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<PAGE>
[GRAPHIC OMITTED]
1999 ANNUAL SHAREHOLDER REPORT
- ------------------------------
Delaware Diversified Value Fund
Delaware Mid-Cap Value Fund
Delaware Retirement Income Fund
Delaware Small Cap Contrarian Fund
December 7, 1999
Dear Shareholder:
Recap of events--The U.S. stock market has provided considerable capital
appreciation since the start of your Fund's fiscal year on December 1, 1998.
Initially, there were concerns about the effect of economic crises in Asia,
Russia, Japan and Latin America. Brighter days soon followed, however, as the
Federal Reserve lowered interest rates three times in the autumn of 1998.
In December 1998, investments had just started to bounce back from the financial
losses suffered in the summer and fall of 1998. Since that time, the stock
market has gone on to recover in dramatic fashion. The Dow Jones Industrial
Average closed above both the 10,000 and 11,000 marks for the first time in the
spring of 1999. Low inflation enabled the Federal Reserve Board to keep interest
rates low and the U.S. stock market moved steadily higher.
However, the success of the stock market in the spring of 1999 heightened
inflationary concerns. The Federal Reserve responded by raising interest rates
by 0.25% on June 30th, August 24th and November 16th. These three increases took
back the three quarter-point reductions made in the fall of 1998 in response to
the global financial crisis and returned the rate to its level of 14 months ago.
In spite of the brightening domestic economic landscape in fiscal 1999, "value"
investments--stocks or bonds that appear to be selling for less than their true
worth--took a back seat to more expensive "growth" investments. Investors seemed
willing to pay higher prices for stocks of companies with faster growing and
more reliable earnings. This is a key reason why Delaware Diversified Value
Fund, Mid-Cap Value Fund, Retirement Income Fund and Small-Cap Contrarian Fund,
which have a strong value approach in some cases lagged their benchmarks in some
cases for the one-year period ended November 30, 1999.
Delaware Diversified Value Fund, which seeks capital appreciation with current
income as a secondary objective, performed well during fiscal 1999. The Fund
provided a 10.30% return (Institutional Class shares with distributions
reinvested) for the one-year period ended November 30, 1999, significantly
outpacing the +6.59% average return of its peers in the Lipper Multi-Cap Fund
Average according to Lipper Analytical Services.
<PAGE>
This Fund has a value orientation--focusing on large capitalization stocks that
the management team believes are undervalued in price and will eventually be
recognized by the market. In order to achieve its investment objective, Delaware
Diversified Value Fund first employs quantitative analysis and then fundamental
analysis. From an initial investment universe of 1,000 companies, the management
team uses proprietary quantitative models to distill potential investments to
250 companies that then become candidates for fundamental research. These 250
stocks are eventually weeded down to 100-125 stocks that are considered
excellent candidates for your Fund. This past year, this stringent value
investment discipline helped your Fund outperform its peers and resulted in 138
total holdings as of November 30, 1999.
Delaware Mid-Cap Value Fund did not benefit from the recent market conditions to
the extent of the other Funds covered in this report. The Fund had a -7.30%
return (Institutional Class shares with distributions reinvested) since its
inception on December 29, 1998. Unfortunately, Delaware Mid-Cap Value Fund also
underperformed its benchmarks, the Russell Mid-Cap Value Index and the Lipper
Mid-Cap Value Funds Average. Your Fund's largest sector weighting for this
fiscal year was Banking, Finance & Insurance. Although these companies fared
well early in 1999, they suffered towards the middle of the year when the
Federal Reserve Board raised interest rates. Financial stocks are credit
sensitive and typically suffer in a rising interest rate environment. This poor
performance by these holdings added significantly to your Fund's negative return
for the year.
One of your Fund's stand-out performers for the year was Zale Corp., a jewelry
retailer that operates the Zale's, Gordon's Jewelers and Bailey, Banks & Biddle
chains in shopping malls. Zale Corp. was your Fund's second largest holding at
2.68% of total assets and provided a positive return with strong holiday season
sales to end fiscal 1999.
Despite Delaware Mid-Cap Value Fund's negative return for this past year, we see
future potential in medium-sized companies, those with a market capitalization
between $1 billion and $9 billion. Mid-sized companies are, in our opinion,
large enough to be established as successful businesses, yet small enough that
we see attractive growth potential.
Delaware Retirement Income Fund, which seeks to achieve high current income with
the potential for capital appreciation, returned +3.14% (for Class A shares at
net asset value with distributions reinvested) for the period. This return
nearly matched the performance of its peers in the Lipper Income Fund Average
(according to Lipper Analytical Services). Your Fund's objective is to achieve
high current income with the potential for capital appreciation. The management
team attempts to meet this objective by investing in a combination of income
generating equity securities and debt securities, including dividend paying
common stocks, securities of real estate investment trusts, preferred stocks,
warrants, rights, convertible securities, investment grade bonds and foreign
equity and fixed-income securities, among several others.
<PAGE>
This past fiscal year, Delaware Retirement Income Fund invested substantially in
the Banking, Finance & Insurance sector (at 17.85% of total assets) and also
Computers & Technology (7.49% of total assets). Its investment in Computers &
Technology particularly helped the Fund deliver positive returns for the fiscal
year and outpace the return of its peers.
One of our newest Funds, Delaware Small Cap Contrarian Fund, took advantage of
attractive opportunities that abound in small-cap company stocks. This Fund
seeks to provide long-term capital appreciation by investing in small company
stocks that we believe to be undervalued. Since its inception on December 29,
1998, the Fund returned +8.24% (Institutional Class shares with distributions
reinvested), outperforming the average returns of its peers in the Lipper
Small-Cap Fund Average (according to Lipper Analytical Services), but not its
benchmark index, the Russell 2000 Index.
Your Fund held 72 stocks this past year and its top sector was Banking, Finance
& Insurance. One of Delaware Small Cap Contrarian Fund's top ten holdings was
NFO Worldwide, a consulting company that provides research-based marketing
information, brand tracking and counsel to businesses on a global basis. NFO
finished its fiscal year with its stock at an all-time high and provided a
positive return for your Fund.
Market Outlook--Looking ahead to the first half of fiscal 2000, we believe that
if U.S. equity market appreciation broadens to include more small and
undervalued companies, these four Delaware Funds have the potential to benefit.
We believe such changes should put Delaware Investments' value-style funds in an
attractive position for even stronger performance going forward. At this time,
we think there is room for continued optimism for the stock market.
Sincerely,
/s/ Wayne A. Stork
- -------------------------------------
Wayne A. Stork
Chairman,
Delaware Investments Family of Funds
/s/ David K. Downes
- -------------------------------------
David K. Downes
President and Chief Executive Officer
Delaware Investments Family of Funds
<PAGE>
Fund Performance (page 2)
Average Annual Total Returns
For Periods Ended November 30, 1999
<TABLE>
<CAPTION>
One Year Ended Lifetime
November 30, 1999
<S> <C> <C>
Delaware Diversified Value Fund Institutional Class (Est. 9/15/98) +10.30% +20.78%
Lipper Multi-Cap Value Fund Average +6.59% (487 funds) +17.02% (478 funds)
Standard & Poor's 500 Stock Index +19.37% +30.63%
Delaware Mid-Cap Value Fund Institutional Class (Est. 12/29/98) -7.30%
Lipper Mid-Cap Value Funds Average +2.25% (205 funds)
Russell Mid-Cap Value Index -2.71%
Delaware Retirement Income Fund A Class (Est. 12/2/96) +3.14% +13.41%
Lipper Income Funds Average +4.13% (90 funds) +7.60% (90 funds)
Standard & Poor's 500 Stock Index +19.37% +22.43%
Delaware Small Cap Contrarian Fund Institutional Class (Est. 12/29/98) +8.24%
Lipper Small-Cap Value Funds Average +0.74% (319 funds)
Russell 2000 Index +8.79%
</TABLE>
(disclosure)
The Institutional results shown above assume reinvestment of distributions. The
A Class Share performance (Delaware Retirement Income Fund) shown above is based
on net asset value and assumes reinvestment of distributions. The return and
value will fluctuate so that shares, when redeemed, may be worth more or less
than the original cost. The unmanaged Standard & Poor's 500 Stock Index is a
measure of large capitalization domestic stocks. The unmanaged Russell 2000
Index is a measure of small company stocks. The unmanaged Russell Mid-Cap Value
Index contains stocks from the Russell Mid-Cap Index with less-than-average
growth orientation. It is not possible to invest directly in any index. Past
performance does not guarantee future results. This information is for
shareholder use only.
