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FOR GROWTH OF CAPITAL
Aggressive Growth Fund
Growth Stock Fund
[photo of illustration from Growth of Capital Brochure]
service and guidance
professional management
goals
1999
Semi-Annual
Report
DELAWARE(SM)
INVESTMENTS
- ----------------------
Philadelphia [] London
<PAGE>
for November 10, 1998
growth
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2
Dear Shareholder:
THE U.S. STOCK MARKET COULD NOT dodge the volatility that rocked many
international equity markets during the first half of fiscal 1999. Stock market
gains made earlier in the year were sharply curtailed last summer after the
Russian economy collapsed. This shook investor confidence the world over.
Most of the world's major stock markets suffered their worst quarter in
years during the three months ended September 30, 1998, according to Bloomberg
Business News. Your Fund's benchmark, the unmanaged Standard & Poor's 500 Index,
took its biggest dip since the autumn of 1990.
The pace of U.S. economic growth remained steady for the six months ended
October 31, 1998. However, investors became concerned when some companies could
not meet earnings expectations.
For the six months ended October 31, 1998, Aggressive Growth Fund and
Growth Stock Fund had total returns (for A Class shares at net asset value with
distributions reinvested) of -10.61% and +0.70%, respectively.
We are pleased to report that Growth Stock Fund outperformed the S&P 500
Index and its Lipper peer group average as shown below. Aggressive Growth Fund's
returns were lower-than-average, however. We believe the difference in results
can be attributed to each Fund's investment style and stock selection
disciplines.
THE PACE OF U.S. ECONOMIC GROWTH REMAINED STEADY FOR THE SIX MONTHS ENDED
OCTOBER 31, 1998. HOWEVER, INVESTORS BECAME CONCERNED WHEN SOME COMPANIES COULD
NOT MEET EARNINGS EXPECTATIONS.
Growth Stock Fund employs a more tempered investment strategy by focusing
on established high quality companies. Aggressive Growth Fund focuses on stocks
with high capital appreciation potential and a higher risk profile.
Aggressive Growth Fund is managed for long-term growth. However, the Fund's
share price is substantially affected by changes in short-term investor
sentiment about earnings and growth prospects of stocks in the Fund's portfolio.
Below you can see that Aggressive Growth Fund provided a three year average
annual total return of +27.28%, outperforming the S&P 500 Index.
CUMULATIVE & AVERAGE TOTAL RETURNS
- --------------------------------------------------------------------------------
FOR PERIODS ENDED OCTOBER 31, 1998
Six Three
Months Years
- --------------------------------------------------------------------------------
Aggressive Growth Fund A Class -10.61% +27.28%
Growth Stock Fund A Class +0.70% +20.36%
Lipper Growth Fund Average -6.78% (1,077 funds) +17.97% (574 funds)
Standard & Poor's 500 Index -0.40% +25.99%
- --------------------------------------------------------------------------------
All performance shown above is based on net asset value without effect of sales
charges and assumes reinvestment of distributions. Performance information for
all classes of each Fund can be found on page 9. Past performance does not
guarantee future results.
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The Federal Reserve Board's decision to reduce its short-term interest rate
target by 50 basis points (0.50%) helped allay fears of a lengthy market
decline. The stock market seemed to rebound following the Fed's decision to ease
monetary policy - the first rate cut in over three years. We believe lowering
borrowing costs may spur further growth in the U.S. economy.
Stock price declines of last summer and fall provided a sobering reminder
that stock investments can be volatile. We believe these declines moved the
market's speculative excess toward a more rational perspective.
On the pages that follow, Aggressive Growth Fund's senior portfolio
manager, Gerald S. Frey, and Growth Stock Fund manager, James King, explain in
detail how each Fund's investment portfolio performed since April.
Given the market's recent volatility, we believe you would benefit from a
careful review of your investments with your financial adviser. In our view,
Aggressive Growth Fund and Growth Stock Fund can play an integral part of a
prudent long-term asset allocation strategy.
We thank you for your continued confidence in Delaware Investments.
Sincerely,
/s/ Wayne A. Stork
- -------------------------
WAYNE A. STORK
Chairman
/s/ Jeffrey J. Nick
- -------------------------
JEFFREY J. NICK
President and Chief Executive Officer
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Portfolio Managers' Review
AGGRESSIVE GROWTH FUND
By Gerald S. Frey
Senior Portfolio Manager
November 10, 1998
Aggressive Growth Fund examines the entire U.S. stock market to uncover
companies we believe are poised for strong growth. We seek out the best
investment opportunities among small, medium and large companies without regard
for a company's market capitalization (stock price times the number of shares
outstanding).
As of October 31, 1998, approximately one-third of your Fund's net assets
were invested in large companies and the remaining two-thirds were split among
mid and small cap stocks. We found better value in smaller company stocks
throughout the period.
We travel to many businesses to interview executives and review their
operations.
We seek companies that exhibit reliable earnings growth and offer
innovative products and services.
During the fiscal period, we focused on consumer and business services
stocks - a sector we believe offers attractive capital appreciation prospects.
The Fund's holdings of Consolidated Graphics, the largest public company
providing graphic arts services, experienced strong capital appreciation during
the period. The company's results exceeded many financial analysts' earnings
expectations. Consolidated Graphics enjoyed robust demand for graphic arts
services and appeared to keep a lid on expenses.
Some of the Fund's technology stock holdings that were exposed to
international markets performed poorly since the spring. Our holdings of
Advanced Fiber Communications, which
WE SEEK COMPANIES THAT EXHIBIT RELIABLE EARNINGS GROWTH AND OFFER INNOVATIVE
PRODUCTS AND SERVICES.
PERFORMANCE BY SECTOR
AGGRESSIVE GROWTH FUND VS. S&P 500 INDEX
- --------------------------------------------------------------------------------
MAY 1, 1998 TO OCTOBER 31, 1998
Industry Group Aggressive Growth Fund S&P 500 Index
- --------------------------------------------------------------------------------
Capital Goods -2.5% -10.8%
Business Services -4.3% -7.9%
Consumer Goods* -4.6% -2.4%
Consumer and Business Services +15.3% -9.4%
Financials -7.5% -10.5%
Technology +6.2% +10.0%
Utilities -3.6% +14.3%
Performance is based on prices of stock holdings and index components and does
not include expenses. The sectors shown here represent more than 87% of
Aggressive Growth Fund's equity holdings and 79% of the unmanaged S&P 500 Index
as of October 31, 1998.
* Includes both non-durable goods such as processed food and clothing along
with durable goods such as home appliances.
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manufactures fiber optic systems for telecommunications companies, was hurt by
weak orders due to falling international demand. The company's share price fell
significantly, as shown on page 6. We have since sold our holdings of Advanced
Fiber during the fiscal period.
In fiscal 1999, we believe the "year 2000 problem" (Y2K), in which
computers may experience difficulties adapting to the year 2000, will impact
many businesses.
In our view, some of the Fund's technology holdings may actually benefit
from this issue.
Compuware, a software developer whose shares we own, has benefitted by
providing solutions to Y2K, and we believe the company can continue to grow
beyond the year 2000.
