<PAGE>
DELAWARE(SM)
INVESTMENTS
- ----------- DELAWARE FOUNDATION FUNDS
Growth Portfolio
Balanced Portfolio
Income Portfolio
Asset Allocation
2000 SEMI-ANNUAL REPORT
(Asset Allocation Artwork)
<PAGE>
A TRADITION OF SOUND INVESTING SINCE 1929
- -----------------------------------------
Table of Contents
- -----------------
Letter to Shareholders 1
Portfolio Management
Review 4
Performance Summary
Growth Portfolio 8
Balanced Portfolio 9
Income Portfolio 10
Financial Statements
Statements of Net Assets 11
Statements of Operations 14
Statements of Changes in
Net Assets 15
Financial Highlights 16
Notes to Financial
Statements 22
A Commitment To Our Investors
Experienced
[ ] Our seasoned investment professionals average more than 15 years'
experience.
[ ] For over 70 years, we have managed money in a variety of investment styles
that have weathered a full range of economic and market environments. We
opened our first mutual fund in 1938.
Disciplined
[ ] We follow strict investment policies and clear buy/sell guidelines.
[ ] We strive to balance risk and reward in order to provide relatively
conservative investment alternatives within any given asset class.
Consistent
[ ] We believe consistent processes are the best way to seek consistent
investment performance.
[ ] Our commitment to style consistency has earned us the confidence of
discriminating institutional and individual investors to manage over $46
billion in assets as of March 31, 2000.
Comprehensive
[ ] We offer more than 70 mutual funds in these asset classes.
o Large-cap equity o High-yield bonds
o Mid-cap equity o Investment grade bonds
o Small-cap equity o Municipal bonds (24 single-state funds)
o International equity o International fixed-income
o Balanced
[ ] Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C)Delaware Distributors, L.P.
<PAGE>
"PERFORMANCE OF THE
MAJOR U.S. EQUITY
MARKETS REMAINED
STRONG DURING THE
SIX-MONTH PERIOD ENDED
MARCH 31, 2000, DRIVEN BY
RISING PRODUCTIVITY AND
CORPORATE EARNINGS."
Dear Shareholder
May 12, 2000
Recap of Events - If you could capture the markets' behavior over the last six
months in a single word, that word would have to be erratic.
Performance of the major U.S. equity markets remained strong during the
six-month period ended March 31, 2000, driven by rising productivity and
corporate earnings. However, inflation fears prompted the Federal Reserve Board
to continue its more restrictive monetary policy. The Fed followed up its
interest rate increases of June 30 and August 24, 1999 with three additional
quarter-point rate hikes between November, 1999 and March, 2000. As of this
writing, the federal funds rate - the rate banks charge each other on overnight
loans - is 6.0%, the highest it has been in five years.
While these rate increases were not enough to completely dampen investors'
enthusiasm, they introduced a new note of caution - at least for the "old
economy" stocks of the Dow Jones Industrial Average. At first, the NASDAQ
Composite (the index that includes many younger technology and small
capitalization companies) seemed unfazed by the interest rate increases. In
fact, soaring prices and demand for technology stocks kept prices high and were
largely responsible for the overall market's impressive gains through December,
1999.
Average Total Returns
For Period Ended March 31, 2000 Six Months
- --------------------------------------------------------------------------------
Delaware Foundation Funds
Growth Portfolio Class A +14.11%
- --------------------------------------------------------------------------------
Balanced Portfolio Class A +10.08%
- --------------------------------------------------------------------------------
Income Portfolio Class A +6.17%
- --------------------------------------------------------------------------------
Unmanaged Equity Indexes
S&P 500 Index +17.52%
Morgan Stanley Europe, Australia and Far East (EAFE) Index +17.00%
Russell 2000 Index +26.83%
Morgan Stanley Emerging Markets Free Index +28.48%
- --------------------------------------------------------------------------------
Unmanaged Fixed-Income Indexes
Lehman Brothers Aggregate Bond Index +2.08%
Salomon Brothers High-Yield Bond Index -1.37%
- --------------------------------------------------------------------------------
All performance shown above is at net asset value without the effect of sales
charges and assumes reinvestment of distributions. Performance information for
all Fund classes can be found on pages 8 through 10. The S&P 500 Index is an
index of 500, mostly large capitalization stocks. The Russell 2000 Index is a
measure of 2000 smaller companies as compiled by the Frank Russell Co. The
Morgan Stanley EAFE Index is a measure of international stocks in established
markets. The Morgan Stanley Emerging Markets Free Index is a measure of
international stocks in emerging markets. The Lehman Brothers Aggregate Bond
Index is a measure of investment grade domestic bonds. The Salomon Brothers
High-Yield Bond Index is a measure of lower rated domestic corporate bonds. All
indexes are unmanaged. (Source: Bloomberg and Lipper Analytical Services, Inc.)
You cannot invest directly in an index. Past performance does not guarantee
future results.
1
<PAGE>
"WE EXPECT TO SEE
CONTINUED MARKET
VOLATILITY OVER THE NEXT
FEW MONTHS AS THE FED
CONTINUES ITS EFFORT TO
THWART INFLATION AND
INVESTORS CONTINUE TO
COMPARE THE MERITS OF
`OLD ECONOMY' TO
`NEW ECONOMY' STOCKS."
(Asset Allocation Artwork)
In late February and March, 2000, however, concerns over rising interest rates,
potential inflation and high stock prices began to take their toll on all market
sectors, leading to several bouts of volatility. After passing the 5000
milestone in early March, the NASDAQ composite fell sharply several times during
the month, but each time recovered. The S&P 500 Index fell sharply in February
only to regain ground in March, reaching a high of 1550 on March 24, 2000. On
several occasions during the quarter, it looked as though investors were
beginning to favor value over growth as they took money from technology stocks
to invest in the traditional stocks - going back to the "old economy" from the
"new economy." However, the Dow finished the quarter down -0.5%, while the S&P
500 Index returned 7.7% and the NASDAQ closed the quarter up 12.3%.
The U.S. bond market continued to struggle during the six-month period ended
March 31, 2000. Bond prices, which move in the opposite direction of interest
rates, fell as the Fed raised the federal funds rate. Long-term interest rates,
which are not determined by the Fed but rather by investor demand, also rose
significantly.
During the period, we saw renewed strength in foreign stocks. In Japan, the
Nikkei 225 Index, the country's leading equity benchmark, was up 15.52%. The
developing economies of the world experienced a remarkable recovery from the
lows of late 1998. The MSCI Emerging Markets Free Index, the leading emerging
markets benchmark, rose 28.48% over the six-month period. Despite rising
interest rates in some developed countries during the fourth quarter 1999, these
markets also performed well. The MSCI EAFE Index, the leading developed markets
benchmark, recorded a return of 17.0% for the period.
Delaware Foundation Funds' returns for the six months ended March 31, 2000 are
modest on an absolute basis. Please see the Portfolio Management Review on page
4 for a discussion of each Portfolio's performance.
For the six-month period ended March 31, 2000:
The Growth Portfolio provided a return of 14.11% (Class A shares at net asset
value with distributions reinvested).
The Balanced Portfolio returned 10.08% (Class A shares at net asset value with
distributions reinvested).
The Income Portfolio returned 6.17% (Class A shares at net asset value with
distributions reinvested).
2
<PAGE>
Market Outlook - In our opinion, the overall outlook for the stock market
appears positive both in the U.S. and overseas. However, we expect to see
continued market volatility over the next few months as the Fed continues its
effort to thwart inflation and investors continue to compare the merits of "old
economy" to "new economy" stocks. In this environment, we remain confident that
an asset allocation approach with a mix of stock and bond mutual funds has the
potential to achieve more consistent returns over time, generally at lower
levels of portfolio volatility. We thank you for your continued investment in
the Delaware Foundation Funds.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
- ------------------------------------- --------------------------------------
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family of Funds Delaware Investments Family of Funds
3
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
- ---------------------------
J. Paul Dokas
Senior Portfolio Manager
May 12, 2000
The Funds' Results
As investors with a long-term outlook, we at Delaware remain committed to our
fundamental discipline. The Delaware Foundation Funds provide the oversight of a
team of professionals who are constantly assessing the risk/reward trade-off
offered by the major asset classes. We use a combination of proprietary
technology, hands-on research and professional judgment to allocate your assets
to investments we believe provide the best potential risk-adjusted returns.
