<PAGE>
DELAWARE(SM)
INVESTMENTS
===========
2000 Annual Shareholder Report
------------------------------
Delaware Diversified Growth Fund
November 6, 2000
Dear Shareholder:
Recap of Events - The record-setting expansion of the U.S. economy has continued
in 2000, yet the U.S. equities market has cooled considerably after strong
performance in recent years. Volatility in the markets has been running high,
and the broad market for U.S. equities is struggling toward its most
disappointing calendar year since 1994. After strong performance in late 1999
and early 2000, the stock market gave up significant ground in the spring and
has been volatile ever since. Major equity indexes such as the Dow Jones
Industrial Average, the S&P 500, and the Nasdaq Composite are in negative
territory year-to-date through September 30th.
There seem to be several reasons for the volatility. Recently, disappointing
earnings announcements by one company have often been followed by brief, but
sharp declines in whole sectors. The rising cost of oil has analysts concerned
that the pace of economic activity may slow, causing consumers to reduce
spending, especially for low-end retail products.
There is also concern on the part of investors and analysts over stock
valuations for companies that play roles in the New Economy. In recent months,
we have begun to see an increased focus on corporate fundamentals such as
earnings and questions about the long-term sustainability of corporate growth.
We believe this trend is positive, as it has been helping to move stocks toward
fair values.
Delaware Diversified Growth Fund, by definition of its investment strategy,
focuses on earnings as a major part of its stock selection process. Your Fund
invests in growth stocks - companies that we believe offer significant potential
for future growth. Among the stock selection criteria for the Fund are evidence
of a company's solid earnings track record and new ways for sustaining and
growing revenues.
(3969) (J6561)
AR-133 [9/00] CC 11/00
1
<PAGE>
Your Fund returned +24.61% during the fiscal year ended September 30, 2000
(Institutional and Class A shares at net asset value with distributions
reinvested), outperforming its benchmark, the Russell 1000 Growth Index
(+23.41%). The Fund's strong performance can be attributed in part to our
holding certain technology stocks that saw significant appreciation during the
year.
Market Outlook - One year ago, our outlook for the U.S. stock market was for a
return to normalcy--that is, a resumption of stock returns that are closer to
normal averages of about 11% annually. We think that the events of the past 12
months have set such a trend in motion. We also expect market volatility to
continue, but believe that your Fund is well-positioned to take advantage of
growth investment opportunities that arise in the market.
We thank you for your continued confidence in Delaware Investments.
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
2
<PAGE>
Portfolio Management Review
---------------------------
Your Fund Managers
J. Paul Dokas, Senior Portfolio Manager and Senior Research Analyst, joined
Delaware Investments in 1997. He was previously Director of Trust Investment
Management at Bell Atlantic Corp. Mr. Dokas earned a bachelor's degree at Loyola
College in Baltimore and an MBA degree at the University of Maryland. He is a
CFA Charterholder.
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 September of 1997,
he was a Consultant at Andersen Consulting, working primarily with financial
services companies. At Delaware, Mr. Ginsberg handles diverse analytical
responsibilities involving large-capitalization stocks.
The Fund's Results
The fiscal year ending September 30, 2000 was marked by extreme periods of
volatility. Growth-oriented indexes posted exceptional returns in the last
quarter of 1999, and this performance continued until mid-March of 2000. Since
then the investment environment has been more challenging, yet your Fund managed
to outpace the benchmark Russell 1000 Growth Index for the fiscal year. We
attribute the Fund's outperformance to strong stock selection.
Delaware Diversified Growth Fund focuses on large-cap growth stocks and we
attempt to approximately match the sector weightings of the benchmark Russell
1000 Growth Index. During much of 2000, we were attracted to several companies
that are developing products that help build the infrastructure of the Internet.
As a result, we increased our holdings in the Fund's computers and technology
sector, the largest sector at 23.02% of the portfolio as of September 30, 2000.
Juniper Networks, a leading provider of networking communications devices that
power the Internet, and Oracle, a provider of application and database software
for the Internet, were two of the Fund's best performers for the year. Both
stocks appreciated more than 200%. Some of our other technology holdings did not
fare as well during the year, including some household tech names such as
Microsoft and Intel. Both of these stocks were negative performers for the
fiscal year and detracted from performance. As of September 30, 2000, we are
underweight relative to the benchmark in Microsoft and Intel, but remain
positive on both companies' fundamentals and their prospects for continued
growth. Intel, a computer chip maker, is continually broadening its business
lines so that the company's earnings are less susceptible to the seasonal
fluctuations associated with retail sales of personal computers. We think this
will be a long-term positive for the stock, our fourth-largest holding as of
September 30, 2000.
