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:
David F. Connor, 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: May 31, 2006
Item 1. Reports to Stockholders
Semiannual Report Delaware
Dividend Income Fund
May 31, 2006
Value equity
[DELAWARE LOGO] [LOGO] POWERED BY RESEARCH (R)
<page>
Table of contents
> Disclosure of Fund expenses .............................................. 1
> Sector allocation. ....................................................... 2
> Statement of net assets .................................................. 3
> Statement of operations .................................................. 11
> Statements of changes in net assets ...................................... 12
> Financial highlights ..................................................... 13
> Notes to financial statements ............................................ 18
> Other Fund information ................................................... 22
> About the organization ................................................... 24
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) 2006 Delaware Distributors, L.P.
<page>
Disclosure of Fund expenses
For the period December 1, 2005 to May 31, 2006.
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 December 1, 2005 to May 31, 2006.
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.
Delaware Dividend Income Fund
Expense Analysis of an Investment of $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 12/1/05 to
12/1/05 5/31/06 Ratios 5/31/06*
______________________________________________________________________________
Actual Fund return
Class A $1,000.00 $1,051.70 1.00% $5.12
Class B 1,000.00 1,047.80 1.75% 8.93
Class C 1,000.00 1,048.70 1.75% 8.94
Class R 1,000.00 1,050.50 1.25% 6.39
Institutional Class 1,000.00 1,053.00 0.75% 3.84
________________________________________________________________________________
With hypothetical 5% return (5% return before expenses)
Class A $1,000.00 $1,019.95 1.00% $5.04
Class B 1,000.00 1,016.21 1.75% 8.80
Class C 1,000.00 1,016.21 1.75% 8.80
Class R 1,000.00 1,018.70 1.25% 6.29
Institutional Class 1,000.00 1,021.19 0.75% 3.78
________________________________________________________________________________
*"Expenses Paid During Period" are equal to the Fund's annualized expense ratio,
multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period).
1
<page>
Sector allocation
Delaware Dividend Income Fund
As of May 31, 2006
Percentage
Sector of Net Assets
________________________________________________________________________________
Common Stock 54.33%
Consumer Discretionary 4.00%
Consumer Staples 4.98%
Diversified REITs 1.07%
Energy 2.39%
Financials 9.53%
Health Care 7.26%
Health Care REITs 0.31%
Industrial REITs 1.29%
Industrials 3.03%
Information Technology 4.59%
Lodging/Resort REITs 1.61%
Mall REITs 1.48%
Manufactured Housing REITs 0.31%
Materials 1.14%
Mortgage REITs 2.72%
Multifamily REITs 0.50%
Office/Industrial REITs 0.50%
Office REITs 1.86%
Shopping Centers REITs 1.94%
Speciality REITs 0.46%
Telecommunications 2.23%
Utilities 1.13%
________________________________________________________________________________
Corporate Bonds 22.55%
Banking 0.21%
Basic Industries 2.81%
Brokerage 0.68%
Capital Goods 1.45%
Consumer Cyclical 1.68%
Consumer Non-Cyclical 2.65%
Energy 1.27%
Finance Companies 0.20%
Media 3.06%
Real Estate 0.43%
Services Cyclical 2.85%
Services Non-Cyclical 1.36%
Technology & Electronics 0.51%
Telecommunications 2.02%
Utilities 1.37%
________________________________________________________________________________
Convertible Bonds 10.34%
Aerospace & Defense 0.63%
Banking, Finance & Insurance 0.14%
Cable, Media & Publishing 1.41%
Computers & Technology 2.22%
Consumer Services 0.34%
Electronics & Electrical Equipment 0.44%
Energy 1.14%
Healthcare & Pharmaceuticals 1.98%
Leisure, Lodging & Entertainment 0.08%
Real Estate 0.11%
Retail 1.27%
Telecommunications 0.18%
Transportation 0.12%
Utilities 0.28%
________________________________________________________________________________
Convertible Preferred Stock 5.36%
Automobiles & Automotive Parts 0.10%
Banking, Finance & Insurance 2.21%
Basic Materials 0.38%
Cable, Media & Publishing 0.25%
Consumer Products 0.40%
Energy 0.50%
Food, Beverage & Tobacco 0.38%
Telecommunications 0.18%
Utilities 0.96%
________________________________________________________________________________
Preferred Stock 0.89%
Leisure, Lodging & Entertainment 0.11%
Real Estate 0.78%
________________________________________________________________________________
Exchange Traded Funds 0.35%
________________________________________________________________________________
Warrants 0.00%
________________________________________________________________________________
Commercial Mortgage-Backed Securities 0.13%
________________________________________________________________________________
Repurchase Agreements 5.43%
________________________________________________________________________________
Total Market Value of Securities 99.38%
________________________________________________________________________________
Receivables and Other Assets Net of Liabilities 0.62%
________________________________________________________________________________
Total Net Assets 100.00%
2
<page>
Statement of net assets
Delaware Dividend Income Fund
May 31, 2006 (Unaudited)
Number of Market
Shares Value
________________________________________________________________________________
Common Stock - 54.33%
________________________________________________________________________________
Consumer Discretionary - 4.00%
Gap 381,600 $ 6,945,120
+ Great Wolf Resorts 141,900 1,677,258
Limited Brands 287,100 7,797,636
Mattel 381,700 6,416,377
___________
22,836,391
___________
Consumer Staples - 4.98%
B&G Foods 16,250 250,250
ConAgra Foods 327,000 7,390,200
Heinz (H.J.) 178,000 7,538,300
Kimberly-Clark 118,000 7,159,060
Safeway 258,500 6,095,430
___________
28,433,240
___________
Diversified REITs - 1.07%
Vornado Realty Trust 68,300 6,139,487
___________
6,139,487
___________
Energy - 2.39%
Chevron 116,400 6,959,556
ConocoPhillips 105,300 6,664,437
___________
13,623,993
___________
Financials - 9.53%
Allstate 130,300 7,167,804
AON 164,800 5,875,120
Chubb 141,200 7,134,836
Hartford Financial Services Group 80,200 7,052,788
Huntington Bancshares 287,600 6,764,352
Morgan Stanley 115,800 6,903,996
Wachovia 120,700 6,457,450
Washington Mutual 153,400 7,042,594
___________
54,398,940
___________
Health Care - 7.26%
Abbott Laboratories 164,400 7,019,880
Baxter International 180,500 6,804,850
Bristol-Myers Squibb 286,100 7,023,755
Merck 211,900 7,054,151
Pfizer 294,500 6,967,870
Wyeth 144,700 6,618,578
___________
41,489,084
___________
Health Care REITs - 0.31%
# Medical Properties Trust 144A 19,700 238,567
Ventas 47,300 1,534,412
___________
1,772,979
___________
Industrial REITs - 1.29%
First Potomac Realty Trust 87,000 2,324,640
ProLogis 102,300 5,058,735
___________
7,383,375
___________
Industrials - 3.03%
Donnelley (R.R.) & Sons 213,500 6,870,430
+ Foster Wheeler 3,656 161,778
Macquarie Infrastructure 92,600 2,574,280
Waste Management 209,800 7,682,876
___________
17,289,364
___________
Information Technology - 4.59%
Hewlett-Packard 209,300 6,777,134
Intel 365,400 6,584,508
International Business Machines 83,700 6,687,630
+ Xerox 447,000 6,137,310
___________
26,186,582
___________
Lodging/Resort REITs - 1.61%
FelCor Lodging Trust 94,800 1,972,788
Hersha Hospitality Trust 245,100 2,289,234
Highland Hospitality 128,000 1,548,800
Strategic Hotel Capital 165,800 3,402,216
___________
9,213,038
___________
Mall REITs - 1.48%
Macerich 29,200 2,012,172
Simon Property Group 81,200 6,465,956
___________
8,478,128
___________
Manufactured Housing REITs - 0.31%
Equity Lifestyle Properties 40,900 1,764,835
___________
1,764,835
___________
Materials - 1.14%
duPont (E.I.) deNemours 152,500 6,485,825
___________
6,485,825
___________
Mortgage REITs - 2.72%
American Home Mortgage
Investment 84,200 2,809,754
Gramercy Capital 189,600 4,959,936
JER Investors Trust 126,500 1,977,195
II KKR Financial 79,300 1,708,915
II Peoples Choice 174,600 960,300
Saxon Capital 278,700 3,107,505
___________
15,523,605
___________
Multifamily REITs - 0.50%
AvalonBay Communities 16,500 1,753,950
United Dominion Realty Trust 40,000 1,080,400
___________
2,834,350
___________
Office/Industrial REITs - 0.50%
Duke Realty 84,200 2,857,748
___________
2,857,748
___________
Office REITs - 1.86%
Brandywine Realty Trust 105,156 3,051,627
(continues) 3
<page>
Statement of net assets
Delaware Dividend Income Fund
Number of Market
Shares Value
________________________________________________________________________________
Common Stock (continued)
________________________________________________________________________________
Office REITs (continued)
Equity Office Properties Trust 121,500 $ 4,088,475
Reckson Associates Realty 90,600 3,482,664
___________
10,622,766
___________
Shopping Centers REITs - 1.94%
Cedar Shopping Centers 70,700 1,027,978
Developers Diversified Realty 100,900 5,161,035
Federal Realty Investment Trust 71,700 4,902,846
___________
11,091,859
___________
Specialty REITs - 0.46%
Entertainment Properties Trust 63,500 2,606,675
___________
2,606,675
___________
Telecommunications - 2.23%
AT&T 253,900 6,616,634
Verizon Communications 196,600 6,135,886
___________
12,752,520
___________
Utilities - 1.13%
+ Mirant 19,417 483,095
Progress Energy 141,400 5,944,456
___________
6,427,551
___________
Total Common Stock
(cost $294,046,133) 310,212,335
___________
Principal
Amount
(U.S. $)
________________________________________________________________________________
Corporate Bonds - 22.55%
________________________________________________________________________________
Banking - 0.21%
Western Financial 9.625%
5/15/12 $1,050,000 1,165,500
___________
1,165,500
___________
Basic Industries - 2.81%
Abitibi-Consolidated
6.95% 12/15/06 50,000 50,500
7.875% 8/1/09 525,000 518,438
AK Steel 7.875% 2/15/09 865,000 862,838
# Apex Silver Mines 144A 2.875%
3/15/24 1,000,000 738,750
Bowater 9.50% 10/15/12 1,680,000 1,721,999
Chemtura 6.875% 6/1/16 650,000 633,750
Donohue Forest Products 7.625%
5/15/07 740,000 749,250
Georgia-Pacific
8.875% 5/15/31 190,000 195,700
9.50% 12/1/11 905,000 972,875
Gold Kist 10.25% 3/15/14 525,000 556,500
Huntsman International
9.875% 3/1/09 240,000 251,400
10.125% 7/1/09 235,000 240,288
Lyondell Chemical 10.50%
6/1/13 100,000 112,500
# Nell AF Sarl 144A 8.375%
8/15/15 840,000 833,700
NewPage 10.00% 5/1/12 565,000 600,313
Norske Skog 8.625% 6/15/11 1,100,000 1,100,000
# Port Townsend Paper 144A
12.00% 4/15/11 955,000 792,650
Potlatch 13.00% 12/1/09 635,000 749,556
Rhodia 8.875% 6/1/11 899,000 912,485
Smurfit Capital Funding 7.50%
11/20/25 610,000 567,300
++ Solutia 6.72% 10/15/37 1,215,000 1,136,025
Tembec Industries 8.625%
6/30/09 2,270,000 1,282,549
Witco 6.875% 2/1/26 500,000 452,500
___________
16,031,866
___________
Brokerage - 0.68%
E Trade Financial 8.00% 6/15/11 1,435,000 1,492,399
FINOVA Group 7.50% 11/15/09 2,318,750 759,391
LaBranche & Company
9.50% 5/15/09 695,000 741,913
11.00% 5/15/12 805,000 887,513
___________
3,881,216
___________
Capital Goods - 1.45%
Armor Holdings 8.25% 8/15/13 820,000 867,150
Building Materials 8.00%
10/15/07 1,050,000 1,063,125
# Compression Polymer 144A
10.50% 7/1/13 330,000 344,850
Graham Packaging 9.875%
10/15/14 675,000 691,875
Interface 10.375% 2/1/10 735,000 811,256
Interline Brands 11.50% 5/15/11 972,000 1,081,350
Intertape Polymer 8.50% 8/1/14 960,000 907,200
{ Mueller Holdings 14.75%
4/15/14 1,115,000 942,175
# Panolam Industrial 144A 10.75%
10/1/13 590,000 584,100
Trimas 9.875% 6/15/12 995,000 955,200
___________
8,248,281
___________
Consumer Cyclical - 1.68%
Accuride 8.50% 2/1/15 655,000 643,538
Carrols 9.00% 1/15/13 405,000 411,075
Ford Motor Credit 7.375%
10/28/09 775,000 714,360
General Motors 8.375% 7/15/33 325,000 248,219
General Motors Acceptance
Corporation
6.875% 9/15/11 995,000 935,731
8.00% 11/1/31 630,000 593,296
Landry's Restaurant 7.50%
12/15/14 835,000 786,988
Metaldyne 10.00% 11/1/13 970,000 936,050
4
<page>
Principal Market
Amount Value
(U.S. $)
________________________________________________________________________________
Corporate Bonds (continued)
________________________________________________________________________________
Consumer Cyclical (continued)
# Neiman Marcus 144A 9.00%
10/15/15 $ 625,000 $ 653,906
# NPC International 144A 9.50%
5/1/14 950,000 954,750
O'Charleys 9.00% 11/1/13 965,000 991,537
# Uno Restaurant 144A 10.00%
2/15/11 475,000 384,750
Visteon
7.00% 3/10/14 175,000 145,688
8.25% 8/1/10 595,000 556,325
Warnaco 8.875% 6/15/13 630,000 652,050
___________
9,608,263
___________
Consumer Non-Cyclical - 2.65%
# Angiotech Pharmaceuticals 144A
7.75% 4/1/14 855,000 857,138
Biovail 7.875% 4/1/10 1,830,000 1,862,024
Brickman Group 11.75%
12/15/09 315,000 342,563
Constellation Brands 8.125%
1/15/12 850,000 877,625
Cott Beverages 8.00% 12/15/11 1,145,000 1,153,588
DEL Laboratories 8.00% 2/1/12 375,000 309,375
Doane Pet Care
10.625% 11/15/15 595,000 742,756
10.75% 3/1/10 230,000 251,344
Dole Foods 8.875% 3/15/11 775,000 762,406
# iPayment 144A 9.75% 5/15/14 525,000 528,938
# Le-Natures 144A 10.00%
6/15/13 680,000 716,550
Marsh Supermarket 8.875%
8/1/07 110,000 109,175
National Beef Packing 10.50%
8/1/11 800,000 808,000
Pilgrim's Pride 9.625% 9/15/11 745,000 784,113
Pinnacle Foods 8.25% 12/1/13 775,000 765,313
Playtex Products 9.375% 6/1/11 980,000 1,026,550
RJ Reynolds Tobacco Holdings
7.875% 5/15/09 345,000 357,075
True Temper Sports 8.375%
9/15/11 1,065,000 1,001,100
Warner Chilcott 8.75% 2/1/15 1,485,000 1,488,712
# Williams Scotsman 144A 8.50%
10/1/15 400,000 405,000
___________
15,149,345
___________
Energy - 1.27%
# Basic Energy Service 144A
7.125% 4/15/16 250,000 243,750
Bluewater Finance 10.25%
2/15/12 438,000 455,520
# Brigham Exploration 144A
9.625% 5/1/14 245,000 244,081
Compton Petroleum 7.625%
12/1/13 335,000 328,300
# Copano Energy 144A 8.125%
3/1/16 250,000 255,000
El Paso Natural Gas 7.625%
8/1/10 340,000 352,750
El Paso Production Holding
7.75% 6/1/13 835,000 855,874
# Hilcorp Energy I 144A
7.75% 11/1/15 265,000 262,350
10.50% 9/1/10 584,000 638,020
Inergy Finance
6.875% 12/15/14 250,000 236,875
8.25% 3/1/16 200,000 206,000
# Mariner Energy 144A 7.50%
4/15/13 250,000 243,125
Plains Exploration & Production
7.125% 6/15/14 335,000 332,488
Pride International 7.375%
7/15/14 345,000 354,488
Quicksilver Resources 7.125%
4/1/16 500,000 480,000
~ Secunda International 13.068%
9/1/12 430,000 453,650
Tennessee Gas Pipeline 8.375%
6/15/32 355,000 390,304
# VeraSun Energy 144A 9.875%
12/15/12 575,000 621,000
Whiting Petroleum 7.25% 5/1/13 325,000 318,500
___________
7,272,075
___________
Finance Companies - 0.20%
# Hughes Network Systems/Finance
144A 9.50% 4/15/14 1,150,000 1,167,250
___________
1,167,250
___________
Media - 3.06%
} Adelphia Communications
8.125% 7/15/06 615,000 285,975
# Affinion Group 144A 11.50%
10/15/15 350,000 357,875
CCH I 11.00% 10/1/15 1,030,000 890,950
++ Century Communications 9.50%
9/1/06 1,120,000 1,036,000
Cenveo 9.625% 3/15/12 580,000 620,963
# Charter Communications 144A
5.875% 11/16/09 500,000 364,375
Charter Communications
Holdings
11.125% 1/15/11 625,000 396,875
13.50% 1/15/11 1,880,000 1,231,400
# Charter Communications
Operating 144A 8.375%
4/30/14 65,000 65,163
~# Cleveland Unlimited 144A
13.16% 12/15/10 350,000 372,750
CSC Holdings 10.50% 5/15/16 1,275,000 1,345,125
(continues) 5
<page>
Statement of net assets
Delaware Dividend Income Fund
Principal Market
Amount Value
(U.S. $)
________________________________________________________________________________
Corporate Bonds (continued)
________________________________________________________________________________
Media (continued)
Dex Media East 12.125%
11/15/12 $ 505,000 $ 571,913
# EchoStar Communications 144A
5.75% 5/15/08 500,000 494,375
Insight Midwest 10.50% 11/1/10 1,935,000 2,039,005
Lodgenet Entertainment 9.50%
6/15/13 1,215,000 1,306,125
Mediacom Capital 9.50%
1/15/13 1,670,000 1,686,699