<PAGE>
<TABLE>
<CAPTION>
Delaware Diversified Value Fund
Lifetime Performance
Growth of a $10,000 Investment
<S> <C> <C> <C> <C> <C> <C>
September 15, 1998 to November 30, 1999 Sep-98 Dec-98 Mar-99 Jun-99 Sep-99 Nov-99
Standard & Poor's 500 Stock Index 10000 12129 12736 13633 12781 $13,866
Delaware Diversified Value Fund Institutional Class 10000 11585 11739 13151 11952 $12,688
Delaware Mid-Cap Value Fund
Lifetime Performance
Growth of a $10,000 Investment
<CAPTION>
<S> <C> <C> <C> <C> <C>
December 29, 1998 to November 30, 1999 Dec-98 Mar-99 Jun-99 Sep-99 Nov-99
Russell Mid-Cap Value Index 10000 9689 10772 9626 $9,729
Delaware Mid-Cap Value Fund Institutional Class 10000 9588 10717 9623 $9,459
Delaware Retirement Income Fund
Lifetime Performance
Growth of a $10,000 Investment
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
December 2, 1996 to November 30, 1999 Nov-96 Jun-97 Nov-97 Jun-98 Nov-98 Jun-99 Nov-99
Standard & Poor's 500 Stock Index 10000 11822 12851 15387 16500 18891 $19,214
Delaware Retirement Income Fund A Class 9423 11541 13034 13861 13323 14631 $13,742
Delaware Small Cap Contrarian Fund
Lifetime Performance
Growth of a $10,000 Investment
<CAPTION>
<S> <C> <C> <C> <C> <C>
December 29, 1998 to November 30, 1999 Dec-98 Mar-99 Jun-99 Sep-99 Nov-99
Russell 2000 Index 10000 9457 10928 10237 $10,879
Delaware Small Cap Contrarian Fund Institutional Class 10000 9835 11870 10622 $10,506
</TABLE>
<PAGE>
DELAWARE GROUP EQUITY FUNDS II
DELAWARE DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
COMMON STOCK - 100.01%
Aerospace & Defense - 3.06%
Allied-Signal 800 $ 47,850
Boeing 800 32,650
General Dynamics 400 20,625
Northrop Grumman 400 22,475
United Technologies 600 33,900
-------------------
157,500
-------------------
Automobiles & Automotive Parts - 2.87%
Ford Motor 1,500 75,750
General Motors 1,000 72,000
-------------------
147,750
-------------------
Banking & Finance - 23.85%
American Express 400 60,524
Bank of America 2,000 117,000
Bank One 2,000 70,500
Chase Manhattan 1,000 77,250
Citigroup 3,850 207,418
Comerica 200 10,600
Federal Home Loan Bank 2,000 98,750
Firstar 1,000 26,000
First Union 1,400 54,163
Fleet Boston Financial 600 22,688
MBNA 1,300 32,825
Merrill Lynch & Company 600 48,375
Morgan (J.P.) 300 39,450
Morgan Stanley Dean Witter 700 84,437
Nationwide Financial Services - Class A 400 14,375
PNC Financial Group 600 33,450
Popular 600 17,325
SouthTrust 400 15,538
Suntrust Banks 300 20,963
Unionbancal 400 17,625
U.S. Bancorp 700 23,931
Wachovia 400 30,976
Wells Fargo 2,200 102,300
-------------------
1,226,463
-------------------
Cable, Media & Publishing - 5.45%
* AMFM 200 14,138
* AT&T - Liberty Media - Class A 800 33,450
* Chris-Craft Industries 403 27,958
* Echostar Communications - Class A 200 13,206
Knight-Ridder 600 32,738
* MediaOne Group 1,000 79,250
* Metro-Goldwyn-Mayer 600 14,288
New York Times 400 15,375
* Viacom - Class B 1,000 49,750
-------------------
280,153
-------------------
</TABLE>
<PAGE>
DELAWARE DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
Chemicals - 2.13%
Dow Chemical 400 $ 46,850
DuPont (E.I.) de Nemours 600 35,663
Praxair 600 26,775
-------------------
109,288
-------------------
Computers & Technology - 3.81%
* 3Com 400 15,937
Compaq Computer 600 14,663
* Covad Communications Group 200 10,380
First Data 600 25,950
Hewlett-Packard 200 18,975
* Micron Technology 400 26,850
* Seagate Technology 800 29,600
Symbol Technologies 600 28,613
* Visio 700 25,178
-------------------
196,146
-------------------
Consumer Products - 1.43%
Kimberly-Clark 400 25,550
Minnesota Mining & Manufacturing 500 47,780
-------------------
73,330
-------------------
Electronics & Electrical Equipment - 3.46%
Emerson Electric 400 22,800
* KLA-Tencor 200 16,919
Motorola 700 79,974
Rockwell International 200 9,925
Tyco International 1,200 48,075
-------------------
177,693
-------------------
Energy - 11.72%
Atlantic Richfield 400 38,550
Baker Hughes 600 15,150
Chevron 1,000 88,562
Coastal 800 28,200
Conoco - Class A 600 15,788
El Paso Energy 800 30,800
Exxon 1,600 126,900
Halliburton 400 15,475
Kerr-McGee 400 22,900
Mobil 800 83,450
Phillips Petroleum 200 9,562
Texaco 1,000 60,938
Transocean Offshore 400 11,275
Ultramar Diamond Shamrock 600 15,188
Unocal 600 19,913
Williams 600 20,250
-------------------
602,901
-------------------
</TABLE>
<PAGE>
DELAWARE DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
Food, Beverage & Tobacco - 4.85%
Anheuser Busch 800 $ 59,850
Campbell Soup 400 17,850
ConAgra 800 19,300
General Mills 400 15,074
Heinz (H.J.) 400 16,750
IBP 600 13,238
McDonald's 400 18,000
PepsiCo 400 13,825
Philip Morris 1,200 31,575
Ralston-Purina Group 600 17,813
The Seagram Company 600 26,138
-------------------
249,413
-------------------
Healthcare & Pharmaceuticals - 3.83%
Abbott Laboratories 600 22,800
American Home Products 1,200 62,400
Baxter International 400 27,025
Johnson & Johnson 200 20,750
Merck & Company 400 31,400
Pharmacia & Upjohn 600 32,812
-------------------
197,187
-------------------
Industrial Machinery - 0.91%
Black & Decker 400 17,950
Ingersoll-Rand 600 29,062
-------------------
47,012
-------------------
Insurance - 4.27%
AFLAC 800 38,300
American General 400 29,324
American International Group 950 98,088
Everest Reinsurance Holdings 600 14,250
Jefferson-Pilot 400 27,150
Torchmark 400 12,700
-------------------
219,812
-------------------
Leisure, Lodging & Entertainment - 1.79%
Eastman Kodak 600 37,125
Starwood Hotels & Resorts World Wide 200 4,463
Walt Disney 1,800 50,175
-------------------
91,763
-------------------
Metals & Mining - 1.30%
Alcoa 800 52,400
Barrick Gold 800 14,400
-------------------
66,800
-------------------
</TABLE>
<PAGE>
DELAWARE DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
Paper & Forest Products - 2.26%
Boise Cascade 400 $ 13,850
Georgia-Pacific 600 23,888
International Paper 600 31,312
Temple-Inland 400 22,900
Weyerhaeuser 400 24,500
-------------------
116,450
-------------------
Real Estate - 0.69%
AMB Property 600 12,000
Crescent Real Estate Equities 600 10,163
Equity Office Properties Trust 600 13,163
-------------------
35,326
-------------------
Retail - 2.08%
Circuit City Stores 600 29,100
* Federated Department Stores 600 28,238
Gap 800 32,400
Sherwin-Williams 800 17,150
-------------------
106,888
-------------------
Telecommunications - 15.09%
Alltel 400 34,600
AT&T 2,900 162,038
BellSouth 2,000 92,374
* General Instrument 400 26,200
GTE 2,000 146,000
* Level 3 Communications 200 13,556
* MCI Worldcom 800 66,150
SBC Communications 2,552 132,545
Sprint 800 55,500
U.S. West 300 18,619
* Voicestream Wireless 200 18,456
* Winstar Communications 200 10,137
-------------------
776,175
-------------------
Transportation & Shipping - 1.12%
Delta Air Lines 400 19,700
Union Pacific 800 37,650
-------------------
57,350
-------------------
Utilities - 4.04%
Allegheny Energy 600 17,400
Consolidated Edison 800 27,600
Duke Energy 600 30,412
Energy East 800 18,800
Entergy 600 16,537
PECO Energy 800 26,350
Public Service Enterprise Group 1,000 35,000
Texas Utilities 1,000 35,813
-------------------
207,912
-------------------
Total Common Stock (cost $5,069,507) 5,143,312
-------------------
</TABLE>
<PAGE>
DELAWARE DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES - 100.01%
(cost $5,069,507) $ 5,143,312
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.01%) (412)
-------------------
NET ASSETS APPLICABLE TO 481,185 SHARES
OUTSTANDING - 100.00% $ 5,142,900
===================
NET ASSET VALUE - DELAWARE DIVERSIFIED VALUE FUND A CLASS
($10.69 / 1 share) $ 10.69
===================
NET ASSET VALUE - DELAWARE DIVERSIFIED VALUE FUND INSTITUTIONAL CLASS
($5,142,889 / 481,184 shares) $ 10.69
===================
COMPONENTS OF NET ASSETS AT NOVEMBER 30, 1999:
Shares of Beneficial Interest (unlimited authorization - no par) $ 4,711,988
Undistributed net investment income 29,251
Accumulated net realized gain on investments 327,856
Net unrealized appreciation of investments 73,805
-------------------
Total net assets $ 5,142,900
===================
* Non-income producing security for the year ended November 30, 1999.
