<PAGE>
DELAWARE(TM)
INVESTMENTS
------------
2000 SEMI-ANNUAL SHAREHOLDER REPORT
- -----------------------------------
- - Delaware American Services Fund
- - Delaware Large Cap Growth Fund
- - Delaware Research Fund
February 11, 2000
Dear Shareholder:
We are pleased to present the 2000 semi-annual report for the newest additions
to Delaware Investments' fleet of domestic funds -- Delaware American Services
Fund, Delaware Large Cap Growth Fund and Delaware Research Fund. The inception
date for each Fund was December 28, 1999.
Recap of events--The U.S. stock market provided strong returns for most of 1999,
exceeding consensus expectations. In addition, a healthy U.S. economy helped
support global economic recovery, especially in emerging markets regions such as
Asia and Latin America.
The Dow Jones Industrial Average and the NASDAQ Composite equity indexes both
finished 1999 at record highs. The market's success, however, was driven by a
select group of stocks - mostly very large, successful growth companies (Source:
Bloomberg).
The strength of the stock market during the year did, however, heighten
inflationary concerns. The Federal Reserve Board responded by raising interest
rates four times since June 1999. As of this writing, the Federal Funds target
rate on overnight loans between banks stands at 5.75%, the lending rate's
highest level in more than four years. The Federal Reserve's actions have been
directed at slowing the economy and pre-empting inflation before it takes root.
As of January 31, 2000, the economy had completed a record 107th month of
expansion (Source: Bloomberg).
Delaware American Services Fund seeks to provide long-term capital growth. We
invest primarily in stocks of U.S. companies in the financial services, business
services, and consumer services sectors. Depending on our evaluation of market
conditions and investment opportunities, the Fund may focus more or less on any
of these sectors. The Fund may also invest in securities of companies in other
service sectors.
The Fund employs a bottom-up stock selection approach to find companies we
believe to be the leading companies in each of these sectors. We evaluate a
stock's characteristics as well as the individual company's management
capabilities and financial strength. The Fund invests in stocks of any size or
market capitalization, including securities of emerging or other growth-oriented
companies.
Currently, we see opportunities in several sectors, including technology,
financial, media and publishing and telecommunications, to name a few.
<PAGE>
Delaware Large Cap Growth Fund seeks to provide long-term capital growth. The
Fund invests primarily in common stocks of companies that we believe have the
potential for high earnings growth. We select stocks through a bottom-up
approach that focuses on a company's historic or projected earnings growth rate,
price-to-earnings ratio and cash flows. Once we identify companies with the
desired characteristics, we evaluate the company's management, its strength
within its industry and various financial and economic factors. Our holdings
currently include technology, electronics and electrical equipment and
telecommunications companies.
Delaware Research Fund seeks to provide long-term capital growth. The Fund
invests primarily in equity securities, without any limit on the size of the
companies issuing them. Generally, the Fund will hold only 20 to 30 different
stocks. The Fund will be less diversified than other funds, but is designed to
capitalize on what we believe are the best stock opportunities.
The Fund may purchase any stock that is held by another Delaware Investments
fund. Once we determine the universe of stocks held by other funds, we rank
those stocks using quantitative models that measure their value, growth and risk
characteristics. Among those falling in the top 25 percent of the group, we
apply a bottom-up analysis to choose what we consider to be the stocks with the
greatest potential for long-term price appreciation. We may include both value
and growth stocks in the Fund. We monitor the stocks held by other funds and
confer with the managers of other funds as needed. The Fund will sell a stock
and replace it with another if the stock is sold by all of the funds holding it
or if it doesn't meet our criteria for some other reason.
Market Outlook--Looking ahead, we believe that the current economic environment
of steady growth and low inflation provides fertile ground for long-term stock
market growth. We believe that Delaware American Services Fund, Delaware Large
Cap Growth Fund and Delaware Research Fund are positioned to benefit from such
anticipated growth. In our view, these funds can be an effective addition to a
well-diversified portfolio. With many opportunities ahead, we look forward to
working with you to make the most of your investments. Thank you for the
confidence you have shown in our new offerings.