The Fund benefited during the year from its holdings in Houston-based oil and
gas company Anadarko Petroleum. Anadarko stock more than doubled during our
fiscal year. We think Anadarko remains well-positioned in its industry given its
3
<PAGE>
strong growth relative to its peers and because it shows a strong profile in its
production of natural gas. Our overall allocation to the energy sector, though
still a small percentage of the portfolio, was greater on September 30, 2000
than it was one year prior. Sector allocations that were reduced during the
fiscal year included consumer products and retail stocks.
Healthcare and pharmaceuticals is the Fund's third-largest sector, and one that
generally performed well during the period. Our largest holding in this sector
is Pfizer, which continues to display strong fundamentals and growth
characteristics. Pfizer became the world's largest pharmaceutical firm this year
with its acquisition of Warner-Lambert, and also boasts the world's largest
budget for pharmaceutical research and development. We also are attracted to the
growth currently being exhibited in biotechnology, and hold positions in stocks
such as PE Biosytems Group, a company that manufactures instrumentation used in
life sciences research. The markets for PE Biosystems' products include an array
of biotech researchers, including those working in basic human disease research,
genetic analysis, and agricultural research.
Outlook
In the near-term, we expect stock returns to remain favorable, but not
spectacular. We expect market volatility to continue, and stress that
diversification will play an increasingly important role in helping investors
reach their long-term investment goals. We remain committed to a fundamental
approach to stock selection, as well as to the large-cap growth investment
objective of Delaware Diversified Growth Fund. We think the long-term outlook
for large-cap growth stocks remains strong, and we will continue to strive for
consistency of return relative to our benchmark.
This annual report is for the information of Delaware Diversified Growth Fund
shareholders. The current prospectus for the Fund sets forth details about
charges, expenses, investment objectives and operating policies. You should read
the Fund's prospectus carefully before you invest or send money.
4
<PAGE>
Top 10 Holdings
September 30, 2000
Percentage
Company Industry of Net Assets
------- -------- -------------
General Electric Electronics & Electrical Equipment 7.4%
--------------------------------------------------------------------------------
Cisco Systems Computers & Technology 5.9%
--------------------------------------------------------------------------------
Pfizer Healthcare & Pharmaceuticals 4.4%
--------------------------------------------------------------------------------
Intel Electronics & Electrical Equipment 4.0%
--------------------------------------------------------------------------------
Microsoft Computers & Technology 3.5%
--------------------------------------------------------------------------------
EMC Computers & Technology 3.2%
--------------------------------------------------------------------------------
Oracle Computers & Technology 2.8%
--------------------------------------------------------------------------------
Sun Microsystems Computers & Technology 2.7%
--------------------------------------------------------------------------------
Wal-Mart Stores Retail 1.9%
--------------------------------------------------------------------------------
Home Depot Retail 1.9%
--------------------------------------------------------------------------------
Top 10 Sectors
September 30, 2000
Percentage
Sector of Net Assets
------ -------------
Computers & Technology 23.02%
-----------------------------------------------------------------
Electronics & Electrical Equipment 21.69%
-----------------------------------------------------------------
Healthcare & Pharmaceuticals 16.20%
-----------------------------------------------------------------
Telecommunications 10.78%
-----------------------------------------------------------------
Software 10.21%
-----------------------------------------------------------------
Retail 5.09%
-----------------------------------------------------------------
Cable, Entertainment, Media & Publishing 4.25%
-----------------------------------------------------------------
Food, Beverage & Tobacco 2.42%
-----------------------------------------------------------------
Banking, Finance & Insurance 2.32%
-----------------------------------------------------------------
Energy 1.79%
-----------------------------------------------------------------
Delaware Diversified Growth Fund
Fund Objective
The Fund seeks capital appreciation.