In all three Delaware Foundation Funds, we look at relative valuations in asset
classes in order to make reasonable, rational investment choices in a consistent
and disciplined way. Though guided by the same overall strategy, the individual
Delaware Foundation Funds' Portfolios don't move in lockstep. Our allocation
decisions adhere to the level of risk tolerance set out by each Portfolio's
objectives.
Delaware Foundation Funds
Growth Portfolio
As we started our fiscal year on October 1, 1999, jitters about future interest
rate increases by the Fed had caused stock prices to decline. The return on the
S&P 500 Index, for example, had plunged to -6.24% for the third quarter of 1999.
At that time, our strategy of looking for the most attractively priced asset
classes on a relative basis made a compelling case for having significant
positions in both U.S. and non-U.S. equities. As of October 1, 1999, our equity
position stood at 83.4% of net assets. More than one-quarter of this was in
foreign equity funds, including Delaware International Equity Fund and Delaware
Emerging Markets Fund.
In October and November 1999, we added to Growth Portfolio's U.S. equity mutual
fund allocations, investing in Delaware Diversified Value Fund, and decreased
our exposure to fixed-income funds. Part of this decrease came from a reduction
in our position in Delaware Delchester Fund, Delaware's high-yield bond fund,
and the elimination of our position in Delaware Extended Duration Bond Fund.
Strong gains in U.S. equity prices in the last quarter of 1999 called for a
shift back to fixed-income funds and cash. As of the end of 1999, your Portfolio
held a 77.5% position in equities and a 22.5% position in fixed-income and cash.
Within the U.S. stock allocation, the Portfolio maintained a substantial
position in small-cap stock funds throughout 1999 because we found relatively
better prices and risk profiles among small-cap stocks than among large
capitalization stocks. In the fourth quarter, however, we reduced our position
to realize profits and rebalance the Portfolio in light of lower than expected
returns for small-cap stocks.
(Asset Allocation Artwork)
4
<PAGE>
"WE USE A COMBINATION
OF PROPRIETARY
TECHNOLOGY, HANDS-ON
RESEARCH AND
PROFESSIONAL JUDGMENT
TO ALLOCATE YOUR ASSETS
TO INVESTMENTS WE
BELIEVE PROVIDE THE BEST
POTENTIAL RISK-ADJUSTED
RETURNS."
Our view on foreign equity funds was favorable throughout 1999. For the
long-term investor, we believe that some exposure to emerging equity markets
offers the potential for high returns and provides an excellent means of
diversification.
In December, 1999 and January, 2000, stocks rallied strongly and hence, lowered
return expectations. As bond yields rose and offered attractive returns, we
moved into bonds. This was accomplished by adding Delaware Extended Duration
Bond Fund to our Portfolio.
We began to reverse this move in late January. By January's end, bonds were
getting more expensive, and stocks began to decline. Once again, as at the
beginning of the third quarter, declining stock prices and rising bond prices
led us to increase our position in U.S. equities with the goal of achieving more
attractive risk-adjusted returns. At the end of the six-month period, our
weighting in equities stands at 86.42%, its high for the period.
Balanced Portfolio
Prior to the start of our fiscal period on October 1, 1999, we had reduced our
exposure to equities as we believed that many U.S. companies carried risks that
exceeded their potential rewards. Our judgment proved correct as equities
experienced a difficult period in the third quarter 1999. We began reallocating
a portion of the Portfolio back to U.S. equities as the fiscal year began on
October 1, 1999.
Bonds began to look more attractive as long-bond yields climbed from a low of
approximately 6% in mid-November, 1999 to nearly 6.8% by mid-January, 2000. At
the same time, we believed that frenetic buying in the equity market was
limiting potential gains. We added to our holdings of Delaware Extended Duration
Bond Fund and Delaware Delchester Fund to increase our exposure to bonds. By
January 31, 2000 we reached a high of 42.6% of total fixed-income assets and a
low of 53.0% of equities.
As with the Growth Portfolio, by late January it became clear that declining
Treasury yields and the growing spread between anticipated returns on stocks and
bonds were making equities again more appealing. We reduced our fixed-income
allocation and simultaneously increased our U.S. equity exposure in the Balanced
Portfolio.
As of March 31, 2000, the Balanced Portfolio had a high of 69.54% invested in
U.S. and foreign equities, surpassing our neutral position of 60% by nearly 10%.
We received a significant amount of new cash from investors just before the
market's mid-March rally and we used that to increase our equity exposure.
5
<PAGE>
(Asset Allocation Artwork)
Income Portfolio
Our target weightings for the Income Portfolio reflect its income orientation:
the Portfolio follows a relatively risk-averse strategy. We base our decisions
on the same assessment of market conditions that the Growth and Balanced
Portfolios are subject to, but with a more conservative risk tolerance.
We began our fiscal period with about 35% of the Portfolio in U.S. equities and
the remainder in a diversified mix of fixed-income funds. This allocation worked
well for us as the equity market experienced difficulty during the third quarter
of 1999. We held our equity position at this level and our fixed-income position
at about 64% through the last quarter of the year.
We remained slightly overweight in non-U.S. equities, staying between 6.1% and
6.8% of the Portfolio through the period, reflecting our favorable view of
international markets.
As U.S. stock prices rose in December and January, we shifted the Portfolio's
allocations in two steps. With bond yields close to 7% on the long-term 30-year
U.S. Treasury bond, and our expected return for stocks dropping close to 9%, we
reduced our holdings of equities and increased our holdings of fixed-income
assets. When the stock market began correcting from its peak in mid-January, we
reallocated the Portfolio back to a more typical allocation and ended the fiscal
period with 40.86% in equity funds and 55.02% in fixed-income funds.
A small position (1.94%) in Delaware REIT Fund is used to generate additional
income for the Portfolio.
6
<PAGE>
"WE REMAIN COMMITTED
TO SAFEGUARDING
INVESTORS' ASSETS FROM
THE EXTREMES IN
VOLATILITY THAT THE
MARKET IS CURRENTLY
EXPERIENCING."
Outlook
We have a generally positive view on the current investment environment and
believe the Delaware Foundation Funds are well-positioned to participate in the
economy's overall health. We remain committed to safeguarding investors' assets
from the extremes in volatility that the market is currently experiencing.
We are encouraged that the Federal Reserve is making policy decisions in an
attempt to prevent future problems. Although some stock valuations may be
excessive, others are well-justified, in our opinion, based on current interest
rate levels and earnings growth rates. Added together, we believe our
diversified approach and risk sensitivity in the Delaware Foundation Funds
continue to offer a way for investors to participate in the economy's and the
market's relative strengths while seeking to preserve capital.
