<PAGE>
DELAWARE(SM)
INVESTMENTS
------------
Delaware Select Growth Fund
Growth of Capital
2001 SEMI-ANNUAL REPORT
(Growth of Capital Artwork)
<PAGE>
TABLE OF CONTENTS
-----------------
Letter to Shareholders 1
Portfolio Management
Review 3
Performance Summary
Delaware Select Growth Fund 6
Financial Statements
Statements of Net Assets 7
Statements of Operations 9
Statements of Changes in
Net Assets 10
Financial Highlights 11
Notes to Financial
Statements 15
<PAGE>
A TRADITION OF SOUND INVESTING SINCE 1929
-----------------------------------------
A Commitment To Our Investors
Experienced
[ ] Our seasoned investment professionals average more than 11 years'
experience.
[ ] We began managing investments in 1929 and opened our first mutual fund in
1938. Over the past 70 years, we have weathered a full range of economic and
market environments.
Disciplined
[ ] We follow strict investment policies and clear buy/sell guidelines.
[ ] We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.
Consistent
[ ] We clearly articulate our investment policies and follow them consistently.
[ ] Our commitment to consistency has earned us the confidence of
discriminating institutional and individual investors to manage
approximately $44 billion in assets as of September 30, 2000.
Comprehensive
[ ] We offer more than 70 mutual funds in these asset classes.
o Large-cap equity o High-yield bonds
o Mid-cap equity o Investment grade bonds
o Small-cap equity o Municipal bonds (23 single-state funds)
o International equity o International fixed-income
o Balanced
[ ] Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C)Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
December 4, 2000
Recap of Events - Delaware Select Growth Fund's fiscal year began on May 1,
2000, amid concerns about the direction of the economy and interest rates. The
Federal Reserve Board had raised short-term interest rates five times since June
1999 in an effort to stave off inflation and temper economic growth. Another
half-percentage-point increase by the Fed on May 16, 2000 came just as the U.S.
stock market was in the final weeks of a two-month-long downturn. Many
technology stocks had suffered big losses as investors were scrutinizing the
extreme valuations and earnings outlook for that sector.
When the Fed decided not to raise rates over the summer, a more positive outlook
emerged and stock prices began rebounding. But the volatility would continue
throughout the first six months of our fiscal year. The positive momentum
gathered by the end of August was reversed during September and October, as
rising energy prices and early warnings of corporate earnings shortfalls pushed
major stock market indexes back into negative territory year-to-date for 2000.
Again, technology stocks were hard hit, contributing to the worst October point
loss ever for the technology-heavy Nasdaq Composite Index (-8.25%) (Source:
Bloomberg).
Delaware Select Growth Fund provided a return of +4.43% for the six months ended
October 31, 2000 (Class A shares at net asset value with distributions
reinvested), reflecting the period's volatile market conditions. On a relative
basis, the Fund outpaced its benchmark, the S&P 500 Index (-1.59%), as well as
the average return of its peers in the Lipper Multi-Cap Growth Funds class
(-0.87%) over the same period.
We attribute Delaware Select Growth Fund's outperformance of its benchmark to
its focus on companies of all sizes. Year-to-date, the performance of
large-company stocks as a whole has fallen behind that of small and mid-size
company stocks. Because Delaware Select Growth Fund holds some small and
mid-size stocks, it benefited from their relatively strong performance. The S&P
500 Index, which consists mostly of large-cap companies, did not. The Fund also
benefited from a number of growth stocks that posted strong gains for the period
despite the widespread market volatility.
Total Return
For the Period Ended October 31, 2000 Six Months
--------------------------------------------------------------------------------
Delaware Select Growth Fund Class A +4.43%
--------------------------------------------------------------------------------
Standard & Poor's 500 Index -1.59%
--------------------------------------------------------------------------------
Lipper Multi-Cap Growth Fund Average (536 funds) -0.87%
--------------------------------------------------------------------------------
All performance shown above is at net asset value without effect of sales
charges and assumes reinvestment of distributions. Performance for all Fund
Classes can be found on page 6. The Lipper Multi-Cap Growth Funds Average
represents the average returns of multi-cap growth mutual funds tracked by
Lipper. (Source: Lipper, Inc.) The Standard & Poor's 500 Index is an unmanaged
composite of mostly large-capitalization U.S. companies. You cannot invest
directly in an index. Past performance does not guarantee future results.
1
<PAGE>
"...IT APPEARS INVESTORS HAVE BEGUN TO FOCUS ON COMPANIES THAT ARE MOST LIKELY
TO DELIVER CONTINUED EARNINGS GROWTH."
Market Outlook - In response to the volatility of the past six months, it
appears investors have begun to focus on companies that are most likely to
deliver continued earnings growth. This has always been the focus of Delaware
Select Growth Fund's stock selection process. By definition, your Fund's
strategy is to invest in companies that offer the potential for high earnings
growth and are recognized leaders in their respective industries. On the
following pages, Delaware Select Growth Fund manager Gerald Frey talks more
about the Fund's recent performance and shares his outlook for the markets.
We realize that day-to-day swings in the equities markets may have prompted you
to reflect on your own investments. We believe that relying on basic, sound
principles of investing is the best approach for weathering the unexpected.
