Reit Fund
service and guidance
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professional management
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goals
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1998
Annual
Report
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----------------------------
Philadelphia * London]
A TRADITION OF SOUND INVESTING
Commitment
A Commitment To Our Investors
Delaware Investments has a tradition of money management that dates
back to 1929. We have a long and distinguished history of helping
individuals and institutions - including some of America's largest
pension funds - reach their financial goals.
Headquartered in Philadelphia, a block from the nation's oldest
stock exchange, the Delaware organization established its first mutual
fund in 1938. Delaware International Advisers Ltd., our international
affiliate, was established in 1990 and is headquartered in London.
Delaware Investments offers a full range of mutual funds. We also
manage investments for variable annuity products, closed-end funds and
offer retirement plan services for individuals and businesses.
Delaware manages approximately $45 billion in mutual fund assets
and institutional advisory accounts for more than half-a-million
investors.
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.
REIT Fund Objective
To seek to achieve maximum long-term total return. Capital appreciation
is a secondary objective. The Fund seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real
estate industry.
total return
Table of Contents
Letter to Shareholders Page 1
Portfolio Manager's Review Page 3
Performance Summary Page 6
Statement of Net Assets Page 7
Financial Highlights Page 10
About Your Fund's
Portfolio Manager
Babak Zenouzi has managed Delaware Investments' REIT Fund since its
inception on December 6, 1995. Mr. Zenouzi joined Delaware in 1992 as a
quantitative analyst and was subsequently promoted to portfolio manager.
Mr. Zenouzi is a member of the National Association of Real Estate
Investment Trusts, a trade organization. Prior to joining Delaware, Mr.
Zenouzi served as senior vice president at The Boston Company and earned
a bachelor's degree from Babson college and an M.S. in Finance from
Boston College.
tradition
November 9, 1998
Dear Shareholder:
During fiscal 1998, real estate investment trusts (REITs) were plagued
by stock market volatility and negative industry trends. REIT Fund's
total return declined by 10.98%* for the 12 months ended October 31,
1998 (for A Class shares with distributions reinvested).
Still, REIT Fund's fiscal 1998 results were notably better than
both the average of its peer group and its unmanaged benchmark, as shown
below. Your Fund outperformed the NAREIT Equity REIT Index by almost 200
basis points (2%).
Since April, REIT stock prices have declined in response to
concerns that companies would not be able to sustain their exceptional
growth rates of recent years. Worried by bad loans abroad and in the
U.S., investors and lending institutions have become wary of credit
risk. As a result, commercial mortgage issuance has temporarily hit a
brick wall. Nevertheless, we believe REIT Fund remains well-positioned
to take advantage of positive long-term real estate trends such as
higher rents and domestic economic growth.
Lack of capital has temporarily made it difficult for REITs to
continue acquiring new business, ending a three-year acquisition wave.
The credit crunch has also driven down prices for commercial real estate
by as much as 25%, and reduced the supply of new construction. In this
environment, we have focused on REITs that can expand using cash flow
from operations.
WE BELIEVE REIT FUND REMAINS WELL-POSITIONED TO TAKE ADVANTAGE OF POSITIVE
LONG-TERM REAL ESTATE TRENDS SUCH AS HIGHER RENTS AND DOMESTIC ECONOMIC
GROWTH.
Reduced property supply has a silver lining - landlords can charge
their tenants more. In many markets, rents are moving higher and we
expect this to bode well for REIT Fund's income potential.
While many analysts anticipate that U.S. corporate earnings growth
will slow dramatically in 1999, we believe that earnings growth for
REITs will remain higher than that of large companies in the Standard &
Poor's 500 Index. We expect REITs' growth rates will average between 9%
and 10% in 1999. This is more than twice the amount that analysts
generally project for stocks in the S&P 500. In this environment, we
will focus on REITs that have access to capital from internal
operations.
AVERAGE ANNUAL TOTAL RETURNS*
FOR PERIODS ENDED OCTOBER 31, 1998
12 Months Lifetime
REIT Fund A Class -10.98% +18.69%
NAREIT Equity REIT Index -12.97% +13.07%
Lipper Real Estate Fund Average
(88 funds) -14.05% (43 Funds) +10.55% (89 Funds)
* All performance shown above is at net asset value without effect of
sales charges and assumes reinvestment of distributions. Effective
November 4, 1997, The Real Estate Investment Trust Portfolio was
redesignated the "A Class" and a distribution fee of 0.25% was
implemented. The A Class performance information prior to that date
reflects the performance of the original class and has not been
adjusted to reflect the effect of the distribution fee. Complete Fund
performance and expense information for all Classes can be found on
page 6. Past performance does not guarantee future results. The
unmanaged NAREIT Equity REIT Index is a composite of real estate
investment trusts that invest in many types of U.S. property.