Fund Allocations
March 31, 2000
<TABLE>
<CAPTION>
Growth Balanced Income
Fund* Type/Style Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware Growth Large-Cap
and Income Fund Value Stocks 9.1% 8.1% 4.7%
- ---------------------------------------------------------------------------------------------------------
Delaware Diversified Large-Cap
Value Fund Value Stocks 9.9% 11.0% 5.0%
- ---------------------------------------------------------------------------------------------------------
Delaware Research Multi-Cap Growth
Fund & Value Stocks 8.4% 9.3% 5.4%
- ---------------------------------------------------------------------------------------------------------
Delaware Diversified Large-Cap
Growth Fund Growth Stocks 21.2% 14.5% 10.9%
- ---------------------------------------------------------------------------------------------------------
Delaware Small Cap Small-Cap
Value Fund Value Stocks 4.4% 3.8% 1.4%
- ---------------------------------------------------------------------------------------------------------
Delaware International
Equity Fund Non-U.S. Stocks 17.0% 11.6% 6.2%
- ---------------------------------------------------------------------------------------------------------
Delaware Real Estate Real Estate
Investment Trust Fund Investment Trusts 0.0% 0.0% 1.9%
- ---------------------------------------------------------------------------------------------------------
Delaware Emerging Developing
Markets Fund Countries Stocks 3.6% 2.4% 0.0%
- ---------------------------------------------------------------------------------------------------------
Delaware Select Multi-Cap
Growth Fund Growth Stocks 12.7% 8.8% 5.4%
- ---------------------------------------------------------------------------------------------------------
Delaware American Mortgages
Government Bond Fund & Treasuries 8.8% 23.8% 41.1%
- ---------------------------------------------------------------------------------------------------------
Delaware Delchester High-Yield
Fund Corporate Bonds 3.0% 6.1% 13.9%
- ---------------------------------------------------------------------------------------------------------
Cash 1.9% 0.6% 4.1%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
*All portfolio holdings are institutional class shares of each Fund.
7
<PAGE>
FUND BASICS
- -----------
Fund Objective
Seeks long-term capital growth.
Assets Under Management
$15.95 million
Fund Start Date
December 31, 1997
Your Fund Manager
J. Paul Dokas joined Delaware in 1997. He was previously Director of Trust
Investment Management at Bell Atlantic Corporation. He earned a bachelor's
degree at Loyola College in Baltimore and an MBA at the University of Maryland.
He is a Chartered Financial Analyst.
NASDAQ Symbols
Class A DFGAX
Class B N/A
Class C N/A
[ASSET ALLOCATION ARTWORK]
GROWTH PORTFOLIO PERFORMANCE
- ----------------------------
Average Total Returns
Through March 31, 2000 Lifetime One Year
- -----------------------------------------------------------------------------
Class A (Est. 12/31/97)
Excluding Sales Charge +11.86% +15.57%
Including Sales Charge +8.95% +8.94%
- -----------------------------------------------------------------------------
Class B (Est. 12/31/97)
Excluding Sales Charge +11.11% +14.66%
Including Sales Charge +9.93% +9.66%
- -----------------------------------------------------------------------------
Class C (Est. 12/31/97)
Excluding Sales Charge +11.16% +14.65%
Including Sales Charge +11.16% +13.65%
- -----------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Returns and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
results excluding sales charge assume either that contingent sales charges did
not apply or the investment was not redeemed. Past performance is not a
guarantee of future results.
Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
The average annual returns for lifetime and one-year periods ended March 31,
2000 for the Growth Portfolio's Institutional Class were 12.15% and 15.83%,
respectively. The Institutional Class (Est. 12/31/97) is available without sales
charge only to certain eligible institutional accounts.
8
<PAGE>
FUND BASICS
- -----------
Fund Objective
Seeks capital appreciation with current income as a secondary objective.
Assets Under Management
$31.36 million
Fund Start Date
December 31, 1997
Your Fund Manager
J. Paul Dokas
NASDAQ Symbols
Class A DFBAX
Class B N/A
Class C N/A
BALANCED PORTFOLIO PERFORMANCE
- ------------------------------
Average Total Returns
Through March 31, 2000 Lifetime One Year
- -----------------------------------------------------------------------------
Class A (Est. 12/31/97)
Excluding Sales Charge +8.16% +10.30%
Including Sales Charge +5.35% +3.94%
- -----------------------------------------------------------------------------
Class B (Est. 12/31/97)
Excluding Sales Charge +7.48% +9.49%
Including Sales Charge +6.25% +4.49%
- -----------------------------------------------------------------------------
Class C (Est. 12/31/97)
Excluding Sales Charge +7.58% +9.47%
Including Sales Charge +7.58% +8.47%
- -----------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Returns and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
results excluding sales charge assume either that contingent sales charges did
not apply or the investment was not redeemed. Past performance is not a
guarantee of future results.
Class A shares of each Fund have a 5.75% maximum front-end sales charge and a
12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
The average annual returns for lifetime and one-year periods ended March 31,
2000 for the Balanced Portfolio's Institutional Class were 8.43% and 10.61%,
respectively. The Institutional Class (Est. 12/31/97) is available without sales
charge only to certain eligible institutional accounts.
9
<PAGE>
FUND BASICS
- -----------
Fund Objective
Seeks a combination of current income and preservation of capital with capital
appreciation.
Assets Under Management
$18.46 million
Fund Start Date
December 31, 1997
Your Fund Manager
J. Paul Dokas
NASDAQ Symbols
Class A DFIAX
Class B N/A
Class C N/A
[ASSET ALLOCATION ARTWORK]
INCOME PORTFOLIO PERFORMANCE
- ----------------------------
Average Total Returns
Through March 31, 2000 Lifetime One Year
- -----------------------------------------------------------------------------
Class A (Est. 12/31/97)
Excluding Sales Charge +5.20% +5.30%
Including Sales Charge +2.46% -0.72%
- -----------------------------------------------------------------------------
Class B (Est. 12/31/97)
Excluding Sales Charge +4.57% +4.44%
Including Sales Charge +3.30% -0.52%
- -----------------------------------------------------------------------------
Class C (Est. 12/31/97)
Excluding Sales Charge +4.47% +4.45%
Including Sales Charge +4.47% +3.46%
- -----------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Returns and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
results excluding sales charge assume either that contingent sales charges did
not apply or the investment was not redeemed. Past performance is not a
guarantee of future results.
Class A shares of each Fund have a 5.75% maximum front-end sales charge and a
12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
The average annual returns for lifetime and one-year periods ended March 31,
2000 for the Income Portfolio's Institutional Class were 5.44% and 5.54%,
respectively. The Institutional Class (Est. 12/31/97) is available without sales
charge only to certain eligible institutional accounts.
10
<PAGE>
Statements of Net Assets
GROWTH PORTFOLIO
- ----------------
Number of Market
March 31, 2000 (Unaudited) Shares Value
- ------------------------------------------------------------------------------
Investment Companies - 98.25%
Equity Funds - 86.42%
Delaware Group Equity Funds II -
Delaware Diversified Value Fund ...................... 154,992 $ 1,576,265
Delaware Group Equity Funds II -
Delaware Growth and Income Fund ...................... 99,586 1,448,972
Delaware Group Equity Funds III -
Delaware Research Fund ............................... 142,383 1,345,521
Delaware Group Equity Funds IV -
Delaware Diversified Growth Fund ..................... 252,469 3,380,556
Delaware Group Equity Funds V -
Delaware Small Cap Value Fund ........................ 28,674 713,690
Delaware Group Global & International Funds -
Delaware Emerging Markets Fund ....................... 63,376 573,549
Delaware Group Global & International Funds -
Delaware International Equity Fund ................... 171,286 2,714,877
Voyageur Mutual Funds III -
Delaware Select Growth Fund .......................... 45,751 2,027,237
-----------
13,780,667
-----------
Fixed-Income Funds - 11.83%
Delaware Group Government Funds -
Delaware American Government Bond Fund ............... 195,711 1,403,248
Delaware Group Income Funds -
Delaware Delchester Fund ............................. 102,119 483,023
-----------
1,886,271
-----------
Total Investment Companies
(cost $14,588,065) ................................... 15,666,938
-----------
Principal
Amount
---------
Repurchase Agreements - 2.02%
With Chase Manhattan 6.03% 4/3/00
(dated 3/31/00, collateralized by $118,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $112,646) ............................... $110,000 110,000
With PaineWebber 6.05% 4/3/00 (dated
3/31/00, collateralized by $31,000 U.S.
