<PAGE>
DELAWARE
INVESTMENTS
-----------
2000 SEMI-ANNUAL SHAREHOLDER REPORT
Delaware Diversified Growth Fund
May 17, 2000
Dear Shareholder:
Recap of Events -- If you could capture the markets' behavior over the last six
months in a single word, that word would have to be erratic.
Performance of the major U.S. equity markets remained strong during the
six-month period ending March 31, 2000, driven by rising productivity and
corporate earnings. However, inflation fears prompted the Federal Reserve Board
to continue its more restrictive monetary policy. The Fed followed up its
interest rate increases of June 30 and August 24, 1999 with four additional rate
hikes between November 1999 and May 2000. As of this writing, the federal funds
rate - the rate banks charge each other on overnight loans - is 6.5%, its
highest level since January 1991.
While these rate increases were not enough to completely dampen investors'
enthusiasm, they introduced a new note of caution - at least for the "old
economy" stocks of the Dow Jones Industrial Average. At first the Nasdaq
Composite (the index that includes many younger technology and small
capitalization companies) seemed unfazed by the interest rate increases. In
fact, soaring prices and demand for technology stocks kept prices high and were
largely responsible for the overall market's impressive gains through December
1999 (Source: Bloomberg).
Both the Dow and the Nasdaq took notice when the Fed increased interest rates by
a quarter percentage point on February 2 and again on March 21, 2000. Throughout
the first quarter 2000, the stock market experienced several bouts of wild
volatility in anticipation of the Fed's moves. In March, the Dow fell to its
lowest level in a year before recovering at the expense of the Nasdaq. Concerns
over rising interest rates, potential inflation and lofty valuations on
technology stocks took their toll on the Nasdaq Composite. After passing the
5000 milestone in early March, the Nasdaq composite fell sharply several times
during the month, but each time recovered. The S&P fell sharply in February only
to gain ground in March, reaching a high of 1550 on March 24 (Source:
Bloomberg). However, the Dow finished the first quarter down -5.0%, while the
S&P 500 Index returned 7.7% and the Nasdaq closed the quarter up 12.3%.
Delaware Diversified Growth Fund invests primarily in equity securities of
large-size companies that we believe have significantly greater growth potential
than the average anticipated growth rate of companies included in the Standard &
Poor's(R) Composite Stock Price Index. The Fund will generally consider
large-size companies to include those in the Russell 1000 Growth Index.
<PAGE>
Your Fund Managers
J. Paul Dokas, Senior Portfolio Manager and Senior Research Analyst, is
responsible for producing quantitative research used to develop new global
investment services, refine existing services and make asset allocation
decisions. Prior to joining Delaware in 1997, he was Director of Trust
Investment Management at Bell Atlantic Corporation. He earned a bachelor's
degree at Loyola College in Baltimore and an MBA at the University of Maryland.
He is a Chartered Financial Analyst.
Robert E. Ginsberg, Equity Analyst, graduated magna cum laude from the Wharton
School of Business at the University of Pennsylvania with a degree in Economics
and a concentration in Finance. Prior to joining Delaware in 1997, he was a
consultant at Andersen Consulting working primarily with financial services
companies. At Delaware, he handles diverse analytical responsibilities involving
large capitalization stocks.
The Fund's Results
Delaware Diversified Growth Fund provided a total return of +35.11% (Class A
shares at net asset value with distributions reinvested), for the six-month
period ended March 31, 2000 outpacing the Fund's benchmarks, the Russell 1000
Growth Index and the S&P 500 Index. We attribute this return to strong stock
selection. Please see the performance information on page 4 of this report.
The Fund focuses on stocks of large-cap growth companies and intends to
approximately match the sector weightings of the Russell 1000 Growth Index.
However, during the first quarter of 2000, we were attracted to several
technology, telecommunications and media companies and increased our holdings in
these sectors. In selecting stocks for the Fund, we focus primarily on the
fundamentals of individual companies.
At the start of 2000, the Fund held a significant position in Time Warner, a
multi-media entertainment company. We believed the company was well positioned
for future growth as a result of its diversified holdings in film, publishing,
music and cable networks and cable systems. In January, Time Warner was acquired
by AOL, the country's largest internet provider, at a substantially higher price
than Time Warner's stock was selling for. The merger will give Time Warner a
platform for delivering its media content online to AOL's 20 million
subscribers. The Fund benefited from the merger in January and again in March,
when the price of AOL stock increased significantly.