Total Fund Assets
As of September 30, 2000
$14.62 million
Number of Holdings
141
5
<PAGE>
Delaware Diversified Growth Fund Performance
--------------------------------------------
Growth of a $10,000 Investment
December 2, 1996 through September 30, 2000
[GRAPHIC OMITTED]
Delaware Diversified Russell 1000
Growth Fund Class A Growth Index
11/30/96
12/10/96 $9,423 $10,000
Dec-96 $9,288 $9,804
Jan-97 $9,687 $10,492
Feb-97 $9,488 $10,421
Mar-97 $8,933 $9,857
Apr-97 $8,933 $10,511
May-97 $9,721 $11,270
Jun-97 $10,065 $11,721
Jul-97 $10,697 $12,758
Aug-97 $10,630 $12,011
Sep-97 $11,274 $12,602
Oct-97 $10,908 $12,136
Nov-97 $10,875 $12,651
Dec-97 $10,916 $12,793
Jan-98 $10,706 $13,176
Feb-98 $11,535 $14,167
Mar-98 $11,978 $14,732
Apr-98 $11,990 $14,935
May-98 $11,500 $14,512
Jun-98 $11,920 $15,400
Jul-98 $11,488 $15,298
Aug-98 $9,550 $13,002
Sep-98 $10,495 $14,001
Oct-98 $10,601 $15,126
Nov-98 $11,278 $16,277
Dec-98 $12,018 $17,745
Jan-99 $11,901 $18,786
Feb-99 $11,406 $17,928
Mar-99 $11,618 $18,873
Apr-99 $11,971 $18,897
May-99 $11,524 $18,317
Jun-99 $12,419 $19,599
Jul-99 $12,218 $18,976
Aug-99 $12,407 $19,285
Sep-99 $12,124 $18,880
Oct-99 $13,101 $20,306
Nov-99 $13,843 $21,400
Dec-99 $15,151 $23,626
Jan-00 $15,151 $22,518
Feb-00 $15,151 $23,619
Mar-00 $16,374 $25,310
Apr-00 $16,374 $24,105
May-00 $16,374 $22,890
Jun-00 $15,958 $24,625
Jul-00 $15,958 $23,599
Aug-00 $15,958 $25,734
Sep-00 $15,102 $23,300
--------------------------------------------------------------------------------
The chart assumes $10,000 invested on December 2, 1996. After the initial date
of investment, returns were plotted on the chart as of every month's end.
Performance for Delaware Diversified Growth Fund includes the effect of a 5.75%
sales charge and the reinvestment of distributions. Performance of other Fund
classes will vary due to differing charges and expenses. You cannot invest
directly in an index. Past performance does not guarantee future results.
6
<PAGE>
Average Annual Total Returns
For Periods Ended September 30, 2000
Lifetime* One Year
Delaware Diversified Growth Fund
Institutional Class Shares +13.12% +24.61%
Class A Shares Excluding Sales Charge +13.12% +24.61%
Class A Shares Including Sales Charge +11.38% +17.43%
Russell 1000 Growth Index +24.70% +23.41%
S&P 500 Index +18.19% +13.28%
S&P/Barra Growth Index +23.90% +12.04%
The Institutional class results shown above assume reinvestment of
distributions. Class A returns are based on net asset value and assume
reinvestment of distributions. Returns and share value will fluctuate so that
shares, when redeemed, may be worth more or less than the original share price.
The Russell 1000 Growth Index measures stocks of large-cap companies in the
large-cap Russell 1000 Index with higher price-to-book ratios and higher
forecasted growth values. The S&P 500 is a weighted, unmanaged index that tracks
the stocks of companies with large market capitalizations. S&P/Barra Growth
Index measures those stocks in the S&P 500 Index with higher price-to-book
ratios. It is not possible to invest directly in an index. Past performance does
not guarantee future results. This information is for shareholder use only.
No sales charges or 12b-1 fees were imposed on Class A shares and no Class B or
Class C shares were outstanding during the periods shown. A voluntary expense
limitation was in effect for the periods shown. Returns would have been lower
without the limitation.
* Since December 2, 1996 (commencement of operations).