# RH Donnelley 144A 8.875%
1/15/16 655,000 661,550
Sheridan Acquisition 10.25%
8/15/11 415,000 425,375
Sirius Satellite 9.625% 8/1/13 225,000 213,750
Vertis 10.875% 6/15/09 445,000 436,100
Warner Music Group 7.375%
4/15/14 1,025,000 1,019,875
# XM Satellite Radio 144A 9.75%
5/1/14 1,750,000 1,636,250
___________
17,458,468
___________
Real Estate - 0.43%
American Real Estate Partners
8.125% 6/1/12 905,000 927,625
BF Saul REIT 7.50% 3/1/14 975,000 999,375
# Rouse 144A 6.75% 5/1/13 325,000 323,375
Tanger Properties 9.125%
2/15/08 218,000 228,555
___________
2,478,930
___________
Services Cyclical - 2.85%
Adesa 7.625% 6/15/12 748,000 755,480
American Airlines 7.379%
5/23/16 290,712 265,798
# CCM Merger 144A 8.00%
8/1/13 925,000 892,625
Corrections Corporation of
America 7.50% 5/1/11 1,210,000 1,228,150
FTI Consulting 7.625% 6/15/13 940,000 970,550
# Galaxy Entertainment Finance
144A 9.875% 12/15/12 1,330,000 1,396,500
Gaylord Entertainment 8.00%
11/15/13 800,000 820,000
{ H-Lines Finance Holdings 11.00%
4/1/13 1,301,000 1,112,355
# Hertz 144A
8.875% 1/1/14 475,000 496,375
10.50% 1/1/16 200,000 217,500
Horizon Lines 9.00% 11/1/12 457,000 479,850
Kansas City Southern Railway
9.50% 10/1/08 765,000 807,075
# Knowledge Learning 144A
7.75% 2/1/15 860,000 820,225
Mandalay Resort Group 9.50%
8/1/08 980,000 1,048,599
OMI 7.625% 12/1/13 1,075,000 1,075,000
Royal Caribbean Cruises 7.25%
3/15/18 325,000 326,192
Seabulk International 9.50%
8/15/13 469,000 522,935
Stena 9.625% 12/1/12 700,000 754,250
{ Town Sports International
11.00% 2/1/14 1,050,000 840,000
Wheeling Island Gaming
10.125% 12/15/09 1,365,000 1,426,425
___________
16,255,884
___________
Services Non-Cyclical - 1.36%
Aleris International 9.00%
11/15/14 850,000 886,125
Allied Waste North America
9.25% 9/1/12 610,000 653,463
Casella Waste Systems 9.75%
2/1/13 1,310,000 1,390,237
# CRC Health 144A 10.75% 2/1/16 1,125,000 1,164,375
Geo Subordinate 11.00%
5/15/12 1,050,000 1,065,750
US Oncology 10.75% 8/15/14 1,120,000 1,244,600
{ Vanguard Health 11.25%
10/1/15 1,865,000 1,380,100
___________
7,784,650
___________
Technology & Electronics - 0.51%
Magnachip Semiconductor
8.00% 12/15/14 1,575,000 1,378,125
# Sensata Technologies BV 144A
8.00% 5/1/14 125,000 123,750
# SunGard Data Systems 144A
10.25% 8/15/15 1,325,000 1,391,250
___________
2,893,125
___________
Telecommunications - 2.02%
++ Allegiance Telecom 11.75%
2/15/08 10,000 4,750
American Cellular 10.00% 8/1/11 480,000 517,800
American Tower 7.125%
10/15/12 865,000 888,788
Cincinnati Bell 8.375% 1/15/14 1,190,000 1,207,850
# Digicel Limited 144A 9.25%
9/1/12 580,000 611,900
{ Inmarsat Finance 10.375%
11/15/12 1,555,000 1,333,412
iPCS 11.50% 5/1/12 10,000 11,450
~ Iwo Escrow Company 8.818%
1/15/12 100,000 104,250
# Nordic Telephone Company
Holdings 144A 8.875%
5/1/16 400,000 415,000
PanAmSat 9.00% 8/15/14 680,000 708,900
~ Qwest 8.16% 6/15/13 485,000 525,619
Rural Cellular 9.875% 2/1/10 640,000 676,800
6
<page>
Principal Market
Amount Value
(U.S. $)
________________________________________________________________________________
Corporate Bonds (continued)
________________________________________________________________________________
Telecommunications (continued)
~# Rural Cellular 144A 10.899%
11/1/12 $ 425,000 $ 445,188
# Telcordia Technologies 144A
10.00% 3/15/13 1,525,000 1,444,937
Triton Communications 9.375%
2/1/11 915,000 677,100
~ US LEC 13.62% 10/1/09 435,000 467,625
# Wind Acquisition 144A 10.75%
12/1/15 1,375,000 1,488,437
___________
11,529,806
___________
Utilities - 1.37%
Avista 9.75% 6/1/08 753,000 808,422
++# Calpine 144A 9.90% 7/15/07 503,413 492,086
Elwood Energy 8.159% 7/5/26 994,539 1,072,701
Midwest Generation
8.30% 7/2/09 945,000 968,625
8.75% 5/1/34 495,000 532,125
Mirant Americas 8.30% 5/1/11 1,245,000 1,251,224
NRG Energy 7.25% 2/1/14 1,200,000 1,202,999
Orion Power Holdings 12.00%
5/1/10 626,000 708,945
# Tenaska Alabama Partners 144A
7.00% 6/30/21 788,208 780,917
___________
7,818,044
___________
Total Corporate Bonds
(cost $130,421,162) 128,742,703
___________
________________________________________________________________________________
Convertible Bonds - 10.34%
________________________________________________________________________________
Aerospace & Defense - 0.63%
# AAR 144A 1.75% 2/1/26 exercise
price $29.43, expiration date
2/1/26 1,150,000 1,160,063
EDO 4.00% 11/15/25 exercise
price $34.19, expiration date
11/15/25 975,000 988,406
# L-3 Communications 144A
3.00% 8/1/35 exercise price
$102.31, expiration date
8/1/35 1,500,000 1,462,500
___________
3,610,969
___________
Banking, Finance & Insurance - 0.14%
PMI Group 2.50% 7/15/21
exercise price $44.16,
expiration date 7/15/21 750,000 799,688
___________
799,688
___________
Cable, Media & Publishing - 1.41%
EchoStar 5.75% 5/15/08 exercise
price $43.29, expiration date
5/15/08 500,000 494,375
Liberty Media 3.25% 3/15/31
exercise price $53.86,
expiration date 3/8/31 3,000,000 2,246,250
Cable, Media & Publishing (continued)
Mediacom Communications
5.25% 7/1/06 exercise price
$18.72, expiration date 7/1/06 2,500,000 2,509,375
# Playboy Enterprises 144A 3.00%
3/15/25 exercise price $17.02,
expiration date 3/15/25 3,240,000 2,822,849
___________
8,072,849
___________
Computers & Technology - 2.22%
Fairchild Semiconductor
International 5.00% 11/1/08
exercise price $30.00,
expiration date 11/1/08 2,500,000 2,475,000
Hutchinson Technology 3.25%
1/15/26 exercise price $36.43,
expiration date 1/15/26 1,540,000 1,401,400
# Informatica 144A 3.00%
3/15/26 exercise price $20.00,
expiration date 3/15/26 2,315,000 2,346,831
# Intel 144A 2.95% 12/15/35
exercise price $31.53,
expiration date 12/15/35 1,140,000 943,350
^# ON Semiconductor 144A 0.36%
4/15/24 exercise price $9.82,
expiration date 4/15/24 3,500,000 2,957,499
SanDisk 1.00% 5/15/13 exercise
price $82.36, expiration date
5/15/13 775,000 737,219
# Sybase 144A 1.75% 2/22/25
exercise price $25.22,
expiration date 2/22/25 1,875,000 1,842,188
___________
12,703,487
___________
Consumer Services - 0.34%
Fluor 1.50% 2/15/24 exercise
price $55.94, expiration date
2/15/24 1,200,000 1,921,500
___________
1,921,500
___________
Electronics & Electrical Equipment - 0.44%
Fisher Scientific 3.25% 3/1/24
exercise price $80.40,
expiration date 3/1/24 1,500,000 1,698,750
Solectron 0.50% 2/15/34 exercise
price $9.67, expiration date
2/15/34 1,100,000 825,000
___________
2,523,750
___________
Energy - 1.14%
Halliburton 3.125% 7/15/23
exercise price $37.65,
expiration date 7/15/23 1,250,000 2,526,563
Pride International 3.25%
5/1/33 exercise price $25.70,
expiration date 5/1/33 1,080,000 1,486,350
Schlumberger 2.125% 6/1/23
exercise price $40.00,
expiration date 6/1/23 1,500,000 2,505,000
___________
6,517,913
___________
(continues) 7
<page>
Statement of net assets
Delaware Dividend Income Fund
Principal Market
Amount Value
(U.S. $)
________________________________________________________________________________
Convertible Bonds (continued)
________________________________________________________________________________
Healthcare & Pharmaceuticals - 1.98%
# Allergan 144A 1.50% 4/1/26
exercise price $126.66,
expiration date 4/1/26 $1,935,000 $ 1,840,668
# Amgen 144A 0.375% 2/1/13
exercise price $79.48,
expiration date 2/1/13 775,000 744,000
CV Therapeutics 3.25% 8/16/13
exercise price $27.00,
expiration date 8/16/13 530,000 487,600
Encysive Pharmaceuticals 2.50%
3/15/12 exercise price $13.95,
expiration date 3/15/12 625,000 442,188
# Encysive Pharmaceuticals 144A
2.50% 3/15/12 exercise
price $13.95, expiration date
3/15/12 2,000,000 1,415,000
# Nektar Therapeutics 144A 3.25%
9/28/12 exercise price $21.52,
expiration date 9/28/12 1,525,000 1,725,156
Teva Pharmaceutical Finance
0.25% 2/1/26 exercise price
$47.16, expiration date 2/1/26 1,535,000 1,500,463
~ Wyeth 4.239% 1/15/24 exercise
price $60.39, expiration date
1/15/24 3,000,000 3,138,899
___________
11,293,974
___________
Leisure, Lodging & Entertainment - 0.08%
# Regal Entertainment Group
144A 3.75% 5/15/08 exercise
price $14.97, expiration date
5/15/08 350,000 453,250
___________
453,250
___________
Real Estate - 0.11%
MeriStar Hospitality 9.50%
4/1/10 exercise price $10.18,
expiration date 4/1/10 600,000 639,750
___________
639,750
___________
Retail - 1.27%
{ Dick's Sporting Goods 1.606%
2/18/24 exercise price $58.13,
expiration date 2/18/24 1,480,000 1,117,400
~ Lowe's 0.861% 10/19/21 exercise
price $50.03, expiration date
10/19/21 1,250,000 1,362,500
# Saks 144A 2.00% 3/15/24
exercise price $14.92,
expiration date 3/15/24 2,200,000 2,538,250
Sonic Automotive 5.25%
5/7/09 exercise price $46.87,
expiration date 5/7/09 1,000,000 980,000
# United Auto Group 144A 3.50%
4/1/26 exercise price $23.69,
expiration date 4/1/26 1,150,000 1,236,250
___________
7,234,400
___________
Telecommunications - 0.18%
Qwest Communications
International 3.50%
11/15/25 exercise price $5.90,
expiration date 11/15/25 750,000 1,020,938
___________
1,020,938
___________
Transportation - 0.12%
# ExpressJet Holdings 144A 4.25%
8/1/23 exercise price $18.20,
expiration date 8/1/23 750,000 677,813
___________
677,813
___________
Utilities - 0.28%
CenterPoint Energy 3.75%
5/15/23 exercise price $11.44,
expiration date 5/15/23 400,000 448,000
# CenterPoint Energy 144A 3.75%
5/15/23 exercise price $11.44,
expiration date 5/15/23 1,030,000 1,153,600
___________
1,601,600
___________
Total Convertible Bonds (cost $57,337,527) 59,071,881
___________
Number of
Shares
________________________________________________________________________________
Convertible Preferred Stock - 5.36%
________________________________________________________________________________
Automobiles & Automotive Parts - 0.10%
Ford Motor Capital Trust II
6.50% exercise price $17.70,
expiration date 1/15/32 20,500 594,910
___________
594,910
___________
Banking, Finance & Insurance - 2.21%
Aspen Insurance 5.625% exercise
price $29.28, expiration date
12/31/49 37,800 1,823,850
Chubb 7.00% exercise price
$35.70, expiration date
8/16/06 80,000 2,840,799
~ Citigroup Funding 5.02%
exercise price $29.50,
expiration date 9/27/08 69,000 2,212,140
E Trade Group 6.125% exercise
price $21.82, expiration date
11/18/08 37,500 1,181,250
Lehman Brothers Holdings
6.25% exercise price $54.24,
expiration date 10/15/07 66,750 1,810,594
Merrill Lynch 6.75% exercise
price $40.80, expiration date
10/15/07 70,000 2,780,750
___________
12,649,383
___________
8
<page>
Number of Market
Shares Value
________________________________________________________________________________
Convertible Preferred Stock (continued)
________________________________________________________________________________
Basic Materials - 0.38%
Huntsman 5.00% exercise price
$28.29, expiration date
2/16/08 52,500 $ 2,198,438
___________
2,198,438
___________
Cable, Media & Publishing - 0.25%
# Interpublic 5.25% 144A exercise
price $13.66, expiration date
12/31/49 1,500 1,408,125
___________
1,408,125
___________
Consumer Products - 0.40%
Newell Financial Trust I 5.25%
exercise price $50.69,
expiration date 12/1/27 51,940 2,265,883
___________
2,265,883
___________
Energy - 0.50%
Chesapeake 4.50% exercise
price $44.17, expiration date
12/31/49 17,075 1,592,244
El Paso Energy Capital Trust
4.75% exercise price $41.59,
expiration date 3/31/28 34,600 1,259,440
___________
2,851,684
___________
Food, Beverage & Tobacco - 0.38%
Constellation Brands 5.75%
exercise price $17.08,
expiration date 9/1/06 59,200 2,146,000
___________
2,146,000
___________
Telecommunications - 0.18%
Lucent Technologies Capital Trust I
7.75% exercise price $4.84,
expiration date 3/15/17 1,000 1,010,875
___________
1,010,875
___________
Utilities - 0.96%
~ CenterPoint Energy 2.00%
exercise price $17.09,
expiration date 9/15/29 26,000 874,016
Entergy 7.625% exercise price
$87.64, expiration date
2/17/09 37,500 1,889,063
NRG Energy 5.75% exercise
price $60.45, expiration date
3/16/09 10,675 2,691,433
___________
5,454,512
___________
Total Convertible Preferred Stock
(cost $31,494,992) 30,579,810
___________
________________________________________________________________________________
Preferred Stock - 0.89%
________________________________________________________________________________
Leisure, Lodging & Entertainment - 0.11%
Red Lion Hotels 9.50% 24,000 633,120
___________
633,120
___________
Real Estate - 0.78%
Equity Inns Series B 8.75% 18,300 474,885
LaSalle Hotel Properties 10.25% 36,500 945,533
Ramco-Gershenson Properties
9.50% 15,700 402,705
SL Green Realty 7.625% 103,000 2,623,286
___________
4,446,409
___________
Total Preferred Stock
(cost $5,107,104) 5,079,529
___________
________________________________________________________________________________
Exchange Traded Funds - 0.35%
________________________________________________________________________________
iShares Dow Jones U.S. Real Estate
Index Fund 29,200 $2,006,332
___________
Total Exchange Traded Funds
(cost $1,550,582) 2,006,332
___________
________________________________________________________________________________
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. $)
________________________________________________________________________________
Commercial Mortgage-Backed Securities - 0.13%
________________________________________________________________________________
# First Union National Bank
Commercial Mortgage Series
2001-C2 L 144A 6.46%
1/12/43 $750,000 745,343
Total Commercial Mortgage-
Backed Securities
(cost $761,221) 745,343
________________________________________________________________________________
Repurchase Agreements - 5.43%
________________________________________________________________________________
With BNP Paribas 4.88% 6/1/06
(dated 5/31/06, to be
repurchased at $19,518,646,
collateralized by $7,290,000
U.S. Treasury Notes 2.375%
due 8/31/06, market value
$7,287,329, $5,650,000
U.S. Treasury Notes 2.75%
due 7/31/06, market value
$5,681,724, $4,325,000
U.S. Treasury Notes 2.875%
due 11/30/06, market value
$4,278,669 and $2,496,000
U.S. Treasury Notes 6.50%
due 2/15/10, market value
$2,670,800) 19,516,000 19,516,000
(continues) 9
<page>
Statement of net assets
Delaware Dividend Income Fund
Principal Market
Amount Value
(U.S. $)
________________________________________________________________________________
Repurchase Agreements (continued)
________________________________________________________________________________
With Cantor Fitzgerald 4.88%
6/1/06 (dated 5/31/06, to be
repurchased at $11,519,561,
collateralized by $5,008,000
U.S. Treasury Notes 2.50%
due 9/30/06, market value
$4,989,967, $5,008,000
U.S. Treasury Notes 3.50%
due 11/15/06, market value
$4,983,898 and $1,696,000
U.S. Treasury Notes 6.00%
due 8/15/09, market value
$1,776,855) $11,518,000 $11,518,000
___________
Total Repurchase Agreements
(cost $31,034,000) 31,034,000
___________
Total Market Value of Securities - 99.38%
(cost $551,753,742) 567,471,933
Receivables and Other Assets
Net of Liabilities - 0.62% 3,562,299
___________
Net Assets Applicable to 50,194,765
Shares Outstanding - 100.00% 571,034,232
___________
Net Asset Value - Delaware Dividend Income Fund
Class A ($312,021,017 / 27,423,299 Shares) $11.38
_______
Net Asset Value - Delaware Dividend Income Fund
Class B ($63,104,400 / 5,548,973 Shares) $11.37
_______
Net Asset Value - Delaware Dividend Income Fund
Class C ($191,225,579 / 16,810,840 Shares) $11.38
_______
Net Asset Value - Delaware Dividend Income Fund
Class R ($3,312,153 / 291,221 Shares) $11.37
_______
Net Asset Value - Delaware Dividend Income Fund
Institutional Class ($1,371,083 / 120,432 Shares) $11.38
_______
________________________________________________________________________________
Components of Net Assets at May 31, 2006:
________________________________________________________________________________
Shares of beneficial interest
(unlimited authorization - no par) $566,535,857
Undistributed net investment income 2,270,316
Accumulated net realized loss on investments (13,490,132)
Net unrealized appreciation of investments 15,718,191
__________
Total net assets $571,034,232
__________
} Security is currently in default. The issue has missed the maturity date.