Top 10 holdings, representing 24.96% of net assets, are in bold face.
----------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE DIVERSIFIED VALUE FUND
Net asset value A Class (A) $ 10.69
Sales charge (5.75% of offering price or 6.08% of the amount
invested per share) (B) 0.65
-------------------
Offering price $ 11.34
===================
</TABLE>
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS II
DELAWARE DIVERSIFIED VALUE FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 48,742
Interest 2,066 $ 50,808
---------------- ---------------
EXPENSES:
Management fees 16,073
Registration fees 3,884
Custodian fees 2,772
Reports and statements to shareholders 2,602
Dividend disbursing and transfer agent fees and expenses 2,567
Accounting and administration 1,439
Trustees' fees 862
Professional fees 412
Taxes (other than taxes on income) 171
Other 914 31,696
----------------
Less expenses absorbed or waived (12,535)
Less expenses paid indirectly (117)
---------------
Total expenses 19,044
---------------
NET INVESTMENT INCOME 31,764
---------------
NET REALIZED AND UNREALIZED GAIN(LOSS)
ON INVESTMENTS:
Net realized gain on investments 327,920
Net change in unrealized appreciation/depreciation of
investments (152,111)
---------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 175,809
---------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $207,573
================
</TABLE>
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS II
DELAWARE DIVERSIFIED VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year 9/15/98*
Ended To
11/30/99 11/30/98
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 31,764 $ 6,131
Net realized gain on investments 327,920 11,763
Net change in unrealized appreciation/depreciation of investments (152,111) 225,916
-----------
-----------
Net increase in net assets resulting from operations 207,573 243,810
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class -- --
Institutional Class (8,706) --
Net realized gain on investments:
A Class -- --
Institutional Class (11,765) --
----------- -----------
(20,471) --
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class -- 9
Institutional Class 2,691,500 2,000,008
----------- -----------
2,691,500 2,000,017
----------- -----------
Net asset value of shares issued upon
reinvestment of distributions from
net investment income and
net realized gain on investments:
A Class -- --
Institutional Class 20,471 --
-----------
-----------
20,471 --
----------- -----------
Increase in net assets derived from capital
share transactions 2,711,971 2,000,017
----------- -----------
NET INCREASE IN NET ASSETS 2,899,073 2,243,827
NET ASSETS:
Beginning of period 2,243,827 --
-----------
-----------
End of period $ 5,142,900 $ 2,243,827
=========== ===========
</TABLE>
- -------------------------------------------------------------------
* Date of commencement of operations.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS II
DELAWARE DIVERSIFIED VALUE FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Delaware Diversified Value Fund Institutional Class
---------------------------------------------------
Year 9/15/98(1)
Ended to
11/30/99 11/30/98
--------- ----------
<S> <C> <C>
Net asset value, beginning of period $ 9.540 $ 8.500
Income from investment operations:
Net investment income(2) 0.129 0.026
Net realized and unrealized gain on investments 1.108 1.014
--------- --------
--------- --------
Total from investment operations 1.237 1.040
--------- --------
--------- --------
Less dividends and distributions:
Dividends from net investment income (0.037) -
Distributions from net realized gain on investments (0.050) -
--------- --------
--------- --------
Total dividends and distributions (0.087) -
--------- --------
--------- --------
Net asset value, end of period $10.690 $ 9.540
========= ========
========= ========
Total return(3) 13.05% 12.24%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 5,143 $ 2,244
Ratio of expenses to average net assets 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.24% 1.24%
Ratio of net investment income to average net assets 1.25% 1.41%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 0.76% 0.92%
Portfolio turnover 111% 74%
</TABLE>
- ------------------------------------------------------
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(2) The average share 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.
As of November 30, 1999, the A Class had one share outstanding, representing the
initial seed purchase. Data for this class is excluded because the data is not
believed to be meaningful.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS II
DELAWARE DIVERSIFIED VALUE FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
Delaware Group Equity Funds II (the "Company") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Company is organized as a Delaware Business Trust and offers five
series: the Delaware Decatur Equity Income Fund (formerly known as the Decatur
Income Fund), the Delaware Growth and Income Fund (formerly known as the Decatur
Total Return Fund), the Delaware Blue Chip Fund, the Delaware Social Awareness
Fund and the Delaware Diversified Value Fund. These financial statements and
related notes pertain to the Delaware Diversified Value Fund (the "Fund"). The
Fund offers four classes of shares. The Delaware Diversified Value Fund A Class
carries a front-end sales charge of 5.75%. The Delaware Diversified Value Fund B
Class carries a back-end deferred sales charge. The Delaware Diversified Value
Fund C Class carries a level load deferred sales charge and the Delaware
Diversified Value Fund Institutional Class has no sales charge. As of November
30, 1999, only the A and Institutional Classes have commenced operations.
The objective of the Fund is capital appreciation with current income as a
secondary objective.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation- Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. 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 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 generally
accepted accounting principles.
<PAGE>
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 100% 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
generally accepted accounting principles 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 "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $59 for the year ended November 30,
1999. In addition, the Fund receives earnings credits from the custodian when
positive balances are maintained, which are used to offset custody fees. These
credits were $58 for the year ended November 30, 1999. The expenses paid under
the above arrangements are included in their respective 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 0.65% on the first $500 million of
average daily net assets, 0.60% on the next $500 million, 0.55% on the next $1.5
billion and 0.50% on average daily net assets in excess of $2.5 billion. On
November 30, 1999, the Fund had a liability for other expenses payable to DMC of
$65.
<PAGE>
DMC has elected to waive that 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 0.75% of average daily net assets of the Fund through January
1, 2000.
The Fund has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent and 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. On November 30, 1999, the Fund had a liability for such
fees and other expenses payable to DSC of $470.
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% of the average daily assets of the A Class and 1.00% of the average
daily net assets of the B and C Classes. At November 30, 1999, the Fund had a
payable for distribution fees and other expenses payable to DDLP of $66.
Certain officers of DMC, DSC and DDLP are officers, trustee and/or employees of
the Fund. These officers, trustees and employees are paid no compensation by the
Fund.
3. Investments
During the year ended November 30, 1999, the Fund made purchases of $5,648,600
and sales of $2,916,661 of investment securities other than U.S. government
securities and temporary cash investments.