On July 22, 1998, Congress passed a new law that limits the special
tax benefits of paired-share REITs, an arrangement which permits the
equity of both a REIT and its tenant operating company to trade as a
single security. This did not affect the real estate industry as much as
expected. On the heels of this legislation, one of the Fund's largest
holdings abandoned its paired-share status and launched a major
corporate restructuring.
On the pages that follow, Babak Zenouzi, REIT Fund's portfolio
manager, talks more about the Fundis positioning during the year, with a
focus on changes made to the portfolio since mid-year. We share Mr.
Zenouzi's positive long-term outlook for the real estate market.
Given the uncertainty that gripped many investors during the
period, a careful review of your investments with your financial adviser
can help you better prepare for the months and years ahead. We believe
that REIT Fund can play an integral part of a long-term asset allocation
strategy.
We thank you for your confidence in Delaware Investments.
Sincerely,
/S/WAYNE A. STORK
Wayne A. Stork
Chairman
/S/JEFFREY J. NICK
Jeffrey J. Nick
President and Chief Executive Officer
PORTFOLIO HIGHLIGHTS
October 31, 1998 October 31, 1997
Median Market Capitalization $890 million $900 million
Number of Stocks 36 39
Price to Funds from Operations Ratio* 9.1x 12.0x
Top Sector Office/Industrial Office/Industrial
Yield Before Expenses 6.02% 5.45%
*This is a measure of a REITs cash flow from rents and management fees.
It is similar to a price-earnings (P/E) ratio for an industrial
company. REIT Fund's thirty-day yields measured according to Securities
and Exchange Commission guidelines were 4.15%, 3.65%, 3.68%, 4.64% and
4.64% for A,B,C,E and Institutional Class shares, respectively, as of
October 31, 1998.
PORTFOLIO MANAGER'S REVIEW
BY BABAK ZENOUZI
Senior Portfolio Manager
November 9, 1998
CREDIT CRUNCH STALLS ACQUISITIONS
Since October 1997, tenant demand has been strong and rents have been
trending higher in many parts of the country. However, financial
problems in Russia and other emerging markets have raised concerns
about lenders' ability to finance development.
By the end of the third calendar quarter, investors and banks
became more cautious with lending. This made it difficult for REITs to
raise capital needed to acquire new properties and companies. We believe
this situation may ease over the coming months as a result of the
Federal Reserve Board's interest rate cuts in late autumn.
REIT Fund held several stocks last spring that relied heavily on
acquisitions to boost their growth rates. We have since sold those
positions to reduce potential volatility. In our opinion, these
companies would not have been able to sustain their growth rates going
forward.
LOCATION, LOCATION, LOCATION
During the past fiscal year, REIT Fund focused on stocks of REITs that
own and operate properties in "infill" locations; that is, areas of the
country that have tremendous appeal, but where land is expensive and
zoning laws are more restrictive. The demand for these "garden spots"
outweighs the supply, which bodes well for companies that own and
operate them.
review
We have found infill locations in the Northwest, Northeast and Mid-
Atlantic regions of the country. Boston Properties, is a good example of
a REIT that focuses on infill locations in the Northeast. We bought the
stock this past summer after its price had declined to a level we
considered a compelling value. Boston Properties has more than 90
commercial properties, including office and industrial properties,
hotels and a parking garage.
[GRAPHIC OMITTED: pie chart ASSET MIX]
ASSET MIX
Multifamily REITs 17.5%
Office/Industrial 38.8%
REITs
Cash 0.9%
Retail Strip
Centers 15.8%
Hotels/Diversified REITs 10.8%
Manufatured
Housing 9.8%
Mall REITs 7.4%
Self Storage 3.0%
Office/Industrial 38.8%
As of October 31, 1998, REIT Fund had allocated 39% of net assets to
office and industrial REITs. We continue to overweight the portfolio in
this sector, as we believe it has solid earnings potential.
Duke Realty Investments is one of the Fund's largest and oldest
holdings in this sector. Duke has consistently outperformed unmanaged
REIT indexes and its office and industrial peers since we purchased the
stock back in 1995. Its dividend yield is upwards of 11%, and its
internal growth rate is in the 4% to 5% range.
Duke owns over 380 properties and maintains 5 million square feet
of space. Presently, it has an additional 1,700 acres of undeveloped
land that can support another 40 million square feet of development.
Duke appears to have strong management supporting its growth.
Since April, we sold our position in Crescent Real Estate Equities
because we questioned the company's ability to maintain its growth rate.
Crescent depended on acquisitions to boost its growth, but was unable to
obtain equity capital to make new deals.
