<PAGE>
DELAWARE(SM)
INVESTMENTS
- -----------
Delaware Trend Fund
Growth of Capital
1999 SEMI-ANNUAL REPORT
[Growth of Capital Artwork]
<PAGE>
A TRADITION OF SOUND INVESTING SINCE 1929
- -----------------------------------------
TABLE OF CONTENTS
Letter to Shareholders 1
Portfolio
Management Review 3
Performance Summary
Delaware Trend Fund 6
Financial Statements
Statement of Net Assets 7
Financial Highlights 11
<PAGE>
A Commitment To Our Investors
Experienced
[ ] Our seasoned investment professionals average more than 15 years'
experience.
[ ] For over 70 years, we have managed money in a variety of investment styles
that have weathered a full range of economic and market environments. We
opened our first mutual fund in 1938.
Disciplined
[ ] We follow strict investment policies and clear buy/sell guidelines.
[ ] We strive to balance risk and reward in order to provide conservative
investment alternatives within any given asset class.
Consistent
[ ] We believe consistent processes are the best way to seek consistent
investment performance.
[ ] Our commitment to style consistency has earned us the confidence of
discriminating institutional and individual investors to manage
approximately $47 billion as of December 31, 1999.
Comprehensive
[ ] We offer over 60 mutual funds in these asset classes to provide style
diversification within the Delaware Investments Family.
o Large-cap equity o High-yield bonds
o Small-cap equity o Investment grade bonds
o Mid-cap equity o Municipal bonds (24 single-state funds)
o International equity o International fixed-income
o Balanced
[ ] Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C)Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
[Growth of Capital Artwork]
January 7, 2000
Recap of Events - The U.S. stock market has barreled along ahead of consensus
expectations over the last six months. In addition, a healthy U.S. economy
helped support global economic recovery, especially in emerging markets regions
such as Asia and Latin America.
An improving global outlook reduced demand for U.S. government debt since June
30, 1999, reducing U.S. bond prices and pushing yields higher. The Dow Jones
Industrial Average reached record highs in the fall of 1999. The success of the
Dow was primarily driven by stocks of some very large, successful companies.
Medium size and smaller stocks, for the most part, remained on the sidelines.
The success of the stock market in the summer did, however, heighten
inflationary concerns. The Federal Reserve responded by raising interest rates
three times on June 30th, August 24th and November 16th. These three increases
took back the last of three quarter-point reductions made in the fall of 1998 in
response to the global financial crisis and returned the rate to its level 14
months ago.
Although the Federal Reserve raised interest rates in 1999 for the first time
since March 1997, the U.S. stock market seemed virtually unphased by the event.
The Dow Jones Industrial Average and Nasdaq Composite equity indexes both went
on to finish the year at record highs (Source: Bloomberg).
Delaware Trend Fund provided a significant total return of +42.18%
(for Class A shares with distributions reinvested at net asset value) for the
six months ended December 31, 1999. Your fund significantly outperformed its
primary benchmark, the Russell 2000 Growth Index, which returned +28.64% for the
same period.
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended 12/31/99 Six Months One Year 10 Years
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Delaware Trend Fund A Class +42.18% +71.33% +20.59%
- ------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Growth Index +28.64% +43.10% +13.51%
Standard & Poor's 500 Index +7.70% +21.05% +18.21%
Lipper Small-Cap Growth
Funds Average +42.50% (254 funds) +60.18% (242 funds) +17.73% (21 funds)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
All performance quote above assumes reinvestment of distributions. Delaware
Trend Fund results are at net asset value. Performance for other fund classes
will vary and can be found on page 5. The unmanaged Russell 2000 Growth Index is
a measure of small-capitalization company stocks that exhibit growth
characteristics as defined by Frank Russell Company. The Standard & Poor's 500
Index is an unmanaged composite of large company stocks. The Lipper Small-Cap
Growth Funds Average is the average of all growth oriented small-cap Funds
tracked by Lipper Analytical. Lipper's new fund classifications also places
Delaware Trend Fund in the Lipper mid-cap growth category. Returns for Lipper's
mid-cap growth category were +46.03%, +72.68% and +18.17% for the six-months,
one-year and ten-year periods, respectively. Past performance does not guarantee
future returns. You cannot invest directly in an index.
1
<PAGE>
DELAWARE TREND FUND PROVIDED A SIGNIFICANT TOTAL RETURN OF +42.18% (FOR CLASS A
SHARES WITH DISTRIBUTIONS REINVESTED AT NET ASSET VALUE) FOR THE SIX MONTHS
ENDED DECEMBER 31, 1999.
<PAGE>
Market Outlook - Delaware Trend Fund's management team takes a methodical,
long-term approach. Your Fund's management team led by Gerry Frey,
systematically sort through hundreds of companies every day. They not only
research them, but also conduct extensive interviews with management.