Bankruptcy proceedings are in process to determine distribution of assets.
The date listed is the estimate of when proceedings will be finalized.
+ Non-income producing security for the period ended May 31, 2006.
++ Non-income producing security. Security is currently in default.
~ Variable rate security. The interest rate shown is the rate as of
May 31, 2006.
^ Zero coupon security. The interest rate shown is the yield at the time of
purchase.
{ 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.
# Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. At May 31, 2006, the aggregate amount of Rule 144A
securities equaled $55,637,738, which represented 9.74% of the Fund's net
assets. See Note 8 in "Notes to Financial Statements."
II Restricted Security. Investment in a security not registered under the
Securities Act of 1933, as amended. This security has certain restrictions on
resale which may limit its liquidity. At May 31, 2006, the aggregate amount
of the restricted securities equals $2,669,215 or 0.47% of the Fund's net
assets. See Note 8 in "Notes to Financial Statements."
REIT - Real Estate Investment Trust
Net Asset Value and Offering Price per Share
- Delaware Dividend Income Fund
Net asset value Class A (A) $11.38
Sales charge (5.75% of offering price) (B) 0.69
______
Offering price $12.07
______
(A) Net asset value per share, as illustrated, is the 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
10
<page>
Statement of operations
Delaware Dividend Income Fund
Six Months Ended May 31, 2006 (Unaudited)
Investment Income:
Dividends $ 5,364,012
Interest 6,880,270 $ 12,244,282
___________ ____________
Expenses:
Management fees 1,752,052
Distribution expenses - Class A 447,487
Distribution expenses - Class B 302,769
Distribution expenses - Class C 890,303
Distribution expenses - Class R 8,913
Dividend disbursing and transfer agent fees and expenses 456,093
Accounting and administration expenses 108,494
Registration fees 61,623
Legal and professional fees 42,489
Reports and statements to shareholders 39,469
Trustees' fees 16,794
Custodian fees 9,356
Insurance fees 5,177
Pricing fees 3,521
Taxes (other than taxes on income) 3,451
Other 13,004 4,160,995
___________
Less expenses absorbed or waived (476,839)
Less waiver of distribution expenses - Class A (74,581)
Less waiver of distribution expenses - Class R (1,485)
Less expense paid indirectly (2,931)
____________
Total expenses 3,605,159
____________
8,639,123
____________
Net Investment Income
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments 6,382,994
____________
Net change in unrealized appreciation/depreciation of investments 10,695,192
____________
Net Realized and Unrealized Gain on Investments 17,078,186
____________
Net Increase in Net Assets Resulting from Operations $ 25,717,309
____________
See accompanying notes
11
<page>
Statements of changes in net assets
Delaware Dividend Income Fund
Six Months
Ended Year
11/30/05 Ended
(Unaudited) 11/30/05
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 8,639,123 $ 13,476,249
Net realized gain on investments and foreign currencies 6,382,994 4,692,803
Net change in unrealized appreciation/depreciation of investments 10,695,192 (2,561,963)
Cost of shares repurchased: _____________ ______________
Net increase in net assets resulting from operations 25,717,309 15,607,089
Cost of shares repurchased: _____________ ______________
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (6,756,898) (6,111,307)
Class B (1,148,073) (1,112,078)
Class C (3,337,660) (3,064,142)
Class R (45,856) (21,534)
Institutional Class (23,768) (12,391)
Net realized gain on investments:
Class A (1,682,444) (829,375)
Class B (342,773) (249,797)
Class C (981,242) (644,998)
Class R (8,517) (2,737)
Institutional Class (5,576) (1,641)
Cost of shares repurchased: _____________ ______________
(14,332,807) (12,050,000)
Cost of shares repurchased: _____________ ______________
Capital Share Transactions:
Proceeds from shares sold:
Class A 54,265,369 155,512,307
Class B 9,440,356 30,360,760
Class C 38,404,881 95,529,471
Class R 1,936,632 1,064,376
Institutional Class 470,956 919,948
Net asset value of shares issued upon reinvestment of dividends and
distributions:
Class A 6,168,929 5,175,642
Class B 1,233,465 1,092,408
Class C 3,569,836 2,975,103
Class R 54,372 24,272
Institutional Class 27,539 11,878
Net assets from reorganization (1): - 85,145,873
Cost of shares repurchased: _____________ ______________
Class A 115,572,335 377,812,038
Cost of shares repurchased: _____________ ______________
Class A (39,858,214) (68,079,584)
Class B (6,759,833) (6,143,372)
Class C (20,109,840) (15,879,276)
Class R (200,685) (49,450)
Institutional Class (89,709) (98,155)
Cost of shares repurchased: _____________ ______________
(67,018,281) (90,249,837)
Cost of shares repurchased: _____________ ______________
Increase in net assets derived from capital share transactions 48,554,054 287,562,201
Cost of shares repurchased: _____________ ______________
Net Increase in Net Assets 59,938,556 291,119,290
Net Assets:
Beginning of period 511,095,676 219,976,386
Cost of shares repurchased: _____________ ______________
End of period (including undistributed net investment income of
$2,270,316 and 4,815,839, respectively) $ 571,034,232 $ 511,095,676
Cost of shares repurchased: _____________ ______________
(1)See Note 6 in "Notes to Financial Statements."
See accompanying notes
12
<page>
Financial highlights
Delaware Dividend Income Fund Class A
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended
Ended ____________________________________________________________
5/31/06(1) 11/30/05 11/30/04 11/30/03 11/30/02 11/30/01(2)
(Unaudited)
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $ 11.140 $ 11.050 $ 10.210 $ 9.030 $ 9.230 $ 9.600
Income (loss) from investment operations:
Net investment income (3) 0.199 0.450 0.345 0.450 0.429 0.405
Net realized and unrealized gain (loss) on investments
and foreign currencies 0.368 0.081 0.891 1.213 (0.196) (0.041)
________ ________ ________ _______ _______ ________
Total from investment operations 0.567 0.531 1.236 1.663 0.233 0.364
________ ________ ________ _______ _______ ________
Less dividends and distributions from:
Net investment income (0.261) (0.360) (0.362) (0.483) (10.433) (0.400)
Net realized gain on investments (0.066) (0.081) (0.034) - - (0.334)
________ ________ ________ _______ _______ ________
Total dividends and distributions (0.327) (0.441) (0.396 (0.483) (0.433) (0.734)
________ ________ ________ _______ _______ ________
Net asset value, end of period $ 11.380 $ 11.140 $ 11.050 $ 0.210 $ 9.030 $ 9.230
________ ________ ________ _______ _______ ________
Total return (4) 5.17% 4.89% 12.38% 19.45% 2.58% 3.87%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $312,021 $285,159 $105,253 $ 5,821 $ 1 $ -
Ratio of expenses to average net assets 1.00% 1.00% 1.00% 0.79% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expense paid indirectly 1.22% 1.27% 1.32% 2.05% 1.30% 1.05%
Ratio of net investment income to average net assets 3.52% 4.05% 3.26% 4.69% 4.71% 4.38%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid
indirectly 3.30% 3.78% 2.94% 3.43% 4.16% 4.08%
Portfolio turnover 53% 85% 95% 212% 188% 89%
____________________________________________________________________________________________________________________________________
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized.
(2) As required, effective December 1, 2001, the Portfolio adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies that require 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.
(3) The average shares outstanding method has been applied for per share information.
(4) 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
(continues) 13
<page>
Financial highlights
Delaware Dividend Income Fund Class B
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended 11/1/03(2)
Ended _____________________ to
5/31/06(1) 11/30/05 11/30/04 11/30/03
(Unaudited)
_________________________________________________________________________________________________________________________________
Net asset value, beginning of period $ 11.130 $ 11.040 $ 10.200 $ 9.950
Income from investment operations:
Net investment income (3) 0.156 0.367 0.267 0.051
Net realized and unrealized gain on investments and foreign currencies 0.369 0.079 0.889 0.199
________ ________ ________ _______
Total from investment operations 0.525 0.446 1.156 0.250
________ ________ ________ _______
Less dividends and distributions from:
Net investment income (0.219) (0.275) (0.282) -
Net realized gain on investments (0.066) (0.081) (0.034) -
________ ________ ________ _______
Total dividends and distributions (0.285) (0.356) (0.316) -
________ ________ ________ _______
Net asset value, end of period $ 11.370 $ 11.130 $ 11.040 $10.200
________ ________ ________ _______
Total return (4) 4.78% 4.09% 11.54% 2.51%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 63,104 $ 57,904 $ 32,165 $ 2,125
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
expense paid indirectly 1.92% 1.97% 2.02% 4.10%
Ratio of net investment income to average net assets 2.77% 3.30% 2.51% 3.65%
Ratio of net investment income to average net assets prior to expense
limitation and expense paid indirectly 2.60% 3.08% 2.25% 1.30%
Portfolio turnover 53% 85% 95% 212%
_________________________________________________________________________________________________________________________________
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total return has not been annualized.
(3) The average shares outstanding method has been applied for per share information.
(4) 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
14
<page>
Delaware Dividend Income Fund Class C
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended 11/1/03(2)
Ended _____________________ to
5/31/06(1) 11/30/05 11/30/04 11/30/03
(Unaudited)
_________________________________________________________________________________________________________________________________
Net asset value, beginning of period $ 11.130 $ 11.040 $ 10.200 $ 9.950
Income from investment operations:
Net investment income (3) 0.156 0.367 0.267 0.051
Net realized and unrealized gain on investments and foreign currencies 0.379 0.079 0.889 0.199
________ ________ ________ _______
Total from investment operations 0.535 0.446 1.156 0.250
________ ________ ________ _______
Less dividends and distributions from:
Net investment income (0.219) (0.275) (0.282) -
Net realized gain on investments (0.066) (0.081) (0.034) -
________ ________ ________ _______
Total dividends and distributions (0.285) (0.356) (0.316) -
________ ________ ________ _______
Net asset value, end of period $ 11.380 $ 11.130 $ 11.040 $10.200
________ ________ ________ _______
Total return (4) 4.87% 4.09% 11.53% 2.51%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $191,226 $165,663 $ 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
expense paid indirectly 1.92% 1.97% 2.02% 4.10%
Ratio of net investment income to average net assets 2.77% 3.30% 2.52% 3.65%
Ratio of net investment income to average net assets prior to expense
limitation and expense paid indirectly 2.60% 3.08% 2.25% 1.30%
Portfolio turnover 53% 85% 95% 212%
_________________________________________________________________________________________________________________________________
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total return has not been annualized.
(3) The average shares outstanding method has been applied for per share information.
(4) 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
(continues) 15
<page>
Financial Highlights
Delaware Dividend Income Fund Class R
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended 11/1/03(2)
Ended _____________________ to
5/31/06(1) 11/30/05 11/30/04 11/30/03
(Unaudited)
_________________________________________________________________________________________________________________________________
Net asset value, beginning of period $ 11.130 $ 11.040 $ 10.220 $ 9.950
Income from investment operations:
Net investment income (3) 0.185 0.416 0.308 0.056
Net realized and unrealized gain on investments and foreign currencies 0.369 0.078 0.879 0.214
________ ________ ________ _______
Total from investment operations 0.554 0.494 1.187 0.270
________ ________ ________ _______
Less dividends and distributions from:
Net investment income (0.248) (0.323) (0.333) -
Net realized gain on investments (0.066) (0.081) (0.034) -
________ ________ ________ _______
Total dividends and distributions (0.314) (0.404) (0.367) -
________ ________ ________ _______
Net asset value, end of period $ 11.370 $ 11.130 $ 11.040 $10.220
________ ________ ________ _______
Total return (4) 5.05% 4.55% 11.86% 2.71%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 3,312 $ 1,429 $ 373 $ 3
Ratio of expenses to average net assets 1.25% 1.30% 1.35% 1.35%
Ratio of expenses to average net assets prior to expense limitation and
expense paid indirectly 1.52% 1.57% 1.62% 3.70%
Ratio of net investment income to average net assets 3.27% 3.75% 2.89% 4.05%
Ratio of net investment income to average net assets prior to expense
limitation and expense paid indirectly 3.00% 3.48% 2.62% 1.70%
Portfolio turnover 53% 85% 95% 212%
_________________________________________________________________________________________________________________________________
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total return has not been annualized.
(3) The average shares outstanding method has been applied for per share information.
(4) 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 and distributor. Performance would have been lower had the expense limitation not been in effect.
See accompanying notes
16
<page>
Delaware Dividend Income Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended
Ended ____________________________________________________________
5/31/06(1) 11/30/05 11/30/04 11/30/03 11/30/02 11/30/01(2)
(Unaudited)
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $ 11.140 $ 11.050 $ 10.220 $ 9.030 $ 9.230 $ 9.600
Income (loss) from investment operations:
Net investment income (3) 0.213 0.477 0.371 0.453 0.429 0.405
Net realized and unrealized gain (loss) on
investments and foreign currencies 0.368 0.082 0.882 1.220 (0.196) (0.041)
_______ _______ _______ _______ _______ ________
Total from investment operations 0.581 0.559 1.253 1.673 0.233 0.364
_______ _______ _______ _______ _______ ________
Less dividends and distributions from:
Net investment income (0.275) (0.388) (0.389) (0.483) (0.433) (0.400)
Net realized gain on investments (0.066) (0.081) (0.034) - - (0.334)
_______ _______ _______ _______ _______ ________
Total dividends and distributions (0.341) (0.469) (0.423) (0.483) (0.433) (0.734)
_______ _______ _______ _______ _______ ________
Net asset value, end of period $ 11.380 $ 11.140 $ 11.050 $ 10.220 $ 9.030 $ 9.230
_______ _______ _______ _______ _______ ________
Total return (4) 5.30% 5.16% 12.55% 19.56% 2.58% 3.87%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 1,371 $ 941 $ 102 $ 3,879 $ 3,233 $ 3,265
Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior
to expense limitation and expense paid indirectly 0.92% 0.97% 1.02% 1.75% 1.00% 0.75%
Ratio of net investment income to average net assets 3.77% 4.30% 3.49% 4.73% 4.71% 4.38%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid
indirectly 3.60% 4.08% 3.22% 3.73% 4.46% 4.38%
Portfolio turnover 53% 85% 95% 212% 188% 89%
____________________________________________________________________________________________________________________________________
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized.
(2) As required, effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment
Companies that require 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.
(3) The average shares outstanding method has been applied for per share information.
(4) 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,
as applicable. Performance would have been lower had the expense limitation not been in effect.
See accompanying notes
17
<page>
Notes to financial statements
Delaware Dividend Income Fund
May 31, 2006 (Unaudited)
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, 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 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 were 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 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 the 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 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.