Sincerely,
/s/ Wayne A. Stork
- -------------------------
Wayne A. Stork
Chairman,
Delaware Investments Family of Funds
/s/ David K. Downes
- ------------------------
David K. Downes
President and Chief Executive Officer
Delaware Investments Family of Funds
<PAGE>
This semi-annual report is for the information of Delaware American Services
Fund, Delaware Large Cap Growth Fund and Delaware Research Fund shareholders.
The current prospectus of each Fund sets forth details about charges, expenses,
investment objectives and operating policies of each Fund. You should read the
prospectus carefully before you invest or send money. Summary investment results
are documented in each Fund's current Statement of Additional Information.
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
DELAWARE AMERICAN SERVICES FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
(Unaudited)
Number Market
of Shares Value
----------------------
COMMON STOCK - 42.31%
Banking, Finance & Insurance - 9.40%
Citigroup 500 $ 27,781
Donaldson, Lufkin & Jenrette 1,100 53,213
Providian Financial 600 54,638
Schwab 1,500 57,562
----------
193,194
----------
Business Services - 4.19%
*Luminant Worldwide 1,400 63,700
*NFO Worldwide 1,000 22,375
----------
86,075
----------
Cable, Media & Publishing - 8.16%
*Adelphia Communications 800 52,500
*CBS 800 51,150
*OPENTV 800 64,200
----------
167,850
----------
Computers & Technology - 9.73%
*BISYS Group 400 26,100
*CGS Systems International 1,300 51,838
*Eplus 500 17,750
*FISERV 1,300 49,806
*S1 700 54,687
----------
200,181
----------
Consumer Products - 2.77%
*Gemstar International Group Limited 800 57,000
----------
57,000
----------
Telecommunications - 8.06%
*Adelphia Business Solutions 1,100 52,800
*Global Crossing Limited 800 40,000
*McLeod 400 23,550
*Telecorp PCS 1,300 49,400
----------
165,750
----------
Total Common Stock (cost $830,651) 870,050
----------
TOTAL MARKET VALUE OF SECURITIES - 42.31% $ 870,050
(cost $830,651)
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 57.69% 1,186,262
----------
NET ASSETS APPLICABLE TO 237,249 SHARES
OUTSTANDING - 100.00% $2,056,312
==========
<PAGE>
DELAWARE AMERICAN SERVICES FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
<S> <C>
NET ASSET VALUE - DELAWARE AMERICAN SERVICES FUND A CLASS
($16,942/1,954 shares) $ 8.67
==========
NET ASSET VALUE - DELAWARE AMERICAN SERVICES FUND INSTITUTIONAL CLASS
($2,039,370/235,295 shares) $ 8.67
==========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization - no par) $2,016,913
Net unrealized appreciation of investments 39,399
----------
Total net assets $2,056,312
==========
* Non-Income producing security for the period ended December 31, 1999
- -----------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE AMERICAN SERVICES FUND
Net asset value A Class (A) $ 8.67
Sales charge (5.75% of offering price or 6.11% of the amount
invested per share) (B) 0.53
----------
Offering price $ 9.20
==========
</TABLE>
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
DELAWARE LARGE CAP GROWTH FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
(Unaudited)
Number Market
of Shares Value
---------------------
COMMON STOCK - 13.13%
Computers & Technology - 7.52%
*America Online 400 $ 30,175
*Cisco Systems 200 21,425
*Juniper Networks 100 34,000
*Oracle 200 22,413
*Yahoo 100 43,269
----------
151,282
----------
Consumer Products - 1.09%
Procter & Gamble 200 21,913
----------
21,913
----------
Electronics & Electrical Equipment - 1.54%
General Electric 200 30,950
----------
30,950
----------
Energy - 0.93%
Schlumberger 300 16,875
Transocean Sedco Forex 58 1,956
----------
18,831
----------
Retail - 1.03%
Wal-Mart Stores 300 20,737
----------
20,737
----------
Telecommunications - 1.02%
*Sprint 200 20,500
----------
20,500
----------
Total Common Stock (cost $259,177) 264,213
----------
TOTAL MARKET VALUE OF SECURITIES - 13.13%
(cost $259,177) $ 264,213
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 86.87% 1,747,340
----------
NET ASSETS APPLICABLE TO 236,060 SHARES OUTSTANDING - 100.00% $2,011,553
==========
NET ASSET VALUE - DELAWARE LARGE CAP GROWTH FUND A CLASS
($6,520 / 765 shares) $ 8.52
==========
<PAGE>
DELAWARE LARGE CAP GROWTH FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
<S> <C>
NET ASSET VALUE - DELAWARE LARGE CAP GROWTH FUND INSTITUTIONAL CLASS
($2,005,033 / 235,295 shares) $ 8.52
==========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization - no par) $2,006,517
Net unrealized appreciation of investments 5,036
----------
Total net assets $2,011,553
==========
* Non-income producing security for the period ended December 31, 1999.