Since April, the Fund's holdings in the financial sector have not performed
well. The sector suffered from successive problems from emerging market currency
exposure, to Russia's debt default, and a souring of overseas loans.
Throughout the period, we sought to avoid banks and investment companies
with exposure to emerging market loans or trading activity. We focused instead
on large regional banks such as First America Corp. of Tennessee that we believe
can continue to grow in an expanding domestic economy.
OUTLOOK
At fiscal mid-year, the U.S. stock market appears to be regaining ground lost
during August and September. The Federal Reserve Board's interest rate cuts
combined with the lowest inflation rate in almost 40 years to provide a backdrop
for the resurgent stock market.
Robust consumer confidence spurred by the lowest unemployment rate in a
generation has helped to sustain the stock market. Some investors believe the
strong U.S. economy may withstand the drag of slowing economies in Asia and
Latin America.
In the coming months, we will attempt to focus on companies with strong
prospects. As always, we will keep your Fund's investment portfolio focused on
long-term growth by seeking companies that perform well regardless of general
economic conditions.
AGGRESSIVE GROWTH FUND
SECTOR ALLOCATION AND PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
OCTOBER 31, 1998
Food, Beverage
and Tobacco 4.6% Retailing 14.2%
Leisure/Lodging 1.1%
Consumer & Business
Services 3.0%
Technology 38.3% Media 9.0%
Cash 10.8%
Financials 6.0%
Other Capital
Goods 3.7% Telecommunications 10.6%
Aggressive S&P 500
Growth Fund Index
----------- -------
Median Market Capitalization $2.2 billion $7.8 billion
Number of Stocks 50 500
Average Stock Price-to-
Earnings Ratio 27.7x 28.6x
Top Sector Technology Technology
Beta* 1.4 1.0
P/Es are based on analysts' earnings estimates.
*A measure of risk relative to the S&P 500 Index. A number less than 1.0 means
less historical price volatility than the Index. A number higher than 1.0 means
more historical volatility. Thus a 1.4 beta means the Fund's historical
volatility has been 40% higher than the index.
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Growth Stock Fund
By James King
Voyageur Asset Management, LLC
Senior Portfolio Manager
November 10, 1998
Growth Stock Fund attempts to maximize growth potential and minimize volatility
by employing a rigorous stock purchase discipline. Indeed, for the six months
ended October 31, 1998, the Fund was able to preserve capital to a greater
extent than the Standard & Poor's 500 Index, as shown on page 2.
The Fund primarily invests in companies that:
o Obtain high quality ratings by Standard & Poor's;
o Offer long-term growth potential;
o Demonstrate stability in the face of economic fluctuations; and
o Have low stock pricesrelative to earnings.
Growth Stock Fund's buy discipline positions our investment portfolio
defensively, which helps lessen the impact of market volatility, in our opinion.
We begin our stock selection strategy by choosing from a universe of
approximately 250 companies that have received an A or A+ rating from Standard &
Poor's. Ratings are assigned based on a company's ability to steadily increase
earnings over a 10-year period.
We then screen out companies whose growth patterns strongly correlate with
the fluctuations of the business cycle. These stocks are relatively more
susceptible to short-term economic whims, in our opinion. Finally, we screen for
companies in the lowest 20% of their historic price-to-earnings ratio (p/e)
range. We believe this allows us to uncover stocks that may be undervalued.
Our screening process narrows the field to about 30 stocks in which the Fund
invests with a long-term horizon in mind. We believe this concentrated portfolio
is adequately diversified across many sectors. Such concentration may help the
Fund benefit from a significant upward move in one of its holdings.
Despite substantial market volatility and record levels of stock trading this
past summer, your Fund's 33% portfolio turnover rate for the first half of
fiscal 1999 was much lower than the 147% average turnover rate in Morningstar's
Growth Stock category average. While not an objective of the Fund, our
long-term, buy-and-hold investment strategy has had the effect of reducing
capital gains distributions. This in turn can help reduce your tax liability.
The Fund's largest sector at fiscal mid-year continued to be food, beverage
and tobacco stocks. One-quarter of your
AGGRESSIVE GROWTH FUND'S WINNERS AND SINNERS
- -------------------------------------------------------------------------------
Total Returns For The Six Months Ended October 31, 1998
Top Five Performing Stocks Bottom Five Performing Stocks
- -------------------------------------------------------------------------------
America Online +95.4% Flexinternational -58.4%
Gemstar +89.9% Advanced Fiber Communications -54.9%
Veritas Software +58.2% Analog Devices -44.8%
Coulter Pharmaceutical +49.2% Pacific Gateway Exchange -42.9%
MCI Worldcom +48.7% Coach USA -36.6%
Source: Wilshire Atlas.
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Fund's net assets were allocated to the sector as of October 31. We believe
these stocks did well because domestic and overseas demand for their products is
likely to remain relatively stable despite weakening economic conditions. Philip
Morris - your Fund's largest holding - performed particularly well after the
tobacco company was successful in defending itself against litigation.
Over the six-month period ended October 31, we sold two stocks and added a
new one to Growth Stock Fund's investment portfolio. Norwest Bank's merger with
Wells Fargo rendered cause for concern. Norwest's stock performed well for much
of the period, but we believe the issues related to the merger may affect the
company's ability to meet analysts earnings expectations. We sold the Fund's
holdings of Norwest at a profit last summer.
Ongoing financial problems in Asia presented difficulties for our holdings of
Bandag - an auto parts manufacturer based in Iowa. A significant percentage of
Bandag's revenue came from selling retreaded truck tires in Asia. As consumer
and industrial demand fell throughout the Pacific Rim, many of Bandag's tires
were parked in warehouses and loading docks awaiting new buyers.
We remained leery of the financial sector throughout the period because of
international economic strife. Some U.S. investment banks were overly exposed to
struggling international markets while others were affected by sour loans.
However, one financial company - Key Corp - was able to pass our screening.
The Ohio company functions as a regional bank in the midwestern U.S. We believe
Key Corp can benefit from a strong demand for capital spurred in part by
historically low interest rates.
GROWTH STOCK FUND'S
STOCK PURCHASE
DISCIPLINE POSITIONS
OUR INVESTMENT
PORTFOLIO DEFENSIVELY
WHICH WE BELIEVE
MAY REDUCE THE
EFFECTS OF STOCK
MARKET VOLATILITY.
GROWTH STOCK FUND
SECTOR ALLOCATION AND PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
October 31, 1998
Chemicals 3.7% Retailing 19.5%
Auto Parts 3.1% Cash 2.0%
Pharmaceuticals 10.9%
Food, Beverage &
Tobacco 24.8% Technology 8.4%
Energy 6.8% Capital Goods 13.7%
Finance 7.1%
Growth S&P 500
Stock Fund Index
- --------------------------------------------------------------------------------
Median Market Capitalization $16.7 billion $7.8 billion
Number of Stocks 26 500
Average Stock Price-to-
Earnings Ratio 21.3x 28.6x
Top Sector Food, Beverage & Tobacco Technology
Beta* 0.86 1.0
P/Es are based on analysts' earnings estimates.