Repurchase Agreements - The Fund may investin a pooled cash account along with
other members of the Delaware Investments (R) Family of Funds pursuant to an
exemptive order issued by the Securities and Exchange Commission. 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) for
financial reporting purposes. 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 character of such distributions by
the issuer. Discounts and premiums are amortized to interest income over the
lives of the respective securities. The Fund declares and pays dividends from
net investment income quarterly and distributions from net realized gain on
investments, if any, annually.
Subject to seeking best execution, the Fund may direct certain security trades
to brokers who have agreed to rebate a portion of the related brokerage
commission to the Fund in cash. Such commission rebates are included in realized
gain on securities in the accompanying financial statements and totaled $11,142
for the six months ended May 31, 2006. In general, best execution refers to many
factors, including the price paid or received for a security, the commission
charged, the promptness and reliability of execution, the confidentiality and
placement accorded the order, and other factors affecting the overall benefit
obtained by the Fund on the transaction.
The Fund receives earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense paid
under the above arrangement is included in custodian fees on the Statement of
Operations with the corresponding expense offset shown as "expense 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),
18
<page>
a series of Delaware Management Business Trust and the investment manager, an
annual fee which is calculated daily 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 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 March 31, 2007.
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 computed at the annual rate of 0.04% of the Fund's average
daily net assets 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 March 31, 2007 in
order to prevent distribution and service fees of Class A and class R shares
from exceeding 0.25% and 0.50%, repectively, of average daily net assets.
Institutional Class shares pay no distribution and service expenses.
At May 31, 2006, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $224,844
Dividend disbursing, transfer agent fees, accounting and
administration fees and other expenses payable to DSC 98,474
Distribution fee payable to DDLP 283,413
Other expenses payable to DMC and affiliates* 38,471
* 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 in-house legal services provided to
the Fund by DMC employees. For the six months ended May 31, 2006, the Fund was
charged $9,409 for internal legal services provided by DMC.
For the six months ended May 31, 2006, DDLP earned $165,319 for commissions on
sales of the Fund's Class A shares. For the six months ended May 31, 2006, DDLP
received gross contingent deferred sales charge commissions of $90, $61,838, and
$13,186 on redemption of the Fund's Class A, Class B, and Class C shares,
respectively, and these commissions were entirely used to offset up-front
commissions previously paid by DDLP to broker-dealers on sales of those 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 six months ended May 31, 2006, the Fund made purchases of $173,348,755
and sales of $135,814,981 of investment securities other than short-term
investments.
At May 31, 2006, the cost of investments for federal income tax purposes has
been estimated since the final tax characteristics cannot be determined until
fiscal year end. At May 31, 2006, the cost of investments was $553,053,658. At
May 31, 2006, the net unrealized appreciation was $14,418,275 of which
$33,344,897 related to unrealized appreciation of investments and $18,926,622
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. Additionally, gains (losses) on foreign currency
transactions and net short-term gains on sales of investment securities are
treated as ordinary income for federal income tax purposes. The tax character of
dividends and distributions paid during the six months ended May 31, 2006 and
the year ended November 30, 2005 was as follows:
Six Months Year
Ended Ended
5/31/06* 11/30/05
___________ ___________
Ordinary income $12,517,917 $11,900,620
Long-term capital gain 1,814,890 149,380
___________ ___________
Total $14,332,807 $12,050,000
___________ ___________
*Tax information for the period ended May 31, 2006 is an estimate and the tax
character of dividends and distributions may be redesignated at fiscal year
end.
The components of net assets are estimated since final tax characteristics
cannot be determined until fiscal year end. As of May 31, 2006, the estimated
components of net assets on a tax basis were as follows:
Shares of beneficial interest $566,535,857
Undistributed ordinary income 3,003,161
Capital loss carryforwards (18,732,090)
Six month period realized gains 5,809,029
Unrealized appreciation of investments 14,418,275
____________
Net assets $571,034,232
____________
The differences between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales, tax treatment of
market discount and premium on debt instruments, tax treatment of contingent
payment debt instruments, and estimates of tax character of distributions from
Real Estate Investment Trusts. The undistributed earnings for Delaware Dividend
Income Fund may be subject to reclassification upon notice of the character of
distributions received from investments in Real Estate Investment Trusts.
(continues) 19
<page>
Notes to financial statements
Delaware Dividend Income Fund
May 31, 2006 (Unaudited)
4. Dividend and Distribution Information (continued)
For financial reporting purposes, capital accounts are adjusted to reflect the
tax character of permanent book/tax differences. Reclassifications are primarily
due to tax treatment of market discount and premium on certain debt instruments
and contingent payment debt instruments, gain (loss) on foreign currency
transactions and limitations on capital loss carryforwards due to the
reorganization. Results of operations and net assets were not affected by these
reclassifications. For the six months ended May 31, 2006, the Fund recorded an
estimate of these differences since the final tax characteristics cannot be
determined until fiscal year end.
Undistributed net investment income $(419,736)
Accumulated net realized gain 419,736
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Such capital loss
carryforwards expire as follows: $10,667,646 expires in 2009 and $8,064,444
expires in 2010. The use of these losses are subject to an annual limitation in
accordance with the Internal Revenue Code.
5. Capital Shares
Transactions in capital shares were as follows:
Six Months Year
Ended Ended
5/31/06 11/30/05
___________ ___________
Shares sold:
Class A 4,786,446 14,033,811
Class B 832,679 2,744,286
Class C 3,384,302 8,613,965
Class R 175,724 96,885
Institutional Class 41,433 83,093
Shares issued upon reinvestment
of dividends and distributions:
Class A 553,632 467,873
Class B 110,755 98,641
Class C 320,366 268,682
Class R 4,850 2,197
Institutional Class 2,471 1,076
Shares issued from
reorganization (1): - 7,705,509
___________ ___________
10,212,658 34,116,018
___________ ___________
Shares repurchased:
Class A (3,524,210) (6,128,075)
Class B (596,688) (554,170)
Class C (1,774,120) (1,436,755)
Class R (17,733) (4,499)
Institutional Class (7,960) (8,958)
___________ ___________
(5,920,711) (8,132,457)
___________ ___________
Net increase 4,291,947 25,983,561
___________ ___________
(1)See Note 6.
For the six months ended May 31, 2006 and the year ended November 30, 2005,
50,487 Class B shares were converted to 50,443 Class A shares valued at $575,838
and 69,809 Class B shares were converted to 69,746 Class A shares valued at
$779,637, respectively. The respective amounts are included in Class B
redemptions and Class A subscriptions in the table above and in the Statements
of Changes in Net Assets.
6. Fund Reorganization
On June 24, 2005, the Fund completed the acquisition of the net assets of
Lincoln National Convertible Securities Fund, Inc. ("LNV Fund") pursuant to a
plan of reorganization approved by the shareholders of LNV Fund at a reconvened
Special Meeting of Shareholders held on June 16, 2005. The transaction, which is
structured as a tax-free reorganization, entailed (i) the acquisition of all of
the assets of LNV Fund by Delaware Dividend Income Fund in exchange for Class A
shares of Delaware Dividend Income Fund and (ii) the pro rata distribution of
such shares to LNV Fund's shareholders in exchange for their shares of LNV Fund.
LNV Fund was a closed-end, diversified investment management company managed by
Delaware Management Company. Delaware Management Company is a series of Delaware
Management Business Trust, a subsidiary of Lincoln National Corporation. The net
assets, net unrealized depreciation and accumulated realized losses of LNV Fund
as of the close of business on June 24, 2005 were as follows:
Net Unrealized Accumulated
Net Assets Depreciation Net Realized Loss
____________ _______________ _________________
Lincoln National
Convertible
Securities Fund $85,145,873 $(100,624) $(25,487,586)
The net assets of the Fund prior to the reorganization were $369,303,593.
7. Line of Credit
The Fund, along with certain other funds in the Delaware Investments (R)
Family of Funds (the "Participants"), participates in a $225,000,000 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 May 31, 2006, or at any
time during the period.
8. 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.
While maintaining oversight, the Fund's Board of Trustees has delegated to DMC
the day-to-day functions of determining whether individual securities are liquid
for purposes of the Fund's limitation on investments in
20
<page>
illiquid assets. At May 31, 2006, no securities have been determined to be
illiquid under the Fund's Liquidity Procedures. Rule 144A securities have been
identified on the Statement of Net Assets.
The Fund invests a portion of its assets 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 Moody's 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 six months ended May 31,
2006. The Fund's REIT holdings are also affected by interest rate changes,
particularly if the REITs it holds use floating rate debt to finance ongoing
operations.
9. 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.
21
<page>
Other Fund information
Delaware Dividend Income Fund
Board Consideration of Delaware Dividend Income Fund Investment Advisory
Agreement
At a meeting held on May 17-18, 2006 (the "Annual Meeting"), the Board of
Trustees, including a majority of disinterested or independent Trustees,
approved the renewal of the Investment Advisory Agreement for the Delaware
Dividend Income Fund (the "Fund"). In making its decision, the Board considered
information furnished throughout the year at regular Board meetings, as well as
information prepared specifically in connection with the Annual Meeting.
Information furnished and discussed throughout the year included reports
detailing Fund performance, investment strategies, expenses, compliance matters
and other services provided by Delaware Management Company ("DMC"), the
investment advisor. Information furnished specifically in connection with the
Annual Meeting included materials provided by DMC and its affiliates ("Delaware
Investments") concerning, among other things, the level of services provided to
the Fund, the costs of such services to the Fund, economies of scale and the
financial condition and profitability of Delaware Investments. In addition, in
connection with the Annual Meeting, the Board considered independent historical
and comparative reports prepared by Lipper Inc. ("Lipper"), an independent
statistical compilation organization. The Board also considered industry
comparative information presented by representatives from Lipper. The Lipper
reports compared the Fund's investment performance and expenses with those of
other comparable mutual funds. The Board also received certain supplemental
information regarding management's policy with respect to advisory fee levels
and its philosophy with respect to breakpoints; the structure of portfolio
manager compensation; and any constraints or limitations on the availability of
securities in certain investment styles which might inhibit DMC's ability to
fully invest in accordance with Fund policies.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel and representatives from
Lipper. At the meeting with representatives from Lipper, Mr. Driscoll, Chairman
of the Delaware Investments (R) Family of Funds, and Chairman and Chief
Executive Officer of the investment advisor, was present to respond to questions
by Lipper and the independent Trustees. While the Board considered the
Investment Advisory Agreements for all of the funds in the Delaware Investments
Family of Funds at the same Board meeting, information was provided and
considered by the Board for each fund individually. In approving the continuance
of the Investment Advisory Agreement for the Fund, the Board, including a
majority of independent Trustees, determined that the existing advisory fee
structure was fair and reasonable and that the continuance of the Investment
Advisory Agreement was in the best interests of the Fund and its shareholders.
While attention was given to all information furnished, the following discusses
the primary factors relevant to the Board's deliberations and determination,
including those relating to the selection of the investment advisor and the
approval of the advisory fee.
Nature, Extent And Quality of Service. Consideration was given to the services
provided by Delaware Investments to the Fund and its shareholders. In reviewing
the nature, extent and quality of services, the Board emphasized reports
furnished to it throughout the year at regular Board meetings covering matters
such as the relative performance of the Fund, compliance of portfolio managers
with the investment policies, strategies and restrictions for the Fund, the
compliance of management personnel with the Code of Ethics adopted throughout
the Delaware Investments Family of Funds complex, the adherence to fair value
pricing procedures as established by the Board, and the accuracy of net asset
value calculations. The Board noted that it was pleased with the current
staffing of the Fund's investment advisor and management's efforts to strengthen
and deepen portfolio management teams during the past year, the emphasis on
research and the compensation system for advisory personnel. Favorable
consideration was given to DMC's efforts to maintain, and in some instances
increase, financial and human resources committed to fund matters. Other factors
taken into account by the Board were Delaware Investments' preparedness for, and
response to, legal and regulatory matters. The Board also considered the
transfer agent and shareholder services provided to Fund shareholders by
Delaware Investments' affiliate, Delaware Service Company, Inc., noting DSC's
commitment to maintain a high level of service in keeping with its past receipt
of the DALBAR Pyramid Award, and the continuing expenditures by Delaware
Investments to improve the delivery of shareholder services. Additionally, the
Board noted the extent of benefits provided to Fund shareholders for being part
of the Delaware Investments Family of Funds, including the privilege to exchange
investments between the same class of shares of funds without a sales charge,
the ability to reinvest Fund dividends into other funds and the privilege to
combine holdings in other funds to obtain a reduced sales charge. The Board was
satisfied with the nature, extent and quality of the overall services provided
by Delaware Investments.
Investment Performance. The Board considered the investment performance of DMC
and the Fund. The Board was pleased with DMC's investment performance. The Board
placed significant emphasis on the investment performance of the Fund in view of
its importance to shareholders. While consideration was given to performance
reports and discussions with portfolio managers at Board meetings throughout the
year, particular weight was given to the Lipper reports furnished for the Annual
Meeting. The Lipper reports prepared for the Fund showed the investment
performance of its Class A shares in comparison to a group of similar funds as
selected by Lipper (the "Performance Universe"). A fund with the best
performance is ranked first, and a fund with the poorest performance is ranked
last. The highest/best performing 25% of funds in the Performance Universe make
up the first quartile; the next 25% - the second quartile; the next 25% - the
third quartile; and the poorest/worst performing 25% of funds in the Performance
Universe make up the fourth quartile. Comparative annualized performance for the
Fund was shown for the past one, three and five year periods ended January 31,
2006. The Board noted its objective that the Fund's performance be at or above
the median of its Performance Universe. The following paragraph summarizes the
performance results for the Fund and the Board's view of such performance.
The Performance Universe for the Fund consisted of the Fund and all retail and
institutional income funds as selected by Lipper. The Lipper report comparison
showed that the Fund's total return for the one and five year periods was in the
first quartile of such Performance Universe. The report further showed that the
Fund's total return for the three year period was in the second quartile. The
Board was satisfied with such performance.
22
<page>
Board Consideration of Delaware Dividend Income Fund Investment Advisory
Agreement (continued)
Comparative Expenses. The Board considered expense data for the Delaware
Investments (R) Family of Funds. Management provided the Board with
information on pricing levels and fee structures for the Funds. The Board
focused particularly on the comparative analysis of the management fees and
total expense ratios of the Fund and the management fees and expense ratios of a
group of similar funds as selected by Lipper (the "Expense Group"). In reviewing
comparative costs, the Fund's contractual management fee and the actual
management fee incurred by the Fund were compared with the contractual
management fees (assuming all funds in the Expense Group were similar in size to
the Fund) and actual management fees (as reported by each fund) of other funds
within the Expense Group, taking into effect any applicable breakpoints and fee
waivers. The Fund's total expenses were also compared with those of its Expense
Group. The Lipper total expenses, for comparative consistency, were shown by
Lipper for Class A shares and compared total expenses including 12b-1 and
non-12b-1 service fees. The Board also considered fees paid to Delaware
Investments for non-management services. The Board noted its objective to limit
the Fund's total expense ratio to an acceptable range as compared to the median
of the Expense Group. The following paragraph summarizes the expense results for
the Fund and the Board's view of such expenses.
The expense comparisons for the Fund showed that its actual management fee and
total expenses were in the quartile with the lowest expenses of its Expense
Group. The Board was satisfied with the management fees and total expenses of
the Fund in comparison to its Expense Group as shown in the Lipper report.
Management Profitability. The Board considered the level of profits, if any,
realized by Delaware Investments in connection with the operation of the Fund.
In this respect, the Board reviewed the Investment Management Profitability
Analysis that addressed the overall profitability of Delaware Investments'
business in providing management and other services to each of the individual
funds and the Delaware Investments (R) Family of Funds as a whole. Specific
attention was given to the methodology followed in allocating costs for the
purpose of determining profitability. Management stated that the level of
profits of Delaware Investments, to a certain extent, reflected operational cost
savings and efficiencies initiated by Delaware Investments. The Board considered
Delaware Investments' expenditures to improve services provided to fund
shareholders and to meet additional regulatory and compliance requirements
resulting from recent SEC initiatives. The Board also considered the extent to
which Delaware Investments might derive ancillary benefits from fund operations,
including the potential for procuring additional business as a result of the
prestige and visibility associated with its role as service provider to the
Delaware Investments Family of Funds, the benefits from allocation of fund
brokerage to improve trading efficiencies and the use of "soft" commission
dollars to pay for proprietary and non-proprietary research. The Board did not
find that the level of profits realized by Delaware Investments from the
relationships with the Fund and the Delaware Investments Family of Funds
required negotiation of reduction of fees.
Economies of Scale. The Trustees considered whether economies of scale are
realized by Delaware Investments as the Fund's assets increase and the extent to
which any economies of scale are reflected in the level of management fees
charged. The Trustees took into account the standardized advisory fee pricing
and structure approved by the Board and shareholders as part of a complex-wide
shareholder meeting conducted in 1998/1999. At that time, Delaware Investments
introduced breakpoints to account for management economies of scale. The Board
noted that the fee under the Fund's management contract fell within the standard
structure. The Board also noted that the Fund's assets exceeded the first
breakpoint level. The Board believed that, given the extent to which economies
of scale might be realized by the advisor and its affiliates, the schedule of
fees under the Investment Advisory Agreement provides a sharing of benefits with
the Fund and its shareholders.