7
<PAGE>
Delaware Diversified Growth Fund
Statement of Net Assets
September 30, 2000
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------------
<S> <C> <C>
Common Stock - 100.11%
Aerospace & Defense - 0.18%
Honeywell International 737 $ 26,256
-----------
26,256
-----------
Banking, Finance & Insurance - 2.32%
American Express 900 54,675
Chase Manhattan 750 34,641
Citigroup 666 36,042
Merrill Lynch & Company 500 33,000
Morgan Stanley Dean Witter 300 27,431
Schwab (Charles) 2,300 81,650
* Stilwell Financial 800 34,800
Wells Fargo & Company 800 36,750
-----------
338,989
-----------
Business Services - 0.51%
First Data 900 35,156
PAYCHEX 750 39,375
-----------
74,531
-----------
Cable, Entertainment, Media & Publishing - 4.25%
* AT&T-Liberty Media 2,400 43,200
* Clear Channel Communications 752 42,488
* Comcast 1,220 49,944
* Echostar Communications 900 47,475
* Getty Images 800 24,350
Time Warner 3,200 250,400
* Viacom 2,010 117,585
Walt Disney 1,200 45,900
-----------
621,342
-----------
Computers & Technology - 23.02%
* America Online 4,200 225,750
* BroadVision 800 20,450
* Brocade Communications System 300 70,800
* CMGI 600 16,763
* Cisco Systems 15,700 867,425
* Comverse Technology 500 54,000
* Dell Computer 5,800 178,713
* EMC 4,700 465,888
Hewlett-Packard 700 67,900
* Inktomi 300 34,200
International Business Machines 2,400 270,000
* Juniper Networks 600 131,363
Linear Technology 1,200 77,700
* Palm 1,338 70,830
</TABLE>
8
<PAGE>
Delaware Diversified Growth Fund
Statement of Net Assets (continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------------
<S> <C> <C>
Computers & Technology (continued)
* Peregrine Systems 1,000 $ 18,938
* RealNetworks 900 35,775
* Seagate Technology 1,300 89,700
* Sun Microsystems 3,500 408,625
Symbol Technologies 1,800 64,688
* VeriSign 600 121,538
* Yahoo 800 72,800
-----------
3,363,846
-----------
Consumer Products - 0.61%
* Gemstar-TV Guide International 525 45,773
Gillette 1,400 43,225
-----------
88,998
-----------
Electronics & Electrical Equipment - 21.69%
* Advanced Micro Devices 1,000 23,625
* Altera 1,400 66,850
* Analog Devices 1,000 82,563
* Applied Materials 2,000 118,625
* Applied Micro Circuits 200 41,413
* Avanex 200 21,538
* AVX 1,100 28,669
* Broadcom 300 73,125
General Electric 18,800 1,084,525
* General Motors- Class H 2,400 89,232
Intel 14,200 591,075
* JDS Uniphase 1,580 149,606
* Kemet 1,000 27,625
* Kla-Tencor 600 24,713
* Maxim Integrated Products 500 40,219
* Micron Technology 1,400 64,400
Motorola 2,005 56,641
* PMC - Sierra 500 107,625
* RF Micro Devices 1,000 31,375
* SDL 200 61,600
* Sycamore Networks 300 32,400
* Teradyne 400 14,000
Texas Instruments 4,010 189,222
* Vishay Intertechnology 900 27,675
* Vitesse Semiconductor 500 44,469
* Xilinx 900 77,063
-----------
3,169,873
-----------
Energy - 1.79%
Anadarko Petroleum 600 39,876
Apache 700 41,388
Enron 600 52,575
* Noble Drilling 800 40,200
Schlumberger 600 49,388
Williams 900 38,025
-----------
261,452
-----------
</TABLE>
9
<PAGE>
Delaware Diversified Growth Fund
Statement of Net Assets (continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------------
<S> <C> <C>
Food, Beverage & Tobacco - 2.42%
Anheuser Busch 800 $ 33,850
Campbell Soup 1,200 31,050
Coca Cola 3,900 214,988
Heinz (H.J.) 800 29,650
Sara Lee 2,200 44,688
-----------
354,226
-----------
Healthcare & Pharmaceuticals - 16.20%
* Abgenix 600 48,488
American Home Products 1,200 67,875
* Amgen 2,200 153,622
Bristol-Myers Squibb 2,800 159,950
Eli Lilly 1,800 146,025
* Genentech 400 74,275
* Guidant 700 49,481
* Immunex 700 30,450