Small cap stocks represent nearly 85% of the listed companies on the three major
exchanges as of December 31, 1999 (Source: Bloomberg). Given the number of small
cap stocks and the return potential they offer over longer periods, we believe
they will continue to be an effective tool for portfolio diversification.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
- -------------------- --------------------------------------
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Delaware Investments
2
<PAGE>
[Growth of Capital Artwork]
PORTFOLIO MANAGEMENT REVIEW
- ---------------------------
Gerald S. Frey
Senior Portfolio Manager
Delaware Management Company
January 7, 2000
OUR SIX-MEMBER RESEARCH TEAM IS ORGANIZED SO THAT EACH TEAM MEMBER HAS PRIMARY
RESPONSIBILITY FOR SPECIFIC SECTORS. WE BELIEVE OUR TEAM APPROACH IS A
SUCCESSFUL WAY TO UNCOVER ATTRACTIVE STOCKS FOR YOUR PORTFOLIO.
Delaware Trend Fund provided a +42.18% return for the six months period ended
December 31, 1999 (Class A shares with distributions reinvested and without the
effect of sales charge.) Driving your Fund's strong performance was our
disciplined stock selection process.
We believe that diversification is essential in attempting to manage the
increased risk related to individual companies in this volatile sector of the
market. Delaware Trend Fund is consistently well-diversified across sectors,
such as technology, health care, and consumer services. 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 focus on small, emerging growth companies that appear to have the ability to
profit by changing or dominant industry trends. Our six-member research team is
organized so that each team member has primary responsibility for specific
sectors. We believe our team approach is a successful way to uncover these
attractive stocks for your portfolio.
Highlights
Technology
Technology stocks performed well for Delaware Trend Fund for the six month
period ending December 31, 1999. We attribute the strong performance in this
sector primarily to our positions in electronics and electrical equipment
companies. We continue to see strong profit margins for small cap stocks
operating in the electronics segment of the technology sector. We believe this
sector will continue to grow over the coming six months. An example of such a
company is Applied Micro Circuits, 5.0% of your Fund's total assets and your
Fund's largest holding as of December 31.
Applied Micro Circuits designs, develops, manufacturers and markets
high-performance, high bandwidth silicon solutions for the world's
communications infrastructure. With the rise of such new communications products
as interactive television, this San Diego based company has become an important
new player in high speed networking solutions.
3
<PAGE>
MANY OF OUR CONSUMER STOCK SELECTIONS PERFORMED WELL IN THE SECOND HALF OF
FISCAL 1999
Portfolio Characteristics
December 31, 1999
- --------------------------------------------------------------------------------
Beta*: 1.35
- --------------------------------------------------------------------------------
P/E Ratio**: 33.0x
- --------------------------------------------------------------------------------
Median Company Size: $4.6 billion
- --------------------------------------------------------------------------------
Portfolio Turnover: 38%
- --------------------------------------------------------------------------------
Top Five Sectors
Computers & Technology: 13.6%
- --------------------------------------------------------------------------------
Electronics: 16.0%
- --------------------------------------------------------------------------------
Telecommunications: 13.6%
- --------------------------------------------------------------------------------
Retail: 13.1%
- --------------------------------------------------------------------------------
Cable, Media & Publishing: 10.6%
- --------------------------------------------------------------------------------
<PAGE>
Over the past six quarters, Applied Micro Circuits has seen its earnings
steadily increase at an average rate of over 50%. With growing recognition in
the technology industry, the company was recently added to the NASDAQ-100 Index,
which includes notable domestic and international issues listed on the NASDAQ
stock exchange.
Health Care
Performance in the health care industry generally has been disappointing,
prompting us to keep the number of holdings low in this area. We have, however,
found some noteworthy stocks in the pharmaceutical sub-sector of health care. We
continue to hold United Therapeutics, which represented 1.05% of your Fund's
total assets as of December 31, 1999.
United Therapeutics develops pharmaceuticals to treat vascular diseases such as
pulmonary hypertension and peripheral vascular disease. The company's lead
products are stable synthetic forms and are delivered either orally or
subcutaneously. Although quarterly earnings have been negative for the last four
quarters, they have outperformed Wall Street analysts' expectations. We continue
to believe this part of the healthcare industry holds significant capital
appreciation potential.
Consumer Stocks
Many of our consumer stock selections performed well in the second half of
fiscal 1999 as both the stock market and consumer confidence soared. Our
positions included a combination of retailers and consumer service companies.
Despite the strength of the overall sector, one of our top consumer holdings was
also one of our worst performers. Dave & Buster's, a Dallas-based company,
operates 22 entertainment centers that combine a casual drinking environment and
an adult "fun-plex" under one roof.
Unfortunately, the shares of Dave & Buster's fell sharply in late August 1999
after the restaurant operator said second-quarter earnings would be about half
of analysts' forecasts (Source: Bloomberg). We took note of this earnings
shortfall and sold our position in the stock.
*Beta, which is based on monthly returns for the last three years, measures
volatility relative to the S&P 500, which has a beta of 1.