These principles include sticking to a regular investment plan, diversifying
your assets, and keeping a long-term outlook, as well as considering your own
risk tolerance and financial goals.
We thank you for staying the course over the past six months, and for your
continued confidence in Delaware Investments.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family of Funds Delaware Investments Family of Funds
(Growth of Capital Artwork)
2
<PAGE>
Gerald S. Frey
Senior Portfolio Manager
December 4, 2000
"DELAWARE SELECT GROWTH FUND IS A WELL-DIVERSIFIED PORTFOLIO THAT INCLUDES
STOCKS FROM A WIDE ARRAY OF INDUSTRIES."
PORTFOLIO MANAGEMENT REVIEW
---------------------------
The Fund's Results
Over the past six months, investors wary of the market's volatility began to
reward companies that have consistently displayed real earnings growth. This
benefited many of the stocks in Delaware Select Growth Fund, where we focus on
earnings growth when choosing investments.
Delaware Select Growth Fund is a well-diversified portfolio that includes stocks
from a wide array of industries. It also holds companies of all sizes. Our
bottom-up stock selection begins with looking for companies that exhibit one or
more of the following characteristics:
o a history of high growth in earnings-per-share
o projections for high future growth or acceleration of earnings-per-share
o a price-to-earnings (P/E) ratio that is low relative to other stocks (a low
P/E relative to other companies in an industry can signal that a stock is a
good value)
o discounted cash flows that are high relative to other stocks
Once we identify stocks with these characteristics, we look more closely at the
company's strength of management, competitive position within its industry, and
ability to support continued growth, among other criteria.
Our strategy of investing in companies of all sizes, including small and
mid-size companies, also helped the Fund finish ahead of the large-cap S&P 500
Index for the six-month period ended October 31, 2000.
Portfolio Highlights
During the period, the Fund held a significant amount of technology stocks.
Software was the Fund's largest sector allocation at 23.83% of total net assets
as of October 31, 2000, and some of the fund's other sectors include
technology-oriented companies as well. Despite poor general performance in
technology stocks during the period in the market, our technology holdings
contributed positively to performance.
Our positive returns from technology were due in part to our holdings in Extreme
Networks and NetIQ, both of which posted gains in excess of 100% for the six
months ended October 31, 2000. Both Extreme Networks and NetIQ are examples of
companies that have strong earnings outlooks and hold a dominant position within
their industry.
3
<PAGE>
"THE FUND'S POSITIVE PERFORMANCE WAS NOT LIMITED TO THE TECHNOLOGY SECTOR."
The Fund's positive performance was not limited to the technology sector. Many
of our holdings in financial services performed well, including Zions Bancorp
and Merrill Lynch. Each of these stocks returned more than 20% for the period.
In fact, the financial sector in general was one of the best performing sectors
over the past six months. During the summer months, financial stocks generally
benefited from the perception that the Fed's interest rate hikes were likely to
end, as well as from increased merger and acquisition activity.
Other strong-performing stocks in the portfolio were Duke Power and retail chain
Bed Bath & Beyond. Like many energy companies, Duke Power has benefited from
rising energy prices. Bed Bath & Beyond has consistently reported healthy
increases in net earnings and continues to open new stores in both new and
existing markets. We believe its prospects for continued growth are quite
strong.
Delaware Select Growth Fund also had some disappointments during the period. In
early May we added to our position in Radio One, a growing radio broadcast
company with stations mainly targeting African-American audiences. The company
had become the largest radio broadcast company in the U.S., and we were
optimistic about its prospects for continued growth. However, Radio One stock
performed poorly during the six-month period and detracted from the Fund's
overall performance. Radio stocks, in general, were hurt during the period by
forecasts for reductions in the industry's growth. We sold Radio One in October
due to our belief that growth prospects for the company had been reduced.
Other holdings that performed poorly included S1 Corporation, a leading provider
of software and electronic services for financial institutions, and Pinnacle
Holdings, a real estate investment trust that rents tower space to providers of
wireless communications services. As with Radio One, we sold these stocks
because of disappointing earnings and reduced prospects for growth.
(Growth of Capital Artwork)
4
<PAGE>
Delaware Select Growth Fund
Portfolio Highlights
October 31, 2000
-----------------------------------------------------
Beta* 1.19
-----------------------------------------------------
Average Price-To-Earnings Ratio** 32.07
-----------------------------------------------------
Median Market
Capitalization $15.91 billion
-----------------------------------------------------
*Beta is 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.
**P/Es are based on analysts' forward earnings estimates as reported by First
Call Thomson Financial.
<PAGE>
Outlook
As we concluded the first half of our fiscal year on October 31, 2000, the U.S.
equity markets had endured one of the worst Octobers on record. Market indexes
were led lower primarily by technology stocks, many of which have been unable to
deliver the spectacular returns of the recent past. This, combined with signs
that the U.S. economy may be slowing, has caused many investors to question the
earnings outlook for companies across the board.
It is our opinion that investors will continue to emphasize earnings, rewarding
those companies that exhibit continued growth and penalizing those companies
that fall short of earnings expectations. In this investment environment, we
will continue to focus on companies that have strong earnings outlooks and are
the recognized leaders of their respective industries.