Treasury Notes 6.375% due 3/31/01, market
value $30,577 and $31,000 U.S. Treasury
Notes 5.25% due 5/31/01, market value
$31,327 and $15,000 U.S. Treasury Notes
11.875% due 11/15/03, market value $18,208
and $31,000 U.S. Treasury Notes 5.875%
due 11/15/04, market value $31,330) .................. 109,000 109,000
With Prudential Securities 6.00% 4/3/00
(dated 3/31/00, collateralized by $94,000
U.S. Treasury Notes 6.00% due 8/15/00,
market value $105,065) ............................... 103,000 103,000
-----------
Total Repurchase Agreements
(cost $322,000) ...................................... 322,000
-----------
<PAGE>
- --------------------------------------------------------------------------------
Total Market Value of Securities - 100.27%
(cost $14,910,065) ................................... $15,988,938
Liabilities Net of Receivables and
Other Assets - (0.27%) ............................... (42,331)
-----------
Net Assets Applicable to 1,555,185
Shares Outstanding - 100.00% ......................... $15,946,607
===========
Net Asset Value - Growth Portfolio A Class
($12,620,435 / 1,230,798 shares) ..................... $10.25
-----------
Net Asset Value - Growth Portfolio B Class
($2,354,020 / 229,645 shares) ........................ $10.25
-----------
Net Asset Value - Growth Portfolio C Class
($809,403 / 78,875 shares) ........................... $10.26
-----------
Net Asset Value - Growth Portfolio Institutional
Class ($162,749 / 15,867 shares) ..................... $10.26
-----------
Components of Net Assets at March 31, 2000:
Shares of Beneficial Interest (unlimited
authorization - no par) .............................. $14,433,469
Undistributed net investment income ................... 2,913
Accumulated net realized gain on investments .......... 431,352
Net unrealized appreciation of investments ............ 1,078,873
-----------
Total net assets ...................................... $15,946,607
===========
Net Asset Value and Offering Price Per Share -
Growth Portfolio
Net asset value A Class (A) ........................... $10.25
Sales charge (5.75% of offering price or 6.15%
of the amount invested per share) (B) ................ 0.63
-----------
Offering price ........................................ $10.88
===========
- ---------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
11
<PAGE>
Statements of Net Assets (continued)
BALANCED PORTFOLIO
- ------------------
Number of Market
March 31, 2000 (Unaudited) Shares Value
- ------------------------------------------------------------------------------
Investment Companies - 99.41%
Equity Funds - 69.54%
Delaware Group Equity Funds II -
Delaware Growth And Income Fund .................... 175,423 $ 2,552,398
Delaware Group Equity Funds II -
Delaware Diversified Value Fund .................... 337,789 3,435,313
Delaware Group Equity Funds III -
Delaware Research Fund ............................. 309,856 2,928,136
Delaware Group Equity Funds IV -
Delaware Diversified Growth Fund ................... 338,968 4,538,778
Delaware Group Equity Funds V -
Delaware Small Cap Value Fund ...................... 48,003 1,194,786
Delaware Group Global & International Funds -
Delaware International Equity Fund ................. 230,117 3,647,354
Delaware Group Global & International Funds -
Delaware Emerging Markets Fund ..................... 84,013 760,315
Voyageur Mutual Funds III -
Delaware Select Growth Fund ........................ 62,118 2,752,460
-----------
21,809,540
-----------
Fixed-Income Funds - 29.87%
Delaware Group Government Funds -
Delaware American Government Bond Fund ............. 1,041,577 7,468,109
Delaware Group Income Funds -
Delaware Delchester Fund ........................... 401,948 1,901,216
-----------
9,369,325
-----------
Total Investment Companies
(cost $30,230,925) ................................. 31,178,865
-----------
Principal
Amount
---------
Repurchase Agreements - 0.80%
With Chase Manhattan 6.03% 4/3/00
(dated 3/31/00, collateralized by $92,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $87,808) .............................. $86,000 86,000
With PaineWebber 6.05% 4/3/00 (dated
3/31/00, collateralized by $24,000 U.S.
Treasury Notes 6.375% due 3/31/01, market
value $23,835 and $24,000 U.S. Treasury Notes
5.25% due 5/31/01, market value $24,420 and
$12,000 U.S. Treasury Notes 11.875%
due 11/15/03, market value $14,193
and $24,000 U.S. Treasury Notes 5.875%
due 11/15/04, market value $24,422) ................ 85,000 85,000
With Prudential Securities 6.00% 4/3/00
(dated 3/31/00, collateralized by $73,000
U.S. Treasury Notes 6.00% due 8/15/00,
market value $81,899) .............................. 80,000 80,000
-----------
Total Repurchase Agreements
(cost $251,000) .................................... 251,000
-----------
<PAGE>
- --------------------------------------------------------------------------------
Total Market Value of Securities - 100.21%
(cost $30,481,925) .......................................... $31,429,865
Liabilities Net of Receivables and
Other Assets - (0.21%) ...................................... (67,267)
-----------
Net Assets Applicable to 3,348,750
Shares Outstanding - 100.00% ................................ $31,362,598
===========
Net Asset Value - Balanced Portfolio A Class
($28,977,225 / 3,094,639 shares) ............................ $9.36
-----------
Net Asset Value - Balanced Portfolio B Class
($1,292,270 / 137,742 shares) ............................... $9.38
-----------
Net Asset Value - Balanced Portfolio C Class
($954,767 / 101,590 shares) ................................. $9.40
-----------
Net Asset Value - Balanced Portfolio Institutional
Class ($138,336 / 14,779 shares) ............................ $9.36
-----------
Components of Net Assets at March 31, 2000:
Shares of Beneficial Interest (unlimited
authorization - no par) ..................................... $30,106,287
Distributions in excess of net investment
income ...................................................... (82,852)
Accumulated net realized gain on investments ................. 391,223
Net unrealized appreciation of investments ................... 947,940
-----------
Total net assets ............................................. $31,362,598
===========
Net Asset Value and Offering Price Per Share -
Balanced Portfolio
Net asset value A Class (A) .................................. $9.36
Sales charge (5.75% of offering price or 6.09%
of the amount invested per share) (B) ....................... 0.57
-----------
Offering price ............................................... $9.93
-----------
- ----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
12
<PAGE>
Statements of Net Assets (continued)
INCOME PORTFOLIO
- ----------------
Number of Market
March 31, 2000 (Unaudited) Shares Value
- ------------------------------------------------------------------------------
Investment Companies - 95.88%
Equity Funds - 40.86%
Delaware Group Equity Funds II -
Delaware Growth and Income Fund ....................... 59,252 $ 862,112
Delaware Group Equity Funds II -
Delaware Diversified Value Fund ....................... 90,413 919,502
Delaware Group Equity Funds III -
Delaware Research Fund ................................ 105,188 994,030
Delaware Group Equity Funds IV -
Delaware Diversified Growth Fund ...................... 149,974 2,008,151
Delaware Group Equity Funds V -
Delaware Small Cap Value Fund ......................... 10,358 257,813
Delaware Group Global & International Funds -
Delaware International Equity Fund .................... 72,518 1,149,406
Delaware Pooled Trust - The Real Estate
Investment Trust Portfolio ............................ 30,013 349,350
Voyageur Mutual Funds III -
Delaware Select Growth Fund ........................... 22,662 1,004,133
-----------
7,544,497
-----------
Fixed-Income Funds - 55.02%
Delaware Group Government Funds -
Delaware American Government Bond Fund ................ 1,058,670 7,590,664
Delaware Group Income Funds -
Delaware Delchester Fund .............................. 543,102 2,568,873
-----------
10,159,537
-----------
Total Investment Companies
(cost $18,359,101) .................................... 17,704,034
-----------
Principal
Amount
---------
Repurchase Agreements - 4.30%
With Chase Manhattan 6.03% 4/3/00
(dated 3/31/00, collateralized by $292,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $277,417) ................................ $271,000 271,000
With PaineWebber 6.05% 4/3/00
(dated 3/31/00, collateralized by $75,000
U.S. Treasury Notes 6.375% due 3/31/01,
market value $75,302 and $77,000 U.S.
