<PAGE>
DELAWARE(SM)
INVESTMENTS
-----------
Delaware S&P 500 Index Fund
Total Return
2000 ANNUAL REPORT
(Total Return Artwork)
<PAGE>
A TRADITION OF SOUND INVESTING SINCE 1929
-----------------------------------------
TABLE OF CONTENTS
-----------------
LETTER TO SHAREHOLDERS 1
PORTFOLIO MANAGEMENT
REVIEW 3
PERFORMANCE SUMMARY 5
FINANCIAL STATEMENTS
Statement of Net Assets 6
Statement of Operations 12
Statement of Changes in
Net Assets 13
Financial Highlights 14
Notes to Financial
Statements 15
Report of Independent
Auditors 17
A Commitment To Our Investors
Experienced
o Our seasoned investment professionals average 11 years' experience.
o We began managing investments in 1929 and opened our first mutual fund in
1938. Over the past 70 years, we have weathered a full range of economic and
market environments.
Disciplined
o We follow strict investment policies and clear buy/sell guidelines.
o We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.
Consistent
o We clearly articulate our investment policies and follow them consistently.
o Our commitment to consistency has earned us the confidence of discriminating
institutional and individual investors to manage more than $44 billion in
assets as of September 30, 2000.
Comprehensive
o 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 (23 single-state funds)
o International equity o International fixed-income
o Balanced
o 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>
Dear Shareholder
"MAJOR INDEXES SUCH AS
THE DOW JONES
INDUSTRIAL AVERAGE, THE
S&P 500 INDEX, AND THE
NASDAQ COMPOSITE ARE
IN NEGATIVE TERRITORY
YEAR-TO-DATE THROUGH
SEPTEMBER 30TH."
November 6, 2000
Recap of Events -- The record-setting expansion of the U.S. economy has
continued in 2000, yet the U.S. equities markets have cooled considerably after
strong performance in recent years. Volatility in the markets has been running
high, and the broad market for U.S. equities is struggling toward its most
disappointing calendar year since 1994. After strong performance in late 1999
and early 2000, stock market indexes gave up significant ground in the spring
and have been volatile ever since. Major indexes such as the Dow Jones
Industrial Average, the S&P 500 Index, and the Nasdaq Composite are in negative
territory year-to-date through September 30th.
There seem to be several reasons for the volatility. Recently, disappointing
earnings announcements by one company have often been followed by brief, but
sharp declines in whole sectors. The rising cost of oil has analysts concerned
that the pace of economic activity may slow, causing consumers to reduce
spending, especially for low-end retail products.
There is also concern on the part of investors and analysts over stock
valuations for companies that play roles in the New Economy. In recent months,
we've begun to see increased focus on fundamentals such as earnings and
questions about the long-term sustainability of corporate growth. We believe
this trend is positive, as it has been helping to move stocks toward what we
consider to be fair values.
Delaware S&P 500 Index Fund returned -0.24% from its inception through September
30, 2000 (Institutional Class shares at net asset value with distributions
reinvested), underperforming its benchmark, the Standard & Poor's 500 Index,
which returned +0.30% for the same period. Your Fund performed better than its
peers, represented by the Lipper S&P 500 Objective Funds Average, which returned
-1.88%.
Total Returns
For the Period Ended September 30, 2000 Since Inception*
--------------------------------------------------------------------------------
Delaware S&P 500 Index Fund Institutional Class -0.24%
--------------------------------------------------------------------------------
Standard & Poor's 500 Index +0.30%
Lipper S&P 500 Objective Funds Average (152 funds) -1.88%
--------------------------------------------------------------------------------
All performance shown above is at net asset value without the effect of sales
charges and assumes reinvestment of dividends and capital gains. Performance
information for all Fund classes can be found on page 5. The S&P 500 Index is an
unmanaged composite of mostly large-capitalization U.S. companies. The Lipper
category represents the average returns of mutual funds which are designed to
replicate the performance of the Standard & Poor's 500 Index (Source: Lipper
Inc.). You cannot invest directly in an index.
Past performance is not a guarantee of future results.
* Performance for Delaware S&P 500 Index Fund and the S&P 500 Index is since the
Fund's inception on January 12, 2000. Performance for the Lipper class is
since December 31, 1999.
"S&P 500" and "Standard & Poor's 500" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by Delaware Management Holdings,
Inc. The Product is not sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the advisability
of investing in the Product.
1
<PAGE>
Market Outlook -- One year ago, our outlook for the U.S. stock market was for a
return to normalcy -- that is, a resumption of stock returns that are closer to
normal averages of about 11% annually. We think that the events of the past 12
months have set such a trend in motion.
Since it is impossible to predict the short-term direction of the markets with
any real accuracy, we recommend that investors continue to rely on basic, sound
principles of investing. These include sticking to a regular investment plan,
diversifying your assets, and keeping a long-term outlook, as well as
considering your own risk tolerance and financial goals. For help in balancing
such considerations, contact your financial adviser.
On the pages that follow, Delaware S&P 500 Index Fund manager, James May,
discusses your Fund's performance over the past few months and provides his
outlook on the equities market. As always, we thank you for remaining committed
to Delaware Investments.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
------------------- ----------------------
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family Delaware Investments Family of Funds
of Funds
(Total Return Artwork)
2
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
---------------------------
James B. May
Portfolio Manager
State Street Global Advisors
November 6, 2000
The Fund's Results
Delaware S&P 500 Index Fund was established on January 12, 2000. During its
first fiscal year (January 12, 2000 through September 30, 2000), the Fund
approximately met its goal to track the performance of the Standard & Poor's 500
Composite Stock Index within one percent of the Index's performance.
The Fund's total lifetime performance was -0.24% (Institutional Class shares at
net asset value with distributions reinvested), close to the average cumulative
increase of +0.30% for the Standard & Poor's Index. Our total assets under
management grew from an initial investment of $12 million on January 12, 2000 to
$29.1 million as of September 30, 2000.
The Delaware S&P 500 Index Fund allows investors to participate in a portfolio
of stocks that corresponds to the common stocks included in the S&P 500 Index.
The S&P 500 Index is a well-known, unmanaged, weighted composite of mostly
large-capitalization U.S. companies. The stocks in the Index are chosen by
Standard & Poor's to best capture the price performance of a large cross-section
of publicly traded companies on the U.S. stock market.
Portfolio Highlights
The extreme volatility in the U.S. stock market, which began near the end of
First Quarter 2000, continued through the Fund's fiscal year end on September
30, 2000. The technology sector in particular suffered during this unstable
period as investors tended to sell off previously high-performing stocks. This
sell-off affected six of the Fund's top original holdings -- Microsoft, Cisco,
Intel, Oracle, IBM and Lucent Technologies. Just as prices for these stocks
soared in 1999, pushing the S&P 500 Index up for the year, they have pushed the
Index down in 2000 as their values declined.
