UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-4997 Exact name of registrant as specified in charter: Delaware Group Equity Funds V Address of principal executive offices: 2005 Market Street Philadelphia, PA 19103 Name and address of agent for service: Richelle S. Maestro, Esq. 2005 Market Street Philadelphia, PA 19103 Registrant's telephone number, including area code: (800) 523-1918 Date of fiscal year end: November 30 Date of reporting period: November 30, 2004 Item 1. Reports to Stockholders Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) ANNUAL REPORT 2004 NOVEMBER 30, 2004 - -------------------------------------------------------------------------------- DELAWARE SMALL CAP CORE FUND (FORMERLY DELAWARE SMALL CAP CONTRARIAN FUND) PORTFOLIO MANAGEMENT REVIEW Q: PLEASE DISCUSS THE FUND'S PERFORMANCE IN RELATION TO THE SMALL-CAP MARKET DURING THE FISCAL YEAR. A: Value-oriented companies and small caps in particular performed well during the past year as investors sought undervalued companies with strong balance sheets. The Small Cap Core Fund returned +20.62% (Class A shares at net asset value with distributions reinvested) for the 12-month period ended November 30, 2004. The Portfolio's benchmark index - the Russell 2000 Index - rose +17.26% for the same period, while its peer group, the Lipper Small Cap Value Funds average, gained +21.81%. Uncertainties in the geopolitical and economic arenas during the past year prompted a shift in favor from growth-oriented investments to value-orientated stocks. During the period, we witnessed increased violence in Iraq, a series of serious hurricanes that hit the southeastern U.S., and several Federal Reserve interest rate increases. Throughout the period, the theme of economic sensitivity prevailed. Investors watched closely for clues to how wide ranging the economic expansion would become. Healthy increases in GDP gave a strong indication of economic growth by mid-year, with a 3.3% increase in the second quarter and a 3.9% boost in the third quarter of 2004. As the economic expansion began to gain momentum and housing continued to boom, manufacturers prospered - particularly producers of steel, copper, plastics, and other durable goods. Q: CAN YOU DESCRIBE YOUR INVESTMENT STRATEGY DURING THE PAST 12 MONTHS? A: During the period, Delaware Small Cap Core Fund underwent a change in investment strategy. For the majority of the fiscal year - up until October 31, 2004 - the Fund followed the traditional strategy of the Small Cap Contrarian Fund. That is, the Fund invested in stocks of small companies whose stock prices appeared low relative to their underlying value or future potential. 1 On November 1, however, the Fund name, strategy, and portfolio management team was changed. The Small Cap Core Fund, now managed by Christopher Adams, Francis Morris, Michael Morris, and Don Padilla, evaluates small-cap stocks based on both growth and value characteristics. We employ a bottom-up security selection process that utilizes quantitative screens, fundamental research, and risk control. We strive to identify stocks of small companies that we believe offer above-average opportunities for long-term price appreciation based on (1) attractive valuations, (2) growth prospects and (3) strong cash flow. In November, we repositioned the Fund to meet our investment strategy and, as a result, many positions were sold while many new holdings were added to the portfolio. Q: WHICH HOLDINGS CONTRIBUTED POSITIVELY TO PERFORMANCE? A: Energy stocks were strong performers during the year, which was a direct result of the dramatic rise in crude oil prices. Oil reached the record-breaking price of $55.17 per barrel on October 22 (source: Bloomberg). Our holdings in oil companies like Whiting Petroleum, which specializes in oil and natural gas exploration and production, helped boost the Fund's return. This company was sold at a profit during the year. As construction activity increased during the past year, commodity prices rose. Texas Industries, which produces steel and cement/concrete products for the construction and manufacturing industries, was in a strong position to capitalize on this trend. We also sold this company during the year. Investments in residential and commercial real estate remained strong during the year, enabling real estate investment trusts (REITs) to continue an expansionary trend. We sold Reckson Associates, which specializes in office and industrial real estate in Manhattan and its surrounding counties, at a profit during the year. Q: WHICH HOLDINGS DETRACTED FROM PERFORMANCE? A: Technology companies, which were the big winners from last year, offered disappointing results during fiscal 2004. Technology stock prices fell as consumer and corporate spending waned in this arena. We saw negative performance from International Rectifier, a supplier of power semiconductors, and QAD Inc., a business software developer and supplier. We sold our positions in each of these companies during the period. Within the transportation industry, airlines continued to struggle as a result of both pricing pressures from smaller low-cost carriers and increasing costs, particularly from the dramatic increase in the cost of oil. Continental Airlines, which we sold during the period, offered disappointing results. Performance by retail athletic clothier Sports Authority detracted from performance during the period. The company recently merged with Gart Sports, which sells sports gear and equipment. We sold our holdings during the period. Another poor performer for the period was generic pharmaceutical producer Par Pharmaceuticals, which has recently faced increasing competition among drug manufacturers. We sold our position in Par Pharmaceuticals earlier in the year as we identified positive pricing opportunities. 2 DELAWARE SMALL CAP CORE FUND (FORMERLY DELAWARE SMALL CAP CONTRARIAN FUND) FUND BASICS As of November 30, 2004 FUND OBJECTIVE: The Fund seeks long-term capital appreciation. TOTAL FUND NET ASSETS: $4.79 million NUMBER OF HOLDINGS: 276 FUND START DATE December 29, 1998 YOUR FUND MANAGER: Christopher Adams Francis Morris Michael Morris Don Padilla PERFORMANCE SUMMARY+ AVERAGE ANNUAL TOTAL RETURNS Through November 30, 2004 LIFETIME FIVE YEARS ONE YEAR DELAWARE SMALL CAP CORE FUND - ------------------------------------------------------------------------------------------------- Class A (Est. 12/29/98) Excluding Sales Charge +15.78% +17.79% +20.62% Including Sales Charge +14.63% +16.41% +14.63% Institutional Class (Est. 12/29/98) +15.78% +17.79% +20.62% Lipper Small-Cap Value Funds Average +13.60%* +12.00% +21.81% Russell 2000 Index + 8.52%* + 6.82% +17.26% - ------------------------------------------------------------------------------------------------- The results shown above assume reinvestment of all distributions. Class A returns, including sales charges, reflect a maximum up-front sales charge of 5.75%. Returns and share value will fluctuate so that shares, when redeemed, may be worth more or less than the original share price. No 12b-1 fees were imposed on Class A shares for the periods shown and had such charges been imposed, returns would have been lower. Class B and C shares were not offered during the periods shown. Institutional Class shares are available without sales or asset-based distribution charges only to certain eligible institutional accounts. The Lipper Small Cap Value Funds Average represents the average return of small cap value mutual funds tracked by Lipper (source: Lipper Inc.). The Russell 2000 Index is an unmanaged composite that tracks the stocks of 2,000 U.S. companies with small market capitalizations. You cannot invest directly in an index. Past performance is not a guarantee of future results. An expense limitation was in effect for all classes of Delaware Small Cap Core Fund during the periods shown. Performance would have been lower had the expense limitation not been in effect. The performance table does not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. This report is for the information of Delaware Small Cap Core Fund shareholders. The current prospectuses for the Fund set forth details about charges, expenses, investment objectives, and operating policies of the Fund. You should read the prospectus carefully before you invest or send money. Summary investment results are documented in the Fund's current Statement of Additional Information. +Please see the following page for a line graph of the Fund's performance since inception. *Assumes start date of December 31, 1998. 3 Delaware Small Cap Core Fund - ----------------------------- (Formerly Delaware Small Cap Contrarian Fund) Performance of a $10,000 Investment December 29, 1998 (Fund's inception) to November 30, 2004 ____________ DELAWARE SMALL CAP CORE FUND - CLASS A SHARES - ------------ RUSSELL 2000 INDEX [GRAPHIC OMITTED] Small Cap Core Russell 2000 Dec. '98 $9,425 $10,000 Nov. '99 $9,902 $10,893 Nov. '00 $10,947 $10,829 Nov. '01 $13,620 $11,351 Nov. '02 $13,767 $10,147 Nov. '03 $18,608 $13,829 Nov. '04 $22,445 $16,216 Chart assumes $10,000 invested on December 29, 1998 and includes the effect of a 5.75% front-end sales charge and the reinvestment of all distributions. Performance of other Fund classes will vary due to differing charges and expenses. Chart also assumes $10,000 invested in the Russell 2000 Index at that month's end, December 31, 1998. After December 31, 1998, returns plotted on the chart were as of the last day of each month shown. The Russell 2000 Index is an unmanaged composite that tracks the stocks of 2,000 U.S. companies with small market capitalizations. No 12b-1 fees were imposed on Class A shares for the periods shown and had such charges been imposed, returns would have been lower. An expense limitation was in effect for all classes of the Fund during the periods shown. Performance would have been lower had the expense limitation not been in effect. An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. The chart does not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. You cannot invest directly in an index. Past performance is not a guarantee of future results. 4 DISCLOSURE OF FUND EXPENSES As a shareholder of a fund, you incur two types of costs (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; end exchange fees; and (2) ongoing costs, including management fees; distribution, and/or service (12b-1) fees; and other fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2004 to November 30, 2004. ACTUAL EXPENSES The first section of the table shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on a fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund's actual expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions. DELAWARE SMALL CAP CORE FUND EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000 Beginning Ending Annualized Expense Account Account Expense Paid During Value Value Ratio Period 6/1/04 11/30/04 6/1/04 to 11/30/04 - ----------------------------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,152.30 0.75% $4.04 Institutional Class 1,000.00 1,152.30 0.75% 4.04 - ----------------------------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% RETURN BEFORE EXPENSES) Class A $1,000.00 $1,021.25 0.75% $3.79 Institutional Class 1,000.00 1,021.25 0.75% 3.79 - ----------------------------------------------------------------------------------------------------- *Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). 5 SECTOR ALLOCATION NOVEMBER 30, 2004 The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following chart lists the Fund's categories of portfolio holdings as a percent of total net assets and is provided in compliance with such requirement. PERCENTAGE SECTOR OF NET ASSETS - -------------------------------------------------------------------------- COMMON STOCK 99.26% - -------------------------------------------------------------------------- Basic Material 6.90% Business Services 4.82% Capital Goods 8.50% Consumer Discretionary 5.31% Consumer Services 2.75% Consumer Staples 2.55% Credit Cyclicals 4.00% Energy 5.07% Finance 16.65% Healthcare 13.26% Media 2.44% REITs 4.95% Technology 17.80% Transportation 1.90% Utilities 2.36% - -------------------------------------------------------------------------- REPURCHASE AGREEMENTS 0.71% - -------------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 99.97% - -------------------------------------------------------------------------- RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 0.03% - -------------------------------------------------------------------------- TOTAL NET ASSETS 100.00% - -------------------------------------------------------------------------- 6 STATEMENT OF NET ASSETS DELAWARE SMALL CAP CORE FUND November 30, 2004 NUMBER OF MARKET SHARES VALUE COMMON STOCK- 99.26% Basic Materials - 6.90% Aceto 1,000 $ 17,000 +AK Steel Holding 2,100 27,111 Ameron International 300 11,394 +Century Aluminum 600 15,372 Crompton 2,500 28,025 Cytec Industries 400 19,444 Ferro 600 13,728 +FMC 600 29,730 Lubrizol 600 20,730 +Maverick Tube 300 9,510 +Mosaic 1,000 17,380 +NewMarket 500 9,595 Octel 400 8,824 +PolyOne 3,100 28,613 +USG 900 29,448 Wausau-Mosinee Paper 1,400 25,130 Worthington Industries 900 19,359 -------- 330,393 -------- Business Services - 4.82% +Administaff 1,400 20,860 +Clark Inc 800 13,320 Gevity HR 600 10,626 Harland (John H.) 500 17,655 Healthcare Services Group 800 16,592 +ITT Educational Services 200 9,546 +Labor Ready 1,500 23,820 Mcgrath Rentcorp 400 16,904 +NCO Group 700 17,577 +Sourcecorp 700 11,641 Unifirst 500 13,820 +United Stationers 500 23,940 +Universal Technical Institute 300 9,990 +West 700 24,248 -------- 230,539 -------- Capital Goods - 8.50% Acuity Brands 900 26,487 +AGCO 1,200 26,148 Applied Industrial Technologies 300 12,495 Barnes Group 500 13,090 Briggs & Stratton 400 15,688 +Flowserve 500 12,610 +Genlyte Group 400 32,068 +Griffon 500 12,540 Hughes Supply 400 13,152 +Kadant 500 10,125 Lawson Products 500 24,425 Lincoln Electric Holdings 500 17,945 NN 1,100 14,014 +Orbital Sciences 1,700 22,100 Oshkosh Truck 300 18,846 +Rofin-Sinar Technologies 400 15,600 7 STATEMENT OF NET ASSETS (CONTINUED) NUMBER OF MARKET SHARES VALUE COMMON STOCK (CONTINUED) Capital Goods (continued) +Technitrol 600 $ 10,350 Tecumseh Products Class A 300 13,737 +Terex 700 32,088 Toro 300 21,750 Watsco 700 23,149 York International 500 18,435 -------- 406,842 -------- Consumer Discretionary - 5.31% +Aeropostale 800 22,800 +AnnTaylor Stores 800 17,552 +Brookstone 900 16,470 +Conn's 1,100 19,503 +CSK Auto 700 10,738 +Electronics Boutique Holdings 500 19,475 Finish Line Class A 1,400 25,760 Goody's Family Clothing 1,300 12,662 +Insight Enterprises 700 14,161 Kellwood 400 13,924 +Pacific Sunwear Of California 900 19,989 +Party City 900 11,511 Stride Rite 1,300 14,313 +Warnaco Group Class A 1,000 19,870 +Yankee Candle 500 15,230 -------- 253,958 -------- Consumer Services - 2.75% +Argosy Gaming 500 23,280 +CKE Restaurants 1,400 17,514 +ExpressJet Holdings 1,500 17,490 Ihop 600 25,422 Lone Star Steakhouse & Saloon 600 16,194 +Papa John's International 300 10,671 +Penn National Gaming 400 21,108 -------- 131,679 -------- Consumer Staples - 2.55% Chiquita Brands International 600 11,868 Lancaster Colony 300 13,104 Longs Drug Stores 400 10,680 Nu Skin Enterprises Class A 800 17,984 PepsiAmericas 400 8,444 Ralcorp Holdings 400 16,480 Ruddick 900 19,629 Sanderson Farms 400 14,900 +Smart & Final 600 8,688 -------- 121,777 -------- Credit Cyclicals - 4.00% ArvinMeritor 700 15,365 Beazer Homes USA 200 24,800 +Jacuzzi Brands 2,300 21,482 M/I Homes 400 18,084 +Meritage 300 28,080 Monaco Coach Corp 1,000 19,900 Standard-Pacific 300 16,803 Thor Industries 700 23,380 +Washington Group International 600 23,400 -------- 191,294 -------- 8 STATEMENT OF NET ASSETS (CONTINUED) NUMBER OF MARKET SHARES VALUE COMMON STOCK (CONTINUED) Energy - 5.07% Chesapeake 500 $ 13,495 +Forest Oil 800 27,224 Holly 800 22,536 Magellan Midstream Partners 200 11,644 +Magnum Hunter Resources 1,500 20,100 +Oceaneering International 600 23,040 +Offshore Logistics 600 22,740 +Oil States International Inc 800 16,296 +Stone Energy 300 14,394 +Universal Compression Holdings 300 11,190 +Veritas Dgc 900 21,060 +W-H Energy Services 800 18,288 World Fuel Services 500 20,600 -------- 242,607 -------- Finance - 16.65% +Affiliated Managers Group 500 31,690 American Home Mortgage Investment 700 22,918 AmerUs Group 500 21,785 Bancfirst 300 21,297 City Holding 300 11,076 +CompuCredit 1,100 26,367 Corus Bankshares 500 24,335 Delphi Financial Group Class A 500 23,230 Dime Community Bancshares 1,000 18,350 FBL Financial Group Class A 700 19,894 +Financial Federal 600 23,076 First Bancorp Puerto Rico 500 32,060 First Place Financial Ohio 900 20,250 +FirstFed Financial 300 15,786 Flagstar Bancorp 800 17,432 Frontier Financial 500 19,930 Greater Bay Bancorp 700 20,335 Independent Bank Corp - Michigan 500 15,050 International Bancshares 400 15,820 Irwin Financial 500 13,305 Kansas City Life Insurance 300 14,832 MainSource Financial Group 800 19,680 Merchants Bancshares 500 14,850 +Metris 1,600 18,528 MFA Mortgage Investments 1,500 13,710 +Molina Healthcare 400 17,380 Netbank 1,200 12,324 Penn-America Group 1,000 14,810 PFF Bancorp 500 22,600 +Piper Jaffray 500 23,005 Presidential Life 800 13,368 Provident Bankshares 600 22,044 Republic Bancorp 1,980 30,769 RLI 600 24,990 +Sierra Health Services 500 27,815 TierOne 1,000 24,810 +Triad Guaranty 200 12,000 Trustmark 700 21,560 Vesta Insurance Group 2,700 10,152 West Coast Bancorp Oregon 900 23,679 -------- 796,892 -------- 9 STATEMENT OF NET ASSETS (CONTINUED) NUMBER OF MARKET SHARES VALUE COMMON STOCK (CONTINUED) Healthcare - 13.26% +Abgenix 600 $ 6,090 +Adolor Corporation 1,100 15,213 +Advanced Medical Optics 500 20,790 +Albany Molecular Research 800 8,576 +Alkermes 800 11,032 Alpharma Class A 900 14,949 +American Healthways 600 20,010 +Applera Corp-Celera Genomics 1,000 14,080 +Apria Healthcare Group 600 18,402 Arrow International 600 18,144 +Bio-Rad Laboratories Class A 300 17,010 +Bradley Pharmaceuticals 500 8,850 +Candela 1,100 10,758 Cooper 300 20,859 +CuraGen 2,100 12,663 +Digene 200 4,837 +Enzo Biochem 600 11,550 +First Horizon Pharmaceutical 1,100 21,516 +Gen-Probe 400 15,960 +Geron 800 5,560 +Immunogen 2,200 17,204 +Inamed 200 10,730 +Kos Pharmaceuticals 400 17,028 +LifePoint Hospitals 500 18,390 +Ligand Pharmaceuticals Class B 700 7,840 +Medarex 1,300 14,170 Mentor/Minn 500 15,430 +Noven Pharmaceuticals 600 10,968 Owens & Minor 700 19,425 PolyMedica 500 17,775 +Priority Healthcare Class B 800 16,720 +Res-Care 1,800 27,000 Select Medical 700 12,215 +Serologicals 600 14,004 +Stewart Enterprises 1,300 9,646 +Sybron Dental Specialties 700 24,038 +Techne 400 14,860 +Telik 600 11,466 +United Therapeutics 700 30,807 Vital Signs 300 11,223 West Pharmaceutical Services 1,000 23,380 +Wright Medical Group 500 13,225 -------- 634,393 -------- Media - 2.44% +Emmis Broadcasting Class A 800 14,792 +infoUSA 1,500 16,515 Journal Communications Class A 1,000 17,540 +Lin TV Class A 900 16,218 Media General Class A 200 12,440 +Mediacom Communications 2,600 13,572 +Scholastic 500 16,470 Sinclair Broadcasting Group 1,300 9,373 -------- 116,920 -------- REITs - 4.95% Brandywine Realty Trust 600 17,070 Equity Inns 1,800 18,576 First Industrial Realty 500 19,900 Glimcher Realty Trust 700 18,865 Home Properties 400 16,472 HRPT Properties Trust 1,200 14,508 Maguire Properties 600 15,786 National Health Investors 800 23,160 10 STATEMENT OF NET ASSETS (CONTINUED) NUMBER OF MARKET SHARES VALUE COMMON STOCK (CONTINUED) REITs (continued) Nationwide Health Properties 900 $ 20,610 Prentiss Properties Trust 600 22,434 Senior Housing Properties Trust 800 15,744 Shurgard Storage Centers Class A 400 16,552 SL Green Realty 300 17,289 -------- 236,966 -------- Technology - 17.80% +AMIS Holdings 1,200 18,192 +Artesyn Technologies 1,600 15,232 +Ask Jeeves 400 10,336 +Aspect Communications 1,200 13,020 +Aspen Technology 3,200 18,464 +Avid Technology 300 17,121 +Axcelis Technologies 1,100 8,030 +Benchmark Electronics 300 10,515 +CACI International 400 24,852 +Cymer 500 15,210 +Digital River 500 20,960 +Digitas 1,400 11,494 +Dionex 400 22,956 +Ditech Communications 400 6,304 +DSP Group 400 8,872 +Dycom Industries 600 17,484 +Earthlink 2,000 21,680 +Electronics for Imaging 600 10,038 +EMS Technologies 400 6,276 FactSet Research Systems 400 20,660 +FileNet 600 16,086 +Internet Security Systems 900 21,789 +iPayment 400 15,376 +j2 Global Communications 500 17,425 +Keane 500 7,750 +Kemet 1,200 10,632 +Kulicke & Soffa Industries 1,900 14,212 +Macrovision 500 13,275 +Mercury Computer Systems 600 18,900 +Micrel 1,000 10,680 +Microsemi Corp 1,200 21,360 +MTC Technologies 500 15,370 +Netgear 1,000 16,400 +Omnivision Technologies 600 10,704 +Photronics 1,100 20,724 +Pixelworks 900 10,125 Plantronics 400 16,476 +Progress Software 900 20,430 +Quality Systems 200 12,282 +Radisys 700 9,863 +Red Hat 1,400 20,272 +RF Micro Devices 1,500 10,440 +RSA Security 700 14,805 +Sigmatel 800 28,624 +Silicon Image 1,500 25,200 +Skyworks Solutions 2,100 20,853 +Stoneridge 600 9,126 +Synaptics 600 23,040 +Take-Two Interactive Software 700 24,465 +United Online 900 9,603 +Universal Electronics 800 14,600 +Varian Semiconductor Equipment Associates 400 14,208 +Viasat 500 10,435 +WebEx Communications 800 18,992 +Wind River Systems 800 9,680 -------- 851,898 -------- 11 STATEMENT OF NET ASSETS (CONTINUED) NUMBER OF MARKET SHARES VALUE COMMON STOCK (CONTINUED) Transportation - 1.90% Arkansas Best 400 $ 17,248 +HUB Group 500 21,750 Overnite 800 28,272 +Pacer International 1,200 23,472 ---------- 90,742 ---------- Utilities - 2.36% Black Hills 500 15,355 Cascade Natural Gas 500 10,690 Cleco 700 13,860 Great Plains Energy 400 11,844 Middlesex Water 500 9,950 Otter Tail 500 13,465 UGI 600 24,348 Westar Energy 600 13,290 ---------- 112,802 ---------- TOTAL COMMON STOCK (COST $4,312,830) 4,749,702 ---------- PRINCIPAL AMOUNT REPURCHASE AGREEMENTS- 0.71% With BNP Paribas 1.94% 12/1/04 (dated 11/30/04, to be repurchased at $17,776, collateralized by $16,089 U.S. Treasury Bills due 3/3/05, market value $15,999 and $2,156 U.S. Treasury Bills due 5/12/05, market value $2,134) $17,775 17,775 With UBS Warburg 1.94% 12/1/04 (dated 11/30/04, to be repurchased at $16,226, collateralized by $5,408 U.S. Treasury Bills due 12/23/04, market value $5,402 and $11,245 U.S. Treasury Bills due 4/14/05, market value $11,155) 16,225 16,225 ---------- TOTAL REPURCHASE AGREEMENTS (COST $34,000) 34,000 ---------- TOTAL MARKET VALUE OF SECURITIES - 99.97% (COST $4,346,830) 4,783,702 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.03% 1,559 ---------- NET ASSETS APPLICABLE TO 327,664 SHARES OUTSTANDING - 100.00% $4,785,261 ---------- Net Asset Value - Delaware Small Cap Core Fund Class A ($20,077 / 1,375 Shares) $14.60 Net Asset Value - Delaware Small Cap Core Fund Institutional Class ($4,765,184 / 326,289 Shares) $14.60 COMPONENTS OF NET ASSETS AT NOVEMBER 30, 2004: Shares of beneficial interest (unlimited authorization - no par) $2,949,010 Undistributed net investment income 6,576 Accumulated net realized gain on investments 1,392,803 Net unrealized appreciation of investments 436,872 ---------- Total net assets $4,785,261 ========== +Non-income producing security for the year ended November 30, 2004. SUMMARY OF ABBREVIATIONS: REIT - Real Estate Investment Trust 12 STATEMENT OF NET ASSETS (CONTINUED) NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE SMALL CAP CORE FUND Net asset value Class A (A) $14.60 Sales charge (5.75% of offering price) (B) 0.89 ------ Offering price $15.49 ====== ______________________ (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 13 DELAWARE SMALL CAP CORE STATEMENT OF OPERATIONS YEAR ENDED NOVEMBER 30, 2004 INVESTMENT INCOME: Dividends $38,105 Interest 2,103 $ 40,208 ---------- EXPENSES: Management fees 31,621 Registration fees 2,335 Trustees' fees 1,851 Accounting and administration expenses 1,510 Custodian fees 1,007 Pricing Fees 976 Legal and professional fees 774 Dividend disbursing and transfer agent fees and expenses 185 Reports and statements to shareholders 103 Distribution expenses - Class A 51 Other 1,996 42,409 ------- Less expenses absorbed or waived (10,651) Less waiver of distribution expenses - Class A (51) Less expenses paid indirectly (32) ---------- Total expenses 31,675 ---------- Net Investment Income 8,533 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 1,393,660 Net change in unrealized appreciation/depreciation of investments (582,199) ---------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 811,461 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 819,994 ========== See accompanying notes 14 DELAWARE SMALL CAP CORE FUND STATEMENTS OF CHANGES IN NET ASSETS Year Ended ------------------------------------------- 11/30/04 11/30/03 ---------- ---------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 8,533 $ 10,692 Net realized gain on investments 1,393,660 287,735 Net change in unrealized appreciation/depreciation of investments (582,199) 730,117 ---------- ---------- Net increase in net assets resulting from operations 819,994 1,028,544 ---------- ---------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A (43) - Institutional Class (13,285) (21,293) Net realized gain on investments: Class A (928) (1) Institutional Class (284,732) (147,913) ---------- ---------- (298,988) (169,207) ---------- ---------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 3,904 14,346 Institutional Class - 4 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 971 1 Institutional Class 298,017 169,206 ---------- ---------- 302,892 183,557 ---------- ---------- Cost of shares repurchased: Class A - (2,303) ---------- ---------- - (2,303) ---------- ---------- Increase in net assets derived from capital share transactions 302,892 181,254 ---------- ---------- Net Increase in Net Assets 823,898 1,040,591 NET ASSETS: Beginning of year 3,961,363 2,920,772 ---------- ---------- End of year (including undistributed net investment income of $6,576 and $10,627, respectively) $4,785,261 $3,961,363 ========== ========== See accompanying notes 15 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows: DELAWARE SMALL CAP CORE FUND CLASS A --------------------------------------------------------------------------------- YEAR ENDED 11/30/04 11/30/03 11/30/02 11/30/01 11/30/00 --------------------------------------------------------------------------------- Net asset value, beginning of period $13.080 $10.290 $11.130 $ 9.090 $8.930 Income from investment operations: Net investment income(1) 0.026 0.036 0.079 0.111 0.159 Net realized and unrealized gain on investments 2.481 3.350 0.069 2.082 0.720 --------------------------------------------------------------------------------- Total from investment operations 2.507 3.386 0.148 2.193 0.879 --------------------------------------------------------------------------------- Less dividends and distributions from: Net investment income (0.044) (0.075) (0.108) (0.153) (0.135) Net realized gain on investments (0.943) (0.521) (0.880) - (0.584) --------------------------------------------------------------------------------- Total dividends and distributions (0.987) (0.596) (0.988) (0.153) (0.719) --------------------------------------------------------------------------------- Net asset value, end of period $14.600 $13.080 $10.290 $11.130 $9.090 ================================================================================= Total return(2) 20.62% 35.19% 1.08% 24.42% 10.56% Ratios and supplemental data: Net assets, end of period (000 omitted) $ 20 $ 13 $ - $ - $ - Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.30% 1.34% 1.34% 1.18% 1.24% Ratio of net investment income to average net assets 0.20% 0.33% 0.74% 1.07% 1.81% Ratio of net investment income (loss) to average net assets prior to expense limitation and expenses paid indirectly (0.35%) (0.26%) 0.15% 0.63% 1.32% Portfolio turnover 136% 44% 76% 82% 125% (1) The average shares outstanding method has been applied for per share information. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager and distributor. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 16 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows: DELAWARE SMALL CAP CORE FUND INSTITUTIONAL CLASS ---------------------------------------------------------------------------- YEAR ENDED 11/30/04 11/30/03 11/30/02 11/30/01 11/30/00 ---------------------------------------------------------------------------- Net asset value, beginning of period $13.080 $10.290 $11.130 $9.090 $8.930 Income from investment operations: Net investment income(1) 0.026 0.036 0.079 0.111 0.159 Net realized and unrealized gain on investments 2.481 3.350 0.069 2.082 0.720 ---------------------------------------------------------------------------- Total from investment operations 2.507 3.386 0.148 2.193 0.879 ---------------------------------------------------------------------------- Less dividends and distributions from: Net investment income (0.044) (0.075) (0.108) (0.153) (0.135) Net realized gain on investments (0.943) (0.521) (0.880) - (0.584) ---------------------------------------------------------------------------- Total dividends and distributions (0.987) (0.596) (0.988) (0.153) (0.719) ---------------------------------------------------------------------------- Net asset value, end of period $14.600 $13.080 $10.290 $11.130 $9.090 ============================================================================ Total return(2) 20.62% 35.19% 1.08% 24.42% 10.56% Ratios and supplemental data: Net assets, end of period (000 omitted) $4,765 $3,948 $2,921 $2,890 $2,322 Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.00% 1.04% 1.04% 0.88% 0.94% Ratio of net investment income to average net assets 0.20% 0.33% 0.74% 1.07% 1.81% Ratio of net investment income (loss) to average net assets prior to expense limitation and expenses paid indirectly (0.05%) 0.04% 0.45% 0.93% 1.62% Portfolio turnover 136% 44% 76% 82% 125% (1) The average shares outstanding method has been applied for per share information. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 17 NOTES TO FINANCIAL STATEMENTS NOVEMBER 30, 2004 Delaware Group Equity Funds V (the "Trust") is organized as a Delaware statutory trust and offers three series: Delaware Dividend Income Fund, Delaware Small Cap Core Fund (formerly known as Small Cap Contrarian Fund) and Delaware Small Cap Value Fund. These financial statements and the related notes pertain to Delaware Small Cap Core Fund (the "Fund"). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class B, Class C, Class R and Institutional Class shares. Class A shares are sold with a front-end sales charge of up to 5.75%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately 8 years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to a limited group of investors. As of November 30, 2004, only Class A and Institutional Class have commenced operations. The investment objective of the Fund is to seek long-term capital appreciation. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Fund. SECURITY VALUATION- Equity securities, except those traded on the Nasdaq Stock Market, Inc. (NASDAQ), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the NASDAQ are valued in accordance with the NASDAQ Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between the bid and asked prices will be used. Short-term debt securities 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 under the direction of the Fund's Board of Trustees. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures, or with respect to foreign securities, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events). FEDERAL INCOME TAXES- The Fund intends to continue to qualify for federal income tax purposes 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. 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. 18 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. USE OF ESTIMATES- The preparation of financial statements in conformity with U.S. 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. Management fees and some other expenses are paid monthly. 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. Distributions received from investments in Real Estate Investment Trusts are recorded as dividend income on ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer. The Fund declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, annually. Through December 31, 2003, certain expenses of the Fund were paid through commission arrangements with brokers. The amount of these expenses was approximately $8 for the year ended November 30, 2004. In addition, the Fund may receive earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The earnings credits for the year ended November 30, 2004 were approximately $24. 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, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.75% on the first $500 million of average daily net assets of the Fund, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on daily average net assets in excess of $2.5 billion. DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse the Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs and extraordinary expenses, do not exceed 0.75% of average daily net assets through May 31, 2005. Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Fund pays DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. 19 Pursuant to a distribution agreement and distribution plan, the Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class B and C shares, and 0.60% of the average daily net assets of Class R shares. DDLP has elected voluntarily to waive such distribution and service fees at this time. Institutional Class shares pay no distribution and service expenses. At November 30, 2004, the Fund had liabilities payable to affiliates as follows: Investment management fee payable to DMC $427 Dividend disbursing, transfer agent, accounting and administration fees and other expenses payable to DSC 150 Other expenses payable to DMC and affiliates* 1,204 *DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement the Fund bears the cost of certain legal services expenses, including internal legal services provided to the Fund by DMC employees. For the year ended November 30, 2004, the Fund was charged $332 for internal legal services provided by DMC. Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust. These officers and trustees are paid no compensation by the Fund. 3. INVESTMENTS For the year ended November 30, 2004, the Fund made purchases of $5,631,065 and sales of $5,534,925 of investment securities other than short-term investments. At November 30, 2004, the cost of investments for federal income tax purposes was $4,348,521. At November 30, 2004, net unrealized appreciation was $435,181 of which $493,701 related to unrealized appreciation of investments and $58,520 related to unrealized depreciation of investments. 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. The tax character of dividends and distributions paid during the years ended November 30, 2004 and 2003 was as follows: 11/30/04 11/30/03 ---------------------- Ordinary income $ 94,305 $19,145 Long-term capital gain 204,683 150,062 ---------------------- Total dividends and distributions $298,988 $169,207 ---------------------- 20 As of November 30, 2004, the components of net assets on a tax basis were as follows: Shares of beneficial interest $2,949,010 Undistributed ordinary income 248,817 Undistributed long-term capital gains 1,152,253 Unrealized appreciation of investments 435,181 ---------- NET ASSETS $4,785,261 ========== For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. For the year ended November 30, 2004, the Fund recorded the following permanent reclassifications. Reclassifications are primarily due to distribution differences. Results of operations and net assets were not affected by these reclassifications. Undistributed net investment income Accumulated net realized gain (loss) - ----------------------------------- ------------------------------------ $744 $(744) 5. CAPITAL SHARES Transactions in capital shares were as follows: YEAR ENDED Year Ended 11/30/04 11/30/03 ------------------------------------------- Shares sold: Class A 312 1,177 Shares issued upon reinvestment of dividends and distributions: Class A 79 - Institutional Class 24,347 18,039 ------------------------------------------- 24,738 19,216 ------------------------------------------- Shares repurchased: Class A - (195) ------------------------------------------- - (195) ------------------------------------------- Net increase 24,738 19,021 =========================================== 6. CREDIT AND MARKET RISK The Fund may invest up to 15% 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 these securities may impair each Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. 21 The Fund invests in real estate investment trusts (REITs) and is subject to some of the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct holdings during the year ended November 30, 2004. The Fund's REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations. The Fund invests a significant portion of its assets in small companies and may be subject to certain risks associated with ownership of securities of small companies. Investments in small-sized companies may be more volatile than investments in larger companies for a number of reasons, which include more limited financial resources or a dependence on narrow product lines. 7. CONTRACTUAL OBLIGATIONS The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund's existing contracts and expects the risk of loss to be remote. 8. 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 January of each year. Please consult your tax advisor for proper treatment of this information. For the fiscal year ended November 30, 2004, the Fund designates distributions paid during the year as follows: (A) (B) Long-Term Ordinary Capital Gain Income Total (C) Distributions Distribution Distributions Qualifying(1) (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS ------------- ------------ ------------- ------------- 68% 32% 100% 100% - ------------------ (A) and (B) are based on a percentage of the Fund's total distributions. (C) is based on a percentage of the Fund's ordinary income distributions. (1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction. 22 For the fiscal year ended November 30, 2004 certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate up to a maximum amount of $298,988 to be taxed at a maximum rate of 15%. Complete information will be computed and reported in conjunction with your 2004 Form 1099-DIV. 23 Report of Registered Public Accounting Firm To the Shareholders and Board of Trustees Delaware Group Equity Funds V - Delaware Small Cap Core Fund We have audited the accompanying statements of net assets of the Delaware Small Cap Core Fund (one of the series constituting Delaware Group Equity Funds V) (the "Fund") as of November 30, 2004, 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 five years in the period then ended. 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 the standards of the Public Company Accounting Oversight Board (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 November 30, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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 the Delaware Small Cap Core Fund at November 30, 2004, 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 five years in the period then ended, in conformity with U.S. generally accepted accounting principles. Ernst & Young LLP Philadelphia, Pennsylvania January 14, 2005 24 DELAWARE INVESTMENTS FAMILY OF FUNDS BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM A mutual fund is governed by a Board of Trustees/Directors ("Trustees") which has oversight responsibility for the management of a fund's business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor and others that perform services for the fund. The independent fund trustees, in particular, are advocates for shareholder interests. The following is a list of the Trustees and Officers with certain background and related information. - ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN FUND POSITION(S) COMPLEX OVERSEEN BY OTHER DIRECTORSHIPS NAME, ADDRESS AND HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING TRUSTEE/ DIRECTOR HELD BY TRUSTEE/ BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER DIRECTOR OR OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEES JUDE T. DRISCOLL(2) Chairman, 4 Years - Since August 2000, Mr. 75 None 2005 Market Street President, Executive Officer Driscoll has served in various Philadelphia, PA 19103 Chief executive capacities at Executive 1 Year - Trustee different times at Delaware March 10, 1963 Officer and Investments(1) Trustee(4) Senior Vice President and Director of Fixed-Income Process - Conseco Capital Management (June 1998 - August 2000) - ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES WALTER P. BABICH Trustee 16 Years Board Chairman - 92 None 2005 Market Street Citadel Construction Philadelphia, PA 19103 Corporation (1989 - Present) October 1, 1927 - ------------------------------------------------------------------------------------------------------------------------------------ JOHN H. DURHAM Trustee 25 Years(3) Private Investor 92 Trustee - 2005 Market Street Abington Memorial Philadelphia, PA 19103 Hospital August 7, 1937 President/Director - 22 WR Corporation - ------------------------------------------------------------------------------------------------------------------------------------ JOHN A. FRY Trustee(4) 3 Year President - Franklin & 75 Director - 2005 Market Street Marshall College Community Health Philadelphia, PA 19103 (June 2002 - Present) Systems May 28, 1960 Executive Vice President - University of Pennsylvania (April 1995 - June 2002) - ------------------------------------------------------------------------------------------------------------------------------------ ANTHONY D. KNERR Trustee 11 Years Founder/Managing Director - 92 None 2005 Market Street Anthony Knerr & Associates Philadelphia, PA 19103 (Strategic Consulting) (1990 - Present) December 7, 1938 - ------------------------------------------------------------------------------------------------------------------------------------ ANN R. LEVEN Trustee 15 Years Treasurer/Chief Fiscal Officer 92 Director and Audit 2005 Market Street - National Gallery of Art Committee Philadelphia, PA 19103 (1994 - 1999) Chairperson - Andy Warhol November 1, 1940 Foundation Director - Systemax Inc. - ------------------------------------------------------------------------------------------------------------------------------------ 25 - ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN FUND POSITION(S) COMPLEX OVERSEEN BY OTHER DIRECTORSHIPS NAME, ADDRESS AND HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S) DURING TRUSTEE/ DIRECTOR HELD BY TRUSTEE/ BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER DIRECTOR OR OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES (continued) - ------------------------------------------------------------------------------------------------------------------------------------ THOMAS F. MADISON Trustee 10 Years President/Chief Executive 92 Director - 2005 Market Street Officer - MLM Partners, Inc. Banner Health Philadelphia, PA 19103 (Small Business Investing & Consulting) Director - February 25, 1936 (January 1993 - Present) Center Point Energy Director - Digital River Inc. Director - Rimage Corporation Director - Valmont Industries, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ JANET L. YEOMANS Trustee 5 Years Vice President/Mergers & 92 None 2005 Market Street Acquisitions - Philadelphia, PA 19103 3M Corporation (January 2003 - Present) July 31, 1948 Ms. Yeomans has held various management positions at 3M Corporation since 1983. - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS JOSEPH H. HASTINGS Executive Vice 1 Year Mr. Hastings has served in 92 None(5) 2005 Market Street President and various executive capacities Philadelphia, PA 19103 Chief Financial at different times at Delaware Officer Investments December 19, 1949 - ------------------------------------------------------------------------------------------------------------------------------------ RICHELLE S. MAESTRO Executive Vice 1 Year Ms. Maestro has served in 92 None(5) 2005 Market Street President, Chief various executive capacities Philadelphia, PA 19103 Legal Officer at different times at Delaware and Secretary Investments November 26, 1957 - ------------------------------------------------------------------------------------------------------------------------------------ MICHAEL P. BISHOF Senior Vice 8 Years Mr. Bishof has served in 92 None(5) 2005 Market Street President and various executive capacities Philadelphia, PA 19103 Treasurer at different times at Delaware Investments August 18, 1962 - ------------------------------------------------------------------------------------------------------------------------------------ (1) Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the registrant's investment advisor, principal underwriter and its transfer agent. (2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an executive officer of the Fund's manager and distributor. (3) Mr. Durham served as a Director Emeritus from 1995 through 1998. (4) Mr. Driscoll and Mr. Fry are not Trustees of the funds of Voyageur Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual Funds III and Voyageur Tax Free Funds. (5) Mr. Hastings, Mr. Bishof and Ms. Maestro also serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter and transfer agent as the registrant. The Statement of Additional Information for the Fund(s) includes additional information about the Trustees is available, without charge, upon request by calling 800 523-1918. 