Treasury Notes 5.25% due 5/31/01, market
value $77,151 and $37,000 U.S. Treasury
Notes 11.875% due 11/15/03,
market value $44,840 and $77,000
U.S. Treasury Notes 5.875% due 11/15/04,
market value $77,157) ................................. 269,000 269,000
With Prudential Securities 6.00% 4/3/00
(dated 3/31/00, collateralized by $231,000
U.S. Treasury Notes 6.00% due 8/15/00,
market value $258,747) ................................ 253,000 253,000
-----------
Total Repurchase Agreements
(cost $793,000) ....................................... 793,000
-----------
<PAGE>
- --------------------------------------------------------------------------------
Total Market Value of Securities - 100.18%
(cost $19,152,101) .................................... $18,497,034
Liabilities Net of Receivables and
Other Assets - (0.18%) ................................ (32,830)
-----------
Net Assets Applicable to 2,128,080
Shares Outstanding - 100.00% .......................... $18,464,204
===========
Net Asset Value - Income Portfolio A Class
($17,824,511 / 2,054,647 shares) ...................... $8.68
-----------
Net Asset Value - Income Portfolio B Class
($361,962 / 41,496 shares) ............................ $8.72
-----------
Net Asset Value - Income Portfolio C Class
($191,799 / 22,035 shares) ............................ $8.70
-----------
Net Asset Value - Income Portfolio Institutional
Class ($85,932 / 9,902 shares) ........................ $8.68
-----------
Components of Net Assets at March 31, 2000:
Shares of Beneficial Interest (unlimited
authorization - no par) ............................... $18,785,931
Distributions in excess of net investment
income ................................................ (2,200)
Accumulated net realized gain on investments ........... 335,540
Net unrealized depreciation of investments ............. (655,067)
-----------
Total net assets ....................................... $18,464,204
===========
Net Asset Value and Offering Price Per Share -
Income Portfolio
Net asset value A Class (A) ............................ $8.68
Sales charge (5.75% of offering price or 6.11%
of the amount invested per share) (B) ................. 0.53
-----------
Offering price ......................................... $9.21
===========
- -------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
13
<PAGE>
Statements of Operations
Delaware Foundation Funds
<TABLE>
<CAPTION>
Growth Balanced Income
Six Months Ended March 31, 2000 (Unaudited) Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Interest ................................................................ $ 11,159 $ 8,407 $ 23,278
Dividends ............................................................... 178,600 370,484 461,608
-----------------------------------
........................................................................ 189,759 378,891 484,886
-----------------------------------
Expenses:
Management fees ......................................................... 7,286 10,461 8,955
Distribution expense .................................................... 28,054 33,958 24,272
Dividend disbursing and transfer agent fees and expenses ................ 55,753 45,855 86,003
Registration fees ....................................................... 22,287 19,107 19,631
Reports and statements to shareholders .................................. 12,000 15,000 9,000
Accounting and administration ........................................... 3,011 4,261 3,656
Amortization of organization expenses ................................... 2,326 2,326 2,321
Professional fees ....................................................... 660 1,950 6,000
Taxes (other than taxes on income) ...................................... 66 120 200
Custodian fees .......................................................... 882 150 90
Trustees' fees .......................................................... 931 987 962
Other ................................................................... 1,500 483 251
-----------------------------------
134,756 134,658 161,341
Less expenses absorbed or waived ........................................ (65,531) (44,374) (86,981)
Less expenses paid indirectly ........................................... (341) (483) (414)
-----------------------------------
Total expenses .......................................................... 68,884 89,801 73,946
-----------------------------------
Net Investment Income ................................................... 120,875 289,090 410,940
-----------------------------------
Net Realized and Unrealized Gain on Investments:
Capital gain distributions from investment companies .................... 374,854 401,496 219,245
Net realized gain on investments ........................................ 231,733 212,667 248,652
Net change in unrealized appreciation/depreciation of investments ....... 1,169,996 1,459,315 151,169
-----------------------------------
Net Realized and Unrealized Gain on Investments ......................... 1,776,583 2,073,478 619,066
-----------------------------------
Net Increase in Net Assets Resulting from Operations .................... $1,897,458 $2,362,568 $1,030,006
===================================
</TABLE>
See accompanying notes
14
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Growth Balanced Income
Delaware Foundation Funds Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
3/31/00 9/30/99 3/31/00 9/30/99 3/31/00 9/30/99
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ............................. $ 120,875 $ 150,639 $ 289,090 $ 431,667 $ 410,940 $ 608,102
Net realized gain on investments .................. 606,587 374,414 614,163 289,279 467,897 44,912
Net change in unrealized
appreciation/depreciation of investments ......... 1,169,996 56,705 1,459,315 (335,144) 151,169 (775,667)
-------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ........................ 1,897,458 581,758 2,362,568 385,802 1,030,006 (122,653)
-------------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income:
A Class .......................................... (328,851) (16,588) (609,902) (268,006) (667,266) (408,473)
B Class .......................................... (36,717) -- (30,399) (11,355) (9,591) (10,673)
C Class .......................................... (13,139) -- (23,486) (10,723) (6,572) (3,980)
Institutional Class .............................. (3,940) (588) (3,916) (1,373) (3,101) (1,913)
Net realized gain on investments:
A Class .......................................... (327,655) (5,317) (306,567) (6,916) (84,213) (2,256)
B Class .......................................... (49,076) (3,737) (19,061) (1,985) (1,276) (994)
C Class .......................................... (17,562) (599) (14,846) (2,649) (953) (401)
Institutional Class .............................. (3,598) (147) (2,009) (166) (372) (149)
-------------------------------------------------------------------------
(780,538) (26,976) (1,010,186) (303,173) (773,344) (428,839)
-------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class .......................................... 1,939,356 15,667,690 12,458,644 22,952,044 2,693,224 22,106,262
B Class .......................................... 888,974 758,187 286,075 652,910 108,137 706,701
C Class .......................................... 377,638 484,774 267,639 302,321 21,335 147,129
Institutional Class 117,318 9,370 68,034 7,483 25,243 4,114
Net asset value of shares issued upon
reinvestment of distributions from
net investment income and net
realized gain on investments:
A Class .......................................... 656,681 21,959 916,362 274,932 751,493 410,729
B Class .......................................... 84,612 3,675 48,464 13,190 8,648 9,874
C Class .......................................... 30,700 597 37,172 12,919 7,838 4,381
Institutional Class .............................. 7,538 735 5,925 1,539 3,473 2,062
-------------------------------------------------------------------------
4,102,817 16,946,987 14,088,315 24,217,338 3,619,391 23,391,252
-------------------------------------------------------------------------
Cost of shares repurchased:
A Class .......................................... (2,213,212) (5,256,441) (3,019,067) (6,789,571) (3,106,635) (5,122,105)
B Class .......................................... (328,144) (264,719) (133,823) (81,066) (3,509) (499,183)
C Class .......................................... (156,932) (73,721) (196,288) (279,472) (35,291) (80,420)
Institutional Class .............................. (34,726) (566) (249) (531) (652) --
-------------------------------------------------------------------------
(2,733,014) (5,595,447) (3,349,427) (7,150,640) (3,146,087) (5,701,708)
-------------------------------------------------------------------------
Increase in net assets derived
from capital share transactions .................. 1,369,803 11,351,540 10,738,888 17,066,698 473,304 17,689,544
-------------------------------------------------------------------------
Net Increase in Net Assets ........................ 2,486,723 11,906,322 12,091,270 17,149,327 729,966 17,138,052
Net Assets:
Beginning of period ............................... 13,459,884 1,553,562 19,271,328 2,122,001 17,734,238 596,186
-------------------------------------------------------------------------
End of period ..................................... $15,946,607 $13,459,884 $31,362,598 $19,271,328 $18,464,204 $17,734,238
=========================================================================
</TABLE>
See accompanying notes
15
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Fund outstanding Growth Portfolio Growth Portfolio
throughout each period was as follows: A Class B Class
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Period Six Months Period
Ended Year Ended 12/31/97(1) to Ended Year Ended 12/31/97(1) to
3/31/00(4) 9/30/99 9/30/98 3/31/00(4) 9/30/99 9/30/98
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $ 9.500 $8.170 $8.500 $ 9.470 $8.140 $8.500
Income (loss) from investment operations:
Net investment income(2) ............................. 0.087 0.138 0.062 0.050 0.068 0.014
Net realized and unrealized gain (loss) on
investments ......................................... 1.212 1.295 (0.392) 1.209 1.287 (0.374)
---------------------------------------------------------------------
Total from investment operations ..................... 1.299 1.433 (0.330) 1.259 1.355 (0.360)
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................. (0.275) (0.078) none (0.210) none none
Distributions from net realized gain on investments .. (0.274) (0.025) none (0.270) (0.025) none
---------------------------------------------------------------------
Total dividends and distributions .................... (0.549) (0.103) none (0.480) (0.025) none
---------------------------------------------------------------------
Net asset value, end of period ........................ $10.250 $9.500 $8.170 $10.249 $9.470 $8.140
=====================================================================
Total return(3) ....................................... 14.11% 17.33% (3.88%) 13.69% 16.41% (4.24%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $12,620 $11,328 $547 $2,354 $1,561 $885
Ratio of expenses to average net assets .............. 0.80% 0.80% 0.80% 1.55% 1.55% 1.55%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ..................................... 1.68% 2.21% 14.36% 2.43% 2.96% 15.11%
Ratio of net investment income to average net assets . 1.76% 1.45% 0.96% 1.01% 0.70% 21.00%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ..................................... 0.88% 0.04% (12.60%) 0.13% (0.71%) (13.35%)
Portfolio turnover .................................... 82% 104% 77% 82% 104% 77%
</TABLE>
- -----------------------------------------------
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(4) Ratios have been annualized and total return has not been annualized.
