownership thereof.
(e) At the Closing, each shareholder of record of Acquired Fund as of
the record date (the "Distribution Record Date") with respect to any unpaid
dividends and other distributions that were declared prior to the Closing,
including any dividend or distribution declared pursuant to Section 9(e) hereof,
shall have the right to receive such unpaid dividends and distributions with
respect to the shares of Acquired Fund that such person had on such Distribution
Record Date.
2. Valuation
(a) The value of Acquired Fund's Net Assets to be acquired by
Acquiring Fund hereunder shall be computed as of Close of Business on the
Valuation Date using the valuation procedures set forth in Acquired Fund's
currently effective prospectus and statement of additional information.
(b) The net asset value of Acquiring Fund Class A Shares, Acquiring Fund
Class B Shares, Acquiring Fund Class C Shares, and Acquiring Fund Institutional
Class Shares shall be determined to the nearest full cent as of the Close of
A-3
Business on the Valuation Date using the valuation procedures set forth in
Acquiring Fund's currently effective prospectus and statement of additional
information.
(c) The net asset value of Acquired Fund Class A Shares, Acquired Fund
Class B Shares, Acquired Fund Class C Shares, and Acquired Fund Institutional
Class Shares shall be determined to the nearest full cent as of the Close of
Business on the Valuation Date, using the valuation procedures as set forth in
Acquired Fund's currently effective prospectus and statement of additional
information.
3. Closing and Valuation Date
The Valuation Date shall be __________, 200_, or such later date as the
parties may mutually agree. The Closing shall take place at the principal office
of Delaware Group Adviser Funds, 2005 Market Street, Philadelphia, Pennsylvania
19103 at approximately _:00 _.m., Eastern Time, on the first business day
following the Valuation Date. Notwithstanding anything herein to the contrary,
in the event that on the Valuation Date (a) the NYSE shall be closed to trading
or trading thereon shall be restricted or (b) trading or the reporting of
trading on such exchange or elsewhere shall be disrupted so that, in the
judgment of Delaware Group Adviser Funds or Delaware Group Equity Funds IV,
accurate appraisal of the value of the net assets of Acquired Fund or Acquiring
Fund is impracticable, the Valuation Date shall be postponed until the first
business day after the day when trading shall have been fully resumed without
restriction or disruption, reporting shall have been restored and accurate
appraisal of the value of the net assets of Acquired Fund and Acquiring Fund is
practicable in the judgment of Delaware Group Adviser Funds and Delaware Group
Equity Funds IV. Delaware Group Equity Funds IV shall have provided for delivery
as of the Closing of those Net Assets of Acquired Fund to be transferred to
Delaware Group Adviser Funds' Custodian, Mellon Bank, One Mellon Center,
Pittsburgh, PA 15285. Also, Delaware Group Equity Funds IV shall deliver at the
Closing a list (which may be in electronic form) of names and addresses of the
shareholders of record of its Acquired Fund shares, and the number of full and
fractional shares of beneficial interest of such classes owned by each such
shareholder, indicating thereon which such shares are represented by outstanding
certificates and which by book-entry accounts, all as of the Close of Business
on the Valuation Date, certified by its transfer agent, or by its President or
Vice-President to the best of their knowledge and belief. Delaware Group Adviser
Funds shall provide evidence satisfactory to Delaware Group Equity Funds IV in
such manner as Delaware Group Equity Funds IV may request that such shares of
beneficial interest of Acquiring Fund have been registered in an open account on
the books of Acquiring Fund.
4. Representations and Warranties by Delaware Group Equity Funds IV
Delaware Group Equity Funds IV represents and warrants to Delaware Group
Adviser Funds that:
(a) Delaware Group Equity Funds IV is a statutory trust created under
the laws of the State of Delaware on December 17, 1999, and is validly existing
and in good standing under the laws of that State. Delaware Group Equity Funds
IV, of which Acquired Fund is a separate series, is duly registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company. Such registration
A-4
is in full force and effect as of the date hereof and will be in full force and
effect as of the Closing.
(b) Delaware Group Equity Funds IV is authorized to issue an unlimited
number of shares of beneficial interest of Acquired Fund, with no par value.
Each outstanding share of Acquired Fund is validly issued, fully paid,
non-assessable and has full voting rights.
(c) The financial statements appearing in Acquired Fund's Annual
Report to Shareholders for the fiscal year ended September 30, 2006, audited by
Ernst & Young, LLP, copies of which have been delivered to Delaware Group
Adviser Funds, and any unaudited financial statements since that date, copies of
which may be furnished to Delaware Group Adviser Funds, fairly present the
financial position of Acquired Fund as of the date indicated, and the results of
its operations for the period indicated, in conformity with generally accepted
accounting principles applied on a consistent basis.
(d) The books and records of Acquired Fund, including FIN 48 work
papers and supporting statements, made available to Delaware Group Adviser Funds
and/or its counsel are true and correct in all material respects and contain no
material omissions with respect to the business and operations of Acquired Fund.
(e) The statement of assets and liabilities to be furnished by
Delaware Group Equity Funds IV as of the Close of Business on the Valuation Date
for the purpose of determining the number of shares of beneficial interest of
Acquiring Fund to be issued pursuant to Section 1 hereof will accurately reflect
the Net Assets of Acquired Fund and outstanding shares of beneficial interest,
as of such date, in conformity with generally accepted accounting principles
applied on a consistent basis.
(f) At the Closing, Delaware Group Equity Funds IV, on behalf of
Acquired Fund, will have good and marketable title to all of the securities and
other assets shown on the statement of assets and liabilities referred to in
subsection (e) above, free and clear of all liens or encumbrances of any nature
whatsoever except such restrictions as might arise under the 1933 Act with
respect to privately placed or otherwise restricted securities that it may have
acquired in the ordinary course of business and such imperfections of title or
encumbrances as do not materially detract from the value or use of the assets
subject thereto, or materially affect title thereto.
(g) Delaware Group Equity Funds IV has the necessary trust power and
trust authority to conduct its business and the business of Acquired Fund as
such businesses are now being conducted.
(h) Delaware Group Equity Funds IV is not a party to or obligated
under any provision of its Agreement and Declaration of Trust, By-Laws, or any
material contract or any other material commitment or obligation, and is not
subject to any order or decree that would be violated by its execution of or
performance under this Agreement.
(i) Delaware Group Equity Funds IV has full trust power and trust
authority to enter into and perform its obligations under this Agreement,
subject to approval of this Agreement by Acquired Fund's shareholders. Except as
provided in the immediately preceding sentence, the execution, delivery and
performance of this Agreement have been validly
A-5
authorized, and this Agreement constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms, subject as to
enforcement to the effect of bankruptcy, insolvency, reorganization, arrangement
among creditors, moratorium, fraudulent transfer or conveyance, and other
similar laws of general applicability relating to or affecting creditor's rights
and to general equity principles.
(j) Neither Delaware Group Equity Funds IV nor Acquired Fund is under
the jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Internal Revenue Code of 1986, as amended (the
"Code").
(k) Delaware Group Equity Funds IV does not have any unamortized or
unpaid organizational fees or expenses.