**Average weighted P/E ratio is based on First Call fiscal 1999 forward earnings
estimates as of December 31, 1999.
4
<PAGE>
WE REMAIN CONVINCED THAT OVER THE LONG TERM, SMALLER COMPANIES OFFER INVESTORS
SUBSTANTIAL OPPORTUNITIES FOR CAPITAL APPRECIATION.
Outlook
Large cap stocks dominated small cap stocks throughout fiscal 1999 until
approximately late September (Source: Bloomberg). In the last three months of
fiscal 1999, however, we witnessed small cap stocks starting to stage a
comeback. As investors became more confident in the U.S. economy's ability to
sustain the longest peacetime expansion on record, they returned to the small
cap market.
We remain confident that over the long term, smaller companies offer investors
substantial opportunities for capital appreciation. Although past market
activity does not ensure future results and we certainly can't predict it, we
are optimistic as we have witnessed powerful rallies by small company stocks,
often in environments similar to what we are now experiencing.
<TABLE>
<CAPTION>
Portfolio Composition Percent of Net Assets
<S> <C> <C>
Common Stock 93.3%
Cash & Other Assets 6.7%
- --------------------------------------------------------------------------------
Top Portfolio Holdings
Company Principal Business Percent of Net Assets
1. Applied Micro Circuits Electronics 5.0%
2. Veritas Software Storage Management Software 4.8%
3. Network Appliance Network Data Storage 4.6%
4. Micrel Integrated Circuits 3.9%
5. Gemstar International Recording Products 3.8%
6. Nextlink Communications Communications 3.7%
7. PMC-Sierra Integrated Circuits 3.1%
8. Dollar Tree Stores Discount Stores 2.9%
9. Mettler-Toledo International Weighting Instruments 2.4%
10. USA Networks TV Sales/Stations 2.2%
</TABLE>
5
<PAGE>
Delaware Trend Fund
FUND BASICS
- -----------
Fund Objectives
Seeks to provide long-term capital appreciation by investing primarily in
emerging and other growth-oriented companies.
Asset Under Management
$1.1 billion
Number of Holdings
78
Fund Start Date
October 3, 1968
Your Fund Manager
Gerald S. Frey who leads the management team, received a Bachelor's degree in
Economics from Bloomsburg University. Before joining Delaware in 1996, he served
as a Senior Director at Morgan Grenfell Capital Management, where he managed
technology-related stocks. Previously, he was a Vice President at Chase
Investors Management Corporation.
NASDAQ Symbols
Class A DELTX
Class B DERBX
Class C DETCX
(Growth of Capital Artwork)
<PAGE>
FUND PERFORMANCE
<TABLE>
<CAPTION>
Average Annual Returns
Through December 31, 1999 Lifetime 10 Years Five Years One Year
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 10/3/85)
Excluding Sales Charge +11.30% +20.59% +29.67% +71.33%
Including Sales Charge +11.09% +19.88% +28.14% +61.51%
- ----------------------------------------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge +26.03% +70.12%
Including Sales Charge +25.96% +65.12%
- ----------------------------------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +26.41% +70.14%
Including Sales Charge +26.41% +65.14%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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 not
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 4% if redeemed before the end of the sixth six months. 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.
Institutional Class Shares are available without sales or asset-based
distribution.
<TABLE>
<CAPTION>
Average Annual Returns
Through December 31, 1999 Lifetime 10 Years Five Years One Year
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional Class (Est. 11/20/92) +11.37% +20.80% +30.01% +71.82%
- ----------------------------------------------------------------------------------------------------------
NASDAQ Symbol Institutional Class: DGTIX
</TABLE>
6
<PAGE>
Statement of Net Assets
Delaware Group Equity Funds III -- DELAWARE TREND FUND
--------------------
Number of Market
December 31, 1999 (Unaudited) Shares Value
- --------------------------------------------------------------------------------
Common Stock - 93.34%
Banking, Finance & Insurance - 4.18%
Ambac Financial Group ................................ 273,700 $ 14,283,719
Doral Financial ...................................... 358,600 4,415,263
Metris ............................................... 356,500 12,722,594
*Sovereign Bancorp .................................... 515,600 3,842,831
Webster Financial .................................... 387,300 9,125,756
------------
44,390,163
------------
Business Services - 3.63%
*Bright Horizons Family Solutions ..................... 205,800 3,858,750
*DBT Online ........................................... 257,800 6,283,875
*Diamond Technology Partners .......................... 93,200 8,009,375
*NFO Worldwide ........................................ 90,900 2,033,888
*Profit Recovery Group ................................ 691,150 18,358,672