For instance, the value of Lucent stock was down sharply early in 2000. On
January 6, 2000, it lost 28 percent of its value in just one day. Unisys lost
about two-thirds of its value between the Fund's January 12th inception and
September 30, 2000, making it one of the worst performers in the Index during
that period. Another poor performer in the technology sector was BMC Software,
which was down more than 50% during that period.
We believe this performance is not necessarily indicative of a trend, but is
merely a market correction resulting from rising interest rates and the
staggeringly high performance within the technology sector in 1999. Not all
technology stocks declined. Software provider EMC Corporation, for example,
bucked the trend and performed well, gaining more than 100% since the Fund's
inception.
With the technology sector suffering, however, many investors turned to
defensive sectors such as financial services and healthcare, which performed
well during the fiscal year.
3
<PAGE>
"THE DELAWARE S&P 500
INDEX FUND ALLOWS
INVESTORS TO PARTICIPATE
IN A PORTFOLIO OF STOCKS
THAT CORRESPONDS TO THE
COMMON STOCKS INCLUDED
IN THE S&P 500 INXES."
During Second Quarter 2000, the best performing sectors in the S&P 500 Index
were healthcare and pharmaceuticals. Investors may have been attracted to the
sectors' inherently steady cash flows. Pfizer, for example, aided by its
acquisition of Warner-Lambert, had strong gains during the first two quarters
and is one of your Fund's top ten holdings.
In the final quarter of our fiscal year, financial companies began to regain
value. A good example is Associates First Capital, a provider of leasing,
insurance, and financial services to businesses and consumers that was up
strongly during the quarter to finish approximately flat for the full fiscal
year. Capital One, a consumer financial services company, gained more than 50%
in the final quarter of the fiscal year after showing few gains during the
previous two. Lehman Brothers, a global investment bank, also gained more than
50% during Third Quarter 2000, and finished up strongly for the fiscal year.
Third Quarter 2000 was still extremely volatile, with the technology sector
continuing to stumble. During the quarter, healthcare and pharmaceuticals began
to go flat, as did consumer discretionary stocks (names such as Procter &
Gamble, Gillette, and Corning), which were down as a sector for Third Quarter
2000 and down 16% for the Fund's fiscal year. Utilities had an excellent third
quarter, but the sector accounts for only 2% of the Index -- making its effect
on performance very minor.
Outlook
Our outlook for the U.S. stock market and economy remains positive, but we
expect continued volatility as the market continues the process of correcting
itself. Although the domestic economy remains robust, the specter of inflation
continues to lurk, and the Federal Reserve Board may continue its efforts to
slow growth by raising interest rates again.
Although we cannot always predict which sectors will eventually prosper, we
believe that an index fund's passive management technique, coupled with prudent
planning, has the potential to benefit the conservative, long-term investor.
<TABLE>
<CAPTION>
Top 10 Holdings
September 30, 2000
Company Industry Percentage of Net Assets
---------------------------------------------------------------------------------------------------
<S> <C> <C>
1. General Electric Electronics & Electrical Equipment 4.4%
---------------------------------------------------------------------------------------------------
2. Cisco Systems Computers & Technology 3.0%
---------------------------------------------------------------------------------------------------
3. Microsoft Corporation Computers & Technology 2.4%
---------------------------------------------------------------------------------------------------
4. Exxon Mobil Corporation Energy 2.4%
---------------------------------------------------------------------------------------------------
5. Pfizer, Inc. Healthcare & Pharmaceuticals 2.2%
---------------------------------------------------------------------------------------------------
6. Intel Corporation Electronics & Electrical Equipment 2.1%
---------------------------------------------------------------------------------------------------
7. Citigroup, Inc. Banking, Finance & Insurance 1.9%
---------------------------------------------------------------------------------------------------
8. Oracle Corporation Computers & Technology 1.7%
---------------------------------------------------------------------------------------------------
9. American International Group Banking, Finance & Insurance 1.7%
---------------------------------------------------------------------------------------------------
10. EMC Corporation Computers & Technology 1.7%
---------------------------------------------------------------------------------------------------
</TABLE>
(Total Return Artwork)
4
<PAGE>
FUND BASICS
-----------
Fund Objective
The Fund seeks to replicate the
total return of the Standard &
Poor's 500 Composite Stock Index.
Number of Holdings
500
Total Fund Assets
As of September 30, 2000
$29.12 million
Your Fund Manager
James B. May holds a BS in
Finance from Bentley College and
an MBA from Boston College. He is
a Principal and Portfolio Manager
at State Street Global Advisors,
where he manages several mutual
funds as well as several separately
managed funds. Previously, he
worked in State Street's passive U.S.
Equities operations. He is a member
of the Financial Management
Association and is working toward
the Chartered Financial Analyst
designation.
Nasdaq Symbols
Consultant Class DSPCX
Institutional Class DSPNX
FUND PERFORMANCE
----------------
Growth of a $10,000 Investment
January 12, 2000 through September 30, 2000
Delaware
S&P 500 Index
S&P 500 Index Fund Consultant Class
1/12/00 $10,000 $10,000
1/31/00 $9,734 $9,718
2/29/00 $9,539 $9,494
3/31/00 $10,461 $10,376
4/30/00 $10,139 $10,071
5/31/00 $9,917 $9,859
6/30/00 $10,154 $10,094
7/31/00 $9,989 $9,918
8/31/00 $10,596 $10,529
9/30/00 $10,030 $9,976
Chart assumes $10,000 invested on January 12, 2000 and includes the reinvestment
of all dividends and capital gains. Performance of other Fund classes will vary
due to differing charges and expenses. Returns on the chart were plotted as of
each month's end. You cannot invest directly in an index.
Total Return
Through September 30, 2000 Lifetime
--------------------------------------------------------------------------------
Consultant Class (Est. 1/12/00) -0.35%
--------------------------------------------------------------------------------
Institutional Class (Est. 1/12/00) -0.24%
--------------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Past performance is not a guarantee of future results.
Consultant Class shares are available without a sales charge. Performance
reflects the impact of a 12b-1 fee.
The Institutional Class is available without sales or asset based distribution
charges only to certain eligible institutional accounts.
An expense limitation was in effect for all classes of Delaware S&P 500 Index
Fund during the period shown. Performance would have been lower if the expense
limitation was not in effect.
"S&P 500" and "Standard & Poor's 500" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by Delaware Management Holdings,
Inc. The Product is not sponsored, endorsed, sold or promoted by Standard &
Poor's and Standard & Poor's makes no representation regarding the advisability
of investing in the Product.