*A measure of risk relative to the S&P 500 Index. A number less than 1.0 means
less historical price volatility than the Index. A number higher than 1.0 means
more historical volatility. Thus a 0.86 beta means the Fund's historical
volatility has been 14% lower than large capitalization stocks on average.
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Outlook
As the second half of the 1999 fiscal year begins, we believe that many
companies' earnings will continue to disappoint for the remainder of the year.
Some companies have begun to revise their earnings estimates downward. Still, we
believe some estimates may still be too optimistic.
Financial strife along the Pacific Rim and Latin America has sharply lowered
the demand for some U.S. goods and services. As a result, many companies may
suffer from overcapacity in manufacturing and large inventories of unsold goods.
This in turn may lead to lower prices for certain goods and, consequently, lower
stock prices.
By focusing on the highest quality stocks, we believe our defensive
investment style has the potential to help preserve capital to a greater degree
than the Standard & Poor's 500 Index in a weak equity market. Many of the
companies in our portfolio have a record of performing well through various
stages of the economic cycle.
We will continue to overweight non-cyclical companies such as food, beverage
and tobacco businesses, which may offer steady performance despite general
economic conditions. We also favor pharmaceutical stocks, which share the same
defensive qualities.
One area we will continue to underweight is technology. Few technology
companies are rated A or A+ by Standard & Poor's because earnings growth tends
to be inconsistent and cyclical. Thus, many of these companies cannot pass the
first screen of our stock selection process.
BY FOCUSING ON THE
HIGHEST QUALITY STOCKS,
WE BELIEVE OUR
DEFENSIVE INVESTMENT
STYLE HAS THE POTENTIAL
TO HELP PRESERVE CAPITAL
TO A GREATER DEGREE
THAN THE STANDARD &
POOR'S 500 INDEX IN A
WEAK EQUITY MARKET.
GROWTH STOCK FUND TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
October 31, 1998
Company S&P Quality Rating Percent of Net Assets
- --------------------------------------------------------------------------------
Philip Morris A+ 5.1%
Electronic Data Systems A+ 4.5%
Wal-Mart Stores A+ 4.4%
Sysco A+ 4.3%
Anheuser-Busch A+ 4.2%
Sherwin Williams A+ 4.1%
ConAgra A+ 4.1%
Illinois Tool Works A 4.1%
Hewlett-Packard A 4.1%
Sara Lee A+ 4.0%
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Performance Summary
AGGRESSIVE GROWTH Fund Performance
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH OCTOBER 31, 1998
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 5/16/94)
Excluding Sales Charge +23.01% +8.03%
Including Sales Charge +21.39% +1.82%
- --------------------------------------------------------------------------------
Class B (Est. 4/16/96)
Excluding Sales Charge +30.66% +7.15%
Including Sales Charge +29.88% +2.46%
- --------------------------------------------------------------------------------
Class C (Est. 5/20/94)
Excluding Sales Charge +22.12% +7.22%
Including Sales Charge +22.12% +6.28%
GROWTH STOCK FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH OCTOBER 31, 1998
Lifetime Ten Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 8/1/85)
Excluding Sales Charge +16.25% +15.74% +17.29% +17.76%
Including Sales Charge +15.73% +15.05% +15.92% +10.98%
- --------------------------------------------------------------------------------
Class B (Est. 9/8/95)
Excluding Sales Charge +19.61% +16.82%
Including Sales Charge +18.96% +11.82%
- --------------------------------------------------------------------------------
Class C (Est. 10/21/95)
Excluding Sales Charge +18.78% +16.87%
Including Sales Charge +18.78% +15.87%
All performance includes reinvestment of distributions and applicable sales
charges as described below. Return and share value will fluctuate so that shares
when redeemed may be worth more or less than the original cost. Past performance
is not a guarantee of future results. Performance for Class B and C shares
excluding sales charge assumes either the investment was not redeemed or
contingent sales charges did not apply.
Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.
Effective November 2, 1998, the maximum sales charge on Class A shares was
raised from 4.75% to 5.75% for investments of less than $50,000 made after this
date.
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.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
Expense limitations were in effect for all classes for the periods shown above.
Performance would have been lower if the limitation were not in effect.
The average annual total return for the lifetime period, and cumulative returns
for the one-year and six month periods ended October 31, 1998 for Aggressive
Growth Fund's Institutional Class, which is available without sales or
asset-based distribution charges only to certain eligible institutional
accounts, were +23.12%, +8.30% and -10.53%, respectively.
The cumulative returns for Aggressive Growth Fund's B and C Class Shares for the
six month period ended October 31, 1998 were -11.02% and -10.98%, respectively.
The average annual total return for the lifetime period, and cumulative returns
for the one-year and six month periods ended October 31, 1998 for Growth Stock
Fund's Institutional Class, which is available without sales or asset-based
distribution charges only to certain eligible institutional accounts, were
+16.31%, +18.34% and +0.79%, respectively.
The cumulative returns for Growth Stock Fund's B and C Class shares for the six
month period ended October 31, 1998 were +0.29% and +0.32%, respectively.
<PAGE>
10 for growth of capital
FINANCIAL STATEMENTS
VOYAGUER MUTUAL FUNDS III, INC.