-------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE LARGE CAP GROWTH FUND
Net asset value A Class (A) $ 8.52
Sales charge (5.75% of offering price or 6.10% of the amount
invested per share) (B) 0.52
----------
Offering price $ 9.04
==========
(A) Net asset value per share, as illustrated, is the estimated amount
which would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
</TABLE>
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
DELAWARE RESEARCH FUND
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
(Unaudited)
Number Market
of Shares Value
---------------------
COMMON STOCK - 99.64%
Aerosapce & Defense - 5.16%
United Technologies 1,600 $104,000
--------
104,000
========
Automobiles & Auto Parts - 4.69%
General Motors 1,300 94,494
--------
94,494
========
Banking, Finance & Insurance - 14.84%
Citigroup 1,800 100,013
Federal Home Loan 2,100 98,831
Merrill Lynch & Company 1,200 100,200
--------
299,044
========
Cable, Media & Publishing - 5.39%
Time Warner 1,500 108,656
--------
108,656
========
Computers & Technology - 15.23%
*3Com 2,100 98,700
*At Home-Series A 2,200 94,325
*VISIO 2,400 114,000
--------
307,025
========
Consumer Products - 4.86%
Minnesota Mining & Manufacturing 1,000 97,875
--------
97,875
========
Electronics & Electrical Equipment - 10.42%
Intel 1,300 107,006
Motorola 700 103,075
--------
210,081
========
Food, Beverage & Tobacco - 4.82%
Sara Lee 4,400 97,075
--------
97,075
========
Healthcare & Phrmaceuticals - 13.96%
American Home Products 2,500 98,594
Pfizer 2,900 94,069
Schering-Plough 2,100 88,594
--------
281,257
========
<PAGE>
DELAWARE RESEARCH FUND
STATEMENT OF NET ASSETS (Continued)
Number Market
of Shares Value
---------------------
Paper & Forest Products - 5.23%
Temple-Inland 1,600 $ 105,500
----------
105,500
==========
Retail - 5.37%
Circuit City Stores 2,400 108,150
----------
108,150
==========
Telecommunications - 9.67%
AT&T 1,800 91,350
*MCI Worldcom 1,900 103,471
----------
194,821
----------
Total Common Stock (cost $1,993,329 2,007,978
----------
TOTAL MARKET VALUE OF SECURITIES - 99.44%
(cost $1,993,229) $2,007,978
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.36% 7,288
----------
NET ASSETS APPLICABLE TO 235,355 SHARES
OUTSTANDING - 100.00% $2,015,266
==========
NET ASSET VALUE - DELAWARE RESEARCH FUND A CLASS
($510/60 shares) $ 8.56
==========
NET ASSET VALUE - DELAWARE RESEARCH FUND INSTITUTIONAL CLASS
($2,014,756/235,295 shares) $ 8.56
==========
COMPONENTS OF NET ASSETS AT DECEMBER 31, 1999:
Shares of beneficial interest (unlimited authorization
- no par) $2,000,517
Net unrealized appreciation of investments 14,749
----------
Total net assets $2,015,266
==========
*Non-income producing security for the period ended
December 31, 1999.