(l) Delaware Group Equity Funds IV has elected to treat Acquired Fund
as a regulated investment company ("RIC") for federal income tax purposes under
Part I of Subchapter M of the Code, Acquired Fund is a "fund" as defined in
Section 851(g)(2) of the Code, has qualified as a RIC for each taxable year
since its inception and will qualify as a RIC as of the Closing, and
consummation of the transactions contemplated by the Plan will not cause it to
fail to be qualified as a RIC as of the Closing.
5. Representations and Warranties by Delaware Group Adviser Funds
Delaware Group Adviser Funds represents and warrants to Delaware Group
Equity Funds IV that:
(a) Delaware Group Adviser Funds is a statutory trust created under
the laws of the State of Delaware on November 23, 1999, and is validly existing
and in good standing under the laws of that State. Delaware Group Adviser Funds,
of which Acquiring Fund is a separate series of shares, is duly registered under
the 1940 Act as an open-end, management investment company, such registration is
in full force and effect as of the date hereof and will be in full force and
effect as of the Closing.
(b) Delaware Group Adviser Funds is authorized to issue an unlimited
number of shares of beneficial interest, without par value, of Acquiring Fund.
Each outstanding share of Acquiring Fund is fully paid, non-assessable and has
full voting rights. The shares of beneficial interest of Acquiring Fund to be
issued pursuant to Section 1 hereof will, upon their issuance, be validly issued
and fully paid and non-assessable and have full voting rights.
(c) At the Closing, each class of shares of beneficial interest of
Acquiring Fund to be issued pursuant to this Agreement will be eligible for
offering to the public in those states of the United States and jurisdictions in
which the corresponding class of shares of Acquired Fund are presently eligible
for offering to the public, and there are an unlimited number of shares
registered under the 1933 Act such that there is a sufficient number of such
shares to permit the transfers contemplated by this Agreement to be consummated.
(d) The statement of assets and liabilities of Acquiring Fund to be
furnished by Delaware Group Adviser Funds as of the Close of Business on the
Valuation Date for the
A-6
purpose of determining the number of shares of beneficial interest of Acquiring
Fund to be issued pursuant to Section 1 hereof will accurately reflect the net
assets of Acquiring Fund and outstanding shares of beneficial interest, as of
such date, in conformity with generally accepted accounting principles applied
on a consistent basis.
(e) At the Closing, Delaware Group Adviser Funds will have good and
marketable title to all of the securities and other assets shown on the
statement of assets and liabilities referred to in subsection (d) above, free
and clear of all liens or encumbrances of any nature whatsoever except such
restrictions as might arise under the 1933 Act with respect to privately placed
or otherwise restricted securities that it may have acquired in the ordinary
course of business and such imperfections of title or encumbrances as do not
materially detract from the value or use of the assets subject thereto, or
materially affect title thereto.
(f) Delaware Group Adviser Funds has the necessary trust power and
trust authority to conduct its business and the business of Acquiring Fund as
such businesses are now being conducted.
(g) Delaware Group Adviser Funds is not a party to or obligated under
any provision of its Agreement and Declaration of Trust, By-Laws, or any
material contract or any other material commitment or obligation, and is not
subject to any order or decree that would be violated by its execution of or
performance under this Agreement.
(h) Delaware Group Adviser Funds has full trust power and trust
authority to enter into and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement have been validly
authorized, and this Agreement constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms, subject, as to
enforcement, to the effect of bankruptcy, insolvency reorganization,
arrangements among creditors, moratorium, fraudulent transfer or conveyance, and
other similar laws of general applicability relating to or affecting creditors
rights and to general equity principles.
(i) Neither Delaware Group Adviser Funds nor Acquiring Fund is under
the jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
(j) The books and records of Acquiring Fund, including FIN 48 work
papers and supporting statements, made available to Delaware Group Equity Funds
IV and/or its counsel are true and correct in all material respects and contain
no material omissions with respect to the business and operations of Acquiring
Fund.
(k) Delaware Group Adviser Funds has elected to treat Acquiring Fund
as a RIC for federal income tax purposes under Part I of Subchapter M of the
Code, Acquiring Fund is a "fund" as defined in Section 851(g)(2) of the Code,
has qualified as a RIC for each taxable year since its inception and will
qualify as a RIC as of the Closing, and consummation of the transactions
contemplated by the Plan will not cause it to fail to be qualified as a RIC as
of the Closing.
A-7
6. Representations and Warranties by Delaware Group Equity Funds IV and
Delaware Group Adviser Funds
Delaware Group Equity Funds IV and Delaware Group Adviser Funds each
represents and warrants to the other that:
(a) Except as discussed in its currently effective prospectus, there
are no legal, administrative or other proceedings or investigations against it,
or, to its knowledge, threatened against it, that would materially affect its
financial condition or its ability to consummate the transactions contemplated
by this Agreement. It is not charged with or, to its knowledge, threatened with,
any violation or investigation of any possible violation of any provisions of
any federal, state or local law or regulation or administrative ruling relating
to any aspect of its business.
(b) There are no known actual or proposed deficiency assessments with
respect to any taxes payable by it.
(c) It has duly and timely filed, on behalf of Acquired Fund or
Acquiring Fund, as appropriate, all Tax (as defined below) returns and reports
(including information returns), which are required to be filed by such Acquired
Fund or Acquiring Fund, and all such returns and reports accurately state the
amount of Tax owed for the periods covered by the returns, or, in the case of
information returns, the amount and character of income required to be reported
by such Acquired Fund or Acquiring Fund. On behalf of Acquired Fund or Acquiring
Fund, as appropriate, it has paid or made provision and properly accounted for
all Taxes (as defined below) due or properly shown to be due on such returns and
reports. The amounts set up as provisions for Taxes in the books and records of
Acquired Fund or Acquiring Fund, as appropriate, as of the Close of Business on
the Valuation Date will, to the extent required by generally accepted accounting
principles, be sufficient for the payment of all Taxes of any kind, whether
accrued, due, absolute, contingent or otherwise, which were or which may be
payable by Acquired Fund or Acquiring Fund, as appropriate, for any periods or
fiscal years prior to and including the Close of Business on the Valuation Date,
including all Taxes imposed before or after the Close of Business on the
Valuation Date that are attributable to any such period or fiscal year. No
return filed by it, on behalf of Acquired Fund or Acquiring Fund, as
appropriate, is currently being audited by the Internal Revenue Service or by
any state or local taxing authority. As used in this Agreement, "Tax" or "Taxes"
means all federal, state, local and foreign (whether imposed by a country or
political subdivision or authority thereunder) income, gross receipts, excise,
sales, use, value added, employment, franchise, profits, property, ad valorem or
other taxes, stamp taxes and duties, fees, assessments or charges, whether
payable directly or by withholding, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority (foreign or domestic) with respect thereto. To its knowledge, there
are no levies, liens or encumbrances relating to Taxes existing, threatened or
pending with respect to the assets of Acquired Fund or Acquiring Fund, as
appropriate.
(d) All information provided to Delaware Group Equity Funds IV by
Delaware Group Adviser Funds, and by Delaware Group Equity Funds IV to Delaware
Group Adviser Funds, for inclusion in, or transmittal with, the Combined Proxy
Statement and Prospectus with respect to this Agreement pursuant to which
approval of Acquired Fund's shareholders will be sought, shall not contain any
untrue statement of a material fact, or omit to
A-8
state a material fact required to be stated therein in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(e) Except in the case of Delaware Group Equity Funds IV with respect
to the approval of Acquired Fund's shareholders of this Agreement, no consent,
approval, authorization or order of any court or governmental authority, or of
any other person or entity, is required for the consummation of the transactions
contemplated by this Agreement, except as may be required by the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940 Act, or
state securities laws or Delaware statutory trust laws (including, in the case
of each of the foregoing, the rules and regulations thereunder).