23
<page>
About the organization
This semiannual 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 (R) 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 that 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
Jude T. Driscoll
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
Thomas L. Bennett
Private Investor
Rosemont, PA
John A. Fry
President
Franklin & Marshall College
Lancaster, PA
Anthony D. Knerr
Founder and Managing Director
Anthony Knerr & Associates
New York, NY
Lucinda S. Landreth
Former Chief Investment Officer
Assurant, Inc.
Philadelphia, PA
Ann R. Leven
Owner - ARL Associates,
Financial and Strategic Consultants
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, MN
J. Richard Zecher
Founder
Investor Analytics
Scottsdale, AZ
Affiliated Officers
Michael P. Bishof
Senior Vice President and
Chief Financial Officer
Delaware Investments Family of Funds
Philadelphia, PA
David F. Connor
Vice President, Deputy General Counsel,
and Secretary
Delaware Investments Family of Funds
Philadelphia, PA
David P. O'Connor
Senior Vice President, General Counsel,
and Chief Legal Officer
Delaware Investments Family of Funds
Philadelphia, PA
John J. O'Connor
Senior Vice President and Treasurer
Delaware Investments Family of Funds
Philadelphia, PA
Contact Information
Investment Manager
Delaware Management Company, a series
of Delaware Management Business Trust
Philadelphia, PA
National Distributor
Delaware Distributors, L.P.
Philadelphia, PA
Shareholder Servicing, Dividend
Disbursing, and Transfer Agent
Delaware Service Company, Inc.
2005 Market Street
Philadelphia, PA 19103-7094
For Shareholders
800 523-1918
For Securities Dealers
and Financial Institutions
Representatives Only
800 362-7500
Web Site
www.delawareinvestments.com
Delaware Investments is the marketing name of Delaware Management Holdings, Inc.
and its subsidiaries.
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 are 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, D.C.; information on the
operation of the Public Reference Room may be obtained by calling 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.
24
<page>
Get shareholder reports and prospectuses online instead of in the mail.
> Visit www.delawareinvestments.com/edelivery
<page>
Simplify your life.
Manage your investments online!
Get Account Access, the Delaware Investments (R) secure Web site that allows
you to conduct your business online. Gain 24-hour access to your account and one
of the highest levels of Web security available. You also get:
o Hassle-free investing - Make online purchases and redemptions at any time.
o Simplified tax processing - Automatically retrieve your Delaware Investments
accounts' 1099 information and import it directly into your 1040 tax return.
Available only with Turbo Tax (R) Online (SM) and Desktop software -
www.turbotax.com.
o Less mail clutter - Get instant access to your fund materials online with
Delaware eDelivery.
Register for Account Access today! Visit www.delawareinvestments.com, select
Individual Investors, and click Account Access.
Please call our shareholder service center at 800 523-1918 Monday through Friday
from 8:00 a.m. to 7:00 p.m., Eastern Time, for assistance with any questions.
[DELAWARE LOGO]
(571) Printed in the USA
SA-129 [5/06] CGI 7/06 MF-06-06-042 P011110
<page>
Semiannual Report Delaware
Small Cap Core Fund
May 31, 2006
Core equity mutual funds
[Delaware Logo] [LOGO] POWERED BY RESEARCH (R)
<page>
Table of contents
> Disclosure of Fund expenses.............................................1
> Sector allocation.......................................................2
> Statement of net assets.................................................3
> Statement of operations.................................................6
> Statements of changes in net assets.....................................7
> Financial highlights....................................................8
> Notes to financial statements..........................................12
> Other Fund information.................................................15
> About the organization.................................................17
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)2006 Delaware Distributors, L.P.
<page>
Disclosure of Fund expenses
For the period December 1, 2005 to May 31, 2006
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 December 1, 2005 to May 31, 2006.
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.
Delaware Small Cap Core Fund
Expense Analysis of an Investment of $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period*
Value Value Expense 12/1/05 to
12/1/05 5/31/06 Ratio 5/31/06
________________________________________________________________________________
Actual Fund Return
Class A $1,000.00 $1,087.60 1.25% $ 6.51
Class C 1,000.00 1,083.30 2.00% 10.39
Class R 1,000.00 1,088.70 1.50% 7.81
Institutional Class 1,000.00 1,089.50 1.00% 5.21
________________________________________________________________________________
Hypothetical 5% Return (5% return before expenses)
Class A $1,000.00 $1,018.70 1.25% $ 6.29
Class C 1,000.00 1,014.96 2.00% 10.05
Class R 1,000.00 1,017.45 1.50% 7.54
Institutional Class 1,000.00 1,019.95 1.00% 5.04
________________________________________________________________________________
*"Expenses Paid During Period" are equal to the Fund's annualized expense
ratio, multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).
1
<page>
Sector allocation
Delaware Small Cap Core Fund
As of May 31, 2006
Sector designations may be different than the sector designations presented in
other Fund materials.
Percentage
Sector of Net Assets
________________________________________________________________________________
Common Stock 96.40%
Basic Materials 6.30%
Business Services 4.39%
Capital Goods 9.30%
Consumer Discretionary 5.02%
Consumer Services 2.34%
Consumer Staples 1.74%
Credit Cyclicals 2.25%
Energy 7.15%
Finance 16.96%
Health Care 11.92%
Media 0.89%
Real Estate 4.77%
Technology 19.86%
Transportation 2.29%
Utilities 1.22%
________________________________________________________________________________
Repurchase Agreements 2.11%
________________________________________________________________________________
Total Market Value of Securities 98.51%
________________________________________________________________________________
Receivables and Other Assets Net of Liabilities 1.49%
________________________________________________________________________________
Total Net Assets 100.00%
________________________________________________________________________________
2
<page>
Statement of net assets
Delaware Small Cap Core Fund
May 31, 2006 (Unaudited)
Number of Market
Shares Value
________________________________________________________________________________
Common Stock - 96.40%
________________________________________________________________________________
Basic Materials - 6.30%
+AK Steel Holding 12,300 $ 165,435
+Century Aluminum 4,250 177,013
Chesapeake 5,600 76,608
Cytec Industries 3,150 181,377
Ferro 5,400 95,040
FMC 2,400 154,968
Georgia Gulf 3,850 124,086
+NS Group 4,200 209,663
+PolyOne 17,400 164,430
Steel Dynamics 3,400 197,506
Wausau Paper 7,350 98,270
Worthington Industries 5,100 86,853
___________
1,731,249
___________
Business Services - 4.39%
Administaff 2,950 113,369
+Armor Holdings 3,200 182,783
Healthcare Services Group 6,100 123,891
+Kforce 9,400 143,632
+Labor Ready 6,250 144,688
McGrath RentCorp 5,050 134,078
+TeleTech Holdings 10,550 127,022
UniFirst 3,400 108,970
+United Stationers 2,750 127,655
___________
1,206,088
___________
Capital Goods - 9.30%
Acuity Brands 4,900 195,510
+AGCO 7,650 187,119
Applied Industrial Technologies 2,700 104,085
Barnes Group 3,800 156,902
Briggs & Stratton 2,700 87,480
Crane 3,450 138,621
DRS Technologies 2,750 146,465
+Genlyte Group 3,350 233,762
+Innovative Solutions & Support 7,600 102,296
+Kadant 4,900 114,856
Lawson Products 2,950 108,531
Lincoln Electric Holdings 2,700 148,392
Lufkin Industries 2,850 172,397
Manitowoc 4,650 213,853
+Orbital Sciences 11,500 172,385
+Rofin-Sinar Technologies 2,450 133,672
+URS 3,350 142,007
___________
2,558,333
___________
Consumer Discretionary - 5.02%
+Charming Shoppes 15,250 169,885
+Children's Place Retail Stores 2,650 154,151
+Guitar Center 3,250 156,488
+Jos A Bank Clothiers 4,000 145,280
+Pacific Sunwear Of California 7,000 153,650
Phillips-Van Heusen 4,100 145,345
+Quiksilver 11,400 142,044
Stage Stores 5,800 188,789
Stride Rite 9,850 124,012
___________
1,379,644
___________
Consumer Services - 2.34%
CKE Restaurants 7,950 133,322
IHOP 3,200 153,663
Lone Star Steakhouse & Saloon 3,350 87,201
+Papa John's International 3,850 121,121
+Shuffle Master 4,100 149,486
___________
644,793
___________
Consumer Staples - 1.74%
Casey's General Stores 8,100 181,359
Chiquita Brands International 5,900 84,429
Longs Drug Stores 2,450 112,798
Nu Skin Enterprises Class A 5,800 99,528
___________
478,114
___________
Credit Cyclicals - 2.25%
+Jacuzzi Brands 12,150 113,846
M/I Homes 2,700 97,200
+Meritage Homes 1,950 104,501
Thor Industries 3,850 185,107
+Williams Scotsman International 4,500 117,000
___________
617,654
___________
Energy - 7.15%
+Dresser-Rand Group 2,400 57,984
+Grey Wolf 18,200 139,230
+Hercules Offshore 4,500 164,565
+James River Coal 2,950 93,604
+Oceaneering International 3,350 251,249
+Oil States International 5,400 187,596
Penn Virginia 2,050 139,195
+Petroquest Energy 13,150 136,892
St. Mary Land & Exploration 3,800 148,542
+Universal Compression Holdings 4,000 232,480
+Veritas DGC 4,900 231,427
World Fuel Services 3,700 184,815
___________
1,967,579
___________
Finance - 16.96%
ADVANTA 4,000 146,400
American Home Mortgage Investment 4,650 155,171
AmerUs Group 1,850 107,559
Bancfirst 3,100 138,725
BankUnited Financial Class A 5,550 172,161
Center Financial 6,000 139,980
City Holding 4,750 171,760
Commercial Capital Bancorp 10,450 164,065
+CompuCredit 3,200 122,432
Dime Community Bancshares 6,400 90,496
Direct General 8,750 154,963
FBL Financial Group Class A 3,700 132,386
First Marblehead 2,050 93,009
First Midwest Bancorp 2,750 96,690
First Place Financial - Ohio 4,900 111,965
+FirstFed Financial 2,550 147,492
Frontier Financial 5,800 198,243
Greater Bay Bancorp 7,050 210,160
(continues) 3
<page>
Statement of net assets
Delaware Small Cap Core Fund
Number of Market
Shares Value
________________________________________________________________________________
Common Stock (continued)
________________________________________________________________________________
Finance (continued)
Hanover Insurance Group 2,700 $ 127,845
Kansas City Life Insurance 1,950 89,271
MainSource Financial Group 4,940 83,980
+MarketAxess Holdings 10,500 114,975
Ohio Casualty 7,050 210,583
PFF Bancorp 4,900 166,600
Presidential Life 5,800 145,058
Republic Bancorp 10,000 108,700
RLI 3,150 148,995
+Sierra Health Services 4,500 185,399
TierOne 5,550 182,040
+Triad Guaranty 2,400 129,912
Trustmark 3,950 118,540
+United America Indemnity 5,900 134,107
West Coast Bancorp Oregon 6,000 163,140
___________
4,662,802
___________
Health Care - 11.92%
+Adolor 7,050 164,758
+Alkermes 6,650 131,803
+Applera-Celera Genomics 10,000 112,000
+Bio-Rad Laboratories Class A 1,950 129,519
+Candela 7,900 136,038
+Digene 4,300 160,734
+First Horizon Pharmaceutical 7,350 155,159
+Gen-Probe 2,400 129,600
+Geron 12,300 85,608
+Healthways 3,700 196,617
+LifePoint Hospitals 3,150 111,290
+Medarex 11,400 116,964
Mentor 2,950 119,151
+MGI PHARMA 6,900 124,269
+Myogen 4,100 127,715
+Noven Pharmaceuticals 7,450 130,524
Owens & Minor 3,900 115,830
+Pharmion 6,200 121,582
PolyMedica 2,700 103,653
+Res-Care 9,750 193,537
+Techne 2,200 120,296
+Telik 6,300 100,674
+United Therapeutics 2,700 130,032
Vital Signs 2,200 110,044
West Pharmaceutical Services 4,400 149,688
___________
3,277,085
___________
Media - 0.89%
+infoUSA 11,350 117,927
Journal Communications Class A 5,400 62,208
+Scholastic 2,450 64,484
___________
244,619
___________
Real Estate - 4.77%
Brandywine Realty Trust 6,550 190,080
Equity Inns 10,000 154,499
First Industrial Realty Trust 3,100 114,700
Glimcher Realty Trust 4,950 124,988
Home Properties 2,950 146,733
Maguire Properties 3,350 106,061
Nationwide Health Properties 6,050 126,990
Pennsylvania Real Estate Investment Trust 3,150 117,495
Senior Housing Properties Trust 6,650 114,447
Sovran Self Storage 2,450 115,567
___________
1,311,560
___________
Technology - 19.86%
+AMIS Holdings 9,450 92,705
+Anixter International 3,100 151,063
+Axcelis Technologies 24,300 154,791
+BEA Systems 650 8,814
+Blackboard 4,100 108,568
+CACI International 2,400 146,208
+Cymer 3,950 183,240
+Digital River 3,050 134,078
+Digitas 7,400 96,274
+Dionex 2,250 121,185
+Dobson Communications Class A 17,000 146,030
+EarthLink 10,450 87,049
+FileNet 5,250 136,763
+Internet Security Systems 4,900 100,352
+j2 Global Communications 5,900 156,704
+Kulicke & Soffa Industries 11,000 88,770
+Mercury Computer Systems 9,500 155,990
+MIPS Technologies 19,250 111,073
+MTC Technologies 3,900 108,108
+Multi-Fineline Electronix 2,400 79,848
+Netgear 7,300 170,893
+OmniVision Technologies 6,250 183,124
+ON Semiconductor 23,200 140,128
+Palm 10,200 168,096
+Photronics 7,800 131,586
Plantronics 3,050 65,728
+Progress Software 4,900 114,072
+Quality Systems 3,250 107,965
+RadiSys 8,100 168,075
+Secure Computing 10,850 96,348
+SI International 3,800 120,422
+Skyworks Solutions 24,100 136,406
+Synaptics 5,100 120,768
+Tekelec 11,900 171,717
+Tessera Technologies 6,400 180,735
+UbiquiTel 11,400 118,674
United Online 7,150 85,228
+Universal Electronics 4,100 72,939
+Varian Semiconductor Equipment 6,450 199,627
+Verint Systems 3,450 111,987
+Viasat 6,000 153,000
+WebEx Communications 6,250 205,312
+Wind River Systems 7,350 69,458
___________
5,459,901
___________
4
<page>
Number of Market
Shares Value
________________________________________________________________________________
Common Stock (continued)
________________________________________________________________________________
Transportation - 2.29%
Arkansas Best 2,550 $ 105,086
+Bristow Group 3,200 115,232
+HUB Group 4,500 212,939
Pacer International 6,650 196,242
___________
629,499
___________
Utilities - 1.22%
Black Hills 3,450 116,713
Cascade Natural Gas 5,400 113,400
Otter Tail 4,050 105,665
___________
335,778
___________
Total Common Stock (cost $25,335,747) 26,504,698
___________
Principal
Amount
________________________________________________________________________________
Repurchase Agreements - 2.11%
________________________________________________________________________________
With BNP Paribas 4.88% 6/1/06
(dated 5/31/06, to be repurchased
at $364,749, collateralized by
$136,200 U.S. Treasury Notes
2.375% due 8/31/06, market
value $136,194, $105,600
U.S. Treasury Notes 2.75% due
7/31/06, market value $106,187,
$80,800 U.S. Treasury Notes 2.875%
due 11/30/06, market value
$79,965 and $46,600 U.S. Treasury
Notes 6.50% due 2/15/10,
market value $49,915) $364,700 364,700
With Cantor Fitzgerald 4.88% 6/1/06
(dated 5/31/06, to be repurchased
at $215,329, collateralized by
$93,600 U.S. Treasury Notes
2.50% due 9/30/06, market
value $93,258, $93,600 U.S. Treasury
Notes 3.50% due 11/15/06,
market value $93,145 and
$31,700 U.S. Treasury Notes
6.00% due 8/15/09, market
value $33,208) 215,300 215,300
___________
Total Repurchase Agreements
(cost $580,000) 580,000
___________
Total Market Value of Securities - 98.51%
(cost $25,915,747) 27,084,698
Receivables and Other Assets Net
of Liabilities - 1.49% 408,839
___________
Net Assets Applicable to 2,268,432 Shares
Outstanding - 100.00% $27,493,537
___________
Net Asset Value - Delaware Small Cap Core Fund
Class A ($12,247,195 / 1,009,303 Shares) $12.13
___________
Net Asset Value - Delaware Small Cap Core Fund
Class C ($4,735,223 / 392,498 Shares) $12.06
___________
Net Asset Value - Delaware Small Cap Core Fund
Class R ($80,961 / 6,680 Shares) $12.12
___________
Net Asset Value - Delaware Small Cap Core Fund
Institutional Class ($10,430,158 / 859,951 Shares) $12.13
___________
Components of Net Assets at May 31, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $25,744,014
Accumulated net realized gain on investments 580,572
Net unrealized appreciation of investments 1,168,951
___________
Total net assets $27,493,537
___________
+Non-income producing security for the period ended May 31, 2006.