Retail Strip Centers
Between April 30 and October 31, we increased your Fund's position in
retail strip center REITs from 12.5% to 15.8%. This has been a source of
positive performance for the portfolio. We believe the retail sector is
more stable since leases are generally for longer time periods and thus,
leads to less volatility. The retail sector also relies more on internal
expansion to drive earnings growth than other sectors.
Our new retail REIT purchases have included Kimco Realty
Corporation, which owns and operates neighborhood and community shopping
centers mainly along the East Coast, and First Washington Realty Trust,
which owns and operates supermarket-anchored neighborhood shopping
centers throughout the Mid-Atlantic states.
In spite of volatility and uncertainty in the capital markets,
First Washington continued to experience strong operating performance
through the third quarter. Funds from operations (FFO) - a standard
measure of operating performance for REITs - increased 54% for the
quarter. We believe this stock will do well even if the economy slows.
Hotels
We have continued to limit our exposure to hotel REITs as the hotel
business has slowed. We sold several positions since April, including
Glenborough Realty Trust, Golf Trust of America and Innkeepers USA
Trust.
The growth of these three hotel REITs has hinged upon a consistent
acquisition program. Like other REITs, they have not been able to access
capital. Ultimately, we believed this would limit further appreciation.
We sold Golf Trust of America in July when it had reached our price
target of $35 a share. As of October, the price fell to $27 a share.
We have also reduced, but not sold, our position in Patriot
American Hospitality. This is the nation's second largest hotel REIT,
and one of the only paired-share REITs in the country. While the paired-
share REIT legislation had some negative impact on Patriot, the primary
reason we sold some of our position was because the company's balance
sheet was too highly leveraged. We have maintained a smaller position in
Patriot since we still like its Wyndham Hotel and Interstate Hotel
franchises.
Another paired-share REIT in the Fund's portfolio last spring was
Starwood Hotel and Resorts. After Congress passed legislation in July
limiting the tax advantages of paired-share REITs, Starwood announced it
would undergo a $310 million corporate restructuring.
In August, Starwood took steps to enhance its operating and
financial flexibility, and reduce its historical dependence on issuing
stock to fund growth. We have continued to hold Starwood, which owns the
rights to brand names such as Westin and Sheraton Hotels.
OUTLOOK
As we begin our new fiscal year, your Fund's management is focusing its
REIT selection on companies that have solid management, strong balance
sheets and good capital structure. We are attempting to avoid REITs
whose earnings are primarily acquisition-driven in an effort to preserve
capital in the portfolio.
outlook
For a REIT to grow, capital must come from money raised in the
investment marketplace as well as money generated internally. As the
credit markets have changed so abruptly in recent months, we have
redirected our stock selection strategy toward REITs that have greater
access to capital through internal growth rather than through external
lending sources.
As we look ahead, we believe lending and market conditions will
improve. Even so, we will remain focused on quality names that offer
strong prospects for internal growth, and will avoid companies dependent
on acquisitions to support their growth.
AS CREDIT MARKETS HAVE CHANGED SO ABRUPTLY IN RECENT MONTHS, WE HAVE
REDIRECTED OUR STOCK SELECTION STRATEGY TOWARD REITS THAT HAVE GREATER
ACCESS TO CAPITAL THROUGH INTERNAL GROWTH RATHER THAN THROUGH EXTERNAL
LENDING SOURCES.
We expect continued market volatility over the coming months. We
also anticipate that the Federal Reserve may cut interest rates again in
fiscal 1999 to sustain U.S. economic growth.
Growth rates in the real estate industry are likely to moderate in
1999 and 2000. However, our long-term outlook for the real estate market
remains positive. We believe that significantly more properties will
switch from private hands to REIT ownership over the coming years.
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GLOSSARY
Equity REIT
Publicly-traded real estate investment trust that owns and manages
property. A REIT is required to pay at least 95% of its income to
shareholders every year as cash dividends to avoid paying corporate
income tax.
Paired-Share REIT
A real estate operating company and a non-real estate business such as a
hotel chain that operate under the same management. Together these
businesses have one publicly traded stock.
NAREIT Equity REIT Index
An unmanaged composite of real estate investment trust stocks compiled
by the National Association of Real Estate Investment Trusts, a trade
group.
Property Classes
Most commercial buildings are graded as Class A, B, C, or D with A being
the highest. Buildings are graded on such qualities as location,
construction materials used, amenities and decade in which the building
was constructed.
Securitization
The process in which an asset held by a private concern becomes public
by offering shares of stock to investors.