------------
38,544,560
------------
Cable, Media & Publishing - 10.60%
*Acme Communications .................................. 122,100 4,059,825
*AMFM ................................................. 100,100 7,832,825
*Consolidated Graphics ................................ 296,000 4,421,500
*Cumulus Media, Class A ............................... 69,800 3,542,350
*Emmis Broadcasting ................................... 119,300 14,869,627
*Getty Images ......................................... 122,500 5,987,188
*Insight Communications ............................... 365,300 10,822,013
*Radio One ............................................ 209,300 19,255,600
*Salem Communications, Class A ........................ 230,900 5,224,113
*USA Networks ......................................... 435,708 24,072,867
*Westwood One ......................................... 163,300 12,410,800
------------
112,498,708
------------
Chemicals - 2.38%
*Mettler-Toledo International ......................... 661,200 25,249,575
------------
25,249,575
------------
Computers & Technology - 13.58%
*Bindview Development ................................. 329,000 16,347,188
*eSPEED, Class A ...................................... 50,200 1,785,238
*Exchange Applications ................................ 159,200 8,895,300
Henry(Jack) & Associates ............................. 296,500 15,918,344
*HotJobs.com .......................................... 141,300 6,173,044
Legato Systems ....................................... 251,800 17,326,988
Onyx Software ........................................ 118,200 4,373,400
*RSA Security ......................................... 74,700 5,789,250
Sanchez Computer Associates .......................... 196,600 8,097,463
*Technology Solutions ................................. 263,800 8,639,450
Veritas Software ..................................... 354,700 50,766,438
------------
144,112,103
------------
Consumer Products - 4.85%
G&K Services, Class A ................................. 360,800 11,680,900
Gemstar International
Group Limited ....................................... 558,600 39,800,250
------------
<PAGE>
Number of Market
December 31, 1999 (Unaudited) Shares Value
- --------------------------------------------------------------------------------
Common Stock (continued)
Electronics & Electrical Equipment - 15.97%
Applied Micro Circuits ............................... 421,900 $ 53,686,775
Etec Systems ......................................... 99,000 4,442,625
Lam Research ......................................... 91,400 10,196,813
Micrel ............................................... 721,900 41,103,181
Novellus Systems ..................................... 81,900 10,035,309
PMC-Sierra ........................................... 203,200 32,575,500
Teradyne ............................................. 263,400 17,384,400
------------
169,424,603
------------
Environmental Services - 0.53%
*Waste Connections .................................... 387,200 5,590,200
------------
5,590,200
------------
Food, Beverage & Tobacco - 2.22%
*American Italian Pasta, Class A ...................... 241,200 7,416,900
*Cheesecake Factory ................................... 404,500 14,157,500
Morrison Management Specialists .................... 93,700 2,020,406
------------
23,594,806
------------
Healthcare & Pharmaceuticals - 3.36%
*Brookdale Living Communities ......................... 477,600 5,910,300
*CIMA Labs ............................................ 102,100 1,333,681
*Neurocrine Biosciences ............................... 44,700 1,106,325
*Pharmacopeia ......................................... 148,500 3,359,813
*Trimeris ............................................. 281,500 6,650,438
*United Therapeutics .................................. 241,800 11,122,800
*Wesley Jessen VisionCare ............................. 139,500 5,283,563
*Women First Healthcare ............................... 164,700 864,675
------------
35,631,595
------------
Industrial Machinery - 0.31%
*Spinnaker Industries, Common ......................... 135,628 1,610,583
*Spinnaker Industries, Class A ........................ 135,500 1,626,000
------------
3,236,583
------------
Leisure, Lodging & Entertainment - 3.90%
CEC Entertainment .................................... 665,100 18,872,213
*Extended Stay America ................................ 210,300 1,603,538
Ruby Tuesday ......................................... 288,600 5,248,913
*Sonic ................................................ 550,200 15,680,700
------------
41,405,364
------------
Retail - 13.05%
American Eagle Outfitters ............................ 308,000 13,860,000
*Cost Plus ............................................ 626,375 22,314,609
*Dollar Tree Stores ................................... 635,550 30,784,453
*Duane Reade .......................................... 453,500 12,499,594