Net Asset Value and Offering Price per Share -
Delaware Small Cap Core Fund
Net asset value Class A (A) $12.13
Sales charge (5.75% of offering price) (B) 0.74
___________
Offering price $12.87
___________
(A) Net asset value per share, as illustrated, is the amount which would be paid
upon redemption or repurchase of shares.
(B) See the current prospectus for purchase of $50,000 or more.
See accompanying notes
5
<page>
Statement of operations
Delaware Small Cap Core Fund
Six Months Ended May 31, 2006 (Unaudited)
Investment Income:
Dividends $ 82,449
Interest 10,414 $ 92,863
_______ ___________
Expenses:
Management fees 69,644
Distribution expenses - Class A 11,747
Distribution expenses - Class C 12,925
Distribution expenses - Class R 107
Registration fees 31,369
Dividend disbursing and transfer agent fees and expenses 13,983
Reports and statements to shareholders 11,392
Legal and professional fees 5,788
Custodian fees 4,525
Accounting and administration expenses 3,714
Pricing fees 764
Trustees' fees 507
Insurance fees 367
Other 7,147 173,979
_______
Less expenses absorbed or waived (56,785)
Less waived distribution expenses - Class A (1,895)
Less waived distribution expenses - Class R (18)
Less expense paid indirectly (192)
___________
Total operating expenses 115,089
___________
Net Investment Loss (22,226)
___________
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments 606,615
Net change in unrealized appreciation/depreciation of investments 449,580
___________
Net Realized and Unrealized Gain on Investments 1,056,195
___________
Net Increase in Net Assets Resulting from Operations $ 1,033,969
___________
See accompanying notes
6
<page>
Statements of changes in net assets
Delaware Small Cap Core Fund
Six Months Year
Ended Ended
5/31/06 11/30/05
(Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment income (loss) $ (22,226) $ 14,447
Net realized gain on investments 606,615 244,228
Net change in unrealized appreciation/depreciation of investments 449,580 282,499
____________ ___________
Net increase in net assets resulting from operations 1,033,969 541,174
____________ ___________
Dividends and Distributions to Shareholders from:
Net investment income:
Class A - (34)
Institutional Class (17,577) (8,157)
Net realized gain on investments:
Class A (87,278) (5,845)
Class C (26,712) -
Institutional Class (134,760) (1,387,384)
____________ ___________
(266,327) (1,401,420)
____________ ___________
Capital Share Transactions:
Proceeds from shares sold:
Class A 8,555,095 3,781,560
Class C 3,900,152 844,303
Class R 83,224 12
Institutional Class 3,294,748 1,440,217
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 70,540 5,879
Class C 24,266 -
Institutional Class 152,337 1,395,541
____________ ___________
16,080,362 7,467,512
____________ ___________
Cost of shares repurchased:
Class A (508,252) (9,325)
Class C (98,474) -
Class R (1,670) -
Institutional Class (120,234) (9,039)
____________ ___________
(728,630) (18,364)
____________ ___________
Increase in net assets derived from capital share transactions 15,351,732 7,449,148
____________ ___________
Net Increase in Net Assets 16,119,374 6,588,902
Net Assets:
Beginning of period 11,374,163 4,785,261
____________ ___________
End of period (including undistributed net investment income of $- and $17,534, respectively) $ 27,493,537 $11,374,163
____________ ___________
See accompanying notes
7
<page>
Financial highlights
Delaware Small Cap Core Fund Class A
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended
Ended ________________________________________________________
5/31/06 (1) 11/30/05 11/30/04 11/30/03 11/30/02 11/30/01
(Unaudited)
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.380 $14.600 $13.080 $10.290 $11.130 $ 9.090
Income (loss) from investment operations:
Net investment income (loss) (2) (0.015) 0.022 0.026 0.036 0.079 0.111
Net realized and unrealized gain on investments 0.995 1.035 2.481 3.350 0.069 2.082
______ ______ ______ ______ ______ _______
Total from investment operations 0.980 1.057 2.507 3.386 0.148 2.193
______ ______ ______ ______ ______ _______
Less dividends and distributions from:
Net investment income - (0.025) (0.044) (0.075) (0.108) 0.153)
Net realized gain on investments (0.230) (4.252) (0.943) (0.521) (0.880) -
______ ______ ______ ______ ______ _______
Total dividends and distributions (0.230) (4.277) (0.987) (0.596) (0.988) (0.153)
______ ______ ______ ______ ______ _______
Net asset value, end of period $12.130 $11.380 $14.600 $13.080 $10.290 $11.130
_______ _______ _______ _______ _______ _______
Total return (3) 8.76% 9.04% 20.62% 35.19% 1.08% 24.42%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $12,247 $3,863 $20 $13 $- $-
Ratio of expenses to average net assets 1.25% 1.02% 0.75% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expense paid indirectly 1.90% 2.53% 1.30% 1.34% 1.34% 1.18%
Ratio of net investment income (loss) to average net assets (0.25%) 0.20% 0.20% 0.33% 0.74% 1.07%
Ratio of net investment income (loss) to average net assets
prior to expense limitation and expense paid indirectly (0.90%) (1.31%) (0.35%) (0.26%) 0.15% 0.63%
Portfolio turnover 152% 104% 136% 44% 76% 82%
____________________________________________________________________________________________________________________________________
(1) 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 waivers 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
8
<page>
Delaware Small Cap Core Fund Class C
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months 8/1/05 (2)
Ended to
5/31/06 (1) 11/30/05
(Unaudited)
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.360 $11.640
Income (loss) from investment operations:
Net investment loss (3) (0.060) (0.021)
Net realized and unrealized gain (loss) on investments 0.990 (0.259)
_______ _______
Total from investment operations 0.930 (0.280)
_______ _______
Less dividends and distributions from:
Net realized gain on investments (0.230) -
_______ _______
Total dividends and distributions (0.230) -
_______ _______
Net asset value, end of period $12.060 $11.360
_______ _______
Total return (4) 8.33% (2.41%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $4,736 $866
Ratio of expenses to average net assets 2.00% 2.00%
Ratio of expenses to average net assets prior to expense
limitation and expense paid indirectly 2.60% 5.14%
Ratio of net investment loss to average net assets (1.00%) (0.56%)
Ratio of net investment loss to average net assets prior to
expense limitation and expense paid indirectly (1.60%) (3.71%)
Portfolio turnover 152% 104%
____________________________________________________________________________________________________________________________________
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total return has not been annualized.
(3) The average shares outstanding method has been applied for per share information.
(4) 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
(continues) 9
<page>
Financial highlights
Delaware Small Cap Core Fund Class R
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months
Ended
5/31/06 (1)
(Unaudited)
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.360
Income (loss) from investment operations:
Net investment loss(2) (0.030)
Net realized and unrealized gain on investments 1.020
______
Total from investment operations 0.990
______
Less dividends and distributions from:
Net realized gain on investments (0.230)
______
Total dividends and distributions (0.230)
______
Net asset value, end of period $12.120
______
Total return(3) 8.87%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $81
Ratio of expenses to average net assets 1.50%
Ratio of expenses to average net assets prior to expense limitation
and expense paid indirectly 2.20%
Ratio of net investment loss to average net assets (0.50%)
Ratio of net investment loss to average net assets prior to expense
limitation and expense paid indirectly (1.20%)
Portfolio turnover 152%
____________________________________________________________________________________________________________________________________
(1) 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. Total investment return reflects waivers and payment of fees by the manager and
distributor. Performance would have been lower had the expense limitation not been in effect.
As of November 30, 2005, the Delaware Small Cap Core Fund Class R had one share outstanding, representing the initial seed purchase.
Shareholder data for this class is not disclosed because management does not believe it to be meaningful.
See accompanying notes
10
<page>
Delaware Small Cap Core Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended
Ended ________________________________________________________
5/31/06 (1) 11/30/05 11/30/04 11/30/03 11/30/02 11/30/01
(Unaudited)
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.390 $14.600 $13.080 $10.290 $11.130 $ 9.090
Income from investment operations:
Net investment income(2) - 0.031 0.026 0.036 0.079 0.111
Net realized and unrealized gain on investments 1.000 1.036 2.481 3.350 0.069 2.082
______ ______ ______ ______ ______ _______
Total from investment operations 1.000 1.067 2.507 3.386 0.148 2.193
______ ______ ______ ______ ______ _______
Less dividends and distributions from:
Net investment income (0.030) (0.025) (0.044) (0.075) (0.108) (0.153)
Net realized gain on investments (0.230) (4.252) (0.943) (0.521) (0.880) -
______ ______ ______ ______ ______ _______
Total dividends and distributions (0.260) (4.277) (0.987) (0.596) (0.988) (0.153)
______ ______ ______ ______ ______ _______
Net asset value, end of period $12.130 $11.390 $14.600 $13.080 $10.290 $11.130
_______ _______ _______ _______ _______ _______
Total return(3) 8.95% 9.14% 20.62% 35.19% 1.08% 24.42%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $10,430 $6,645 $4,765 $3,948 $2,921 $2,890
Ratio of expenses to average net assets 1.00% 0.94% 0.75% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to
expense limitation and expense paid indirectly 1.60% 2.23% 1.00% 1.04% 1.04% 0.88%
Ratio of net investment income to average net assets 0.00% 0.28% 0.20% 0.33% 0.74% 1.07%
Ratio of net investment income (loss) to average net
assets prior to expense limitation and expense
paid indirectly (0.60%) (1.01%) (0.05%) 0.04% 0.45% 0.93%
Portfolio turnover 152% 104% 136% 44% 76% 82%
____________________________________________________________________________________________________________________________________
(1) 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 waivers and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in effect.
See accompanying notes
11
<page>
Notes to financial statements
Delaware Small Cap Core Fund
May 31, 2006 (Unaudited)
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 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 C, Class R and Institutional Class shares. Class A shares are
sold with a front-end sales charge of up to 5.75%. 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 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.
Repurchase Agreements - The Fund may invest in a pooled cash account along
with other members of the Delaware Investments(R) Family of Funds pursuant to
an exemptive order issued by the Securities and Exchange Commission. 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(R)
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) for financial reporting purposes. 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 distributions by the issuer. The Fund declares and pays
dividends from net investment income and distributions from net realized gain on
investment, if any, annually.
Subject to seeking best execution, the Fund may direct certain security trades
to brokers who have agreed to rebate a portion of the related brokerage
commission to the Fund in cash. Such commission rebates are included in realized
gain on securities in the accompanying financial statements and totaled $305 for
the six months ended May 31, 2006. In general, best execution refers to many
factors, including the price paid or received for a security, the commission
charged, the promptness and reliability of execution, the confidentiality and
placement accorded the order, and other factors affecting the overall benefit
obtained by the Fund on the transaction.
The Fund receives earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense paid
under the above arrangement is included in the custodian fees and on the
Statement of Operations with the corresponding expense offset shown as "expense
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.
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 1.00% of average daily net assets of the Fund through March 31, 2007.
12
<page>
2. Investment Management, Administration Agreements and Other Transactions with
Affiliates (continued)
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 computed at the annual rate of 0.04% of the Fund's average
daily net assets 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
C shares and 0.60% of the average daily net assets of the Class R shares. DDLP
has contracted to waive distribution and service fees through March 31, 2007 in
order to prevent distribution and services fees of Class A shares and Class R
shares from exceeding 0.25% and 0.50%, respectively, of average daily net
assets. Institutional Class shares pay no distribution and services expenses.
At May 31, 2006, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $ 3,878
Dividend disbursing, transfer agent, accounting
and administration fees and other expenses
payable to DSC 4,335
Distribution fees payable to DDLP 6,338
Other expenses payable to DMC and affiliates* 21,120
*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, including internal legal services provided to the Fund
by DMC employees. For the six months ended May 31, 2006, the Fund was charged
$408 for internal legal services provided by DMC.
For the six months ended May 31, 2006, DDLP earned $21,099 for commissions on
sales of the Fund's Class A shares. For the six months ended May 31, 2006, DDLP
received gross contingent deferred sales charge commissions of $181 on
redemption of the Fund's Class C shares. These commissions were entirely used to
offset up-front commissions previously paid by DDLP to broker-dealers on sales
of those shares. Class A shares received no gross contingent deferred sales
charge commissions during the period.
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 six months ended May 31, 2006, the Fund made purchases of $28,405,226
and sales of $13,934,302 of investment securities other than short-term
investments.
At May 31, 2006, the cost of investments for federal income tax purposes has
been estimated since the final tax characteristics cannot be determined until
fiscal year end. At May 31, 2006, the cost of investments was $25,973,011. At
May 31, 2006, net unrealized appreciation was $1,111,687 of which $1,863,454
related to unrealized appreciation of investments and $751,767 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. Additionally, net short-term gains on sales of
investment securities are treated as ordinary income for federal income tax
purposes. The tax character of dividends and distributions paid during the six
months ended May 31, 2006 and year ended November 30, 2005 was as follows:
Six Months Year
Ended Ended
5/31/06* 11/30/05
__________ __________
Ordinary income $204,444 $ 246,155
Long-term capital gain 61,883 1,155,265
__________ __________
Total $266,327 $1,401,420
_________ __________
*Tax information for the six months ended May 31, 2006 is an estimate and the
tax character of dividends and distributions may be redesignated at fiscal year
end.
The components of net assets are estimated since the final tax characteristics
cannot be determined until fiscal year end. As of May 31, 2006, the estimated
components of net assets on a tax basis were as follows:
Shares of beneficial interest $25,744,014
Undistributed ordinary income 366,862
Undistributed long-term capital gain 270,974
Unrealized appreciation of investments 1,111,687
___________
Net assets $27,493,537
___________
The difference between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales.
For financial reporting purposes, capital accounts are adjusted to reflect
the tax character of permanent book/tax differences. Reclassifications are
primarily due to tax treatment of dividends and distributions. Results of
operations and net assets were not affected by these reclassifications. For the
six months ended May 31, 2006, the Fund recorded an estimate of these
differences since the final tax characteristics cannot be determined until
fiscal year end.
Paid - in capital $(5,876)
Undistributed net investment income 22,269
Accumulated net realized gain (loss) (16,393)
(continues) 13
<page>
Notes to financial statements
Delaware Small Cap Core Fund
5. Capital Shares
Transactions in capital shares were as follows:
Six Months Year
Ended Ended
5/31/06 11/30/05
Shares sold:
Class A 704,899 338,367
Class C 322,043 76,257
Class R 6,812 1
Institutional Class 273,297 127,717
Shares issued upon reinvestment of
dividends and distributions:
Class A 6,254 548
Class C 2,157 -
Institutional Class 13,517 130,181
_________ _______
1,328,979 673,071
_________ _______
Shares repurchased:
Class A (41,292) (848)
Class C (7,959) -
Class R (133) -
Institutional Class (10,253) (797)
_________ _______
(59,637) (1,645)
_________ _______
Net increase 1,269,342 671,426
_________ _______
6. Line of Credit
The Fund, along with certain other funds in the Delaware Investments(R)
Family of Funds (the "Participants"), participates in a $225,000,000 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 May 31, 2006, or at any
time during the period.
7. 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 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 six months ended May 31,
2006. 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 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.
While maintaining oversight, the Fund's Board of Trustees has delegated to DMC
the day-to-day functions of determining whether individual securities are liquid
for purposes of the Fund's limitation on investments in illiquid assets. At May
31, 2006, there were no Rule 144A securities and no securities have been
determined to be illiquid under the Fund's Liquidity Procedures.
8. 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.
14
<page>
Other Fund information
Delaware Small Cap Core Fund
Board Consideration of Delaware Small Cap Core Fund Investment Advisory
Agreement
At a meeting held on May 17-18, 2006 (the "Annual Meeting"), the Board of
Trustees, including a majority of disinterested or independent Trustees,
approved the renewal of the Investment Advisory Agreement for the Delaware Small
Cap Core Fund (the "Fund"). In making its decision, the Board considered
information furnished throughout the year at regular Board meetings, as well as
information prepared specifically in connection with the Annual Meeting.
Information furnished and discussed throughout the year included reports
detailing Fund performance, investment strategies, expenses, compliance matters
and other services provided by Delaware Management Company ("DMC"), the
investment advisor. Information furnished specifically in connection with the
Annual Meeting included materials provided by DMC and its affiliates ("Delaware
Investments") concerning, among other things, the level of services provided to
the Fund, the costs of such services to the Fund, economies of scale and the
financial condition and profitability of Delaware Investments. In addition, in
connection with the Annual Meeting, the Board considered independent historical
and comparative reports prepared by Lipper Inc. ("Lipper"), an independent
statistical compilation organization. The Board also considered industry
comparative information presented by representatives from Lipper. The Lipper
reports compared the Fund's investment performance and expenses with those of
other comparable mutual funds. The Board also received certain supplemental
information regarding management's policy with respect to advisory fee levels
and its philosophy with respect to breakpoints; the structure of portfolio
manager compensation; and any constraints or limitations on the availability of
securities in certain investment styles which might inhibit DMC's ability to
fully invest in accordance with Fund policies.