AGGRESSIVE GROWTH FUND
STATEMENT OF NET ASSETS
OCTOBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK - 90.37%
BANKING, FINANCE & INSURANCE - 6.02%
Ambac Financial Group ............................... 24,000 $ 1,396,500
Finova Group ........................................ 14,500 706,875
First American (Tennessee) .......................... 38,600 1,592,250
Metris .............................................. 85,000 2,767,813
-----------
6,463,438
-----------
BUILDINGS & MATERIALS - 2.03%
*Comfort Systems USA ................................. 114,700 2,179,300
-----------
2,179,300
-----------
CABLE, MEDIA & PUBLISHING - 8.97%
*Chancellor Media-A .................................. 95,000 3,648,594
*Consolidated Graphics ............................... 40,000 1,897,500
*Emmis Broadcasting .................................. 52,000 1,707,875
Snyder Communications ............................... 66,400 2,369,650
-----------
9,623,619
-----------
CHEMICALS - 1.62%
*Mettler-Toledo International ........................ 79,500 1,739,063
-----------
1,739,063
-----------
COMPUTERS & TECHNOLOGY - 33.78%
*3Com ................................................ 70,000 2,526,563
*America Online ...................................... 29,000 3,684,813
*Aspect Development .................................. 100,000 3,159,375
*Cisco Systems ....................................... 15,000 946,406
*Citrix Systems ...................................... 30,000 2,121,563
*Clarify ............................................. 75,000 1,017,188
Compaq Computer ..................................... 95,000 3,004,375
*Compuware ........................................... 29,000 1,570,531
Discreet Logic ...................................... 25,000 306,250
*Genesys Telecomm Labs ............................... 75,000 1,978,125
*Hall, Kinion & Associates ........................... 165,000 1,294,219
*Hyperion Solutions .................................. 50,000 1,498,438
*Intuit .............................................. 35,000 1,763,125
*J.D. Edwards ........................................ 29,200 952,650
*Nova ................................................ 29,600 854,700
*Platinum Technology ................................. 95,000 1,555,625
*Seagate Technology .................................. 109,500 2,888,063
*SunGuard Data Systems ............................... 80,000 2,700,000
*Veritas Software .................................... 48,500 2,428,031
-----------
36,250,040
-----------
CONSUMER PRODUCTS - 0.54%
*Henry Schein ........................................ 15,000 580,313
-----------
580,313
-----------
ELECTRONICS & ELECTRICAL - 4.48%
*Applied Materials ................................... 36,200 1,253,425
*Micrel .............................................. 50,000 1,640,625
Texas Instruments ................................... 30,000 1,918,125
-----------
4,812,175
-----------
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- --------------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK (CONTINUED)
ENVIRONMENTAL SERVICES - 1.52%
Waste Management .................................... 36,108 $ 1,629,374
-----------
1,629,374
-----------
FOOD, BEVERAGE & TOBACCO - 4.57%
*Aurora Foods ........................................ 1,300 22,750
*Outback Steakhouse .................................. 108,300 3,753,272
*Papa John's International ........................... 29,600 1,123,875
-----------
4,899,897
-----------
LEISURE, LODGING & ENTERTAINMENT - 1.13%
*Extended Stay America ............................... 126,300 1,215,638
-----------
1,215,638
-----------
RETAIL - 10.70%
Cost Plus ........................................... 72,000 2,144,250
CVS Corporation ..................................... 46,500 2,124,460
*Home Depot .......................................... 56,800 2,470,800
*Linens 'N Things .................................... 50,000 1,546,875
Staples ............................................. 98,000 3,194,188
-----------
11,480,573
-----------
TELECOMMUNICATIONS - 10.57%
American Tower - Class A ............................ 96,000 2,100,000
*Clear Channel Communications ........................ 55,000 2,505,938
MCI Worldcom ........................................ 45,000 2,487,656
Pacific Gateway Exchange ............................ 60,000 1,740,000
*Star Telecommunications ............................. 190,000 2,511,563
-----------
11,345,157
-----------
TEXTILES, APPAREL & FURNITURE - 2.95%
*Abercrombie & Fitch Class A ......................... 80,000 3,175,000
-----------
3,175,000
-----------
MISCELLANEOUS - 1.49%
*National Equipment Services ......................... 205,000 1,601,563
-----------
1,601,563
-----------
Total Common Stock (cost $92,697,619) ............... 96,995,150
-----------
Principal
Amount
----------
FEDERAL AGENCY (DISCOUNTED) - 10.80%
Federal Home Loan Bank 4.77% 11/6/98 .............. $7,600,000 7,594,957
Federal Home Loan Mortgage Corporation
4.79% 11/6/98 .................................... 1,500,000 1,499,002
Federal Home Loan Mortgage Corporation
5.10% 11/17/98 ................................... 2,500,000 2,494,667
-----------
Total Federal Agency (cost $11,588,626) ........... 11,588,626
-----------
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AGGRESSIVE GROWTH FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES OWNED - 101.17%
(COST $104,286,245) ........................................ $108,583,776
LIABILITIES NET OF RECEIVABLES AND OTHER
ASSETS - (1.17%) ........................................... (1,257,706)
------------
NET ASSETS APPLICABLE TO 6,043,765 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00% .................... $107,326,070
============
NET ASSET VALUE - AGGRESSIVE GROWTH FUND A CLASS
($56,328,591 / 3,122,849 SHARES) ........................... $18.04
======
NET ASSET VALUE - AGGRESSIVE GROWTH FUND B CLASS
($36,559,613 / 2,093,523 SHARES) ........................... $17.46
======
NET ASSET VALUE - AGGRESSIVE GROWTH FUND C CLASS
($11,450,332 / 662,521 SHARES) ............................. $17.28
======
NET ASSET VALUE - AGGRESSIVE GROWTH FUND INSTITUTIONAL
CLASS ($2,987,534 / 164,872 SHARES) ........................ $18.12
======
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1998:
Common stock, $.01 par value, 10,000,000,000 shares
authorized to the Fund with 1,000,000,000 shares
allocated to the Aggressive Growth Fund A Class,
1,000,000,000 shares allocated to the Aggressive
Growth Fund B Class, 1,000,000,000 shares allocated
to the Aggressive Growth Fund C Class, and
1,000,000,000 shares allocated to the Aggressive
Growth Fund Institutional Class ............................ $111,572,550
Accumulated net investment loss ............................... (688,784)
Accumulated net realized loss on investments .................. (7,855,227)
Net unrealized appreciation of investments .................... 4,297,531
------------
Total net assets .............................................. $107,326,070
============
- ----------
Top ten holdings, representing 34.35% of net assets, are in boldface.
*Non-income producing security for the six months ended 10/31/98.
NET ASSET VALUE AND OFFERING PRICE PER SHARE --
AGGRESSIVE GROWTH FUND A CLASS:
Net asset value A Class (A) ................................... $18.04
Sales Charge (4.75% of offering price or 4.99%, of the amount
invested per share) (B) .................................... 0.90
------
Offering Price ................................................ $18.94
======
- ----------
(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 $100,000
or more. See Notes to Financial Statements for change in front end sales
charge effective November 2, 1998.
See accompanying notes
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DELAWARE GROUP
VOYAGEUR MUTUAL FUNDS III, INC.