--------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE RESEARCH FUND
Net asset value A Class (A) $ 8.56
Sales charge (5.75% of offering price of 6.07% of the amount
invested per share) (B) 0.52
----------
Offering price $ 9.08
==========
(A) Net asset value per share as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
<PAGE>
Statements of Assets and Liabilities
December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Delaware Delaware
American Large Cap Delaware
Services Growth Research
Fund Fund Fund
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS:
Investments at market $ 870,050 $ 264,213 $2,007,978
Cash 2,006,430 2,006,517 2,000,017
Other assets 10,483 - 500
---------- ---------- ----------
Total assets 2,886,963 2,270,730 4,008,495
---------- ---------- ----------
LIABILITIES:
Payable for securities purchased 830,651 259,177 1,993,229
---------- ---------- ----------
Total liabilities 830,651 259,177 1,993,229
---------- ---------- ----------
TOTAL NET ASSETS $2,056,312 $2,011,553 $2,015,266
========== ========== ==========
Investments at cost $ 830,651 $ 259,177 $ 1,993,229
========== ========== ==========
</TABLE>
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Delaware Delaware
American Large Cap Delaware
Services Growth Research
Fund Fund Fund
--------- ---------- ---------
12/28/99* 12/28/99* 12/28/99*
To To To
12/31/99 12/31/99 12/31/99
--------- ---------- ---------
<S> <C> <C> <C>
Investment income: $ - $ - $ -
------- ------ -------
Expenses: - - -
------- ------ -------
Net investment income - - -
------- ------ -------
Net realized and unrealized gain on investments:
Net change in unrealized appreciation
of investments 39,399 5,036 14,749
------- ------ -------
Net realized and unrealized gain on investments: 39,399 5,036 14,749
------- ------ -------
Net increase in net assets resulting from operations $39,399 $5,036 $14,749
======= ====== =======
</TABLE>
- ----------
*Date of commencement of operations.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Delaware Delaware
American Large Cap Delaware
Services Growth Research
Fund Fund Fund
---------- ----------- ----------
12/28/99* 12/28/99* 12/28/99*
To To To
12/31/99 12/31/99 12/31/99
(Unaudited) (Unaudited) (Unaudited)
---------- ----------- ----------
<S> <C> <C> <C>
Increase in Net Assets from Operations:
Net change in unrealized appreciation of investments $ 39,399 $ 5,036 $ 14,749
---------- ---------- ----------
Net increase in net assets resulting from operations 39,399 5,036 14,749
---------- ---------- ----------
Capital Share Transactions:
Proceeds from shares sold:
A Class 16,904 6,509 509
Institutional Class 2,000,009 2,000,008 2,000,008
---------- ---------- ----------
2,016,913 2,006,517 2,000,517
Increase in net assets derived from capital share transactions 2,016,913 2,006,517 2,000,517
---------- ---------- ----------
Net Increase in Net Assets 2,056,312 2,011,553 2,015,266
Net Assets:
Beginning of period -- -- --
---------- ---------- ----------
End of period $2,056,312 $2,011,553 $2,015,266
========== ========== ==========
</TABLE>
- ----------
*Date of commencement of operations.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
Delaware American Services Fund A Class
---------------------------------------
12/28/99(1)
to
12/31/99
(Unaudited)
<S> <C>
Net asset value, beginning of period $8.500
Income from investment operations:
Net investment income 0.000
Net realized and unrealized gain on investments 0.170
------
Total from investment operations 0.170
------
Net asset value, end of period $8.670
======
Total return(2) 0.00%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 17
Ratio of expenses to average net assets 2
Ratio of net investment income to average net assets 2
Portfolio turnover 0%
</TABLE>
- ----------
(1) Date of commencement of operations.