In considering such materials, the independent Trustees received assistance
and advice from and met separately with independent counsel and representatives
from Lipper. At the meeting with representatives from Lipper, Mr. Driscoll,
Chairman of the Delaware Investments(R) Family of Funds, and Chairman and
Chief Executive Officer of the investment advisor, was present to respond to
questions by Lipper and the independent Trustees. While the Board considered the
Investment Advisory Agreements for all of the funds in the Delaware Investments
Family of Funds at the same Board meeting, information was provided and
considered by the Board for each fund individually. In approving the continuance
of the Investment Advisory Agreement for the Fund, the Board, including a
majority of independent Trustees, determined that the existing advisory fee
structure was fair and reasonable and that the continuance of the Investment
Advisory Agreement was in the best interests of the Fund and its shareholders.
While attention was given to all information furnished, the following discusses
the primary factors relevant to the Board's deliberations and determination,
including those relating to the selection of the investment advisor and the
approval of the advisory fee.
Nature, extent and quality of service. Consideration was given to the services
provided by Delaware Investments to the Fund and its shareholders. In reviewing
the nature, extent and quality of services, the Board emphasized reports
furnished to it throughout the year at regular Board meetings covering matters
such as the relative performance of the Fund, compliance of portfolio managers
with the investment policies, strategies and restrictions for the Fund, the
compliance of management personnel with the Code of Ethics adopted throughout
the Delaware Investments Family of Funds complex, the adherence to fair value
pricing procedures as established by the Board, and the accuracy of net asset
value calculations. The Board noted that it was pleased with the current
staffing of the Fund's investment advisor and management's efforts to strengthen
and deepen portfolio management teams during the past year, the emphasis on
research and the compensation system for advisory personnel. Favorable
consideration was given to DMC's efforts to maintain, and in some instances
increase, financial and human resources committed to fund matters. Other factors
taken into account by the Board were Delaware Investments' preparedness for, and
response to, legal and regulatory matters. The Board also considered the
transfer agent and shareholder services provided to Fund shareholders by
Delaware Investments' affiliate, Delaware Service Company, Inc., noting DSC's
commitment to maintain a high level of service in keeping with its past receipt
of the DALBAR Pyramid Award, and the continuing expenditures by Delaware
Investments to improve the delivery of shareholder services. Additionally, the
Board noted the extent of benefits provided to Fund shareholders for being part
of the Delaware Investments Family of Funds, including the privilege to exchange
investments between the same class of shares of funds without a sales charge,
the ability to reinvest Fund dividends into other funds and the privilege to
combine holdings in other funds to obtain a reduced sales charge. The Board was
satisfied with the nature, extent and quality of the overall services provided
by Delaware Investments.
Investment performance. The Board considered the investment performance of
DMC and the Fund. The Board was pleased with DMC's investment performance. The
Board placed significant emphasis on the investment performance of the Fund in
view of its importance to shareholders. While consideration was given to
performance reports and discussions with portfolio managers at Board meetings
throughout the year, particular weight was given to the Lipper reports furnished
for the Annual Meeting. The Lipper reports prepared for the Fund showed the
investment performance of its Class A shares in comparison to a group of similar
funds as selected by Lipper (the "Performance Universe"). A fund with the best
performance is ranked first, and a fund with the poorest performance is ranked
last. The highest/best performing 25% of funds in the Performance Universe make
up the first quartile; the next 25% - the second quartile; the next 25% - the
third quartile; and the poorest/worst performing 25% of funds in the Performance
Universe make up the fourth quartile. Comparative annualized performance for the
Fund was shown for the past one, three and five periods ended January 31, 2006.
The Board noted its objective that the Fund's performance be at or above the
median of its Performance Universe. The following paragraph summarizes the
performance results for the Fund and the Board's view of such performance.
The Performance Universe for the Fund consisted of the Fund and all retail and
institutional small-cap core funds as selected by Lipper. The Lipper report
comparison showed that the Fund's total return for the one and three year
periods was in the second quartile of such Performance Universe. The report
further showed that the Fund's total return for the five year period was in the
first quartile. The Board was satisfied with such performance.
(continues) 15
<page>
Other Fund information
Delaware Small Cap Core Fund
Comparative expenses. The Board considered expense data for the Delaware
Investments Family of Funds. Management provided the Board with information on
pricing levels and fee structures for the Funds. The Board focused particularly
on the comparative analysis of the management fees and total expense ratios of
the Fund and the management fees and expense ratios of a group of similar funds
as selected by Lipper (the "Expense Group"). In reviewing comparative costs, the
Fund's contractual management fee and the actual management fee incurred by the
Fund were compared with the contractual management fees (assuming all funds in
the Expense Group were similar in size to the Fund) and actual management fees
(as reported by each fund) of other funds within the Expense Group, taking into
effect any applicable breakpoints and fee waivers. The Fund's total expenses
were also compared with those of its Expense Group. The Lipper total expenses,
for comparative consistency, were shown by Lipper for Class A shares and
compared total expenses including 12b-1 and non-12b-1 service fees. The Board
noted its objective to limit the Fund's total expense ratio to an acceptable
range as compared to the median of the Expense Group. The following paragraph
summarizes the expense results for the Fund and the Board's view of such
expenses.
The expense comparisons for the Fund showed that its actual management fee and
total expenses were in the quartile with the lowest expenses of its Expense
Group. The Board was satisfied with the management fees and total expenses of
the Fund in comparison to its Expense Group as shown in the Lipper report.
Management profitability. The Board considered the level of profits, if any,
realized by Delaware Investments in connection with the operation of the Fund.
In this respect, the Board reviewed the Investment Management Profitability
Analysis that addressed the overall profitability of Delaware Investments'
business in providing management and other services to each of the individual
funds and the Delaware Investments(R) Family of Funds as a whole. Specific
attention was given to the methodology followed in allocating costs for the
purpose of determining profitability. Management stated that the level of
profits of Delaware Investments, to a certain extent, reflected operational cost
savings and efficiencies initiated by Delaware Investments. The Board considered
Delaware Investments' expenditures to improve services provided to fund
shareholders and to meet additional regulatory and compliance requirements
resulting from recent SEC initiatives. The Board also considered the extent to
which Delaware Investments might derive ancillary benefits from fund operations,
including the potential for procuring additional business as a result of the
prestige and visibility associated with its role as service provider to the
Delaware Investments Family of Funds, the benefits from allocation of fund
brokerage to improve trading efficiencies and the use of "soft" commission
dollars to pay for proprietary and non-proprietary research. The Board did not
find that the level of profits realized by Delaware Investments from the
relationships with the Fund and the Delaware Investments Family of Funds
required negotiation of reduction of fees.
Economies of scale. The Trustees considered whether economies of scale are
realized by Delaware Investments as the Fund's assets increase and the extent to
which any economies of scale are reflected in the level of management fees
charged. The Trustees took into account the standardized advisory fee pricing
and structure approved by the Board and shareholders as part of a complex-wide
shareholder meeting conducted in 1998/1999. At that time, Delaware Investments
introduced breakpoints to account for management economies of scale. The Board
noted that the fee under the Fund's management contract fell within the standard
structure. Although the Fund has not reached a size at which it can take
advantage of breakpoints, the Board recognized that the fee was structured so
that when the Fund grows, economies of scale may be shared.
16
<page>
About the organization
This semiannual report is for the information of Delaware Small Cap Core Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware Small Cap Core Fund and the
Delaware Investments(R) 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 that 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
Jude T. Driscoll
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
Thomas L. Bennett
Private Investor
Rosemont, PA
John A. Fry
President
Franklin & Marshall College
Lancaster, PA
Anthony D. Knerr
Founder and Managing Director
Anthony Knerr & Associates
New York, NY
Lucinda S. Landreth
Former Chief Investment Officer
Assurant, Inc.
Philadelphia, PA
Ann R. Leven
Owner - ARL Associates,
Financial and Strategic Consultants
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, MN
J. Richard Zecher
Founder
Investor Analytics
Scottsdale, AZ
Affiliated officers
Michael P. Bishof
Senior Vice President and
Chief Financial Officer
Delaware Investments Family of Funds
Philadelphia, PA
David F. Connor
Vice President, Deputy General Counsel,
and Secretary
Delaware Investments Family of Funds
Philadelphia, PA
David P. O'Connor
Senior Vice President, General Counsel,
and Chief Legal Officer
Delaware Investments Family of Funds
Philadelphia, PA
John J. O'Connor
Senior Vice President and Treasurer
Delaware Investments Family of Funds
Philadelphia, PA
Contact information
Investment manager
Delaware Management Company, a series
of Delaware Management Business Trust
Philadelphia, PA
National distributor
Delaware Distributors, L.P.
Philadelphia, PA
Shareholder servicing, dividend disbursing, and transfer agent
Delaware Service Company, Inc.
2005 Market Street
Philadelphia, PA 19103-7094
For shareholders
800 523-1918
For securities dealers and financial institutions representatives only
800 362-7500
Web site
www.delawareinvestments.com
Delaware Investments is the marketing name of Delaware Management Holdings, Inc.
and its subsidiaries.
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 are 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, D.C.; information on the
operation of the Public Reference Room may be obtained by calling 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.
17
<page>
Simplify your life.
Manage your investments online!
Get Account Access, the Delaware Investments(R) secure Web site that allows you
to conduct your business online. Gain 24-hour access to your account and one of
the highest levels of Web security available. You also get:
o Hassle-free investing - Make online purchases and redemptions at any time.
o Simplified tax processing - Automatically retrieve your Delaware Investments
accounts' 1099 information and import it directly into your 1040 tax return.
Available only with Turbo Tax(R) Online(SM) and Desktop software -
www.turbotax.com.
o Less mail clutter - Get instant access to your fund materials online with
Delaware eDelivery.
Register for Account Access today! Visit www.delawareinvestments.com, select
Individual Investors, and click Account Access.
Please call our shareholder service center at 800 523-1918 Monday through Friday
from 8:00 a.m. to 7:00 p.m., Eastern Time, for assistance with any questions.
[Delaware Logo]
(567) Printed in the USA
SA-480 [5/06] CGI 7/06 SEMI-0606 SM CAP CORE PO11113
Semiannual Report Delaware
Small Cap Value Fund
May 31, 2006
Value equity mutual funds
[DELAWARE LOGO] [LOGO] POWERED BY RESEARCH (R)
Table of contents
> Disclosure of Fund expenses .............................................1
> Sector allocation .......................................................2
> Statement of net assets .................................................3
> Statement of operations .................................................6
> Statements of changes in net assets .....................................7
> Financial highlights ....................................................8
> Notes to financial statements ..........................................13
> Other Fund information .................................................17
> About the organization .................................................19
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) 2006 Delaware Distributors, L.P.
Disclosure of Fund expenses
For the period December 1, 2005 to May 31, 2006
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 December 1, 2005 to May 31, 2006.
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 for certain classes. The expenses shown in the table assume
reinvestment of all dividends and distributions.
Delaware Small Cap Value Fund
Expense Analysis of an Investment of $1,000
Expenses
Beginning Ending Paid During
Account Account Annualized Period
Value Value Expense 12/1/05 to
12/1/05 5/31/06 Ratio 5/31/06*
_________________________________________________________________________________
Actual Fund Return
Class A $1,000.00 $1,089.80 1.38% $ 7.19
Class B 1,000.00 1,085.50 2.10% 10.92
Class C 1,000.00 1,085.90 2.10% 10.92
Class R 1,000.00 1,088.50 1.60% 8.33
Institutional Class 1,000.00 1,091.30 1.10% 5.74
_________________________________________________________________________________
Hypothetical 5% Return (5% return before expenses)
Class A $1,000.00 $1,018.15 1.38% $ 6.94
Class B 1,000.00 1,014.56 2.10% 10.55
Class C 1,000.00 1,014.56 2.10% 10.55
Class R 1,000.00 1,017.05 1.60% 8.05
Institutional Class 1,000.00 1,019.55 1.10% 5.54
_________________________________________________________________________________
*Expenses are equal to the Fund's annualized expense ratio, multiplied by the
average account value over the period, multiplied by 182/365 (to reflect the
one-half year period).
1
Sector allocation
Delaware Small Cap Value Fund
As of May 31, 2006
Sector designations may be different than the sector designations presented in
other Fund materials.
