<PAGE>
Trend Fund
FOR GROWTH OF CAPITAL
service and guidance
(various photos demonstrating service and guidance,
professional management and goals)
professional management
1999
Annual
Report
goals
DELAWARE INVESMENTS
- -------------------
Philadelphia o London
<PAGE>
A TRADITION OF SOUND INVESTING
commitment
A Commitment
To Our Investors
Delaware Investments has a tradition of money management that dates back to
1929. We have a long and distinguished history of helping individuals and
institutions - including some of America's largest pension funds - reach their
financial goals.
Headquartered in Philadelphia, a block from the nation's oldest stock
exchange, the Delaware organization established its first mutual fund in 1938.
Delaware International Advisers Ltd., our international affiliate, was
established in 1990 and is headquartered in London.
Delaware Investments offers a full range of mutual funds. We also manage
investments for variable annuities and closed-end funds as well as offer a wide
range of retirement plan services for individuals and businesses. Delaware
Investments manages approximately $45 billion in mutual fund assets and
institutional advisory accounts for more than half-a-million investors.
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
TREND FUND OBJECTIVE
To provide long-term capital appreciation by investing primarily in securities
of emerging and other growth-oriented companies.
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS Page 1
PORTFOLIO MANAGER'S REVIEW Page 3
PERFORMANCE Page 9
STATEMENT OF NET ASSETS Page 10
FINANCIAL HIGHLIGHTS Page 13
growth of
capital
tradition
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1
July 7, 1999
Dear Shareholder:
STOCK MARKET RETURNS DURING THE PAST year have varied as much as night and day.
Last summer brought stormy weather to the markets as overseas economic concerns
spawned turbulent conditions in the U.S. stock market. Asian markets faced
continued uncertainty and Russia's currency declined steeply in value.
Brighter days soon followed, however, as the Federal Reserve lowered
interest rates three times this past autumn, setting the stage for a comeback
for U.S. stocks. Small company stocks joined in the rally, gaining over 36%
between their low on October 8, 1998 and December 31, 1998 (source: Bloomberg).
Trend Fund provided a robust total return of +24.76% (for Class A shares
with distributions reinvested at net asset value) for the year ended June 30,
1999. It significantly outperformed the +8.30% return of its primary benchmark,
the Russell 2000 Growth Index and also the +1.93% return of its peer group, the
Lipper Small Cap Fund Average.
Since December, economic activity in the United States has barreled ahead
of consensus expectations. In addition, a healthy U.S. economy helped support
global recovery, especially in emerging market regions such as Asia and Latin
America.
The improving global outlook reduced demand for U.S. government debt over
the last six months, reducing U.S. bond prices and pushing yields higher.
Continued growth inspired concern about possible inflation and the Federal
Reserve Board raised interest rates on June 30, at a meeting of the Federal Open
Market Committee. Even after the Fed raised interest rates, U.S. equity indexes
climbed to new records.
Trend Fund was successful during this period because the Fund focused on
TREND FUND WAS SUCCESSFUL DURING THIS PERIOD BECAUSE THE FUND FOCUSED ON
COMPANIES THAT WERE, IN OUR VIEW, WELL-MANAGED AND DISPLAYED ABOVE AVERAGE SALES
GROWTH.
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
AS OF JUNE 30, 1999
One Year Ten Years
- --------------------------------------------------------------------------------
Trend Fund A Class +24.76% +17.64%
- --------------------------------------------------------------------------------
Russell 2000 Growth Index +8.30% +11.39%
Standard & Poor's 500 Index +22.76% +18.76%
Lipper Small Cap Fund Average +1.93% (698 funds) +14.32% (72 funds)
- --------------------------------------------------------------------------------
All performance quoted above assumes reinvestment of distributions. Trend Fund
and Lipper Small Cap Fund Average results are at net asset value. Complete fund
performance for all Trend Fund classes can be found on page 9. Past performance
does not guarantee future results. The unmanaged Russell 2000 Growth Index is a
measure of small company stocks that exhibit growth characteristics as defined
by Frank Russell Company. A direct investment in an index is not possible.
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2
SMALL CAP STOCKS REPRESENT NEARLY 85% OF THE LISTED COMPANIES ON THE THREE MAJOR
EXCHANGES ACCORDING TO THE MARCH 21, 1999 NEW YORK TIMES. WE BELIEVE THEY WILL
CONTINUE TO BE A NECESSARY AND EFFECTIVE TOOL IN PORTFOLIO DIVERSIFICATION.
companies that were, in our view, well-managed and displayed above average sales
growth. Your Fund's portfolio is built on in-depth fundamental research
and investment discipline.
Often stock selection has been portrayed in the media as a flashy activity
demanding keen timeliness and spontaneous skill. Trend Fund's management team
takes a more methodical, long-term approach. Your Fund's portfolio manager,
Gerald S. Frey, and his growth team systematically sort through companies every
day. They not only research them, but also conduct extensive interviews with
management.
As you review your investment allocation plan with the help of your
financial adviser, we suggest you consider the potential benefits of owning
shares in a small company mutual fund. Small cap stocks represent nearly 85% of
the listed companies on the three major exchanges according to the March 21,
1999 New York Times. Given the number of small cap stocks and the returns they
have historically provided over longer periods, we believe they will continue to
be a necessary and effective tool in portfolio diversification.
We thank you for being a Trend Fund shareholder. We certainly can't
guarantee that our future results will be as outstanding as they have been this
past year, but we believe that our experience and a strong commitment to
disciplined and consistent investing can help multiply the assets in your
portfolio.