*Linens' n Things ..................................... 384,500 11,390,813
O'Reilly Automotive .................................. 541,800 11,648,700
+Schultz Sav-O Stores ................................. 341,500 4,354,125
Talbots .............................................. 164,400 7,336,350
*Too .................................................. 410,600 7,082,850
Tweeter Home Entertainment Group ..................... 415,800 14,760,900
*West Marine .......................................... 294,500 2,429,625
------------
138,462,019
------------
7
<PAGE>
Statement of Net Assets (continued)
Number of Market
Delaware Trend Fund Shares Value
- --------------------------------------------------------------------------------
Common Stock (continued)
Telecommunications - 13.59%
*Concord Communications ............................... 242,500 $ 10,760,938
Dycom ................................................ 498,000 21,943,125
Network Appliance .................................... 588,800 48,907,200
Nextlink Communications, Class A ..................... 468,900 38,948,006
*Pinnacle Holdings .................................... 518,800 21,984,150
*Tickets.com .......................................... 115,600 1,654,525
------------
144,197,944
------------
Transportation & Shipping - 1.19%
Forward Air .......................................... 289,900 12,574,403
------------
12,574,403
------------
Total Common Stock (cost $542,111,250) 990,393,776
------------
Principal
Amount
-----------
Repurchase Agreements - 6.60%
With Chase Manhattan 2.50% 1/3/00
(dated 12/31/99, collateralized by
$19,766,000 U.S. Treasury Notes
4.75% due 2/15/04, market value
$18,987,595) ....................................... $18,560,000 18,560,000
With J.P. Morgan Securities 3.00% 1/3/00
(dated 12/31/99, collateralized by
$7,552,000 U.S. Treasury Notes 6.375%
due 9/30/01 market value $7,688,573
and $7,353,000 U.S. Treasury Notes
6.625% due 4/30/02, market value
$7,493,613 and $7,335,000 U.S. Treasury
Notes 6.25% due 6/30/02, market value
$7,329,263) ...................................... 22,060,000 22,060,000
With PaineWebber 3.00% 1/3/00 (dated
12/31/99, collateralized by $7,556,000
U.S. Treasury Notes 5.625% due
11/30/00, market value $7,563,995
and $7,353,000 U.S.Treasury Notes
5.375% due 2/15/01, market value
$7,442,996) ...................................... 14,707,000 14,707,000
With Prudential 2.75% 1/3/00
(dated 12/31/99, collateralized by
$15,328,000 U.S. Treasury Bills
5.375% due 5/18/00, market value
$15,009,706) ..................................... 14,707,000 14,707,000
----------
Total Repurchase Agreements
(cost $70,034,000) 70,034,000
----------
<PAGE>
Market
Value
- --------------------------------------------------------------------------------
Total Market Value of Securities - 99.94%
(cost $612,145,250) .......................................... $1,060,427,776
Receivables and Other Assets
Net of Liabilities - 0.06% ................................... 599,876
--------------
Net Assets Applicable to 44,236,155 Shares
Outstanding - 100.00% ........................................ $1,061,027,652
--------------
Net Asset Value - Delaware Trend Fund A Class
($723,532,470 / 29,985,989 Shares) ........................... $24.13
------
Net Asset Value - Delaware Trend Fund B Class
($150,983,146 / 6,622,020 Shares) ............................ $22.80
------
Net Asset Value - Delaware Trend Fund C Class
($38,929,819 / 1,680,694 Shares) ............................. $23.16
------
Net Asset Value - Trend Fund Institutional Class
($147,582,217 / 5,947,452 Shares) ............................ $24.81
------
- ----------------------
*Non-income producing security for the period ended December 31, 1999.
+Considered an affiliated company as the fund owns more than 5% of the
outstanding voting securities of such company. Top ten holdings representing
36.37% of net assets, are printed in bold.
Components of Net Assets at December 31, 1999
Shares of Beneficial Interest (unlimited authorization -
no par) ...................................................... $ 575,317,731
Accumulated net investment loss ................................ (3,509,247)
Accumulated net realized gain on investments ................... 40,936,642
Net unrealized appreciation of investments ..................... 448,282,526
--------------
Total net assets ............................................... $1,061,027,652
--------------
Net Asset Value and Offering Price Per Share -
Delaware Trend Fund
Net asset value A Class (A) .................................... $24.13
Sales charge (5.75% of offering price or 6.09%
of the amount invested per share) (B) ........................ 1.47
------
Offering price .............................................. $25.60
------
- ----------------------
(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 purchase of $50,000 or more.