The Fund also benefited from its holdings of Intel, the premier maker of
computer chips. Intel reported outstanding sales during the fourth quarter of
1999, which is typically the best selling season for personal computers. Global
economic recovery also boosted the company's international sales. In 1999, 57%
of Intel's sales came from outside the United States (Source: Intel's 1999
Annual Report). In the coming months, we believe Intel will see even stronger
growth worldwide as the developing economies continue to expand.
The Fund also held stocks in household products and consumer staples companies,
such as Philip Morris, Procter & Gamble and Colgate Palmolive. We held roughly
the same proportion of stocks in these sectors as the Russell 1000 Growth Index.
The companies added diversification to the Fund, but overall, stocks in these
sectors of the economy performed poorly during the past six months and our
holdings hurt the Fund's performance.
<PAGE>
Outlook
We have a generally positive view on the current investment environment and are
encouraged that the Federal Reserve is making policy decisions in an attempt to
prevent future problems. We believe a disciplined investment strategy can create
a portfolio with very attractive risk/return characteristics and that consistent
performance can result in superior long-term results. In our opinion, Delaware
Diversified Growth Fund is well positioned to participate in the economy's
overall health.
Top Ten Holdings
March 31, 2000
Percentage
Company Industry of Net Assets
1. Cisco Systems Computers & Technology 6.77%
2. General Electric Electronics & Electrical 6.68%
3. Microsoft Software 5.66%
4. Intel Electronics & Electrical 5.58%
5. Lucent Technologies Telecommunications 2.71%
6. Time Warner Cable, Entertainment, Media 2.45%
& Publishing
7. Oracle Software 2.26%
8. Wal-Mart Stores Retail 2.18%
9. Sun Microsystems Computers & Technology 2.16%
10. Pfizer Healthcare & Pharmaceuticals 2.12%
Portfolio Highlights
March 31, 2000
Number of Holdings 124
P/E Ratio* 33.5x
Median Market Capitalization $36.05 billion
* Price to earnings ratios are based on trailing earnings for the period ended
March 31, 2000.
Fund Objective
The Funds seeks to provide capital appreciation.
Total Fund Assets
$13.47 million
NASDAQ Symbols
Class A DGDAX
<PAGE>
Delaware Diversified Growth Fund Performance
Average Total Returns
<TABLE>
<CAPTION>
Six Months Ended Since Inception*
March 31, 2000
<S> <C> <C>
Delaware Diversified Growth Fund
(Institutional Class and Class A Shares
Excluding Sales Charge) 35.11% 18.07%
Class A Shares Including Sales Charge 27.32% 15.98%
Russell 1000 Growth Index 34.06% 33.89%
S&P 500 Index 17.52% 26.07%
</TABLE>
Returns reflect reinvestment of distributions. Returns and share values will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. The Russell 1000 Growth Index is a measure of large
capitalization company stocks that exhibit growth characteristics as defined by
Frank Russell Company. The S&P 500 Index is a measure of 500 large
capitalization company stocks. Both indexes are unmanaged. You cannot invest
directly in an index. Past performance is not a guarantee of future results.
No sales charge or 12b-1 fees were imposed on Class A shares and no Class B or C
shares were offered for the periods shown. A voluntary expense limitation was in
effect for the periods shown. Returns would have been lower without the
limitation.
* December 2, 1996 (commencement of operations).
Market Outlook - In our opinion, the overall outlook for the stock market
appears positive both in the U.S. and overseas. However, we expect to see
continued market volatility over the next few months as the Fed continues its
effort to thwart inflation and investors continue to compare the merits of "old
economy" to "new economy" stocks. We thank you for your continued investment in
Delaware Diversified Growth Fund.