See accompanying notes
16
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Fund outstanding Growth Portfolio Growth Portfolio
throughout each period was as follows: C Class Institutional Class
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Period Six Months Period
Ended Year Ended 12/31/97(1) to Ended Year Ended 12/31/97(1) to
3/31/00(4) 9/30/99 9/30/98 3/31/00(4) 9/30/99 9/30/98
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $9.480 $8.140 $8.500 $9.520 $8.180 $8.500
Income (loss) from investment operations:
Net investment income(2) ............................. 0.050 0.067 0.013 0.100 0.162 0.078
Net realized and unrealized gain (loss) on
investments ......................................... 1.209 1.298 (0.373) 1.214 1.303 (0.398)
---------------------------------------------------------------------
Total from investment operations ..................... 1.259 1.365 (0.360) 1.314 1.465 (0.320)
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................. (0.205) none none (0.300) (0.100) none
Distributions from net realized gain on investments .. (0.274) (0.025) none (0.274) (0.025) none
---------------------------------------------------------------------
Total dividends and distributions .................... (0.479) (0.025) none (0.574) (0.125) none
---------------------------------------------------------------------
Net asset value, end of period ........................ $10.260 $9.480 $8.140 $10.260 $9.520 $8.180
=====================================================================
Total return(3) ....................................... 13.68% 16.53% (4.24%) 14.25% 17.71% (3.77%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $809 $506 $74 $163 $65 $48
Ratio of expenses to average net assets .............. 1.55% 1.55% 1.55% 0.55% 0.55% 0.55%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ..................................... 2.43% 2.96% 15.11% 1.43% 1.96% 14.11%
Ratio of net investment income to average net assets . 1.01% 0.70% 0.21% 2.01% 1.70% 1.21%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ..................................... 0.13% (0.71%) (13.35%) 1.13% 0.29% (12.35%)
Portfolio turnover .................................... 82% 104% 77% 82% 104% 77%
</TABLE>
- -----------------------------------------------
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(4) Ratios have been annualized and total return has not been annualized.
See accompanying notes
17
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Fund outstanding Balanced Portfolio Balanced Portfolio
throughout each period was as follows: A Class B Class
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Period Six Months Period
Ended Year Ended 12/31/97(1) to Ended Year Ended 12/31/97(1) to
3/31/00(4) 9/30/99 9/30/98 3/31/00(4) 9/30/99 9/30/98
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $8.940 $8.130 $8.500 $8.950 $8.130 $8.500
Income (loss) from investment operations:
Net investment income(2) ............................. 0.130 0.249 0.153 0.095 0.181 0.104
Net realized and unrealized gain (loss) on
investments ......................................... 0.738 0.789 (0.463) 0.745 0.787 (0.444)
--------------------------------------------------------------------
Total from investment operations ..................... 0.868 1.038 (0.310) 0.840 0.968 (0.340)
--------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................. (0.288) (0.200) (0.060) (0.250) (0.120) (0.030)
Distributions from net realized gain on investments .. (0.160) (0.028) none (0.160) (0.028) none
--------------------------------------------------------------------
Total dividends and distributions .................... (0.448) (0.228) (0.060) (0.410) (0.148) (0.030)
--------------------------------------------------------------------
Net asset value, end of period ........................ $9.360 $8.940 $8.130 $9.380 $8.950 $8.130
====================================================================
Total return(3) ....................................... 10.08% 12.52% (3.68%) 9.74% 11.66% (4.02%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $28,977 $17,373 $972 $1,292 $1,035 $408
Ratio of expenses to average net assets .............. 0.80% 0.80% 0.80% 1.55% 1.55% 1.55%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ..................................... 1.22% 1.57% 12.87% 1.97% 2.32% 13.62%
Ratio of net investment income to average net assets . 2.81% 2.73% 2.34% 2.06% 1.98% 1.59%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ..................................... 2.39% 1.96% (9.73%) 1.64% 1.21% (10.48%)
Portfolio turnover .................................... 63% 93% 73% 63% 93% 73%
</TABLE>
- -----------------------------------------------
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(4) Ratios have been annualized and total return has not been annualized.
See accompanying notes
18
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Fund outstanding Balanced Portfolio Balanced Portfolio
throughout each period was as follows: C Class Institutional Class
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Period Six Months Period
Ended Year Ended 12/31/97(1) to Ended Year Ended 12/31/97(1) to
3/31/00(4) 9/30/99 9/30/98 3/31/00(4) 9/30/99 9/30/98
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $8.960 $8.140 $8.500 $8.940 $8.130 $8.500
Income (loss) from investment operations:
Net investment income(2) ............................. 0.095 0.182 0.104 0.141 0.271 0.169
Net realized and unrealized gain (loss) on
investments ......................................... 0.755 0.786 (0.434) 0.742 0.792 (0.469)
--------------------------------------------------------------------
Total from investment operations ..................... 0.850 0.968 (0.330) 0.883 1.063 (0.300)
--------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................. (0.250) (0.120) (0.030) (0.303) (0.225) (0.070)
Distributions from net realized gain on investments .. (0.160) (0.028) none (0.160) (0.028) none
--------------------------------------------------------------------
Total dividends and distributions .................... (0.410) (0.148) (0.030) (0.463) (0.253) (0.070)
--------------------------------------------------------------------
Net asset value, end of period ........................ $9.400 $8.960 $8.140 $9.360 $8.940 $8.130
====================================================================
Total return(3) ....................................... 9.72% 11.77% (3.90%) 10.25% 12.83% (3.56%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $955 $802 $694 $138 $61 $48
Ratio of expenses to average net assets .............. 1.55% 1.55% 1.55% 0.55% 0.55% 0.55%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ..................................... 1.97% 2.32% 13.62% 0.97% 1.32% 12.62%
Ratio of net investment income to average net assets . 2.06% 1.98% 1.59% 3.06% 2.98% 2.59%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ..................................... 1.64% 1.21% (10.48%) 2.64% 2.21% (9.48%)
Portfolio turnover .................................... 63% 93% 73% 63% 93% 73%
</TABLE>
- -----------------------------------------------
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(4) Ratios have been annualized and total return has not been annualized.