Performance Summary
[GRAPHIC OMITTED: worm chart REIT FUND'S LIFETIME PERFORMANCE]
REIT FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
DECEMBER 6, 1995 THROUGH OCTOBER 31, 1998
Period REIT Fund NAREIT Equity Lipper Real Estate
End A Class REIT Index Fund Average
Dec.
'95 9,524 10,000 10,000
Jan.
'96 10,059 10,165 10,255
Apr.
'96 10,155 10,280 10,687
Jul.
'96 10,713 10,762 11,296
Oct.
'96 12,012 11,719 13,083
Jan.
'97 14,318 13,678 13,311
Apr.
'97 14,242 13,248 14,015
Jul.
'97 16,395 14,744 15,945
Oct.
'97 17,597 15,556 16,002
Jan.
'98 18,307 16,181 16,049
Apr.
'98 17,892 15,663 16,237
Jul.
'98 16,746 14,445 15,352
Oct.
'98 $15,502 $13,567 $14,570
Footnote reads:
Chart assumes $10,000 invested on December 6, 1995 and includes the
effect of a 5.75% maximum front-end sales charge and the reinvestment
of all dividends and capital gains. Effective November 4, 1997, The
Real Estate Investment Trust Portfolio was redesignated the "A Class"
and a distribution fee of 0.25% was implemented. The A Class
performance information prior to that date reflects the performance
of the original class and has not been adjusted to reflect the effect
of the distribution fee. Performance of other classes of REIT Fund
will vary due to differing charges and expenses. Past performance
does not guarantee future results. Effective November 2, 1998, the
maximum sales charge on Class A shares was raised from 4.75% to 5.75%
for investments of less than $50,000.
REIT FUND PERFORMANCE
AVERAGE ANNUAL TOTAL RETURNS THROUGH OCTOBER 31, 1998
Lifetime One Year
A Class (Est. 12/6/95)
Excluding Sales Charge +18.69% -10.98%
Including Sales Charge +16.29% -16.09%
B Class (Est. 11/11/97)
Excluding Sales Charge -11.31%
Including Sales Charge -15.34%
C Class (Est. 11/11/97)
Excluding Sales Charge -11.31%
Including Sales Charge -12.11%
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 the original cost.
B and C Class results excluding sales charge assumes either that
contingent sales charges did not apply or the investment was not
redeemed. Past performance is not a guarantee of future results.
Effective November 4, 1997, The Real Estate Investment Trust Portfolio
was redesignated whereby the legal name of the original class (the
"Pooled Trust Class") was changed to the "A Class" and a distribution
fee of 0.25% was implemented. The A Class performance information prior
to that date reflects the performance of the original class and has not
been adjusted to reflect the effect of the distribution fee.
A Class shares have a 5.75% maximum front-end sales charge and a 12b-1
fee.
B Class shares do not carry a front-end sales charge, but are subject to
a 1% annual distribution and service fee. They are subject to a deferred
sales charge of up to 5% if redeemed before the end of the sixth year.
C Class shares have a 1% annual distribution and service fee. If
redeemed within 12 months, a 1% contingent deferred sales charge
applies.
The average annual total returns for the lifetime and one-year periods
as of October 31, 1998, for REIT Fund's Institutional Class and E Class
shares, which are available without sales or asset based distribution
charges only to certain eligible institutional accounts, were +18.80%
and -10.73%, respectively. The E Class and Institutional Class were
originally made available on November 4, 1997 and November 11, 1997
respectively; performance prior to that date reflects the performance of
the original class (established 12/6/95) which operated under a
substantially similar expense structure.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
DELAWARE POOLED TRUST, INC. -
THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 1998
NUMBER OF MARKET
SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------
COMMON STOCK - 99.04%
HOTELS/DIVERSIFIED REITS - 10.76%
*Catellus Development 148,100 $2,036,375
Newhall Land & Farming 83,600 1,948,925
Patriot American Hospitality 168,701 1,497,223
Starwood Hotels & Resorts Trust 75,900 2,148,919
------------
7,631,442
------------
MALL REITS - 7.42%
General Growth Properties 54,300 1,931,044
Simon Property Group 58,900 1,763,319
Taubman Centers 114,400 1,565,850
------------
5,260,213
------------
MANUFACTURED HOUSING REITS - 5.79%
Chateau Communities 63,348 1,860,847
Sun Communities 67,000 2,240,313
------------