GROWTH STOCK FUND
STATEMENT OF NET ASSETS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK - 98.02%
AUTOMOBILES & AUTO PARTS - 3.14%
Genuine Parts ....................................... 45,000 $ 1,417,500
-----------
1,417,500
-----------
BANKING, FINANCE & INSURANCE - 7.13%
KeyCorp ............................................. 54,000 1,636,872
SouthTrust .......................................... 43,500 1,586,391
-----------
3,223,263
-----------
CABLE, MEDIA & PUBLISHING - 3.56%
Gannett ............................................. 26,000 1,608,750
-----------
1,608,750
-----------
CHEMICALS - 3.69%
Sigma-Aldrich ....................................... 54,000 1,668,938
-----------
1,668,938
-----------
COMPUTERS & TECHNOLOGY - 8.41%
Electronic Data Systems ............................. 49,000 1,993,688
Hewlett-Packard ..................................... 30,000 1,805,625
-----------
3,799,313
-----------
ENERGY - 6.82%
Royal Dutch Petroleum ............................... 32,000 1,576,000
Shell Transport and Trading ......................... 41,000 1,506,750
-----------
3,082,750
-----------
FOOD, BEVERAGE & TOBACCO - 24.77%
Anheuser Busch ...................................... 31,000 1,842,563
ConAgra ............................................. 60,000 1,826,250
Philip Morris ....................................... 44,000 2,249,500
Sara Lee ............................................ 30,000 1,790,625
Sysco ............................................... 70,000 1,885,625
UST ................................................. 47,000 1,598,000
-----------
11,192,563
-----------
HEALTHCARE & PHARMACEUTICALS - 10.85%
Abbott Laboratories ................................. 37,000 1,736,688
Merck & Company ..................................... 12,000 1,623,000
Schering-Plough ..................................... 15,000 1,543,125
-----------
4,902,813
-----------
INDUSTRIAL MACHINERY - 7.23%
Grainger (W.W.) ..................................... 32,000 1,474,000
Illinois Tool Works ................................. 28,000 1,795,500
-----------
3,269,500
-----------
PACKAGING & CONTAINERS - 2.96%
Bemis ............................................... 36,000 1,336,500
-----------
1,336,500
-----------
RETAIL - 19.46%
Albertson's ......................................... 28,000 1,555,750
Dillard ............................................. 55,000 1,708,438
Home Depot .......................................... 41,000 1,783,500
Sherwin-Williams .................................... 72,000 1,813,500
Wal-Mart Stores ..................................... 28,000 1,932,000
-----------
8,793,188
-----------
Total Common Stock (cost $28,403,938) ............... 44,295,078
-----------
<PAGE>
12 for growth of capital
GROWTH STOCK FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.14%
Norwest Advantage Treasury Fund ..................... 968,357 $ 968,357
-----------
Total Short-Term Investments (cost $968,357) ....... 968,357
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED - 100.16%
(COST $29,372,295) .......................................... $45,263,435
LIABILITIES NET OF RECEIVABLES AND OTHER
ASSETS - (0.16%) ............................................ (71,140)
-----------
NET ASSETS APPLICABLE TO 1,458,473 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00% ..................... $45,192,295
===========
NET ASSET VALUE - GROWTH STOCK FUND A CLASS
($40,640,292 / 1,309,037 SHARES) ............................ $31.05
======
NET ASSET VALUE - GROWTH STOCK FUND B CLASS
($2,554,412 / 84,327 SHARES) ................................ $30.29
======
NET ASSET VALUE - GROWTH STOCK FUND C CLASS
($1,194,737 / 39,445 SHARES) ................................ $30.29
======
NET ASSET VALUE - GROWTH STOCK FUND INSTITUTIONAL CLASS
($802,854 / 25,664 SHARES) .................................. $31.28
======
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1998:
Common stock, $0.01 par value, 10,000,000,000 shares
authorized to the Fund with 1,000,000,000 shares
allocated to the Growth Stock Fund A Class,
1,000,000,000 shares allocated to the Growth
Stock Fund B Class, 1,000,000,000 shares allocated
to the Growth Stock Fund C Class, and
1,000,000,000 shares allocated to the
Growth Stock Fund Institutional Class ....................... $27,606,212
Accumulated net investment loss ................................ (12,330)
Accumulated net realized gain on investments ................... 1,707,273
Net unrealized appreciation on investments ..................... 15,891,140
-----------
Total net assets ............................................... $45,192,295
===========
- ----------
Top ten holdings, representing (42.90%) of net assets, are in boldface.
NET ASSET VALUE AND OFFERING PRICE PER SHARE --
GROWTH STOCK FUND A CLASS
Net asset value A Class (A) .................................... $31.05
Sales Charge (4.75% of offering price or 4.99%, of the amount
invested per share) (B) ..................................... 1.55
------
Offering price ................................................. $32.60
======
- ------
(A) Net Asset Value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current prospectus for purchases of $100,000
or more. See Notes to Financial Statements for change in front end sales
charge effective November 2, 1998. See accompanying notes
<PAGE>
DELAWARE GROUP
VOYAGEUR MUTUAL FUNDS III, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Aggressive Growth
Growth Fund Stock Fund
---------------------------
INVESTMENT INCOME:
Interest ............................................$ 279,259 $ 30,844
Dividends ........................................... 65,614 383,931
---------- ----------
344,873 414,775
---------- ----------
EXPENSES:
Management fees ..................................... 431,419 218,528
Distribution expense ................................ 246,852 65,819
Dividend disbursing and transfer agent
fees and expenses ................................ 246,412 46,765
Registration fees ................................... 93,311 31,335
Reports and statements to shareholders .............. 25,666 12,843
Accounting and administration ....................... 17,632 7,393
Professional fees ................................... 23,666 8,693
Custodian fees ...................................... 16,835 --
Taxes (other than taxes on income) .................. 2,125 3,430
Directors' fees ..................................... 212 317
Other ............................................... 14,187 9,982
---------- ----------
1,118,317 405,105
Less expenses waived or absorbed .................... (224,338) (12,464)
---------- ----------
Total operating expenses
(before interest expense) ........................ 893,979 392,641
Interest expense .................................... 2,705 --
---------- ----------
Total expenses ...................................... 896,684 392,641
---------- ----------
NET INVESTMENT INCOME (LOSS) ........................ (551,811) 22,134
---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments .............(7,024,354) 1,689,703
Net change in unrealized appreciation/depreciation
of investments ...................................(1,585,077) (1,414,242)
---------- ----------
Net realized and unrealized gain (loss)
on investments ...................................(8,609,431) 275,461
---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ......................$(9,161,242) $297,595
=========== ==========
See accompanying notes
<PAGE>
for growth of capital 13
DELAWARE GROUP VOYAGEUR MUTUAL FUNDS III, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive Growth Fund Growth Stock Fund
---------------------------- -------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
10/31/98 4/30/98 10/31/98 4/30/98
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income (loss) .................................... $ (551,811) $ (139,791) $ 22,134 $ 17,857
Net realized gain (loss) on investments ......................... (7,024,354) 2,274,789 1,689,703 3,217,814
Net change in unrealized appreciation/depreciation
of investments ............................................... (1,585,077) 5,806,360 (1,414,242) 8,777,754
------------ ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations .................................... (9,161,242) 7,941,358 297,595 12,013,425
------------ ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ...................................................... - - - (147,399)
B Class ...................................................... - - - -
C Class ...................................................... - - - -
Institutional Class .......................................... - - - -
Net realized gain on investments:
A Class ...................................................... (759,414) (1,197,178) (1,266,094) (2,640,914)
B Class ...................................................... (495,438) (302,775) (65,656) (83,774)
C Class ...................................................... (167,011) (121,344) (35,317) (64,003)
Institutional Class .......................................... (52,266) (75,818) (24,583) (1)