Sincerely,
/S/WAYNE A. STORK
- -----------------
WAYNE A. STORK
Director of the Fund
Chairman,
Delaware Investments Family of Funds
/S/DAVID K. DOWNES
- ------------------
DAVID K. DOWNES
President and Chief Executive Officer
Delaware Investments Family of Funds
discipline
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3
Portfolio Manager's Review
GERALD S. FREY,
Vice President/Senior Portfolio Manager
Lead Portfolio Manager, Trend Fund
July 7, 1999
(photo of three people in a discussion)
OVERVIEW
Financial markets took investors on a roller coaster ride during the past year.
After a difficult summer and early fall, we saw the market rebound with
many investments bouncing back.
Since October 1999, the stock market has recovered 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. The success of the Dow was driven by
stocks of some very large, successful companies. Many individual stocks did not
share in the superior gains reported for the major indexes. Medium size and
smaller stocks, for the most part, remained on the sidelines.
Despite the difficulties experienced by its peers, Trend Fund generated
excellent returns over the past year. Our strategic focus on bottom-up stock
selection allowed your Fund to pinpoint stocks that performed very well even in
a market environment that was generally unfavorable to small companies.
TREND FUND'S TEAM APPROACH
Because we believe diversification is essential in managing the increased risk
related to smaller companies, Trend Fund is consistently well-diversified across
sectors including technology, retail, finance and health care. When selecting
stocks, we look for the following characteristics:
o Attractive sales and earnings prospects relative to their competition
o Market leaders
o Strong product cycles and innovative concepts and
o Favorable industry trends
We are most interested in small, emerging companies. Investing in companies
during the early phases of their growth cycle offers us the greatest opportunity
for capital appreciation.
Our six-member research team is organized so that each team member has
primary responsibility for specific sectors. We believe our team approach is an
effective way to uncover promising small companies for your portfolio.
Finding attractive growth prospects isn't just a matter of reading a
company's
DESPITE THE DIFFICULTIES EXPERIENCED BY ITS PEERS, TREND FUND GENERATED
EXCELLENT RETURNS OVER THE PAST YEAR.
overview
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for growth
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4
financial records. As we begin to research individual stocks, we evaluate the
company by meeting with its executives, customers, competitors, and industry
experts. We think that these interviews offer critical insight about the company
that we might not find in financial statements or historical stock prices.
We maintain a relationship with a company after purchasing its stock,
enabling us to stay aware of changes in the company's situation and the outlook
for its future growth.
STRATEGIC POSITIONING
TECHNOLOGY
Technology stocks were one of your Fund's best performing sectors. We attribute
strong performance in this area to our positions in companies like GeoTel
Communications Corporation.
GeoTel Communications Corporation provides customer-interaction software
for call centers. The company's products create an enterprise-wide
customer-interaction platform by integrating automatic call distributors, voice
response system databases, desktop applications, telephone networks from
multiple vendors and other resources.
News of a partnership with Cable and Wireless PLC (a service provider in
the United Kingdom) on May 20 helped push the stock price to new highs. Cable
and Wireless is deploying GeoTel's network within its network in order to offer
enhanced services to business customers in Europe.
On June 25, GeoTel was acquired by Cisco Systems for $2.0 billion in stock.
Because Cisco Systems does not fit into Trend Fund's universe of companies with
smaller market capitalizations, we will likely re-deploy these assets to other
small cap growth holdings in the months ahead.
INVESTING IN COMPANIES DURING THE EARLY PHASES OF THEIR GROWTH CYCLE OFFERS US
THE GREATEST OPPORTUNITY FOR CAPITAL APPRECIATION.
strategic
positioning
TOP TEN HOLDINGS
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JUNE 30, 1999
Company Product/Service Share of Net Assets
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Gemstar International Group TV/Video Recording Products 4.7%
Applied Micro Circuits Corp. Semiconductors 4.4%
Micrel Inc. Integrated Circuits 3.4%
Cost Plus Inc. Retail Home Furnishings 3.4%
Veritas Software Storage Management Software 3.1%
Staples Office Product Superstores 2.8%
Consolidated Graphics Commercial Printing Services 2.5%
Cisco Systems Computer Network Products 2.5%
Profit Recovery Group Audit Recovery Systems 2.5%
Mettler-Toledo International Weighing Instruments 2.4%
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5
However, for other small cap stocks in the technology sector like GeoTel
Communications, we continue to see strong profit margins and we believe this
industry can continue to grow over the coming years.
Gemstar International, a pioneer of enhanced TV and manufacturer of the VCR
Plus system, is still flourishing. Trend Fund's largest holding, Gemstar
continues to look attractive as consumer demand for interactive TV and VCR
products increases.
Although some technology sectors continue to soar, the software industry as
a whole has not performed as well as we had hoped. As Year 2000 concerns mount
and software companies redirect resources to prevent a crisis, new developments
in the industry have slowed.
Sometimes, during the lifecycle of a successful company, short spurts of
dramatic growth are followed by slower growth periods. Though the company might
still have potential, we may reap the most benefits by selling the stock at what
we believe to be the pinnacle of the company's success. Such was the case with
Inso Corporation. Inso develops software tools and solutions to markets them to
corporations, end-users, and global software developers, such as Microsoft Corp.
The company's software enables users to enhance the quality of written
communication and access information from authoritative sources. Many of the
spelling and grammar check features of Microsoft Word have been created by Inso.
Inso's stock price suffered when it reported net losses for the fiscal
quarter ended April 30, 1999. Subsequently, the company's management, in the
midst of restructuring, called for a further workforce reduction of more than
20%. The spring of 1999 was a turbulent period for Inso Corporation, and its
stock price reflected that. We sold all of our holdings in this company this
past spring.
technology
TREND FUND'S LARGEST HOLDING, GEMSTAR CONTINUES TO LOOK ATTRACTIVE AS CONSUMER
DEMAND FOR INTERACTIVE TV AND VCR PRODUCTS INCREASES.
