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<PAGE>
April 24, 1998
Dear Shareholder:
Capital Appreciation Fund provided a total return of +6.25% with
distributions reinvested (for A Class at net asset value and Institutional
shares) for the six months ended March 31, 1998.
Approximately two-thirds of Capital Appreciation Fund's net assets were
allocated to small and mid-cap stocks as of mid-year. The balance of the Fund
was invested in the stocks of large U.S. companies.
As of March 31, 1998, technology and health care were your Fund's two
largest sectors, representing 18.2% and 10.0% of net assets respectively. Since
September, some of the Fund's small and mid-cap selections did not perform as
well as expected or as well as stocks of large companies. Health care stocks
underperformed the overall stock market while technology shares remained
volatile.
We anticipate that Capital Appreciation Fund, established on December 2,
1996, will remain in limited distribution for the balance of fiscal 1998. As of
March 31, 1998, the Fund had $2.58 million in net assets.
<TABLE>
<CAPTION>
Cumulative Total Return
Six Months Ended 12 Months Ended December 2, 1996 to
March 31, 1998 March 31, 1998 March 31, 1998
---------------------------------------------------------------
<S> <C> <C> <C>
Capital Appreciation Fund
(Institutional Class and
A Class Excluding Sales Charge) +6.25% +34.09% +27.12%
(A Class Including Sales Charge) +1.17% +27.75% +21.13%
Russell 2000 Index +6.37% +42.16% +33.88%
Standard & Poor's 500 Index +17.21% +47.97% +46.29%
</TABLE>
All performance shown above is at net asset value and assumes reinvestment of
distributions. Past performance does not guarantee future results. No sales
charge or 12b-1 fees were imposed on A Class shares for the periods shown and no
B or C Class shares were offered. Performance would have been lower without the
fee waiver. Return and share value fluctuate so that shares, when redeemed may
be worth more or less than their original cost.
Thank you for your commitment to Delaware Investments.
Sincerely,
/s/ Wayne A. Stork /s/ Gerald S. Frey
------------------ ------------------
Wayne A. Stork Gerald S. Frey
Chairman Vice President/Senior Portfolio Manager
/s/ Jeffrey J. Nick /s/ Robert L. Arnold
------------------- --------------------
Jeffrey J. Nick Robert L. Arnold
President and Chief Executive Vice President/Senior Portfolio Manager
Officer
<PAGE>
Delaware Group Equity Funds IV, Inc. -
Capital Appreciation Fund
Statement of Net Assets
March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Number of Market
Shares Value
<S> <C> <C>
COMMON STOCK - 96.27%
Aerospace & Defense - 2.24%
AAR 2,100 $57,225
----------
57,225
----------
Automobiles & Auto Parts - 2.93%
General Motors 600 40,462
Tenneco 800 34,150
----------
74,612
----------
Banking, Finance & Insurance - 9.57%
Aon 700 45,325
Bankers Trust New York 300 36,094
CoreStates Financial 500 44,875
Mellon Bank 600 38,100
National City 600 43,987
St. Paul 400 35,650
----------
244,031
----------
Cable, Media, & Publishing - 5.97%
McGraw-Hill 500 38,031
* Snyder Communications 1,100 51,562
* World Color Press 1,800 62,550
----------
152,143
----------
Chemicals - 1.16%
Hercules 600 29,625
----------
29,625
----------
Computers & Technology - 18.22%
* BISYS Group 1,100 38,672
* BMC Software 700 58,691
* Compuware 1,200 59,213
* EMC 1,000 37,812
* J.D. Edwards 1,500 49,031
* FlexInternational Software 3,300 40,744
* MMC Networks 2,500 51,406
* Peerless Systems 2,000 36,000
* PLATINUM Technology 2,000 51,612
* Veritas Software 700 41,475
----------
464,656
----------
Electronics & Electrical - 5.71%
* Analog Devices 1,500 49,875
* Micrel 1,300 49,319
* Sipex 1,400 46,375
----------
145,569
----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Energy - 2.72%
Atlantic Richfield 500 39,312
USX-Marathon Group 800 30,100
----------
69,412
----------
Environmental Services - 3.29%
Browning Ferris 1,100 35,888
* USA Waste Services 1,075 47,905
----------
83,793
----------
Food, Beverage & Tobacco - 4.60%
* American Italian Pasta-A 1,500 54,188
ConAgra 700 22,488
Philip Morris 975 40,645
----------
117,321
----------
Healthcare & Pharmaceuticals - 9.96%
American Home Products 500 47,688
Bausch & Lomb 600 27,412
Baxter International 600 33,075
* Health Management Associates Class A 1,950 55,819
* Healthsouth 1,600 44,900
* Phycor 2,000 45,062
----------
253,956
----------
Industrial Machinery - 1.19%
Camco International 500 30,250
----------