See accompanying notes
19
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Fund outstanding Income Portfolio Income Portfolio
throughout each period was as follows: A Class B Class
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Period Six Months Period
Ended Year Ended 12/31/97(1) to Ended Year Ended 12/31/97(1) to
3/31/00(4) 9/30/99 9/30/98 3/31/00(4) 9/30/99 9/30/98
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $8.550 $8.290 $8.500 $8.590 $8.290 $8.500
Income (loss) from investment operations:
Net investment income(2) ............................. 0.198 0.382 0.250 0.166 0.316 0.201
Net realized and unrealized gain (loss) on
investments ......................................... 0.313 0.198 (0.350) 0.305 0.219 (0.331)
--------------------------------------------------------------------
Total from investment operations ..................... 0.511 0.580 (0.100) 0.471 0.535 (0.130)
--------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................. (0.338) (0.295) (0.110) (0.298) (0.210) (0.080)
Distributions from net realized gain on investments .. (0.043) (0.025) none (0.043) (0.025) none
--------------------------------------------------------------------
Total dividends and distributions .................... (0.381) (0.320) (0.110) (0.341) (0.235) (0.080)
--------------------------------------------------------------------
Net asset value, end of period ........................ $8.680 $8.550 $8.290 $8.720 $8.590 $8.290
====================================================================
Total return(3) ....................................... 6.17% 6.85% (1.21%) 5.78% 6.18% (1.56%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $17,825 $17,239 $398 $362 $243 $26
Ratio of expenses to average net assets .............. 0.80% 0.80% 0.80% 1.55% 1.55% 1.55%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ..................................... 1.76% 2.13% 32.95% 2.51% 2.88% 33.70%
Ratio of net investment income to average net assets . 4.59% 4.34% 3.80% 3.84% 3.59% 3.05%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ..................................... 3.63% 3.01% (28.35%) 2.88% 2.26% (29.10%)
Portfolio turnover .................................... 46% 73% 81% 46% 73% 81%
</TABLE>
- -----------------------------------------------
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(4) Ratios have been annualized and total return has not been annualized.
See accompanying notes
20
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Fund outstanding Income Portfolio Income Portfolio
throughout each period was as follows: C Class Institutional Class
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Period Six Months Period
Ended Year Ended 12/31/97(1) to Ended Year Ended 12/31/97(1) to
3/31/00(4) 9/30/99 9/30/98 3/31/00(4) 9/30/99 9/30/98
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $8.580 $8.290 $8.500 $8.560 $8.280 $8.500
Income (loss) from investment operations:
Net investment income(2) ............................. 0.166 0.316 0.204 0.209 0.403 0.266
Net realized and unrealized gain (loss) on
investments ......................................... 0.295 0.209 (0.334) 0.302 0.212 (0.356)
--------------------------------------------------------------------
Total from investment operations ..................... 0.461 0.525 (0.130) 0.511 0.615 (0.090)
--------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................. (0.298) (0.210) (0.080) (0.348) (0.310) (0.130)
Distributions from net realized gain on investments .. (0.043) (0.025) none (0.043) (0.025) none
--------------------------------------------------------------------
Total dividends and distributions .................... (0.341) (0.235) (0.080) (0.391) (0.335) (0.130)
--------------------------------------------------------------------
Net asset value, end of period ........................ $8.700 $8.580 $8.290 $8.681 $8.560 $8.280
====================================================================
Total return(3) ....................................... 5.67% 6.06% (1.56%) 6.29% 7.16% (1.10%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $192 $195 $123 $86 $57 $49
Ratio of expenses to average net assets .............. 1.55% 1.55% 1.55% 0.55% 0.55% 0.55%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ..................................... 2.51% 2.88% 33.70% 1.51% 1.88% 32.70%
Ratio of net investment income to average net assets . 3.84% 3.59% 3.05% 4.84% 4.59% 4.05%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ..................................... 2.88% 2.26% (29.10%) 3.88% 3.26% (28.10%)
Portfolio turnover .................................... 46% 73% 81% 46% 73% 81%
</TABLE>
- -----------------------------------------------
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(4) Ratios have been annualized and total return has not been annualized.
See accompanying notes
21
<PAGE>
Notes to Financial Statements
March 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Delaware Foundation Funds (the "Trust") is registered as a non-diversified
open-end investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"). The Trust is organized as a Delaware business trust under a
Certificate of Trust dated October 24, 1997 and offers three portfolios: the
Delaware Foundation Funds Growth Portfolio ("Growth Portfolio"), the Delaware
Foundation Funds Balanced Portfolio ("Balanced Portfolio") and the Delaware
Foundation Funds Income Portfolio ("Income Portfolio") (individually a
"Portfolio" and collectively, the "Portfolios"). Each portfolio of the Trust is
non-diversified, as defined by the 1940 Act, and offers four classes of shares.
Class A carries a front-end sales charge of 5.75%. Class B carries a back-end
deferred sales charge, Class C carries a level load deferred sales charge and
the Institutional Class has no sales charge. The Portfolios will invest in
open-end investment companies (mutual funds) that are members of the Delaware
Investments Family of Funds (collectively, the "Underlying Funds"). The
Underlying Funds include funds investing in U.S. and foreign stocks, bonds and
money market instruments.
The investment objective of each Portfolio is as follows:
Growth Portfolio: To seek long-term capital growth.
Balanced Portfolio: To seek capital appreciation with current income as a
secondary objective.
Income Portfolio: To seek a combination of current income and preservation of
capital with capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Portfolios.
Security Valuation - The market value of the Portfolios' investments in the
underlying Funds is based on the published net asset value of each share of an
underlying Fund computed as of the close of regular trading on the New York
Stock Exchange on days when the Exchange is open.
Federal Income Taxes - Each Portfolio intends to continue to qualify as a
regulated investment company and make the requisite distributions to
shareholders. Accordingly, no provision for federal income taxes has been made
in the financial statements. Income and capital gain distributions are
determined in accordance with federal income tax regulations, which may differ
from accounting principles generally accepted in the United States.
22
<PAGE>
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Portfolios on the basis of daily net assets of each class. Distribution
expenses relating to a specific class are charged directly to that class.
Repurchase Agreements - The Portfolios may invest in a pooled cash account along
with other members of the Delaware Investments Family of Funds. The aggregate
daily balance of the pooled cash account is invested in repurchase agreements
secured by obligations of the U.S. government. The respective collateral is held
by the Portfolios' custodian bank until the maturity of the respective
repurchase agreements. Each repurchase agreement is 102% collateralized.
However, in the event of default or bankruptcy by the counterparty to the
agreement, realization of the collateral may be subject to legal proceedings.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Each Portfolio declares and pays distributions
from net realized gain on investments, if any, annually and from net investment
income as follows: the Income Portfolio and the Balanced Portfolio quarterly,
and the Growth Portfolio annually.
Certain expenses of Portfolios are paid through commission arrangements with
brokers. These transactions are done subject to best execution. In addition, the
Portfolios received earnings credits from their custodian when positive cash
balances are maintained, which are used to offset custody fees. The expenses
paid under the above arrangements are included in their respective expense
captions on the Statement of Operations with the corresponding offset shown as
"Expenses paid indirectly". The amount of these expenses and credits for the six
months ended March 31, 2000 are as follows:
Growth Balanced Income
Portfolio Portfolio Portfolio
--------- --------- ---------
Commission Expenses ................. $341 $483 $414
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, each
Portfolio pays Delaware Management Company (DMC), the Investment Manager of each
Portfolio, an annual Asset Allocation fee which is calculated at the rate of
0.25% (currently waived to 0.10%) of each of the Portfolios average daily net
assets.