7. Covenants of Delaware Group Equity Funds IV
(a) Delaware Group Equity Funds IV covenants to operate the business
of Acquired Fund as presently conducted between the date hereof and the Closing.
(b) Delaware Group Equity Funds IV undertakes that Acquired Fund will
not acquire the shares of beneficial interest of Acquiring Fund for the purpose
of making distributions thereof other than to Acquired Fund's shareholders.
(c) Delaware Group Equity Funds IV covenants that by the Closing, all
of Acquired Fund's federal and other Tax returns and reports required by law to
be filed on or before such date shall have been filed and all federal and other
Taxes shown as due on said returns either shall have been paid or adequate
liability reserves shall have been provided for the payment of such Taxes.
(d) Delaware Group Equity Funds IV will at the Closing provide
Delaware Group Adviser Funds with:
(1) A statement of the respective tax basis of all investments to
be transferred by Acquired Fund to Acquiring Fund.
(2) A copy (which may be in electronic form) of the shareholder
ledger accounts including, without limitation, the name, address and
taxpayer identification number of each shareholder of record, the
number of shares of beneficial interest held by each shareholder, the
dividend reinvestment elections applicable to each shareholder, and
the backup withholding and nonresident alien withholding
certifications, notices or records on file with Acquired Fund with
respect to each shareholder, for all of the shareholders of record of
Acquired Fund's shares as of the Close of Business on the Valuation
Date, who are to become holders of Acquiring Fund as a result of the
transfer of assets that is the subject of this Agreement, certified by
its transfer agent or its President or its Vice-President to the best
of their knowledge and belief.
(3) All FIN 48 work papers and supporting statements pertaining
to the Acquired Fund.
A-9
(e) The Board of Trustees of Delaware Group Equity Funds IV shall
call, and Delaware Group Equity Funds IV shall hold, a Special Meeting of
Acquired Fund's shareholders to consider and vote upon this Agreement (the
"Special Meeting") and Delaware Group Equity Funds IV shall take all other
actions reasonably necessary to obtain approval of the transactions contemplated
herein. Delaware Group Equity Funds IV agrees to mail to each shareholder of
record entitled to vote at the Special Meeting at which action on this Agreement
is to be considered, in sufficient time to comply with requirements as to notice
thereof, a Combined Proxy Statement and Prospectus that complies in all material
respects with the applicable provisions of Section 14(a) of the 1934 Act and
Section 20(a) of the 1940 Act, and the rules and regulations promulgated
thereunder.
(f) Delaware Group Equity Funds IV shall supply to Delaware Group
Adviser Funds, at the Closing, the statement of the assets and liabilities
described in Section 4(e) of this Agreement in conformity with the requirements
described in such Section.
8. Covenants of Delaware Group Adviser Funds
(a) Delaware Group Adviser Funds covenants that the shares of
beneficial interest of Acquiring Fund to be issued and delivered to Acquired
Fund pursuant to the terms of Section 1 hereof shall have been duly authorized
as of the Closing and, when so issued and delivered, shall be registered under
the 1933 Act, validly issued, and fully paid and non-assessable, and no
shareholder of Acquiring Fund shall have any statutory or contractual preemptive
right of subscription or purchase in respect thereof, other than any rights
created pursuant to this Agreement.
(b) Delaware Group Adviser Funds covenants to operate the business of
Acquiring Fund as presently conducted between the date hereof and the Closing.
(c) Delaware Group Adviser Funds covenants that by the Closing, all of
Acquiring Fund's federal and other Tax returns and reports required by law to be
filed on or before such date shall have been filed and all federal and other
Taxes shown as due on said returns shall have either been paid or adequate
liability reserves shall have been provided for the payment of such Taxes.
(d) Delaware Group Adviser Funds shall supply to Delaware Group Equity
Funds IV, at the Closing, the statement of assets and liabilities described in
Section 5(d) of this Agreement in conformity with the requirements described in
such Section.
(e) Delaware Group Adviser Funds shall have filed with the United
States Securities and Exchange Commission (the "Commission") a Registration
Statement on Form N-14 under the 1933 Act ("Registration Statement"), relating
to the shares of beneficial interest of Acquiring Fund issuable hereunder, and
shall have used its best efforts to provide that such Registration Statement
becomes effective as promptly as practicable. At the time such Registration
Statement becomes effective, it (i) complied in all material respects with the
applicable provisions of the 1933 Act, the 1934 Act and the 1940 Act, and the
rules and regulations promulgated thereunder; and (ii) will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading. At
the time the Registration Statement becomes effective, at
A-10
the time of Acquired Fund's shareholders' meeting, and at the Closing, the
prospectus and statement of additional information included in the Registration
Statement did not and will not contain an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
9. Conditions Precedent to be Fulfilled by Delaware Group Equity Funds IV
and Delaware Group Adviser Funds
The obligations of Delaware Group Equity Funds IV and Delaware Group
Adviser Funds to effectuate this Agreement and the Plan hereunder shall be
subject to the following respective conditions:
(a) That (1) all the representations and warranties of the other party
contained herein shall be true and correct in all material respects as of the
Closing with the same effect as though made as of and at such date; (2) the
other party shall have performed all obligations required by this Agreement to
be performed by it at or prior to the Closing; and (3) the other party shall
have delivered to such party a certificate signed by the President or
Vice-President and by the Secretary or equivalent officer to the foregoing
effect.
(b) That the other party shall have delivered to such party a copy of
the resolutions approving this Agreement adopted by the other party's Board of
Trustees, certified by the Secretary or equivalent officer.
(c) That the Commission shall not have issued an unfavorable advisory
report under Section 25(b) of the 1940 Act, nor instituted nor threatened to
institute any proceeding seeking to enjoin the consummation of the
reorganization contemplated hereby under Section 25(c) of the 1940 Act, and no
other legal, administrative or other proceeding shall be instituted or
threatened that would materially and adversely affect the financial condition of
either party or would prohibit the transactions contemplated hereby.
(d) That this Agreement, the Plan and the transactions contemplated
hereby shall have been approved by the appropriate action of the shareholders of
Acquired Fund at an annual or special meeting or any adjournment thereof.
(e) That Acquired Fund shall have declared a distribution or
distributions on or prior to the Valuation Date that, together with all previous
distributions, shall have the effect of distributing to its shareholders (i) all
of its ordinary income, capital gain net income and net interest income
excludable under Section 103(a) of the Code, if any, for the period from the
close of its last fiscal year to the Close of Business on the Valuation Date,
and (ii) any undistributed ordinary income, capital gain net income and net
interest income excludable under Section 103(a) of the Code from any prior
period. Capital gain net income has the meaning given such term by Section
1222(g) of the Code.
(f) That all required consents of other parties and all other
consents, orders and permits of federal, state and local authorities (including
those of the Commission and of state Blue Sky securities authorities, including
any necessary "no-action" positions or exemptive orders from such federal and
state authorities) to permit consummation of the transaction contemplated hereby
shall have been obtained, except where failure to obtain any such consent,
A-11
order or permit would not involve risk of material adverse effect on the assets
and properties of Acquired Fund or Acquiring Fund.