5
<PAGE>
Statement of Net Assets
DELAWARE S&P 500 Index Fund
Number of Market
September 30, 2000 Shares Value
--------------------------------------------------------------------------------
Common Stock - 96.05%
Aerospace & Defense - 1.20%
Boeing .......................................... 1,979 $124,677
General Dynamics ................................ 445 27,952
Honeywell International ......................... 1,746 62,201
Lockheed Martin ................................. 990 32,630
Northrop ........................................ 172 15,631
Textron ......................................... 322 14,852
United Technologies ............................. 1,029 71,258
--------
349,201
--------
Automobiles & Automotive Parts - 0.97%
Cooper Industries ............................... 200 7,050
Cooper Tire & Rubber ............................ 200 2,013
Cummins Engine .................................. 100 2,994
Dana ............................................ 300 6,450
Danaher ......................................... 300 14,925
Delphi Automotive Systems ....................... 1,257 19,012
Ford Motor ...................................... 4,157 105,224
General Motors .................................. 1,169 75,985
Genuine Parts ................................... 396 7,549
Goodrich (B.F.) ................................. 223 8,739
Goodyear Tire & Rubber .......................... 300 5,400
*Navistar International .......................... 200 5,988
PACCAR .......................................... 147 5,448
TRW ............................................. 251 10,197
Visteon ......................................... 327 4,946
--------
281,920
--------
Banking, Finance & Insurance - 15.25%
AFLAC ........................................... 582 37,284
Aetna ........................................... 301 17,477
Allstate ........................................ 1,663 57,789
AmSouth Bancorporation .......................... 800 10,000
American Express ................................ 3,025 183,769
American General ................................ 547 42,666
American International Group .................... 5,096 487,624
Aon ............................................. 574 22,530
Associates First Capital Class A ................ 1,630 61,940
BB&T ............................................ 878 26,450
Bank of America ................................. 3,707 194,154
Bank of New York ................................ 1,711 95,923
Bank One ........................................ 2,605 100,618
Bear Stearns .................................... 252 15,876
Block (H&R) ..................................... 200 7,413
Capital One Financial ........................... 453 31,738
CIT Group ....................................... 598 10,465
Charter One Financial ........................... 450 10,980
Chase Manhattan ................................. 2,892 133,574
Chubb ........................................... 372 29,435
Cigna ........................................... 343 35,809
Cincinnati Financial ............................ 364 12,922
Citigroup ....................................... 9,980 539,544
Comerica ........................................ 351 20,512
Conseco ......................................... 600 4,575
<PAGE>
Number of Market
Shares Value
--------------------------------------------------------------------------------
Common Stock (continued)
Banking, Finance & Insurance (continued)
Countrywide Credit Industry ....................... 262 $ 9,891
Equifax ........................................... 300 8,081
Federal Home Loan ................................. 1,521 82,229
Federal National Mortgage ......................... 2,295 164,093
Fifth Third Bancorp ............................... 1,020 54,953
First Union ....................................... 2,147 69,107
Firstar ........................................... 2,129 47,636
Fleet Boston Financial ............................ 2,070 80,730
Franklin Resources ................................ 535 23,770
Golden West Financial ............................. 356 19,091
Hartford Financial Services ....................... 493 35,958
Household International ........................... 1,039 58,833
Huntington Bancshares ............................. 565 8,298
Jefferson-Pilot ................................... 233 15,815
KeyCorp ........................................... 933 23,617
Lehman Brothers Holdings .......................... 267 39,449
Lincoln National .................................. 429 20,646
Loews Corporation ................................. 217 18,092
MBIA .............................................. 216 15,363
MBNA .............................................. 1,857 71,495
MGIC Investment ................................... 226 13,814
Marsh & McLennan .................................. 590 78,323
Mellon Financial .................................. 1,080 50,085
Merrill Lynch & Company ........................... 1,764 116,424
Morgan (J.P.) ..................................... 356 58,162
Morgan Stanley Dean Witter ........................ 2,491 227,771
National City ..................................... 1,348 29,825
Northern Trust .................................... 505 44,882
Old Kent Financial ................................ 315 9,115
PNC Financial Group ............................... 661 42,965
Paine Webber Group ................................ 339 23,094
Progressive ....................................... 166 13,591
Providian Financial ............................... 314 39,878
Regions Financial ................................. 505 11,457
Safeco ............................................ 295 8,039
Schwab (Charles) .................................. 3,032 107,636
SouthTrust ........................................ 387 12,166
St. Paul .......................................... 490 24,163
State Street Bank ................................. 365 47,450
*Stilwell Financial ................................ 476 20,706
Summit Bancorp .................................... 389 13,421
Suntrust Banks .................................... 668 33,275
Synovus Financial ................................. 619 13,115
T. Rowe Price Associates .......................... 264 12,392
Torchmark ......................................... 291 8,093
U.S. Bancorp ...................................... 1,683 38,288
USA Education ..................................... 353 17,010
Union Planters .................................... 300 9,919
UnumProvident ..................................... 528 14,388
Wachovia .......................................... 449 25,453
Washington Mutual ................................. 1,206 48,014
6
<PAGE>
Statement of Net Assets (continued)
Number of Market
Delaware S&P 500 Index Fund Shares Value
--------------------------------------------------------------------------------
Common Stock (continued)
Banking, Finance & Insurance (continued)
Wells Fargo ..................................... 3,706 $ 170,244
----------
4,441,372
----------
Buildings & Materials - 0.15%
Armstrong Holdings .............................. 124 1,480
Centex .......................................... 100 3,213
Fluor ........................................... 147 4,410
Kaufman & Broad Home ............................ 100 2,694
Louisiana-Pacific ............................... 200 1,838
Masco ........................................... 960 17,880
Pulte ........................................... 100 3,300
Snap-on ......................................... 100 2,356
Vulcan Materials ................................ 200 8,038
----------
45,209
----------
Business Services - 0.32%
*Cendant ......................................... 1,602 17,422
*Convergys ....................................... 343 13,334
Deluxe .......................................... 182 3,697
Paychex ......................................... 819 42,998
Sabre Group Holdings ............................ 336 9,723
Young and Rubicam ............................... 149 7,376
----------
94,550
----------
Cable, Media & Publishing - 2.37%
*Clear Channel Communications .................... 1,286 72,659
Donnelley & Sons ................................ 288 7,074
Dow Jones ....................................... 200 12,100
*Dun and Bradstreet .............................. 369 12,707
Gannett ......................................... 579 30,687
InterPublic Group ............................... 667 22,720
Knight-Ridder ................................... 150 7,622
McGraw-Hill ..................................... 414 26,315
Meredith ........................................ 100 2,950
New York Times .................................. 367 14,428
Omnicom Group ................................... 390 28,446
Polaroid ........................................ 100 1,344
Time Warner ..................................... 2,896 226,612
Tribune ......................................... 657 28,662
*Viacom Class B .................................. 3,358 196,443
----------
690,769
----------
Chemicals - 1.42%
Air Products & Chemicals ........................ 515 18,540
Avery Dennison .................................. 241 11,176
Dow Chemical .................................... 1,484 37,007
DuPont(E.I.)deNemours ........................... 2,283 94,602
Eastman Chemical ................................ 147 5,430
Englehard ....................................... 308 5,005
*FMC ............................................. 58 3,890
Great Lakes Chemical ............................ 100 2,931
Hercules ........................................ 200 2,825
PPG Industries .................................. 362 14,367
Pharmacia ....................................... 2,862 172,257
<PAGE>
Number of Market
Shares Value