(2) The ratios of expenses and net investment income to average net assets and
total return have been omitted as management believes that such ratios and
return for this relatively short period are not meaningful.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
Delaware American Services Fund Institutional Class
---------------------------------------------------
12/28/99(1)
to
12/31/99
(Unaudited)
<S> <C>
Net asset value, beginning of period $8.500
Income from investment operations:
Net investment income 0.000
Net realized and unrealized gain on investments 0.170
------
Total from investment operations 0.170
------
Net asset value, end of period $8.670
======
Total return(2) 0.00%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,039
Ratio of expenses to average net assets 2
Ratio of net investment income to average net assets 2
Portfolio turnover 0%
</TABLE>
- ----------
(1) Date of commencement of operations.
(2) The ratios of expenses and net investment income to average net assets and
total return have been omitted as management believes that such ratios and
return for this relatively short period are not meaningful.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
Delaware Large Cap Growth Fund A Class
--------------------------------------
12/28/99(1)
to
12/31/99
(Unaudited)
<S> <C>
Net asset value, beginning of period $8.500
Income from investment operations:
Net investment income 0.000
Net realized and unrealized gain on investments 0.020
------
Total from investment operations 0.020
------
Net asset value, end of period $8.520
======
Total return(2) 0.00%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 7
Ratio of expenses to average net assets 2
Ratio of net investment income to average net assets 2
Portfolio turnover 0%
</TABLE>
- ----------
(1) Date of commencement of operations.
(2) The ratios of expenses and net investment income to average net assets and
total return have been omitted as management believes that such ratios and
return for this relatively short period are not meaningful.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
Delaware Large Cap Growth Fund Institutional Class
--------------------------------------------------
12/28/99(1)
to
12/31/99
(Unaudited)
<S> <C>
Net asset value, beginning of period $8.500
Income from investment operations:
Net investment income 0.000
Net realized and unrealized gain on investments 0.020
------
Total from investment operations 0.020
------
Net asset value, end of period $8.520
======
Total return(2) 0.00%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,005
Ratio of expenses to average net assets 2
Ratio of net investment income to average net assets 2
Portfolio turnover 0%
</TABLE>
- ----------
(1) Date of commencement of operations.
(2) The ratios of expenses and net investment income to average net assets and
total return have been omitted as management believes that such ratios and
return for this relatively short period are not meaningful.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
Delaware Research Fund A Class
------------------------------
12/28/99(1)
to
12/31/99
(Unaudited)
<S> <C>
Net asset value, beginning of period $8.500
Income from investment operations:
Net investment income -
Net realized and unrealized gain on investments 0.060
------
Total from investment operations 0.060
------
Net asset value, end of period $8.560
======
Total return(2) 0.00%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 1
Ratio of expenses to average net assets 2
Ratio of net investment income to average net assets 2
Portfolio turnover 0%
</TABLE>
- ----------
(1) Date of commencement of operations.
(2) The ratios of expenses and net investment income to average net assets and
total return have been omitted as management believes that such ratios and
return for this relatively short period are not meaningful.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
Delaware Research Fund Institutional Class
------------------------------------------
12/28/99(1)
to
12/31/99
(Unaudited)
<S> <C>
Net asset value, beginning of period $8.500
Income from investment operations:
Net investment income 0.000
Net realized and unrealized gain on investments 0.060
------
Total from investment operations 0.060
------
Net asset value, end of period $8.560
======
Total return(2) 0.00%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,015
Ratio of expenses to average net assets 2
Ratio of net investment income to average net assets 2
Portfolio turnover 0%
</TABLE>
- ----------
(1) Date of commencement of operations.
(2) The ratios of expenses and net investment income to average net assets and
total return have been omitted as management believes that such ratios and
return for this relatively short period are not meaningful.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS III
Notes to Financial Statements
December 31, 1999
(Unaudited)
Delaware Group Equity Funds III (the Company) is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Company is organized as a Delaware Business Trust and offers five
series: the Delaware American Services Fund, the Delaware Large Cap Growth Fund,
the Delaware Research Fund, the Delaware Technology and Innovation Fund and the
Delaware Trend Fund. These financial statements and related notes pertain to the
Delaware American Services Fund, the Delaware Large Cap Growth Fund and the
Delaware Research Fund (each referred to as a Fund or collectively as the
"Funds"). Each Fund offers four classes of shares. The A Class carries a
front-end sales charge of 5.75%. The B Class carries a back-end deferred sales
charge. The C Class carries a level load deferred sales charge and the
Institutional Class has no sales charge. As of December 31, 1999, only the A and
Institutional Classes commenced operations.