At November 30, 1999, the net unrealized appreciation for federal income tax
purposes was $71,156 of which $237,617 related to unrealized appreciation of
securities and $166,461 related to unrealized depreciation of securities. At
November 30, 1999, the aggregate cost of securities for federal income tax
purposes was $5,072,156
<PAGE>
4. Capital Stock
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Year 9/15/98*
Ended To
11/30/99 11/30/98
----------- -----------
<S> <C> <C>
Shares sold:
A Class - 1
Institutional Class 243,796 235,295
Shares issued upon reinvestment of dividends from
net investment income and net realized gains on
investments:
A Class - -
Institutional Class 2,093 -
------------ -----------
245,889 235,296
------------ -----------
Net Increase 245,889 235,296
============ ===========
</TABLE>
* Date of commencement of operations.
<PAGE>
5. Lines of Credit
The Fund has a committed line of credit for $100,000. No amount was outstanding
at November 30, 1999, or at any time during the fiscal year.
6. Tax Information (Unaudited)
The information set forth is for each Fund's fiscal year as required by federal
laws. Shareholders, however, must report distributions on a calendar year basis
for income tax purposes, which may include distributions for portions of two
fiscal years of a fund. Accordingly, the information needed by shareholders for
income tax purposes will be sent to them in early 2000. Please consult your tax
advisor for proper treatment of this information.
For the fiscal year ended November 30, 1999, the Delaware Diversified Value Fund
designated as long term capital gains and ordinary income distributions paid
during the year as follows:
(A) (B) (C) (D)
Long-Term
Capital Gains Ordinary Total
Distributions Income Distributions Qualifying1
(Tax Basis) Dividends (Tax Basis) Distributions
----------- --------- ----------- -------------
------ 100% 100% 48%
- -----------------------------
(A) and (B) are based on a percentage of the Fund's total distributions.
(D) is based on a percentage of ordinary income of the Fund.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Trustees
Delaware Group Equity Funds II - Delaware Diversified Value Fund
We have audited the accompanying statement of net assets of Delaware Diversified
Value Fund (the "Fund") as of November 30, 1999, and the related statement of
operations for the year then ended, and the statements of changes in net assets
and financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of November 30, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Diversified Value Fund at November 30, 1999, the results of its
operations for the year then ended, and the changes in its net assets and its
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
---------------------
January 7, 2000
<PAGE>
DELAWARE GROUP EQUITY FUNDS V
DELAWARE MIDCAP VALUE FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
COMMON STOCK 97.71%
Aerospace & Defense 1.42%
Litton Industries 600 $ 26,888
-------------------
26,888
-------------------
Automobiles & Automotive Parts 4.36%
Avis RentACar 1,100 21,038
BorgWarner Automotive 900 36,443
Dana 900 24,975
-------------------
82,456
-------------------
Banking, Finance & Insurance 18.28%
Compass Bancshares 1,350 34,256
Dime Bancorp 1,600 29,200
Edwards (A.G.) 1,100 32,725
Everest Reinsurance Holdings 1,100 26,125
Horace Mann Educators 1,100 24,131
North Fork Bancorporation 1,750 35,219
Peoples Heritage Financial Group 1,800 30,656
Protective Life 800 25,600
SouthTrust 800 31,075
Summit Bancorp 1,000 32,625
Unionbancal Corporation 1,000 44,063
-------------------
345,675
-------------------
Buildings & Materials 6.31%
D.R. Horton 2,400 33,000
* Jacobs Engineering Group 900 28,294
Masco 1,200 30,300
Southdown 600 27,713
-------------------
119,307
-------------------
Cable, Media & Publishing 3.76%
KnightRidder 700 38,194
Reynolds & Reynolds Class A 1,700 32,938
-------------------
71,132
-------------------
Chemicals 1.30%
CK Witco 2,300 24,581
-------------------
24,581
-------------------
</TABLE>
<PAGE>
DELAWARE MIDCAP VALUE FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
Computers & Technology 6.04%
* Computer Sciences 400 $ 26,100
* Sterling Software 1,700 44,731
* Synopsys 600 43,406
-------------------
114,237
-------------------
Consumer Products 1.54%
US Industries 2,100 29,138
-------------------
29,138
-------------------
Electronics & Electrical Equipment 6.56%
Honeywell 400 44,775
Symbol Technologies 500 23,844
Teleflex 900 30,769
Thomas & Betts 600 24,600
-------------------
123,988
-------------------
Energy 8.97%
Cooper Cameron 700 30,013
Nicor 800 27,750
Noble Affiliates 1,300 28,600
* Santa Fe Snyder 3,000 24,000
Transocean Offshore 1,000 28,188
Valero Energy 1,500 31,125
-------------------
169,676
-------------------
Food, Beverage & Tobacco 5.80%
Corn Products 1,200 37,650
* Suiza Foods 1,000 35,938
Universal Foods 1,700 36,125
-------------------
109,713
-------------------
Healthcare & Pharmaceuticals 2.54%
* AmeriSource Health Class A 1,500 18,563
* Trigon Healthcare 1,000 29,438
-------------------
48,001
-------------------
Industrial Machinery 4.01%
IngersollRand 800 38,750
Pentair 1,000 37,125
-------------------
75,875
-------------------
Leisure, Lodging & Entertainment 3.65%
Viad 1,200 31,575
Wendy's International 1,700 37,506
-------------------
69,081
-------------------
</TABLE>
<PAGE>
DELAWARE MIDCAP VALUE FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
Metals & Mining 1.34%
USXU.S. Steel Group 1,000 $ 25,313
-------------------
25,313
-------------------
Paper & Forest Products 1.60%
Westvaco 1,000 30,188
-------------------
30,188
-------------------
Real Estate 1.74%
Equity Office Properties Trust 1,500 32,906
-------------------
32,906
-------------------
Retail 7.48%
* BJ's Wholesale Club 1,400 52,325
Ross Stores 2,000 38,438
* Zale 1,000 50,625
-------------------
141,388
-------------------
Textiles, Apparel & Furniture 4.01%
* Furniture Brands International 2,000 39,000
HON Industries 1,700 36,763
-------------------
75,763
-------------------
Transportation & Shipping 2.78%
CNF Transportation 500 16,625
CSX 600 21,338
Southwest Airlines 900 14,681
-------------------
52,644
-------------------
Utilities 4.22%
DQE 800 29,450
RGS Energy Group 1,100 24,544
Sierra Pacific Resources 1,440 25,830
-------------------
79,824
-------------------
Total Common Stock (cost $1,974,025) 1,847,774
-------------------
Principal
Repurchase Agreements 3.28% Amount
------------------
With Chase Manhattan 5.64% 12/01/99 (dated 11/30/99,
collateralized by $9,000 U.S. Treasury Notes 5.50%
due 02/28/03, market value $8,881 and
$15,000 U.S. Treasury Notes 7.88%
due 11/15/04, market value $15,995) $ 24,250 24,250
</TABLE>
<PAGE>
DELAWARE MIDCAP VALUE FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Principal Market
Amount Value
------------------ -------------------
<S> <C> <C>
With JP Morgan 5.64% 12/01/99 (dated 11/30/99,
collateralized by $10,000 U.S. Treasury Notes 5.50%
due 03/31/03, market value $10,137 and
by $9,000 U.S. Treasury Notes 6.25%
due 02/15/03, market value $9,137) $ 18,875 $ 18,875
With PaineWebber 5.64% 12/01/99 (dated 11/30/99,
collateralized by $19,000 U.S. Treasury Notes 5.50%
due 01/31/03, market value $19,256) 18,875 18,875
-------------------
Total Repurchase Agreements (cost $62,000) 62,000
-------------------
TOTAL MARKET VALUE OF SECURITIES 100.99%
(cost $2,036,025) $ 1,909,774
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS (0.99%) (18,676)
-------------------
NET ASSETS APPLICABLE TO 235,296 SHARES
OUTSTANDING 100.00% $ 1,891,098
==================
NET ASSET VALUE DELAWARE MIDCAP VALUE FUND A CLASS
($8.04 / 1 share ) $ 8.04
=================
NET ASSET VALUE DELAWARE MIDCAP VALUE FUND INSTITUTIONAL CLASS
($1,891,090 / 235,295 shares) $ 8.04
=================
- ---------------------------------------------------------------------
* Nonincome producing security for the period ended November 30, 1999.
Top ten holdings representing 22.97% of net assets are in bold face.