--------------------------------------------------------------------------------
Common Stock (continued)
Chemicals (continued)
Praxair ......................................... 356 $13,306
Rohm & Haas Co .................................. 468 13,601
Sigma-Aldrich ................................... 160 5,280
Union Carbide ................................... 291 10,985
*W.R. Grace & Company ............................ 200 1,375
-------
412,577
-------
Computers & Technology - 17.96%
*Adaptec ......................................... 248 4,960
Adobe Systems ................................... 273 42,383
*America Online .................................. 5,162 277,458
*American Power Conversion ....................... 433 8,308
*Apple Computer .................................. 715 18,411
Autodesk ........................................ 100 2,538
Automatic Data Processing ....................... 1,370 91,619
*BMC Software .................................... 500 9,563
*Cabletron Systems ............................... 370 10,869
*Ceridian ........................................ 300 8,419
*Cisco Systems ................................... 15,783 872,011
*Citrix Systems .................................. 400 8,025
Compaq Computer ................................. 3,801 104,832
Computer Associates International ............... 1,296 32,643
*Computer Sciences ............................... 371 27,547
*Compuware ....................................... 707 5,921
*Comverse Technology ............................. 343 37,044
*Dell Computer ................................... 5,770 177,788
*EMC ............................................. 4,889 484,622
Electronic Data Systems ......................... 1,023 42,455
First Data ...................................... 905 35,352
*Gateway ......................................... 706 33,006
Hewlett-Packard ................................. 2,201 213,497
International Business Machines ................. 3,866 434,925
*Lexmark International Group Class A ............. 278 10,425
Linear Technology ............................... 683 44,224
*Mercury Interactive ............................. 170 26,648
*Micron Technology ............................... 1,240 57,040
*Microsoft ....................................... 11,756 708,299
*NCR ............................................. 183 6,920
*Novell .......................................... 764 7,592
*Oracle .......................................... 6,281 494,629
*Palm ............................................ 100 5,294
*Parametric Technology ........................... 600 6,563
*PeopleSoft ...................................... 623 17,405
PerkinElmer ..................................... 100 10,438
Pitney Bowes .................................... 574 22,637
*Sapient ......................................... 254 10,335
*Seagate Technology .............................. 503 34,707
*Siebel Systems .................................. 915 101,851
*Sun Microsystems ................................ 3,483 406,640
*Teradyne ........................................ 367 12,845
*Unisys .......................................... 600 6,750
*Veritas Software ................................ 883 125,386
7
<PAGE>
Statement of Net Assets (continued)
Number of Market
Delaware S&P 500 Index Fund Shares Value
--------------------------------------------------------------------------------
Common Stock (continued)
Computers & Technology (continued)
Xerox ............................................. 1,411 $ 21,253
*Yahoo ............................................. 1,206 109,746
---------
5,231,823
---------
Consumer Products - 2.97%
Avon Products ..................................... 530 21,664
Black & Decker .................................... 200 6,838
Clorox ............................................ 501 19,821
Corning ........................................... 643 190,971
Gillete ........................................... 2,380 73,483
International Flavors & Fragrances ................ 200 3,650
Kimberly-Clark .................................... 1,214 67,756
Mattel ............................................ 965 10,796
Maytag ............................................ 151 4,690
Minnesota Mining & Manufacturing .................. 865 78,823
Procter & Gamble .................................. 2,872 192,424
Tyco International ................................ 3,719 192,923
---------
863,839
---------
Consumer Services - 0.01%
American Greetings Class A ........................ 100 1,750
---------
1,750
---------
Electronics & Electrical Equipment - 10.87%
*Advanced Micro Devices ............................ 650 15,356
*Agilent Technologies .............................. 987 48,301
*Altera ............................................ 872 41,638
*Analog Devices .................................... 773 63,821
*Broadcom Class A .................................. 488 118,950
*Conexant Systems .................................. 500 20,938
Eaton ............................................. 156 9,614
Emerson Electric .................................. 934 62,578
FirstEnergy ....................................... 500 13,469
Florida Progress .................................. 200 10,588
General Electric .................................. 22,073 1,273,294
Intel ............................................. 14,976 623,376
*JDS Uniphase ...................................... 2,055 194,583
*KLA Instruments ................................... 394 16,228
*LSI Logic ......................................... 675 19,744
*Maxim Integrated Products ......................... 620 49,871
Molex ............................................. 436 23,735
Motorola .......................................... 4,881 137,888
*National Semiconductor ............................ 393 15,818
National Service Industries ....................... 100 1,956
*Novellus Systems .................................. 291 13,550
Raytheon Class B .................................. 736 20,930
Rockwell International ............................ 400 12,100
*Sanmina ........................................... 332 31,084
*Solectron ......................................... 1,405 64,806
Tektronix ......................................... 100 7,681
Texas Instruments ................................. 3,896 183,843
Thomas & Betts .................................... 100 1,744
Whirlpool ......................................... 139 5,404
<PAGE>
Statement of Net Assets (continued)
Number of Market
Shares Value
--------------------------------------------------------------------------------
Common Stock (continued)
Electronics & Electrical Equipment (continued)
*Xilinx ............................................ 722 $ 61,821
---------
3,164,709
---------
Energy - 6.65%
Amerada Hess ...................................... 206 13,789
Anadarko Petroleum ................................ 538 35,755
Apache ............................................ 268 15,846
Ashland ........................................... 164 5,525
Baker Hughes ...................................... 734 27,250
Burlington Resources .............................. 462 17,007
Chevron ........................................... 1,420 121,055
Coastal ........................................... 471 34,913
Conoco Class B .................................... 1,412 38,036
Constellation Energy .............................. 328 16,318
Devon Energy Corporation .......................... 301 18,105
El Paso Energy .................................... 490 30,196
Enron ............................................. 1,623 142,215
Exxon Mobil ....................................... 7,750 690,719
Halliburton ....................................... 976 47,763
Kerr-McGee ........................................ 200 13,250
Nicor ............................................. 100 3,619
Occidental Petroleum .............................. 792 17,276
Peoples Energy .................................... 100 3,338
Phillips Petroleum ................................ 559 35,077
*Rowan Companies ................................... 200 5,800
Royal Dutch Petroleum ............................. 4,831 289,558
Schlumberger Limited .............................. 1,241 102,150
Sempra Energy ..................................... 400 8,325
Sunoco ............................................ 200 5,388
Transocean Sedco Forex ............................ 448 26,264
Texaco ............................................ 1,208 63,420
Tosco ............................................. 300 9,356
USX-Marathon Group ................................ 698 19,806
Unocal ............................................ 500 17,719
Williams .......................................... 971 41,025
Xcel Energy ....................................... 719 19,759
---------
1,935,622
---------
Environmental Services - 0.32%
*Allied Waste Industries ........................... 400 3,675
Ecolab ............................................ 350 12,622
PE Biosystems Group ............................... 471 54,872
Waste Management .................................. 1,319 23,000
---------
94,169
---------
Food, Beverage & Tobacco - 4.16%
Adolph Coors Company .............................. 71 4,486
Anheuser Busch .................................... 2,072 87,672
Archer-Daniels-Midland ............................ 1,430 12,335
Ball .............................................. 77 2,440
Bestfoods ......................................... 603 43,868
Brown-Forman Class B .............................. 143 7,829
Campbell Soup ..................................... 893 23,106
Coca Cola ......................................... 5,547 305,778
8
<PAGE>
Statement of Net Assets (continued)