26 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) VALUE-EQUITY ANNUAL REPORT NOVEMBER 30, 2004 - -------------------------------------------------------------------------------- DELAWARE DIVIDEND INCOME FUND [LOGO] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS - ----------------------------------------------------------------- PORTFOLIO MANAGEMENT REVIEW 1 - ----------------------------------------------------------------- PERFORMANCE SUMMARY 3 - ----------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES 5 - ----------------------------------------------------------------- SECTOR ALLOCATION 6 - ----------------------------------------------------------------- FINANCIAL STATEMENTS: Statement of Net Assets 8 Statement of Operations 13 Statements of Changes in Net Assets 14 Financial Highlights 15 Notes to Financial Statements 19 - ----------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 22 - ----------------------------------------------------------------- BOARD OF TRUSTEES/OFFICERS 23 - ----------------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2004 Delaware Distributors, L.P. PORTFOLIO DELAWARE DIVIDEND INCOME FUND MANAGEMENT REVIEW December 10, 2004 FUND MANAGERS Damon J. Andres Senior Portfolio Manager Nancy M. Crouse Senior Portfolio Manager Timothy L. Rabe Senior Portfolio Manager Q: PLEASE DESCRIBE THE NATURE OF THE ECONOMY IN WHICH YOU INVESTED FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2004. A: The 12-month period began on a positive note for the U.S. stock market, with prices increasing until early April. The market then undertook a rather lengthy period of choppiness, owing to investor uncertainty that stemmed from the political environment, rapidly rising oil prices, ongoing geopolitical unrest, and the potential for slowing economic growth, among other key factors (source: Lipper Inc.). With the recent conclusion of the presidential election, at least one element of uncertainty has been effectively removed, which is encouraging. Recent data suggest that continued economic growth appears to be intact and that job growth has accelerated (source: U.S. Bureau of Labor Statistics). Also, oil prices reached the lofty level of $55 per barrel in October, but retreated somewhat in the final month of the period. In general, higher energy prices have neither caused a spike in overall inflation in the U.S. nor have they held back consumer spending (source: Bloomberg L.P.). Lastly, the Federal Reserve has managed the increase in short-term rates in a way that has not had a negative impact on the stock market. During the 12-month period, some of the best-performing sectors of the Standard & Poor's (S&P) 500 Index were those typically preferred by investors for their defensive characteristics, such as the utilities group. Aggressive stocks, like those found in the technology sector, trailed the broad market in 2004, which we take as an indication of the risk aversion present in the market. Taken together, we have viewed these trends as contrarian indicators, pointing to the possibility of solid equity performance moving forward. Q: HOW DID THE FUND PERFORM RELATIVE TO ITS GENERAL BENCHMARK AND FUND PEER GROUP FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2004? A: Delaware Dividend Income Fund returned +12.38% (Class A shares at net asset value with distributions reinvested) for the 12-month period ended November 30, 2004. For comparison, its collective benchmark, the S&P 500 Index, gained +12.85% and its peer group, as measured by the Lipper Income Funds average, appreciated +9.21% for the same time period (source: Lipper Inc.). Q: PLEASE DESCRIBE THE PERFORMANCE OF THE FUND'S STOCKS FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2004. A: In general, Fund performance benefited from the general shift in investor preference from more aggressive types of common stocks, such as those associated with the technology arena, to those with more stable operations and a general orientation toward paying dividends. Specifically, our common stocks outperformed the Fund's collective benchmark, the S&P 500 Index. However, we lagged the Russell 1000 Value Index, which serves as our internal performance benchmark, with security selection and sector allocations detracting from Fund return (source: Wilshire Associates Inc.). Among preferred securities, a light fall calendar kept investor focus on secondary issues, with the bank sector being rather strong. Agency-related preferred exhibited volatility due to ongoing concerns about the status of such government-sponsored enterprises (source: Citigroup Global Markets Inc.). Q: HOW DID THE FUND'S FIXED INCOME INVESTMENTS PERFORM FOR THE PERIOD ENDED NOVEMBER 30, 2004? A: The Fund invests in high-yield corporate bonds, which experienced a generally favorable investment climate for the fiscal year ended November 30, 2004. Given the typically low yields associated with many income-oriented securities during 2004, high-yielding corporate bonds appealed to investors, particularly given the generally strengthening nature of corporate balance sheets (source: U.S. Bureau of Economic Analysis). The Bear Stearns High Yield Index, our benchmark for this portion of the Fund, gained a solid +12.02% for the 12-month period (source: Bloomberg L.P.). We generated excess return across many areas of the high-yield corporate bond market, which we credit to our focus on thorough market and securities research in order to identify securities with appealing fundamentals and attractive valuations. We have continued to dig deeply into both new issue niche credits and battered issues that we believe may recover with ongoing economic strength and increased investor demand. Also, we have continued to focus on some smaller companies that have generally been out of favor but that have tended to possess solid fundamentals and favorable relative value. During the 12-month period, we favored the cable, chemical, and packaging sectors while we remained cautious of bonds issued by airline, broadcasting, and lodging-type companies. 1 Q: HOW ABOUT REAL ESTATE INVESTMENTS? A: The Fund invests in real estate investment trusts (REITs), which have rebounded nicely from the slump they experienced in the second quarter of 2004. During April, REITs were treated unfairly in our opinion, with many investors treating them like bonds due to their competitive income streams. REITs got caught up in a general decline in bond prices, which began when economic data signaled that interest rates might move higher. When the interest rate environment calmed and the economy continued on its expansionary path, investor interest in REITs resumed, leading to strong performances for the 12-month period; the NAREIT Equity REIT Index appreciated +29.88% for the fiscal year (source: NAREIT, Inc.). Q: WHAT INDIVIDUAL BONDS PERFORMED WELL AND WHICH ONES DISAPPOINTED DURING THE 12-MONTH PERIOD? A: Portola Packaging faced some short-term financing challenges during the 12 months while Advanced Accessories Systems experienced weakness that typified the automotive sector. The bonds of chemical manufacturer Rhodia, while struggling through much of the period, exhibited a measure of strength in the closing months of the fiscal year. We believe these bonds continue to hold upside potential, and we thus held them in the portfolio as of fiscal year-end. Bonds that exhibited strength included those of Kmart, which reflected what we believe has been a carefully engineered rebuilding process, including select real estate sales. Another retailer whose bonds benefited the Fund was J. Crew. By period end, we had liquidated these two retail-oriented bonds. Also, we saw our exposure to Gold Kist appreciate, as the poultry producer announced an initial public offering (IPO) during the period and benefited from rising chicken prices, given health-related concerns involving beef. We continued to hold this position at fiscal year-end. Q: WHAT REIT INVESTMENTS PERFORMED WELL DURING THE FISCAL YEAR AND WHICH DID NOT? A: We underperformed in the apartment sector. Our position in Apartment Investment and Management Company (AIMCO) gained nearly 10 percent, yet lagged the market due to continued sector weakness brought about by aggressive multifamily construction and the attractiveness of low mortgage rates for potential renters. We sold this position during the period, as we did General Growth Properties, a regional mall manager that faced relatively high levels of variable-rate debt. This can adversely impact earnings in a rising rate environment. Within this same sector, we gained 37 percent with our position in Simon Property Group, which largely manages higher-end retail properties. We maintained this position in Simon Property at period-end, as we did Ramco-Gershenson Properties, a strip mall manager that modestly underperformed the market due to a convertible security issuance and investor concern for the prospects of the stores that anchor Ramco's properties. In the industrial/office space, we benefited from a position in Reckson Associates, which gained 42 percent for the fiscal year. Rising a like amount was MortgageIT Holdings, a company that we believed might benefit from the continued solid housing environment. By period-end, we had sold our Reckson position but maintained our MortgageIT REIT. Q: PLEASE LIST SOME COMMON STOCKS THAT UNDERPERFORMED THE BENCHMARK? A: We lost a measure of performance with consumer growth stocks, which had the greatest downside influence on Fund performance. Big name pharmaceuticals struggled during the period, and our positions in Merck and Pfizer experienced poor performances. Consumer staple names also did not experience a favorable environment for the period, and our overweighting in underperforming food and beverage stocks caused a drag on Fund return. Our non-banking stocks impeded fund performance, as MBNA and Morgan Stanley experienced slight negative returns for the fiscal year. Fortunately, we gained excess return in our banking stocks, among which Bank of America led the way with a 27 percent appreciation for the 12-month period. As of November 30, 2004, we still held each of these stocks in the Fund's portfolio. Q: CONVERSELY, COULD YOU IDENTIFY SOME ISSUES WERE GENERATED EXCESS RETURN FOR THE FUND? A: We enjoyed sound performance with Starwood Hotels & Worldwide Resorts, which rose 55 percent for the fiscal year period due to a resurgence in travel and leisure-related activities. The dramatic run up in petroleum prices during the period greatly affected energy-related companies with Kerr-McGee and ChevronTexaco gaining 53 percent and 50 percent, respectively. Our belief that the economy's continued expansion might benefit the basic materials group resulted in solid gains for the fiscal year in Dow Chemical, up 38 percent, and Packaging Corporation of America (PCA) which rose 21 percent. As of fiscal year-end we maintained positions in all of these stocks except for PCA. 2 DELAWARE DIVIDEND INCOME FUND The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. A rise/fall in interest rates can have a significant impact or bond prices and the net asset value (NAV) of the Fund. Funds that invest in Bonds can lose their value as interest rates rise and an investor can lose principal. Please obtain the performance data for the most recent month end by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com/performance. You should consider the investment objectives, risks, charges, and expenses of the investment carefully before investing. The Delaware Dividend Income Fund prospectus contains this and other important information about the investment company. Please request a prospectus by calling 800 523-1918. Read it carefully before you invest or send money. FUND PERFORMANCE Average Annual Total Returns Through November 30, 2004 Lifetime Five Years One Year - ------------------------------------------------------------------------- Class A (Est. 12/2/96) Excluding Sales Charge +10.64% +9.02% +12.38% Including Sales Charge +9.83% +7.72% +5.94% - ------------------------------------------------------------------------- Class B (Est. 10/1/03) Excluding Sales Charge +12.17% +11.54% Including Sales Charge + 9.43% + 7.54% - ------------------------------------------------------------------------- Class C (Est. 10/1/03) Excluding Sales Charge +12.17% +11.53% Including Sales Charge +12.17% +10.53% - ------------------------------------------------------------------------- Returns reflect the reinvestment of all distributions and any applicable sales charges as noted below. Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or the investment was not redeemed. The Fund offers Class A, B, C, R, and Institutional Class shares. Class A shares are sold with a front-end sales charge of up to 5.75% and have an annual distribution and service fee of up to 0.30%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. They are also subject to an annual distribution and service fee of 1%. Class C shares are sold with a contingent deferred sales charge of 1% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1%. The annual total return for the lifetime and one-year periods ended November 30, 2004 for Delaware Dividend Income Fund's Class R shares were +12.63% and +11.86%, respectively. Class R shares were first made available on October 1, 2003 and are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of 0.60%. The average annual total returns for lifetime, five-year, and one-year periods ended November 30, 2004 for Delaware Dividend Income Fund's Institutional Class were +10.68%, +9.10%, and +12.55%, respectively. Institutional Class shares were first made available on December 2, 1996 and are available without sales or asset-based distribution charges only to certain eligible institutional accounts. An expense limitation was in effect for all classes of Delaware Dividend Income Fund during the periods shown. Performance would have been lower had the expense limitation not been in effect. The performance table does not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. Nasdaq Institutional Class symbol: DDIIX Nasdaq Class R symbol: DDDRX 3 DELAWARE DIVIDEND INCOME FUND FUND BASICS As of November 30, 2004 - -------------------------------------------------------------------------------- FUND OBJECTIVE: The Fund seeks to provide high current income and an investment that has the potential for capital appreciation. - -------------------------------------------------------------------------------- TOTAL FUND NET ASSETS: $ 219.98 million - -------------------------------------------------------------------------------- NUMBER OF HOLDINGS: 221 - -------------------------------------------------------------------------------- FUND START DATE: December 2, 1996 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- YOUR FUND MANAGERS: Damon J. Andres earned a bachelor's degree in business administration with an emphasis in finance and accounting from the University of Richmond. Prior to joining Delaware Investments in 1994, he performed investment consulting services as a Consulting Associate with Cambridge Associates, Inc. in Arlington, Virginia. Mr. Andres is a CFA charterholder. Nancy M. Crouse earned a bachelor's degree form Lafayette College and an MBA from the University of Pittsburgh. Before joining Delaware Investments in 1993, she served as vice president at CoreStates Investment Advisers, where she performed securities analysis and managed balanced portfolios. Ms. Crouse is a CFA charterholder. Timothy L. Rabe received a bachelor's degree in finance from the University of Illinois. Prior to joining Delaware Investments in 2000, Mr. Rabe was a high-yield portfolio manager for Conseco Capital Management. Before that, he worked as a tax analyst for The Northern Trust Company. Mr. Rabe is a CFA charterholder. - -------------------------------------------------------------------------------- NASDAQ SYMBOLS: Class A DDIAX Class B DDDBX Class C DDICX PERFORMANCE OF A $10,000 INVESTMENT December 2, 1996 through November 30, 2004 DIVIDEND INCOME FUND S&P 500 INDEX --------------- ------------- Inception through 31-Dec-96 $9,894 $10,000 31-Dec-96 to 30-Nov-97 $13,036 $13,110 30-Nov-98 $13,325 $16,214 30-Nov-99 $13,743 $19,601 30-Nov-00 $14,796 $18,772 30-Nov-01 $15,369 $16,480 30-Nov-02 $15,765 $13,759 30-Nov-03 $18,832 $15,834 30-Nov-04 $21,159 $17,871 Chart assumes $10,000 invested on December 2, 1996 and includes the effect of a 5.75% front-end sales charge and the reinvestment of all distributions. Performance prior to October 1, 2003 does not reflect the impact of distribution and service (12b-1) fees and the higher management and transfer agency fees currently borne by holders of Class A shares. Performance for other Fund classes will vary due to differing charges and expenses. The chart also assumes $10,000 invested in the S&P 500 Index at that month's end, December 31, 1996. After December 31, 1996, returns plotted on the chart were as of the last day of each month shown. The S&P 500 Index is an unmanaged composite of mostly large-capitalization U.S. companies. An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index. Past performance is not a guarantee of future results. An expense limitation was in effect for the period shown. Performance would have been lower had the expense limitation not been in effect. The performance graph does not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. 4 DISCLOSURE For the Period June 1, 2004 to November 30, 2004 OF FUND EXPENSES As a shareholder of the fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2004 to November 30, 2004. ACTUAL EXPENSES The first section of the table shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund's actual expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions. "Expenses Paid During Period" are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). DELAWARE DIVIDEND INCOME FUND EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000 Beginning Ending Annualized Expenses Account Account Expense Paid During Value Value Ratio Period 6/1/04 11/30/04 6/1/04 to 11/30/04 - --------------------------------------------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,081.30 1.00% $5.20 Class B 1,000.00 1,077.50 1.75% 9.09 Class C 1,000.00 1,077.50 1.75% 9.09 Class R 1,000.00 1,079.50 1.35% 7.02 Institutional Class 1,000.00 1,082.70 0.75% 3.91 - --------------------------------------------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% RETURN BEFORE EXPENSES) Class A $1,000.00 $1,020.00 1.00% $5.05 Class B 1,000.00 1,016.25 1.75% 8.82 Class C 1,000.00 1,016.25 1.75% 8.82 Class R 1,000.00 1,018.25 1.35% 6.81 Institutional Class 1,000.00 1,021.25 0.75% 3.79 - --------------------------------------------------------------------------------------------------------------------- 5 SECTOR ALLOCATION As of November 30, 2004 DELAWARE DIVIDEND INCOME FUND The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart, or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following chart lists the Fund's categories of portfolio holdings as a percent of total net assets and is provided in compliance with such requirement. PERCENTAGE SECTOR OF NET ASSETS - ------------------------------------------------------------------------ COMMON STOCK 57.48% - ------------------------------------------------------------------------ Aerospace & Defense 1.24% Banking, Finance & Insurance 9.34% Cable, Media & Publishing 1.27% Chemicals 1.22% Computers & Technology 1.68% Consumer Products 1.27% Electronics & Electrical Equipment 2.62% Energy 4.00% Food, Beverage & Tobacco 3.23% Healthcare & Pharmaceuticals 3.65% Investment Companies 0.58% Leisure, Lodging & Entertainment 1.68% Metals & Mining 1.26% Paper & Forest Products 2.07% REITs 15.95% Telecommunications 2.76% Utilities 3.66% - ------------------------------------------------------------------------ CORPORATE BONDS 18.09% - ------------------------------------------------------------------------ Aerospace & Defense 0.20% Automobiles & Automotive Parts 0.23% Banking, Finance & Insurance 0.44% Buildings & Materials 0.07% Cable, Media & Publishing 2.77% Chemicals 0.43% Computers & Technology 0.56% Consumer Services 0.39% Energy 1.33% Environmental Services 0.38% Food, Beverage & Tobacco 0.60% Healthcare & Pharmaceuticals 1.09% Industry Machinery 0.25% Leisure, Lodging & Entertainment 3.24% Packaging & Containers 0.76% Paper & Forest Products 0.69% REITs 0.28% Retail 0.61% Telecommunications 1.84% Textiles, Apparel & Furniture 0.24% Transportation & Shipping 0.42% Utilities 1.27% PERCENTAGE SECTOR OF NET ASSETS - ------------------------------------------------------------------------ FOREIGN BONDS 4.39% - ------------------------------------------------------------------------ Bahamas 0.17% Bermuda 0.12% Canada 1.40% Cayman Islands 0.51% France 0.19% Ireland 0.54% Liberia 0.25% Luxembourg 0.08% Marshall Island 0.14% Netherlands 0.10% Norway 0.29% Singapore 0.20% Sweden 0.21% Virgin Islands 0.19% - ------------------------------------------------------------------------ CONVERTIBLE BONDS 4.12% - ------------------------------------------------------------------------ Banking, Finance & Insurance 0.50% Cable, Media & Publishing 0.59% Computers & Technology 0.48% Consumer Services 0.25% Electronics & Electrical Equipment 0.12% Energy 0.49% Healthcare & Pharmaceuticals 0.57% Industrial Machinery 0.23% Leisure, Lodging & Entertainment 0.22% REITs 0.06% Retail 0.40% Utilities 0.21% - ------------------------------------------------------------------------ CONVERTIBLE PREFERRED STOCK 2.77% - ------------------------------------------------------------------------ Automobiles & Automotive Parts 0.31% Banking, Finance & Insurance 0.40% Cable, Media & Publishing 0.55% Energy 0.27% Food, Beverage & Tobacco 0.30% Paper & Forest Products 0.33% Telecommunications 0.55% Utilities 0.06% 6 SECTOR ALLOCATION DELAWARE DIVIDEND INCOME FUND (CONTINUED) PERCENTAGE SECTOR OF NET ASSETS - ------------------------------------------------------------------------ PREFERRED STOCK 1.61% - ------------------------------------------------------------------------ Energy 0.11% Leisure, Lodging & Entertainment 0.28% REITs 1.16% Utilities 0.06% - ------------------------------------------------------------------------ EXCHANGE TRADED FUNDS 0.79% - ------------------------------------------------------------------------ WARRANTS 0.00% - ------------------------------------------------------------------------ REPURCHASE AGREEMENTS 9.01% - ------------------------------------------------------------------------ TOTAL MARKET VALUE OF SECURITIES 98.26% - ------------------------------------------------------------------------ RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES 1.74% - ------------------------------------------------------------------------ TOTAL NET ASSETS 100.00% - ------------------------------------------------------------------------ 7 STATEMENT DELAWARE DIVIDEND INCOME FUND OF NET ASSETS November 30, 2004 Number of Market Shares Value COMMON STOCK -- 57.48% Aerospace & Defense - 1.24% Goodrich (B.F.) 85,700 $2,720,975 ---------- 2,720,975 ---------- Banking, Finance & Insurance - 9.34% Bank of America 58,736 2,717,715 Citigroup 58,500 2,617,875 Friedman Billings Ramsey Group Class A 106,425 2,034,846 JP Morgan Chase 71,100 2,676,915 MBNA 104,500 2,775,520 Mellon Financial 82,700 2,416,494 Morgan Stanley 53,700 2,725,275 US Bancorp 87,000 2,577,810 ---------- 20,542,450 ---------- Cable, Media & Publishing - 1.27% Viacom Class B 80,700 2,800,290 ---------- 2,800,290 ---------- Chemicals - 1.22% Dow Chemical 53,100 2,679,957 ---------- 2,679,957 ---------- Computers & Technology - 1.68% Intel 79,300 1,772,355 Pitney Bowes 43,900 1,921,503 ---------- 3,693,858 ---------- Consumer Products - 1.27% Clorox 50,600 2,789,072 ---------- 2,789,072 ---------- Electronics & Electrical Equipment - 2.62% Emerson Electric 32,500 2,171,650 General Electric 92,800 3,281,408 +Solectron 50,968 318,550 ---------- 5,771,608 ---------- Energy - 4.00% ChevronTexaco 46,300 2,527,980 Exxon Mobil 57,200 2,931,500 Kerr-McGee 53,600 3,335,528 ---------- 8,795,008 ---------- Food, Beverage & Tobacco - 3.23% Anheuser-Busch 51,900 2,599,671 General Mills 42,500 1,933,325 PepsiCo 51,600 2,575,356 ---------- 7,108,352 ---------- Healthcare & Pharmaceuticals - 3.65% Merck 39,800 1,115,196 Pfizer 101,900 2,829,763 +Tenet Healthcare 138,300 1,500,555 