(g) That prior to or at the Closing, Delaware Group Equity Funds IV
and Delaware Group Adviser Funds shall receive an opinion from Stradley Ronon
Stevens & Young, LLP ("SRSY") to the effect that, provided the acquisition
contemplated hereby is carried out in accordance with the applicable laws of the
State of Delaware, this Agreement and in accordance with customary
representations provided by Delaware Group Equity Funds IV and Delaware Group
Adviser Funds in certificates delivered to SRSY:
(1) The acquisition by Acquiring Fund of substantially all of the
assets of Acquired Fund in exchange solely for Acquiring Fund shares
to be issued pursuant to Section 1 hereof, followed by the
distribution by Acquired Fund to its shareholders of Acquiring Fund
shares in complete liquidation of Acquired Fund, will qualify as a
reorganization within the meaning of Section 368(a)(1) of the Code,
and Acquiring Fund and Acquired Fund will each be a "party to the
reorganization" within the meaning of Section 368(b) of the Code;
(2) No gain or loss will be recognized by Acquired Fund upon the
transfer of substantially all of its assets to Acquiring Fund in
exchange solely for the voting shares of Acquiring Fund (to be issued
in accordance with Section 1 hereof) under Section 361(a) and Section
357(a) of the Code;
(3) No gain or loss will be recognized by Acquiring Fund upon the
receipt by it of substantially all of the assets of Acquired Fund in
exchange solely for the voting shares of Acquiring Fund (to be issued
in accordance with Section 1 hereof) under Section 1032(a) of the
Code;
(4) No gain or loss will be recognized by Acquired Fund upon the
distribution of Acquiring Fund shares to Acquired Fund shareholders in
accordance with Section 1 hereof in liquidation of Acquired Fund under
Section 361(c)(1) of the Code.
(5) The basis of the assets of Acquired Fund received by
Acquiring Fund will be the same as the basis of such assets to
Acquired Fund immediately prior to the exchange under Section 362(b)
of the Code;
(6) The holding period of the assets of Acquired Fund received by
Acquiring Fund will include the period during which such assets were
held by Acquired Fund under Section 1223(2) of the Code;
(7) No gain or loss will be recognized by the shareholders of
Acquired Fund upon the exchange of their shares in Acquired Fund for
the voting shares (including fractional shares to which they may be
entitled) of Acquiring Fund (to be issued in accordance with Section 1
hereof) under Section 354(a) of the Code;
(8) The basis of Acquiring Fund shares received by Acquired Fund
shareholders in accordance with Section 1 hereof (including fractional
shares to
A-12
which they may be entitled) will be the same as the basis of the
shares of Acquired Fund exchanged therefor under Section 358(a)(1) of
the Code;
(9) The holding period of Acquiring Fund's shares received by
Acquired Fund's shareholders in accordance with Section 1 hereof
(including fractional shares to which they may be entitled) will
include the holding period of Acquired Fund's shares surrendered in
exchange therefor, provided that Acquired Fund shares were held as a
capital asset on the date of the Reorganization under Section 1223(l)
of the Code; and
(10) Acquiring Fund will succeed to and take into account as of
the date of the transfer (as defined in Section 1.381(b)-1(b) of the
regulations issued by the United States Treasury (the "Treasury
Regulations")) the items of Acquired Fund described in Section 381(c)
of the Code, subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code, and the Treasury
Regulations.
(h) That Delaware Group Adviser Funds shall have received an opinion
in form and substance reasonably satisfactory to it from SRSY, counsel to
Delaware Group Equity Funds IV, to the effect that, subject in all respects to
the effects of bankruptcy, insolvency, arrangement among creditors, moratorium,
fraudulent transfer or conveyance, and other similar laws of general
applicability relating to or affecting creditor's rights and to general equity
principles:
(1) Delaware Group Equity Funds IV was created as a statutory
trust under the laws of the State of Delaware on December 17, 1999,
and is validly existing and in good standing under the laws of the
State of Delaware;
(2) Delaware Group Equity Funds IV is authorized to issue an
unlimited number of shares of beneficial interest, without par value,
of Acquired Fund;
(3) Delaware Group Equity Funds IV is an open-end, investment
company of the management type registered as such under the 1940 Act;
(4) Except as disclosed in Acquired Fund's currently effective
prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against
Delaware Group Equity Funds IV, the unfavorable outcome of which would
materially and adversely affect Delaware Group Equity Funds IV or
Acquired Fund;
(5) To such counsel's knowledge, no consent, approval,
authorization or order of any court, governmental authority or agency
is required for the consummation by Delaware Group Equity Funds IV of
the transactions contemplated by this Agreement, except such as have
been obtained under the 1933 Act, the 1934 Act, the 1940 Act, and
Delaware laws (including, in the case of each of the foregoing, the
rules and regulations thereunder) and such as may be required under
state securities laws;
A-13
(6) Neither the execution, delivery nor performance of this
Agreement by Delaware Group Equity Funds IV violates any provision of
its Agreement and Declaration of Trust, its By-Laws, or the provisions
of any agreement or other instrument, known to such counsel to which
Delaware Group Equity Funds IV is a party or by which Delaware Group
Equity Funds IV is otherwise bound; and
(7) This Agreement has been validly authorized and executed by
Delaware Group Equity Funds IV and represents the legal, valid and
binding obligation of Delaware Group Equity Funds IV and is
enforceable against Delaware Group Equity Funds IV in accordance with
its terms.
In giving the opinions set forth above, SRSY may state that it is
relying on certificates of the officers of Delaware Group Equity Funds IV with
regard to matters of fact and certain certifications and written statements of
governmental officials with respect to the good standing of Delaware Group
Equity Funds IV.
(i) That Delaware Group Equity Funds IV shall have received an opinion
in form and substance reasonably satisfactory to it from SRSY, counsel to
Delaware Group Adviser Funds, to the effect that, subject in all respects to the
effects of bankruptcy, insolvency, arrangement among creditors, moratorium,
fraudulent transfer or conveyance, and other similar laws of general
applicability relating to or affecting creditor's rights and to general equity
principles:
(1) Delaware Group Adviser Funds was created as a statutory trust
(formerly known as a business trust) under the laws of the State of
Delaware on November 23, 1999, and is validly existing and in good
standing under the laws of the State of Delaware;
(2) Delaware Group Adviser Funds is authorized to issue an
unlimited number of shares of beneficial interest, without par value,
of Acquiring Fund;
(3) Delaware Group Adviser Funds is an open-end investment
company of the management type registered as such under the 1940 Act;
(4) Except as disclosed in Acquiring Fund's currently effective
prospectus, such counsel does not know of any material suit, action,
or legal or administrative proceeding pending or threatened against
Delaware Group Adviser Funds, the unfavorable outcome of which would
materially and adversely affect Delaware Group Adviser Funds or
Acquiring Fund;
(5) The shares of beneficial interest of Acquiring Fund to be
issued pursuant to the terms of Section 1 hereof have been duly
authorized and, when issued and delivered as provided in this
Agreement, will have been validly issued and fully paid and will be
non-assessable by Delaware Group Adviser Funds or Acquiring Fund, and
to such counsel's knowledge, no shareholder has any preemptive right
to subscription or purchase in respect thereof other than any rights
that may be deemed to have been granted pursuant to this Agreement;
A-14
(6) To such counsel's knowledge, no consent, approval,
authorization or order of any court, governmental authority or agency
is required for the consummation by Delaware Group Adviser Funds of
the transactions contemplated by this Agreement, except such as have
been obtained under the 1933 Act, the 1934 Act, the 1940 Act, and
Delaware laws (including, in the case of each of the foregoing, the
rules and regulations thereunder) and such as may be required under
state securities laws;
(7) Neither the execution, delivery nor performance of this
Agreement by Delaware Group Adviser Funds violates any provision of
its Agreement and Declaration of Trust, its By-Laws, or the provisions
of any agreement or other instrument, known to such counsel to which
Delaware Group Adviser Funds is a party or by which Delaware Group
Adviser Funds is otherwise bound; and
(8) This Agreement has been validly authorized and executed by
Delaware Group Adviser Funds and represents the legal, valid and
binding obligation of Delaware Group Adviser Funds and is enforceable
against Delaware Group Adviser Funds in accordance with its terms.