<TABLE>
<CAPTION>
Top 10 Holdings
As of October 31, 2000
Company Industry Percentage of Net Assets
<S> <C> <C>
-------------------------------------------------------------------------------------------------
1. America Online Software 4.4%
-------------------------------------------------------------------------------------------------
2. i2 Technologies Software 4.3%
-------------------------------------------------------------------------------------------------
3. Network Appliance Computers & Technology 4.0%
-------------------------------------------------------------------------------------------------
4. Genentech Healthcare & Pharmaceuticals 3.8%
-------------------------------------------------------------------------------------------------
5. Extreme Networks Telecommunications 3.6%
-------------------------------------------------------------------------------------------------
6. Veritas Software Software 3.5%
-------------------------------------------------------------------------------------------------
7. Kohl's Retail 3.3%
-------------------------------------------------------------------------------------------------
8. Applied Micro Circuits Computers & Technology 3.1%
-------------------------------------------------------------------------------------------------
9. JDS Uniphase Computers & Technology 2.9%
-------------------------------------------------------------------------------------------------
10. Brinker International Leisure, Lodging & Entertainment 2.9%
-------------------------------------------------------------------------------------------------
Top 10 Sectors
As of October 31, 2000
Industry Percentage of Net Assets
-------------------------------------------------------------------------------------------------
1. Software 23.8%
-------------------------------------------------------------------------------------------------
2. Computers & Technology 20.4%
-------------------------------------------------------------------------------------------------
3. Banking, Finance & Insurance 14.1%
-------------------------------------------------------------------------------------------------
4. Retail 12.1%
-------------------------------------------------------------------------------------------------
5. Telecommunications 8.8%
-------------------------------------------------------------------------------------------------
6. Healthcare & Pharmaceuticals 6.5%
-------------------------------------------------------------------------------------------------
7. Utilities 4.6%
-------------------------------------------------------------------------------------------------
8. Leisure, Lodging & Entertainment 3.4%
-------------------------------------------------------------------------------------------------
9. Cable, Media & Publishing 2.9%
-------------------------------------------------------------------------------------------------
10. Transportation 1.3%
-------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
FUND BASICS
-----------
Fund Objective
The Fund seeks long-term capital appreciation, which it attempts to achieve by
investing primarily in equity securities of companies we believe have the
potential for high earnings growth.
Total Fund Assets
as of October 31, 2000
$2.06 billion
Number of Holdings
63
Fund Start Date
May 16, 1994
Your Fund Management
Gerald S. Frey leads the Delaware Investments growth team. He holds a BA in
Economics from Bloomsburg University and attended Wilkes College and New York
University. Prior to joining Delaware Investments in 1996, he was a Senior
Director with Morgan Grenfell Capital Management in New York, where he managed
technology-related stocks. Previously, he was a Vice President at Chase
Investors Management Corporation.
Nasdaq Symbols
Class A: DVEAX
Class B: DVEBX
Class C: DVECX
<PAGE>
DELAWARE SELECT GROWTH FUND PERFORMANCE
Average Annual Total Returns
Through October 31, 2000 Lifetime Five Years One Year
--------------------------------------------------------------------------------
Class A (Est. 5/16/94)
Excluding Sales Charge +30.52% +35.55% +30.79%
Including Sales Charge +29.33% +33.95% +23.27%
--------------------------------------------------------------------------------
Class B (Est. 4/16/96)
Excluding Sales Charge +37.98% -- +29.82%
Including Sales Charge +37.84% -- +24.82%
--------------------------------------------------------------------------------
Class C (Est. 5/20/94)
Excluding Sales Charge +29.59% +34.54% +29.81%
Including Sales Charge +29.59% +34.54% +28.81%
--------------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
share results excluding sales charges assume either that contingent sales
charges did not apply or the investment was not redeemed. Past performance is
not a guarantee of future results.
Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
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 redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes of Delaware Select Growth
Fund during the periods shown. Performance would have been lower if the expense
limitation was not in effect.
The average annual total returns for the lifetime, five-year, and one-year
periods ended October 31, 2000 for Delaware Select Growth Fund's Institutional
Class were +30.70%, +35.80%, and +31.11%, respectively. The Institutional Class
was originally made available without sales charge only to certain eligible
institutional accounts on August 29, 1997. Performance prior to that date is
based on Class A share performance and was adjusted to eliminate the effect of
the sales charge, but not Class A shares's asset-based distribution charge.
