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