4,101,160
------------
MULTIFAMILY REITS - 17.48%
Apartment Investment & Management 69,200 2,417,675
Avalon Bay Communities 67,794 2,177,882
Camden Property Trust 75,800 2,037,125
Equity Residential Properties 48,600 2,041,200
Essex Property Trust 69,800 2,189,975
Grove Property Trust 149,100 1,528,275
------------
12,392,132
------------
OFFICE/INDUSTRIAL REITS - 38.76%
Alexandria Real Estate Equities 82,700 2,207,056
AMB Property 53,700 1,235,100
Boston Properties 50,900 1,450,650
Cabot Industrial Trust 88,400 1,768,000
CarrAmerica Realty 106,100 2,387,250
Duke Realty Investments 97,900 2,337,362
Equity Office Properties Trust 101,502 2,436,048
First Industrial Realty 72,800 1,865,500
Liberty Property Trust 67,200 1,545,600
Prentiss Properties Trust 88,200 1,819,125
Reckson Associates Realty 115,000 2,609,063
SL Green Realty 105,200 1,992,225
Spieker Properties 59,000 2,035,500
Trizec Hahn 93,000 1,784,438
------------
27,472,917
------------
RETAIL STRIP CENTERS - 15.83%
Developers Diversified Realty 92,800 1,751,600
First Washington 78,000 1,764,750
JDN Realty 86,750 1,848,859
Kimco Realty 63,600 2,532,075
New Plan Excel Realty Trust 71,160 1,618,890
Pan Pacific Retail Properties 91,300 1,706,169
------------
11,222,343
------------
SELF-STORAGE REITS - 3.00%
Public Storage 79,800 2,129,662
------------
2,129,662
------------
Total Common Stock (cost $72,380,468) 70,209,869
------------
Principal
Amount
REPURCHASE AGREEMENTS - 1.12%
With Chase Manhattan 5.30% 11/02/98 (dated
10/30/98, collateralized by $264,000
U.S. Treasury Notes 5.75% due 10/31/02,
market value $285,388) $280,000 280,000
With J.P. Morgan 5.25% 11/02/98 (dated
10/30/98, collateralized by $88,000
U.S. Treasury Notes 5.25% due 1/31/01,
market value $91,399 and by $69,000 U.S.
Treasury Notes 5.50% due 2/28/03, market
value $72,465 and by $9,000 U.S. Treasury
Notes 5.625% due 11/30/00, market
value $9,695 and $81,000 U.S. Treasury
Notes 6.25% due 1/31/02, market
value $86,984) 255,000 255,000
With PaineWebber 5.30% 11/02/98 (dated
10/30/98, collateralized by $98,000
U.S. Treasury Notes 5.625% due 5/15/01,
market value $104,166 and $84,000 U.S.
Treasury Notes 6.50% due 8/31/01,
market value $90,422 and $63,000 U.S.
Treasury Notes 7.50% due 5/15/02,
market value $72,034) 261,000 261,000
------------
Total Repurchase Agreements (cost $796,000) 796,000
------------
TOTAL MARKET VALUE OF SECURITIES - 100.16%
(COST $73,176,468) $71,005,869
------------
LIABILITIES NET OF RECEIVABLES AND OTHER
ASSETS - (0.16%) (117,613)
------------
NET ASSETS APPLICABLE TO 5,457,465 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00% $70,888,256
============
NET ASSET VALUE - THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
A CLASS ($13,340,588 / 1,027,530 SHARES) $12.98
======
NET ASSET VALUE - THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
B CLASS ($12,801,873 / 985,683 SHARES) $12.99
======
NET ASSET VALUE - THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
C CLASS ($2,434,729 / 187,444 SHARES) $12.99
======
NET ASSET VALUE - THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
INSTITUTIONAL CLASS ($1,504,323 / 115,787 SHARES) $12.99
======
NET ASSET VALUE - THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
E CLASS ($40,806,743 / 3,141,021 SHARES) $12.99
======
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1998:
Common stock, $0.01 par value, 2,000,000,000 shares authorized
to Delaware Pooled Trust, Inc. with 50,000,000 shares
allocated to The Real Estate Investment Trust Portfolio $68,928,998
Undistributed net investment income 1,350,932
Accumulated net realized gain on investments 2,778,925
Net unrealized depreciation of investments (2,170,599)
------------
Total Net Assets $70,888,256
============
- ------------------------
REIT - Real Estate Investment Trust
* Non-income producing security
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
Net Asset Value A Class $12.98
Sales charge (4.75% of offering price or 5.01% of
amount invested per share) (B) 0.65
------
Offering price $13.63
======
- ------------------------
(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 How to Buy Shares in the current prospectus for purchases of $50,000 or
more. See Notes to Financial Statements for change in front-end sales charge
effective November 2, 1998.