30,250
----------
Leisure, Lodging, & Entertainment - 2.70%
* Papa John's International 1,800 68,737
----------
68,737
----------
Real Estate Investment Trusts - 3.55%
Ocwen Asset Investment 2,400 41,025
Koger Equity 2,200 49,500
----------
90,525
----------
Retail - 9.92%
* CDnow 2,000 48,063
* Dollar Tree Stores 1,100 58,575
* General Nutrition 1,500 59,531
May Department Stores 600 38,100
* Viking Office Products 2,100 48,694
----------
252,963
----------
Telecommunocations - 5.15%
GTE 600 35,925
* PairGain Technologies 2,300 55,128
* Tellabs 600 40,294
----------
131,347
----------
Transportation & Shipping - 1.32%
Union Pacific 600 33,712
----------
33,712
----------
Utilities - 2.06%
* AES 1,000 52,438
----------
52,438
----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Miscellaneous - 4.01%
* Cendant 1,442 57,134
Pitney Bowes 900 45,169
----------
102,303
----------
Total Common Stock ( cost $2,086,202 ) 2,454,618
----------
REPURCHASE AGREEMENTS - 11.65% Principal Market
With J.P. Morgan 5.85% 4/1/98 Amount Value
(dated 3/31/98, collateralized by $85,000 U.S.
Treasury Notes 6.750% due 5/31/99, market value
$88,842) $87,000 $87,000
With PaineWebber 5.875% 4/1/98
(dated 3/31/98, collateralized by $49,000 U.S.
Treasury Notes 6.625% due 6/30/01, market value
$51,091 and 43,000 U.S. Treaury Notes 6.25%
due 6/30/98, market value $43,833) 93,000 93,000
With Prudential Securities 5.90% 4/1/98
(dated 3/31/98, collateralized by $125,000 U.S.
Treasury Bills due 1/7/99, market value
$119,959) 117,000 117,000
-----------
Total Repurchase Agreements
(cost $297,000) 297,000
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED - 107.92% $2,751,618
(cost $2,383,202)
LIABILITES NET OF RECEIVABLES AND
OTHER ASSETS - (7.92%) (201,953)
-----------
NET ASSETS APPLICABLE TO 248,595 SHARES
(0.01 par value) OUTSTANDING - 100.00% $2,549,665
===========
NET ASSET VALUE - CAPITAL APPRECIATION FUND A CLASS
($8,256 / 805 shares) $10.26
===========
NET ASSET VALUE - CAPITAL APPRECIATION FUND INSTITUTIONAL CLASS
($2,541,409 / 247,790 shares) $10.26
===========
-------------------------------
* Non-income producing security
COMPONENTS OF NET ASSETS AT MARCH 31, 1998:
Common Stock $0.01 value 200,000,000 shares authorized to the Fund with
100,000,000 shares allocated to Capital Appreciation Fund Class A,
25,000,000 shares allocated to Capital Appreciation Fund Class B,
25,000 shares allocated to Capital Appreciation Fund Class C and
50,000,000 shares allocated to Capital Appreciation Fund
Institutional Class $2,125,876
Undistributed net investment income 5,793
Accumulated net realized gain on investments 49,580
Net unrealized appreciation of investments 368,416
===========
Total net assets $2,549,665
===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
CAPITAL APPRECIATION FUND A CLASS
Net Asset Value A Class (A) $10.26
Sales Charge (4.75% of offering or 4.97% of the amount invested
per share) (B) 0.51
-----------
Offering price $10.77
===========
</TABLE>
-----------------
(A) Net asset value per share, as illustrated, is the estimated amount
which would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for the Purchases of
$100,000 or more.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS IV, INC. -
CAPITAL APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
Delaware Group Equity Funds IV, Inc. - Capital Appreciation Fund (the "Fund") is
registered as a diversified open-end investment company under the Investment
Company Act of 1940, as amended. The Fund is organized as a Maryland Corporation
and offers four classes of shares. The Capital Appreciation Fund A Class carries
a front-end sales charge of 4.75%. The Capital Appreciation Fund B Class carries
a back-end sales charge. The Capital Appreciation Fund C Class carries a level
load deferred sales charge and Capital Appreciation Fund Institutional Class has
no sales charge. As of March 31, 1998, only the Capital Appreciation Fund A
Class and the Capital Appreciation Fund Institutional Class have commenced
operations. The Fund's objective is to provide investors with an investment that
has the potential for capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation- Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Money market instruments having less than 60
days to maturity are valued at amortized cost which approximates market value.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
Federal Income Taxes- The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles.