(photograph of keyboard)
PORTFOLIO HIGHLIGHTS
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June 30, 1999 June 30, 1998
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Number of Stocks 75 93
Median Market Capitalization $811.6 million $661.0 million
Portfolio Turnover 86% 114%
Beta 1.17 0.93
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6
HEALTH CARE
Performance in the health care industry has been disappointing, prompting us to
keep our holdings in this area low compared to the Russell 2000 Growth Index.
Government reforms in the health care arena have hurt profits in the service
side of the industry - that is, hospital and hospital management companies. Some
companies, typically those in the device and pharmaceutical sub-sector of health
care, have managed to fare well even in this environment. We continue to hold
both Xomed Surgical Products and Wesley Jessen Vision Care. One holding, Coulter
Pharmaceuticals, stumbled significantly in the second half of fiscal 1999. We
have subsequently sold our position in this stock.
CONSUMER STOCKS
Many of our consumer stock selections performed well in fiscal 1999 as consumer
confidence soared. Our position, representing the Fund's second largest
weighting at 15.2% of the portfolio, included a combination of retailers, food
processors and consumer service companies.
Although the nation's wage increases have begun to outpace inflation for
the first time in years, many consumers remain value-conscious. Seeking to
capitalize on this trend, we have Cost Plus, Inc. as one of our largest holdings
at 3.37% of the Fund's total net assets. This relatively young company operates
its stores under the name "Cost Plus World Market." Cost Plus's products include
furniture, rugs, glassware, kitchen utensils, gourmet foods, coffees and teas.
This retailer continued to prosper as new home sales hit record highs in late
1998.
WE HAVE WITNESSED POWERFUL RALLIES BY SMALL COMPANY STOCKS, OFTEN IN
ENVIRONMENTS SIMILAR TO WHAT WE ARE NOW EXPERIENCING.
TREND FUND SURPASSES PEERS
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(Bar Graph)
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Trend Fund A Class 24.76% 16.31% 21.54% 17.64%
Lipper Small Cap
Fund Average 1.93% (698) 10.45% (400) 16.52% (72) 14.32% (72)
Source: Lipper Analytical. The performance shown above includes the reinvestment
of distributions, but does not include the effect of sales charges. Past
performance is not a guarantee of future results. Return and share value
fluctuate so that shares when redeemed may be worth more or less than the
original investment. Performance for other share classes will differ due to
varying charges and expenses. Complete performance for all Trend Fund classes
can be found on page 9. The number of funds in the Lipper Small Cap Fund Average
for each time period is shown in parentheses.
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7
(photograph of family on beach)
OUTLOOK
"When blue chips like Coca-Cola and Microsoft soared, stocks of small companies
sagged. But when the smoke clears and the next market cycle takes over, the
small caps may finally have their day." - Forbes magazine, May 1999.
In the coming months, we expect economic uncertainty to continue in some
foreign markets, including Russia, Japan and Latin America. For this reason, we
believe the Federal Reserve will not risk raising interest rates significantly,
possibly halting the financial recovery that is currently taking place all over
the globe. The U.S. economy does not appear vulnerable to recession as consumer
spending remains high.
As for the small cap market, until very recently it's been a frustrating
situation with large cap stocks consistently dominating small cap stocks. In the
last few months, however, we have seen small cap stocks make a comeback. As
investors become more confident in the U.S. economy's ability to sustain the
longest peacetime expansion on record, we believe they will return to the small
cap market.
Many investors believe there is overvaluation in the stock market,
especially in the large cap sector. This can mean additional risk. The list of
large cap stocks that have consistently shared in the market's gains has grown
narrower and narrower, resulting in a group of twenty stocks aptly named the
"nifty twenty." Investors had a high degree of confidence in the earnings of
these companies and focused on them to the exclusion of nearly all other
companies. Some of those names have stumbled as the market broadened to include
value stocks and also stocks with smaller market capitalizations. However, even
with recent declines in large cap growth stocks, they remain richly priced based
on most valuation methods.
We remain convinced that over the long term, smaller companies offer
investors substantial opportunities for capital appreciation. In addition, we
believe current valuations of small cap stocks compared to their larger cap
peers suggest compelling opportunities in this sector. Although past performance
does not guarantee future results, based on our previous experience, we are
optimistic about the future performance of this sector. We have witnessed
powerful rallies by small company stocks, often in environments similar to what
we are now experiencing.
We also think that Trend Fund's performance, not just over this past year,
but also over the lifetime of the Fund demonstrates our ability to capitalize on
the potential in smaller stocks.
WE REMAIN CONVINCED THAT OVER THE LONG TERM, SMALLER COMPANIES OFFER INVESTORS
SUBSTANTIAL OPPORTUNITIES FOR CAPITAL APPRECIATION.
outlook
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8
TREND -
A LIFELONG FRIEND
A lot can happen in 25 years. An infant becomes a graduate student. A police
officer or soldier can qualify for a pension. A long-term Treasury bond matures.
Let's turn back the clock to June 30, 1974. Let's say you are 32 years old
and a newlywed. You also have $10,000 from an inheritance to invest. You are
looking for an equity mutual fund to invest in and decide on the Trend Fund (A
Class shares at 5.75% sales charge). You make a single investment of $10,000.
Turn the clock forward to December 30, 1984. You now have a daughter who is
five years old and your investment in Trend Fund is ten years old. Even though
the nation has just recently come out of a recession, your account has already
grown in value to over $43,107 with distributions reinvested, quadrupling in
value.
Push forward to December 30, 1989. It's over two years since the October
1987 stock market crash. You've had your Trend Fund account for over fifteen
years and you're starting to see considerable appreciation. Your account is now
worth $101,602 with distributions reinvested.