------------ ----------- ----------- -----------
(1,474,129) (1,697,115) (1,391,650) (2,936,091)
------------ ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ...................................................... 39,490,371 31,439,897 2,756,214 8,650,407
B Class ...................................................... 25,656,256 15,982,839 972,932 739,470
C Class ...................................................... 7,963,453 5,425,395 216,403 294,728
Institutional Class .......................................... 3,596,687 3,291,956 1,766 828,889
Net asset value of shares issued upon reinvestment of dividends
from net investment income and net realized gain on investments:
A Class ...................................................... 729,692 1,077,585 1,217,919 2,660,669
B Class ...................................................... 469,763 283,448 58,159 78,013
C Class ...................................................... 160,488 116,190 35,134 63,798
Institutional Class .......................................... 52,266 75,818 24,583 1
------------ ----------- ----------- -----------
78,118,976 57,693,128 5,283,110 13,315,975
------------ ----------- ----------- -----------
Cost of shares repurchased:
A Class ...................................................... (10,333,754) (10,065,175) (3,526,179) (12,995,728)
B Class ...................................................... (2,524,948) (881,725) (337,944) (385,466)
C Class ...................................................... (1,387,601) (403,052) (138,532) (148,914)
Institutional Class .......................................... (2,658,877) (1,099,659) (3,714) (2,000)
------------ ----------- ----------- -----------
(16,905,180) (12,449,611) (4,006,369) (13,532,108)
------------ ----------- ----------- -----------
Increase (decrease) in net assets derived from
capital share transactions ................................... 61,213,796 45,243,517 1,276,741 (216,133)
------------ ----------- ----------- -----------
NET INCREASE IN NET ASSETS ...................................... 50,578,425 51,487,760 182,686 8,861,201
NET ASSETS:
Beginning of period ............................................. 56,747,645 5,259,885 45,009,609 36,148,408
------------ ----------- ----------- -----------
End of period ................................................... $107,326,070 $56,747,645 $45,192,295 $45,009,609
============ =========== =========== ===========
</TABLE>
See accompanying notes
<PAGE>
14 for growth of capital
DELAWARE GROUP VOYAGEUR MUTUAL FUNDS III, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH A CLASS
-------------------------------------------------------------
SIX MONTHS PERIOD FROM
ENDED YEAR ENDED 5/16/94(1) TO
10/31/98 4/30/98(2) 4/30/97 4/30/96 4/30/95
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $20.570 $11.770 $13.080 $10.400 $10.000
Income from investment operations:
Net investment loss ........................... (0.048) (0.052) (0.180) (0.100) (0.090)
Net realized and unrealized gain (loss)
on investments ............................... (2.115) 11.127 0.960 3.270 0.490
------- ------- ------- ------- -------
Total from investment operations .............. (2.163) 11.075 0.780 3.170 0.400
------- ------- ------- ------- -------
Less distributions:
Distributions from net realized gains
on investments ............................... (0.367) (2.275) (2.090) (0.400) -
Return of capital ............................. - - - (0.090) -
------- ------- ------- ------- -------
Total distributions ........................... (0.367) (2.275) (2.090) (0.490) -
------- ------- ------- ------- -------
Net asset value, end of period ................... $18.040 $20.570 $11.770 $13.080 $10.400
======= ======= ======= ======= =======
Total return(3)................................... (10.61%) 98.60% 4.34% 31.02% 4.00%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) ............................... $56,329 $31,926 $4,944 $4,334 $2,189
Ratio of expenses to average
net assets .................................. 1.75% 1.75% 1.84% 2.01% 1.74%
Ratio of expenses to average net assets
prior to expense limitation ................. 2.27% 2.29% 2.65% 2.74% 2.97%
Ratio of net investment loss to average
net assets .................................. (0.96%) (0.69%) (1.38%) (1.00%) (1.21%)
Ratio of net investment loss to average
net assets prior to expense limitation ...... (1.48%) (1.23%) (2.19%) (1.73%) (2.44%)
Portfolio turnover ............................ 416% 356% 180% 166% 88%
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH B CLASS
-------------------------------------------------
SIX MONTHS PERIOD FROM
ENDED YEAR ENDED 4/16/96(1) TO
10/31/98 4/30/98(2) 4/30/97 4/30/96
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $20.000 $11.570 $13.060 $11.910
Income from investment operations:
Net investment loss ........................... (0.083) (0.061) (0.210) (0.010)
Net realized and unrealized gain (loss)
on investments ............................... (2.090) 10.766 0.810 1.160
------- ------- ------- -------
Total from investment operations .............. (2.173) 10.705 0.600 1.150
------- ------- ------- -------
Less distributions:
Distributions from net realized gains
on investments .............................. (0.367) (2.275) (2.090) -
Return of capital ............................. - - - -
------- ------- ------- -------
Total distributions ........................... (0.367) (2.275) (2.090) -
------- ------- ------- -------
Net asset value, end of period ................... $17.460 $20.000 $11.570 $13.060
======= ======= ======= =======
Total return(3)................................... (11.02%) 97.12% 2.84% 9.66%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) ............................... $36,560 $16,539 $95 $0
Ratio of expenses to average
net assets .................................. 2.50% 2.50% 2.57% 1.86%
Ratio of expenses to average net assets
prior to expense limitation ................. 3.02% 3.04% 3.37% 1.86%
Ratio of net investment loss to average
net assets .................................. (1.71%) (1.44%) (1.97%) (1.39%)
Ratio of net investment loss to average
net assets prior to expense limitation ...... (2.23%) (1.98%) (2.77%) (1.39%)
Portfolio turnover ............................ 416% 356% 180% 166%
</TABLE>
- ---------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc., as the Fund's investment manager.
(3) Does not include maximum sales charge of 5.75% nor the 1% limited contingent
deferred sales charge that would apply in the event of certain redemptions
within 12 months of purchase of A Class. Does not include contingent
deferred sales charge which varies from 1-4% depending upon the holding
period for B Class.
See accompanying notes
<PAGE>
for growth of capital 15
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH
AGGRESSIVE GROWTH C CLASS INSTITUTIONAL CLASS
------------------------------------------------------------- ----------------------
SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM
ENDED YEAR ENDED 5/20/94(1) TO ENDED 8/29/97(1) TO
10/31/98 4/30/98(2) 4/30/97 4/30/96 4/30/95 10/31/98 4/30/98(2)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $19.800 $11.470 $12.880 $10.330 $10.000 $20.640 $17.150
Income from investment operations:
Net investment loss ..................... (0.084) (0.071) (0.230) (0.210) (0.160) (0.073) (0.019)
Net realized and unrealized gain (loss)
on investments ........................ (2.069) 10.676 0.910 3.250 0.490 (2.080) 5.539
------- ------- ------- ------- ------- ------- -------
Total from investment operations ........ (2.153) 10.605 0.680 3.040 0.330 (2.153) 5.520
------- ------- ------- ------- ------- ------- -------
Less distributions:
Distributions from net realized gains
on investments ........................ (0.367) (2.275) (2.090) (0.400) - (0.367) (2.030)
Return of capital ....................... - - - (0.090) - - -
------- ------- ------- ------- ------- ------- -------
Total distributions ..................... (0.367) (2.275) (2.090) (0.490) - (0.367) (2.030)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ............. $17.280 $19.800 $11.470 $12.880 $10.330 $18.120 $20.640
======= ======= ======= ======= ======= ======= =======
Total return(3) ............................ (10.98%) 96.99% 3.58% 29.96% 3.30% (10.53%) 34.68%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) ......................... $11,450 $5,892 $222 $150 $128 $2,987 $2,391
Ratio of expenses to average
net assets ............................ 2.50% 2.50% 2.62% 2.77% 2.40% 1.50% 1.50%
Ratio of expenses to average net
assets prior to expense limitation .... 3.02% 3.04% 3.43% 3.50% 3.50% 2.02% 2.04%
Ratio of net investment loss to
average net assets .................... (1.71%) (1.44%) (2.02%) (1.73%) (1.80%) (0.71%) (0.44%)
Ratio of net investment loss to average
net assets prior to expense limitation. (2.23%) (1.98%) (2.83%) (2.46%) (2.90%) (1.23%) (0.98%)
Portfolio turnover ...................... 416% 356% 180% 166% 88% 416% 356%
</TABLE>
- ------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc., as the Fund's investment manager.