DMC has elected to waive that portion of the management fee and reimburse each
Portfolio to the extent that annual operating expenses, exclusive of taxes,
interest, brokerage commissions, extraordinary expenses and distribution
expenses, exceed 0.55% of average daily net assets of the Portfolios through
June 30, 2000.
The Portfolios have engaged Delaware Service Company, Inc. (DSC), an affiliate
of DMC, to provide dividend disbursing, transfer agent and accounting services.
Each Portfolio pays DSC a monthly fee based on the number of shareholder
accounts, shareholder transactions and average net assets, subject to certain
minimums.
On March 31, 2000, the Portfolios had liabilities payable to affiliates as
follows:
Growth Balanced Income
Portfolio Portfolio Portfolio
--------- --------- ---------
Dividend disbursing, transfer
agent and accounting
services and other expenses
payable to DSC ....................... $10,759 $10,126 $13,344
Other expenses payable to DMC
and affiliates ....................... 6,043 6,324 5,242
Pursuant to the Distribution Agreement, the Portfolios pay Delaware
Distributors, L.P. (DDLP), the Distributor and an affiliate of DMC, an annual
fee not to exceed 0.25% of the average daily net assets of the A Class and 1.00%
of the average daily net assets of the B and C Classes.
For the six months ended March 31, 2000, DDLP earned commissions on sales of the
A Class shares for each Portfolio as follows:
Growth Balanced Income
Portfolio Portfolio Portfolio
--------- --------- ---------
$450 $440 $--
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Portfolios. These officers, trustees and employees are paid no compensation
by the Portfolios.
23
<PAGE>
3. Investments
During the six months ended March 31, 2000, the Portfolios made purchases and
sales of investment securities, including shares of the Underlying Funds, other
than U.S. government securities and temporary cash investments as follows:
Growth Balanced Income
Portfolio Portfolio Portfolio
--------- --------- ---------
Purchases ................. $6,852,485 $17,161,519 $4,764,655
Sales ..................... 5,883,365 6,698,381 3,953,837
The cost of investments for federal income tax purposes approximates cost for
book purposes. The aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for each Portfolio were as
follows:
Growth Balanced Income
Portfolio Portfolio Portfolio
--------- --------- ---------
Cost of investments $14,910,065 $30,481,925 $19,152,101
---------------------------------------------------
Aggregate unrealized
appreciation $1,560,503 $1,832,139 $ 730,369
Aggregate unrealized
depreciation (481,630) (884,199) (1,385,436)
---------------------------------------------------
Net unrealized
appreciation/depreciation $1,078,873 $ 947,940 $ (655,067)
===================================================
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
4. Capital Shares
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Growth Portfolio Balanced Portfolio Income Portfolio
---------------- ------------------ ----------------
Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended
3/31/00 9/30/99 3/31/00 9/30/99 3/31/00 9/30/99
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
A Class 196,072 1,668,679 1,379,951 2,536,969 312,851 2,501,936
B Class 89,539 83,142 31,328 72,833 12,626 82,008
C Class 38,013 52,132 29,303 34,165 2,476 16,945
Institutional Class 11,607 950 7,293 823 2,895 470
Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class 66,198 2,382 99,716 30,428 87,405 47,302
B Class 8,512 398 5,272 1,463 1,000 1,128
C Class 3,085 64 4,039 1,433 910 502
Institutional Class 760 80 646 171 403 237
--------- --------- ---------- --------- --------- ---------
413,786 1,807,827 1,557,548 2,678,285 420,566 2,650,528
--------- --------- ---------- --------- --------- ---------
Shares repurchased:
A Class (223,476) (545,940) (329,265) (742,675) (360,869) (582,005)
B Class (33,175) (27,503) (14,463) (8,853) (404) (57,950)
C Class (15,564) (7,945) (21,232) (31,351) (4,069) (9,577)
Institutional Class (3,355) (57) (27) (58) (76) 0
--------- --------- ---------- --------- --------- ---------
(275,570) (581,445) (364,987) (782,937) (365,418) (649,532)
--------- --------- ---------- --------- --------- ---------
Net increase 138,216 1,226,382 1,192,561 1,895,348 55,148 2,000,996
========= ========= ========== ========= ========= =========
</TABLE>
5. Line of Credit
Effective October 8, 1999, the Portfolios, along with certain other funds in the
Delaware Investments Family of Funds (the "Participants), participate in a
$683,500,000 revolving line of credit facility to be used for temporary or
emergency purposes as an additional source of liquidity to fund redemptions of
investor shares. The Participants are charged an annual commitment fee, which is
allocated across the Participants on the basis of each Portfolio's allocation of
the entire facility. The Participants may borrow up to a maximum of one-third of
their net assets under the agreement. Prior to October 8, 1999, the Delaware
Foundation Funds Growth, Balanced and Income Portfolios had committed lines of
credit of $500,000, $700,000 and $600,000, respectively. The Portfolios had no
amounts outstanding at March 31, 2000, or at any time during the fiscal period.
24
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
- ------------------------------------
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
Growth of Capital
o Technology and Innovation
Fund
o Select Growth Fund
o Trend Fund
o Growth Opportunities Fund*
o Small Cap Value Fund
o U.S. Growth Fund
o Tax-Efficient Equity Fund
o Social Awareness Fund
Total Return
o Blue Chip Fund
o Devon Fund
o Growth and Income Fund
o Decatur Equity
Income Fund
o REIT Fund
o Balanced Fund
International and Global
o Emerging Markets Fund
o New Pacific Fund
o Overseas Equity Fund
o International Equity Fund
o Global Equity Fund
o Global Bond Fund
Current Income
o Delchester Fund
o High-Yield
Opportunities Fund
o Strategic Income Fund
o Corporate Bond Fund
o Extended Duration
Bond Fund
o American Government
Bond Fund
o U.S. Government
Securities Fund
o Limited-Term
Government Fund
Tax-Exempt Income
o National High-Yield
Municipal Bond Fund
o Tax-Free USA Fund
o Tax-Free Insured Fund
o Tax-Free USA
Intermediate Fund
o State Tax-Free Funds**
Stability of Principal
o Cash Reserve
o Tax-Free Money Fund
Asset Allocation
o Foundation Funds
Growth Portfolio
Balanced Portfolio
Income Portfolio
* Formerly known as DelCap Fund.
** Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New
Jersey, New Mexico, New York, Oregon, Pennsylvania and Wisconsin. Insured
and intermediate bond funds are available in selected states.
(C)Delaware Distributors, L.P.
<PAGE>
DELAWARE(SM)
INVESTMENTS
- -----------
Philadelphia o London
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
This semi-annual report is for the information of Delaware Foundation Funds
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Delaware Foundation Funds Prospectus and the Delaware
Investments Performance Update for the most recently completed calendar quarter.
The prospectus sets forth details about charges, expenses, investment objectives
and operating policies of each Portfolio. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in each Portfolio will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
BOARD OF TRUSTEES
Wayne A. Stork
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
Walter P. Babich
Board Chairman
Citadel Constructors, Inc.
King of Prussia, PA
David K. Downes
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
John H. Durham
Private Investor
Horsham, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY
Ann R. Leven
Former Treasurer, National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Charles E. Peck
Retired
Fredericksburg, VA
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, MN
<PAGE>
AFFILIATED OFFICERS
Charles E. Haldeman, Jr.
President and Chief Executive Officer
Delaware Management Holdings, Inc.
Philadelphia, PA
Richard J. Flannery
Executive Vice President
and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
Bruce D. Barton
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
Investment Manager
Delaware Management Company
Philadelphia, PA
International Affiliate
Delaware International Advisers Ltd.
London, England
National Distributor
Delaware Distributors, L.P.
Philadelphia, PA
Shareholder Servicing, Dividend
Disbursing and Transfer Agent
Delaware Service Company, Inc.
Philadelphia, PA
1818 Market Street
Philadelphia, PA 19103-3682
(3120) Printed in the USA
SA-444 [3/00] PP 5/00 (J5856)