See accompanying notes
8
<PAGE>
Statement of Operations
Delaware Group Equity Funds III
Delaware Trend Fund
- --------------------------------------------------------------------------------
Six Months Ended 12/31/99
(Unaudited)
Investment Income:
Interest ........................................... $ 1,579,429
Dividends .......................................... 344,525 $ 1,923,954
---------- ------------
Expenses:
Management fees .................................... 2,809,827
Distribution expense ............................... 1,340,709
Dividend disbursing and transfer agent fees
and expenses ..................................... 878,100
Accounting and administration ...................... 184,544
Reports and statements to shareholders ............. 103,500
Registration fees .................................. 38,000
Taxes (other than taxes on income) ................. 32,000
Custodian fees ..................................... 22,476
Professional fees .................................. 21,000
Trustees' fees ..................................... 4,451
Other .............................................. 19,073
-----------
................................................... 5,453,680
Less fees paid indirectly (20,479) 5,433,201
---------- ------------
Net Investment Loss (3,509,247)
------------
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments ................... 116,839,107
Net change in unrealized appreciation of investments 191,366,267
------------
Net Realized and Unrealized Gain on Investments .... 308,205,374
------------
Net Increase in Net Assets Resulting from Operations $304,696,127
------------
See accompanying notes
9
<PAGE>
Statements of Changes in Net Assets
Delaware Group Equity Funds III
Delaware Trend Fund
- --------------------------------------------------------------------------------
Six Months Ended Year
12/31/99 Ended
(Unaudited) 6/30/99
Increase (Decrease) in Net Assets from Operations:
Net investment loss .......................... $ (3,509,247) $ (5,459,525)
Net realized gain on investments ............. 116,839,107 49,556,238
Net change in unrealized appreciation of
investments ................................ 191,366,267 97,315,848
-------------- ------------
Net increase in net assets resulting from
operations ................................. 304,696,127 141,412,561
-------------- ------------
Distributions to Shareholders from:
Net realized gain on investments
A Class .................................... (78,621,705) (63,040,188)
B Class .................................... (15,747,094) (10,391,880)
C Class .................................... (3,776,202) (2,060,376)
Institutional Class ........................ (13,226,767) (7,689,241)
-------------- ------------
(111,371,768) (83,181,685)
-------------- ------------
Capital Share Transactions:
Proceeds from shares sold:
A Class .................................... 206,163,627 801,415,672
B Class .................................... 35,328,046 20,583,538
C Class .................................... 16,218,479 13,073,466
Institutional Class ........................ 59,481,223 29,375,062
Net asset value of shares issued upon
reinvestment of distributions from net
realized gain on investments:
A Class .................................... 73,155,977 59,761,204
B Class .................................... 14,175,092 9,305,352
C Class .................................... 3,360,161 1,973,688
Institutional Class ........................ 13,226,020 7,688,052
-------------- ------------
421,108,625 943,176,034
-------------- ------------
Cost of shares repurchased:
A Class .................................... (194,011,911) (871,474,004)
B Class .................................... (10,251,948) (20,851,723)
C Class .................................... (7,868,091) (10,491,571)
Institutional Class ........................ (16,924,163) (39,095,070)
-------------- ------------
(229,056,113) (941,912,368)
-------------- ------------
Increase in net assets derived from capital
share transactions ......................... 192,052,512 1,263,666
-------------- ------------
Net increase in net assets ................... 385,376,871 59,494,542
Net Assets:
Beginning of year ............................ 675,650,781 616,156,239
-------------- ------------
End of period ................................ $1,061,027,652 $675,650,781
-------------- ------------
See accompanying notes
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period was as follows: Delaware Trend Fund A Class
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended
12/31/99 Year Ended
(Unaudited) 6/30/99 6/30/98 6/30/97 6/30/96 6/30/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $ 19.630 $18.550 $16.730 $18.160 $14.210 $12.210
Income (loss) from investment operations:
Net investment loss(1) .................................. (0.084) (0.140) (0.126) (0.075) (0.127) (0.074)
Net realized and unrealized gain on investments ......... 7.564 3.820 3.886 0.155 4.977 2.864
---------------------------------------------------------------------
Total from investment operations ........................ 7.480 3.680 3.760 0.080 4.850 2.790
---------------------------------------------------------------------
Less distributions:
Distributions from net realized gain on investments ..... (2.980) (2.600) (1.940) (1.510) (0.900) (0.790)
---------------------------------------------------------------------
Total distributions ..................................... (2.980) (2.600) (1.940) (1.510) (0.900) (0.790)
---------------------------------------------------------------------
Net asset value, end of period ............................ $24.130 $19.630 $18.550 $16.730 $18.160 $14.210
---------------------------------------------------------------------
Total return(2) ........................................... 42.18% 24.76% 23.97% 1.67% 35.53% 24.40%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $723,532 $504,007 $469,152 $428,309 $497,188 $318,933
Ratio of expenses to average net assets ................. 1.33% 1.45% 1.34% 1.34% 1.31% 1.36%
Ratio of net investment income to average net assets .... (0.83%) (0.87%) (0.70%) (0.47%) (0.79%) (0.58%)
Portfolio turnover ...................................... 38% 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. See accompanying
notes
11
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period was as follows: Delaware Trend Fund B Class
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Period
12/31/99 Year Ended 9/6/94(3) to
(Unaudited) 6/30/99 6/30/98 6/30/97 6/30/96 6/30/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $18.750 $17.960 $16.370 $17.920 $14.130 $12.110
Income (loss) from investment operations:
Net investment loss1 .................................... (0.152) (0.248) (0.252 (0.189) (0.248) (0.142)
Net realized and unrealized gain on investments ......... 7.182 3.638 3.782 0.149 4.938 2.162
---------------------------------------------------------------------