In giving the opinions set forth above, SRSY may state that it is
relying on certificates of the officers of Delaware Group Adviser Funds with
regard to matters of fact and certain certifications and written statements of
governmental officials with respect to the good standing of Delaware Group
Adviser Funds.
(j) That Delaware Group Adviser Funds' Registration Statement with
respect to the shares of beneficial interest of Acquiring Fund to be delivered
to Acquired Fund's shareholders in accordance with Section 1 hereof shall have
become effective, and no stop order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto, shall have been
issued prior to the Closing or shall be in effect at the Closing, and no
proceedings for the issuance of such an order shall be pending or threatened on
that date.
(k) That the shares of beneficial interest of Acquiring Fund to be
delivered in accordance with Section 1 hereof shall be eligible for sale by
Delaware Group Adviser Funds with each state commission or agency with which
such eligibility is required in order to permit the shares lawfully to be
delivered to each Acquired Fund shareholder.
(l) That at the Closing, Delaware Group Equity Funds IV, on behalf of
Acquired Fund, transfers to Acquiring Fund aggregate Net Assets of Acquired Fund
comprising at least 90% in fair market value of the total net assets and 70% in
fair market value of the total gross assets recorded on the books of Acquired
Fund at the Close of Business on the Valuation Date.
10. Fees and Expenses The expenses of entering into and carrying
out the provisions of this Agreement, whether or not consummated, shall be borne
30% by Acquired Fund; 30% by Acquiring Fund; and 40% by Delaware Management
Company, a series of Delaware Management Business Trust.
A-15
11. Termination; Waiver; Order
(a) Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may be terminated and the Plan abandoned at any
time (whether before or after adoption thereof by the shareholders of Acquired
Fund) prior to the Closing as follows:
(1) by mutual consent of Delaware Group Equity Funds IV and
Delaware Group Adviser Funds;
(2) by Delaware Group Adviser Funds if any condition precedent to
its obligations set forth in Section 9 has not been fulfilled or
waived by Delaware Group Adviser Funds; or
(3) by Delaware Group Equity Funds IV if any condition precedent
to its obligations set forth in Section 9 has not been fulfilled or
waived by Delaware Group Equity Funds IV.
(b) If the transactions contemplated by this Agreement have not been
consummated by ______________, 2008, this Agreement shall automatically
terminate on that date, unless a later date is agreed to by both Delaware Group
Equity Funds IV and Delaware Group Adviser Funds.
(c) In the event of termination of this Agreement pursuant to the
provisions hereof, the same shall become void and have no further effect, and
there shall not be any liability on the part of either Delaware Group Equity
Funds IV or Delaware Group Adviser Funds or persons who are their trustees,
officers, agents or shareholders in respect of this Agreement.
(d) At any time prior to the Closing, any of the terms or conditions
of this Agreement may be waived by either Delaware Group Equity Funds IV or
Delaware Group Adviser Funds, respectively (whichever is entitled to the benefit
thereof).
(e) The respective representations, warranties and covenants contained
in Sections 4-8 hereof shall expire with, and be terminated by, the consummation
of the Plan, and neither Delaware Group Equity Funds IV nor Delaware Group
Adviser Funds, nor any of their officers, trustees, agents or shareholders shall
have any liability with respect to such representations or warranties after the
Closing. This provision shall not protect any officer, trustee, agent or
shareholder of Delaware Group Equity Funds IV or Delaware Group Adviser Funds
against any liability to the entity for which that officer, trustee, agent or
shareholder so acts or to its shareholders to which that officer, trustee, agent
or shareholder would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties in the conduct of
such office.
(f) If any order or orders of the Commission with respect to this
Agreement shall be issued prior to the Closing and shall impose any terms or
conditions that are determined by action of the Board of Trustees of Delaware
Group Equity Funds IV or the Board of Trustees of Delaware Group Adviser Funds
to be acceptable, such terms and conditions shall be binding as if a part of
this Agreement without further vote or approval of the shareholders of Acquired
Fund, unless such further vote is required by applicable law or by mutual
consent of the parties.
A-16
12. Liability of Delaware Group Adviser Funds and Delaware Group Equity
Funds IV
(a) Each party acknowledges and agrees that all obligations of
Delaware Group Adviser Funds under this Agreement are binding only with respect
to Acquiring Fund; that any liability of Delaware Group Adviser Funds under this
Agreement with respect to Acquiring Fund, or in connection with the transactions
contemplated herein with respect to Acquiring Fund, shall be discharged only out
of the assets of Acquiring Fund; that no other series of Delaware Group Adviser
Funds shall be liable with respect to this Agreement or in connection with the
transactions contemplated herein; and that neither Delaware Group Equity Funds
IV nor Acquired Fund shall seek satisfaction of any such obligation or liability
from the shareholders of Delaware Group Adviser Funds, the trustees, officers,
employees or agents of Delaware Group Adviser Funds, or any of them.
(b) Each party acknowledges and agrees that all obligations of
Delaware Group Equity Funds IV under this Agreement are binding only with
respect to Acquired Fund; that any liability of Delaware Group Equity Funds IV
under this Agreement with respect to Acquired Fund, or in connection with the
transactions contemplated herein with respect to Acquired Fund, shall be
discharged only out of the assets of Acquired Fund; that no other series of
Delaware Group Equity Funds IV shall be liable with respect to this Agreement or
in connection with the transactions contemplated herein; and that neither
Delaware Group Adviser Funds nor Acquiring Fund shall seek satisfaction of any
such obligation or liability from the shareholders of Delaware Group Equity
Funds IV, the trustees, officers, employees or agents of Delaware Group Equity
Funds IV, or any of them.
13. Final Tax Returns and Forms 1099 of Acquired Fund
(a) After the Closing, Delaware Group Equity Funds IV shall or shall
cause its agents to prepare any federal, state or local Tax returns, including
any Forms 1099, required to be filed by Delaware Group Equity Funds IV with
respect to Acquired Fund's final taxable year ending with its complete
liquidation and for any prior periods or taxable years and shall further cause
such Tax returns and Forms 1099 to be duly filed with the appropriate taxing
authorities.