Sincerely,
/s/ Wayne A. Stork
- -------------------
Wayne A. Stork
Chairman,
Delaware Investments Family of Funds
/s/ David K. Downes
- -------------------
David K. Downes
President and Chief Executive Officer
Delaware Investments Family of Funds
<PAGE>
Delaware Diversified Growth Fund
Statement of Net Assets
March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Number of Market
Shares Value
------------------------------
<S> <C>
Common Stock - 100.07%
Aerospace & Defense - 0.25%
Honeywell International 637 $33,562
------------------
33,562
------------------
Banking, Finance & Insurance - 3.13%
American Express 600 89,362
Chase Manhattan 400 34,875
Citigroup 900 53,381
Federal Home Loan 1,900 83,956
J.P. Morgan 200 26,350
MBNA 2,300 58,650
Merrill Lynch & Company 400 42,000
Morgan Stanley Dean Witter 400 32,625
------------------
421,199
------------------
Business Services - 0.90%
Electronic Data Systems 600 38,513
First Data 800 35,400
PAYCHEX 900 47,138
------------------
121,051
------------------
Cable, Entertainment, Media & Publishing - 6.62%
* AMFM 800 49,700
* AT&T-Liberty Media 1,600 94,800
* Adelphia Communications 1,000 49,000
CBS 1,300 73,612
* Chris-Craft Industries 721 45,919
Comcast - Special 1,820 78,943
* ECHOSTAR COMMUNICATIONS 800 63,200
* TV Guide 400 19,225
Time Warner 3,300 330,000
* Viacom 800 42,200
Walt Disney 1,100 45,513
------------------
892,112
------------------
Computers & Technology - 21.07%
* America Online 2,900 195,025
* Ariba 100 20,962
* At Home 1,300 42,819
* CMGI 600 67,987
* Cisco Systems 11,800 912,287
* Comverse Technology 300 56,700
* Dell Computer 4,200 226,538
* EMC 2,200 275,000
* Exodus Communications 300 42,150
Hewlett-Packard 1,200 159,075
International Business Machines 1,800 212,400
* Juniper Networks 100 26,356
Linear Technology 1,200 66,000
* REALNETWORKS 400 22,775
* Sun Microsystems 3,100 290,480
* 3Com 1,300 72,313
* VeriSign 200 29,900
* Vignette 100 16,025
* Yahoo 600 102,825
------------------
2,837,617
------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
-------------------------------
<S> <C> <C>
Consumer Products - 1.87%
Gillete 2,800 $105,525
Kimberly-Clark 800 44,800
Procter & Gamble 1,800 101,250
------------------
251,575
------------------
Electronics & Electrical - 20.07%
* Altera 600 53,550
* Applied Materials 1,800 169,650
* Applied Micro Circuits 200 30,012
* Broadcom 200 48,575
* E-TEK Dynamics 300 70,575
General Electric 5,800 900,088
General Motors-Class H 300 37,350
Intel 5,700 752,044
JDS Uniphase 400 48,225
* Maxim Integrated Products 300 21,319
Motorola 935 133,121
* PMC - Sierra 300 61,106
Texas Instruments 1,600 256,000
* Vitesse Semiconductor 400 38,500
* Xilinx 1,000 82,813
------------------
2,702,928
------------------
Energy - 1.06%
Anadarko Petroleum 800 30,950
Apache 800 39,800
Enron 500 37,438
Williams 800 35,150
------------------
143,338
------------------
Food, Beverage & Tobacco - 3.93%
Anheuser Busch 600 37,350
Bestfoods 900 42,131
Campbell Soup 1,100 33,825
Coca Cola 3,500 164,281
McDonald's 800 30,050
PepsiCo 3,500 120,969
Philip Morris 2,200 46,475
Ralston-Purina Group 2,000 54,750
------------------
529,831
------------------
Healthcare & Pharmaceuticals - 12.57%
* Affymetrix 200 29,687
American Home Products 1,600 85,800
* Amgen 2,600 159,575
* Biogen 400 27,950
Bristol-Myers Squibb 2,600 150,150
Eli Lilly 1,900 119,700
Guidant 600 35,288
Johnson & Johnson 2,300 161,144
Medtronic 2,300 118,306
Merck & Company 3,600 223,650
Pfizer 7,800 285,188
Schering-Plough 3,300 121,275
Warner-Lambert 1,800 175,500
------------------
1,693,213
------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of Market
Shares Value
-------------------------------
<S> <C> <C>
Retail - 7.06%
* Amazon.com 300 $20,100
* Best Buy 700 60,200
CVS Corporation 1,400 52,587
Circuit City Stores 900 54,787
* Federated Department Stores 700 29,225
Gap 1,550 77,209
Home Depot 4,300 277,350
* Safeway 900 40,725
Target 600 44,850
Wal-Mart Stores 5,300 294,150
------------------
951,183
------------------
Software - 10.14%
Adobe Systems 600 66,786
* BEA Systems 200 14,675
* Citrix Systems 600 39,750
Computer Associates International 700 41,431
* Microsoft 7,175 762,344
* Oracle 3,900 304,444
* Siebel Systems 200 23,888
* Sterling Software 1,000 30,500