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
DELAWARE POOLED TRUST, INC. -
THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1998
<S> <C> <C>
INVESTMENT INCOME:
Dividends $3,954,429
Interest 66,959 $4,021,388
------------
EXPENSES:
Management fees 543,001
Distribution expense 116,778
Dividend disbursing and transfer agent fees
and expenses 84,252
Accounting and administration 28,718
Registration fees 27,332
Professional fees 19,210
Reports and statements to shareholders 13,197
Taxes (other than taxes on income) 5,143
Custodian fees 3,982
Other 8,894 850,507
------------ ------------
Less expenses absorbed by Delaware Management
Company (118,126)
------------
Total expenses 732,381
------------
NET INVESTMENT INCOME 3,289,007
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments 2,783,948
Net change in unrealized appreciation/depreciation
of investments (15,725,684)
------------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS (12,941,736)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(9,652,729)
============
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
DELAWARE POOLED TRUST, INC. -
THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
10/31/98 10/31/97
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $3,289,007 $2,009,554
Net realized gain on investments 2,783,948 2,948,532
Net change in unrealized appreciation/depreciation of
investments (15,725,684) 11,291,570
------------ ------------
Net increase (decrease) in net assets resulting from
operations (9,652,729) 16,249,656
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class (233,551) (1,524,572)
B Class (168,186) --
C Class (26,850) --
Institutional Class (113,915) --
E Class (3,049,187) --
Net realized gain on investments:
A Class (31,854) (1,672,794)
B Class (44,406) --
C Class (4,998) --
Institutional Class (109,306) --
E Class (2,745,948) --
------------ ------------
(6,528,201) (3,197,366)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class 18,899,466 19,188,692
B Class 16,282,975 --
C Class 2,912,202 --
Institutional Class 5,252,183 --
E Class 54,856,483 --
Net asset value of shares issued upon reinvestment
of distributions from net investment income and net
realized gain on investments:
A Class 240,840 3,197,366
B Class 163,496 --
C Class 25,241 --
Institutional Class 223,221 --
E Class 5,669,978 --
------------ ------------
104,526,085 22,386,058
------------ ------------
Cost of shares repurchased:
A Class (64,151,749) (1,816,777)
B Class (1,568,218) --
C Class (144,365) --
Institutional Class (3,514,603) --
E Class (8,167,173) --
------------ ------------
(77,546,108) (1,816,777)
------------ ------------
Increase in net assets derived from capital share
transactions 26,979,977 20,569,281
------------ ------------
NET INCREASE IN NET ASSETS 10,799,047 33,621,571
NET ASSETS:
Beginning of year 60,089,209 26,467,638
------------ ------------
End of year $70,888,256 $60,089,209
============ ============
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
DELAWARE POOLED TRUST, INC. -
THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
REIT Fund REIT Fund
A Class B Class
------------ ------------
Year Year 12/6/95(1) 11/11/97(1)
Ended Ended to to
10/31/98(3) 10/31/97 10/31/96 10/31/98
<S> <C> <C> <C> <C>
Net asset value,
beginning of
period $16.260 $12.490 $10.000 $16.230
Income (loss) from
investment operations:
Net investment
income 1.118 0.616 0.652 0.914
Net realized and
unrealized gain (loss)
on investments (2.713) 4.664 1.938 (2.559)
------------ ------------ ------------ ------------
Total from
investment
operations (1.595) 5.280 2.590 (1.645)
------------ ------------ ------------ ------------
Less dividends
and distributions:
Dividends
from net
investment
income (0.865) (0.720) (0.100) (0.775)
Distributions
from net
realized gains
on investments (0.820) (0.790) -- (0.820)
------------ ------------ ------------ ------------
Total dividends
and distributions (1.685) (1.510) (0.100) (1.595)
------------ ------------ ------------ ------------
Net asset value,
end of period $12.980 $16.260 $12.490 $12.990
============ ============ ============ ============
Total return(2) (10.98%) 46.50% 26.12% (11.31%)
Ratios and
supplemental data:
Net assets,
end of period
(000 omitted) $13,340 $60,089 $26,468 $12,802
Ratio of expenses
to average net
assets 1.11% 0.82% 0.89% 1.86%
Ratio of expenses
to average net
assets prior
to expense
limitation 1.27% 0.99% 1.02% 2.02%
Ratio of net
investment income
to average net
assets 4.31% 4.25% 6.70% 3.56%
Ratio of net
investment income
to average net
assets prior to
expense limitation 4.15% 4.08% 6.57% 3.40%
Portfolio turnover 51% 58% 109% 51%
<CAPTION>
REIT Fund REIT Fund REIT Fund
C Class Institutional Class E Class
------------ --------------------- ------------
11/11/97(1) 11/11/97(1) 11/4/97(1)
to to to
10/31/98 10/31/98 10/31/98
<S> <C> <C> <C>
Net asset value,
beginning of
period $16.230 $16.230 $16.340
Income (loss) from
investment operations:
Net investment
income 0.914 1.134 1.134
Net realized and
unrealized gain (loss)
on investments (2.559) (2.659) (2.769)
------------ ------------ ------------
Total from
investment
operations (1.645) (1.525) (1.635)
------------ ------------ ------------
Less dividends
and distributions:
Dividends
from net
investment
income (0.775) (0.895) (0.895)
Distributions
from net
realized gains
on investments (0.820) (0.820) (0.820)
------------ ------------ ------------
Total dividends
and distributions (1.595) (1.715) (1.715)
------------ ------------ ------------
Net asset value,
end of period $12.990 $12.990 $12.990
============ ============ ============
Total return(2) (11.31%) (10.56%) (11.17%)
Ratios and
supplemental data:
Net assets,
end of period
(000 omitted) $2,435 $1,504 $40,807
Ratio of expenses
to average net
assets 1.86% 0.86% 0.86%
Ratio of expenses
to average net
assets prior
to expense
limitation 2.02% 1.02% 1.02%
Ratio of net
investment income
to average net
assets 3.56% 4.56% 4.56%
Ratio of net
investment income
to average net
assets prior to
expense limitation 3.40% 4.40% 4.40%
Portfolio turnover 51% 51% 51%
- ------------------------
1 Date of commencement of operations; ratios have been annualized and total return
has not been annualized.