(b) Notwithstanding the provisions of Section 1 hereof, any expenses
incurred by Delaware Group Equity Funds IV or Acquired Fund (other than for
payment of Taxes) in connection with the preparation and filing of said Tax
returns and Forms 1099 after the Closing, shall be borne by Acquired Fund to the
extent such expenses have been or should have been accrued by Acquired Fund in
the ordinary course without regard to the Plan contemplated by this Agreement;
any excess expenses shall be borne by Delaware Management Company, a series of
Delaware Management Business Trust, at the time such Tax returns and Forms 1099
are prepared.
14. Cooperation and Exchange of Information
Delaware Group Adviser Funds and Delaware Group Equity Funds IV will
provide each other and their respective representatives with such cooperation,
assistance and information as either of them reasonably may request of the other
in filing any Tax returns,
A-17
amended return or claim for refund, determining a liability for Taxes, or in
determining the financial reporting of any tax position, or a right to a refund
of Taxes or participating in or conducting any audit or other proceeding in
respect of Taxes. Each party or their respective agents will retain for a period
of six (6) years following the Closing all returns, schedules and work papers
and all material records or other documents relating to Tax matters and
financial reporting of tax positions of Acquired Fund and Acquiring Fund for its
taxable period first ending after the Closing and for all prior taxable periods.
15. Entire Agreement and Amendments
This Agreement embodies the entire Agreement between the parties and
there are no agreements, understandings, restrictions, or warranties between the
parties other than those set forth herein or herein provided for. This Agreement
may be amended only by mutual consent of the parties in writing. Neither this
Agreement nor any interest herein may be assigned without the prior written
consent of the other party.
16. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such counterparts together
shall constitute but one instrument.
17. Notices
Any notice, report, or demand required or permitted by any provision
of this Agreement shall be in writing and shall be deemed to have been given if
delivered or mailed, first class postage prepaid, addressed to Delaware Group
Equity Funds IV or Delaware Group Adviser Funds at 2005 Market Street,
Philadelphia, PA 19103, Attention: Secretary.
18. Governing Law
This Agreement shall be governed by and carried out in accordance with
the laws of the State of Delaware.
19. Effect of Facsimile Signature
A facsimile signature of an authorized officer of a party hereto on
this Agreement and/or any transfer document shall have the same effect as if
executed in the original by such officer.
A-18
IN WITNESS WHEREOF, Delaware Group Equity Funds IV and Delaware Group
Adviser Funds have each caused this Agreement and Plan of Reorganization to be
executed on its behalf by its duly authorized officers, all as of the day and
year first-above written.
Delaware Group Equity Funds IV, on behalf of
the Delaware Large Cap Growth Fund
By:
Richard Salus
Chief Financial Officer
Delaware Group Adviser Funds, on behalf of the
Delaware U.S. Growth Fund
By:
Richard Salus
Chief Financial Officer
A-19
EXHIBIT B
PRINCIPAL HOLDERS OF SHARES
- ----------------------------------------------------------------------------------------
FUND NAME / CLASS NAME AND ADDRESS OF ACCOUNT SHARE AMOUNT PERCENTAGE
- ----------------------------------------------------------------------------------------
Delaware Large Cap Growth
Fund - Class [xx]
- ----------------------------------------------------------------------------------------
Delaware U.S. Growth
Fund - Class [xx]
- ----------------------------------------------------------------------------------------
B-1
STATEMENT OF ADDITIONAL INFORMATION
FOR
DELAWARE U.S. GROWTH FUND
a series of
DELAWARE GROUP ADVISER FUNDS
Dated [October 24, 2007]
Acquisition of Substantially All of the Assets of:
DELAWARE LARGE CAP GROWTH FUND
(a series of Delaware Group Equity Funds IV)
By and in exchange for shares of
DELAWARE U.S. GROWTH FUND
(a series of Delaware Group Adviser Funds)
This Statement of Additional Information ("SAI") relates specifically to the
proposed acquisition of substantially all of the assets of Delaware Large Cap
Growth Fund (the "Large Cap Growth Fund") in exchange for shares of Delaware
U.S. Growth Fund (the "U.S. Growth Fund").
This SAI consists of this Cover Page and the following documents, each of which
is attached to and is legally considered to be a part of this SAI.
1. Statement of Additional Information of the U.S. Growth Fund, dated
February 28, 2007, as previously filed via EDGAR is incorporated
herein by reference to Delaware Group Adviser Fund's filing under Rule
485(b) filed February 26, 2007 and will be mailed to any shareholder
who requests this SAI.
2. Supplements to the Statement of Additional Information of the U.S.
Growth Fund, dated March 16, 2007, April 11, 2007, and August 15, 2007
as previously filed via EDGAR is incorporated herein by reference to
Delaware Group Adviser Fund's filings under Rule 497 filed on March
16, 2007, April 11, 2007, and August 15, 2007, respectively, and will
be mailed to any shareholder who requests this SAI.
3. Annual Report of the U.S. Growth Fund for the fiscal year ended
October 31, 2006 as previously filed via EDGAR is incorporated herein
by reference to Delaware Group Adviser Fund's N-CSR filed January 5,
2007 and will be mailed to any shareholder who requests this SAI.
4. Annual Report of the Large Cap Growth Fund for the fiscal year ended
September 30, 2006 as previously filed via EDGAR is incorporated
herein by reference to Delaware Group Equity Funds IV's N-CSR filed
December 8, 2006 and will be mailed to any shareholder who requests
this SAI.
2
5. Semiannual Report of the U.S. Growth Fund for the period ended April
30, 2007 as previously filed via EDGAR is incorporated herein by
reference to Delaware Group Adviser Funds N-CSR filed July 6, 2007 and
will be mailed to any shareholder who requests this SAI.
6. Semiannual Report of the Large Cap Growth Fund for the period ended
March 31, 2007 as previously filed via EDGAR is incorporated herein by
reference to Delaware Group Equity Funds IV's N-CSR filed May 31, 2007
and will be mailed to any shareholder who requests this SAI.
This SAI is not a prospectus; you should read this SAI in conjunction with the
Proxy Statement/Prospectus dated [October 24, 2007], relating to the
above-referenced transaction. You can request a copy of the Proxy
Statement/Prospectus by calling 800 523-1918 or by writing to Delaware U.S.
Growth Fund at Attention: Account Services, P.O. Box 219656, Kansas City, MO
64121-9656 by regular mail or 430 W. 7th Street, Kansas City, MO 64105 by
overnight courier service.
To vote by Internet
(1) Read the Proxy Statement.
(2) Go to www.proxyweb.com.
(3) Follow the on-line instructions.
To vote by Phone
(1) Read the Proxy Statement.
(2) Call 1-888-221-0697.
(3) Follow the recorded instructions.
To vote by Mail
(1) Read the Proxy Statement.
(2) Check the appropriate box on the reverse side.
(3) Sign, date, and return the Proxy Card in the envelope provided.
If you vote by Telephone or Internet, please do not return your Proxy Card.