Nasdaq Symbol Institutional Class: VAGGX
6
<PAGE>
Statement of Net Assets
DELAWARE SELECT GROWTH FUND
---------------------------
Number of Market
October 31, 2000 (Unaudited) Shares Value
--------------------------------------------------------------------------------
Common Stock - 99.72%
Banking, Finance & Insurance - 14.12%
Capital One Financial ....................... 333,500 $ 21,052,188
Federal Home Loan ........................... 725,200 43,512,000
Federal National Mortgage ................... 638,900 49,195,300
Lehman Brothers Holdings .................... 342,200 22,071,900
Merrill Lynch & Company ..................... 264,800 18,536,000
Morgan Stanley Dean Witter .................. 291,800 23,435,188
Providian Financial ......................... 318,800 33,155,200
State Street Bank ........................... 183,400 22,877,316
Washington Mutual ........................... 412,100 18,132,400
Zions Bancorp ............................... 689,100 39,580,181
------------
291,547,673
------------
Basic Industry/Capital Good - 1.22%
*Sepracor .................................... 370,400 25,233,500
------------
25,233,500
------------
Business Services - 0.63%
Robert Half International ................... 427,200 13,029,600
------------
13,029,600
------------
Cable, Media & Publishing - 2.86%
*AT&T Liberty Media - Class A ................ 994,300 17,897,400
*USA Networks ................................ 914,800 18,524,700
*Viacom - Class B ............................ 396,700 22,562,313
------------
58,984,413
------------
Computers & Technology - 20.40%
*Altera ...................................... 577,200 23,629,125
*Applied Micro Circuits ...................... 833,400 63,650,925
*JDS Uniphase ................................ 745,240 60,643,905
Linear Technology .......................... 365,500 23,597,594
*Micrel ...................................... 1,029,500 46,584,875
*Maxim Integrated Products ................... 402,000 26,657,625
*Network Appliance ........................... 688,200 81,895,800
*PMC - Sierra ................................ 223,500 37,883,250
*Sun Microsystems ............................ 310,400 34,415,600
*Xilinx ...................................... 305,900 22,158,631
------------
421,117,330
------------
Healthcare & Pharmaceuticals - 6.51%
*Genentech ................................... 956,200 78,886,500
*Pain Therapeutics ........................... 624,200 13,381,288
*Serono ...................................... 414,900 9,387,113
*United Therapeutics ......................... 611,900 32,736,650
------------
134,391,551
------------
Leisure, Lodging & Entertainment - 3.41%
*Brinker International ....................... 1,504,100 59,035,925
*Outback Steakhouse .......................... 395,400 11,268,900
------------
70,304,825
------------
<PAGE>
Number of Market
Shares Value
--------------------------------------------------------------------------------
Common Stock (continued)
Retail - 12.08%
*Bed Bath & Beyond ....................... 1,983,000 $ 51,186,188
Home Depot .............................. 235,100 10,109,300
*Kohl's .................................. 1,249,300 67,696,444
*Krispy Kreme Doughnuts .................. 127,500 12,566,719
Limited ................................. 1,619,300 40,887,325
*Starbucks ............................... 668,200 29,860,188
Walgreen ................................ 811,400 37,020,125
--------------
249,326,289
--------------
Software - 23.83%
*i2 Technologies ......................... 517,200 87,924,000
*America Online .......................... 1,780,900 89,810,787
*Ariba ................................... 240,600 30,405,825
*Docent .................................. 1,154,700 29,733,525
*Gemstar International Group Limited ..... 513,100 35,179,419
*NetIQ ................................... 477,400 41,116,075
*Peregrine Systems ....................... 1,864,900 44,757,600
*Quest Software .......................... 746,300 32,603,981
*VeriSign ................................ 219,700 29,000,400
*Veritas Software ........................ 507,275 71,533,701
--------------
492,065,313
--------------
Telecommunication - 8.79%
*Brocade Communications Systems .......... 193,800 44,065,275
*Comcast - Class A ....................... 184,900 7,534,675
*Extreme Networks ........................ 905,200 75,075,025
*Foundry Networks ........................ 274,600 18,243,738
*Juniper Networks ........................ 124,800 24,336,000
*XO Communications ....................... 364,500 12,296,180
--------------
181,550,893
--------------
Transportation - 1.28%
Expeditors International ................ 508,600 26,383,625
--------------
26,383,625
--------------
Utilities - 4.59%
*AES ..................................... 231,200 13,062,800
Duke Energy ............................. 477,700 41,291,194
Dynegy .................................. 872,600 40,412,288
--------------
94,766,282
--------------
Total Common Stock
(cost $1,639,963,205) ................. $2,058,701,294
==============
7
<PAGE>
Statement of Net Assets (continued)
Number of Market
Delaware Select Growth Fund Shares Value
--------------------------------------------------------------------------------
Federal Agency (Discount Notes) - 1.53%
Federal Home Loan Bank
6.39% 11/16/00 ................................ 20,390,000 $ 20,335,644
Federal Home Loan Mortgage Corporation
6.38% 11/17/00 ................................ 3,000,000 2,991,478
6.38% 12/5/00 ................................. 5,310,000 5,278,002
Federal National Mortgage Association
6.567% 11/16/00 ............................... 2,890,000 2,882,245
------------
Total Federal Agency
(cost $31,487,369) ............................ 31,487,369
------------
Principal
Amount
---------
Short-Term Investments - 0.00%
Well Fargo National Tax-Free Money
Market Fund ................................... 1,090 1,090
--------------
Total Short-Term Investments
(cost $1,090) ................................. 1,090
--------------
Total Market Value of Securities - 101.25%
(cost $1,671,451,664) ......................... 2,090,189,753
Liabilities Net of Receivables
and Other Assets - (1.25%) .................... (25,786,697)
--------------
Net Assets Applicable to 56,150,038