This past June, you celebrated your silver wedding anniversary. You've been
married for twenty-five years now and your daughter just finished her sophomore
year of college. You're 57 years old and starting to seriously consider
retirement. So you turn to your June 30, 1999 Trend Fund account statement. The
balance reads $464,766 with distributions reinvested. Your account has grown by
over $450,000. You made a one-time investment of $10,000 two and a half decades
ago.
A GENERATION OF GROWTH AND COMMITMENT
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JUNE 30, 1974 TO JUNE 30, 1999
Initial Investment in Trend Fund A Class Shares: $10,000
Total Investment: $10,000
Account Value After Twenty-five Years: $464,766
(Line Graph)
Period End Market Value
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Jun. '74........................... $ 9,409
Dec. '74........................... 8,022
Dec. '75........................... 10,494
Dec. '76........................... 13,590
Dec. '77........................... 14,400
Dec. '78........................... 14,785
Dec. '79........................... 19,114
Dec. '80........................... 24,632
Dec. '81........................... 29,848
Dec. '82........................... 38,991
Dec. '83........................... 53,711
Dec. '84........................... 43,107
Dec. '85........................... 55,134
Dec. '86........................... 58,045
Dec. '87........................... 53,517
Dec. '88........................... 67,874
Dec. '89........................... 101,602
Dec. '90........................... 76,599
Dec. '91........................... 133,545
Dec. '92........................... 163,594
Dec. '93........................... 200,183
Dec. '94........................... 180,226
Dec. '95........................... 256,845
Dec. '96........................... 284,343
Dec. '97........................... 339,599
Dec. '98........................... 385,687
Jun. '99........................... $464,766
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Past performance does not guarantee future results. The above illustration is
hypothetical, assumes continuous reinvestment of all capital gains and dividends
and 5.75% sales charge. Sales charges has varied over the life of the Fund. The
effect of income taxes has not been included. See the facing page for complete
performance and sales charge information for all classes.
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9
TREND FUND'S LONG-TERM PERFORMANCE
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GROWTH OF A $10,000 INVESTMENT
JUNE 30,1989 TO JUNE 30, 1999
(Line Graph)
Trend Fund Lipper Small Cap Fund Russell 2000
A Class Average (72 funds Growth Index
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Jun. '89 $ 9,428 $10,000 $10,000
Dec. '89 10,464 10,654 10,506
Dec. '90 7,889 9,535 8,677
Dec. '91 13,754 14,469 13,119
Dec. '92 16,849 16,294 14,138
Dec. '93 20,617 19,117 16,027
Dec. '94 18,562 19,106 15,637
Dec. '95 26,453 25,318 20,491
Dec. '96 29,285 29,514 22,799
Dec. '97 34,976 35,053 25,752
Dec. '98 39,723 35,640 26,070
Jun. '99 $47,867 $39,107 $29,411
- --------------------------------------------------------------------------------
Chart assumes $10,000 invested on June 30, 1989, a 5.75% maximum front-end sales
charge and reinvestment of distributions. Returns for other classes will differ
due to different charges and expenses. Past performance does not guarantee
future returns.
TREND FUND PERFORMANCE
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AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 1999
Lifetime Ten Years Five Years One Year
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Class A (Est. 10/3/68)
Excluding Sales Charge +10.23% +17.64% +21.54% +24.76%
Including Sales Charge +10.02% +16.95% +20.12% +17.59%
Class B (Est. 9/6/94)
Excluding Sales Charge +20.10% +23.83%
Including Sales Charge +19.89% +18.83%
Class C (Est. 11/29/95)
Excluding Sales Charge +18.54% +23.82%
Including Sales Charge +18.54% +22.82%
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share value will fluctuate so that shares when
redeemed may be worth more or less than the original cost. Past performance does
not guarantee future results. B and C Class results excluding sales charge
assume either contingent sales charges did not apply or the investment was
redeemed.
Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a deferred sales
charge of up to 5% if redeemed before the end of the sixth year. Lifetime
performance excluding sales charge assumes the investment was not redeemed.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
Average annual total returns for the lifetime, ten-year, five-year and one-year
periods ended 6/30/99, for Trend Fund Institutional Class were +10.29%, +17.83%,
+21.86% and +25.07%, respectively. The Institutional Class was initially made
available without sales charges only to certain eligible institutional accounts
on 11/9/92; performance prior to that date was adjusted to eliminate the effect
of the sales charge, but not Class A's asset-based distribution charge in effect
since 6/1/92.