COMPONENTS OF NET ASSETS AT NOVEMBER 30, 1999:
Shares of Beneficial Interest (unlimited authorization no par) $ 2,000,005
Undistributed net investment income 17,083
Accumulated net realized gain on investments 261
Net unrealized depreciation of investments (126,251)
-------------------
Total net assets $ 1,891,098
==================
NET ASSET VALUE AND OFFERING PRICE PER SHARE
DELAWARE MIDCAP VALUE FUND
Net asset value A Class (A) $ 8.04
Sales charge (5.75% of offering price or 6.09% of the amount
invested per share) (B) 0.49
-------------------
Offering price $ 8.53
==================
</TABLE>
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS V
DELAWARE RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
COMMON STOCK 45.85%
Aerospace & Defense 1.35%
Lockheed Martin 2,000 $ 39,750
-------------------
39,750
-------------------
Automobiles & Automotive Parts 3.87%
Dana 1,000 27,750
General Motors 1,200 86,400
-------------------
114,150
-------------------
Banking, Finance & Insurance 12.03%
Bank of America 1,018 59,553
Chubb 1,500 80,344
Mellon Financial 2,800 102,025
St. Paul 2,000 60,375
Summit Bancorp 1,600 52,200
-------------------
354,497
-------------------
Buildings & Materials 1.60%
GeorgiaPacific PEPS Units 1,100 47,094
-------------------
47,094
-------------------
Computers & Technology 2.60%
Pitney Bowes 1,600 76,700
-------------------
76,700
-------------------
Chemicals 1.06%
DuPont (E.I.) de Nemours 526 31,264
-------------------
31,264
-------------------
Energy 2.78%
Chevron 600 53,138
Conoco Class B 1,103 28,885
-------------------
82,023
-------------------
Food, Beverage & Tobacco 1.07%
Philip Morris 1,200 31,575
-------------------
31,575
-------------------
Industrial Machinery 3.64%
Deere & Co. 2,500 107,344
-------------------
107,344
-------------------
</TABLE>
<PAGE>
DELAWARE RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
Leisure, Lodging & Entertainment 1.33%
Starwood Hotels & Resorts Worldwide 1,750 $ 39,047
-------------------
39,047
-------------------
Metals & Mining 2.08%
Alcan Aluminum 1,800 61,200
-------------------
61,200
-------------------
Paper & Forest Products 1.94%
TempleInland 1,000 57,250
-------------------
57,250
-------------------
Real Estate 4.76%
Corporate Office Properties 5,500 42,625
Grove Property Trust 7,500 97,500
-------------------
140,125
-------------------
Telecommunications 0.11%
Winstar Communications 65 3,295
-------------------
3,295
-------------------
Transportation & Shipping 2.32%
Alexander & Baldwin 3,000 68,438
-------------------
68,438
-------------------
Utilities 3.31%
Duke Energy 1,000 50,688
Southern 2,000 46,750
-------------------
97,438
-------------------
Total Common Stock (cost $1,327,457) 1,351,190
-------------------
</TABLE>
<PAGE>
DELAWARE RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Number of Market
Shares Value
------------------ -------------------
<S> <C> <C>
CONVERTIBLE PREFERRED STOCK 15.92%
Banking, Finance & Insurance 3.63%
Newell Financial Trust I 5.25% 2,600 106,925
-------------------
106,925
-------------------
Industrial Machinery 1.59%
IngersollRand 6.75% 2,000 46,750
-------------------
46,750
-------------------
Telecommunications 4.54%
Cox Communications 7.00% 1,200 76,050
Winstar Communications 7.00% 1,000 57,750
-------------------
133,800
-------------------
</TABLE>
<PAGE>
DELAWARE RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<S> <C> <C>
Transportation 1.66%
Union Pacific Capital Trust 6.25% 1,100 $ 48,950
-------------------
48,950
-------------------
Utilities 4.50%
Houston Industries 7.00% 700 72,275
Texas Utilities 9.25% 1,300 60,369
-------------------
132,644
-------------------
Total Convertible Preferred Stock (cost $459,357) 469,069
-------------------
Principal
CORPORATE BONDS 7.23% Amount
------------------
Chemicals 0.79%
Precision Technology unsec sr sub nts 11.125% 06/15/07 $ 25,000 23,313
-------------------
23,313
-------------------
Consumer Products 1.58%
Consumers International sr nts 10.25% 04/01/05 25,000 25,188
Riddell Sports unsec sr sub nts 10.50% 07/15/07 25,000 21,313
-------------------
46,501
-------------------
Industrial Machinery 0.42%
Burke Industries unsec sr nts 10.00% 08/15/07 25,000 12,500
-------------------
12,500
-------------------
Leisure, Lodging & Entertainment 1.15%
AFC Enterprises sr sub nts 10.25% 05/15/07 10,000 10,025
Town Sports International unsec sr nts 9.75% 10/15/04 25,000 24,000
34,025
Packaging & Containers 0.81%
Huntsman Packaging unsec sr sub nts 9.125% 10/01/07 25,000 23,688
23,688
Retail 2.48%
Fleming sr sub nts 10.625% 12/15/01 50,000 50,625
Leslie's Poolmart unsec sr nts 10.375% 07/15/04 25,000 22,500
-------------------
73,125
-------------------
Total Corporate Bonds (cost $235,500) 213,152
-------------------
CONVERTIBLE BONDS 24.71%
Automobiles & Automotive Parts 1.77%
Magna International 4.875% 12/15/05 60,000 52,125
-------------------
52,125
-------------------
</TABLE>
<PAGE>
DELAWARE RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Principal Market
Amount Value
------------------ -------------------
<S> <C> <C>
DELAWARE RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS (Continued)
Banking, Finance & Insurance 2.19%
Bell Atlantic Financial Services 5.75% 04/01/03 $ 65,000 $ 64,675
-------------------
64,675
-------------------
Cable, Media & Publishing 4.35%
Mindspring Enterprises 5.00% 04/15/06 80,000 76,400
World Color Press 6.00% 10/01/07 50,000 51,500
-------------------
127,900
-------------------
Computers & Technology 4.89%
Siebel Systems 5.50% 09/15/06 85,000 144,075
-------------------
144,075
-------------------
Industrial Machinery 4.76%
MailWell 5.00% 11/01/02 100,000 89,250
Thermo Fibertek 4.50% 07/15/04 65,000 51,025
-------------------
140,275
-------------------
Metals & Mining 2.27%
MascoTech 4.50% 12/15/03 90,000 66,938
-------------------
66,938
-------------------
Telecommunications 4.48%
Clear Channel Communications 1.50% 12/01/02 70,000 69,650
Level Three Communications 6.00% 09/15/09 50,000 62,438
-------------------
132,088
-------------------
Total Convertible Bonds (cost $690,650) 728,076
-------------------
Repurchase Agreements 4.21%
With Chase Manhattan 5.64% 12/01/99
dated 11/30/99, collateralized by $18,000
U.S. Treasury Notes 5.50% due 02/28/03,
market value $17,761 and $30,000 U.S. Treasury
Notes 7.875% due 11/15/04, market value $31,989) 48,000 48,000
With J.P. Morgan Securities 5.63% 12/01/99
(dated 11/30/99, collateralized by $20,000
U.S. Treasury Notes 5.50% due 03/31/03,
market value $20,273 and $18,000 U.S. Treasury
Notes 6.25% due 02/15/03, market value $18,273) 38,000 38,000
With PaineWebber 5.63% 12/01/99
(dated 11/30/99, collateralized by $38,000
U.S.Treasury Notes 5.50% due 01/31/03, market
value $38,513) 38,000 38,000
-------------------
Total Repurchase Agreements (cost $124,000) 124,000
-------------------
</TABLE>
<PAGE>
DELAWARE RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<S> <C>