Wyeth 64,600 2,575,602 ---------- 8,021,116 ---------- Investment Companies - 0.58% Gladstone Capital 52,000 1,275,560 ---------- 1,275,560 ---------- Leisure, Lodging & Entertainment - 1.68% +Jameson Inns 785,000 1,373,750 Starwood Hotels & Resorts Worldwide 44,600 2,332,134 ---------- 3,705,884 ---------- Number of Market Shares Value COMMON STOCK (continued) Metals & Mining - 1.26% Alcoa 81,500 $ 2,769,370 ------------ 2,769,370 ------------ Paper & Forest Products - 2.07% International Paper 58,700 2,437,224 Weyerhaeuser 32,100 2,118,600 ------------ 4,555,824 ------------ REITs - 15.95% American Home Mortgage Investment 54,900 1,797,426 Brandywine Realty Trust 95,700 2,722,665 BRE Properties Class A 81,400 3,308,095 CarrAmerica Realty 76,000 2,461,640 CBL & Associates Properties 11,500 842,835 Developers Diversified Realty 60,600 2,608,830 Duke Realty 45,900 1,585,845 Equity Office Properties Trust 60,600 1,663,470 Federal Realty Investment Trust 41,300 2,071,195 +*Fieldstone Investments 144A 26,200 451,950 First Potomac Realty Trust 53,800 1,236,862 Hersha Hospitality Trust 95,000 941,450 +*KKR Financial 144A 141,000 1,431,150 Liberty Property Trust 30,400 1,246,400 +*Medical Properties Trust 144A 11,300 113,000 +MortgageIT Holdings 145,300 2,484,630 Prentiss Properties Trust 53,100 1,985,409 +Saxon Capital 37,000 839,900 Simon Property Group 34,300 2,129,344 Sunset Financial 84,400 876,072 Vornado Realty Trust 31,200 2,293,200 ------------ 35,091,368 ------------ Telecommunications - 2.76% Alltel 48,500 2,749,465 BCE 136,600 3,312,550 ------------ 6,062,015 ------------ Utilities - 3.66% Dominion Resources 41,000 2,684,270 Duke Energy 105,300 2,661,984 FPL Group 38,600 2,714,738 ------------ 8,060,992 ------------ TOTAL COMMON STOCK (cost $119,932,258) 126,443,699 ------------ Principal Amount (U.S. $) CORPORATE BONDS - 18.09% Aerospace & Defense - 0.20% Armor Holdings 8.25% 8/15/13 $395,000 443,388 ------------ 443,388 ------------ Automobiles & Automotive Parts - 0.23% Advanced Accessory Systems 10.75% 6/15/11 200,000 191,000 *Collins & Aikman Products 144A 12.875% 8/15/12 360,000 311,400 ------------ 502,400 ------------ 8 STATEMENT DELAWARE DIVIDEND INCOME FUND OF NET ASSETS (CONTINUED) Principal Market Amount (U.S. $) Value CORPORATE BONDS (continued) Banking, Finance & Insurance - 0.44% *ETrade Financial 144A 8.00% 6/15/11 $ 405,000 $ 434,362 *Farmers Exchange Capital 144A 7.20% 7/15/48 228,000 226,927 Labranche & Company 11.00% 5/15/12 215,000 231,125 Midland Funding II 11.75% 7/23/05 73,304 76,952 ---------- 969,366 ---------- Building & Materials - 0.07% *Lone Star Industries 144A 8.85% 6/15/05 161,000 164,709 ---------- 164,709 ---------- Cable, Media & Publishing - 2.77% American Media Operation 10.25% 5/1/09 260,000 273,000 Cenveo 7.875% 12/1/13 140,000 133,000 9.625% 3/15/12 325,000 367,250 ++Charter Communications Holdings 12.125% 1/15/12 1,000,000 620,000 *Charter Communications Inc 144A 5.875% 11/16/09 500,000 535,000 *Charter Communications Operating 144A 8.00% 4/30/12 505,000 525,200 CSC Holdings 10.50% 5/15/16 655,000 745,062 Dex Media West 9.875% 8/15/13 115,000 133,400 Insight Midwest 10.50% 11/1/10 860,000 945,999 Lodgenet Entertainment 9.50% 6/15/13 490,000 543,900 Mediacom Capital 8.50% 4/15/08 225,000 230,625 Nextmedia Operating 10.75% 7/1/11 410,000 460,738 Sheridan Acquisition 10.25% 8/15/11 306,000 335,835 XM Satellite Radio 12.00% 6/15/10 200,000 238,000 ---------- 6,087,009 ---------- Chemicals - 0.43% Huntsman International 9.875% 3/1/09 240,000 263,400 Lyondell Chemical 9.875% 5/1/07 184,000 194,580 Nalco 7.75% 11/15/11 320,000 346,400 Witco 6.875% 2/1/26 155,000 140,275 ---------- 944,655 ---------- Computers & Technology - 0.56% Fairchild Semiconductor International 5.00% 11/1/08 850,000 859,563 Stratus Technologies 10.375% 12/1/08 410,000 369,000 ---------- 1,228,563 ---------- Consumer Services - 0.39% Adesa 7.625% 6/15/12 425,000 448,375 Corrections Corporation of America 9.875% 5/1/09 60,000 67,800 Service Corp International 6.75% 4/1/16 330,000 348,150 ---------- 864,325 ---------- Energy - 1.33% *Dynegy Holdings 144A 10.125% 7/15/13 518,000 607,354 El Paso Natural Gas 7.625% 8/1/10 100,000 109,000 El Paso Production Holding 7.75% 6/1/13 505,000 528,987 *Hilcorp Energy 144A 10.50% 9/1/10 235,000 267,900 *Hornbeck Offshore 144A 6.125% 12/1/14 465,000 461,513 Principal Market Amount (U.S. $) Value CORPORATE BONDS (continued) Energy (continued) Plains Exploration & Production 7.125% 6/15/14 $ 335,000 $ 370,175 *Pride International 144A 7.375% 7/15/14 345,000 383,813 Tennessee Gas Pipeline 8.375% 6/15/32 185,000 204,194 ---------- 2,932,936 ---------- Environmental Services - 0.38% IESI 10.25% 6/15/12 510,000 595,425 *IMCO Recycling 144A 9.00% 11/15/14 230,000 238,625 ---------- 834,050 ---------- Food, Beverage & Tobacco - 0.60% *Commonwealth Brands 144A 10.625% 9/1/08 395,000 412,775 Cott Beverages 8.00% 12/15/11 430,000 469,775 Gold Kist 10.25% 3/15/14 23,000 26,795 *Le-Natures 144A 10.00% 6/15/13 360,000 399,600 ---------- 1,308,945 ---------- Healthcare & Pharmaceuticals - 1.09% Ameripath 10.50% 4/1/13 190,000 196,650 HCA 5.50% 12/1/09 180,000 179,329 *Mariner Health 144A 8.25% 12/15/13 590,000 709,150 Province Healthcare 7.50% 6/1/13 550,000 621,500 Universal Hospital Services 10.125% 11/1/11 325,000 344,500 *US Oncology 144A 10.75% 8/15/14 300,000 344,250 ---------- 2,395,379 ---------- Industrial Machinery - 0.25% Aearo 8.25% 4/15/12 150,000 155,250 Interline Brands 11.50% 5/15/11 195,000 218,400 ++Mueller Holdings 14.75% 4/15/14 260,000 176,800 ---------- 550,450 ---------- Leisure, Lodging & Entertainment - 3.24% Ameristar Casinos 10.75% 2/15/09 680,000 758,200 Boyd Gaming 9.25% 8/1/09 770,000 832,562 Caesars Entertainment 9.375% 2/15/07 430,000 474,075 Gaylord Entertainment 8.00% 11/15/13 250,000 271,250 *Gaylord Entertainment 144A 6.75% 11/15/14 290,000 291,450 Mandalay Resort 10.25% 8/1/07 650,000 739,375 MGM MIRAGE 9.75% 6/1/07 650,000 723,938 Penn National Gaming 8.875% 3/15/10 215,000 237,038 11.125% 3/1/08 880,000 944,899 Venetian Casino Resort 11.00% 6/15/10 675,000 772,874 Wheeling Island Gaming 10.125% 12/15/09 375,000 404,063 *Wynn Las Vegas 144A 6.625% 12/1/14 690,000 681,375 ---------- 7,131,099 ---------- Packaging & Containers - 0.76% AEP Industries 9.875% 11/15/07 495,000 503,662 *Owens-Brockway 144A 6.75% 12/1/14 235,000 236,763 *Port Townsend Paper 144A 11.00% 4/15/11 440,000 468,600 Portola Packaging 8.25% 2/1/12 265,000 202,063 Radnor Holdings 11.00% 3/15/10 165,000 136,125 o*Radnor Holdings 144A 8.82% 4/15/09 130,000 131,950 ---------- 1,679,163 ---------- 9 STATEMENT DELAWARE DIVIDEND INCOME FUND OF NET ASSETS (CONTINUED) Principal Market Amount (U.S. $) Value CORPORATE BONDS (continued) Paper & Forest Products - 0.69% *Boise Cascade 144A 7.125% 10/15/14 $ 215,000 $ 225,750 Fort James 7.75% 11/15/23 805,000 933,800 Potlatch 12.50% 12/1/09 282,000 348,483 ---------- 1,508,033 ---------- REITs - 0.28% BF Saul 7.50% 3/1/14 415,000 427,450 Tanger Properties 9.125% 2/15/08 163,000 183,375 ---------- 610,825 ---------- Retail - 0.61% O'Charleys 9.00% 11/1/13 325,000 342,063 Office Depot 10.00% 7/15/08 182,000 218,400 Perkins Family Restaurants 10.125% 12/15/07 170,000 174,675 Petco Animal Supplies 10.75% 11/1/11 350,000 411,250 VICORP Restaurants 10.50% 4/15/11 195,000 195,000 ---------- 1,341,388 ---------- Telecommunications - 1.84% Alaska Communications Systems Holdings 9.875% 8/15/11 395,000 416,725 Centennial Cellular Operating 10.125% 6/15/13 350,000 383,250 Cincinnati Bell 8.375% 1/15/14 540,000 541,350 Citizens Communications 8.50% 5/15/06 90,000 96,863 MCI 5.908% 5/1/07 150,000 152,250 6.688% 5/1/09 365,000 368,650 Nextel Communications 5.95% 3/15/14 750,000 766,874 *Qwest 144A 7.875% 9/1/11 615,000 659,588 *Qwest Services 144A 14.00% 12/15/10 300,000 357,000 *UbiquiTel Operating 144A 9.875% 3/1/11 150,000 165,375 o*US LEC 144A 10.67% 10/1/09 150,000 149,250 ---------- 4,057,175 ---------- Textiles, Apparel & Furniture - 0.24% Warnaco 8.875% 6/15/13 480,000 531,600 ---------- 531,600 ---------- Transportation & Shipping - 0.42% Delta Air Lines 7.299% 9/18/06 30,000 23,748 *Horizon Lines 144A 9.00% 11/1/12 260,000 285,350 Kansas City Southern Railway 9.50% 10/1/08 380,000 432,250 Seabulk International 9.50% 8/15/13 164,000 177,120 ---------- 918,468 ---------- Utilities - 1.27% Avista 9.75% 6/1/08 273,000 318,528 o*Calpine 144A 7.82% 7/15/07 439,438 392,198 *Calpine 144A 9.625% 9/30/14 175,000 174,781 Elwood Energy 8.159% 7/5/26 268,081 291,538 Principal Market Amount (U.S. $) Value CORPORATE BONDS (continued) Utilities (continued) Midwest Generation 8.30% 7/2/09 $ 165,000 $ 178,613 8.75% 5/1/34 300,000 341,625 *NRG Energy 144A 8.00% 12/15/13 650,000 721,500 PSE&G Energy Holdings 7.75% 4/16/07 154,000 165,550 Reliant Energy 9.50% 7/15/13 185,000 213,213 ----------- 2,797,546 ----------- TOTAL CORPORATE BONDS (cost $38,759,691) 39,801,472 ----------- FOREIGN BONDS - 4.39% Bahamas - 0.17% *Ultrapetrol 144A 9.00% 11/24/14 375,000 376,875 ----------- 376,875 ----------- Bermuda - 0.12% Intelsat 6.50% 11/1/13 315,000 268,969 ----------- 268,969 ----------- Canada - 1.40% Abitibi-Consolidated 6.95% 12/15/06 445,000 462,244 Ispat Inland 9.75% 4/1/14 315,000 381,938 *Jean Coutu Group 144A 8.50% 8/1/14 500,000 510,000 Rogers Cablesystems 10.00% 3/15/05 1,065,000 1,086,299 11.00% 12/1/15 300,000 336,000 o*Secunda International 144A 9.76% 9/1/12 315,000 311,850 ----------- 3,088,331 ----------- Cayman Islands - 0.51% *Apex Silver Mines 144A 2.875% 3/15/24 1,000,000 908,750 Bluewater Finance 10.25% 2/15/12 198,000 215,820 ----------- 1,124,570 ----------- France - 0.19% Rhodia 8.875% 6/1/11 420,000 413,700 ----------- 413,700 ----------- Ireland - 0.54% Smurfit Capital 6.75% 11/20/05 815,000 837,413 Smurfit Capital Funding 7.50% 11/20/25 350,000 350,000 ----------- 1,187,413 ----------- Liberia - 0.25% Royal Caribbean Cruises 7.25% 3/15/18 500,000 543,750 ----------- 543,750 ----------- Luxembourg - 0.08% *BCP Caylux Holdings 144A 9.625% 6/15/14 150,000 169,125 ----------- 169,125 ----------- 10 STATEMENT DELAWARE DIVIDEND INCOME FUND OF NET ASSETS Principal Market Amount (U.S. $) Value FOREIGN BONDS (continued) Marshall Island - 0.14% OMI 7.625% 12/1/13 $ 285,000 $ 308,156 ---------- 308,156 ---------- Netherlands - 0.10% Schlumberger 2.125% 6/1/23 200,000 215,500 ---------- 215,500 ---------- Norway - 0.29% Petroleum Geo-Services 8.00% 11/5/06 105,000 107,100 10.00% 11/5/10 455,000 520,975 ---------- 628,075 ---------- Singapore - 0.20% *Flextronics International 144A 6.25% 11/15/14 195,000 191,588 *Stats Chippac 144A 6.75% 11/15/11 260,000 256,750 ---------- 448,338 ---------- Sweden - 0.21% Stena 9.625% 12/1/12 325,000 368,875 *Stena 144A 7.00% 12/1/16 90,000 88,650 ---------- 457,525 ---------- Virgin Islands - 0.19% Chippac International 12.75% 8/1/09 390,000 416,988 ---------- 416,988 ---------- TOTAL FOREIGN BONDS (cost $9,631,901) 9,647,315 ---------- CONVERTIBLE BONDS - 4.12% Banking, Finance & Insurance - 0.50% PMI Group 2.50% 7/15/21 1,000,000 1,106,250 ---------- 1,106,250 ---------- Cable, Media & Publishing - 0.59% Mediacom Communications 5.25% 7/1/06 1,000,000 982,500 Quebecor World USA 6.00% 10/1/07 300,000 309,000 ---------- 1,291,500 ---------- Computers & Technology - 0.48% #*ON Semiconductor 144A 0.28% 4/15/24 1,500,000 1,053,750 ---------- 1,053,750 ---------- Consumer Services - 0.25% Fluor 1.50% 2/15/24 500,000 554,375 ---------- 554,375 ---------- Electronics & Electrical Equipment - 0.12% *Solectron 144A 0.50% 2/15/34 275,000 258,500 ---------- 258,500 ---------- Energy - 0.49% Halliburton 3.125% 7/15/23 850,000 1,085,875 ---------- 1,085,875 ---------- Healthcare & Pharmaceuticals - 0.57% oWyeth 1.36% 1/15/24 1,250,000 1,263,825 ---------- 1,263,825 ---------- Principal Market Amount (U.S. $) Value CONVERTIBLE BONDS (continued) Industrial Machinery - 0.23% *Human Genome 144A 2.25% 10/15/11 $ 500,000 $ 498,750 ---------- 498,750 ---------- Leisure, Lodging & Entertainment - 0.22% *Regal Entertainment 144A 3.75% 5/15/08 350,000 481,688 ---------- 481,688 ---------- REITs - 0.06% Meristar Hospitality 9.50% 4/1/10 100,000 121,125 ---------- 121,125 ---------- Retail - 0.40% *Saks 144A 2.00% 3/15/24 925,000 883,375 ---------- 883,375 ---------- Utilities - 0.21% CenterPoint Energy 3.75% 5/15/23 400,000 457,000 ---------- 457,000 ---------- TOTAL CONVERTIBLE BONDS (cost $9,121,098) 9,056,013 ---------- Number of Shares CONVERTIBLE PREFERRED STOCK- 2.77% Automobiles & Automotive Parts - 0.31% General Motors 5.25% 30,000 690,600 ---------- 690,600 ---------- Banking, Finance & Insurance - 0.40% Chubb 7.00% 20,000 587,400 Lehman Brothers Holdings 6.25% 11,250 292,500 ---------- 879,900 ---------- Cable, Media & Publishing - 0.55% Interpublic Group 5.375% 25,800 1,200,990 ---------- 1,200,990 ---------- Energy - 0.27% Chesapeake Energy 6.00% 6,500 590,688 ---------- 590,688 ---------- Food, Beverage & Tobacco - 0.30% Constellation Brands 5.75% 18,200 656,110 ---------- 656,110 ---------- Paper & Forest Products - 0.33% Temple-Inland 7.50% 14,000 724,780 ---------- 724,780 ---------- Telecommunications - 0.55% Lucent Technologies Capital Trust I 7.75% 1,000 1,216,940 ---------- 1,216,940 ---------- Utilities - 0.06% Aquila 6.75% 4,000 132,000 ---------- 132,000 ---------- TOTAL CONVERTIBLE PREFERRED STOCK (cost $6,206,982) 6,092,008 ---------- 11 STATEMENT DELAWARE DIVIDEND INCOME FUND OF NET ASSETS Number of Market Shares Value PREFERRED STOCK - 1.61% Energy - 0.11% Chesapeake Energy 5.00% 2,000 $ 250,750 ---------- 250,750 ---------- Leisure, Lodging & Entertainment - 0.28% WestCoast Hospital 9.50% 24,000 624,000 ---------- 624,000 ---------- REITs - 1.16% Equity Inns Series B 8.75% 18,300 488,610 LaSalle Hotel Properties 10.25% 36,500 1,026,014 Ramco-Gershenson Properties 9.50% 15,700 433,477 SL Green Realty 7.625% 23,000 596,563 ---------- 2,544,664 ---------- Utilities - 0.06% Public Service Enterprise Group 10.25% 2,400 139,920 TNP Enterprises PIK 14.50% 1 938 ---------- 140,858 ---------- TOTAL PREFERRED STOCK (cost $3,438,548) 3,560,272 ---------- EXCHANGE TRADED FUNDS- 0.79% iShares Dow Jones U.S. Real Estate Index Fund 14,600 1,726,888 ---------- TOTAL EXCHANGE TRADED FUNDS (cost $1,550,582) 1,726,888 ---------- WARRANTS- 0.00% +*Solutia 144A, exercise price $7.59, expiration date 7/15/09 12 0 ---------- TOTAL WARRANTS (cost $1,021) 0 ---------- Principal Amount (U.S. $) REPURCHASE AGREEMENTS - 9.01% With BNP Paribas 1.94% 12/1/04 (dated 11/30/04, to be repurchased at $10,367,559, collateralized by $9,383,000 U.S. Treasury Bills due 3/3/05, market value $9,331,137 and $1,257,000 U.S. Treasury Bills due 5/12/05, market value $1,244,518) $10,367,000 10,367,000 With UBS Warburg 1.94% 12/1/04 (dated 11/30/04, to be repurchased at $9,463,510, collateralized by $3,154,000 U.S. Treasury Bills due 12/23/04, market value $3,150,403 and $6,558,000 U.S. Treasury Bills due 4/14/05, market value $6,505,786) 9,463,000 9,463,000 ----------- TOTAL REPURCHASE AGREEMENTS (cost $19,830,000) 19,830,000 ------------- TOTAL MARKET VALUE OF SECURITIES - 98.26% (cost $208,472,081) $ 216,157,667 RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 1.74% 3,818,719 ------------ NET ASSETS APPLICABLE TO 19,919,257 SHARES OUTSTANDING - 100.00% $219,976,386 ============ Net Asset Value - Delaware Dividend Income Fund Class A ($105,252,660 / 9,528,314 Shares) $11.05 ------ Net Asset Value - Delaware Dividend Income Fund Class B ($32,165,013 / 2,913,468 Shares) $11.04 ------ Net Asset Value - Delaware Dividend Income Fund Class C ($82,083,013 / 7,434,401 Shares) $11.04 ------ Net Asset Value - Delaware Dividend Income Fund Class R ($373,167 / 33,797 Shares) $11.04 ------ Net Asset Value - Delaware Dividend Income Fund Institutional Class ($102,533 / 9,277 Shares) $11.05 ------ COMPONENTS OF NET ASSETS AT NOVEMBER 30, 2004: Shares of beneficial interest (unlimited authorization - no par) $209,954,887 Undistributed net investment income 1,056,427 Accumulated net realized gain on investments 1,279,486 Net unrealized appreciation of investments 7,685,586 ------------ Total net assets $219,976,386 ============ *Securities exempt from registration under 144A of the Securities Act of 1933. See Note 7 in "Notes to Financial Statements." +Non-income producing security for the year ended November 30, 2004. ++Step coupon bond. Indicates security that has a zero coupon that remains in effect until a predetermined date at which time the stated interest rate becomes effective. #Zero coupon bond. The interest rate shown is the yield at the time of purchase. oVariable rate notes. The interest rate shown is the rate at November 30, 2004. SUMMARY OF ABBREVIATIONS: PIK - Pay-in-kind REITs - Real Estate Investment Trust NET ASSET VALUE AND OFFERING PRICE PER SHARE -- DELAWARE DIVIDEND INCOME FUND Net asset value Class A (A) $11.05 Sales charge (5.75% of offering price) (B) 0.67 ------ Offering price $11.72 ====== (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 STATEMENT DELAWARE DIVIDEND INCOME FUND OF OPERATIONS Year Ended November 30, 2004 INVESTMENT INCOME: Dividends $2,544,797 Interest 2,100,775 Foreign tax withheld (3,183) $ 4,642,389 ---------- ----------- EXPENSES: Management fees 710,153 Distribution expenses -- Class A 150,170 Distribution expenses -- Class B 158,968 Distribution expenses -- Class C 380,595 Distribution expenses -- Class R 1,169 Dividend disbursing and transfer agent fees and expenses 145,580 Registration fees 130,325 Reports and statements to shareholders 50,457 Accounting and administration expenses 38,195 Professional Fees 24,549 Custodian Fees 8,993 Trustees' Fees 5,830 Pricing Fees 5,484 Other 3,454 1,813,922 ---------- Less expenses absorbed or waived (307,197) Less waiver of distribution expenses -- Class A (25,028) Less expenses paid indirectly (450) ----------- Total expenses 1,481,247 ----------- NET INVESTMENT INCOME 3,161,142 ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on: Investments 1,623,086 Foreign currencies 586 ----------- Net realized gain 1,623,672 Net change in unrealized appreciation/depreciation of investments 7,298,755 ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 8,922,427 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 12,083,569 ============ See accompanying notes 13 STATEMENTS DELAWARE DIVIDEND INCOME FUND OF CHANGES IN NET ASSETS Year Ended 11/30/04 11/30/03 INCREASE IN NET ASSETS FROM OPERATIONS: Net investment income $ 3,161,142 $ 195,849 Net realized gain on investments 1,623,672 115,690 Net change in unrealized appreciation/depreciation of investments 7,298,755 433,193 ------------ ----------- Net increase in net assets resulting from operations 12,083,569 744,732 ------------ ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A (1,382,695) (83) Class B (334,815) -- Class C (794,269) -- Class R (4,793) -- Institutional Class (119,652) (172,891) Net realized gain on investments: Class A (32,120) -- Class B (11,519) -- Class C (24,930) -- Class R (10) -- Institutional Class (13,041) -- ------------ ----------- (2,717,844) (172,974) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 103,634,846 5,863,682 Class B 29,742,332 2,117,277 Class C 76,439,150 4,302,013 Class R 349,869 3,010 Institutional Class 92,571 15,207 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 1,067,277 83 Class B 274,814 -- Class C 603,599 -- Class R 4,803 -- Institutional Class 130,995 172,891 ------------ ----------- 212,340,256 12,474,163 ------------ ----------- Cost of shares repurchased: Class A (9,699,802) (98,673) Class B (1,349,886) (12,463) Class C (2,649,479) (989) Class R (3) -- Institutional Class (4,198,164) (15) ------------ ----------- (17,897,334) (112,140) ------------ ----------- Increase in net assets derived from capital share transactions 194,442,922 12,362,023 ----------- NET INCREASE IN NET ASSETS 203,808,647 12,933,781 ------------ ----------- NET ASSETS: Beginning of year 16,167,739 3,233,958 ------------ ----------- End of year (including undistributed net investment income of $1,046,063 and $191,505, respectively) $219,976,386 $16,167,739 ============ =========== See accompanying notes 14 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows: DELAWARE DIVIDEND INCOME FUND CLASS A - ----------------------------------------------------------------------------------------------------------------------- Year Ended 11/30/04 11/30/03 11/30/02(1) 11/30/01 11/30/00 NET ASSET VALUE, BEGINNING OF PERIOD $10.210 $9.030 $9.230 $9.600 $9.430 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income(2) 0.345 0.450 0.429 0.405 0.403 Net realized and unrealized gain (loss) on investments 0.891 1.213 (0.196) (0.041) 0.285 ------- ------- ------ ------ ------ Total from investment operations 1.236 1.663 0.233 0.364 0.688 ------- ------- ------ ------ ------ LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.362) (0.483) (0.433) (0.400) (0.420) Net realized gain on investments (0.034) -- -- (0.334) (0.098) ------- ------- ------ ------ ------ Total dividends and distributions (0.396) (0.483) (0.433) (0.734) (0.518) ------- ------- ------ ------ ------ NET ASSET VALUE, END OF PERIOD $11.050 $10.210 $9.030 $9.230 $9.600 ======= ======= ====== ====== ====== TOTAL RETURN(3) 12.38% 19.45% 2.58% 3.87% 7.66% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $105,253 $5,821 $1 -- $24 Ratio of expenses to average net assets 1.00% 0.79% 0.75% 0.75% 0.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.32% 2.05% 1.30% 1.05% 1.24% Ratio of net investment income to average net assets 3.26% 4.69% 4.71% 4.38% 4.22% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.94% 3.43% 4.16% 4.08% 3.73% Portfolio turnover 95% 212% 188% 89% 41% (1) As required, effective December 1, 2001, the Portfolio adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended November 30, 2002 was a decrease in net investment income per share of $0.048, an increase in net realized and unrealized gain (loss) per share of $0.048, and a decrease in the ratio of net investment income to average net assets of 0.53%. Per share data and ratios for periods prior to December 1, 2001 have not been restated to reflect this change in accounting. (2) The average shares outstanding method has been applied for per share information. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager and distributor. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 15 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows: DELAWARE DIVIDEND INCOME DELAWARE DIVIDEND INCOME FUND CLASS B FUND CLASS C - ----------------------------------------------------------------------------------------------------------------------- 10/1/03(1) 10/1/03(1) Year Ended to Year Ended to 11/30/04 11/30/03 11/30/04 11/30/03 NET ASSET VALUE, BEGINNING OF PERIOD $10.200 $9.950 $10.200 $9.950 INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.267 0.051 0.267 0.051 Net realized and unrealized gain on investments 0.889 0.199 0.889 0.199 ------- ------- ------- ------- Total from investment operations 1.156 0.250 1.156 0.250 ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.282) -- (0.282) -- Net realized gain on investments (0.034) -- (0.034) -- ------- ------- ------- ------- Total dividends and distributions (0.316) -- (0.316) -- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $11.040 $10.200 $11.040 $10.200 ======= ======= ======= ======= TOTAL RETURN(3) 11.54% 2.51% 11.53% 2.51% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $32,165 $2,125 $82,083 $4,341 Ratio of expenses to average net assets 1.75% 1.75% 1.75% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 2.02% 4.10% 2.02% 4.10% Ratio of net investment income to average net assets 2.51% 3.65% 2.52% 3.65% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.25% 1.30% 2.25% 1.30% Portfolio turnover 95% 212% 95% 212% (1) Date of commencement of operations; ratios and portfolio turnover have been annualized and total return has not been annualized. (2) The average shares outstanding method has been applied for per share information. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 16 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows: DELAWARE DIVIDEND INCOME FUND CLASS R - ------------------------------------------------------------------------------------------------ 10/1/03(1) Year Ended to 11/30/04 11/30/03 NET ASSET VALUE, BEGINNING OF PERIOD $10.220 $9.950 INCOME FROM INVESTMENT OPERATIONS: Net investment income(2) 0.308 0.056 Net realized and unrealized gain on investments 0.879 0.214 ------- ------- Total from investment operations 1.187 0.270 ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.333) -- Net realized gain on investments (0.034) -- ------- ------- Total dividends and distributions (0.367) -- ------- ------- NET ASSET VALUE, END OF PERIOD $11.040 $10.220 ======= ======= TOTAL RETURN(3) 11.86% 2.71% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $373 $3 Ratio of expenses to average net assets 1.35% 1.35% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.62% 3.70% Ratio of net investment income to average net assets 2.89% 4.05% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.62% 1.70% Portfolio turnover 95% 212% (1) Date of commencement of operations; ratios and portfolio turnover have been annualized and total return has not been annualized. (2) The average shares outstanding method has been applied for per share information. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 17 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows: DELAWARE DIVIDEND INCOME FUND INSTITUTIONAL CLASS - ----------------------------------------------------------------------------------------------------------------------- Year Ended 11/30/04 11/30/03 11/30/02(1) 11/30/01 11/30/00 NET ASSET VALUE, BEGINNING OF PERIOD $10.220 $9.030 $9.230 $9.600 $9.420 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income(2) 0.371 0.453 0.429 0.405 0.403 Net realized and unrealized gain (loss) on investments 0.882 1.220 (0.196) (0.041) 0.295 ------- ------- ------ ------ ------ Total from investment operations 1.253 1.673 0.233 0.364 0.698 ------- ------- ------ ------ ------ LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.389) (0.483) (0.433) (0.400) (0.420) Net realized gain on investments (0.034) -- -- (0.334) (0.098) ------- ------- ------ ------ ------ Total dividends and distributions (0.423) (0.483) (0.433) (0.734) (0.518) ------- ------- ------ ------ ------ NET ASSET VALUE, END OF PERIOD $11.050 $10.220 $9.030 $9.230 $9.600 ======= ======= ====== ====== ====== TOTAL RETURN(3) 12.55% 19.56% 2.58% 3.87% 7.78% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $102 $3,879 $3,233 $3,265 $3,145 Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.02% 1.75% 1.00% 0.75% 0.94% Ratio of net investment income to average net assets 3.49% 4.73% 4.71% 4.38% 4.22% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.22% 3.73% 4.46% 4.38% 4.03% Portfolio turnover 95% 212% 188% 89% 41% (1) As required, effective December 1, 2001, the Portfolio adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that requires amortization of all premium and discounts on debt securities. The effect of this change for the year ended November 30, 2002 was a decrease in net investment income per share of $0.048, an increase in net realized and unrealized gain (loss) per share of $0.048, and a decrease in the ratio of net investment income to average net assets of 0.53%. Per share data and ratios for periods prior to December 1, 2001 have not been restated to reflect this change in accounting. (2) The average shares outstanding method has been applied for per share information. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 18 NOTES DELAWARE DIVIDEND INCOME FUND TO FINANCIAL STATEMENTS November 30, 2004 Delaware Group Equity Funds V (the "Trust") is organized as a Delaware statutory trust and offers three series: Delaware Dividend Income Fund, Delaware Small Cap Contrarian Fund and Delaware Small Cap Value Fund. These financial statements and the related notes pertain to Delaware Dividend Income Fund (the "Fund"). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offer Class A, Class B, Class C, Class R and Institutional Class shares. Class A shares are sold with a front-end sales charge of up to 5.75%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares were held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately 8 years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to a limited group of investors. The investment objective of the Fund is to seek to provide high current income and the potential for capital appreciation. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Fund. Security Valuation -- Equity securities, except those traded on the Nasdaq Stock Market, Inc. (NASDAQ), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the NASDAQ are valued in accordance with the NASDAQ Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between bid and asked prices will be used. Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities 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 under the direction of the Funds' Board of Trustees. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures, or with respect to foreign securities, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges or among dealers, news events). Federal Income Taxes -- The Fund intends to continue to qualify for federal income tax purposes 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. Class Accounting -- Investment income, common expenses and realized and unrealized gain (loss) on investments are allocated to the various classes of each 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. Use of Estimates -- The preparation of financial statements in conformity with U.S. 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. Management fees and some other expenses are paid monthly. 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. Interest income is recorded on the accrual basis. Discounts and premiums on non-convertible debt securities are amortized to interest income over the lives of the respective securities. The Fund declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, annually. Through December 31, 2003, certain expenses of the Fund were paid through commission arrangements with brokers. The amounts of these expenses was approximately $47 for the year ended November 30, 2004. In addition, the Fund receives earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The earnings credits for the year ended November 30, 2004 were approximately $403. 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, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of the investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated at a rate of 0.65% on the first $500 million of average daily net assets of the Fund, 0.60% on the next $500 million, 0.55% on the next $1.5 billion, and 0.50% on daily average net assets in excess of $2.5 billion. DMC has contractually agreed to waive that portion, if any, of the management fee and reimburse the Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs and extraordinary expenses, do not exceed 0.75% of average daily net assets through May 31, 2005. Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Fund pays DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, the Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class B and C shares and 0.60% of the average daily net assets of Class R shares. DDLP has contracted to waive distribution and service fees through January 31, 2005 in order to prevent distribution and service fees of Class A shares from exceeding 0.25% of average daily net assets. Institutional Class shares pay no distribution and service expenses. 19 NOTES DELAWARE DIVIDEND INCOME FUND TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED) At November 30, 2004, the Fund had liabilities payable to affiliates as follows: Investment management fee payable to DMC $13,728 Dividend disbursing, transfer agent accounting and administration fees and other expenses payable to DSC 28,556 Other expenses payable to DMC and affiliates 5,590 *DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement the Fund bears the cost of certain legal services expenses, including internal legal services provided to the Fund by DMC employees. For the year ended November 30, 2004, the Fund was charged $5,783 for internal legal services provided by DMC. For the year ended November 30, 2004, DDLP earned $417,052 for commissions on sales of the Fund's Class A shares. Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust. These officers and trustees are paid no compensation by the Fund. 3. INVESTMENTS For the year ended November 30, 2004, the Fund made purchases of $269,098,226 and sales of $95,311,343 of investment securities other than short-term investments. At November 30, 2004, the cost of investments for federal income tax purposes was $208,666,650. At November 30, 2004, the net unrealized appreciation was $7,491,017 of which $11,147,397 related to unrealized appreciation of investments and $3,656,380 related to unrealized depreciation of investments. 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. The tax character of dividends and distributions paid during the years ended November 30, 2004 and 2003 was as follows: Year Ended 11/30/04 11/30/03 -------- -------- Ordinary income $2,717,844 $172,974 As of November 30, 2004, the components of net assets on a tax basis were as follows: Shares of beneficial interest $209,954,887 Undistributed ordinary income 2,394,474 Undistributed long-term capital gains 136,008 Unrealized appreciation of investments 7,491,017 ------------ Net assets $219,976,386 ============ For financial reporting purposes, capital accounts are adjusted to reflect the tax character of book/tax differences. For the year ended November 30, 2004, the Fund recorded the following permanent reclassifications. Reclassifications are primarily due to tax treatment of market discount and premium on certain debt instruments. Results of operations and net assets were not affected by these reclassifications. Undistributed net Accumulated investment income realized gain ----------------- ------------- $339,418 $(339,418) 5. CAPITAL SHARES Transactions in capital shares were as follows: Year Ended 11/30/04 11/30/03 Shares sold: Class A 9,774,324 579,601 Class B 2,806,174 209,452 Class C 7,203,243 425,577 Class R 33,044 298 Institutional Class 8,765 1,484 Shares issued upon reinvestment of dividends and distributions: Class A 101,364 10 Class B 26,108 -- Class C 57,292 -- Class R 455 -- Institutional Class 12,554 20,198 ---------- --------- 20,023,323 1,236,620 ---------- --------- Shares repurchased: Class A (917,417) (9,712) Class B (127,032) (1,234) Class C (251,612) (99) Institutional Class (391,674) (2) ---------- --------- (1,687,735) (11,047) ---------- --------- Net increase 18,335,588 1,225,573 ========== ========= For the year ended November 30, 2004, 24,503 Class B shares were converted to 24,480 Class A shares valued at $262,099. These amounts are included in Class B redemptions and Class A subscriptions in the table above and the Statement of Changes in Net Assets. 6. LINE OF CREDIT The Fund, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $183,100,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each fund's 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 amount outstanding at November 30, 2004, or at any time during the period. 20 NOTES DELAWARE DIVIDEND INCOME FUND TO FINANCIAL STATEMENTS (CONTINUED) 7. CREDIT AND MARKET RISKS The Fund may invest up to 15% 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 these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. The Fund invests in high-yield fixed-income securities, which carry ratings of BBB or lower by Standard & Poor's Ratings Group and/or Baa or lower by Investor Services, Inc. Investments in these higher yielding securities are generally accompanied by a greater degree of credit risk than higher rated securities. Additionally, lower rated securities may be more susceptible to adverse economic and competitive industry conditions than investment grade securities. The Fund invests in real estate investment trusts (REITs) and is subject to some of the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct holdings during the year ended November 30, 2004. The Fund's REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations. 8. CONTRACTUAL OBLIGATIONS The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund's existing contracts and expects the risk of loss to be remote. 9. TAX INFORMATION (UNAUDITED) The information set forth 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 January of each year. Please consult your tax advisor for proper treatment of this information. For the fiscal year ended November 30, 2004, the Fund designates distributions paid during the year as follows: (A) (B) Long-Term Ordinary Capital Gains Income Total (C) Distributions Distributions Distributions Qualifying (Tax Basis) (Tax Basis) (Tax Basis) Dividends(1) - ------------- ------------- ------------- ------------ -- 100% 100% 50% (A) and (B) are based on a percentage of the Fund's total distributions. (D) is based on a percentage of the Fund's ordinary income distributions. (1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction. 21 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees Delaware Group Equity Funds V - Delaware Dividend Income Fund We have audited the accompanying statement of net assets and the statement of assets and liabilities of the Delaware Dividend Income Fund (one of the series constituting the Delaware Group Equity Funds V) (the "Fund") as of November 30, 2004, 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 the standards of the Public Company Accounting Oversight Board (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 November 30, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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 the Delaware Dividend Income Fund of Delaware Group Equity Funds V at November 30, 2004, 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 U.S. generally accepted accounting principles. Ernst & Young LLP Philadelphia, Pennsylvania January 14, 2005 22 DELAWARE INVESTMENTS FAMILY OF FUNDS BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM A mutual fund is governed by a Board of Trustees/Directors which has oversight responsibility for the management of a fund's business affairs. Trustees/Directors establish procedures and oversee and review the performance of the investment manager, the distributor and others that perform services for the fund. The independent fund trustees, in particular, are advocates for shareholder interests. The following is a list of the Trustees/Directors and Officers with certain background and related information. Number of Other Principal Portfolios in Fund Directorships Name, Position(s) Occupation(s) Complex Overseen Held by Address Held with Length of Time During by Trustee/Director Trustee/Director and Birthdate Fund(s) Served Past 5 Years or Officer or Officer - ----------------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEES JUDE T. DRISCOLL(2) Chairman, President 4 Years - Since August 2000, 75 None 2005 Market Street Chief Executive Officer Executive Officer Mr. Driscoll has served in Philadelphia, PA and Trustee (4) various executive capacities 19103 1 year - at different times at Trustee Delaware Investments(1) March 10, 1963 Senior Vice President and Director of Fixed-Income Process - Conseco Capital Management (June 1998 - August 2000) - ----------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES WALTER P. BABICH Trustee 16 Years Board Chairman - 92 None 2005 Market Street Citadel Construction Corporation Philadelphia, PA (1989 - Present) 19103 October 1, 1927 JOHN H. DURHAM Trustee 25 Years(3) Private Investor 92 Trustee - Abington 2005 Market Street Memorial Hospital Philadelphia, PA 19103 August 7, 1937 President/Director - 22 WR Corporation JOHN A. FRY Trustee(4) 3 Years President - 75 Director - 2005 Market Street Franklin & Marshall College Community Health Philadelphia, PA (June 2002 - Present) Systems 19103 Executive Vice President - University of Pennsylvania May 28, 1960 (April 1995 - June 2002) ANTHONY D. KNERR Trustee 11 Years Founder/Managing Director - 92 None 2005 Market Street Anthony Knerr & Associates Philadelphia, PA (Strategic Consulting) 19103 (1990 - Present) December 7, 1938 23 Number of Other Principal Portfolios in Fund Directorships Name, Position(s) Occupation(s) Complex Overseen Held by Address Held with Length of Time During by Trustee/Director Trustee/Director and Birthdate Fund(s) Served Past 5 Years or Officer or Officer - ----------------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES (CONTINUED) ANN R. LEVEN Trustee 15 Years Treasurer/Chief Fiscal Officer - 92 Director and 2005 Market Street National Gallery of Art Audit Committee Philadelphia, PA (1994 - 1999) Chairperson - Andy 19103 Warhol Foundation Director - Systemax Inc. November 1, 1940 THOMAS F. MADISON Trustee 10 Years President/Chief 92 Director - 2005 Market Street Executive Officer - Banner Health Philadelphia, PA MLM Partners, Inc. 19103 (Small Business Investing Director - and Consulting) CenterPoint Energy (January 1993 - Present) February 25, 1936 Director - Digital River Inc. Director - Rimage Corporation Director - Valmont Industries, Inc. JANET L. YEOMANS Trustee 5 Years Vice President/Mergers & 92 None 2005 Market Street Acquisitions - 3M Corporation Philadelphia, PA (January 2003 - Present) 19103 Ms. Yeomans has held July 31, 1948 various management positions at 3M Corporation since 1983. - ----------------------------------------------------------------------------------------------------------------------------------- OFFICERS JOSEPH H. HASTINGS Executive 1 Year Mr. Hastings has served in 92 None(5) 2005 Market Street Vice President various executive capacities Philadelphia, PA and at different times at 19103 Chief Financial Delaware Investments. Officer Decenber 19, 1949 RICHELLE S. MAESTRO Executive Vice President, 1 Year Ms. Maestro has served in 92 None(5) 2005 Market Street Chief Legal Officer various executive capacities Philadelphia, PA and Secretary at different times at 19103 Delaware Investments. November 26, 1957 MICHAEL P. BISHOF Senior Vice President 8 Years Mr. Bishof has served in 92 None(5) 2005 Market Street and Treasurer various executive capacities Philadelphia, PA at different times at 19103 Delaware Investments. August 18, 1962 (1) Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the registrant's investment advisor, principal underwriter and its transfer agent. (2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an executive officer of the Fund's manager and distributor. (3) Mr. Durham served as a Director Emeritus from 1995 through 1998. (4) Mr. Driscoll and Mr. Fry are not Trustees of the funds of Voyageur Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual Funds III and Voyageur Tax Free Funds. (5) Mr. Hastings, Mr. Bishof and Ms. Maestro also serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. The Statement of Additional Information for the Fund(s) includes additional information about the Trustees/Directors and Officers and is available, without charge, upon request by calling 800 523-1918. 24 Delaware Investments(SM) - -------------------------------------- A member of Lincoln Financial Group(R) This annual report is for the information of Delaware Dividend Income Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Dividend Income Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the Fund. You should read the prospectus carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in the Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION JUDE T. DRISCOLL JOSEPH H. HASTINGS INVESTMENT MANAGER Chairman Executive Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA NATIONAL DISTRIBUTOR WALTER P. BABICH Delaware Distributors, L.P. Board Chairman RICHELLE S. MAESTRO Philadelphia, PA Citadel Construction Corporation Executive Vice President, King of Prussia, PA Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT JOHN H. DURHAM Philadelphia, PA Delaware Service Company, Inc. Private Investor 2005 Market Street Gwynedd Valley, PA MICHAEL P. BISHOF Philadelphia, PA 19103-7094 Senior Vice President and Treasurer JOHN A. FRY Delaware Investments Family of Funds FOR SHAREHOLDERS President Philadelphia, PA 800 523-1918 Franklin & Marshall College Lancaster, PA FOR SECURITIES DEALERS AND FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY ANTHONY D. KNERR 800 362-7500 Managing Director Anthony Knerr & Associates WEB SITE New York, NY www.delawareinvestments.com ANN R. LEVEN Former Treasurer/Chief Fiscal Officer National Gallery of Art Washington, DC +----------------------------------------------------------------------------------+ | The Fund files its complete schedule of portfolio holdings with the Securities | THOMAS F. MADISON | and Exchange Commission for the first and third quarters of each fiscal year on | President and Chief Executive Officer | Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and | MLM Partners, Inc. | procedures that the Fund uses to determine how to vote proxies (if any) relating | Minneapolis, MN | to portfolio securities is available without charge (i) upon request, by calling | | 800 523-1918; (ii) on the Fund's Web site at http://www.delawareinvestments.com; | JANET L. YEOMANS | and (iii) on the Commission's Web site at http://www.sec.gov. The Fund's Forms | Vice President/Mergers & Acquisitions | N-Q may be reviewed and copied at the Commission's Public Reference Room in | 3M Corporation | Washington, DC; information on the operation of the Public Reference Room may be | St. Paul, MN | obtained by calling 1-800-SEC-0330. | | | | Information (if any) regarding how the Fund voted proxies relating to portfolio | | securities during the most recently disclosed 12-month period ended June 30 is | | available without charge (i) through the Fund's Web site at | | http://www.delawareinvestments.com; and (ii) on the Commission's Web site at | | http://www.sec.gov. | +----------------------------------------------------------------------------------+ (9101) Printed in the USA AR-129 [11/04] IVES 1/05 J9927 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) VALUE-EQUITY ANNUAL REPORT NOVEMBER 30, 2004 - -------------------------------------------------------------------------------- DELAWARE SMALL CAP VALUE FUND [LOGO] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS - ------------------------------------------------------------------- PORTFOLIO MANAGEMENT REVIEW 1 - ------------------------------------------------------------------- PERFORMANCE SUMMARY 3 - ------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES 5 - ------------------------------------------------------------------- SECTOR ALLOCATION 6 - ------------------------------------------------------------------- FINANCIAL STATEMENTS: Statement of Net Assets 7 Statement of Operations 10 Statements of Changes in Net Assets 11 Financial Highlights 12 Notes to Financial Statements 17 - ------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 20 - ------------------------------------------------------------------- BOARD OF TRUSTEES/OFFICERS 21 - ------------------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2004 Delaware Distributors, L.P. PORTFOLIO DELAWARE SMALL CAP VALUE FUND MANAGEMENT REVIEW December 10, 2004 FUND MANAGER Christopher S. Beck Senior Portfolio Manager Q: WHAT WAS THE NATURE OF SMALL-CAP EQUITY INVESTING FOR THE 12 MONTHS ENDED NOVEMBER 30, 2004? A: The steady appreciation in small-cap equities that began in earnest during the spring of 2003 lasted for just over one year. In early April 2004, stock prices reversed course, as unexpectedly promising employment news, solid consumer demand, and higher-than-anticipated inflationary pressures caused investors to fear rising interest rates. The slide in equity prices came to a halt in August, as stronger-than-anticipated earnings for the first half of 2004 helped diminish investor risk aversion, and prices began another period of steady ascension through fiscal year-end. Among sectors for the 12-month period, energy performed exceptionally well, as did the materials group. While information technology-related stocks were the market's underperformers for the one-year period, they nonetheless experienced a measure of renewed interest on the part of investors in the final months of the period. Q: HOW DID THE FUND PERFORM DURING ITS FISCAL YEAR? A: Value-oriented stocks and small caps in particular performed well during the past 12 months as investors sought companies with appealing valuations and strong balance sheets. Delaware Small Cap Value Fund returned +20.52% (Class A shares at net asset value with distributions reinvested) for the fiscal year ended November 30, 2004. The Fund's benchmark, the Russell 2000 Value Index, rose +23.71% for the same period, while its peer group, the Lipper Small-Cap Funds Average, gained +21.83% (source: Lipper Inc.). Q: CAN YOU DESCRIBE YOUR INVESTMENT STRATEGY DURING THE PAST 12 MONTHS? A: As always, Delaware Small Cap Value Fund invests primarily in small companies whose stock prices appear low relative to their underlying value or future potential. During the past year, there were many opportunities for favorable purchases within the small-cap value arena, particularly among economically-sensitive stocks. Basic industry-type companies, such as those involved with the processing of metals, paper, and chemicals, prospered in an environment of general economic expansion, which included increased building and manufacturing. We currently remain somewhat cautious of the technology sector, and favor only those companies with strong earnings prospects. Despite some setbacks within the Fund's portfolio for the 12-month period, we believe technology companies in general may be poised for success going forward. Q: WHICH PORTFOLIO HOLDINGS CONTRIBUTED POSITIVELY TO FUND PERFORMANCE? A: Energy stocks were strong performers during the fiscal year, which was a direct result of the dramatic rise in oil prices. Our position in Whiting Petroleum, which specializes in oil and natural gas exploration and production, helped boost the Fund's return for the 12-month period. As construction activity increased during the past year, commodity prices rose. Texas Industries, which produces steel and cement/concrete products for the construction and manufacturing industries, was in a strong position to capitalize on this trend and gained just over 100 percent for the period. Investments in residential and commercial real estate remained strong during the fiscal year, enabling real estate investment trusts (REITs) to perform well for the period. The Fund benefited from a position in Reckson Associates Realty, which specializes in office and industrial real estate in Manhattan and its surrounding counties. The company recently underwent a managerial restructuring, which we believe better positions the company for long-term success. 1 Q: WHICH HOLDINGS DETRACTED FROM FUND PERFORMANCE FOR THE FISCAL YEAR? A: Technology-related companies, which were the big winners of 2003, offered disappointing results for the recently concluded fiscal year, as profitability expectations among technology stocks came in question. Because technology- and electronics-related companies comprise over 10 percent of the portfolio, slumping prices in these areas detracted from Fund performance relative to the benchmark index. We experienced negative performance from International Rectifier, a supplier of power semiconductors, and QAD, a business software developer and supplier. We believe the rebound in technology related equities that emerged late in the period may continue moving forward, and our positioning in this group might well enable us to participate in any price appreciation. Within the transportation industry, airlines continued to struggle as a result of both pricing pressures from smaller low-cost carriers and increasing costs, particularly from the dramatic rise in oil prices. Continental Airlines, a Fund holding, announced in November that it intends to cut costs dramatically moving forward by decreasing employee pay and benefits, along with other measures. Performance by retail athletic clothier Sports Authority detracted from Fund performance during the period. The company recently merged with Gart Sports, which sells sports gear and equipment. As a result of the merger, we anticipate favorable long-term growth from the company and, as a result, have maintained our position in the stock. Another poor performer for the 12-month period was generic pharmaceutical producer Par Pharmaceuticals, which has recently faced increasing competition. We sold our position in Par Pharmaceuticals earlier in the year as we identified positive pricing opportunities. 2 DELAWARE SMALL CAP VALUE FUND The performance data quoted represent past performance; past performance does not guarantee future results. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please obtain the performance data for the most recent month end by calling 800 523-1918 or visiting our Web site at www.delawareinvestments.com/performance. You should consider the investment objectives, risks, charges, and expenses of the investment carefully before investing. The Delaware Small Cap Value Fund prospectus contains this and other important information about the investment company. Please request a prospectus by calling 800 523-1918. Read it carefully before you invest or send money. Instances of high double-digit returns are highly unusual and cannot be sustained and were achieved primarily during favorable market conditions. FUND PERFORMANCE Average Annual Total Returns Through November 30, 2004 Lifetime 10 Years Five Years One Year - --------------------------------------------------------------------------------------------- Class A (Est. 6/24/87) Excluding Sales Charge +13.63% +13.82% +15.65% +20.52% Including Sales Charge +13.24% +13.15% +14.29% +13.59% - --------------------------------------------------------------------------------------------- Class B (Est. 9/6/94) Excluding Sales Charge +12.33% +13.18% +14.84% +19.69% Including Sales Charge +12.33% +13.18% +14.58% +15.69% - --------------------------------------------------------------------------------------------- Class C (Est. 11/29/95) Excluding Sales Charge +12.46% -- +14.85% +19.69% Including Sales Charge +12.46% -- +14.85% +18.69% - --------------------------------------------------------------------------------------------- Returns reflect the reinvestment of all distributions and any applicable sales charges as noted below. Performance for Class B and C shares, excluding sales charges, assumes either that contingent deferred sales charges did not apply or the investment was not redeemed. The Fund offers Class A, B, C, R, and Institutional Class shares. Class A shares are sold with a front-end sales charge of up to 5.75% and have an annual distribution and service fee of up to 0.30%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. They are also subject to an annual distribution and service fee of 1%. Lifetime and 10-year performance figures for Class B shares reflect conversion to Class B shares after eight years. Class C shares are sold with a contingent deferred sales charge of 1% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1%. The average annual total return for the lifetime and one-year periods ended November 30, 2004 for Delaware Small Cap Value Fund's Class R shares were +28.61% and +20.15%, respectively. Class R shares were first made available on June 2, 2003 and are available only for certain retirement plan products. They are sold without a sales charge and have an annual distribution and service fee of 0.60%. The average annual total returns for the lifetime (since 6/24/87), 10-year, five-year, and one-year periods ended November 30, 2004 for Delaware Small Cap Value Fund's Institutional Class were +13.87%, +14.16%, +16.01%, and +20.88%, respectively. The Institutional Class shares were first made available on November 9, 1992 and are available without sales or asset-based distribution charges only to certain eligible institutional accounts. Institutional Class performance prior to November 9, 1992 is based on Class A performance and was adjusted to eliminate the sales charges, but not the asset-based distribution charge of Class A shares. The performance table does not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. Nasdaq Institutional Class symbol: DEVIX Nasdaq Class R symbol: DVLRX 3 DELAWARE SMALL CAP VALUE FUND FUND BASICS As of November 30, 2004 - ------------------------------------ FUND OBJECTIVE: The Fund seeks capital appreciation. - ------------------------------------ TOTAL FUND NET ASSETS: $476.3 million - ------------------------------------ NUMBER OF HOLDINGS: 119 - ------------------------------------ FUND START DATE: June 24, 1987 - ------------------------------------ YOUR FUND MANAGER: - -------------------------------------------------------------------------------- Christopher S. Beck holds a bachelor's degree from the University of Delaware and an MBA from Lehigh University. Mr. Beck has 23 years of experience in the investment industry. Prior to joining Delaware Investments in 1997, he was director of research at Cypress Capital Management, chief investment officer of the University of Delaware Endowment Fund, and manager of a small-cap fund at Pitcairn Trust Company. Mr. Beck is a CFA charterholder. - -------------------------------------------------------------------------------- NASDAQ SYMBOLS: Class A DEVLX Class B DEVBX Class C DEVCX - -------------------------------------------------------------------------------- PERFORMANCE OF A $10,000 INVESTMENT November 30, 1994 through November 30, 2004 DELAWARE SMALL CAP VALUE FUND RUSSELL 2000 CLASS A SHARES VALUE INDEX 30-Nov-94 $9,425 $10,000 30-Nov-95 $11,347 $12,564 30-Nov-96 $13,511 $15,226 30-Nov-97 $18,427 $20,023 30-Nov-98 $17,049 $18,777 30-Nov-99 $16,621 $18,510 30-Nov-00 $17,790 $21,155 30-Nov-01 $20,933 $25,188 30-Nov-02 $21,268 $24,732 30-Nov-03 $28,541 $33,366 30-Nov-04 $34,398 $41,277 Chart assumes $10,000 invested on November 30, 1994 and includes the effect of a 5.75% front-end sales charge and the reinvestment of all distributions. Performance of other Fund classes will vary due to different charges and expenses. Returns plotted on the chart were as of the last day of each month shown. The Russell 2000 Value Index is an unmanaged composite that measures the stocks of small, value-oriented companies. An index is unmanaged and does not reflect the costs of operating a mutual fund, such as the costs of buying, selling, and holding securities. You cannot invest directly in an index. Past performance is not a guarantee of future results. The performance graph does not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. 4 DISCLOSURE For the Period June 1, 2004 to November 30, 2004 OF FUND EXPENSES As a shareholder of the fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period June 1, 2004 to November 30, 2004. ACTUAL EXPENSES The first section of the table shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The expenses shown in the table assume reinvestment of all dividends and distributions. "Expenses Paid During Period" are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). DELAWARE SMALL CAP VALUE FUND(1) EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000 Beginning Ending Annualized Expenses Account Account Expense Paid During Value Value Ratio Period 6/1/04 11/30/04 6/1/04 to 11/30/04 - --------------------------------------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,157.70 1.54% $8.31 Class B 1,000.00 1,153.70 2.24% 12.06 Class C 1,000.00 1,153.70 2.24% 12.06 Class R 1,000.00 1,155.70 1.84% 9.92 Institutional Class 1,000.00 1,159.20 1.24% 6.69 - --------------------------------------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% return before expenses) Class A $1,000.00 $1,017.30 1.54% $7.77 Class B 1,000.00 1,013.80 2.24% 11.28 Class C 1,000.00 1,013.80 2.24% 11.28 Class R 1,000.00 1,015.85 1.84% 9.27 Institutional Class 1,000.00 1,018.80 1.24% 6.26 - --------------------------------------------------------------------------------------------------------------- (1) Other expenses are expected to decrease during the Fund's fiscal year ended November 30, 2005 due to a reduction in transfer agent fees associated with servicing retirement accounts. Had this reduction been in effect during the period, the Fund's expense analysis would be as follows: Beginning Ending Annualized Expenses Account Account Expense Paid During Value Value Ratio Period 6/1/04 11/30/04 6/1/04 to 11/30/04 - --------------------------------------------------------------------------------------------------------------- ACTUAL FUND RETURN Class A $1,000.00 $1,158.15 1.45% $7.82 Class B 1,000.00 1,154.15 2.15% 11.58 Class C 1,000.00 1,154.15 2.15% 11.58 Class R 1,000.00 1,156.15 1.75% 9.43 Institutional Class 1,000.00 1,159.65 1.15% 6.21 - --------------------------------------------------------------------------------------------------------------- HYPOTHETICAL 5% RETURN (5% return before expenses) Class A $1,000.00 $1,017.75 1.45% $7.31 Class B 1,000.00 1,014.25 2.15% 10.83 Class C 1,000.00 1,014.25 2.15% 10.83 Class R 1,000.00 1,016.25 1.75% 8.82 Institutional Class 1,000.00 1,019.25 1.15% 5.81 - --------------------------------------------------------------------------------------------------------------- 5 SECTOR ALLOCATION As of November 30, 2004 DELAWARE SMALL CAP VALUE FUND The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart or graph format in their annual and semiannual shareholder reports, whether or not a schedule of investments is utilized. The following chart lists the Fund's categories of portfolio holdings as a percent of total net assets and is provided in compliance with such requirement. PERCENTAGE SECTOR OF NET ASSETS - -------------------------------------------------------------------------- COMMON STOCK 96.31% - -------------------------------------------------------------------------- Aerospace & Defense 1.55% Banking & Finance 9.85% Basic Industry/Capital Goods 13.24% Buildings & Materials 2.62% Business Services 2.25% Cable, Media & Publishing 0.45% Chemicals 4.41% Consumer Products 2.54% Electronics & Electrical Equipment 3.12% Energy 9.62% Environmental Services 0.94% Healthcare & Pharmaceuticals 5.36% Insurance 3.94% Metals & Mining 2.24% Packaging & Containers 1.78% Paper & Forest Products 1.45% REITs 3.81% Retail 7.15% Technology/Hardware 5.68% Technology/Software 1.50% Telecommunications 1.23% Textiles, Apparel & Furniture 5.18% Transportation 4.45% Utilities 1.95% - -------------------------------------------------------------------------- EXCHANGE TRADED FUNDS 1.60% - -------------------------------------------------------------------------- WARRANTS 0.01% - -------------------------------------------------------------------------- REPURCHASE AGREEMENTS 4.70% - -------------------------------------------------------------------------- SECURITIES LENDING COLLATERAL 17.00% - -------------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 119.62% - -------------------------------------------------------------------------- OBLIGATION TO RETURN SECURITIES LENDING COLLATERAL (17.00%) - -------------------------------------------------------------------------- LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS (2.62%) - -------------------------------------------------------------------------- TOTAL NET ASSETS 100.00% - -------------------------------------------------------------------------- 6 STATEMENT DELAWARE SMALL CAP VALUE FUND OF NET ASSETS November 30, 2004 Number of Market Shares Value COMMON STOCK - 96.31% Aerospace & Defense - 1.55% +Herley Industries 142,900 $ 2,942,311 +United Defense Industries 97,700 4,425,810 ----------- 7,368,121 ----------- Banking & Finance - 9.85% *Boston Private Financial Holdings 194,200 5,260,878 Colonial BancGroup 309,600 6,572,807 *Commercial Federal 145,500 4,238,415 Compass Bancshares 94,300 4,390,608 First Republic Bank 104,600 5,375,394 *Greater Bay Bancorp 165,000 4,793,250 *MAF Bancorp 101,000 4,635,900 Provident Bankshares 140,100 5,147,274 *Republic Bancorp 200,475 3,115,382 +Sterling Financial 85,483 3,415,046 ----------- 46,944,954 ----------- Basic Industry/Capital Goods - 13.24% *Arch Coal 143,500 5,481,700 Crane 124,900 3,779,474 *Federal Signal 75,800 1,303,760 +Griffon 250,960 6,294,077 Harsco 90,300 4,799,445 *+Insituform Technologies Class A 107,600 2,511,384 +Jacobs Engineering Group 64,900 2,983,453 *Kaydon 154,100 5,005,168 Mueller Industries 77,900 2,393,867 *Smith (A.O.) 64,200 1,929,210 +Terex 74,902 3,433,508 *Texas Industries 113,100 6,785,999 The St. Joe Company 95,000 5,210,750 Universal Forest Products 46,000 1,985,360 *Wabtec 227,500 4,679,675 *Walter Industries 178,000 4,482,040 ----------- 63,058,870 ----------- Building & Materials - 2.62% KB HOME 65,800 5,783,162 *Thor Industries 135,700 4,532,380 *+WCI Communities 84,500 2,164,890 ----------- 12,480,432 ----------- Business Services - 2.25% Brink's 165,400 6,386,094 *+United Stationers 90,200 4,318,776 ----------- 10,704,870 ----------- Cable, Media & Publishing - 0.45% Belo Class A 84,600 2,133,612 ----------- 2,133,612 ----------- Chemicals - 4.41% *Fuller (H.B.) 117,100 3,351,402 *MacDermid 159,100 5,858,062 +PolyOne 391,000 3,608,930 Spartech 127,700 3,569,215 Westlake Chemical 147,200 4,620,608 ----------- 21,008,217 ----------- Consumer Products - 2.54% Bunge Limited 104,500 5,509,240 +Constellation Brands 147,200 6,579,840 ----------- 12,089,080 ----------- Number of Market Shares Value COMMON STOCK (continued) Electronics & Electrical Equipment - 3.12% +Checkpoint Systems 205,200 $ 3,787,992 *+Plexus 209,600 2,882,000 Symbol Technologies 263,700 3,997,692 +Technitrol 243,400 4,198,650 ----------- 14,866,334 ----------- Energy - 9.62% *+Energy Partners 298,000 5,772,260 +FMC Technologies 128,900 4,234,365 *+Grey Wolf 710,700 3,908,850 *+Magnum Hunter Resources 441,800 5,920,120 +Newfield Exploration 108,600 6,825,510 *+Newpark Resources 636,500 3,640,780 *Southwest Gas 150,300 3,817,620 +W-H Energy Services 223,500 5,109,210 *+Whiting Petroleum 194,600 6,624,184 ----------- 45,852,899 ----------- Environmental Services - 0.94% +Casella Waste Systems 295,100 4,458,961 ----------- 4,458,961 ----------- Healthcare & Pharmaceuticals - 5.36% +Alderwoods Group 329,700 3,488,226 Arrow International 87,600 2,649,024 +Genesis HealthCare 82,600 2,663,850 *+Kindred Healthcare 134,400 3,669,120 +Ocular Sciences 49,700 2,401,206 Owens & Minor 167,000 4,634,250 *+RehabCare Group 106,600 2,805,712 +Service Corporation International 452,400 3,193,944 ----------- 25,505,332 ----------- Insurance - 3.94% *AmerUs Group 126,300 5,502,891 Berkley (W.R.) 144,600 6,557,610 *Harleysville Group 117,400 2,822,296 Platinum Underwriters Holdings 129,600 3,863,376 ----------- 18,746,173 ----------- Metals & Mining - 2.24% *Gibraltar Steel 187,050 4,506,035 +Golden Star Resources 443,200 1,914,624 *+Meridian Gold 218,500 4,276,045 ----------- 10,696,704 ----------- Packaging & Containers - 1.78% +Crown Holdings 303,700 3,887,360 +Pactiv 184,600 4,587,310 ------------ 8,474,670 ----------- Paper & Forest Products - 1.45% Louisiana-Pacific 167,500 4,098,725 Wausau-Mosinee Paper 157,100 2,819,945 ----------- 6,918,670 ----------- REITs - 3.81% Ashford Hospitality Trust 184,600 1,827,540 Camden Property Trust 102,200 5,010,866 *Highland Hospitality 264,600 2,979,396 Prentiss Properties Trust 115,900 4,333,501 Reckson Associates Realty 123,000 3,982,740 ----------- 18,134,043 ----------- 7 STATEMENT DELAWARE SMALL CAP VALUE FUND OF NET ASSETS (CONTINUED) Number of Market Shares Value COMMON STOCK (continued) Retail - 7.15% +AnnTaylor Stores 185,000 $ 4,058,900 Cato Class A 214,500 5,722,861 +Department 56 93,600 1,584,648 +Electronics Boutique Holdings 127,600 4,970,020 *+JO-ANN Stores 84,385 2,322,275 *Oakley 170,900 2,076,435 Pier 1 Imports 252,800 4,611,072 +Shopko Stores 156,000 2,789,280 *+Sports Authority 93,636 2,669,562 *+Take-Two Interactive Software 93,600 3,271,320 ------------ 34,076,373 ------------ Technology/Hardware - 5.68% *+Bell Microproducts 251,800 2,152,890 *+Entegris 354,100 3,463,098 *+Insight Enterprises 192,800 3,900,344 +International Rectifier 98,500 4,170,490 +Overland Storage 208,700 3,099,195 *+Photronics 96,800 1,823,712 +Storage Technology 171,100 4,985,854 +Tech Data 76,100 3,454,179 ------------ 27,049,762 ------------ Technology/Software - 1.50% +Datastream Systems 330,100 1,947,590 QAD 205,300 1,691,672 *+SYNNEX 164,100 3,511,740 ------------ 7,151,002 ------------ Telecommunications - 1.23% +Netgear 356,000 5,838,400 ------------ 5,838,400 ------------ Textiles, Apparel & Furniture - 5.18% +Carter's 45,300 1,590,030 *Furniture Brands International 113,500 2,756,915 *K Swiss 198,200 5,369,634 Kellwood 145,300 5,057,893 Phillips-Van Heusen 99,600 2,719,080 Reebok International 82,400 3,203,712 Wolverine World Wide 132,700 3,974,365 ------------ 24,671,629 ------------ Transportation - 4.45% Alexander & Baldwin 178,900 7,569,259 *+Continental Airlines Class B 134,800 1,501,672 +Kirby 106,800 4,861,536 +SCS Transportation 61,100 1,292,265 Skywest 93,800 1,785,014 +Yellow Roadway 79,000 4,175,150 ------------ 21,184,896 ------------ Utilities - 1.95% Black Hills 51,300 1,575,423 +El Paso Electric 185,700 3,333,315 PNM Resources 172,500 4,388,400 ------------ 9,297,138 ------------ TOTAL COMMON STOCK (cost $319,278,818) 458,711,142 ------------ Number of Market Shares Value EXCHANGE TRADED FUNDS - 1.60% *iShares Russell 2000 Value Index Fund 40,200 $ 7,619,508 ------------ TOTAL EXCHANGE TRADED FUNDS (cost $5,591,158) 7,619,508 ------------ WARRANTS - 0.01% +Magnum Hunter Resources, exercise price $15.00, expiration date 3/21/05 49,500 30,195 ------------ TOTAL WARRANTS (cost $0) 30,195 ------------ Principal Amount REPURCHASE AGREEMENTS - 4.70% With BNP Paribas 1.94% 12/1/04 (dated 11/30/04, to be repurchased at $11,695,630 collateralized by $10,585,000 U.S. Treasury Bills due 3/3/05, market value $10,526,351 and $1,419,000 U.S. Treasury Bills due 5/12/05, market