<PAGE>
10 for growth of capital
Financial Statements
DELAWARE GROUP EQUITY FUNDS III, INC. - TREND FUND
STATEMENT OF NET ASSETS
JUNE 30, 1999
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NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK - 93.61%
BANKING, FINANCE & INSURANCE - 6.57%
Ambac Financial Group ............................ 272,100 $15,543,713
Annuity & Life RE ................................ 34,500 775,172
* Corporate Executive Board ........................ 45,000 1,601,719
Doral Financial .................................. 321,600 5,537,550
Freedom Securities ............................... 65,500 1,121,688
Metris ........................................... 295,000 12,021,250
Webster Financial ................................ 286,500 7,789,219
-----------
44,390,311
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BUILDINGS & MATERIALS - 0.68%
* Comfort Systems USA .............................. 130,000 2,340,000
* National Equipment Services ...................... 189,800 2,277,600
-----------
4,617,600
-----------
BUSINESS SERVICES - 2.47%
* Profit Recovery Group ............................ 353,300 16,704,466
-----------
16,704,466
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CABLE, MEDIA & PUBLISHING - 10.19%
* Chancellor Media, Class A ........................ 230,500 12,699,109
* Consolidated Graphics ............................ 342,800 17,140,000
* Emmis Broadcasting ............................... 101,300 4,985,859
* Metro Networks ................................... 95,600 5,096,675
* Radio One ........................................ 102,800 4,767,350
TCA Cable TV ..................................... 146,300 8,110,506
* USA Networks ..................................... 399,708 16,025,793
-----------
68,825,292
-----------
CHEMICALS - 2.43%
* Mettler-Toledo International ..................... 661,200 16,406,025
-----------
16,406,025
-----------
COMPUTERS & TECHNOLOGY - 13.65%
* Bindview Development ............................. 302,100 7,165,434
* Cisco Systems .................................... 264,196 17,015,871
* Clarify .......................................... 78,600 3,244,706
* Exchange Applications ............................ 229,900 9,375,609
Henry(Jack) & Associates ......................... 289,000 11,307,125
* Legato Systems ................................... 111,500 6,442,609
* Neon Systems ..................................... 38,000 1,263,500
* New Era of Networks .............................. 68,500 3,007,578
* Onyx Software .................................... 110,400 2,380,500
* Persistence Software ............................. 29,700 406,519
* Softworks ........................................ 271,500 2,994,984
* SunGard Data Systems ............................. 191,000 6,589,500
* Veritas Software ................................. 223,050 21,182,780
-----------
92,376,715
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CONSUMER PRODUCTS - 5.46%
G&K Services ..................................... 99,800 5,223,906
* Gemstar International Group Limited .............. 485,000 31,676,563
-----------
36,900,469
-----------
NUMBER MARKET
OF SHARES VALUE
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COMMON STOCK (CONTINUED)
ELECTRONICS & ELECTRICAL - 11.54%
* Applied Micro Circuits ........................... 354,800 $29,470,575
* HI/FN ............................................ 60,700 4,603,716
* Micrel ........................................... 312,200 23,141,825
* PMC - Sierra ..................................... 168,800 9,953,925
* Teradyne ......................................... 150,100 10,769,675
-----------
77,939,716
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ENVIRONMENTAL SERVICES - 1.54%
* Waste Connections ................................ 341,200 10,406,600
-----------
10,406,600
-----------
FOOD, BEVERAGE & TOBACCO - 2.19%
* Cheesecake Factory ............................... 350,900 10,680,519
* Packaged Ice ..................................... 210,900 1,258,809
Ruby Tuesday ..................................... 149,000 2,831,000
-----------
14,770,328
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HEALTHCARE & PHARMACEUTICALS - 4.55%
* Brookdale Living Communities ..................... 530,400 7,906,275
* Pharmacopeia ..................................... 113,000 1,250,063
* Qlt Phototheraputics ............................. 51,000 2,800,219
* Renal Care Group ................................. 102,925 2,659,968
* Trigon Healthcare ................................ 162,600 5,914,575
* United Therapeutics .............................. 149,800 1,778,875
* Wesley Jessen VisionCare ......................... 99,200 3,189,900
* Women First Healthcare ........................... 111,800 1,495,325
* Xomed Surgical Products .......................... 76,800 3,720,000
-----------
30,715,200
-----------
INDUSTRIAL MACHINERY - 0.53%
* Spinnaker Industries, Common ..................... 135,628 1,814,025
* Spinnaker Industries, Class A .................... 135,500 1,744,563
-----------
3,558,588
-----------
LEISURE, LODGING & ENTERTAINMENT - 3.73%
* CEC Entertainment ................................ 325,800 13,765,050
* Dave & Buster's .................................. 238,300 6,910,700
* Extended Stay America ............................ 374,500 4,494,000
-----------
25,169,750
-----------
RETAIL - 20.33%
* American Eagle Outfitters ........................ 273,500 12,452,797
* Cost Plus ........................................ 501,750 22,798,266
* Dollar Tree Stores ............................... 328,150 14,428,345
* Duane Reade ...................................... 330,000 10,106,250
* Hibbett Sporting Goods ........................... 66,000 1,472,625
* Linens 'n Things ................................. 330,900 14,476,875
* O'Reilly Automotive .............................. 172,600 8,683,938
+ Schultz Sav-O Stores ............................. 341,500 5,506,688
* Sonic ............................................ 389,300 12,603,588
* Staples .......................................... 612,600 18,933,169
<PAGE>
for growth of capital 11
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
RETAIL (CONTINUED)
Talbots .......................................... 97,400 $ 3,713,375
* Tweeter Home Entertainment Group ................. 175,400 6,851,563
* West Marine ...................................... 200,600 2,927,506
* Zany Brainy ...................................... 250,900 2,422,753
------------
137,377,738
------------
TELECOMMUNICATIONS - 7.27%
* Concord Communications ........................... 195,100 8,706,338
* Network Appliance ................................ 290,200 16,223,994
* Nextlink Communications, Class A ................. 206,200 15,329,681
* Pinnacle Holdings ................................ 362,000 8,846,375
------------
49,106,388
------------
TRANSPORTATION & SHIPPING - 0.48%
* Forward Air Corp ................................. 114,400 3,213,925
------------
3,213,925
------------
Total Common Stock (cost $375,562,852 ) .......... 632,479,111
------------
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENTS - 6.06%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by
$7,100,000 U.S. Treasury Notes 5.375% due
02/15/01, market value $7,207,592 and
$3,550,000 U.S. Treasury Notes 6.375% due
09/30/01, market value $3,648,255 and
$3,042,000 U.S. Treasury Notes 6.125% due
12/31/01, market value $3,063,123) ............... $13,575,000 13,575,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 6/30/99, collateralized by
$3,920,000 U.S. U.S. Treasury Notes 6.375%
due 8/15/02, market value $4,067,792
and $3,550,000 U.S. Treasury Notes 6.25%
due 8/31/02, market value $3,659,440
and $2,455,000 U.S. Treasury Notes 5.75%
due 11/30/02, market value $2,455,824
and $3,550,000 U.S. Treasury Notes 5.50%
due 1/31/03, market value $3,585,253) ............ 13,489,000 13,489,000
With PaineWebber 4.80% 7/1/99 (dated 06/30/99,
collateralized by $3,351,000
U.S. Treasury Notes 7.125% due 2/29/00,
market value $3,468,577 and
$3,550,000 U.S.Treasury Notes 5.625%
due 11/30/00, market value $3,565,092
and $7,100,000 U.S. Treasury Notes 5.75%
due 11/30/02, market value $7,102,069) ........... 13,845,000 13,845,000
------------
Total Repurchase Agreements
(cost $40,909,000)................................ 40,909,000
------------
TOTAL MARKET VALUE OF SECURITIES - 99.67%
(cost $416,471,852) ....................................... $673,388,111
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.33% ..... 2,262,670
------------
NET ASSETS APPLICABLE TO 34,590,712 SHARES
($0.50 PAR VALUE) OUTSTANDING - 100.00% ................... $675,650,781
============
NET ASSET VALUE - TREND FUND A CLASS
($504,006,826 / 25,680,284 shares) ................................. $19.63
======
NET ASSET VALUE - TREND FUND B CLASS
($86,462,571 / 4,610,560 shares) ................................... $18.75
======
NET ASSET VALUE - TREND FUND C CLASS
($20,566,057 / 1,081,936 shares) ................................... $19.01
======
NET ASSET VALUE - TREND FUND INSTITUTIONAL CLASS
($64,615,327 / 3,217,932 shares) ................................... $20.08
======
----------------------
Non-income producing security for the year ended June 30, 1999.