TOTAL MARKET VALUE OF SECURITIES 97.92%
(cost $2,836,964) $ 2,885,487
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 2.08% 61,150
-----------
NET ASSETS APPLICABLE TO 312,891 SHARES
OUTSTANDING 100.00% $ 2,946,637
===========
NET ASSET VALUE DELAWARE RETIREMENT INCOME FUND A CLASS
($22,194 / 2,354 shares) $ 9.43
===========
NET ASSET VALUE DELAWARE RETIREMENT INCOME FUND INSTITUTIONAL CLASS
($2,924,443 / 310,537 shares) $ 9.42
===========
nts - notes sub - subordinate sr - senior unsec - unsecured
PEPS - Premium Equity Participating Securities
COMPONENTS OF NET ASSETS AT NOVEMBER 30, 1999:
Shares of Beneficial Interest (unlimited authorization no par) $ 2,745,462
Undistributed net investment income 121,954
Accumulated net realized gain on investments 30,698
Net unrealized appreciation of investments 48,523
-----------
Total net assets $ 2,946,637
===========
NET ASSET VALUE AND OFFERING PRICE PER SHARE
DELAWARE RETIREMENT INCOME FUND
Net asset value A Class (A) $ 9.43
Sales charge (5.75% of offering price or 6.15% of the amount
invested per share)(B) 0.58
-----------
Offering price $ 10.01
===========
</TABLE>
- -----------------------------------------------------------------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS V
DELAWARE SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
COMMON STOCK 94.15%
Aerospace & Defense 2.68%
Cordant Technologies 1,000 $ 29,125
Precision Castparts 1,000 27,188
-------------------
56,313
-------------------
Automobiles & Automotive Parts 2.59%
BorgWagner Automotive 700 28,350
Clarcor 1,500 26,062
-------------------
54,412
-------------------
Banking, Finance & Insurance 16.54%
Alabama National Bancorp 700 15,837
* Avis RentACar 1,700 32,512
Community Trust Bancorp 800 17,100
Everest Reinsurance Holdings 1,200 28,500
* Farm Family Holdings 900 36,675
FBL Financial Group 1,100 19,112
FNB 1,255 32,473
* Golden State Bancorp 1,400 27,212
Harleysville Group 1,800 27,056
Horace Mann Educators 1,300 28,519
Mississippi Valley Bancshares 500 15,625
Provident Bankshares 1,570 31,155
Republic Bancorp 2,600 35,750
-------------------
347,526
-------------------
Buildings & Materials 4.95%
D.R. Horton 1,200 16,500
Florida Rock Industries 500 15,625
* Griffon 3,700 28,444
Texas Industries 1,200 43,500
-------------------
104,069
-------------------
Business Services 4.92%
* Metamor Worldwide 1,700 44,891
* Modis Professional Services 1,800 19,238
* NFO Worldwide 3,000 39,188
-------------------
103,317
-------------------
</TABLE>
<PAGE>
DELAWARE SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
Chemicals 2.66%
CK Witco 2,200 $ 23,512
Hanna (M.A.) 3,100 32,356
-------------------
55,868
-------------------
Computers & Technology 2.34%
* Metro Information Services 1,900 28,262
* NeoMagic 2,300 20,916
-------------------
49,178
-------------------
Electronics & Electronic Equipment 1.31%
Cohu 1,200 27,525
-------------------
27,525
-------------------
Energy 9.12%
* Cooper Cameron 800 34,300
Helmerich & Payne 1,200 27,150
NUI 800 20,150
New Jersey Resources 500 20,125
* Oceaneering International 1,500 19,500
Oneok 500 13,469
Santa Fe International 1,400 31,938
Valero Energy 1,200 24,900
-------------------
191,532
-------------------
Engineering & Construction 1.20%
* Jacobs Engineering Group 800 25,150
-------------------
25,150
-------------------
Food, Beverage & Tobacco 4.42%
Dole Food 1,300 20,800
* Suiza Foods 1,000 35,938
Universal Foods 1,700 36,125
-------------------
92,863
-------------------
Healthcare & Pharmaceuticals 2.09%
* Ameripath 3,100 25,333
* AmeriSource Health Class A 1,500 18,562
-------------------
43,895
-------------------
Industrial Machinery 5.81%
* Circor International 2,100 22,837
IDEX 1,300 35,831
RegalBeloit 1,400 30,800
United Dominion Industries 1,600 32,700
-------------------
122,168
-------------------
</TABLE>
<PAGE>
DELAWARE SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
Metals & Mining 3.22%
* Bethlehem Steel 2,200 $ 13,750
Century Aluminum 2,400 23,550
Homestake Mining 2,100 17,325
LTV 3,700 12,950
-------------------
67,575
-------------------
Paper & Forest Products 1.51%
Caraustar Industries 1,300 31,728
-------------------
31,728
-------------------
REITs 8.33%
Cabot Industrial Trust 2,100 38,587
Chateau Communities 1,400 36,400
Pan Pacific Retail Properties 2,200 37,400
Prentiss Properties Trust 1,900 38,475
SL Green Realty 1,200 24,225
-------------------
175,087
-------------------
Retail 4.10%
Casey's General Stores 2,200 28,119
Claire's Stores 900 19,519
* Discount Auto Parts 1,500 20,719
Great Atlantic & Pacific Tea 700 17,806
-------------------
86,163
-------------------
Telecommunications 4.39%
* Brightpoint 4,700 52,141
* TeleSpectrum Worldwide 5,500 40,047
-------------------
92,188
-------------------
Textiles, Apparel & Furniture 4.00%
* Furniture Brands International 1,700 33,150
Kellwood 1,300 26,975
Spring Industries Class A 600 24,000
-------------------
84,125
-------------------
Transportation & Shipping 4.01%
Alexander & Baldwin 1,500 34,219
CNF Transportation 1,000 33,250
USFreightways 400 16,725
-------------------
84,194
-------------------
</TABLE>
<PAGE>
DELAWARE SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------ -------------------
<S> <C> <C>
Utilities 3.96%
RGS Energy Group 900 $ 20,081
Scana 1,500 40,688
Sierra Pacific Resources 1,252 22,458
83,227
Total Common Stock (cost $2,039,831) 1,978,103
<CAPTION>
Principal
Amount
------------------
<S> <C> <C>
Repurchase Agreements 6.38%
With Chase Manhattan 5.64% 12/01/99 (dated 11/30/99,
collateralized by $19,300 U.S. Treasury Notes 5.50%
due 02/28/03, market value $19,193 and
$32,200 U.S. Treasury Notes 7.875% due 11/15/04,
market value $34,569 $ 52,400 52,400
With J. P. Morgan Securities 5.63% 12/01/99 (dated
11/30/99, collateralized by $22,100 U.S. Treasury Notes
5.50% due 03/31/03, market value $21,908 and $19,300
U.S. Treasury Notes 6.25% due 02/15/03, market value
$19,747) 40,800 40,800
With PaineWebber 5.63% 12/01/99 (dated 11/30/99,
collateralized by $41,500 U.S. Treasury Notes 5.50%
due 01/31/03, market value $41,618) 40,800 40,800
-------------------
Total Repurchase Agreements (cost $134,000) 134,000
-------------------
TOTAL MARKET VALUE OF SECURITIES
(cost $2,173,831) 100.53% $ 2,112,103
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS (0.53%) (11,160)
-------------------
NET ASSETS APPLICABLE TO 235,296 SHARES
OUTSTANDING 100.00% $ 2,100,943
===================
NET ASSET VALUE DELAWARE SMALL CAP CONTRARIAN FUND A CLASS
($8.93 / 1 Share) $ 8.93
===================
NET ASSET VALUE DELAWARE SMALL CAP CONTRARIAN FUND
INSTITUTIONAL CLASS
($2,100,934 / 235,295 shares) $ 8.93
===================
</TABLE>
<PAGE>
DELAWARE SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<S> <C> <C>
REITs Real Estate Investment Trusts
* Nonincome producing security for the period ended November 30, 1999.
Top ten holdings representing 19.59% of net assets are in bold face.