Total from investment operations ........................ 7.030 3.390 3.530 (0.040) 4.690 2.020
---------------------------------------------------------------------
Less distributions:
Distributions from net realized gain on investments ..... (2.980) (2.60) (1.940) (1.510) (0.900) none
---------------------------------------------------------------------
Total distributions ..................................... (2.980) (2.60) (1.940) (1.510) (0.900) none
---------------------------------------------------------------------
Net asset value, end of period ............................ $22.800 $18.750 $17.960 $16.370 $17.920 $14.130
---------------------------------------------------------------------
Total return(2) ........................................... 41.73% 23.83% 23.09% 0.96% 34.55% 16.68%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $150,983 $86,463 $71,470 $55,047 $35,090 $5,175
Ratio of expenses to average net assets ................. 2.05% 2.17% 2.09% 2.09% 2.06% 2.12%
Ratio of net investment income to average net assets .... (1.55%) (1.59%) (1.45%) (1.25%) (1.54%) (1.34%)
Portfolio turnover ...................................... 38% 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
12
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period was as follows: Delaware Trend Fund C Class
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Period
12/31/99 Year Ended 11/29/95(3) to
(Unaudited) 6/30/99 6/30/98 6/30/97 1996
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $19.010 $18.170 $16.540 $18.090 $15.460
Income (loss) from investment operations:
Net investment loss1 .................................... (0.152) (0.250) (0.255) (0.197) (0.253)
Net realized and unrealized gain on investments ......... 7.282 3.690 3.825 0.157 3.233
---------------------------------------------------------
Total from investment operations ........................ 7.130 3.440 3.570 (0.40) 2.980
---------------------------------------------------------
Less distributions:
Distributions from net realized gain on investments ..... (2.980) (2.600) (1.940) (1.510) (0.350)
---------------------------------------------------------
Total distributions ..................................... (2.980) (2.600) (1.940) (1.510) (0.350)
---------------------------------------------------------
Net asset value, end of period ............................ $23.160 $19.010 $18.170 $16.540 $18.090
---------------------------------------------------------
Total return(2) ........................................... 41.68% 23.82% 23.09% 0.95% 19.66%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $38,930 $20,566 $14,259 $11,447 $6,359
Ratio of expenses to average net assets ................. 2.05% 2.17% 2.09% 2.09% 2.06%
Ratio of net investment income to average net assets .... (1.55%) (1.59%) (1.45%) (1.28%) (1.54%)
Portfolio turnover ...................................... 38% 86% 114% 115% 90%
</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
13
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period was as follows: Delaware Trend Fund Institutional Class
Six Months Ended
12/31/99 Year Ended
(Unaudited) 6/30/99 6/30/98 6/30/97 6/30/96 6/30/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $20.080 $18.870 $16.950 $18.330 $14.300 $12.250
Income (loss) from investment operations:
Net investment loss1 .................................... (0.055) (0.095) (0.082) (0.034) (0.087) (0.044)
Net realized and unrealized gain on investments ......... 7.765 3.905 3.942 0.164 5.017 2.884
--------------------------------------------------------------------
Total from investment operations ........................ 7.710 3.810 3.860 0.130 4.930 2.840
--------------------------------------------------------------------
Less distributions:
Distributions from net realized gain on investments ..... (2.980) (2.600) (1.940) (1.510) (0.900) (0.790)
--------------------------------------------------------------------
Total distributions ..................................... (2.980) (2.600) (1.940) (1.510) (0.900) (0.790)
--------------------------------------------------------------------
Net asset value, end of period ............................ $24.810 $20.080 $18.870 $16.950 $18.330 $14.300
--------------------------------------------------------------------
Total return(2) ........................................... 42.39% 25.07% 24.35% 1.94% 35.88% 24.74%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $147,582 $64,615 $61,275 $120,319 $150,695 $55,437
Ratio of expenses to average net assets ................. 1.05% 1.17% 1.09% 1.08% 1.06% 1.12%
Ratio of net investment income to average net assets .... (0.55%) (0.59%) (0.45%) (0.21%) (0.54% (0.34%)
Portfolio turnover ...................................... 38% 86% 114% 115% 90% 64%
</TABLE>
- ----------------------
(1) Per share information was based on the average shares outstanding method.
See accompanying notes
14
<PAGE>
Notes to Financial Statements
December 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Delaware Group Equity Funds III - Delaware 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 Delaware Business Trust and offers
four classes of shares. The Delaware Trend Fund A Class carries a front-end
sales charge of 5.75%. The Delaware Trend Fund B Class carries a back-end
deferred sales charge. The Delaware Trend Fund C Class carries a level load
deferred sales charge and the Delaware Trend Fund 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 - All equity securities are valued at the last quoted sales
price as of the close of the NYSE on the valuation date. If on a particular day
an equity security does not trade, then the mean between the bid and asked
prices will be used. Money market instruments having less than 60 days to
maturity are valued at amortized cost which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Trustees.
Federal Income Taxes - The Fund intends to 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 102% collateralized. However,
in the event of default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings.
Use of Estimates - The preparation of financial statements in conformity with
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.
<PAGE>
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 Funds are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $8,803 for the six months ended December 31,
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 $11,676 for the six months ended December 31, 1999. The
expenses paid under the above arrangements are included in their respective
expense captions on the Statement of Operations with the corresponding expense
shown as "Fees 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 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
assets in excess $2,500 million. At December 31, 1999, the fund had a liability
for investment management fees and other expenses payable to DMC of $245,166.