Considered an affiliated company as the Fund owns more than 5% of the
outstanding voting securities of such company. Top ten stock holdings
representing 31.74% of net assets, are printed in bold.
COMPONENTS OF NET ASSETS AT JUNE 30, 1999
Common stock, $0.50 par value,
500,000,000 shares
authorized to the Fund ................................... $383,265,219
Accumulated net realized gain on investments ............... 35,469,303
Net unrealized appreciation of investments ................. 256,916,259
------------
Total net assets ........................................... $675,650,781
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE - TREND FUND
Net asset value A Class (A) ......................................... $19.63
Sales charge (5.75% of offering price or 6.11% of the amount
invested per share) (B) ........................................... 1.20
------
Offering price ...................................................... $20.83
======
- ----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $50,000 or
more.
See accompanying notes
<PAGE>
12 for growth of capital
DELAWARE GROUP EQUITY FUNDS III, INC. - TREND FUND
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ......................................... $1,741,936
Dividends ........................................ 1,468,279 $ 3,210,215
------------
Expenses:
Management fees .................................. 4,225,029
Distribution expense ............................. 2,097,612
Dividend disbursing and transfer agent fees
and expenses ................................... 1,674,430
Accounting and administration .................... 285,707
Reports and statements to shareholders ........... 173,270
Registration fees ................................ 62,100
Taxes (other than taxes on income) ............... 56,265
Professional fees ................................ 33,000
Custodian fees ................................... 16,496
Directors' fees .................................. 15,392
Other ............................................ 48,901
------------
8,688,202
Less fees paid indirectly ........................ (18,462) 8,669,740
---------- ------------
NET INVESTMENT LOSS .............................. (5,459,525)
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ................. 49,556,238
Net change in unrealized appreciation/depreciation
of investments ................................. 97,315,848
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ................................. 146,872,086
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $141,412,561
============
See accompanying notes
DELAWARE GROUP EQUITY FUNDS III, INC. - TREND FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
6/30/99 6/30/98
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
from Operations:
Net investment loss ..................... $ (5,459,525) $ (5,024,761)
Net realized gain on investments ........ 49,556,238 114,261,594
Net change in unrealized appreciation/
depreciation of investments ........... 97,315,848 38,430,492
------------- --------------
Net increase in net assets resulting
from operations ....................... 141,412,561 147,667,325
------------- --------------
Distribution to Shareholders from
Net Realized Gain on Investments
A Class ............................... (63,040,188) (52,530,445)
B Class ............................... (10,391,880) (7,025,698)
C Class ............................... (2,060,376) (1,412,695)
Institutional Class ................... (7,689,241) (12,847,164)
------------- --------------
(83,181,685) (73,816,002)
------------- --------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ............................... 801,415,672 1,483,621,973
B Class ............................... 20,583,538 17,205,955
C Class ............................... 13,073,466 10,917,442
Institutional Class ................... 29,375,062 83,515,986
Net asset value of shares issued upon
reinvestment of distributions from
net realized gain oninvestments:
A Class ............................... 59,761,204 49,569,183
B Class ............................... 9,305,352 6,576,691
C Class ............................... 1,973,688 1,382,403
Institutional Class ................... 7,688,052 12,837,201
------------- --------------
943,176,034 1,665,626,834
------------- --------------
Cost of shares repurchased:
A Class ............................... (871,474,004)
B Class ............................... (20,851,723) (13,571,551)
C Class ............................... (10,491,571) (10,756,253)
Institutional Class ................... (39,095,070) (161,861,839)
------------- --------------
(941,912,368)
------------- --------------
Increase (decrease) in net assets derived
from capital share transactions ....... 1,263,666 (72,847,376)
------------- --------------
Net Increase in Net Assets .............. 59,494,542 1,003,947
Net Assets:
Beginning of year ....................... 616,156,239 615,152,292
------------- --------------
End of year ............................. $ 675,650,781 $ 616,156,239
============= ==============
See accompanying notes
<PAGE>
for growth of capital 13
DELAWARE GROUP EQUITY FUNDS III, INC. - TREND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
TREND FUND A CLASS
------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .......... $18.550 $16.730 $18.160 $14.210 $12.210
Income (loss) from investment operations:
Net investment loss(1)..................... (0.140) (0.126) (0.075) (0.127) (0.074)
Net realized and unrealized gain
on investments .......................... 3.820 3.886 0.155 4.977 2.864
------- ------- ------- ------- -------
Total from investment operations .......... 3.680 3.760 0.080 4.850 2.790
------- ------- ------- ------- -------
Less distributions:
Distributions from net realized gain
on investments .......................... (2.600) (1.940) (1.510) (0.900) (0.790)
------- ------- ------- ------- -------