DELAWARE LARGE CAP GROWTH FUND (THE "FUND")
A series of Delaware Group Equity Funds IV (the "Trust")
MEETING OF SHAREHOLDERS - January 25, 2008
PROXY SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST
The undersigned, revoking previous proxies, hereby appoint(s) David F. Connor,
Michael E. Dresnin, and Emilia P. Wang, or any of them, attorneys with full
power of substitution, to vote all shares of the Fund, as indicated below, that
the undersigned is entitled to vote at the above stated Meeting of Shareholders
to be held at the offices of Delaware Investments located at 2001 Market Street,
2nd Floor Auditorium, Philadelphia, PA 19103-7055 on January 25, 2008 at 3:00
p.m., Eastern Time, and at any adjournments thereof. All powers may be exercised
by two or more of said proxy holders or substitutes voting or acting or, if only
one votes and acts, then by that one. This proxy shall be voted on the proposal
described in the Proxy Statement/Prospectus as specified on the reverse side.
Receipt of the Notice of Meeting and the accompanying Proxy Statement/Prospectus
is hereby acknowledged.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES WITH RESPECT TO THE
FUND. THE FOLLOWING MATTER IS PROPOSED BY THE FUND. THE BOARD OF TRUSTEES
RECOMMENDS A VOTE FOR THE PROPOSAL. IF NO SPECIFICATION IS MADE AND THIS PROXY
IS SIGNED AND RETURNED, THE PROXY SHALL BE VOTED FOR THE PROPOSAL. PLEASE REFER
TO THE PROXY STATEMENT/PROSPECTUS FOR A DISCUSSION OF THE PROPOSAL. IF OTHER
MATTERS PROPERLY COME BEFORE THE MEETING TO BE VOTED ON, THE SHARES REPRESENTED
BY THE PROXY HOLDERS WILL BE VOTED AND CONSENTED ON THOSE MATTERS IN ACCORDANCE
WITH THE VIEWS OF MANAGEMENT.
Date: __________________, 200__
Signature(s) (Joint Owners) (Please sign within box)
[GRAPHIC OMITTED]
THIS PROXY CARD IS ONLY VALID WHEN SIGNED: To avoid the additional expense to
the Fund of further solicitation, please date and sign name(s) above as printed
on this card to authorize the voting of your shares as indicated. Where shares
are registered with joint owners, only one joint owner need sign. Persons
signing as executor, administrator, trustee, or other representative should give
full title as such.
Please fill in box as shown using black or blue ink or Number 2 pencil. Please
do not use fine point pens. [X]
Proposal: For Against Abstain
1. To approve an Agreement and Plan of Reorganization [ ] [ ] [ ]
between Delaware Group Equity Funds IV, on behalf of
Delaware Large Cap Growth Fund (the "Acquired Fund"),
and Delaware Group Adviser Funds, on behalf of Delaware
U.S. Growth Fund (the "Acquiring Fund"), which provides
for: (i) the acquisition by the Acquiring Fund of
substantially all of the assets of the Acquired Fund,
in exchange for shares of the Acquiring Fund; (ii) the
pro rata distribution of shares of the Acquiring Fund
to the shareholders of the Acquired Fund; and (iii)
the liquidation and dissolution of the Acquired Fund.
2. To vote upon any other business as may properly
come before the Meeting or any adjournment thereof.
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
YOUR VOTE IS IMPORTANT - PLEASE ACT TODAY.
PART C
OTHER INFORMATION
Item 15. Indemnification. Article VI of the Amended and Restated By-Laws
(November 16, 2006) incorporated into this filing by reference to Form
N-14 filed September 24, 2007.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the provisions described in
response to Item 15, or otherwise, the Registrant has been advised
that in the opinion of the U.S. Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Item 16. Exhibits. The following exhibits are incorporated by reference to the
Registrant's previously filed registration statements on Form N-1A
indicated below, except as noted:
(1) Copies of the charter of the Registrant as now in effect;
(a) Executed Agreement and Declaration of Trust (December 17,
1998) incorporated into this filing by reference to
Post-Effective Amendment No. 12 filed November 22, 1999.
(b) Executed Certificate of Trust (December 17, 1998)
incorporated into this filing by reference to Post-Effective
Amendment No. 12 filed November 22, 1999.
(c) Executed Certificate of Amendment (November 15, 2006) to the
Agreement and Declaration of Trust incorporated into this
filing by reference to Form N-14 filed September 24, 2007.
(2) Copies of the existing bylaws or corresponding instrument of the
Registrant;
(a) Amended and Restated By-Laws (November 16, 2006)
incorporated into this filing by reference to Form N-14
filed September 24, 2007.
(3) Copies of any voting trust agreement affecting more than 5
percent of any class of equity securities of the Registrant;
Not applicable.
(4) Copies of the agreement of acquisition, reorganization, merger,
liquidation and any amendments to it;
(a) Form of Agreement and Plan of Reorganization between the
Registrant, on behalf of Delaware U.S. Growth Fund, and
Delaware Group Equity Funds IV, on behalf of its series,
Delaware Large Cap Growth Fund, is incorporated into this
filing by reference to Form N-14 filed September 24, 2007.
(5) Copies of all instruments defining the rights of holders of the
securities being registered including, where applicable, the
relevant portion of the articles of incorporation or by-laws of
the Registrant;
(a) Agreement and Declaration of Trust. Articles III, IV, V and
VI of Agreement and Declaration of Trust (December 17, 1998)
incorporated into this filing by reference to Post-Effective
Amendment No. 12 filed November 22, 1999.
(b) By-Laws. Article II of the Amended and Restated By-Laws
(November 16, 2006) incorporated into this filing by
reference to Form N-14 filed September 24, 2007.
(6) Copies of all investment advisory contracts relating to the
management of the assets of the Registrant;
(a) Executed Investment Management Agreement (November 23, 1999)
between Delaware Management Company (a series of Delaware
Management Business Trust) and the Registrant on behalf of
Delaware U.S. Growth Fund incorporated into this filing by
reference to Post-Effective Amendment No. 16 filed March 1,
2001.
(i) Executed Amendment No. 1 (June 28, 2002) to Exhibit A
of the Investment Management Agreement (November 23,
1999) between the Registrant and Delaware Management
Company (a series of Delaware Management Business
Trust) adding Delaware Diversified Income Fund
incorporated into this filing by reference to
Post-Effective Amendment No. 20 filed December 31,
2002.
(b) Executed Investment Advisory Expense Limitation Letter
(September 11, 2007) between Delaware Management Company and
the Registrant incorporated into this filing by reference to
Form N-14 filed September 24, 2007.
(7) Copies of each underwriting or distribution contract between the
Registrant and a principal underwriter, and specimens or copies
of all agreements between principal underwriters and dealers;
(a) Distribution Agreements.
(i) Executed Distribution Agreement (May 15, 2003) between
Delaware Distributors, L.P. and the Registrant on
behalf of each Class incorporated into this filing by
reference to Post-Effective Amendment No. 22 filed
December 30, 2003.
(ii) Executed Third Amended and Restated Financial
Intermediary Distribution Agreement (January 1, 2007)
between Lincoln Financial Distributors, Inc. and
Delaware Distributors, L.P. on behalf of the Registrant
incorporated into this filing by reference to
Post-Effective Amendment No. 26 filed February 26,
2007.
(b) Dealer's Agreement (January 2001) incorporated into this
filing by reference to Post-Effective Amendment No. 19 filed
June 28, 2002.
(c) Vision Mutual Fund Gateway(R)Agreement (November 2000)
incorporated into this filing by reference to Post-Effective
Amendment No. 19 filed June 28, 2002.
(d) Registered Investment Advisers Agreement (January 2001)
incorporated into this filing by reference to Post-Effective
Amendment No. 19 filed June 28, 2002.