Number of Market
Delaware S&P 500 Index Fund Shares Value
-------------------------------------------------------------------------------
Common Stock (continued)
Food, Beverage & Tobacco (continued)
Coca-Cola Enterprises .................................. 944 $ 15,045
ConAgra ................................................ 1,148 23,032
Darden Restaurants ..................................... 300 6,244
Fortune Brands ......................................... 400 10,600
General Mills .......................................... 621 22,046
Heinz (H.J.) ........................................... 778 28,835
Hershey Foods .......................................... 310 16,779
Kellogg Company ........................................ 899 21,745
Nabisco Group Holdings ................................. 699 19,922
PepsiCo ................................................ 3,269 150,374
Philip Morris .......................................... 5,045 148,512
Quaker Oats ............................................ 280 22,155
Ralston-Purina Group ................................... 694 16,439
Sara Lee ............................................... 1,934 39,284
Supervalu .............................................. 306 4,609
Sysco .................................................. 806 37,328
The Seagram Company .................................... 956 54,910
UST .................................................... 375 8,578
Unilever NV - NY Shares ................................ 1,252 60,409
Wrigley,(WM) Jr. ....................................... 244 18,270
---------
1,212,630
---------
Healthcare & Pharmaceuticals - 10.54%
Abbott Laboratories .................................... 3,504 166,659
Allergan ............................................... 277 23,389
*Alza ................................................... 273 23,615
American Home Products ................................. 2,963 167,595
*Amgen .................................................. 2,258 157,672
Bausch & Lomb .......................................... 100 3,894
Baxter International ................................... 637 50,841
Becton Dickinson ....................................... 568 15,017
*Biogen ................................................. 617 37,637
Biomet ................................................. 360 12,600
*Boston Scientific ...................................... 905 14,876
Bristol-Myers Squibb ................................... 4,343 248,094
C.R.Bard ............................................... 100 4,225
Cardinal Health ........................................ 605 53,353
*Guidant ................................................ 693 48,986
HCA - The Healthcare Company ........................... 1,275 47,334
*Healthsouth ............................................ 800 6,500
*Humana ................................................. 400 4,300
IMS Health ............................................. 606 12,575
Johnson & Johnson ...................................... 3,053 286,791
Lilly (Eli) ............................................ 2,491 202,082
Mallinckrodt ........................................... 154 7,026
*Manor Care ............................................. 200 3,138
McKesson HBOC .......................................... 611 18,674
*Medimmune .............................................. 475 36,694
Medtronic .............................................. 2,731 141,500
Merck & Company ........................................ 5,168 384,693
Millipore .............................................. 100 4,844
Pfizer ................................................. 14,108 633,978
<PAGE>
Number of Market
Shares Value
-------------------------------------------------------------------------------
Common Stock (continued)
Healthcare & Pharmaceuticals (continued)
*Quintiles Transnational ................................ 200 $ 3,188
*Saint Jude Medical ..................................... 162 8,262
Schering-Plough ........................................ 3,317 154,241
*Synavant ............................................... 30 203
Tenet Healthcare ....................................... 698 25,390
UnitedHealth Group ..................................... 343 33,871
*Watson Pharmaceutical .................................. 213 13,818
*Wellpoint Health Networks .............................. 137 13,152
----------
3,070,707
----------
Industrial Machinery - 0.72%
*Applied Materials ...................................... 1,781 105,636
Briggs & Stratton ...................................... 43 1,626
Caterpillar ............................................ 739 24,941
Crane Co. .............................................. 100 2,288
Deere & Co. ............................................ 521 17,323
Grainger (W.W.) ........................................ 200 5,263
ITT Industries ......................................... 200 6,488
Ingersoll-Rand ......................................... 350 11,856
McDermott International ................................ 300 3,300
Pall ................................................... 297 5,921
Parker Hannifin ........................................ 258 8,708
Stanley Works .......................................... 200 4,613
*Thermo Electron ........................................ 399 10,374
Timken ................................................. 100 1,369
----------
209,706
----------
Leisure, Lodging & Entertainment - 1.38%
Carnival Cruise Lines .................................. 1,339 32,973
Eastman Kodak .......................................... 681 27,836
Harley-Davidson ........................................ 671 32,124
*Harrah's Entertainment ................................. 291 8,003
Hasbro ................................................. 300 3,431
Hilton Hotels .......................................... 809 9,354
Marriott International Class A ......................... 500 18,219
McDonald's ............................................. 2,915 87,997
Walt Disney ............................................ 4,620 176,715
Wendy's International .................................. 200 4,013
----------
400,665
----------
Metals & Mining - 0.42%
Alcan Aluminum ......................................... 473 13,687
Alcoa .................................................. 1,891 47,866
Allegheny Technologies ................................. 200 3,625
Barrick Gold ........................................... 853 13,008
*Bethlehem Steel ........................................ 500 1,500
*Freeport McMoran Copper Class B ........................ 300 2,644
Homestake Mining ....................................... 500 2,594
*Inco ................................................... 431 6,950
Newmont Mining ......................................... 340 5,780
Nucor .................................................. 200 6,025
Phelps Dodge ........................................... 152 6,346
Placer Dome ............................................ 700 6,606
9
<PAGE>
Statement of Net Assets (continued)
Number of Market
Delaware S&P 500 Index Fund Shares Value
-------------------------------------------------------------------------------
Common Stock (continued)
Metals & Mining (continued)
USX-U.S. Steel Group ................................... 200 $ 3,038
Worthington Industries ................................. 200 1,875
----------
121,544
----------
Miscellaneous - 0.08%
*Consolidated Stores .................................... 200 2,700
Dover .................................................. 452 21,216
----------
23,916
----------
Packaging & Containers - 0.20%
Bemis .................................................. 100 3,213
Crown Cork & Seal ...................................... 200 2,138
Illinois Tool Works .................................... 685 38,274
*Owens-Illinois ......................................... 300 2,775
*Pactiv ................................................. 400 4,475
*Sealed Air ............................................. 161 7,285
----------
58,160
----------
Paper & Forest Products - 0.35%
Boise Cascade .......................................... 100 2,656
Fort James ............................................. 463 14,150
Georgia-Pacific ........................................ 375 8,813
International Paper .................................... 1,118 32,073
Mead ................................................... 200 4,675
Potlatch ............................................... 55 1,739
Temple-Inland .......................................... 100 3,788
Westvaco ............................................... 200 5,338
Weyerhaeuser ........................................... 496 20,026
Willamette Industries .................................. 300 8,400
----------
101,658
----------
Retail - 5.39%
Alberto Culver Class B ................................. 100 2,881
Albertson's ............................................ 892 18,732
*AutoZone ............................................... 300 6,806
*Bed Bath & Beyond ...................................... 568 13,854
*Best Buy ............................................... 454 28,886
CVS Corporation ........................................ 922 42,700
Circuit City Stores .................................... 456 10,488
Colgate-Palmolive ...................................... 1,260 59,472
*Costco Wholesale ....................................... 1,041 36,370
Dillard ................................................ 200 2,125
Dollar General ......................................... 741 12,412
*Federated Department Stores ............................ 524 13,690
Gap .................................................... 1,859 37,412
Harcourt General ....................................... 149 8,791