* Veritas Software 625 81,875
------------------
1,365,693
------------------
Telecommunications - 11.05%
A T & T 1,300 73,125
ALLTEL 800 50,450
* CIENA 300 37,837
Corning 400 77,600
* Level 3 Communications 900 95,175
Lucent Technologies 6,000 364,500
* MCI Worldcom 2,700 122,344
* McLeod USA 400 33,925
* Nextel Communications 600 88,950
Nortel Networks 300 37,800
* QUALCOMM 1,300 194,106
* Qwest Communications International 800 38,800
Sprint 800 50,400
* Sprint PCS 400 26,125
Telephone & Data Systems 300 33,300
* Tellabs 600 37,791
Time Warner Telecommunications 400 31,800
* Voicestream Wireless 400 51,525
* Winstar Communications 700 42,000
------------------
1,487,553
------------------
Utilities - 0.35%
* Calpine 500 47,000
------------------
47,000
------------------
Total Common Stock (cost $10,428,834) 13,477,855
------------------
Total Market Value of Securities - 100.07%
(cost $10,428,834) $13,477,855
Liabilities Net of Receivables and Other Assets - (0.07%) (9,178)
------------------
Net Assets Applicable to 1,005,710 Shares
(no par value) Outstanding - 100.00% $13,468,677
==================
Net Asset Value - Delaware Diversified
Growth Fund A Class ($62,266 / 4,649 shares) $13.39
==================
Net Asset Value - Delaware Diversified
Growth Fund Institutional Class ($13,406,411 / 1,001,061 shares) $13.39
==================
</TABLE>
-------------------------------
* Non-income producing security for the six months ended March 31, 2000.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Components of Net Assets at March 31, 2000:
Shares of beneficial interest (unlimited authorization - no par) $9,452,608
Distributions in excess of net investment income (11,967)
Accumulated net realized gain on investments 979,015
Net unrealized appreciation of investments 3,049,021
------------------
Total net assets $13,468,677
==================
Net Asset Value and Offering Price per Share -
Delaware Diversified Growth Fund
Net asset value A Class (A) $13.39
Sales charge (5.75% of offering price or 6.12% of the amount invested
per share) (B) 0.82
------------------
Offering price $14.21
==================
</TABLE>
-------------------------------
(A) Net asset value per share, as illustrated, is the estimated amount
which would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
<PAGE>
Delaware Diversified Growth Fund
Statement Of Operations
Six Months Ended March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Dividends $33,390
Interest 631 $34,021
---------
Expenses:
Management fees 36,262
Accounting and administration 3,657
Professional fees 2,400
Registration fees 2,000
Trustees' fees 1,675
Dividend disbursing and transfer agent fees and expenses 1,108
Custodian fees 835
Taxes (other than taxes on income) 500
Distribution expenses 54
Other 2,159
---------
50,650
Less expenses absorbed or waived (4,697)
Less expenses paid indirectly (275)
---------
Total expenses 45,678
--------------
Net Investment Loss (11,657)
--------------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments 1,005,740
Net change in unrealized appreciation / depreciation of investments 2,736,985
--------------
Net Realized And Unrealized Gain
On Investments 3,742,725
--------------
Net Increase In Net Assets Resulting
From Operations $3,731,068
==============
</TABLE>
See accompanying notes
<PAGE>
Delaware Diversified Growth Fund
Statements Of Changes In Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
03/31/00 Year Ended
(Unaudited) 09/30/99
--------------------------------------
<S> <C> <C>
Increase (Decrease) In Net Assets From Operations:
Net investment income (loss) ($11,657) $16,373
Net realized gain on investments 1,005,740 486,713
Net change in unrealized appreciation/depreciation of investments 2,736,985 182,987
--------------------------------------
Net increase in net assets resulting from operations 3,731,068 686,073
--------------------------------------
Distributions To Shareholders From:
Net investment income:
A Class (28) (107)
Institutional Class (12,681) (19,823)
Net realized gain on investments:
A Class (1,070) -
Institutional Class (475,552) -
--------------------------------------
(489,331) (19,930)
--------------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class 54,894 -
Institutional Class 1,100,110 7,975,000