(e) Bank/Trust Agreement (August 2004) incorporated into this
filing by reference to Post-Effective Amendment No. 23 filed
December 27, 2004.
(f) Executed Distribution Expense Limitation Letter (September
11, 2007) between Delaware Distributors, L.P. and the
Registrant incorporated into this filing by reference to
Form N-14 filed September 24, 2007.
(8) Copies of all bonus, profit sharing, pension, or other similar
contracts or arrangements wholly or partly for the benefit of
trustees or officers of the Registrant in their capacity as such.
Furnish a reasonably detailed description of any plan that is not
set forth in a formal document;
Not applicable.
(9) Copies of all custodian agreements and depository contracts under
Section 17(f) of the Investment Company Act of 1940, as amended
(the "1940 Act") for securities and similar investments of the
Registrant, including the schedule of remuneration;
(a) Form of Mutual Fund Custody and Services Agreement between
Mellon Bank, N.A. and the Registrant incorporated into this
filing by reference to Form N-14 filed September 24, 2007.
(b) Form of Securities Lending Authorization between Mellon
Bank, N.A. and the Registrant incorporated into this filing
by reference to Form N-14 filed September 24, 2007.
(10) Copies of any plan entered into by Registrant pursuant to Rule
12b-1 under the 1940 Act and any agreements with any person
relating to implementation of the plan, and copies of any plan
entered into by Registrant pursuant to Rule 18f-3 under the 1940
Act, any agreement with any person relating to implementation of
the plan, any amendment to the plan, and a copy of the portion of
the minutes of the meeting of the Registrant's trustees
describing any action taken to revoke the plan;
(a) Plan under Rule 12b-1 for Class A (April 19, 2001)
incorporated into this filing by reference to Post-Effective
Amendment No. 17 filed December 28, 2001.
(b) Plan under Rule 12b-1 for Class B (April 19, 2001)
incorporated into this filing by reference to Post-Effective
Amendment No. 17 filed December 28, 2001.
(c) Plan under Rule 12b-1 for Class C (April 19, 2001)
incorporated into this filing by reference to Post-Effective
Amendment No. 17 filed December 28, 2001.
(d) Plan under Rule 12b-1 for Class R (May 15, 2003)
incorporated into this filing by reference to Post-Effective
Amendment No. 25 filed February 22, 2006.
(e) Plan under Rule 18f-3 (October 31, 2005) incorporated into
this filing by reference to Post-Effective Amendment No. 25
filed February 22, 2006.
(11) An opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will, when
sold, be legally issued, fully paid and nonassessable;
(a) Opinion and Consent of Counsel (September 2007) relating to
the Registrant incorporated into this filing by reference to
Form N-14 filed September 24, 2007.
(12) An opinion, and consent to their use, of counsel or, in lieu of
an opinion, a copy of the revenue ruling from the Internal
Revenue Service, supporting the tax matters and consequences to
shareholders discussed in the prospectus;
(a) To be filed by amendment.
(13) Copies of all material contracts of the Registrant not made in
the ordinary course of business which are to be performed in
whole or in part on or after the date of filing the registration
statement;
(a) Executed Shareholder Services Agreement (April 19, 2001)
between Delaware Service Company, Inc. and the Registrant
incorporated into this filing by reference to Post-Effective
Amendment No. 17 filed December 28, 2001.
(i) Executed Amended Schedule A (June 28, 2002) to
Shareholder Services Agreement incorporated into this
filing by reference to Post-Effective Amendment No. 20
filed December 31, 2002.
(ii) Executed Schedule B (June 1, 2007) to the Shareholder
Services Agreement incorporated into this filing by
reference to Form N-14 filed September 24, 2007.
(b) Form of Fund Accounting and Financial Administration
Services Agreement between Mellon Bank, N.A. and the
Registrant to be filed by amendment.
(14) Copies of any other opinions, appraisals, or rulings, and
consents to their use, relied on in preparing the registration
statement and required by Section 7 of the Securities Act of
1933, as amended (the "1933 Act" or "Securities Act");
(a) Consent of Independent Registered Public Accounting Firm
(October 2007) attached as Exhibit No. EX-99.14.a.
(15) All financial statements omitted pursuant to Item 14(a)(1);
Not applicable.
(16) Manually signed copies of any power of attorney pursuant to which
the name of any person has been signed to the registration
statement; and
(a) Powers of Attorney attached as Exhibit No. EX-99.16.a.
(17) Any additional exhibits which the Registrant may wish to file.
(a) Code of Ethics for the Delaware Investments Family of Funds
(September 2006) incorporated into this filing by reference
to Form N-14 filed September 24, 2007.
(b) Code of Ethics for Delaware Investments (Delaware Management
Company, a series of Delaware Management Business Trust, and
Delaware Distributors, L.P.) (February 2006) incorporated
into this filing by reference to Post-Effective Amendment
No. 26 filed February 26, 2007.
(c) Code of Ethics for Lincoln Financial Distributors, Inc.
(June 2007) incorporated into this filing by reference to
Form N-14 filed September 24, 2007.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
(3) The undersigned Registrant agrees to file by Post-Effective Amendment
the opinion and consent of counsel regarding the tax consequences of
the proposed reorganization required by Item 16(12) of Form N-14
within a reasonable time after receipt of such opinion.
SIGNATURES
As required by the Securities Act of 1933, as amended, (the "1933 Act"),
this Registration Statement has been signed on behalf of the Registrant in the
City of Philadelphia and the Commonwealth of Pennsylvania on the 23rd day of
October, 2007.
DELAWARE GROUP ADVISER FUNDS
By: /s/ Patrick P. Coyne
Patrick P. Coyne
Chairman/President/Chief Executive Officer
As required by the 1933 Act, this Registration Statement has been signed by
the following persons in the capacities and on the dates indicated:
Signature Title Date
/s/ Patrick P. Coyne Chairman/President/ October 23, 2007
Patrick P. Coyne Chief Executive Officer
(Principal Executive
Officer) and Trustee
Thomas L. Bennett * Trustee October 23, 2007
Thomas L. Bennett
John A. Fry * Trustee October 23, 2007
John A. Fry
Anthony D. Knerr * Trustee October 23, 2007
Anthony D. Knerr
Lucinda S. Landreth * Trustee October 23, 2007
Lucinda S. Landreth
Ann R. Leven * Trustee October 23, 2007
Ann R. Leven
Thomas F. Madison * Trustee October 23, 2007
Thomas F. Madison
Janet L. Yeomans * Trustee October 23, 2007
Janet L. Yeomans
J. Richard Zecher * Trustee October 23, 2007
J. Richard Zecher
Richard Salus * Senior Vice President/ October 23, 2007
Richard Salus Chief Financial Officer
(Principal Financial
Officer)
*By: /s/ Patrick P. Coyne
Patrick P. Coyne
as Attorney-in-Fact for
each of the persons indicated
(Pursuant to Powers of Attorney filed herewith)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
EXHIBITS
TO
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDEX TO EXHIBITS
(Delaware Group Adviser Funds)
Exhibit No. Exhibit
- ------------------------ -------------------------------------------------------
EX-99.14.a Consent of Independent Registered Public Accounting
Firm (October 2007)
EX-99.16.a Powers of Attorney (October 22, 2007)