Total distributions ....................... (2.600) (1.940) (1.510) (0.900) (0.790)
------- ------- ------- ------- -------
Net asset value, end of year ................ $19.630 $18.550 $16.730 $18.160 $14.210
======= ======= ======= ======= =======
Total return(2) ............................. 24.76% 23.97% 1.67% 35.53% 24.40%
Ratios and supplemental data:
Net assets, end of year (000 omitted) ..... $504,007 $469,152 $428,309 $497,188 $318,933
Ratio of expenses to average net assets 1.45% 1.34% 1.34% 1.31% 1.36%
Ratio of net investment loss to average
net assets ............................. (0.87%) (0.70%) (0.47%) (0.79%) (0.58%)
Portfolio turnover ........................ 86% 114% 115% 90% 64%
</TABLE>
<TABLE>
<CAPTION>
TREND FUND B CLASS
------------------------------------------------------------------------------
PERIOD
9/6/94(3)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED TO
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $17.960 $16.370 $17.920 $14.130 $12.110
Income (loss) from investment operations:
Net investment loss1 ...................... (0.248) (0.252) (0.189) (0.248) (0.142)
Net realized and unrealized gain
on investments .......................... 3.638 3.782 0.149 4.938 2.162
-------- -------- -------- -------- --------
Total from investment operations .......... 3.390 3.530 (0.040) 4.690 2.020
-------- -------- -------- -------- --------
Less distributions:
Distributions from net realized gain
on investments .......................... (2.600) (1.940) (1.510) (0.900) none
-------- -------- -------- -------- --------
Total distributions ....................... (2.600) (1.940) (1.510) (0.900) none
-------- -------- -------- -------- --------
Net asset value, end of period .............. $18.750 $17.960 $16.370 $17.920 $14.130
======== ======== ======== ======== ========
Total return(2) ............................. 23.83% 23.09% 0.96% 34.55% 16.68%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ... $86,463 $71,470 $55,047 $35,090 $5,175
Ratio of expenses to average net assets ... 2.17% 2.09% 2.09% 2.06% 2.12%
Ratio of net investment loss to
average net assets ..................... (1.59%) (1.45%) (1.25%) (1.54%) (1.34%)
Portfolio turnover ........................ 86% 114% 115% 90% 64%
</TABLE>
- ----------------------
1 Per share information was based on the average shares outstanding method.
2 Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
3 Date of initial public offering: ratios have been annualized and total
return has not been annualized.
See accompanying notes
<PAGE>
14 for growth of capital
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period
was as follows:
<TABLE>
<CAPTION>
TREND FUND C CLASS
-------------------------------------------------------------
PERIOD
11/29/95(3)
YEAR ENDED YEAR ENDED YEAR ENDED TO
6/30/99 6/30/98 6/30/97 6/30/96
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................ $18.170 $16.540 $18.090 $15.460
Income (loss) from investment operations:
Net investment loss(1)............................. (0.250) (0.255) (0.197) (0.253)
Net realized and unrealized gain
on investments ................................. 3.690 3.825 0.157 3.233
------- ------- ------- -------
Total from investment operations .................. 3.440 3.570 (0.040) 2.980
------- ------- ------- -------
Less distributions:
Distributions from net realized gain
on investments ................................ (2.600) (1.940) (1.510) (0.350)
------- ------- ------- -------
Total distributions ............................... (2.600) (1.940) (1.510) (0.350)
------- ------- ------- -------
Net asset value, end of period ...................... $19.010 $18.170 $16.540 $18.090
======= ======= ======= =======
Total return(2) ...................................... 23.82% 23.09% 0.95% 19.66%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........... $20,566 $14,259 $11,447 $6,359
Ratio of expenses to average net assets ........... 2.17% 2.09% 2.09% 2.06%
Ratio of net investment loss to average
net assets .................................... (1.59%) (1.45%) (1.28%) (1.54%)
Portfolio turnover ................................ 86% 114% 115% 90%
</TABLE>
<TABLE>
<CAPTION>
TREND FUND INSTITUTIONAL CLASS
------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
6/30/99 6/30/98 6/30/97 6/30/96 6/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........... $18.870 $16.950 $18.330 $14.300 $12.250
Income (loss) from investment operations:
Net investment loss(1) ...................... (0.095) (0.082) (0.034) (0.087) (0.044)
Net realized and unrealized gain
on investments ............................ 3.905 3.942 0.164 5.017 2.884
------- ------- ------- ------- ------
Total from investment operations ........... 3.810 3.860 0.130 4.930 2.840
------- ------- ------- ------- ------
Less distributions:
Distributions from net realized gain
on investments .......................... (2.600) (1.940) (1.510) (0.900) (0.790)
------- ------- ------- ------- ------
Total distributions ........................ (2.600) (1.940) (1.510) (0.900) (0.790)
------- ------- ------- ------- ------
Net asset value, end of year ................. $20.080 $18.870 $16.950 $18.330 $14.300
======= ======= ======= ======= =======
Total return ................................. 25.07% 24.35% 1.94% 35.88% 24.74%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .... $64,615 $61,275 $120,319 $150,695 $55,437
Ratio of expenses to average net assets .... 1.17% 1.09% 1.08% 1.06% 1.12%
Ratio of net investment loss to average
net assets .............................. (0.59%) (0.45%) (0.21%) (0.54%) (0.34%)
Portfolio turnover ......................... 86% 114% 115% 90% 64%
</TABLE>
- ----------------------
1 Per share information was based on the average shares outstanding method.
2 Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
3 Date of initial public offering: ratios have been annualized and total
return has not been annualized.