(3) Does not include contingent deferred sales charge which varies from 1-4%
depending upon the holding period for C Class shares.
See accompanying notes
<PAGE>
16 for growth of capital
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
GROWTH STOCK A CLASS
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
10/31/98 4/30/98(2) 4/30/97 4/30/96 4/30/95 4/30/94
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $31.830 $25.340 $23.660 $19.910 $17.510 $17.810
Income from investment operations:
Net investment income (loss) .......................... 0.023 0.029 0.160 0.080 0.150 0.070
Net realized and unrealized gain
(loss) on investments ............................... 0.182 8.591 3.360 4.820 2.770 (0.160)
------- ------- ------- ------- ------- -------
Total from investment operations ...................... 0.205 8.620 3.520 4.900 2.920 (0.090)
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net
investment income ................................... - (0.113) (0.080) (0.110) (0.130) (0.060)
Distributions from net realized
gain on investments ................................. (0.985) (2.017) (1.760) (1.040) (0.390) (0.150)
------- ------- ------- ------- ------- -------
Total dividends and distributions ..................... (0.985) (2.130) (1.840) (1.150) (0.520) (0.210)
------- ------- ------- ------- ------- -------
Net asset value, end of period ........................... $31.050 $31.830 $25.340 $23.660 $19.910 $17.510
======= ======= ======= ======= ======= =======
Total return(3)........................................... 0.70% 35.27% 15.27% 25.00% 17.04% (0.52%)
Ratios and supplemental data:
Net assets, end of period
(000 omitted) ....................................... $40,640 $41,196 $34,255 $28,956 $23,651 $28,518
Ratio of expenses to
average net assets .................................. 1.75% 1.75% 1.72% 1.78% 1.90% 1.90%
Ratio of expenses to average net assets
prior to expense limitation ......................... 1.81% 1.82% 1.72% 1.87% 1.99% 2.13%
Ratio of net investment income (loss)
to average net assets ............................... 0.15% 0.07% 0.68% 0.36% 0.75% 0.40%
Ratio of net investment income
(loss) to average net assets
prior to expense limitation ......................... 0.09% - 0.68% 0.27% 0.66% 0.17%
Portfolio turnover .................................... 33% 9% 29% 37% 22% 34%
</TABLE>
<PAGE>
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
GROWTH STOCK B CLASS
--------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED 9/8/95(1) TO
10/31/98 4/30/98(2) 4/30/97 4/30/96
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $31.200 $24.930 $23.390 $21.640
Income from investment operations:
Net investment income (loss) .......................... (0.055) (0.165) - 0.060
Net realized and unrealized gain
(loss) on investments ............................... 0.130 8.425 3.300 2.960
------- ------- ------- -------
Total from investment operations ...................... 0.075 8.260 3.300 3.020
------- ------- ------- -------
Less dividends and distributions:
Dividends from net
investment income ................................... - - - (0.230)
Distributions from net realized
gain on investments ................................. (0.985) (1.990) (1.760) (1.040)
------- ------- ------- -------
Total dividends and distributions ..................... (0.985) (1.990) (1.760) (1.270)
------- ------- ------- -------
Net asset value, end of period ........................... $30.290 $31.200 $24.930 $23.390
======= ======= ======= =======
Total return(3) .......................................... 0.29% 34.29% 14.50% 14.37%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) ....................................... $2,554 $1,903 $1,182 $454
Ratio of expenses to
average net assets .................................. 2.50% 2.50% 2.47% 2.41%
Ratio of expenses to average net assets
prior to expense limitation ......................... 2.56% 2.57% 2.47% 2.50%
Ratio of net investment income (loss)
to average net assets ............................... (0.60%) (0.67%) (0.01%) (0.62%)
Ratio of net investment income
(loss) to average net assets
prior to expense limitation ......................... (0.66%) (0.74%) (0.01%) (0.71%)
Portfolio turnover .................................... 33% 9% 29% 37%
</TABLE>
- ------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc., as the Fund's investment manager.
(3) Does not include maximum sales charge of 5.75% nor the 1% limited contingent
deferred sales charge that would apply in the event of certain redemptions
within 12 months of purchase of A Class. Does not include contingent
deferred sales charge which varies from 1-4% depending upon the holding
period for B Class.
See accompanying notes
<PAGE>
for growth of capital 17
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
GROWTH STOCK
GROWTH STOCK C CLASS INSTITUTIONAL CLASS
---------------------------------------------- ------------------------
SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM
ENDED YEAR ENDED 10/31/95(1) ENDED 8/29/97(1)
10/31/98 4/30/98(2) 4/30/97 TO 4/30/96 10/31/98 TO 4/30/98(2)
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $31.190 $24.930 $23.430 $22.610 $32.030 $27.520
Income from investment operations:
Net investment income (loss) ....................... (0.076) (0.192) 0.070 0.110 0.068 0.047
Net realized and unrealized gain
on investments .................................... 0.161 8.442 3.220 2.000 0.167 5.803
------- ------- ------- ------- ------- -------
Total from investment operations ................... 0.085 8.250 3.290 2.110 0.235 5.850
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ............... - - (0.030) (0.250) - (0.040)
Distributions from net realized gain
on investments .................................... (0.985) (1.990) (1.760) (1.040) (0.985) (1.300)
------- ------- ------- ------- ------- -------
Total dividends and distributions .................. (0.985) (1.990) (1.790) (1.290) (0.985) (1.340)
------- ------- ------- ------- ------- -------
Net asset value, end of period ........................ $30.290 $31.190 $24.930 $23.430 $31.280 $32.030
======= ======= ======= ======= ======= =======
Total return(3) ....................................... 0.32% 34.25% 14.42% 9.72% 0.79% 21.41%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............ $1,195 $1,112 $712 $104 $803 $799
Ratio of expenses to average net assets ............ 2.50% 2.50% 2.47% 2.35% 1.50% 1.50%
Ratio of expenses to average net assets prior to
expense limitation ............................... 2.56% 2.57% 2.47% 2.43% 1.56% 1.57%
Ratio of net investment income (loss) to average
net assets ....................................... (0.60%) (0.67%) 0.14% (0.65%) 0.40% 0.33%
Ratio of net investment income (loss) to average
net assets prior to expense limitation ........... (0.66%) (0.74%) 0.14% (0.73%) 0.34% 0.26%
Portfolio turnover ................................. 33% 9% 29% 37% 33% 9%
</TABLE>
- -----------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc., as the Fund's investment manager.
(3) Does not include contingent deferred sales charge which varies from 1-4%
depending upon the holding period for C Class shares.
See accompanying notes
<PAGE>
18 for growth of capital
DELAWARE GROUP VOYAGEUR MUTUAL FUNDS III, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
Delaware - Voyageur Aggressive Growth Fund (formerly Voyageur Aggressive Growth
Fund) and Delaware - Voyageur Growth Stock Fund (formerly Voyageur Growth Stock
Fund), series within Voyageur Mutual Funds III Inc. (each referred to as a
"Fund" or collectively as the "Funds") are registered as diversified open-end
investment companies under the Investment Company Act of 1940, as amended. The
Funds are organized as Maryland Corporations and each offers four classes of
shares. The A Class carries a front end sales charge which was raised from 4.75%
to 5.75% effective November 2, 1998. The B Class carries a back end sales
charge. The C Class carries a level load deferred sales charge and the
Institutional Class has no sales charge.