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
December 31, 1999 the Fund had a liability for such fees and other expenses
payable to DSC of $144,041.
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. At December 31, 1999 the Fund
had a liability for such fees payable to DDLP of $26,676.
For the six months ended December 31, 1999, DDLP earned $77,561 for commissions
on sales of the Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Fund. These officers, trustees and employees are paid no compensation by the
Fund.
15
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
3. Investments
During the six months ended December 31, 1999, the Fund made purchases of
$319,315,854 and sales of $269,603,214 of investment securities other than U.S.
government securities and temporary cash investments.
At December 31, 1999, net unrealized appreciation for federal income tax
purposes aggregated $448,282,526 of which $475,280,562 related to unrealized
appreciation of securities and $26,998,036 related to unrealized depreciation of
securities. At December 31, 1999, the aggregate cost of securities for federal
income tax purposes was $612,145,250.
4. Capital Shares
Transactions in capital shares were as follows:
Six Months Ended Year
12/31/99 Ended
(Unaudited) 6/30/99
Shares sold:
A Class ....................................... 10,277,572 51,759,227
B Class ....................................... 1,800,364 1,341,460
C Class ....................................... 819,775 832,368
Institutional Class ........................... 2,888,854 1,815,083
Shares issued upon reinvestment of distributions from net realized gain on
investments:
A Class ....................................... 3,684,427 4,112,939
B Class ....................................... 746,598 666,093
C Class ....................................... 173,126 139,286
Institutional Class ........................... 638,949 518,412
----------- -----------
21,029,665 61,184,868
----------- -----------
Shares repurchased:
A Class ....................................... (9,656,294)(55,479,338)
B Class ....................................... (535,502) (1,375,488)
C Class ....................................... (394,143) (674,406)
Institutional Class ........................... (798,283) (2,363,001)
----------- -----------
(11,384,222)(59,892,233)
----------- -----------
Net increase ..................................... 9,645,443 01,292,635
----------- -----------
5. Lines of Credit
The Fund has a committed line of credit for $24.3 million. No amount was
outstanding at December 31, 1999, or at any time during the fiscal year.
6. Market Risk
The 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.
16
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
[GRAPHIC OMITTED: BUILDING BLOCKS OF A DIVERSIFIED PORTFOLIO "HOUSE"]
GROWTH OF CAPITAL
Aggressive Growth Equity Funds
Growth Equity Funds
o Select Growth Fund
o Trend Fund
o DelCap Fund
o Small Cap Value Fund
o U.S. Growth Fund
o Growth Stock Fund
o Tax-Efficient Equity Fund
o Social Awareness Fund
TOTAL RETURN
Moderate Growth Equity Funds
o Blue Chip Fund
o Devon Fund
o Decatur Equity Income Fund
o Growth and Income Fund
o REIT Fund
o Balanced Fund
INTERNATIONAL AND GLOBAL
International and Global Funds
o Emerging Markets Fund
o New Pacific Fund
o Overseas Equity Fund
o International Equity Fund
o Global Equity Fund
o Global Bond Fund
CURRENT INCOME
Taxable Bond Funds
o Delchester Fund
o High-Yield Opportunities Fund
o Extended Duration Bond Fund
o Strategic Income Fund
o Corporate Bond Fund
o American Government Bond Fund
o U.S. Government Securities Fund
o Limited-Term Government Fund
TAX-EXEMPT INCOME
Tax-Exempt Bond Funds
o National High Yield Municipal Bond Fund
o Tax-Free USA Fund
o Tax-Free Insured Fund
o Tax-Free USA Intermediate Fund
o State Tax-Free Funds*
STABILITY OF PRINCIPAL
Stability of Principal
o Cash Reserve
o Tax-Free Money Fund Asset Allocation
o Foundation Funds
Growth Portfolio
Balanced Portfolio
Income Portfolio
* Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New Jersey, New
Mexico, New York, Ohio, Oregon, Pennsylvania, and Wisconsin. Insured and
intermediate bond funds are available in selected states.
<PAGE>
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
This semi-annual report is for the information of Delaware Trend Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus for Delaware 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 each Fund. You should read the prospectus carefully
before you invest. The figures in this report represent past results which are
not a guarantee of future results. The return and principal value of an
investment in each Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
BOARD OF TRUSTEES
Wayne A. Stork
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
Walter P. Babich
Board Chairman,
Citadel Constructors, Inc.
King of Prussia, PA
David K. Downes
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
John H. Durham
Private Investor
Horsham, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY
Ann R. Leven
Former Treasurer, National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
<PAGE>
Charles E. Peck
Retired
Fredericksburg, VA
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, Minnesota
AFFILIATED OFFICERS
Charles E. Haldeman, Jr.
President and Chief Executive Officer
Delaware Management Holdings, Inc.
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
<PAGE>
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
(2721) Printed in the USA
SA-003 [12/99] PP 2/00 (J5546)