Home Depot ............................................. 5,196 275,713
*K Mart ................................................. 1,088 6,528
*Kohl's ................................................. 716 41,304
*Kroger ................................................. 1,855 41,853
Limited ................................................ 917 20,231
Liz Claiborne .......................................... 100 3,850
Longs Drug Stores ...................................... 100 1,913
Lowe's Companies ....................................... 867 38,907
<PAGE>
Number of Market
Shares Value
-------------------------------------------------------------------------------
Common Stock (continued)
Retail (continued)
May Department Stores .................................. 711 $ 14,576
Nordstrom .............................................. 300 4,669
*Office Depot ........................................... 624 4,875
Penney (J.C.) .......................................... 500 5,906
Radioshack ............................................. 398 25,721
*Safeway ................................................ 1,089 50,843
Sears, Roebuck ......................................... 780 25,288
Sherwin-Williams ....................................... 400 8,550
*Staples ................................................ 1,041 14,769
*Starbucks .............................................. 411 16,466
TJX Companies New ...................................... 628 14,130
Target ................................................. 1,996 51,148
Tiffany ................................................ 298 11,492
*Toys R Us .............................................. 497 8,076
*Tricon Global Restaurants .............................. 300 9,188
Tupperware ............................................. 100 1,800
V F .................................................... 300 7,406
Wal-Mart Stores ........................................ 9,935 478,122
Walgreen ............................................... 2,303 87,370
Winn-Dixie Stores ...................................... 300 4,313
----------
1,569,626
----------
Telecommunications - 9.42%
*ADC Telecommunications ................................. 1,550 41,680
A T & T ................................................ 8,452 248,278
Alltel ................................................. 718 37,471
*Andrew ................................................. 156 4,085
BellSouth .............................................. 4,215 169,654
*Comcast Special Class A ................................ 2,061 84,372
*Global Crossing Limited ................................ 1,930 59,830
Lucent Technologies .................................... 7,433 227,171
*Network Appliance ...................................... 686 87,379
*Nextel Communications .................................. 1,752 81,906
*Niagra Mohawk Holdings ................................. 315 4,961
Nortel Networks ........................................ 6,659 396,627
*Qualcom ................................................ 1,636 116,565
*Qwest Communications International ..................... 3,749 180,186
SBC Communications ..................................... 7,543 377,150
Scientific-Atlanta ..................................... 337 21,442
*Sprint ................................................. 2,038 71,457
*Tellabs ................................................ 895 42,736
Verizon Communications ................................. 6,075 294,258
*Worldcom ............................................... 6,483 196,921
----------
2,744,129
----------
Textiles, Apparel & Furniture - 0.20%
Johnson Controls ....................................... 196 10,425
Leggett & Platt ........................................ 400 6,325
Newell Rubbermaid ...................................... 539 12,296
Nike ................................................... 582 23,316
*Reebok International ................................... 100 1,881
Russell ................................................ 100 1,588
10
<PAGE>
Statement of Net Assets (continued)
Number of Market
Delaware S&P 500 Index Fund Shares Value
-------------------------------------------------------------------------------
Common Stock (continued)
Textiles, Apparel & Furniture (continued)
Spring Industries Class A .............................. 100 $ 2,819
----------
58,650
----------
Transportation & Shipping - 0.51%
*AMR .................................................... 300 9,806
Brunswick .............................................. 200 3,650
Burlington Northern Santa Fe ........................... 950 20,484
CSX .................................................... 497 10,841
Delta Air Lines ........................................ 276 12,248
*Fedex .................................................. 616 27,313
Norfolk Southern ....................................... 833 12,183
Ryder System ........................................... 100 1,844
Southwest Airlines ..................................... 1,103 26,748
*US Air Group ........................................... 128 3,896
Union Pacific .......................................... 528 20,526
----------
149,539
----------
Utilities - 2.22%
*AES .................................................... 1,035 70,898
Ameren ................................................. 302 12,646
American Electric Power ................................ 715 27,974
CMS Energy ............................................. 200 5,388
CP&L Energy ............................................ 345 14,382
CenturyTel ............................................. 275 7,494
Cinergy ................................................ 400 13,225
Columbia Energy Group .................................. 183 12,993
Consolidated Edison .................................... 452 15,425
DTE Energy ............................................. 300 11,475
Dominion Resources ..................................... 507 29,438
Duke Energy ............................................ 806 69,115
Eastern Enterprises .................................... 51 3,254
Edison International ................................... 720 13,905
Entergy ................................................ 518 19,296
FPL Group .............................................. 397 26,103
General Public Utilities ............................... 274 8,888
Keyspan ................................................ 300 12,038
Oneok .................................................. 100 3,975
*PECO Energy ............................................ 381 23,074
PG&E ................................................... 822 19,882
PPL .................................................... 300 12,525
Pinnacle West Capital .................................. 200 10,175
Public Service Enterprise Group ........................ 485 21,673
Reliant Energy ......................................... 658 30,597
Southern ............................................... 1,430 46,386
Sprint ................................................. 2,012 58,977
TXU .................................................... 566 22,428
Unicom ................................................. 399 22,419
----------
646,048
----------
Total Common Stock (cost $27,883,384) .................. 27,974,488
----------
<PAGE>
Principal Market
Amount Value
------------------------------------------------------------------------------
U.S. Treasury Obligations - 0.34%
+U.S. Treasury Bill 5.885% 12/14/00 ..................... $100,000 98,790
----------
Total U.S. Treasury Obligations
(cost $98,790) ...................................... $ 98,790
----------
Repurchase Agreements - 3.71%
With Chase Manhattan 6.40% 10/2/00
(dated 9/29/00, collateralized by $420,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $407,606). ............................. 397,000 397,000
With J.P. Morgan Securities 6.40% 10/2/00
(dated 9/29/00, collateralized by $163,000
U.S.Treasury Notes 6.625% due 4/30/02,
market value $168,298). ............................. 165,000 165,000
With PaineWebber 6.50% 10/2/00
(dated 9/29/00, collateralized by $2,000
U.S. Treasury Notes 5.75% due 10/31/00,
market value $1,931 and $82,000
U.S. Treasury Notes 4.625% due 12/31/00,
market value $82,941 and $82,000
U.S. Treasury Notes 6.25% due 1/31/02,
market value $83,302). .............................. 165,000 165,000
With Prudential Securities 6.50% 10/2/00
(dated 9/29/00, collateralized by $289,000
U.S. Treasury Notes 12.375% due 5/15/04,
market value $361,615). ............................. 354,000 354,000
----------
Total Repurchase Agreements
(cost $1,081,000) .................................... 1,081,000
----------
Total Market Value of Securities - 100.10%
(cost $29,063,174) ................................... 29,154,278
Liabilities Net of Receivables and Other
Assets - (0.10%) ..................................... (30,411)
----------
Net Assets Applicable to 3,435,442 Shares
Outstanding - 100.00% ................................ $29,123,867
===========
Net Asset Value - Delaware S&P 500
Index Fund Consultant Class
($5,218,520 / 616,055 shares) ....................... $8.47
-----
Net Asset Value - Delaware S&P 500
Index Fund Institutional Class
($23,905,347 / 2,819,387 shares) .................... $8.48
-----
Components of Net Assets at September 30, 2000:
Shares of beneficial interest,
(unlimited authorization - no par) .................. $29,030,342
Undistributed net investment income .................... 166,927
Accumulated net realized loss
on investments ...................................... (118,967)
Net unrealized appreciation of investments ............. 45,565
-----------
Total net assets ....................................... $29,123,867
===========
----------------
*Non-income producing security.