Johnson & Johnson 600 56,363
* Medimmune 800 61,800
Medtronic 2,600 134,713
Merck & Company 3,100 230,756
* Millenium Pharmaceuticals 300 43,819
PE Corp-PE Biosystems Group 700 81,550
Pfizer 14,425 648,223
Pharmacia 2,600 156,488
* Protein Design Labs 400 48,200
Schering-Plough 3,300 153,450
* Techne 200 22,400
-----------
2,367,928
-----------
Retail - 5.09%
* Amazon.com 1,000 38,438
* Best Buy 500 31,813
CVS Corporation 1,200 55,575
Home Depot 5,100 270,619
* Safeway 700 32,681
Target 1,400 35,875
Wal-Mart Stores 5,800 279,125
-----------
744,126
-----------
Software - 10.21%
Adobe Systems 300 46,575
* Ariba 600 85,959
* BEA Systems 1,400 109,025
* Commerce One 400 31,400
* i2 Technologies 300 56,119
* Microsoft 8,575 516,644
* Oracle 5,100 401,625
* Siebel Systems 900 100,181
* Tibco Software 500 42,219
* Veritas Software 725 102,950
-----------
1,492,697
-----------
Telecommunications - 10.78%
* ADC Telecommunications 1,800 48,403
ALLTEL 700 36,531
* CIENA 600 73,688
Corning 600 178,200
</TABLE>
10
<PAGE>
Delaware Diversified Growth Fund
Statement of Net Assets (continued)
<TABLE>
<CAPTION>
Number Market
of Shares Value
------------------------
<S> <C> <C>
Telecommunications (continued)
* Crown Castle International 1,600 $ 49,700
* Exodus Communications 1,500 74,063
* Level 3 Communications 1,000 77,125
Lucent Technologies 6,400 195,600
* McLeod USA 2,100 30,056
* Metromedia Fiber Network 1,000 24,313
* Network Appliance 800 101,900
* Nextel Communications 2,100 98,175
* Nextlink Communications 1,000 35,188
Nokia OYJ 1,000 39,813
* QUALCOMM 1,900 135,375
* Qwest Communications International 900 43,256
* Redback Networks 400 65,575
Scientific-Atlanta 500 31,813
Sprint 900 26,381
* Sprint PCS 2,100 73,631
* Tellabs 1,200 57,300
* Time Warner Telecommunications 500 24,156
* Winstar Communications 1,600 24,800
* Worldcom 1,000 30,375
-----------
1,575,417
-----------
Utilities - 1.04%
* AES 1,600 109,600
* Calpine 400 41,750
-----------
151,350
-----------
Total Common Stock (cost $12,936,612) 14,631,031
===========
Principal
Amount
---------
Repurchase Agreements - 0.01%
With Chase Manhattan 6.40% 10/2/00
(dated 9/29/00, collateralized by $777
U.S. Treasury Notes 4.75% due 2/15/04,
market value $754). $735 735
With J.P. Morgan Securities 6.40% 10/2/00
(dated 9/29/00, collateralized by $301
U.S.Treasury Notes 6.625% due 4/30/02,
market value $311). 305 305
With PaineWebber 6.50% 10/2/00
(dated 9/29/00, collateralized by $3
U.S. Treasury Notes 5.75% due 10/31/00,
market value $4 and $152 U.S.
Treasury Notes 4.625% due 12/31/00, market
value $153 and $152 U.S. Treasury
Notes 6.25% due 1/31/02, market value $154). 305 305
With Prudential Securities 6.50% 10/2/00
(dated 9/29/00, collateralized by $534
U.S. Treasury Notes 12.375% due 5/15/04,
market value $669). 655 655
-----------
Total Repurchase Agreements (cost $2,000) 2,000
===========
</TABLE>
11
<PAGE>
Delaware Diversified Growth Fund
Statement of Net Assets (continued)
<TABLE>
<CAPTION>
<S> <C>
Total Market Value of Securities - 100.12%
(cost $12,938,612) $14,633,031
Liabilities Net of Receivables and Other Assets - (0.12%) (17,611)
-----------
Net Assets Applicable to 1,183,828 Shares
Outstanding - 100.00% $14,615,420
===========
Net Asset Value - Delaware Diversified
Growth Fund A Class ($47,463 / 3,844 Shares) $12.35
===========
Net Asset Value - Delaware Diversified
Growth Fund Institutional Class ($14,567,957 / 1,179,984 Shares) $12.35
===========
-------------------------------
* Non-income producing security for the period ended September 30, 2000.