Shares Outstanding - 100.00% .................. $2,064,403,056
==============
Net Asset Value - Delaware Select
Growth Fund A Class
($733,072,537 / 19,303,221 Shares) ............ $37.98
------
Net Asset Value - Delaware Select
Growth Fund B Class
($871,968,642 / 24,128,915 Shares) ............ $36.14
------
Net Asset Value - Delaware Select
Growth Fund C Class
($389,975,768 / 10,908,704 Shares) ............ $35.75
------
Net Asset Value - Delaware Select
Growth Fund Institutional Class
($69,386,109 / 1,809,198 Shares) .............. $38.35
------
Components of Net Assets at October 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par ) ...................... $1,789,061,896
Accumulated net realized loss
on investments ................................ (143,396,929)
Net unrealized appreciation
of investments ................................ 418,738,089
--------------
Total net assets ................................. $2,064,403,056
==============
----------------
*Non-income producing security for the period ended October 31, 2000
Net Asset Value and Offering Price Per Share -
Delaware Select Growth Fund
Net asset value A Class (A) ...................... $37.98
Sales charge (5.75% of offering price
or 6.11% of amount invested
per share) (B) ................................ 2.32
------
Offering price ................................... $40.30
======
-------------
(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
8
<PAGE>
Statements of Operations
Six Months Ended October 31, 2000 (Unaudited) Delaware Select Growth Fund
--------------------------------------------------------------------------------
Investment Income:
Interest ............................................ $ 2,136,106
Dividends ........................................... 2,105,556 $ 4,241,662
----------- -----------
Expenses:
Management fees ..................................... 6,721,833
Distribution expense ................................ 6,706,718
Dividend disbursing and transfer agent fees
and expenses ...................................... 2,580,350
Accounting and administration ....................... 388,934
Reports and statements to shareholders .............. 319,077
Registration fees ................................... 290,304
Custodian fees ...................................... 63,784
Professional fees ................................... 50,817
Trustees' fees ...................................... 12,775
Taxes (other than taxes on income) .................. 4,703
Other ............................................... 118,756 17,258,051
-----------
Less expenses paid indirectly ....................... (22,329)
-----------
Total expenses ...................................... 17,235,722
-----------
Net Investment Loss ................................. (12,994,060)
-----------
Net Realized and Unrealized Gain (Loss) on
Investments:
Net realized loss on investments .................... (114,436,852)
Net change in unrealized appreciation/depreciation
of investments .................................... 194,080,769
-----------
Net Realized and Unrealized Gain on Investments ..... 79,643,917
-----------
Net Increase in Net Assets Resulting from Operations $66,649,857
===========
See accompanying notes
9
<PAGE>
Statements of Changes in Net Assets
Delaware Select Growth Fund
--------------------------------------------------------------------------------
Six Months Year
Ended Ended
10/31/00 4/30/00
(Unaudited)
Increase (Decrease) in Net Assets from
Operations:
Net investment loss ............................ $ (12,994,060) $ (11,148,047)
Net realized gain (loss) on investments ........ (114,436,852) 17,905,589
Net change in unrealized appreciation/
depreciation of investments .................. 194,080,769 180,863,933
------------------------------
Net increase in net assets resulting from
operations ................................... 66,649,857 187,621,475
------------------------------
Distribution to Shareholders:
From net realized gain on investments:
A Class ..................................... - (7,142,107)
B Class ..................................... - (6,583,080)
C Class ..................................... - (2,258,612)
Institutional Class ......................... - (811,040)
In excess of net realized gain on investments*:
A Class ..................................... - (6,247,793)
B Class ..................................... - (6,680,100)
C Class ..................................... - (2,482,871)
Institutional Class ......................... - (555,253)
------------------------------
- (32,760,856)
------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ..................................... 163,822,642 505,087,596
B Class ..................................... 213,265,876 538,948,183
C Class ..................................... 107,142,896 279,314,546
Institutional Class ......................... 18,187,431 57,943,242
Net asset value of shares issued upon reinvestment
of distributions:
A Class ..................................... - 12,712,306
B Class ..................................... - 12,647,121
C Class ..................................... - 4,471,980
Institutional Class ......................... - 1,366,295
------------------------------
502,418,845 1,412,491,269
------------------------------
Cost of shares repurchased:
A Class ..................................... (90,085,727) (92,368,713)
B Class ..................................... (41,186,314) (42,086,811)
C Class ..................................... (32,473,329) (27,235,623)
Institutional Class ......................... (10,811,889) (24,905,150)
------------------------------
(174,557,259) (186,596,297)
------------------------------
Increase in net assets derived from capital share
transactions ................................. 327,861,586 1,225,894,972
------------------------------
Net Increase in Net Assets ..................... 394,511,443 1,380,755,591
Net Assets:
Beginning of period ............................ 1,669,891,613 289,136,022
------------------------------
End of period .................................. $2,064,403,056 $1,669,891,613
============== ==============
-------------
*Distributions which exceed net realized gains for financial purposes but not
tax purposes are reported as distributions in excess of net realized gains.