Net asset value of shares issued upon reinvestment of distributions from net
investment income and net realized gain on investments:
A Class 1,098 107
Institutional Class 488,233 19,823
--------------------------------------
1,644,335 7,994,930
--------------------------------------
Cost of shares repurchased:
A Class (13,387) (3,643)
Institutional Class (2,300,000) -
--------------------------------------
(2,313,387) (3,643)
--------------------------------------
Increase (decrease) in net assets derived from capital
share transactions (669,052) 7,991,287
--------------------------------------
Net Increase in Net Assets 2,572,685 8,657,430
Net Assets:
Beginning of period 10,895,992 2,238,562
--------------------------------------
End of period $13,468,677 $10,895,992
======================================
</TABLE>
See accompanying notes
<PAGE>
Delaware Diversified Growth Fund
Financial Highlights
Selected data for each share of the Fund outstanding throughout the period were
as follows:
<TABLE>
<CAPTION>
A Class
-------
Six Months Period
Ended 12/02/96 (2)
03/31/00 (1) Year Ended Year Ended to
(Unaudited) 09/30/99 09/30/98 09/30/97
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.300 $8.990 $10.160 $8.500
Income (loss) from investment operations:
Net investment income (loss) (0.011)(3) 0.036 (3) 0.082 (3) 0.067
Net realized and unrealized gain (loss) on investments 3.563 1.354 (0.755) 1.601
---------------------------------------------------------
Total from investment operations 3.552 1.390 (0.673) 1.668
---------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income (0.012) (0.080) (0.076) (0.008)
Distributions from net realized gain on investments (0.450) - (0.421) -
---------------------------------------------------------
Total dividends and distributions (0.462) (0.080) (0.497) (0.008)
---------------------------------------------------------
Net asset value, end of period $13.390 $10.300 $8.990 $10.160
=========================================================
Total return (4) 35.11% 15.52% (6.91%) 19.64%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $62 $10 $12 $8
Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.13% 1.28% 2.28% 1.70%
Ratio of net investment income to average net assets (0.18%) 0.36% 0.83% 0.91%
Ratio of net investment income (loss) to average net assets
prior to expense limitation
and expenses paid indirectly (0.56%) (0.17%) (0.70%) (0.03%)
Portfolio turnover 97% 120% 163% 84%
Institutional Class
-------------------
Six Months Period
Ended 12/02/96 (2)
03/31/00 (1) Year Ended Year Ended to
(Unaudited) 09/30/99 09/30/98 09/30/97
-----------------------------------------------------------
Net asset value, beginning of period $10.300 $8.990 $10.160 $8.500
Income (loss) from investment operations:
Net investment income (loss) (0.011)(3) 0.036 (3) 0.082 (3) 0.067
Net realized and unrealized gain (loss) on investments 3.563 1.354 (0.755) 1.601
-----------------------------------------------------------
Total from investment operations 3.552 1.390 (0.673) 1.668
-----------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income (0.012) (0.080) (0.076) (0.008)
Distributions from net realized gain on investments (0.450) - (0.421) -
-----------------------------------------------------------
Total dividends and distributions (0.462) (0.080) (0.497) (0.008)
-----------------------------------------------------------
Net asset value, end of period $13.390 $10.300 $8.990 $10.160
===========================================================
Total return (4) 35.11% 15.52% (6.91%) 19.64%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $13,406 $10,886 $2,227 $2,393
Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 0.83% 0.98% 1.98% 1.40%
Ratio of net investment income to average net assets (0.18%) 0.36% 0.83% 0.91%
Ratio of net investment income (loss) to average net assets
prior to expense limitation
and expenses paid indirectly (0.26%) 0.13% (0.40%) 0.27%
Portfolio turnover 97% 120% 163% 84%
</TABLE>
<PAGE>
- -------------------------------------------------------------------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(3) Computed based on the average shares outstanding method.
(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 a sales charge.