Components of Net Assets at September 30, 2000:
Shares of beneficial interest (unlimited authorization - no par) $11,542,406
Accumulated net realized gain on investments 1,378,594
Net unrealized appreciation of investments 1,694,420
-----------
Total net assets $14,615,420
===========
Net Asset Value and Offering Price per Share -
Delaware Diversified Growth Fund
Net asset value A Class (A) $12.35
Sales charge (5.75% of offering price or 6.07% of the amount invested
per share) (B) 0.75
-----------
Offering price $13.10
===========
</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
12
<PAGE>
Delaware Diversified Growth Fund
Statement of Operations
Year Ended September 30, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Dividends $ 63,528
Interest 1,675 $ 65,203
-------- ----------
Expenses:
Management fees 82,589
Accounting and administration expenses 6,550
Registration fees 3,500
Dividend disbursing and transfer agent fees and expenses 3,481
Trustees' fees 2,883
Professional fees 2,400
Reports and statements to shareholders 3,768
Custodian fees 1,225
Distribution expenses 132
Other 4,486
--------
111,014
Less expenses absorbed or waived (11,024)
Less expenses paid indirectly (306)
----------
Total expenses 99,684
----------
Net Investment Loss (34,481)
----------
Net Realized and Unrealized Gain(Loss) on Investments:
Net realized gain on investments 1,440,111
Net change in unrealized appreciation/depreciation of investments 1,382,384
----------
Net Realized and Unrealized Gain on Investments 2,822,495
----------
Net Increase in Net Assets Resulting from Operations $2,788,014
----------
</TABLE>
See accompanying notes
13
<PAGE>
Delaware Diversified Growth Fund
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended
9/30/00 9/30/99
-----------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income (loss) ($34,481) $16,373
Net realized gain on investments 1,440,111 486,713
Net change in unrealized appreciation/depreciation of investments 1,382,384 182,987
-----------------------------------
Net increase in net assets resulting from operations 2,788,014 686,073
-----------------------------------
Distributions to Shareholders from:
Net investment income:
A Class (29) (107)
Institutional Class (12,681) (19,823)
Net realized gain on investments:
A Class (1,070) -
Institutional Class (475,552) -
-----------------------------------
(489,332) (19,930)
-----------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class 54,894 -
Institutional Class 3,200,110 7,975,000
Net asset value of shares issued upon reinvestment of distributions:
A Class 1,099 107
Institutional Class 488,233 19,823
-----------------------------------
3,744,336 7,994,930
-----------------------------------
Cost of shares repurchased:
A Class (23,590) (3,643)
Institutional Class (2,300,000) -
-----------------------------------
(2,323,590) (3,643)
-----------------------------------
Increase in net assets derived from capital share transactions 1,420,746 7,991,287
-----------------------------------
Net Increase in Net Assets 3,719,428 8,657,430
Net Assets:
Beginning of period 10,895,992 2,238,562
-----------------------------------
End of period $14,615,420 $10,895,992
===================================
</TABLE>
See accompanying notes
14
<PAGE>
Delaware Diversified Growth Fund
Financial Highlights
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
A Class
----------------------------------------------------
Period
12/2/96 (1)
Year Ended to
9/30/00 9/30/99 9/30/98 9/30/97
----------------------------------------------------
<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) (2) (0.032) 0.036 0.082 0.067
Net realized and unrealized gain (loss) on investments 2.544 1.354 (0.755) 1.601
----------------------------------------------------
Total from investment operations 2.512 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 $12.350 $10.300 $8.990 $10.160
====================================================
Total return (3) 24.61% 15.52% (6.91%) 19.64%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $47 $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 (loss) to average net assets (0.26%) 0.36% 0.83% 0.91%
Ratio of net investment income (loss) to average net assets
prior to expense limitation and expenses paid indirectly (0.64%) (0.17%) (0.70%) (0.03%)
Portfolio turnover 91% 120% 163% 84%
</TABLE>
--------------------------------------------------------------------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Per share information for the years ended September 30, 1998, 1999, and 2000
was based on the average shares outstanding method.
(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 a sales charge.
See accompanying notes
15
<PAGE>
Delaware Diversified Growth Fund
Financial Highlights
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Institutional Class
----------------------------------------------------
Period
12/2/96 (1)
Year Ended to
9/30/00 9/30/99 9/30/98 9/30/97
----------------------------------------------------
<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) (2) (0.032) 0.036 0.082 0.067
Net realized and unrealized gain (loss) on investments 2.544 1.354 (0.755) 1.601
----------------------------------------------------
Total from investment operations 2.512 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 $12.350 $10.300 $8.990 $10.160
====================================================
Total return (3) 24.61% 15.52% (6.91%) 19.64%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $14,568 $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 (loss) to average net assets (0.26%) 0.36% 0.83% 0.91%
Ratio of net investment income (loss) to average net assets
prior to expense limitation and expenses paid indirectly (0.34%) 0.13% (0.40%) 0.27%
Portfolio turnover 91% 120% 163% 84%
</TABLE>
--------------------------------------------------------------------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Per share information for the years ended September 30, 1998, 1999, and 2000
was based on the average shares outstanding method.