See accompanying notes
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Select Growth Fund A Class
------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
10/31/00(4) 4/30/00 4/30/99 4/30/98(1) 4/30/97 4/30/96
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $36.380 $25.910 $20.570 $11.770 $13.080 $10.400
Income (loss) from investment operations:
Net investment loss(2) ............................... (0.173) (0.294) (0.203) (0.052) (0.180) (0.100)
Net realized and unrealized gain on investments ...... 1.773 12.393 5.910 11.127 0.960 3.270
---------------------------------------------------------------------
Total from investment operations ..................... 1.600 12.099 5.707 11.075 0.780 3.170
---------------------------------------------------------------------
Less distributions:
From net realized gain on investments ................ - (1.049) (0.367) (2.275) (2.090) (0.400)
In excess of net realized gain on investments ........ - (0.580) - - - -
Return of capital .................................... - - - - - (0.090)
---------------------------------------------------------------------
Total distributions .................................. - (1.629) (0.367) (2.275) (2.090) (0.490)
---------------------------------------------------------------------
Net asset value, end of period .......................... $37.980 $36.380 $25.910 $20.570 $11.770 $13.080
=====================================================================
Total return(3) ......................................... 4.43% 47.93% 28.43% 98.60% 4.34% 31.02%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $733,072 $632,036 $135,865 $31,926 $4,944 $4,334
Ratio of expenses to average net assets .............. 1.32% 1.29% 1.67% 1.75% 1.84% 2.01%
Ratio of expenses to average net assets prior to
expense limitation and expenses
paid indirectly .................................... 1.32% 1.29% 2.06% 2.29% 2.65% 2.74%
Ratio of net investment loss to average
net assets ......................................... (0.88%) (0.85%) (0.95%) (0.69%) (1.38%) (1.00%)
Ratio of net investment loss to average
net assets prior to expense limitation and
expenses paid indirectly ........................... (0.88%) (0.85%) (1.34%) (1.23%) (2.19%) (1.73%)
Portfolio turnover ................................... 144% 183% 313% 356% 180% 166%
</TABLE>
---------------------
(1) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of the sales charge.
(4) Ratios have been annualized and total return has not been annualized.
See accompanying notes
11
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Select Growth Fund B Class
------------------------------------------------------------------------------------------------------------------------------------
Six Months Period From
Ended Year Ended 4/16/96(1)
10/31/00(5) 4/30/00 4/30/99 4/30/98(2) 4/30/97 to 4/30/96
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $34.740 $24.990 $20.000 $11.570 $13.060 $11.910
Income (loss) from investment operations:
Net investment loss(3) ................................ (0.303) (0.544) (0.350) (0.061) (0.210) (0.010)
Net realized and unrealized gain on investments ....... 1.703 11.923 5.707 10.766 0.810 1.160
---------------------------------------------------------------------
Total from investment operations ...................... 1.400 11.379 5.357 10.705 0.600 1.150
---------------------------------------------------------------------
Less distributions:
From net realized gain on investments ................. - (1.049) (0.367) (2.275) (2.090) -
In excess of net realized gain on investments ......... - (0.580) - - - -
---------------------------------------------------------------------
Total distributions ................................... - (1.629) (0.367) (2.275) (2.090) -
---------------------------------------------------------------------
Net asset value, end of period ........................... $36.140 $34.740 $24.990 $20.000 $11.570 $13.060
=====================================================================
Total return(4) .......................................... 4.03% 46.82% 27.41% 97.12% 2.84% 9.66%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $871,969 $674,810 $103,299 $16,539 $95 $0
Ratio of expenses to average net assets ............... 2.07% 2.04% 2.42% 2.50% 2.57% 1.86%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ..................................... 2.07% 2.04% 2.81% 3.04% 3.37% 1.86%
Ratio of net investment loss to average
net assets .......................................... (1.63%) (1.60%) (1.70%) (1.44%) (1.97%) (1.39%)
Ratio of net investment loss to average
net assets prior to expense limitation and
expenses paid indirectly ............................ (1.63%) (1.60%) (2.09%) (1.98%) (2.77%) (1.39%)
Portfolio turnover .................................... 144% 183% 313% 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) The average shares outstanding method has been applied for per share
information.
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of the sales charge.
(5) Ratios have been annualized and total return has not been annualized.
See accompanying notes
12
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Select Growth Fund C Class
------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
10/31/00(4) 4/30/00 4/30/99 4/30/98(1) 4/30/97 4/30/96
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $34.370 $24.740 $19.800 $11.470 $12.880 $10.330
Income (loss) from investment operations:
Net investment loss(2) ................................ (0.300) (0.555) (0.345) (0.071) (0.230) (0.210)
Net realized and unrealized gain on investments ....... 1.680 11.814 5.652 10.676 0.910 3.250
---------------------------------------------------------------------
Total from investment operations ...................... 1.380 11.259 5.307 10.605 0.680 3.040
---------------------------------------------------------------------
Less distributions:
From net realized gains on investments ................ - (1.049) (0.367) (2.275) (2.090) (0.400)
In excess of net realized gain on investments ......... - (0.580) - - - -
Return of capital ..................................... - - - - - (0.090)
---------------------------------------------------------------------
Total distributions ................................... - (1.629) (0.367) (2.275) (2.090) (0.490)
---------------------------------------------------------------------
Net asset value, end of period ........................... $35.750 $34.370 $24.740 $19.800 $11.470 $12.880
=====================================================================
Total return(3) .......................................... 4.02% 46.86% 27.45% 96.99% 3.58% 29.96%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $389,976 $304,078 $32,235 $5,892 $222 $150
Ratio of expenses to average net assets ............... 2.07% 2.04% 2.42% 2.50% 2.62% 2.77%
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ..................................... 2.07% 2.04% 2.81% 3.04% 3.43% 3.50%
Ratio of net investment loss to average
net assets .......................................... (1.63%) (1.60%) (1.70%) (1.44%) (2.02%) (1.73%)
Ratio of net investment loss to average
net assets prior to expense limitation and
expenses paid indirectly ............................ (1.63%) (1.60%) (2.09%) (1.98%) (2.83%) (2.46%)
Portfolio turnover .................................... 144% 183% 313% 356% 180% 166%
</TABLE>
-----------------
(1) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of the sales charge.