See accompanying notes
<PAGE>
Delaware Diversified Growth Fund
Notes To Financial Statements
March 31, 2000 (Unaudited)
Delaware Group Equity Funds IV (the "Company") is registered as a diversified
open-end investment company under the Investment Company Act of 1940, as
amended. The Company offers two series, the Delaware Growth Opportunities Fund
(formerly Delaware DelCap Fund) and the Delaware Diversified Growth Fund; each
organized as a Delaware Business Trust. These financial statements and related
notes pertain to the Delaware Diversified Growth Fund (the "Fund"). The Fund
offers four classes of shares. The Delaware Diversified Growth Fund A Class
carries a front-end sales charge of 5.75%. The Delaware Diversified Growth Fund
B Class carries a back-end sales charge. The Delaware Diversified Growth Fund C
Class carries a level load deferred sales charge and Delaware Diversified Growth
Fund Institutional Class has no sales charge. As of March 31, 2000, only the
Delaware Diversified Growth Fund A Class and the Delaware Diversified Growth
Fund Institutional Class have commenced operations. The Fund's objective is to
seek capital appreciation.
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 NYSE on the valuation date. If on a particular day
an equity security does not trade then the mean between the bid and asked prices
will be used. Money market instruments having less than 60 days to maturity are
valued at amortized cost which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Fund's Board
of Trustees.
Federal Income Taxes- The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles.
Class Accounting- Investment income, common expenses and realized and unrealized
gain (loss) on investments are allocated to the various classes of the Fund on
the basis of daily net assets of each class. Distribution expenses relating to a
specific class are charged directly to that class.
Repurchase Agreements- The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
<PAGE>
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is at least 102% collateralized. However,
in the event of default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings.
Use of Estimates- The preparation of financial statements in conformity with
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.
Other- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. The Fund declares and pays dividends from net
investment income and capital gains, if any, 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 approximately $140 for the six months ended March 31, 2000.
In addition, the Fund receives earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. These
credits were $135 for the six months ended March 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 0.65% on the first $500
million of the average daily net assets, 0.60% on the next $500 million, 0.55%
on the next $1,500 million and 0.50% in excess of $2,500 million. At March 31,
2000, the Fund had a liability for Investment Management fees and other expenses
payable to DMC of $8,188.
DMC has elected to waive that portion, if any, of the management fee and
reimburse the Fund to the extent that annual operating expenses, exclusive of
taxes, interest, brokerage commissions, extraordinary expenses and distribution
expenses, exceed 0.75% of average daily net assets of the Fund.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent and accounting services. The Fund
pays DSC a monthly fee based on the number of shareholder accounts, shareholder
<PAGE>
transactions and average net assets, subject to certain minimums. At March 31,
2000, the Fund had a liability for such fees and other expenses payable to DSC
of $953.
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 such fees.
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
For the six months ended March 31, 2000, the Fund made purchases of $5,869,788
and sales of $6,046,643 of investment securities other than U.S. government
securities and temporary cash investments.
The cost of investments for federal income tax purposes approximates the cost
for book purposes. At March 31, 2000, net unrealized appreciation for federal
income tax purposes aggregated $3,049,021 of which $3,462,598 related to
unrealized appreciation of securities and $413,577 related to unrealized
depreciation of securities. At March 31, 2000, the aggregate cost of securities
for federal income tax purposes was $10,428,834.
<PAGE>
4. Capital Shares
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
03/31/00 09/30/99
-----------------------------------------
<S> <C> <C>
Shares sold:
A Class.......................................... 4,654 -
Institutional Class.............................. 88,997 806,946
Shares issued upon reinvestment of distributions
From net investment income and
net realized Gain on investments:
A Class........................................ 93 12
Institutional Class............................ 41,516 2,046
-----------------------------------------
135,260 809,004
-----------------------------------------
Shares repurchased:
A Class........................................ (1,078) (369)
Institutional Class............................ (186,234) -
-----------------------------------------
(187,312) (369)
-----------------------------------------
Net increase (decrease).............................. (52,052) 808,635
=========================================
</TABLE>
5. Line of Credit
Effective October 8, 1999, the Fund, along with certain other funds in the
Delaware Investments Family of Funds (the "Participants"), participate in a
$683,500,000 revolving line of credit facility to be used for temporary or
emergency purposes as an additional source of liquidity to fund redemption's of
investor shares. The Participants are charged an annual commitment fee, which is
allocated across the Participants on the basis of each Participant`s allocation
of the entire facility. The Participants may borrow up to a maximum of one third
of their net assets under the agreement. Prior to October 8, 1999, the Delaware
Diversified Growth Fund had a committed line of credit of $400,000. The Fund had
no amounts outstanding at March 31, 2000 or at any time during the six-month
period.