See accompanying notes
<PAGE>
for growth of capital 15
DELAWARE GROUP EQUITY FUNDS III, INC. - TREND FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
- --------------------------------------------------------------------------------
Delaware Group Equity Funds III, Inc. - Trend Fund (the "Fund") is registered
as a diversified open-end investment company under the Investment Company Act
of 1940, as amended. The Fund is organized as a Maryland Corporation and
offers four classes of shares. The Trend Fund A Class carries a front-end
sales charge of 5.75%. The Trend Fund 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.
The Fund's objective is to provide long term capital appreciation by investing
in securities of emerging and other growth-oriented companies.
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
Directors.
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.
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. Original issue discounts are accreted to
interest income over the lives of the respective securities. The Fund declares
and pays dividends from net investment income and capital gains, if any,
semi-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 $13,032 for the year ended June 30,
1999. 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 $5,430 for the year ended June 30, 1999. 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
"Fees paid indirectly".
2. Investment Management and Other Transactions with Affiliates
Commencing April 1, 1999, and 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 daily at the
rate of 0.750% on the first $500 million of average daily net assets of the
Fund, 0.700% on the next $500 million, 0.650% on the next $1,500 million and
0.600% on the average daily net assests in excess $2,500 million. Prior to
April 1, 1999, the fund paid DMC an annual fee which was calculated at the
rate of 0.750% of average daily net assets, less the fees paid to the
unaffiliated directors. At June 30, 1999, the Fund had a liability for
investment management fees and other expenses payable to DMC of $106,825.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to provide dividend disbursing, transfer agent, and accounting 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.
At June 30, 1999 the Fund had a liability for such fees and other expenses
payable to DSC of $72,685.
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 net assets of the A Class and 1.00% of the
average daily net assets of the B and C Classes.
For the year ended June 30, 1999, DDLP earned $132,883 for commissions on
sales of the Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the year ended June 30, 1999, the Fund made purchases of $463,457,321
and sales of $549,571,176 of investment securities other than U.S. government
securities and temporary cash investments.
At June 30, 1999, net unrealized appreciation for federal income tax purposes
aggregated $256, 598,692 of which $261,077,971 related to unrealized
appreciation of securities and $4,479,279 related to unrealized depreciation
of securities. At June 30, 1999, the aggregate cost of securities for federal
income tax purposes was $416,789,419.
<PAGE>
16 for growth of capital
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. Capital Stock
Transactions in capital stock shares were as follows:
YEAR ENDED YEAR ENDED
6/30/99 6/30/98
----------- -----------
Shares sold:
A Class .......................................... 51,759,227 85,939,344
B Class .......................................... 1,341,460 1,005,828
C Class .......................................... 832,368 636,820
Institutional Class .............................. 1,815,083 4,600,325
Shares issued upon reinvestment of
distributions from net realized gain
on investments:
A Class .......................................... 4,112,939 2,957,167
B Class .......................................... 666,093 402,299
C Class .......................................... 139,286 83,604
Institutional Class .............................. 518,412 755,277
----------- -----------
61,184,868 96,380,664
----------- -----------
4. Capital Stock (Continued)
YEAR ENDED YEAR ENDED
6/30/99 6/30/98
----------- -----------
Shares repurchased:
A Class .......................................... (55,479,338) (89,203,065)
B Class .......................................... (1,375,488) (792,064)
C Class .......................................... (674,406) (629,680)
Institutional Class .............................. (2,363,001) (9,205,605)
----------- -----------
(59,892,233) (99,830,414)
----------- -----------
Net increase (decrease) ............................ 1,292,635 (3,449,750)
=========== ===========
5. Lines of Credit
The Fund has a committed line of credit for $ 24.3 million. No amount was
outstanding at June 30, 1999, or at any time during the fiscal year.
- --------------------------------------------------------------------------------
DELAWARE GROUP EQUITY FUNDS III, INC. - TREND FUND
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
DELAWARE GROUP EQUITY FUNDS III, INC. - TREND FUND
We have audited the accompanying statement of net assets of Delaware Group
Equity Funds III, Inc. - Trend Fund (the "Fund") as of June 30, 1999, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of June 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 Group Equity Funds III, Inc. - Trend Fund at June 30, 1999, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and its financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/ ENRST & YOUNG
-----------------
ENRST & YOUNG
Philadelphia, Pennsylvania
August 6, 1999
<PAGE>
THIS ANNUAL REPORT IS FOR THE INFORMATION OF TREND FUND SHAREHOLDERS,BUT IT
MAY BE USED with prospective investors when preceded or accompanied by a current
Prospectus for Trend 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 or send money.
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.
Board of Directors
WAYNE A. STORK
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
DAVID K. DOWNES
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
JOHN H. DURHAM
Partner, Complete Care Services
Horsham, PA
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
JAN L. YEOMANS
Vice President and Treasurer
3M Corporation
St. Paul, Minnesota
Affiliated Officers
RICHARD J. FLANNERY
Executive Vice President and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
BRUCE D. BARTON
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
directors
& officers
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INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SHAREHOLDER SERVICING,
Dividend Disbursing
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
<PAGE>
When used with prospective investors, this report must be preceded or
accompanied by a current Trend Fund Prospectus and the Delaware Investments
Performance Update for the most recently completed calendar quarter. For a
prospectus of any other mutual fund from Delaware Investments, contact your
financial adviser or Delaware Investments.
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
DELAWARE INVESMENTS
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Philadelphia * London
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Fund are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
Printed in the USA
on recycled paper
(1970) (J4966)
AR-003[6/99]PPL9/99