The Delaware American Services Fund seeks to provide long-term capital growth.
The Fund invests primarily in stocks of U.S. companies in the financial
services, business services, and consumer services sectors.
The Delaware Large Cap Growth Fund seeks to provide long-term capital growth.
The Fund invests primarily in common stocks of companies that have a high
potential for high earnings growth.
The Delaware Research Fund seeks to provide long-term capital growth. The Fund
invests primarily in equity securities, without any limit on size or
capitalization of the companies issuing them.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Funds.
Security Valuation- 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 Funds' Board of Trustees.
Federal Income Taxes- Each Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
<PAGE>
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 each Fund on
the basis of daily net assets of each class. Distribution expenses relating to a
specific class are charged directly to that class.
Repurchase Agreements- Each Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by each
Funds 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.
Other- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Each Fund declares and pays dividends from net
investment income and capital gains, if any, annually.
For the period ended December 31, 1999, the Funds did not incur or accrue any
expenses or income.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Funds
pay Delaware Management Company ("DMC"), the Investment Manager of the Funds, an
annual fee which is calculated on the daily net assets of each Fund as follows:
<PAGE>
Delaware American Services Fund
-------------------------------
On the first $500 million...............................0.75%
On the next $500 million................................0.70%
On the next $1.5 billion................................0.65%
Over $2.5 billion.......................................0.60%
Delaware Large Cap Growth Fund
------------------------------
On the first $500 million..............................1.00%
On the next $500 million................................0.95%
On the next $1.5 billion................................0.90%
Over $2.5 billion.......................................0.85%
Delaware Research Fund
----------------------
On the first $500 million...............................0.65%
On the next $500 million................................0.60%
On the next $1.5 billion................................0.55%
Over $2.5 billion.......................................0.50%
DMC has elected to waive that portion, if any, of the management fee and
reimburse each Fund to the extent that annual operating expenses, exclusive of
taxes, interest, distribution fees, brokerage commissions and extraordinary
expenses, exceed 0.75% of average daily net assets of each Fund through August
31, 2001.
The Funds have engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent and accounting services.
Each Fund pays DSC a monthly fee based on the number of shareholder accounts,
shareholder transactions and average net assets, subject to certain minimums.
Pursuant to the Distribution Agreement, each Fund pays Delaware Distributors,
L.P. ("DDLP"), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.25% of the average daily assets of the A Class and 1.00% of the average
daily net assets of the B and C Classes.
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Funds. These officers, trustees and employees are paid no compensation by
the Funds.
3. Investments
For the period ended December 31, 1999, the Funds made purchases of investment
securities other than U.S. government securities and temporary cash investments
as follows:
<PAGE>
Purchases
---------
Delaware American
Services Fund $ 830,651
Delaware Large Cap
Growth Fund 259,177
Delaware Research
Fund 1,993,229
The Funds made no sales during the period ended December 31, 1999.
At December 31, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for each Fund were
as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Aggregate Net
Cost of Unrealized Unrealized Unrealized
Investments Appreciation Depreciation Appreciation
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Delaware American
Services Fund $ 830,651 $40,446 $ (1,047) $39,399
Delaware Large Cap
Growth Fund 259,177 6,993 (1,957) 5,036
Delaware Research
Fund 1,993,229 23,212 (8,463) 14,749
</TABLE>
4. Capital Shares
Transactions in capital shares were as follows:
Delaware Delaware
American Large Cap Delaware
Services Growth Research
Fund Fund Fund
---- ---- ----
12/28/99* 12/28/99* 12/28/99*
To To To
12/31/99 12/31/99 12/31/99
-------- -------- --------
Shares sold:
A Class 1,954 765 60
Institutional Class 235,295 235,295 235,295
------- ------- -------
237,249 236,060 235,355
------- ------- -------
Net increase 237,249 236,060 235,355
======= ======= =======
*Date of commencement of operations.