(4) Ratios have been annualized and total return has not been annualized.
See accompanying notes
13
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Select Growth Fund Institutional Class
-------------------------------------------------------------------------------------------------------------
Six Months Period From
Ended Year Ended 8/29/97(1)
10/31/00(5) 4/30/00 4/30/99 to 4/30/98(2)
(Unaudited)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $36.690 $26.060 $20.640 $17.150
Income (loss) from investment operations:
Net investment loss(3) ................................. (0.126) (0.196) (0.155) (0.019)
Net realized and unrealized gain on investments ........ 1.786 12.455 5.942 5.539
--------------------------------------------
Total from investment operations ....................... 1.660 12.259 5.787 5.520
--------------------------------------------
Less distributions:
From net realized gains on investments ................. - (1.049) (0.367) (2.030)
In excess of net realized gain on investments .......... - (0.580) - -
--------------------------------------------
Total distributions .................................... - (1.629) (0.367) (2.030)
--------------------------------------------
Net asset value, end of period ............................ $38.350 $36.690 $26.060 $20.640
============================================
Total return(4) ........................................... 4.55% 48.29% 28.73% 34.68%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $69,386 $58,967 $17,737 $2,391
Ratio of expenses to average net assets ................ 1.07% 1.04% 1.42% 1.50%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.07% 1.04% 1.81% 2.04%
Ratio of net investment loss to average net assets ..... (0.63%) (0.60%) (0.70%) (0.44%)
Ratio of net investment loss to average net
assets prior to expense limitation and expenses
paid indirectly ...................................... (0.63%) (0.60%) (1.09%) (0.98%)
Portfolio turnover ..................................... 144% 183% 313% 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) The average shares outstanding method has been applied for per share
information.
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value.
(5) Ratios have been annualized and total return has not been annualized.
See accompanying notes
14
<PAGE>
Notes to Financial Statements
October 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
Voyageur Mutual 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 three
series: Delaware Select Growth Fund, Delaware Growth Stock Fund and Delaware
Tax-Efficient Equity Fund. These financial statements and the related notes
pertain to Delaware Select Growth Fund (the "Fund"). The Fund offers four
classes of shares. The A Class carries a maximum 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.
The Delaware Select 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.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Fund:
Security Valuation - All equity securities are valued at the last quoted sales
price as of the close of the New York Stock Exchange (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. Long-term debt securities are
valued by an independent pricing service. Such prices are believed to reflect
the fair value of such securities. Money market instruments having less than 60
days to maturity are valued at amortized cost, which approximates market value.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Trustees.
Federal Income Taxes - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
<PAGE>
--------------------------------------------------------------------------------
Other - Expenses common to all funds within the Delaware Investments Family of
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. The Fund declares and pays
dividends from net investment income and capital gains, if any, semi-annually.
Certain expenses of the Fund are paid through commission arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was $22,239 for the period ended October 31, 2000. The expenses
paid under the above arrangements are included in their respective expense
captions on the Statement of Operations with the corresponding expense offset
shown as "expenses paid indirectly".
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company ("DMC"), the Investment Manager of the Fund, an
annual fee which is calculated daily at the rate of 0.75% on the first $500
million of average daily net assets of the Fund, 0.70% on the next $500 million,
0.65% on the next $1,500 million and 0.60% on the average daily net assets in
excess $2,500 million. At October 31, 2000, the Fund had a liability for
Investment Management fees and other expenses payable to DMC of $1,194,323.
DMC has elected to waive the portion, if any, of the management fee and
reimburse the Fund to the extent that annual operating expenses exclusive of
taxes, interest, brokerage commissions, distribution fees and extraordinary
expenses exceed 1.50% of the average daily net assets of the Fund through
December 31, 2000.
The Fund has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent, accounting and
administration services. The Fund pays DSC a monthly fee based on the number of
shareholder accounts, shareholder transactions and average net assets, subject
to certain minimums. At October 31, 2000, the Fund had a liability for such fees
and other expenses payable to DSC of $421,615.
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. At October 31, 2000, the Fund had
a liability for distribution fees and other expenses payable to DDLP of
$141,137.
15
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates
(continued)
For the period ended October 31, 2000, DDLP earned $340,700 for commissions on
sales of the Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Fund. These officers, trustees and employees are paid no compensation by the
Fund.