The Aggressive Growth Fund's objective is to seek long-term capital appreciation
by investing primarily in equity securities of companies which the Fund manager
believes have the potential for high earnings growth. The Growth Stock Fund's
objective is to seek long-term capital appreciation through investment in equity
securities diversified through companies and industries.
1. Fund Reorganization
On April 30, 1997, Lincoln National Corporation ("LNC") acquired Voyageur Fund
Managers Inc.'s ("Voyageur") parent, Dougherty Financial Group, Inc. ("DFG"),
pursuant to an agreement and plan of merger dated January 15, 1997, in which LNC
acquired DFG including the mutual fund investment advisory business of DFG
conducted by Voyageur. Upon completion of the acquisition, Delaware Management
Company. ("DMC") became the investment advisor to the Funds, Delaware
Distributors, L.P. ("DDLP") became the distributor for the Funds, and Delaware
Service Company, ("DSC") became the transfer, dividend-disbursing, shareholder
servicing and accounting and administration service agent for the Funds. DMC,
DDLP, and DSC assumed these services under substantially similar fee structures
that were in effect prior to the acquisition.
2. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Funds.
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Money market instruments having less than 60
days to maturity are valued at amortized cost which approximates market value.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
Federal Income Taxes - Each 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 Funds on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
<PAGE>
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
Mutual 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. Each Fund declares and pays
dividends from net investment income and capital gains annually.
Certain Fund expenses are paid through "soft dollar" arrangements with brokers.
The amount of these expenses is less than 0.01% of the Fund's average daily net
assets.
3. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Funds
pay DMC, the Investment Manager of the Funds, an annual fee of 1.00% of average
net assets, which is calculated daily on the net assets of each Fund.
DMC has entered into a sub-advisory agreement with Voyageur Asset Management
Inc. with respect to the management of the Growth Stock Fund. The sub-advisor
receives a sub-advisory fee from DMC for their services. The Growth Stock Fund
does not pay any fees to the sub-advisor.
DMC has elected to waive that portion of the management fee and reimburse each
Fund to the extent that annual operating expenses exclusive of taxes, interest,
brokerage commissions and extraordinary expenses, exceed 1.75% of each Funds
average daily net assets attributable to Class A shares, 1.50% of each Funds
average daily net assets attributable to Institutional Class shares, and 2.50%
of each Funds average daily net assets attributable to Class B and Class C
shares. Total expenses absorbed by DMC for the six months ended October 31, 1998
are as follows:
Aggressive Growth
Growth Fund Stock Fund
----------- ----------
Total expenses
absorbed by DMC .............................. $224,338 $12,464
The Funds have engaged DSC, an affiliate of DMC, to provide dividend disbursing,
transfer agent and accounting and administration services for each Fund. Each
Fund pays DSC a monthly fee based on the number of shareholder accounts,
shareholder transactions and average net assets, subject to certain minimums.
For the six months ended October 31, 1998, the amounts expensed for each Fund
were as follows:
Aggressive Growth
Growth Fund Stock Fund
----------- ----------
Dividend disbursing, transfer agent
fees and other expenses ...................... $246,412 $46,765
Accounting and administration fees .............. 17,632 7,393
<PAGE>
for growth of capital 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
On October 31, 1998, the Funds had payables to affiliates as follows:
Aggressive Growth
Growth Fund Stock Fund
----------- ----------
Investment Management fee
payable to DMC ................................ $43,469 $48,880
Dividend disbursing, transfer agent fees,
accounting fees and other expenses
payable to DSC ................................ 49,220 12,482
Other expenses payable to
DMC and affiliates ............................ 1,010 1,509
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 0.25% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Class. No distribution expenses are paid
by the Institutional Class.
For the six months ended October 31, 1998, DDLP earned commissions on sales of
the Fund A Class shares for each Fund as follows:
Aggressive Growth
Growth Fund Stock Fund
----------- ----------
$108,393 $5,336
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 Funds.
4. Investments
During the six months ended October 31, 1998, the Funds made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments for each Fund as follows:
Aggressive Growth
Growth Fund Stock Fund
----------- ----------
Purchases ...................................... $212,060,733 $7,891,687
Sales .......................................... 160,779,420 6,997,554
At October 31, 1998, the Funds aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes were as follows:
Aggressive Growth
Growth Fund Stock Fund
----------- ----------
Cost of Investments ............................. $106,226,744 $29,387,413
Aggregate unrealized
appreciation ................................. 5,729,799 16,431,555
Aggregate unrealized
depreciation ................................. 3,372,767 555,532
Net unrealized
appreciation ................................. 2,357,032 15,876,023
<PAGE>
5. Capital Stock
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
Aggressive Growth Fund Growth Stock Fund
----------------------- --------------------
Six Months Six Months
Ended Year Ended Year
10/31/98 Ended 10/31/98 Ended
(Unaudited) 4/30/98 (Unaudited) 4/30/98
<S> <C> <C> <C> <C>
Shares sold:
A Class ..................................................................... 2,117,365 1,644,240 92,071 289,387
B Class ..................................................................... 1,390,340 849,561 33,073 24,380
C Class ..................................................................... 436,174 292,993 7,184 10,214
Institutional Class ......................................................... 191,134 170,504 57 24,996
Shares issued upon reinvestment of
dividends from net investment income and net
realized gains on investments:
A Class ..................................................................... 38,244 62,779 39,959 90,233
B Class ..................................................................... 25,351 16,905 1,950 2,689
C Class ..................................................................... 8,751 7,005 1,178 2,198
Institutional Class ......................................................... 2,729 4,398 801 -
--------- --------- ------- -------
4,210,088 3,048,385 176,273 444,097
--------- --------- ------- -------
Shares repurchased:
A Class ..................................................................... (584,886) (575,071) (117,321) (437,377)
B Class ..................................................................... (148,928) (47,894) (11,696) (13,459)
C Class ..................................................................... (79,969) (21,760) (4,571) (5,301)
Institutional Class ......................................................... (144,835) (59,058) (129) (61)
--------- --------- ------- -------
(958,618) (703,783) (133,717) (456,198)
--------- --------- ------- -------
Net increase (decrease) ........................................................ 3,251,470 2,344,602 42,556 (12,101)
========= ========= ====== =======
</TABLE>
6. Credit and Market Risk
The Fund may invest up to 15% 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.
<PAGE>
This Semi-Annual Report is for the information of Aggressive Growth Fund and
Growth Stock Fund shareholders, but it may be used with prospective investors
when preceded or accompanied by a current Prospectus for the Funds, which sets
forth details about charges, expenses, investment objectives and operating
policies of the Funds. 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.
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware Investment 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
DELAWARE
INVESTMENTS
===================
Philadelphia o London
Printed in the USA
on recycled paper
(1263)
SA-316[10/98] PP12/98
(photo of globes)
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawarefunds.com
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 Funds 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 Funds are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