value $1,403,927) $11,695,000 11,695,000 With UBS Warburg 1.94% 12/1/04 (dated 11/30/04, to be repurchased at $10,675,575 collateralized by $3,558,000 U.S. Treasury Bills due 12/23/04, market value $3,553,934 and $7,398,000 U.S. Treasury Bills due 4/14/05, market value $7,339,104) 10,675,000 10,675,000 ------------ TOTAL REPURCHASE AGREEMENTS (cost $22,370,000) 22,370,000 ------------ TOTAL MARKET VALUE OF SECURITIES BEFORE SECURITIES LENDING COLLATERAL - 102.62% (cost $347,239,976) 488,730,845 ------------ SECURITIES LENDING COLLATERAL** - 17.00% Banc of America Securities LLC 2.08% 12/1/04 13,073,527 13,073,527 Barclays London 1.92% 1/31/05 617,562 617,329 Bear Stearns 2.12% 3/18/05 2,781,611 2,783,955 Beta Finance 2.30% 2/11/05 2,652,956 2,640,837 BNP Paribus 2.21% 1/25/05 623,586 622,665 Calyon 2.07% 4/19/05 3,086,459 3,086,328 Credit Swiss First Boston NY 1.60% 12/13/04 2,469,521 2,469,316 Deutsche Bank Financial 2.13% 2/22/05 617,309 617,484 Deutsche Bank London 1.96% 12/31/04 2,469,591 2,469,316 Fannie Mae 1.94% 12/29/04 2,461,867 2,457,901 General Electric Capital 2.12% 2/3/05 926,036 926,425 Goldman Sachs Group LP 1.80% 12/21/04 1,419,999 1,419,857 2.24% 12/8/04 1,450,642 1,450,723 IXIS Corporate & Investment Bank 2.19% 12/31/04 3,086,633 3,086,645 Landesbank Hessen 2.19% 12/30/04 3,116,574 3,114,121 Lehman Holdings 2.13% 12/23/05 3,101,421 3,101,421 Merrill Lynch Mortgage Capital 2.16% 1/12/05 2,469,316 2,469,316 8 STATEMENT DELAWARE SMALL CAP VALUE FUND OF NET ASSETS (CONTINUED) Principal Market Amount Value SECURITIES LENDING COLLATERAL** (continued) Morgan Stanley 2.14% 3/10/05 $2,469,316 $ 2,469,316 2.21% 1/2/06 616,362 617,329 Nordea Bank New York 2.07% 5/13/05 3,086,516 3,086,213 Pfizer 2.02% 1/2/06 2,961,897 2,963,179 Proctor and Gamble 1.83% 1/2/06 3,084,975 3,086,645 Rabobank, New York 2.15% 3/2/05 3,086,620 3,086,258 Royal Bank of Canada 2.14% 6/27/05 3,087,033 3,086,107 Sigma Finance 1.97% 9/30/05 2,901,797 2,900,782 Societe Generale 2.06% 6/14/05 1,549,045 1,548,597 2.15% 12/8/04 2,469,114 2,469,161 Union Bank of Switzerland 1.13% 12/20/04 3,087,564 3,086,645 Wells Fargo 2.06% 1/2/06 3,086,645 3,086,645 Wilmington Trust 2.05% 1/5/05 3,086,953 3,086,763 ------------ TOTAL SECURITIES LENDING COLLATERAL (cost $80,980,806) 80,980,806 ------------ TOTAL MARKET VALUE OF SECURITIES - 119.62% (cost $428,220,782) 569,711,651++ OBLIGATION TO RETURN SECURITIES LENDING COLLATERAL - (17.00%)** (80,980,806) LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (2.62%) (12,468,028) ------------ NET ASSETS APPLICABLE TO 12,237,551 SHARES OUTSTANDING - 100.00% $476,262,817 ------------ Net Asset Value - Delaware Small Cap Value Fund Class A ($270,332,058 / 6,820,227 Shares) $39.64 ------ Net Asset Value - Delaware Small Cap Value Fund Class B ($111,347,850 / 2,954,133 Shares) $37.69 ------ Net Asset Value - Delaware Small Cap Value Fund Class C ($66,313,313 / 1,760,051 Shares) $37.68 ------ Net Asset Value - Delaware Small Cap Value Fund Class R ($4,539,087 / 114,962 Shares) $39.48 ------ Net Asset Value - Delaware Small Cap Value Fund Institutional Class ($23,730,509 / 588,178 Shares) $40.35 ------ COMPONENTS OF NET ASSETS AT NOVEMBER 30, 2004: Shares of beneficial interest (unlimited authorization -- no par) $278,028,446 Accumulated net realized gain on investments 56,743,502 Net unrealized appreciation of investments 141,490,869 ------------ Total net assets $476,262,817 ============ *Fully or partially on loan. **See Note 7 in "Notes to Financial Statements." +Non-income producing security for the year ended November 30, 2004. ++Includes $79,367,960 of securities loaned. SUMMARY OF ABBREVIATIONS: REIT - Real Estate Investment Trust NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE SMALL CAP VALUE FUND Net asset value Class A (A) $39.64 Sales charge (5.75% of offering price, or 6.10% of amount invested per share) (B) 2.42 ------ Offering price $42.06 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $50,000 or more. See accompanying notes 9 STATEMENT DELAWARE SMALL CAP VALUE FUND OF OPERATIONS Year Ended November 30, 2004 INVESTMENT INCOME: Dividends $5,162,442 Interest 247,288 Securities lending income 148,267 $5,557,997 ---------- ---------- EXPENSES: Management fees 3,373,984 Distribution expenses -- Class A 748,880 Distribution expenses -- Class B 1,060,420 Distribution expenses -- Class C 558,236 Distribution expenses -- Class R 18,359 Dividend disbursing and transfer agent fees and expenses 1,643,616 Accounting and administration expenses 161,158 Reports and statements to shareholders 142,915 Registration fees 99,214 Legal and professional fees 77,219 Custodian fees 23,293 Trustees' fees 19,510 Taxes (other than taxes on income) 7,732 Pricing Fees 993 Other 9,851 7,945,380 ---------- Less expenses paid indirectly (1,408) ----------- Total expenses 7,943,972 ----------- NET INVESTMENT LOSS (2,385,975) ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments 59,163,709 Net change in unrealized appreciation/depreciation of investments 26,597,601 ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 85,761,310 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $83,375,335 =========== See accompanying notes 10 STATEMENTS DELAWARE SMALL CAP VALUE FUND OF CHANGES IN NET ASSETS Year Ended 11/30/04 11/30/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss $ (2,385,975) $ (2,459,007) Net realized gain on investments 59,163,709 31,761,494 Net change in unrealized appreciation/depreciation of investments 26,597,601 76,784,485 ------------ ------------ Net increase in net assets resulting from operations 83,375,335 106,086,972 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain on investments: Class A (16,080,554) (5,630,292) Class B (7,388,227) (2,772,312) Class C (3,426,454) (1,095,652) Class R (133,545) -- Institutional Class (2,199,840) (599,160) ------------ ------------ (29,228,620) (10,097,416) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 56,360,643 38,257,242 Class B 12,292,857 14,676,802 Class C 20,538,825 11,886,179 Class R 3,470,893 1,704,178 Institutional Class 11,602,459 9,664,752 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 15,140,871 5,300,403 Class B 6,672,916 2,552,249 Class C 3,179,515 1,028,672 Class R 130,217 -- Institutional Class 2,199,835 599,160 ------------ ------------ 131,589,031 85,669,637 ------------ ------------ Cost of shares repurchased: Class A (72,260,823) (38,593,243) Class B (26,208,562) (20,265,650) Class C (12,909,856) (8,899,510) Class R (1,329,592) (94,701) Institutional Class (27,801,757) (3,704,109) ------------ ------------ (140,510,590) (71,557,213) ------------ ------------ Increase (decrease) in net assets derived from capital share transactions (8,921,559) 14,112,424 ------------ ------------ NET INCREASE IN NET ASSETS 45,225,156 110,101,980 NET ASSETS: Beginning of year 431,037,661 320,935,681 ------------ ------------ End of year (there was no undistributed net investment income at either year end) $476,262,817 $431,037,661 ============ ============ See accompanying notes 11 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows: - --------------------------------------------------------------------------------------------------------------------------------- Delaware Small Cap Value Fund Class A - --------------------------------------------------------------------------------------------------------------------------------- Year Ended 11/30/04 11/30/03 11/30/02 11/30/01 11/30/00 NET ASSET VALUE, BEGINNING OF PERIOD $35.220 $27.120 $29.350 $25.980 $24.680 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income (loss)(1) (0.105) (0.136) (0.060) 0.059 0.091 Net realized and unrealized gain on investments 6.879 9.079 0.574 4.429 1.594 ------- ------- ------- ------- ------- Total from investment operations 6.774 8.943 0.514 4.488 1.685 ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income -- -- -- (0.026) (0.080) Net realized gain on investments (2.354) (0.843) (2.744) (1.047) (0.305) In excess of net realized gain on investments -- -- -- (0.045) -- ------- ------- ------- ------- ------- Total dividends and distributions (2.354) (0.843) (2.744) (1.118) (0.385) ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $39.640 $35.220 $27.120 $29.350 $25.980 ======= ======= ======= ======= ======= TOTAL RETURN(2) 20.52% 34.17% 1.60% 17.66% 7.04% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $270,332 $240,322 $180,696 $182,925 $151,044 Ratio of expenses to average net assets 1.54% 1.63% 1.63% 1.58% 1.68% Ratio of net investment income (loss) to average net assets (0.30%) (0.47%) (0.21%) 0.21% 0.37% Portfolio turnover 35% 42% 47% 72% 56% (1) The average shares outstanding method has been applied for per share information. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. See accompanying notes 12 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows: - ------------------------------------------------------------------------------------------------------------------------------ Delaware Small Cap Value Fund Class B - ------------------------------------------------------------------------------------------------------------------------------ Year Ended 11/30/04 11/30/03 11/30/02 11/30/01 11/30/00 NET ASSET VALUE, BEGINNING OF PERIOD $33.820 $26.260 $28.680 $25.520 $24.340 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss(1) (0.334) (0.327) (0.252) (0.138) (0.079) Net realized and unrealized gain on investments 6.558 8.730 0.576 4.345 1.564 ------- ------- ------- ------- ------- Total from investment operations 6.224 8.403 0.324 4.207 1.485 ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net realized gain on investments (2.354) (0.843) (2.744) (1.047) (0.305) ------- ------- ------- ------- ------- Total dividends and distributions (2.354) (0.843) (2.744) (1.047) (0.305) ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $37.690 $33.820 $26.260 $28.680 $25.520 ======= ======= ======= ======= ======= TOTAL RETURN(2) 19.69% 33.21% 0.91% 16.83% 6.27% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $111,348 $107,136 $86,641 $83,648 $58,156 Ratio of expenses to average net assets 2.24% 2.33% 2.33% 2.28% 2.38% Ratio of net investment loss to average net assets (1.00%) (1.17%) (0.91%) (0.49%) (0.33%) Portfolio turnover 35% 42% 47% 72% 56% (1) The average shares outstanding method has been applied for per share information. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. See accompanying notes 13 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows: - --------------------------------------------------------------------------------------------------------------------------- Delaware Small Cap Value Fund Class C - --------------------------------------------------------------------------------------------------------------------------- Year Ended 11/30/04 11/30/03 11/30/02 11/30/01 11/30/00 NET ASSET VALUE, BEGINNING OF PERIOD $33.810 $26.250 $28.670 $25.510 $24.320 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss(1) (0.333) (0.326) (0.251) (0.135) (0.079) Net realized and unrealized gain on investments 6.557 8.729 0.575 4.342 1.574 ------- ------- ------- ------- ------- Total from investment operations 6.224 8.403 0.324 4.207 1.495 ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net realized gain on investments (2.354) (0.843) (2.744) (1.047) (0.305) ------- ------- ------- ------- ------- Total dividends and distributions (2.354) (0.843) (2.744) (1.047) (0.305) ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $37.680 $33.810 $26.250 $28.670 $25.510 ======= ======= ======= ======= ======= TOTAL RETURN(2) 19.69% 33.22% 0.91% 16.88% 6.27% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $66,313 $48,453 $34,140 $31,823 $20,822 Ratio of expenses to average net assets 2.24% 2.33% 2.33% 2.28% 2.38% Ratio of net investment loss to average net assets (1.00%) (1.17%) (0.91%) (0.49%) (0.33%) Portfolio turnover 35% 42% 47% 72% 56% (1) The average shares outstanding method has been applied for per share information. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. See accompanying notes 14 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows: - ---------------------------------------------------------------------------------------------------------- Delaware Small Cap Value Fund Class R - ---------------------------------------------------------------------------------------------------------- Year Ended 6/2/03(1) to 11/30/04 11/30/03 NET ASSET VALUE, BEGINNING OF PERIOD $35.190 $29.000 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss(2) (0.209) (0.160) Net realized and unrealized gain on investments 6.853 6.350 ------- ------- Total from investment operations 6.644 6.190 ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net realized gain on investments (2.354) -- ------- ------- Total dividends and distributions (2.354) -- ------- ------- NET ASSET VALUE, END OF PERIOD $39.480 $35.190 ======= ======= TOTAL RETURN(3) 20.15% 21.35% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $4,539 $1,740 Ratio of expenses to average net assets 1.84% 1.97% Ratio of net investment loss to average net assets (0.60%) (0.97%) Portfolio turnover 35% 42% (1) Date of commencement of operations, ratios have been annualized and total return has not been annualized. (2) The average shares outstanding method has been applied for per share information. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. See accompanying notes 15 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows: - ---------------------------------------------------------------------------------------------------------------------------- Delaware Small Cap Value Fund Institutional Class - ---------------------------------------------------------------------------------------------------------------------------- Year Ended 11/30/04 11/30/03 11/30/02 11/30/01 11/30/00 NET ASSET VALUE, BEGINNING OF PERIOD $35.700 $27.400 $29.540 $26.130 $24.830 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income (loss)(1) 0.000 (0.050) 0.026 0.144 0.165 Net realized and unrealized gain on investments 7.004 9.193 0.578 4.458 1.600 ------- ------- ------- ------- ------- Total from investment operations 7.004 9.143 0.604 4.602 1.765 ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income -- -- -- (0.100) (0.160) Net realized gain on investments (2.354) (0.843) (2.744) (1.047) (0.305) In excess of net realized gain on investments -- -- -- (0.045) -- ------- ------- ------- ------- ------- Total dividends and distributions (2.354) (0.843) (2.744) (1.192) (0.465) ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $40.350 $35.700 $27.400 $29.540 $26.130 ======= ======= ======= ======= ======= TOTAL RETURN(2) 20.88% 34.57% 1.88% 18.09% 7.35% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $23,731 $33,387 $19,459 $18,224 $10,992 Ratio of expenses to average net assets 1.24% 1.33% 1.33% 1.28% 1.38% Ratio of net investment income (loss) to average net assets 0.00% (0.17%) 0.09% 0.51% 0.67% Portfolio turnover 35% 42% 47% 72% 56% (1) The average shares outstanding method has been applied for per share information. (2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. See accompanying notes 16 NOTES DELAWARE SMALL CAP VALUE FUND TO FINANCIAL STATEMENTS November 30, 2004 Delaware Group Equity Funds V (the "Trust") is organized as a Delaware statutory trust and offers three series: Delaware Small-Cap Contrarian Fund, Delaware Small Cap Value Fund, and Delaware Dividend Income Fund. These financial statements and the related notes pertain to Delaware Small Cap Value Fund (the "Fund"). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class B, Class C, Class R, and Institutional Class shares. Class A shares are sold with a front-end sales charge of up to 5.75%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first twelve months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to a limited group of investors. The investment objective of the Fund is to seek capital appreciation. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Fund. Security Valuation -- Equity securities, except those traded on the Nasdaq Stock Market, Inc. (NASDAQ), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the NASDAQ are valued in accordance with the NASDAQ Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between the bid and asked prices will normally be used. Short-term debt securities 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 under the direction of the Fund's Board of Trustees. Federal Income Taxes -- The Fund intends to continue to qualify for federal income tax purposes 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. 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. Use of Estimates -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that may 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. Management fees and some other expenses are paid monthly. 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. Distributions received from investments in Real Estate Investment Trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer. The Fund declares and pays dividends from net investment income and distributions from net realized gains on investments, if any, annually. Through December 31, 2003, certain expenses of the Fund were paid through commission arrangements with brokers. The amount of these expenses was approximately $880 for the year ended November 30, 2004. In addition, the Fund receives earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The earnings credits for the year ended November 30, 2004, were approximately $528. 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, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.75% on the first $500 million of average daily net assets of the Fund, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion. Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Fund pays DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, the Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class B and C shares and 0.60% of the average daily net assets of the Class R shares. Institutional Class shares pay no distribution and service expenses. At November 30, 2004, the Fund had liabilities payable to affiliates as follows: Investment management fee payable to DMC $293,128 Dividend disbursing, transfer agent fees, accounting and administration fees and other expenses payable to DSC 98,609 Other expenses payable to DMC and affiliates* 24,005 *DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit legal, and tax services, registration fees and trustees' fees. 17 NOTES DELAWARE SMALL CAP VALUE FUND TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED) As provided in the investment management agreement the Fund bears the cost of certain legal services expenses, including internal legal services provided to the Fund by DMC employees. For the year ended November 30, 2004, the Fund was charged $17,975 for internal legal services provided by DMC. For the year ended November 30, 2004, DDLP earned $84,040 for commissions on sales of the Fund's Class A shares. Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust. These officers and trustees are paid no compensation by the Fund. 3. INVESTMENTS For the year ended November 30, 2004, the Fund made purchases of $149,104,574 and sales of $180,762,214 of investment securities other than short-term investments. At November 30, 2004, the cost of investments for federal income tax purposes was $428,242,146. At November 30, 2004, the net unrealized appreciation was $141,469,505 of which $146,023,891 related to unrealized appreciation of investments and $4,554,386 related to unrealized depreciation of investments. 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. The tax character of dividends and distributions paid during the years ended November 30, 2004 and 2003 were as follows: 11/30/04 11/30/03 -------- -------- Ordinary Income $ 2,051,867 $ -- Long-term capital gain 27,176,753 10,097,416 ----------- ----------- Total Distribution $29,228,620 $10,097,416 ----------- ----------- As of November 30, 2004, the components of net assets on a tax basis were as follows: Shares of beneficial interest $278,028,446 Undistributed ordinary income 12,614,183 Undistributed long-term capital gain 44,150,683 Unrealized appreciation of investments 141,469,505 ------------ Net assets $476,262,817 ============ For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. For the year ended November 30, 2004, the Fund recorded the following permanent reclassifications. Reclassifications are primarily due to tax treatment of net operating losses. Results of operations and net assets were not affected by these reclassifications. Accumulated net investment income (loss) $2,385,975 Accumulated realized gain (loss) $(2,385,975) The undistributed earnings for the Fund are estimated pending final notification of the tax character of dividends received from investments in Real Estate Investment Trusts. 5. CAPITAL SHARES Transactions in capital shares were as follows: Year Ended 11/30/04 11/30/03 Shares sold: Class A 1,612,277 1,317,213 Class B 368,241 516,373 Class C 616,133 421,216 Class R 99,598 52,297 Institutional Class 327,242 327,466 Shares issued upon reinvestment of dividends and distributions: Class A 455,639 208,595 Class B 209,774 103,918 Class C 99,985 41,901 Class R 3,923 -- Institutional Class 65,219 23,322 ---------- ---------- 3,858,031 3,012,301 ---------- ---------- Shares repurchased: Class A (2,071,582) (1,365,058) Class B (791,357) (752,492) Class C (389,122) (330,789) Class R (38,022) (2,834) Institutional Class (739,401) (125,861) ---------- ---------- (4,029,484) (2,577,034) ---------- ---------- Net increase (decrease) (171,453) 435,267 ========== ========== For the years ended November 30, 2004 and 2003, 119,383 Class B shares were converted to 113,988 Class A shares valued at $3,975,630 and 76,322 Class B shares were converted to 73,585 Class A shares valued at $2,135,097, respectively. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the Statements of Changes in Net Assets. 6. LINE OF CREDIT The Fund, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $183,100,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each fund's 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 November 30, 2004, or at any time during the year. 18 NOTES DELAWARE SMALL CAP VALUE FUND TO FINANCIAL STATEMENTS (CONTINUED) 7. SECURITIES LENDING The Fund, along with other funds in the Delaware Investments Family of Funds, may lend its securities pursuant to a security lending agreement ("Lending Agreement") with J.P. Morgan Chase. Initial security loans made pursuant to the Lending Agreement are required to be secured by U.S. government obligations and/or cash collateral not less than 102% of the market value of the securities issued in the United States. With respect to each loan, if the aggregate market value of the collateral held on any business day is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral not less than the applicable collateral requirements. Cash collateral received is invested in fixed-income securities, with a weighted average maturity not to exceed 90 days, rated in one of the top two tiers by Standard & Poors Ratings Group or Moody's Investors Service, Inc. or repurchase agreements collateralized by such securities. However, in the event of default or bankruptcy by the lending agent, realization and/or retention of the collateral may be subject to legal proceedings. In the event the borrower fails to return loaned securities and the collateral received is insufficient to cover the value of the loaned securities and provided such collateral shortfall is not the result of investment losses, the lending agent has agreed to pay the amount of the shortfall to the Fund, or at the discretion of the lending agent, replace the loaned securities. The Fund continues to record dividends on the securities loaned and is subject to change in value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. The security lending agent and the borrower retain a portion of the earnings from the collateral investments. The Fund records security lending income net of such allocation. At November 30, 2004, the market value of securities on loan was $79,367,960, for which cash collateral was received and invested in accordance with the Lending Agreement. Such investments are presented on the Statement of Net Assets under the caption "Securities Lending Collateral." 