+Principal amount of $100,000 pledged as collateral for futures contracts.
See accompanying notes
11
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
For the period January 12, 2000* through September 30, 2000 Delaware S&P 500 Index Fund
----------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Dividends ........................................................... $174,698
Interest ............................................................ 56,515 $231,213
-------- --------
Expenses:
Management fees ..................................................... 10,553
Dividend disbursing and transfer agent fees and expenses ............ 142,725
Registration fees ................................................... 55,818
Reports and statements to shareholders .............................. 20,250
Custodian fees ...................................................... 16,236
Professional fees ................................................... 7,971
Accounting and administration ....................................... 5,670
Distribution expenses ............................................... 2,229
Trustees' fees ...................................................... 652
Taxes (other than taxes on income) .................................. 97
Other ............................................................... 11,262 273,463
--------
Less expenses absorbed or waived .................................... (207,453)
Less expenses paid indirectly ....................................... (1,724)
--------
Total expenses ...................................................... 64,286
--------
Net Investment Income ............................................... 166,927
--------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on
Investments ...................................................... (131,517)
Futures contracts ................................................ 12,550
--------
Net realized loss ................................................... (118,967)
Net change in unrealized appreciation/depreciation of investments ... 45,565
--------
Net Realized and Unrealized Loss on Investments ..................... (73,402)
--------
Net Increase in Net Assets Resulting from Operations ................ $93,525
========
</TABLE>
----------------
*Date of commencement of operations.
See accompanying notes
12
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Delaware S&P 500 Index Fund
--------------------------------------------------------------------------------------------
1/12/00*
to
9/30/00
<S> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ................................................ $ 166,927
Net realized loss on investments ..................................... (118,967)
Net change in unrealized appreciation/depreciation of investments .... 45,565
-----------
Net increase in net assets resulting from operations ................. 93,525
-----------
Capital Share Transactions:
Proceeds from shares sold:
Consultant Class .................................................. 6,261,402
Institutional Class ............................................... 25,255,171
-----------
31,516,573
-----------
Cost of shares repurchased:
Consultant Class .................................................. (917,801)
Institutional Class ............................................... (1,568,430)
-----------
(2,486,231)
-----------
Increase in net assets derived from capital share transactions ....... 29,030,342
-----------
Net Increase in Net Assets ........................................... 29,123,867
Net Assets:
Beginning of period .................................................. --
-----------
End of period ........................................................ $29,123,867
===========
</TABLE>
----------------
*Date of commencement of operations.
See accompanying notes
13
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Delaware Delaware
S&P 500 S&P 500
Selected data for each share of the Fund outstanding Index Fund Index Fund
throughout the period were as follows: Consultant Class Institutional Class
---------------------------------------------------------------------------------------------------------------
1/12/00(1) 1/12/00(1)
to to
9/30/00 9/30/00
<S> <C> <C>
Net asset value, beginning of period ............................... $8.500 $ 8.500
Income (loss) from investment operations:
Net investment income(2) ........................................ 0.059 0.066
Net realized and unrealized loss on investments ................. (0.089) (0.086)
------ -------
Total from investment operations ................................ (0.030) (0.020)
------ -------
Net asset value, end of period ..................................... $8.470 $ 8.480
====== =======
Total return(3) .................................................... (0.35%) (0.24%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ......................... $5,219 $23,905
Ratio of expenses to average net assets ......................... 0.52% 0.40%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ........................ 1.83% 1.71%
Ratio of net investment income to average net assets ............ 0.95% 1.07%
Ratio of net investment loss to average net assets prior
to expense limitation and expenses paid indirectly ............. (0.36%) (0.24%)
Portfolio turnover .............................................. 18% 18%
</TABLE>
----------------
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(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.
See accompanying notes
14
<PAGE>
Notes to Financial Statements
September 30, 2000
--------------------------------------------------------------------------------
Delaware Foundation Funds (the "Trust") is registered as a diversified open-end
investment company under the Investment Company Act of 1940, as amended. The
Trust is organized as a Delaware Business Trust and offers four portfolios: the
Delaware Growth Portfolio, the Delaware Balanced Portfolio, the Delaware Income
Portfolio and the Delaware S&P 500 Index Fund. These financial statements
pertain only to the Delaware S&P 500 Index Fund (the "Fund"), which offers two
classes of shares, the Consultant Class and the Institutional Class. Neither
class has a sales charge. The objective of the Fund is to seek to replicate the
total return of the Standard & Poor's 500 Composite Stock Price Index.
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
Fund.
Security Valuation - All equity securities are valued at the last quoted sales
price as of the close of the NYSE on the valuation date. If on a particular day
an equity security does not trade, then the mean between the bid and asked
prices will be used. Money market instruments having less than 60 days to
maturity are valued at amortized cost, which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Trustees.
Federal Income Taxes - The Fund intends 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.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund 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 Fund 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
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is at least 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.
<PAGE>
--------------------------------------------------------------------------------
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. The Fund declares and pays dividends from net
investment income and capital gains, if any, annually.