Class Accounting- Investment income, common expenses and realized and unrealized
gain (loss) on investments are allocated to the various classes of the Fund on
the basis of daily net assets of each class. Distribution expenses relating to a
specific class are charged directly to that class.
Repurchase Agreements- The Fund may invest in a pooled cash account along with
other members of the Delaware Group of Funds. The aggregate daily balance of the
pooled cash account is invested in repurchase agreements secured by obligations
of the U.S. government. The respective collateral is held by the Fund's
custodian bank until the maturity of the respective repurchase agreements. Each
repurchase agreement is at least
<PAGE>
100% collateralized. However, in the event of default or bankruptcy by the
counterparty to the agreement, realization of the collateral may be subject to
legal proceedings.
Other- Expenses common to all Funds within the Delaware Group of Funds are
allocated amongst the funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale of
investment securities are those of the specific securities sold. Dividend income
is recorded on the ex-dividend date and interest income is recorded on the
accrual basis. The 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.
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.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. (DMC), the Investment Manager of the
Fund, an annual fee which is calculated daily at the rate of 0.75% of the net
assets of the Fund and 0.70% for net assets over $1 billion of the Fund less the
fees paid to the unaffiliated directors. Total expenses absorbed by DMC for the
period ended March 31, 1998 were $16,775. At March 31, 1998, the Fund had a
liability for Investment Management fees and other expenses payable to DMC for
$10,923.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent and accounting services for the
Fund. For the period ended March 31, 1998, the Fund expensed $1,963 for dividend
disbursing and transfer agent services and $464 for accounting services. At
March 31, 1998, the Fund had a liability for such fees and other expenses
payable to DSC for $3,471.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Class. No distribution expenses are paid
by the Institutional Class. DDLP has elected voluntarily to waive 12B-1 plan
fees through November 30, 1998.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
<PAGE>
3. Investments
During the six months ended March 31, 1998, the Fund made purchases of
$2,463,365 and sales of $2,038,038 of investment securities other than U.S.
government securities and temporary cash investments.
At March 31, 1998, the aggregate cost of securities for federal income tax
purposes was $2,386,627.
At March 31, 1998, net unrealized appreciation for federal income tax purposes
aggregated $364,991 of which $408,154 related to unrealized appreciation of
securities and $43,163 related to unrealized depreciation of securities.
4. Capital Stock
Transactions in capital shares as follows:
<TABLE>
<CAPTION>
10/01/97 12/02/96
to to
03/31/98 09/30/97
-------- --------
<S> <C> <C>
Shares sold:
Capital Appreciation Fund A Class .................... 86 823
Capital Appreciation Fund Institutional Class ........ 14,862 235,295
Shares issued upon reinvestment of dividends
from net investment income and realized gains:
Capital Appreciation Fund A Class .................... 44 --
Capital Appreciation Fund Institutional Class ........ 12,270 225
-------- --------
27,262 236,343
Shares repurchased:
Capital Appreciation Fund A Class .................... (124) (24)
Capital Appreciation Fund Institutional Class ........ (14,862) --
-------- --------
(14,986) (24)
Net Increase ......................................... 12,276 236,319
-------- --------
</TABLE>
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