3. Investments
During the period ended October 31, 2000, the Fund made purchases of
$1,683,100,064 and sales of $1,355,920,014 of investment securities other than
U.S. government securities and temporary cash investments.
At October 31, 2000, net unrealized appreciation for federal income tax purposes
aggregated $418,738,089 of which $475,107,498 related to unrealized appreciation
of securities and $56,369,409 related to unrealized depreciation of securities.
At October 31, 2000, the aggregate cost of securities for federal income tax
purposes was $1,671,451,664.
4. Capital Shares
Transactions in capital shares were as follows:
Six Months Year
Ended Ended
10/31/00 4/30/00
(Unaudited)
Shares sold:
A Class .............................................. 4,262,565 14,432,966
B Class .............................................. 5,829,066 16,099,565
C Class .............................................. 2,956,799 8,168,692
Institutional Class .................................. 485,478 1,614,899
Shares issued upon reinvestment of distributions:
A Class .............................................. - 398,816
B Class .............................................. - 406,136
C Class .............................................. - 143,965
Institutional Class .................................. - 43,709
---------- ----------
13,533,908 41,308,748
---------- ----------
Shares repurchased:
A Class .............................................. (2,333,973) (2,700,023)
B Class .............................................. (1,122,091) (1,217,125)
C Class .............................................. (894,638) (769,271)
Institutional Class .................................. (283,472) (731,988)
---------- ----------
(4,634,174) (5,418,407)
---------- ----------
Net increase .......................................... 8,899,734 35,890,341
========== ==========
5. Line of Credit
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $375,400,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each Funds' allocation of the entire facility. The Participants may
borrow up to one third of their net assets under the agreement. The Fund had no
amounts outstanding at October 31, 2000 or at any time during the fiscal year.
16
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
------------------------------------
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
<TABLE>
<CAPTION>
<S> <C> <C>
Growth of Capital International and Global Tax-Exempt Income
o Technology and Innovation o Emerging Markets Fund o National High-Yield
Fund o New Pacific Fund Municipal Bond Fund
o Select Growth Fund o Overseas Equity Fund o Tax-Free USA Fund
o Trend Fund o International Equity Fund o Tax-Free Insured Fund
o Growth Opportunities Fund* o Global Equity Fund o Tax-Free USA
o Small Cap Value Fund o Global Bond Fund Intermediate Fund
o U.S. Growth Fund o State Tax-Free Funds**
o Tax-Efficient Equity Fund Current Income
o Social Awareness Fund o Delchester Fund Stability of Principal
o High-Yield o Cash Reserve
Total Return Opportunities Fund o Tax-Free Money Fund
o Blue Chip Fund o Strategic Income Fund
o Devon Fund o Corporate Bond Fund Asset Allocation
o Growth and Income Fund o Extended Duration o Foundation Funds
o Decatur Equity Bond Fund Growth Portfolio
Income Fund o American Government Balanced Portfolio
o REIT Fund Bond Fund Income Portfolio
o Balanced Fund o U.S. Government
Securities Fund
o Limited-Term
Government Fund
</TABLE>
* Formerly known as DelCap Fund.
** Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New Jersey,
New Mexico, New York, Oregon, Pennsylvania and Wisconsin. Insured and
intermediate bond funds are available in selected states.
(C)Delaware Distributors, L.P.
<PAGE>
DELAWARE(SM)
INVESTMENTS
-----------
Philadelphia o London
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
This semi-annual report is for the information of Delaware Select Growth Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for the Fund and the Delaware Investments
Performance Update for the most recently completed calendar quarter. The
prospectus sets forth details about charges, expenses, investment objectives and
operating policies of the Fund. You should read the prospectus carefully before
you invest. The figures in this report represent past results which are not a
guarantee of future results. The return and principal value of an investment in
the Fund will fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
BOARD OF TRUSTEES Charles E. Peck Investment Manager
Retired Delaware Management Company
Wayne A. Stork Fredericksburg, VA Philadelphia, PA
Chairman
Delaware Investments Family of Funds Janet L. Yeomans International Affiliate
Philadelphia, PA Vice President and Treasurer Delaware International Advisers Ltd.
3M Corporation London, England
Walter P. Babich St. Paul, MN
Board Chairman National Distributor
Citadel Constructors, Inc. AFFILIATED OFFICERS Delaware Distributors, L.P.
King of Prussia, PA Philadelphia, PA
Charles E. Haldeman, Jr.
David K. Downes President and Chief Executive Officer Shareholder Servicing, Dividend
President and Chief Executive Officer Delaware Management Holdings, Inc. Disbursing and Transfer Agent
Delaware Investments Family of Funds Philadelphia, PA Delaware Service Company, Inc.
Philadelphia, PA Philadelphia, PA
Richard J. Flannery
John H. Durham Executive Vice President 1818 Market Street
Private Investor and General Counsel Philadelphia, PA 19103-3682
Horsham, PA Delaware Investments Family of Funds
Philadelphia, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates Bruce D. Barton
New York, NY President and Chief Executive Officer
Delaware Distributors, L.P.
Ann R. Leven Philadelphia, PA
Former Treasurer, National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
</TABLE>
(4083) Printed in the USA
SA-316 [10/00] BP 12/00 (J6567)