Certain expenses of the Fund are paid through commission arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $363 for the period ended September 30, 2000.
In addition, the Fund receives earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. These
credits were $1,361 for the period ended September 30, 2000. The expenses paid
under the above arrangements are included in their respective expenses captions
on the Statement of Operations with the corresponding expense offset shown as
"Expenses paid indirectly".
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company ("DMC"), the Investment Manager of the Fund, an
annual fee which is calculated at the rate of 0.07% on average daily net assets.
At September 30, 2000, the Fund had no liability for investment management fees,
and other expenses payable to DMC.
DMC has entered into a sub-advisory agreement with State Street Global Advisors,
a division of State Street Corporation, with respect to the management of the
Fund. For the services provided to DMC, DMC pays the subadvisor a annual fee
which is calculated daily at the rate of 0.05% on the first $50 million of
average daily net assets of the Fund, 0.04% on the next $50 million, and 0.02%
on the average daily net assets in excess of $100 million, subject to an annual
minimum of $50,000. The Fund does not pay any fees to the subadvisor.
DMC has elected to waive the portion, if any, of the management fee and
reimburse the Fund to the extent that annual operating expenses, exclusive of
taxes, interest, distribution fees, brokerage commissions and extraordinary
expenses exceed 0.40% of average daily net assets of the Fund through November
30, 2000.
15
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
The Fund has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent, accounting and
administration services. The Fund pays DSC a monthly fee based on the number of
shareholder accounts, shareholder transactions and average net assets, subject
to certain minimums.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. ("DDLP"), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% (currently limited to 0.12% by the Board of Trustees) of the
average daily assets of the Consultant Class.
At September 30, 2000, the Fund had a liability for such fees and other expenses
payable to DMC and affiliates of $64,286.
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Fund. These officers, trustees and employees are paid no compensation by the
Fund.
3. Investments
During the period ended September 30, 2000, the Fund made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:
Purchases ................................................ $30,743,386
Sales .................................................... $ 2,728,485
At September 30, 2000, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for the Fund were as
follows:
Cost of investments ...................................... $29,160,221
-----------
Aggregate unrealized appreciation ........................ $ 3,067,165
Aggregate unrealized depreciation ........................ (3,073,108)
-----------
Net unrealized depreciation .............................. $ (5,943)
-----------
4. Futures Contracts
The Fund uses index futures contracts to a limited extent, with the objectives
of maintaining full exposure to the stock market, enhancing returns, maintaining
liquidity, and minimizing transaction costs. Upon entering into a futures
contract, the Fund deposits cash or pledges U.S. government securities to a
broker, equal to the minimum "initial margin" requirements of the exchange on
which the contract is traded. (In some cases, due to the form of the futures
agreement, initial margin is held in a segregated account with the Fund's
custodian, rather than directly with the broker). Subsequent payments are
received from the broker or paid to the broker (or added to the segregated
account) each day, based on the daily fluctuation in the market value of the
contract. These receipts or payments are known as "variation margin" and are
recorded daily by the fund as unrealized gains or losses until the contracts are
closed. When the contracts are closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value of the contract at the time it is closed. Risk may arise
upon entering into futures contracts from potential imperfect correlation
between the futures contracts and the underlying securities and from the
possibility of an illiquid secondary market for these instruments.
<PAGE>
--------------------------------------------------------------------------------
Financial futures contracts open at September 30, 2000 were as follows:
Contracts Notional Expiration Unrealized
to buy (sell) Cost Amount Date Gain (Loss)
--------------------------------------------------------------------------------
3 S&P 500 Index $1,135,815 December 2000 $(45,539)
The use of futures contracts involves elements of market risk and risks in
excess of the amount recognized in the financial statements. The "Notional Cost
Amount" presented above represents the Fund's total exposure in such contracts,
whereas only the net unrealized appreciation (depreciation) is reflected in the
Fund's net assets.
5. Lines of Credit
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $375,400,000 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 Funds' allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Fund had no amount outstanding at September 30, 2000 or at any time during the
period.
6. Capital Shares
Transactions in capital shares were as follows:
1/12/00*
to
9/30/00
Shares sold:
Consultant Class ............................................ 723,296
Institutional Class ......................................... 3,000,779
---------
3,724,075
---------
Shares repurchased:
Consultant Class ............................................ (107,241)
Institutional Class ......................................... (181,392)
---------
(288,633)
---------
Net increase .................................................. 3,435,442
=========
*Date of commencement of operations.
16
<PAGE>
Report of Independent Auditors
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
Delaware Group Foundation Funds -- Delaware S&P 500 Index Fund
We have audited the accompanying statement of net assets of Delaware S&P 500
Index Fund (the "Fund") as of September 30, 2000, and the related statement of
operations, statement of changes in net assets, and financial highlights for the
period January 12, 2000 (commencement of operations) through September 30, 2000.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 2000, by correspondence
with the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware S&P 500 Index Fund at September 30, 2000, and the results of its
operations, the changes in its net assets and its financial highlights for the
period January 12, 2000 (commencement of operations) through September 30, 2000,
in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
November 10, 2000
17
<PAGE>
DELAWARE(SM) For Shareholders
INVESTMENTS 1.800.523.1918
---------------------
Philadelphia o London For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
This annual report is for the information of Delaware S&P 500 Index Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware S&P 500 Index Fund 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 the Fund. 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 the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BOARD OF TRUSTEES Charles E. Peck Investment Manager
Retired Delaware Management Company
Wayne A. Stork Fredericksburg, VA Philadelphia, PA
Chairman
Delaware Investments Family of Funds Janet L. Yeomans International Affiliate
Philadelphia, PA Vice President and Treasurer Delaware International Advisers Ltd.
3M Corporation London, England
Walter P. Babich St. Paul, MN
Board Chairman Subadvisor
Citadel Constructors, Inc. State Street Global Advisors
King of Prussia, PA Boston, MA
AFFILIATED OFFICERS
David K. Downes National Distributor
President and Chief Executive Officer Charles E. Haldeman, Jr. Delaware Distributors, L.P.
Delaware Investments Family of Funds President and Chief Executive Officer Philadelphia, PA
Philadelphia, PA Delaware Management Holdings, Inc.
Philadelphia, PA Shareholder Servicing, Dividend
John H. Durham Disbursing and Transfer Agent
Private Investor Richard J. Flannery Delaware Service Company, Inc.
Horsham, PA Executive Vice President Philadelphia, PA
and General Counsel
Anthony D. Knerr Delaware Investments Family of Funds 1818 Market Street
Consultant, Anthony Knerr & Associates Philadelphia, PA Philadelphia, PA 19103-3682
New York, NY
Bruce D. Barton
Ann R. Leven President and Chief Executive Officer
Former Treasurer, National Gallery of Art Delaware Distributors, L.P.
Washington, DC Philadelphia, PA
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
</TABLE>
(3991) Printed in the USA
AR-491 [9/00] PPL 11/00 J6495