COMPONENTS OF NET ASSETS AT NOVEMBER 30, 1999:
Shares of Beneficial Interest (unlimited authorization no par) $ 2,000,017
Undistributed net investment income 25,302
Accumulated net realized gain on investments 137,352
Net unrealized depreciation of investments (61,728)
-------------------
Total net assets $ 2,100,943
===================
NET ASSET VALUE AND OFFERING PRICE PER SHARE
DELAWARE SMALL CAP CONTRARIAN FUND
Net asset value A Class (A) $ 8.93
Sales charge (5.75% of offering price, or 6.05% of
amount invested per share) (B) 0.54
-------------------
Offering price $ 9.47
===================
</TABLE>
- -----------------------------------------------------------------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS V
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Delaware Delaware Delaware
MidCap Retirement Small Cap
Value Income Contrarian
Fund Fund Fund
---- ---- ----
12/29/98* 12/29/98*
To Year Ended To
11/30/99 11/30/99 11/30/99
-------- -------- --------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 3,765 $ 78,886 $ 6,449
Dividends 27,145 77,540 33,680
------- -------- -------
30,910 156,426 40,129
------- -------- -------
EXPENSES:
Management fees 13,663 19,528 14,693
Reports and statements to shareholders 676 1,085 7,258
Professional fees 3,281 122 3,078
Registration fees 945 292 3,064
Accounting and administration 1,278 1,189 1,875
Taxes (other than taxes on income) 1,750 38 1,638
Dividend disbursing, transfer agent fees and other expenses 810 1,112 1,520
Custodian fees 310 699 1,852
Trustee's fees 1,100 1,374 650
Distribution fees - 70 -
Other 868 1,000 798
---------- -------- --------
24,681 26,509 36,426
Less expenses waived or absorbed (10,808) (3,835) (20,651)
Less expenses paid indirectly (46) (262) (948)
---------- -------- --------
Total expenses 13,827 22,412 14,827
NET INVESTMENT INCOME 17,083 134,014 25,302
---------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments 261 30,708 137,352
Net change in unrealized appreciation/ depreciation
of investments (126,251) (79,700) (61,728)
---------- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (125,990) (48,992) 75,624
---------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ (108,907) $ 85,022 $100,926
========== ======== ========
</TABLE>
- -----------------------------------------------------------------------------
*Date of commencement of operations.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS V
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Delaware Delaware Delaware
MidCap Retirement Small Cap
Value Income Contrarian
Fund Fund Fund
----------- --------------------------- ----------
12/29/98* 12/29/98*
To Year Ended Year Ended To
11/30/99 11/30/99 11/30/98 11/30/99
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 17,083 $ 134,014 $ 175,964 $ 25,302
Net realized gain on investments 261 30,708 108,694 137,352
Net change in unrealized appreciation/depreciation of investments (126,251) (79,700) (219,218) (61,728)
----------- ----------- ---------- ----------
Net increase (decrease) in net assets resulting from operations (108,907) 85,022 65,440 100,926
----------- ----------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class - (1,392) (263) -
Institutional Class - (173,404) (134,766) -
Net realized gain on investments:
A Class - (864) (553) -
Institutional Class - (107,679) (283,718) -
----------- ----------- ---------- ----------
- (283,339) (419,300) -
----------- ----------- ---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class 508 - 21,843 409
Institutional Class 2,000,009 - 13,498 2,000,008
Net asset value of shares issued upon
reinvestment of distributions from net
investment income and net realized gain
on investments:
A Class - 2,256 816 -
Institutional Class - 281,083 418,484 -
----------- ----------- ---------- ----------
2,000,517 283,339 454,641 2,000,417
----------- ----------- ---------- ----------
Cost of shares repurchased:
A Class (512) (1,266) (7,629) (400)
Institutional Class - (14) (2,000) -
----------- ----------- ---------- ----------
(512) (1,280) (9,629) (400)
----------- ----------- ---------- ----------
Increase in net assets derived from capital share transactions 2,000,005 282,059 445,012 2,000,017
----------- ----------- ---------- ----------
NET INCREASE IN NET ASSETS 1,891,098 83,742 91,152 2,100,943
NET ASSETS:
Beginning of period - 2,862,895 2,771,743 -
----------- ----------- ---------- ----------
End of period $ 1,891,098 $ 2,946,637 $2,862,895 $2,100,943
=========== =========== ========== ==========
</TABLE>
- -------------------------------------------------------------------
*Date of commencement of operations.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS V
DELAWARE MIDCAP VALUE FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout the period
was as follows:
Delaware
MidCap Value Fund
Institutional Class
-------------------
12/29/98(1)
To
11/30/99
--------
Net asset value, beginning of period $ 8.500
Income (loss) from investment operations:
Net investment income(2) 0.073
Net realized and unrealized gain (loss) on investments (0.533)
-------
Total from investment operations (0.460)
-------
Less dividends and distributions:
Dividends from net investment income -
Distributions from net realized gain on investments -
-------
Total dividends and distributions -
-------
Net asset value, end of period $ 8.040
=======
Total return(3) (5.41%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 1,891
Ratio of expenses to average net assets 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.33%
Ratio of net investment income to average net assets 0.92%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 0.34%
Portfolio turnover 37%
- --------------
(1) Date of commencement of operations; 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.
Shares of the Delaware MidCap Value Fund A Class were initially offered on
December 29, 1998. On May 3, 1999, the A Class sold shares which were
subsequently repurchased, leaving a balance of 1 share, which is the initial
seed purchase, as of November 30, 1999. This shareholder data is not being
disclosed because the data is not believed to be meaningful.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS V
DELAWARE RETIREMENT INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Delaware
Retirement Income Fund
A Class
-------------------------------------------------
12/02/96(1)
Year Ended Year Ended To
11/30/99 11/30/98 11/30/97
---------- ---------- ----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.160 $ 11.700 $ 8.500
Income (loss) from investment operations:
Net investment income2 0.431 0.632 0.558
Net realized and unrealized gain (loss) on investments (0.156) (0.402) 2.685
-------- -------- -------
Total from investment operations 0.275 0.230 3.243
-------- -------- -------
Less dividends and distributions:
Dividends from net investment income (0.620) (0.570) (0.043)
Distributions from net realized gain on investments (0.385) (1.200)
-------- -------- -------
Total dividends and distributions (1.005) (1.770) (0.043)
-------- -------- -------
Net asset value, end of period $ 9.430 $ 10.160 $ 11.700
======== ======== ========
Total return3 3.14% 2.22% 38.31%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 22 $ 23 $ 9
Ratio of expenses to average net assets 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.17% 1.62% 2.18%
Ratio of net investment income to average net assets 4.46% 6.01% 5.48%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.03% 5.14% 4.05%
Portfolio turnover 42% 91% 196%
</TABLE>
- --------------
1 Date of commencement of operations; ratios have been annualized 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.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS V
DELAWARE RETIREMENT INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Delaware
Retirement Income Fund
Institutional Class
----------------------------------------------
12/02/96(1)
Year Ended Year Ended To
11/30/99 11/30/98 11/30/97
-------- -------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.150 $ 11.690 $ 8.500
Income (loss) from investment operations:
Net investment income(2) 0.431 0.632 0.558
Net realized and unrealized gain (loss) on investments (0.156) (0.402) 2.675
-------- -------- -------
Total from investment operations 0.275 0.230 3.233
-------- -------- -------
Less dividends and distributions:
Dividends from net investment income (0.620) (0.570) (0.043)
Distributions from net realized gain on investments (0.385) (1.200) none
-------- -------- -------
Total dividends and distributions (1.005) (1.770) (0.043)
-------- -------- -------
Net asset value, end of period $ 9.420 $ 10.150 $ 11.690
======== ======== ========
Total return(3) 3.15% 2.22% 38.19%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 2,924 $ 2,840 $ 2,763
Ratio of expenses to average net assets 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 0.87% 1.32% 1.88%
Ratio of net investment income to average net assets 4.46% 6.01% 5.48%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.33% 5.44% 4.35%
Portfolio turnover 42% 91% 196%
</TABLE>
- ----------
(1) Date of commencement of operations; ratios have been annualized 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.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS V
DELAWARE SMALL CAP CONTRARIAN FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout the period
was as follows:
Small Cap Contrarian
Institutional Class
12/29/981
To
11/30/99
Net asset value, beginning of period $ 8.500
Income from investment operations:
Net investment income2 0.104
Net realized and unrealized gain on investments 0.326
Total from investment operations 0.430
Less dividends and distributions:
Dividends from net investment income
Distributions from net realized gain on investments
Total dividends and distributions
Net asset value, end of period $ 8.930
Total return3 5.06%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 2,101
Ratio of expenses to average net assets 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.84%
Ratio of net investment income to average net assets 1.27%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 0.18%
Portfolio turnover 63%
- ------------------
(1) Date of commencement of operations; 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.