2 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.
3 Effective November 4, 1997, the original class of The Real Estate Investment Trust
Portfolio was redesignated the REIT Fund A Class and became subject to a 0.25%
12B-1 distribution fee. Before that date, that class was not subject to such a fee
and the financial highlights presented above for that prior period have not been
restated to reflect a 0.25% fee. In conjunction with the redesignation of the
original class, four additional classes of shares (REIT Fund B Class, REIT C
Class, REIT Fund Institutional Class and The Real Estate Investment Trust
Portfolio Class, referred to in the table as "E Class") were created. REIT Fund A
Class shares representing $54.9 million and $1.8 million were exchanged by
shareholders for E Class and REIT Fund Institutional Class shares, respectively.
See accompanying notes
</TABLE>
DELAWARE POOLED TRUST, INC. -
THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
The Real Estate Investment Trust Portfolio (the "Fund") is a series of
Delaware Pooled Trust, Inc. which 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 currently
offers five classes of shares. The Real Estate Investment Trust
Portfolio A Class carries a front-end sales charge which was raised from
4.75% to 5.75% effective November 2, 1998. The Real Estate Investment
Trust Portfolio B Class carries a back-end deferred sales charge, The
Real Estate Investment Trust Portfolio C Class carries a level load
deferred sales charge, and The Real Estate Investment Trust Portfolio
Institutional and E Classes carry no sales charge. This report contains
information relating only to The Real Estate Investment Trust Portfolio.
All other Pooled Trust series are included in a separate report.
The Fund seeks to achieve a maximum long-term total return, with capital
appreciation a secondary objective. It seeks to achieve its objectives
by investing in securities of companies primarily engaged in the real
estate industry. The Portfolio will invest at least 65% of its assets in
stocks of real estate investment trusts.
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.
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 Fund's custodian bank until the
maturity of the respective repurchase agreements. Each repurchase
agreement is at least 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.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Other - Expenses common to all funds within the Delaware Investments
Family of 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 on a
quarterly basis. Net capital gains, if any, will be distributed
annually.
Certain expenses of the Fund 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.
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 0.75% of
the average daily net assets of the Fund, less the fees paid to the
unaffiliated directors. At October 31, 1998, the Fund had a liability
for Investment Management fees and other expenses payable to DMC of
$27,084.
Lincoln Investment Management, Inc., an affiliate of DMC, receives 30%
of the advisory fee paid to DMC for acting as sub-advisor to the Fund.
DMC has elected to waive that portion of its 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 0.86% of the Fund's average daily net
assets through October 31, 1998.
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 transactions and average net
assets, subject to certain minimums. At October 31, 1998, the Fund had a
liability for such fees and other expenses payable to DSC of $10,929.
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
attributable to A Class shares and 1.00% of the average daily net assets
attributable to B Class and C Class shares. At October 31, 1998, the
Fund had a liability for distribution fees and other expenses payable to
DDLP and other affiliates of $1,248.
For the year ended October 31, 1998, DDLP earned $42,513 for commissions
on sales of A Class shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or
employees of the Fund. These officers, directors and employees are not
compensated by the Fund.
3. Investments
During the year ended October 31, 1998, the Fund made purchases of
$59,996,903 and sales of $36,235,492 of investments other than U.S.
government securities and temporary cash investments.