(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.
16
<PAGE>
Delaware Diversified Growth Fund
Notes to Financial Statements
September 30, 2000
Delaware Group Equity Funds IV (the "Trust") is organized as a Delaware business
trust, and offers two funds: Delaware Growth Opportunities Fund and Delaware
Diversified Growth Fund. These financial statements and related notes pertain to
the Delaware Diversified Growth Fund (the "Fund"). Delaware Diversified Growth
Fund is a diversified open-end investment company under the Investment Company
Act of 1940, as amended. The Fund offers four classes of shares. The A Class
carries a front-end sales charge of 5.75%. The B Class carries a back-end sales
charge. The C Class carries a level load deferred sales charge and Institutional
Class has no sales charge. As of September 30, 2000, only the A Class and the
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 regular close of the New York Stock Exchange 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 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 accounting
principles generally accepted in the United States.
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
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 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.
17
<PAGE>
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 $306 for the year ended September 30, 2000. In
addition, the Fund receives earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. There were
no earnings credits for the year ended September 30, 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 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
$1.5 billion and 0.50% in excess of $2.5 billion. At September 30, 2000, the
Fund had a liability for investment management fees payable to DMC of $7,213.
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 through November
30, 2000.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent, accounting and administrative
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 September 30, 2000, the Fund had a liability for such fees and
other expenses payable to DSC of $109.
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 Classes. No distribution expenses are
paid by the Institutional Class. DDLP has elected voluntarily to waive such
fees.
18
<PAGE>
At September 30, 2000, the Fund had a liability for other expenses payable to
DMC and affiliates of $1,162.
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 year ended September 30, 2000, the Fund made purchases of $13,022,228
and sales of $12,116,687 of investment securities other than U.S. government
securities and temporary cash investments.
At September 30, 2000, net unrealized appreciation for federal income tax
purposes aggregated $1,611,835 of which $2,837,509 related to unrealized
appreciation of securities and $1,225,674 related to unrealized depreciation of
securities. At September 30, 2000, the aggregate cost of securities for federal
income tax purposes was $13,021,196.
4. Capital Shares
Transactions in capital shares were as follows:
Year
Ended
09/30/00 09/30/99
----------------------
Shares sold:
A Class.......................................... 4,654 -
Institutional Class.............................. 267,920 806,946
Shares issued upon reinvestment of distributions:
A Class.......................................... 93 12
Institutional Class.............................. 41,517 2,046
----------------------
314,184 809,004
----------------------
Shares repurchased:
A Class.......................................... (1,883) (369)
Institutional Class.............................. (186,235) -
----------------------
(188,118) (369)
----------------------
Net increase (decrease) (126,066) 808,635
======================
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 redemption's of investor shares. The Participants
19
<PAGE>
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 a maximum of one third of their net assets under the agreement.
The Fund had no amounts outstanding as of September 30, 2000 or at any time
during the period.
6. Tax Information (unaudited)
The information set forth below is for the Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in early 2001. Please
consult your tax advisor for proper treatment of this information.
For the period ended September 30, 2000, the Fund designates distributions paid
during the year as follows:
(A) (B) (C) (D)
Long-Term Ordinary Total Qualifying
Capital Gains Income Distribution Dividends
Distributions Distributions (Tax Basis) (1)
(Tax Basis) (Tax Basis)
----------------------------------------------------------------------
81% 19% 100% 5%
Items (A) and (B) are based on a percentage of the Fund's total distributions.
Item (D) is based on a percentage of ordinary income of the Fund.
(1) Qualifying dividends represent dividends that qualify for the corporate
dividends received deduction.
20
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Trustees
Delaware Group Equity Funds IV - Delaware Diversified Growth Fund
We have audited the accompanying statement of net assets of Delaware Diversified
Growth Fund (the "Fund") as of September 30, 2000, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 2000, by correspondence
with the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Diversified Growth Fund at September 30, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the periods indicated therein, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
November 10, 2000
21