Shares of the Delaware Small Cap Contrarian Fund A Class were initially offered
on December 29, 1998. On March 16, 1999, the A Class sold shares which were
subsequently repurchased, leaving a balance of 1 share, which is the initial
seed purchase, as of November 30, 1999. This shareholder data is not being
disclosed because the data is not believed to be meaningful.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS V
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1999
Delaware Group Equity Funds V (the "Company") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Company is organized as a Delaware Business Trust and offers four
series: the Delaware Mid-Cap Value Fund, the Delaware Retirement Income Fund,
the Delaware Small Cap Contrarian Fund, and the Delaware Small Cap Value Fund.
These financial statements and related notes pertain to the Delaware Mid-Cap
Value Fund, the Delaware Retirement Income Fund, and the Delaware Small Cap
Contrarian Fund (each referred to as a "Fund" or collectively as the "Funds").
The Funds offer four classes of shares. The A Class carries a front-end sales
charge of 5.75%. The B Class carries a back-end deferred sales charge. The C
Class carries a level-load deferred sales charge and the Institutional Class has
no sales charge. As of November 30, 1999, only the A and Institutional Classes
have commenced operations.
The Delaware Mid-Cap Value Fund's objective is to provide long-term capital
appreciation. The Delaware Retirement Income Fund's objective is to seek to
provide investors with high current income and an investment that has the
potential for capital appreciation. The Delaware Small Cap Contrarian Fund's
objective is to provide long-term capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Funds.
Security Valuation- Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. 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 Funds' Board of Trustees.
Federal Income Taxes- Each Fund intends to qualify or 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 generally accepted accounting principles.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Class Accounting- Investment income, common expenses and realized and unrealized
gain (loss) on investments are allocated to the various classes of each 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- Each 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 each
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is at least 100% 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
generally accepted accounting principles 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 Fund declares and pays dividends from net
investment income and capital gains, if any, annually.
Certain expenses of the Funds are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. In
addition, the Funds receive earnings credits from their custodian when positive
cash balances are maintained, 0which 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 expense
offset shown as "Expenses paid indirectly". The amount of these expenses for the
year ended November 30, 1999 are as follows:
"Soft Dollar" Earnings
Expenses Credits
-------- -------
Delaware Mid-Cap Value Fund $46 $ -
Delaware Retirement Income Fund 69 193
Delaware Small Cap Contrarian Fund 46 902
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Funds
pay Delaware Management Company ("DMC"), the Investment Manager of the Funds, an
annual fee which is calculated on the daily net assets of each Fund as follows:
Delaware Mid-Cap Value Fund
---------------------------
On the first $500 million ........................... 0.75%
On the next $500 million ............................ 0.70%
On the next $1,500 million .......................... 0.65%
Over $2,500 million ................................. 0.60%
Delaware Retirement Income Fund
-------------------------------
On the first $500 million .......................... 0.65%
On the next $500 million ............................ 0.60%
On the next $1,500 million .......................... 0.55%
Over $2,500 million ................................. 0.50%
Delaware Small Cap Contrarian Fund
----------------------------------
On the first $500 million ........................... 0.75%
On the next $500 million ............................ 0.70%
On the next $1,500 million .......................... 0.65%
Over $2,500 million ................................. 0.60%
DMC has elected to waive that portion, if any, of the management fee and
reimburse each Fund to the extent that annual operating expenses, exclusive of
taxes, interest, distribution expenses, brokerage commissions and extraordinary
expenses, exceed 0.75% of the Funds' average daily net assets through May 31,
2000.
The Funds have engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent and accounting and
administration services. Each Fund pays DSC a monthly fee based on the number of
shareholder accounts, shareholder transactions and average net assets, subject
to certain minimums.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
At November 30, 1999, the Funds had liabilities for such fees and other expenses
payable to DMC and affiliates as follows:
Dividend
Disbursing,
Transfer
Agent, Other
Investment Accounting Fees Expenses
Management And Other Payable
Fees Payable Expenses to DMC
to DMC Payable to DSC and Affiliates
------ -------------- --------------
Delaware Mid-Cap
Value Fund $3,103 $1,539 $1,551
Delaware Retirement
Income Fund 1,418 - -
Delaware Small Cap
Contrarian Fund - 3,513 5,953
Pursuant to the Distribution Agreement, the Funds pay Delaware Distributors,
L.P. ("DDLP"), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily assets of the A Class and 1.00% of the average
daily net assets of the B and C Classes. DDLP has elected voluntarily to waive
such fees.
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Funds. These officers, trustees and employees are paid no compensation by
the Funds.
3. Investments
During the year ended November 30, 1999, the Funds made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments for each Funds as follows:
Purchases Sales
--------- -----
Delaware Mid-Cap
Value Fund $2,679,136 $705,112
Delaware Retirement
Income Fund 1,180,627 1,353,547
Delaware Small Cap 3,070,613 1,167,684
Contrarian Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
At November 30, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for each Fund were
as follows:
<TABLE>
<CAPTION>
Net
Aggregate Aggregate Aggregate Unrealized
Cost of Unrealized Unrealized Appreciation
Investments Appreciation Depreciation (Depreciation)
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Delaware Mid-Cap
Value Fund $2,036,025 $118,497 ($244,748) ($126,251)
Delaware Retirement
Income Fund 2,836,964 312,276 (263,753) 48,523
Delaware Small Cap
Contrarian Fund 2,173,831 145,896 (207,624) (61,728)
</TABLE>
4. Capital Shares
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Mid-Cap Retirement Small Cap
Value Income Contrarian
Fund Fund Fund
--------- ------------------------- ----------
12/29/98* Year Year 12/29/98*
To Ended Ended To
11/30/99 11/30/99 11/30/98 11/30/99
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Shares sold:
A Class 57 -- 2,120 57
Institutional Class 235,295 -- 1,251 235,295
Shares issued upon reinvestment
of distributions from net
net investment income and
net realized gain on
investments:
A Class -- 246 83 --
Institutional Class
-- 30,854 42,186 --
235,352 31,100 45,640 235,352
Shares repurchased:
A Class (56) (137) (700) (56)
Institutional Class -- (1) (185) --
(56) (138) (885) (56)
Net increase 235,296 30,962 44,755 235,296
</TABLE>
*Date of commencement of operations.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
5. Lines of Credit Each of the Funds have a committed line of credit of
$100,000. No amounts were outstanding at November 30, 1999, or at any time
during the fiscal year.
6. Market and Credit Risk
Each Fund may invest up to 15% of its total net assets in illiquid securities
which may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of some of these securities may adversely affect the Fund's ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities.
The Delaware Retirement Income Fund may invest up to 10% of its total assets in
illiquid securities which may include securities with contractual restrictions
on resale, securities exempt from registration under Rule 144A of the Securities
Act of 1933, as amended, and other securities which may not be readily
marketable. The relative illiquidity of some of these securities may adversely
affect the Fund's ability to dispose of such securities in a timely manner and
at a fair price when it is necessary to liquidate such securities.
7. Tax Information (Unaudited)
The information set forth is for each Fund's fiscal year as required by federal
laws. Shareholders, however, must report distributions on a calendar year basis
for income tax purposes, which may include distributions for portions of two
fiscal years of the Fund. Accordingly, the information needed by shareholders
for income tax purposes will be sent to them in early 2000. Please consult your
tax advisor for proper treatment of this information.
For the fiscal year ended November 30, 1999, the Funds designate as long-term
capital gains, ordinary income and tax-exempt income distributions paid during
the year as follows:
<TABLE>
<CAPTION>
(A)
Long-Term (B) (C)
Capital Gain Ordinary Total (D)
Distributions Income Distributions Qualifying(1)
Tax Basis Distributions Tax Basis Dividends
--------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Delaware Retirement
Income Fund 38% 62% 100% 43%
</TABLE>
Items (A) and (B) are based on a percentage of each of the Fund's total
distributions. Item (D) is based on a percentage of ordinary income of each of
the Funds (1) Qualifying dividends represent dividends which qualify for the
corporate dividends received deduction.
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Trustees
Delaware Group Equity Funds V
We have audited the accompanying statements of net assets of Delaware Group
Equity Funds V (Delaware Mid-Cap Value Fund, Delaware Retirement Income Fund and
Delaware Small Cap Contrarian Fund) (the "Funds") as of November 30, 1999, and
the related statements of operations, statements of changes in net assets and
financial highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of November 30, 1999, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above listed funds of Delaware Group Equity Funds V at November 30, 1999,
and the results of their operations, the changes in their net assets and their
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
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Philadelphia, Pennsylvania
January 7, 2000
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