For the year ended October 31, 1998, sales include $3,332,119 of
investment securities delivered to shareholders in exchange for 206,517
shares redeemed by The Real Estate Investment Trust Portfolio.
At October 31, 1998, the aggregate cost of securities for federal income
tax purposes was $74,013,741.
At October 31, 1998, net unrealized depreciation for federal income tax
purposes aggregated $3,007,872, of which $3,160,786 related to
unrealized appreciation of securities and $6,168,658 related to
unrealized depreciation of securities.
Notes to Financial Statements (Continued)
4. Capital Stock
Transactions in capital stock shares were as follows:
Year Ended Year Ended
10/31/98 10/31/97
Shares sold:
A Class 1,265,036 1,438,178
B Class 1,085,487 --
C Class 196,042 --
Institutional Class 346,250 --
E Class 3,348,843 --
Shares issued upon reinvestment of distributions
from net investment income and net realized
gains on investments;
A Class 16,895 265,342
B Class 11,336 --
C Class 1,754 --
Institutional Class 14,989 --
E Class 380,536 --
------------ ------------
6,667,168 1,703,520
------------ ------------
Shares repurchased:
A Class (3,949,165) (127,788)
B Class (111,140) 0
C Class (10,352) 0
Institutional Class (245,452) 0
E Class (588,358) 0
------------ ------------
(4,904,467) (127,788)
------------ ------------
Net Increase 1,762,701 1,575,732
============ ============
5. Lines of Credit
The Fund has a committed line of credit for $2,600,000. No amount was
outstanding at October 31, 1998 or at any time during the fiscal year.
6. Credit and Market Risk
The Fund may invest up to 10% of its total assets in illiquid securities
which may include securities with contractual restrictions on resale,
securities exempt from registration under Rule 144A of the Securities
Act of 1933, as amended, and other securities which may not be readily
marketable. The relative illiquidity of some of these securities may
adversely affect the Fund's ability to dispose of such securities in a
timely manner and at a fair price when it is necessary to liquidate such
securities.
DELAWARE POOLED TRUST, INC. - THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
DELAWARE POOLED TRUST, INC. - THE REAL ESTATE INVESTMENT TRUST PORTFOLIO
We have audited the accompanying statement of net assets of Delaware
Pooled Trust, Inc. - The Real Estate Investment Trust Portfolio (the
"Fund") as of October 31, 1998, 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 generally accepted auditing
standards. 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 October 31,
1998, by correspondence with the Fund's 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 Pooled Trust, Inc. - The Real Estate
Investment Trust Portfolio at October 31, 1998, 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
generally accepted accounting principles.
/S/ERNST & YOUNG LLP
Philadelphia, Pennsylvania
December 4, 1998
THIS ANNUAL REPORT IS FOR THE INFORMATION OF REIT FUND SHAREHOLDERS, BUT
IT MAY BE USED with prospective investors when preceded or accompanied
by a current Prospectus for REIT Fund, which sets forth details about
charges, expenses, investment objectives and operating policies of the
Fund. You should read the prospectus carefully before you invest.
Summary investment results are documented in the Fund's current
Statement of Additional Information. 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.
BOARD OF DIRECTORS
WAYNE A. STORK
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
JEFFREY J. NICK
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
JOHN H. DURHAM
Partner, Complete Care Services
Horsham, PA
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC
W. THACHER LONGSTRETH
City Councilman
Philadelphia, PA
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
Affiliated Officers
AFFILIATED OFFICERS
DAVID K. DOWNES
Executive Vice President, Chief Financial Officer
and Chief Operating Officer
Delaware Investments Family of Funds
Philadelphia, PA
GEORGE M. CHAMBERLAIN, JR.
Senior Vice President, Secretary
and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
BRUCE D. BARTON
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
[GRAPHIC OMITTED: PHOTO OF TWO GLOBES]
directors & officers
INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
SUBADVISER
Lincoln Investment Management
Fort Wayne, IN
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
When used with prospective investors, this report must be preceded or
accompanied by a current REIT Fund Prospectus and the Delaware
Investments Performance Update for the most recently completed calendar
quarter. For a prospectus of any other mutual fund from Delaware
Investments, contact your financial adviser or Delaware Investments.
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawarefunds.com
Be sure to consult your financial adviser when making investments.
Mutual funds can be a valuable part of your financial plan; however,
shares of the Fund are not FDIC or NCUSIF insured, are not guaranteed by
any bank or any credit union, and involve investment risk, including the
possible loss of the principal amount invested. Shares of the Fund are
not bank or credit union deposits.
(copyright) Delaware Distributors, L.P.
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
Printed in the USA
on recycled paper
(1268)
AR-187[10/98]TKO12/98