8. CREDIT AND MARKET RISK The Fund invests a significant portion of its assets in small companies and may be subject to certain risks associated with ownership of securities of small companies. Investments in small sized companies may be more volatile than investments in larger companies for a number of reasons, which include limited financial resources or a dependence on narrow product lines. The Fund invests in REITs and is subject to some of the risks associated with that industry. If the Fund holds real estate directly as a result of defaults or receives rental income directly from real estate holdings, its tax status as a regulated investment company may be jeopardized. There were no direct holdings during the year ended November 30, 2004. The Fund's REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations. 9. CONTRACTUAL OBLIGATIONS The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund's existing contracts and expects the risk of loss to be remote. 10. 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 January of each year. Please consult your tax advisor for proper treatment of this information. For the fiscal year ended November 30, 2004, the Fund designates distributions paid during the year as follows: (A) (B) Long-Term Ordinary Capital Gains Income Total (C) Distributions Distributions* Distributions Qualifying (Tax Basis) (Tax Basis) (Tax Basis) Dividends(1) --------------- -------------- ------------- ----------- 93% 7% 100% 4% (A) and (B) are based on a percentage of the Fund's total distributions. (C) is based on a percentage of the Fund's ordinary income distributions. (1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction. *For the fiscal year ended November 30, 2004, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate up to a maximum amount of $2,197,734 to be taxed at a maximum rate of 15%. Complete information will be computed and reported in conjunction with your 2004 Form 1099-DIV. 19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees Delaware Group Equity Funds V - Delaware Small Cap Value Fund We have audited the accompanying statement of net assets of the Delaware Small Cap Value Fund (one of the series constituting Delaware Group Equity Funds V) (the "Fund") as of November 30, 2004, 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 the standards of the Public Company Accounting Oversight Board (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 November 30, 2004, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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 the Delaware Small Cap Value Fund of Delaware Group Equity Funds V at November 30, 2004, 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 U.S. generally accepted accounting principles. Ernst & Young LLP Philadelphia, Pennsylvania January 14, 2005 20 DELAWARE INVESTMENTS FAMILY OF FUNDS BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM A mutual fund is governed by a Board of Trustees/Directors which has oversight responsibility for the management of a fund's business affairs. Trustees/Directors establish procedures and oversee and review the performance of the investment manager, the distributor and others that perform services for the fund. The independent fund trustees, in particular, are advocates for shareholder interests. The following is a list of the Trustees/Directors and Officers with certain background and related information. NUMBER OF OTHER PRINCIPAL PORTFOLIOS IN FUND DIRECTORSHIPS NAME, POSITION(S) OCCUPATION(S) COMPLEX OVERSEEN HELD BY ADDRESS HELD WITH LENGTH OF TIME DURING BY TRUSTEE/DIRECTOR TRUSTEE/DIRECTOR AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER OR OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEES JUDE T. DRISCOLL(2) Chairman, President, 4 Years - Since August 2000, 75 None 2005 Market Street Chief Executive Executive Officer Mr. Driscoll has served in Philadelphia, PA Officer, and various executive capacities 19103 Trustee(4) 1 Year - at different times at Trustee Delaware Investments(1) March 10, 1963 Senior Vice President and Director of Fixed-Income Process - Conseco Capital Management (June 1998 - August 2000) - ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES WALTER P. BABICH Trustee 16 Years Board Chairman - 92 None 2005 Market Street Citadel Construction Corporation Philadelphia, PA (1989 - Present) 19103 October 1, 1927 - ------------------------------------------------------------------------------------------------------------------------------------ JOHN H. DURHAM Trustee 25 Years(3) Private Investor 92 Trustee - Abington 2005 Market Street Memorial Hospital Philadelphia, PA 19103 President/Director - 22 WR Corporation August 7, 1937 - ------------------------------------------------------------------------------------------------------------------------------------ JOHN A. FRY Trustee(4) 3 Years President - 75 Director - 2005 Market Street Franklin & Marshall College Community Health Philadelphia, PA (June 2002 - Present) Systems 19103 Executive Vice President - May 28, 1960 University of Pennsylvania (April 1995 - June 2002) - ------------------------------------------------------------------------------------------------------------------------------------ ANTHONY D. KNERR Trustee 11 Years Founder/Managing Director - 92 None 2005 Market Street Anthony Knerr & Associates Philadelphia, PA (Strategic Consulting) 19103 (1990 - Present) December 7, 1938 - ------------------------------------------------------------------------------------------------------------------------------------ 21 NUMBER OF OTHER PRINCIPAL PORTFOLIOS IN FUND DIRECTORSHIPS NAME, POSITION(S) OCCUPATION(S) COMPLEX OVERSEEN HELD BY ADDRESS HELD WITH LENGTH OF TIME DURING BY TRUSTEE/DIRECTOR TRUSTEE/DIRECTOR AND BIRTHDATE FUND(S) SERVED PAST 5 YEARS OR OFFICER OR OFFICER - ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES (CONTINUED) ANN R. LEVEN Trustee 15 Years Treasurer/Chief Fiscal Officer - 92 Director and 2005 Market Street National Gallery of Art Audit Committee Philadelphia, PA (1994 - 1999) Chairperson - Andy 19103 Warhol Foundation November 1, 1940 Director - Systemax Inc. - ------------------------------------------------------------------------------------------------------------------------------------ THOMAS F. MADISON Trustee 10 Years President/Chief 92 Director - 2005 Market Street Executive Officer - Banner Health Philadelphia, PA MLM Partners, Inc. 19103 (Small Business Investing Director - and Consulting) CenterPoint Energy February 25, 1936 (January 1993 - Present) Director - Digital River Inc. Director - Rimage Corporation Director - Valmont Industries, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ JANET L. YEOMANS Trustee 5 Years Vice President/Mergers & 92 None 2005 Market Street Acquisitions - 3M Corporation Philadelphia, PA (January 2003 - Present) 19103 Ms. Yeomans has held July 31, 1948 various management positions at 3M Corporation since 1983. - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS JOSEPH H. HASTINGS Executive 1 Year Mr. Hastings has served in 92 None(5) 2005 Market Street Vice President various executive capacities Philadelphia, PA and at different times at 19103 Chief Financial Delaware Investments. Officer December 19, 1949 - ------------------------------------------------------------------------------------------------------------------------------------ RICHELLE S. MAESTRO Executive Vice President, 1 Year Ms. Maestro has served in 92 None(5) 2005 Market Street Chief Legal Officer various executive capacities Philadelphia, PA and Secretary at different times at 19103 Delaware Investments. November 26, 1957 - ------------------------------------------------------------------------------------------------------------------------------------ MICHAEL P. BISHOF Senior Vice President 8 Years Mr. Bishof has served in 92 None(5) 2005 Market Street and Treasurer various executive capacities Philadelphia, PA at different times at 19103 Delaware Investments. August 18, 1962 - ------------------------------------------------------------------------------------------------------------------------------------ (1) Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the registrant's investment advisor, principal underwriter and its transfer agent. (2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an executive officer of the Fund's manager and distributor. (3) Mr. Durham served as a Director Emeritus from 1995 through 1998. (4) Mr. Driscoll and Mr. Fry are not Trustees of the funds of Voyageur Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual Funds III and Voyageur Tax Free Funds. (5) Mr. Hastings, Mr. Bishof and Ms. Maestro also serve in similar capacities for the six portfolios of the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant. The Statement of Additional Information for the Fund(s) includes additional information about the Trustees/Directors and Officers and is available, without charge, upon request by calling 800 523-1918. 22 Delaware Investments(SM) - -------------------------------------- A member of Lincoln Financial Group(R) This annual report is for the information of Delaware Small Cap Value Fund, but may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Small Cap Value Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the Fund. You should read carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in the Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION JUDE T. DRISCOLL JOSEPH H. HASTINGS INVESTMENT MANAGER Chairman Executive Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA NATIONAL DISTRIBUTOR WALTER P. BABICH Delaware Distributors, L.P. Board Chairman RICHELLE S. MAESTRO Philadelphia, PA Citadel Construction Corporation Executive Vice President, King of Prussia, PA Chief Legal Officer and Secretary SHAREHOLDER SERVICING, DIVIDEND Delaware Investments Family of Funds DISBURSING AND TRANSFER AGENT JOHN H. DURHAM Philadelphia, PA Delaware Service Company, Inc. Private Investor 2005 Market Street Gwynedd Valley, PA MICHAEL P. BISHOF Philadelphia, PA 19103-7094 Senior Vice President and Treasurer JOHN A. FRY Delaware Investments Family of Funds FOR SHAREHOLDERS President Philadelphia, PA 800 523-1918 Franklin & Marshall College Lancaster, PA FOR SECURITIES DEALERS AND FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY ANTHONY D. KNERR 800 362-7500 Managing Director Anthony Knerr & Associates WEB SITE New York, NY www.delawareinvestments.com ANN R. LEVEN Former Treasurer/Chief Fiscal Officer National Gallery of Art Washington, DC THOMAS F. MADISON President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN JANET L. YEOMANS Vice President/Mergers & Acquisitions 3M Corporation St. Paul, MN - -------------------------------------------------------------------------------- The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as a description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on the Fund's Web site at http://www.delawareinvestments.com; and (iii) on the Commission's Web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. - -------------------------------------------------------------------------------- (9090) Printed in the USA AR-021 [11/04] IVES 1/05 J9926 Item 2. Code of Ethics The registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. A copy of the registrant's Code of Business Ethics has been posted on Delaware Investments' internet website at www.delawareinvestments.com. Any amendments to the Code of Business Ethics, and information on any waiver from its provisions granted by the registrant, will also be posted on this website within five business days of such amendment or waiver and will remain on the website for at least 12 months. Item 3. Audit Committee Financial Expert The registrant's Board of Trustees/Directors has determined that each member of the registrant's Audit Committee is an audit committee financial expert, as defined below. For purposes of this item, an "audit committee financial expert" is a person who has the following attributes: a. An understanding of generally accepted accounting principles and financial statements; b. The ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves; c. Experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant's financial statements, or experience actively supervising one or more persons engaged in such activities; d. An understanding of internal controls and procedures for financial reporting; and e. An understanding of audit committee functions. An "audit committee financial expert" shall have acquired such attributes through: a. Education and experience as a principal financial officer, principal accounting officer, controller, public accountant, or auditor or experience in one or more positions that involve the performance of similar functions; b. Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor, or person performing similar functions; c. Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing, or evaluation of financial statements; or d. Other relevant experience. The registrant's Board of Trustees/Directors has also determined that each member of the registrant's Audit Committee is independent. In order to be "independent" for purposes of this item, the Audit Committee member may not: (i) other than in his or her capacity as a member of the Board of Trustees/Directors or any committee thereof, accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer; or (ii) be an "interested person" of the registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940. The names of the audit committee financial experts on the registrant's Audit Committee are set forth below: Ann R. Leven Thomas F. Madison Janet L. Yeomans(1) Item 4. Principal Accountant Fees and Services (a) Audit fees. The aggregate fees billed for services provided to the Registrant by its independent auditors for the audit of the Registrant's annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $59,550 for the fiscal year ended November 30, 2004. The aggregate fees billed for services provided to the Registrant by its independent auditors for the audit of the Registrant's annual financial statements and for services normally provided by the independent auditors in connection with statutory and regulatory filings or engagements were $50,560 for the fiscal year ended November 30, 2003. (b) Audit-related fees. The aggregate fees billed by the Registrant's independent auditors for services relating to the performance of the audit of the Registrant's financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended November 30, 2004. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. The aggregate fees billed by the Registrant's independent auditors for services relating to the performance of the audit of the financial statements of the Registrant's investment adviser(s) and other service providers under common control with the adviser(s) and that relate directly to the operations or financial reporting of the Registrant were $164,700 for the Registrant's fiscal year ended November 30, 2004. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of reports concerning transfer agent's system of internal accounting control pursuant to Rule 17Ad-13 of the Securities Exchange Act; issuance of agreed upon procedures reports to the Registrant's Board in connection with the annual transfer agent and fund accounting service agent contract renewals and the pass-through of internal legal cost relating to the operations of the Registrant; and preparation of Report on Controls Placed in Operation and Tests of Operating Effectiveness Relating to the Retirement Plan Services Division ("SAS 70 report"). The aggregate fees billed by the Registrant's independent auditors for services relating to the performance of the audit of the Registrant's financial statements and not reported under paragraph (a) of this Item were $0 for the fiscal year ended November 30, 2003. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. - -------- (1) The instructions to Form N-CSR require disclosure on the relevant experience of persons who qualify as audit committee financial experts based on "other relevant experience." The Board of Trustees/Directors has determined that Ms. Yeomans qualifies as an audit committee financial expert by virtue of her education and experience as the Treasurer of a large global corporation. The aggregate fees billed by the Registrant's independent auditors for services relating to the performance of the audit of the financial statements of the Registrant's investment adviser(s) and other service providers under common control with the adviser(s) and that relate directly to the operations or financial reporting of the Registrant were $162,700 for the Registrant's fiscal year ended November 30, 2003. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These audit-related services were as follows: issuance of reports concerning transfer agent's system of internal accounting control pursuant to Rule 17Ad-13 of the Securities Exchange Act; issuance of agreed upon procedures reports to the Fund's Board in connection with the annual transfer agent and fund accounting service agent contract renewals and the pass-through of internal legal cost relating to the operations of the Registrant; and preparation of Report on Controls Placed in Operation and Tests of Operating Effectiveness Relating to the Retirement Plan Services Division ("SAS 70 report"). (c) Tax fees. The aggregate fees billed by the Registrant's independent auditors for tax-related services provided to the Registrant were $5,250 for the fiscal year ended November 30, 2004. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These services were as follows: review of income tax returns and review of annual excise distribution calculations. The aggregate fees billed by the Registrant's independent auditors for tax-related services provided to the Registrant's investment adviser(s) and other service providers under common control with the adviser(s) and that relate directly to the operations or financial reporting of the Registrant were $0 for the Registrant's fiscal year ended November 30, 2004. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. The aggregate fees billed by the Registrant's independent auditors for tax-related services provided to the Registrant were $3,750 for the fiscal year ended November 30, 2003. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. These services were as follows: review of income tax returns and review of annual excise distribution calculations. The aggregate fees billed by the Registrant's independent auditors for tax-related services provided to the Registrant's adviser(s) and other service providers under common control with the adviser(s) and that relate directly to the operations or financial reporting of the Registrant were $0 for the Registrant's fiscal year ended November 30, 2003. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. (d) All other fees. The aggregate fees billed for all services provided by the independent auditors to the Registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended November 30, 2004. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the Registrant's independent auditors to the Registrant's adviser(s) and other service providers under common control with the adviser(s) and that relate directly to the operations or financial reporting of the Registrant were $0 for the Registrant's fiscal year ended November 30, 2004. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. The aggregate fees billed for all services provided by the independent auditors to the Registrant other than those set forth in paragraphs (a), (b) and (c) of this Item were $0 for the fiscal year ended November 30, 2003. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. The aggregate fees billed for all services other than those set forth in paragraphs (b) and (c) of this Item provided by the Registrant's independent auditors to the Registrant's adviser(s) and other service providers under common control with the adviser(s) and that relate directly to the operations or financial reporting of the Registrant were $0 for the Registrant's fiscal year ended November 30, 2003. The percentage of these fees relating to services approved by the Registrant's Audit Committee pursuant to the de minimis exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%. (e) The Registrant's Audit Committee has not established pre-approval policies and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X. (f) Not applicable. (g) The aggregate non-audit fees billed by the Registrant's independent auditors for services rendered to the Registrant and to its investment adviser(s) and other service providers under common control with the adviser(s) were $357,709 and $289,350 for the Registrant's fiscal years ended November 30, 2004 and November 30, 2003, respectively. (h) In connection with its selection of the independent auditors, the Registrant's Audit Committee has considered the independent auditors' provision of non-audit services to the Registrant's investment adviser(s) and other service providers under common control with the adviser(s) that were not required to be pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee has determined that the independent auditors' provision of these services is compatible with maintaining the auditors' independence. Item 5. Audit Committee of Listed Registrants Not applicable. Item 6. Schedule of Investments Included as part of report to shareholders filed under Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers Not applicable. Item 10. Submission of Matters to a Vote of Security Holders Not applicable. Item 11. Controls and Procedures The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There were no significant changes in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant's fourth fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits (a) (1) Code of Ethics Not applicable. (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. (3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. Not applicable. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized. DELAWARE GROUP EQUITY FUNDS V Jude T. Driscoll - --------------------------------- By: Jude T. Driscoll Title: Chairman Date: February 3, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Jude T. Driscoll - --------------------------------- By: Jude T. Driscoll Title: Chairman Date: February 3, 2005 Joseph H. Hastings - --------------------------------- By: Joseph H. Hastings Title: Chief Financial Officer Date: February 3, 2005