Percentage
Sector of Net Assets
_________________________________________________________________________________
Common Stock 96.26%
Basic Industry 13.76%
Business Services 2.00%
Capital Spending 7.35%
Consumer Cyclical 1.34%
Consumer Services 11.57%
Consumer Staples 3.12%
Energy 7.31%
Financial Services 18.14%
Health Care 7.06%
Real Estate 4.67%
Technology 13.17%
Transportation 3.81%
Utilities 2.96%
_________________________________________________________________________________
Repurchase Agreements 4.40%
_________________________________________________________________________________
Securities Lending Collateral 20.05%
Fixed Rate Notes 5.41%
Variable Rate Notes 14.64%
_________________________________________________________________________________
Total Market Value of Securities 120.71%
_________________________________________________________________________________
Obligation to Return Securities Lending Collateral (20.05%)
_________________________________________________________________________________
Liabilities Net of Receivables and Other Assets (0.66%)
_________________________________________________________________________________
Total Net Assets 100.00%
_________________________________________________________________________________
2
Statement of net assets
Delaware Small Cap Value Fund
May 31, 2006 (Unaudited)
Number of Market
Shares Value
________________________________________________________________________________
Common Stock - 96.26%
________________________________________________________________________________
Basic Industry - 13.76%
Albemarle 129,000 $ 6,192,000
*+ Alpha Natural Resources 250,500 5,400,780
Arch Coal 115,200 5,569,920
* Bowater 215,800 4,993,612
+ Chaparral Steel 85,100 5,227,693
* Crane 167,600 6,734,168
+ Crown Holdings 390,100 6,292,313
FMC 104,500 6,747,565
* Fuller (H.B.) 126,300 6,093,975
* Georgia Gulf 249,600 8,044,608
+ Griffon 216,360 5,872,010
IPSCO 63,100 5,967,998
* MacDermid 235,900 7,341,208
+ Pactiv 166,500 4,107,555
*+ PolyOne 470,900 4,450,005
Spartech 212,700 4,883,592
* Texas Industries 86,700 4,245,699
Valspar 162,100 4,460,992
* Westlake Chemical 155,100 4,842,222
____________
107,467,915
____________
Business Services - 2.00%
Brink's 185,700 10,204,215
*+ United Stationers 115,859 5,378,175
____________
15,582,390
____________
Capital Spending - 7.35%
*+ Casella Waste Systems 345,700 5,392,920
* Gibraltar Industries 223,014 6,210,940
Harsco 111,800 9,058,036
+ Insituform Technologies Class A 124,400 3,184,640
* Kaydon 198,000 8,262,540
Mueller Industries 187,900 6,134,935
+ Mueller Water Products Class A 174,200 3,010,176
Wabtec 289,900 10,137,803
Walter Industries 103,900 6,042,824
____________
57,434,814
____________
Consumer Cyclical - 1.34%
Furniture Brands International 153,800 3,309,776
KB HOME 72,800 3,727,360
*+ WCI Communities 163,600 3,466,684
____________
10,503,820
____________
Consumer Services - 11.57%
+ AnnTaylor Stores 244,550 9,405,393
Applebee's International 189,300 3,827,646
Belo Class A 274,800 4,748,544
Borders Group 236,500 4,909,740
* Cato Class A 326,300 7,697,417
*+ CEC Entertainment 167,600 5,591,136
+ Dollar Tree Stores 245,000 6,475,350
* K Swiss 169,100 4,460,858
Kellwood 142,500 4,444,575
* Kenneth Cole Productions Class A 126,900 3,117,933
*+ Lenox Group 92,600 940,816
Meredith 105,000 5,255,250
* Stage Stores 156,700 5,100,585
* Thor Industries 152,500 7,332,200
* Tuesday Morning 233,900 3,758,773
* Wolverine World Wide 276,150 6,334,881
*+ Zale 298,300 7,004,084
____________
90,405,181
____________
Consumer Staples - 3.12%
American Greetings Class A 286,900 6,452,381
Bunge Limited 83,000 4,697,800
+ Constellation Brands 244,200 6,031,740
Del Monte Foods 607,200 7,189,248
____________
24,371,169
____________
Energy - 7.31%
*+ Energy Partners 308,300 6,535,960
+ Grey Wolf 832,600 6,369,390
+ Newfield Exploration 115,100 4,918,223
* Southwest Gas 195,600 5,693,916
Tesoro 54,800 3,732,428
TODCO 118,800 5,247,396
+ W-H Energy Services 287,900 16,220,286
*+ Whiting Petroleum 220,800 8,357,280
____________
57,074,879
____________
Financial Services - 18.14%
* AmerUs Group 151,800 8,825,652
Bank of Hawaii 182,800 9,273,444
* BankUnited Financial Class A 291,600 9,045,432
Berkley (W.R.) 304,500 10,465,665
* Boston Private Financial Holdings 258,200 7,746,000
Colonial BancGroup 479,100 12,772,806
Compass Bancshares 75,700 4,212,705
* First Midwest Bancorp 121,400 4,268,424
* First Republic Bank 230,400 9,681,408
* Greater Bay Bancorp 274,000 8,167,940
* Harleysville Group 153,800 4,258,722
* Independent Bank 87,300 2,778,759
* Infinity Property & Casualty 143,500 6,115,970
* MAF Bancorp 150,000 6,493,500
* NBT Bancorp 135,200 2,981,160
Platinum Underwriters Holdings 237,100 6,387,474
* Provident Bankshares 233,000 8,220,240
* Republic Bancorp 404,836 4,400,567
* Sterling Financial 229,868 6,905,235
*+ Triad Guaranty 160,900 8,709,517
____________
141,710,620
____________
Health Care - 7.06%
* Arrow International 188,700 6,083,688
+ Community Health Systems 164,500 6,201,650
* Owens & Minor 223,600 6,640,920
+ Par Pharmaceuticals 142,000 3,258,900
+ Pediatrix Medical Group 168,400 7,778,396
*+ PRA International 204,900 5,136,843
Service Corp International 753,900 6,023,661
* STERIS 267,100 6,076,525
Universal Health Services Class B 156,700 7,954,092
____________
55,154,675
____________
(continues) 3
Statement of net assets
Delaware Small Cap Value Fund
Number of Market
Shares Value
________________________________________________________________________________
Common Stock (continued)
________________________________________________________________________________
Real Estate - 4.67%
* Ashford Hospitality Trust 375,000 $ 4,481,250
Brandywine Realty Trust 318,937 9,255,552
Camden Property Trust 108,600 7,754,040
* Education Realty Trust 184,900 2,607,090
* Highland Hospitality 413,400 5,002,140
* Reckson Associates Realty 192,000 7,380,480
____________
36,480,552
____________
Technology - 13.17%
Acxiom 321,400 7,578,612
+ BEA Systems 796,200 10,796,472
*+ Bell Microproducts 387,000 2,337,480
+ Brocade Communications Systems 1,777,600 10,861,136
*+ Checkpoint Systems 265,600 5,999,904
*+ CommScope 291,200 8,511,776
*+ Emulex 423,200 7,499,104
*+ Entegris 454,800 4,402,464
+ Ingram Micro Class A 397,800 6,866,028
+ Insight Enterprises 322,500 5,850,150
+ International Rectifier 123,400 5,497,470
+ NETGEAR 158,800 3,717,508
* QAD 209,400 1,474,176
Symbol Technologies 321,400 3,815,018
*+ Synnex 210,800 3,781,752
+ Synopsys 310,100 6,335,343
* Technitrol 329,700 7,523,754
____________
102,848,147
____________
Transportation - 3.81%
* Alexander & Baldwin 192,200 8,697,050
*+ Kirby 139,800 10,503,174
*+ SCS Transportation 88,000 2,153,360
SkyWest 197,400 4,585,602
*+ YRC Worldwide 97,800 3,857,232
____________
29,796,418
____________
Utilities - 2.96%
Black Hills 110,100 3,724,683
+ El Paso Electric 275,600 5,313,568
* FairPoint Communications 227,200 3,062,656
* Otter Tail 181,700 4,740,553
* PNM Resources 247,000 6,241,690
____________
23,083,150
____________
Total Common Stock (cost $569,631,749) 751,913,730
____________
Principal
Amount
________________________________________________________________________________
Repurchase Agreements - 4.40%
________________________________________________________________________________
With BNP Paribas 4.88% 6/1/06
(dated 5/31/06, to be repurchased
at $21,613,929, collateralized by
$8,073,000 U.S. Treasury Notes
2.375% due 8/31/06, market
value $8,069,506, $6,257,000
U.S. Treasury Notes 2.75% due
7/31/06, market value $6,291,566,
$4,789,000 U.S. Treasury Notes
2.875% due 11/30/06, market
value $4,737,915 and $2,764,000
U.S. Treasury Notes 6.50% due
2/15/10, market value $2,957,467) $21,611,000 21,611,000
With Cantor Fitzgerald 4.88% 6/1/06
(dated 5/31/06, to be repurchased
at $12,755,729, collateralized by
$5,545,000 U.S. Treasury Notes
2.50% due 9/30/06, market
value $5,525,560, $5,545,000
U.S. Treasury Notes 3.50% due
11/15/06, market value $5,518,839
and $1,878,000 U.S. Treasury
Notes 6.00% due 8/15/09, market
value $1,967,572) 12,754,000 12,754,000
____________
Total Repurchase Agreements
(cost $34,365,000) 34,365,000
____________
Total Market Value of Securities Before
Securities Lending Collateral - 100.66%
(cost $603,996,749) 786,278,730
____________
4
Principal Market
Amount Value
________________________________________________________________________________
Securities Lending Collateral** - 20.05%
________________________________________________________________________________
Short-Term Investments
Fixed Rate Notes - 5.41%
Calyon 5.05% 6/19/06 $ 5,240,883 $ 5,240,883
Citigroup Global Markets
5.10% 6/1/06 24,540,991 24,540,991
Deutsche Bank London
5.00% 6/29/06 6,047,172 6,047,172
Washington Mutual Grand
5.00% 6/30/06 6,450,317 6,450,317
____________
42,279,363
____________
~ Variable Rate Notes - 14.64%
American Honda Finance
5.07% 2/21/07 3,628,303 3,628,303
ANZ National 5.05% 7/2/07 806,290 806,290
Australia New Zealand 5.06% 7/2/07 4,031,448 4,031,448
Bank of America 5.07% 2/23/07 5,240,883 5,240,883
Bank of New York 5.07% 7/2/07 3,225,159 3,225,159
Barclays 5.06% 5/18/07 5,240,883 5,240,883
Bayerische Landesbank 5.10% 8/25/06 4,031,448 4,031,448
Bear Stearns 5.13% 11/30/06 4,837,738 4,837,738
BNP Paribas 5.14% 7/2/07 4,031,448 4,031,448
Canadian Imperial Bank 5.06% 7/2/07 2,015,724 2,015,724
Canadian Imperial Bank
5.07% 11/22/06 4,031,448 4,031,448
CDC Financial Products
5.16% 6/30/06 5,240,883 5,240,883
Citigroup Global Markets
5.13% 6/7/06 5,240,883 5,240,883
Commonwealth Bank 5.05% 7/2/07 4,031,448 4,031,448
Goldman Sachs 5.20% 5/31/07 5,240,883 5,240,883
Manufacturers & Traders
5.07% 9/26/06 4,031,432 4,031,115
Marshall & Ilsley Bank 5.06% 7/2/07 4,434,593 4,434,593
Merrill Lynch Mortgage Capital
5.16% 6/7/06 3,628,303 3,628,303
Morgan Stanley 5.24% 5/31/07 4,998,996 4,998,996
National Australia Bank 5.04% 3/7/07 4,998,996 4,998,996
National City Bank 5.07% 3/2/07 4,838,188 4,839,545
National Rural Utilities 5.07% 7/2/07 6,369,688 6,369,688
Nordea Bank New York 5.06% 5/16/07 2,015,720 2,015,623
Nordea Bank Norge 5.06% 7/2/07 4,031,448 4,031,448
Royal Bank of Scotland 5.07% 7/2/07 4,031,448 4,031,448
Societe Generale 4.99% 7/2/07 2,015,724 2,015,724
Toyota Motor Credit 5.05% 6/23/06 4,031,457 4,031,478
Wells Fargo 5.07% 7/2/07 4,031,448 4,031,448
____________
114,333,274
____________
Total Securities Lending Collateral
(cost $156,612,637) 156,612,637
____________
Total Market Value of Securities - 120.71%
(cost $760,609,386) $942,891,367!
Obligation to Return Securities Lending
Collateral - (20.05%)** (156,612,637)
Liabilities Net of Receivables and
Other Assets - (0.66%) (5,163,932)
____________
Net Assets Applicable to 20,326,115 Shares
Outstanding - 100.00% $781,114,798
____________
Net Asset Value - Delaware Small Cap Value Fund
Class A ($476,421,932 / 12,111,883 Shares) $39.34
______
Net Asset Value - Delaware Small Cap Value Fund
Class B ($105,867,203 / 2,895,743 Shares) $36.56
______
Net Asset Value - Delaware Small Cap Value Fund
Class C ($146,112,289 / 3,998,154 Shares) $36.54
______
Net Asset Value - Delaware Small Cap Value Fund
Class R ($17,022,636 / 436,549 Shares) $38.99
______
Net Asset Value - Delaware Small Cap Value Fund
Institutional Class ($35,690,738 / 883,786 Shares) $40.38
______
Components of Net Assets at May 31, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $572,345,016
Accumulated net realized gain on investments 26,487,801
Net unrealized appreciation of investments 182,281,981
____________
Total net assets $781,114,798
____________
+ Non-income producing security for the period ended May 31, 2006.
* Fully or partially on loan.
~ Variable rate security. The interest rate shown is the rate at the time of
purchase.
** See Note 7 in "Notes to Financial Statements."
! Includes $154,770,586 of securities loaned.
Net Asset Value and Offering Price per Share -
Delaware Small Cap Value Fund
Net asset value Class A (A) $39.34
Sales charge (5.75% of offering price) (B) 2.40
______
Offering price $41.74
______
(A) Net asset value per share, as illustrated, is the 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
5
Statement of operations
Delaware Small Cap Value Fund
Six Months Ended May 31, 2006 (Unaudited)
Investment Income:
Dividends $3,025,032
Interest 874,547
Securities lending income 103,595
Foreign tax withheld (2,685) $4,000,489
__________ ___________
Expenses:
Management fees 2,779,498
Distribution expenses - Class A 690,472
Distribution expenses - Class B 553,763
Distribution expenses - Class C 697,621
Distribution expenses - Class R 42,412
Dividend disbursing and transfer agent fees and expenses 1,038,320
Accounting and administration expenses 151,705
Reports and statements to shareholders 52,087
Registration fees 60,046
Legal and professional fees 43,147
Insurance fees 12,559
Trustees' fees 21,937
Custodian fees 12,537
Pricing fees 463
Other 9,610 6,166,177
__________
Less waiver of distribution expenses - Class A (43,610)
Less waiver of distribution expenses - Class R (7,069)
Less expense paid indirectly (2,309)
___________
Total expenses 6,113,189
___________
Net Investment Loss (2,112,700)
___________
Net Realized and Unrealized Gain on Investments and Foreign Currencies:
Net realized gain (loss) on:
Investments 28,697,245
Foreign currencies (185)
___________
Net realized gain 28,697,060
Net change in unrealized appreciation/depreciation of investments 35,170,134
___________
Net Realized and Unrealized Gain on Investments 63,867,194
___________
Net Increase in Net Assets Resulting from Operations $61,754,494
___________
See accompanying notes
6
Statements of changes in net assets
Delaware Small Cap Value Fund
Six Months Year
Ended Ended
5/31/06 11/30/05
(Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment loss $(2,112,700) $(2,407,279)
Net realized gain on investments 28,697,060 57,318,859
Net change in unrealized appreciation/depreciation of investments 35,170,134 5,620,978
___________ ___________
Net increase in net assets resulting from operations 61,754,494 60,532,558
___________ ___________
Dividends and Distributions to Shareholders from:
Net realized gain on investments:
Class A (32,435,486) (31,763,824)
Class B (8,947,128) (13,514,764)
Class C (10,292,652) (8,240,031)
Class R (868,000) (548,342)
Institutional Class (2,443,227) (2,698,187)
___________ ___________
(54,986,493) (56,765,148)
___________ ___________
Capital Share Transactions:
Proceeds from shares sold:
Class A 87,374,986 169,715,275
Class B 4,982,660 14,236,482
Class C 28,942,526 63,480,297
Class R 7,262,230 8,843,862
Institutional Class 5,683,929 14,240,093
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 30,498,053 29,903,497
Class B 8,309,204 12,427,282
Class C 9,675,322 7,549,508
Class R 865,472 548,342
Institutional Class 2,425,287 2,698,187
___________ ___________
186,019,669 323,642,825
___________ ___________
Cost of shares repurchased:
Class A (56,367,566) (65,214,888)
Class B (18,350,663) (24,899,314)
Class C (13,111,521) (18,127,279)
Class R (1,838,970) (3,578,256)
Institutional Class (3,714,858) (10,142,609)
___________ ___________
(93,383,578) (121,962,346)
___________ ___________
Increase in net assets derived from capital share transactions 92,636,091 201,680,479
___________ ___________
Net Increase in Net Assets 99,404,092 205,447,889
Net Assets:
Beginning of period 681,710,706 476,262,817
____________ ____________
End of period (there was no undistributed net investment income at either
period end) $781,114,798 $681,710,706
____________ ____________
See accompanying notes
7
Financial highlights
Delaware Small Cap Value Fund Class A
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended
Ended ________________________________________________________
5/31/06(1) 11/30/05 11/30/04 11/30/03 11/30/02 11/30/01
(Unaudited)
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $ 39.110 $ 39.640 $ 35.220 $ 27.120 $ 29.350 $ 25.980
Income (loss) from investment operations:
Net investment income (loss)(2) (0.064) (0.075) (0.105) (0.136) (0.060) 0.059
Net realized and unrealized gain on investments 3.347 4.170 6.879 9.079 0.574 4.429
_______ _______ _______ _______ _______ _______
Total from investment operations 3.283 4.095 6.774 8.943 0.514 4.488
_______ _______ _______ _______ _______ _______
Less dividends and distributions:
From net investment income - - - - - (0.026)
From net realized gain on investments (3.053) (4.625) (2.354) (0.843) (2.744) (1.047)
In excess of net realized gain on investments - - - - - (0.045)
_______ _______ _______ _______ _______ _______
Total dividends and distributions (3.053) (4.625) (2.354) (0.843) (2.744) (1.118)
_______ _______ _______ _______ _______ _______
Net asset value, end of period $ 39.340 $ 39.110 $ 39.640 $ 35.220 $ 27.120 $ 29.350
_______ _______ _______ _______ _______ _______
Total return(3) 8.98% 11.42% 20.52% 34.17% 1.60% 17.66%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 476,422 $409,567 $270,332 $ 240,322 $180,696 $182,925
Ratio of expenses to average net assets 1.38% 1.44% 1.54% 1.63% 1.63% 1.58%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.40% 1.44% 1.54% 1.63% 1.63% 1.58%
Ratio of net investment income (loss) to average net assets (0.33%) (0.20%) (0.30%) (0.47%) (0.21%) 0.21%
Ratio of net investment income (loss) to average net assets
prior to expense limitation and expenses paid indirectly (0.35%) (0.20%) (0.30%) (0.47%) (0.21%) 0.21%
Portfolio turnover 31% 33% 35% 42% 47% 72%
____________________________________________________________________________________________________________________________________
(1) 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 waivers and payment of fees by the distributor, as applicable. Performance would have been lower had the expense
limitation not been in effect.
See accompanying notes
8
Delaware Small Cap Value Fund Class B
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended
Ended ________________________________________________________
5/31/06(1) 11/30/05 11/30/04 11/30/03 11/30/02 11/30/01
(Unaudited)
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $36.690 $37.690 $33.820 $ 26.260 $28.680 $ 25.520
Income (loss) from investment operations:
Net investment loss(2) (0.191) (0.311) (0.334) (0.327) (0.252) (0.138)
Net realized and unrealized gain on investments 3.114 3.936 6.558 8.730 0.576 4.345
_______ _______ _______ _______ _______ _______
Total from investment operations 2.923 3.625 6.224 8.403 0.324 4.207
_______ _______ _______ _______ _______ _______
Less dividends and distributions from:
Net realized gain on investments (3.053) (4.625) (2.354) (0.843) (2.744) (1.047)
_______ _______ _______ _______ _______ _______
Total dividends and distributions (3.053) (4.625) (2.354) (0.843) (2.744) (1.047)
_______ _______ _______ _______ _______ _______
Net asset value, end of period $36.560 $36.690 $37.690 $ 33.820 $26.260 $ 28.680
_______ _______ _______ _______ _______ _______
Total return(3) 8.55% 10.68% 19.69% 33.21% 0.91% 16.83%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $105,867 $110,684 $111,348 $107,136 $86,641 $ 83,648
Ratio of expenses to average net assets 2.10% 2.14% 2.24% 2.33% 2.33% 2.28%
Ratio of net investment loss to average net assets (1.05%) (0.90%) (1.00%) (1.17%) (0.91%) (0.49%)
Portfolio turnover 31% 33% 35% 42% 47% 72%
____________________________________________________________________________________________________________________________________
(1) 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.
See accompanying notes
(continues) 9
Financial highlights
Delaware Small Cap Value Fund Class C
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended
Ended ________________________________________________________
5/31/06(1) 11/30/05 11/30/04 11/30/03 11/30/02 11/30/01
(Unaudited)
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $36.670 $37.680 $33.810 $26.250 $28.670 $25.510
Income (loss) from investment operations:
Net investment loss(2) (0.190) (0.313) (0.333) (0.326) (0.251) (0.135)
Net realized and unrealized gain on investments 3.113 3.928 6.557 8.729 0.575 4.342
_______ _______ _______ _______ _______ _______
Total from investment operations 2.923 3.615 6.224 8.403 0.324 4.207
_______ _______ _______ _______ _______ _______
Less dividends and distributions from:
Net realized gain on investments (3.053) (4.625) (2.354) (0.843) (2.744) (1.047)
_______ _______ _______ _______ _______ _______
Total dividends and distributions (3.053) (4.625) (2.354) (0.843) (2.744) (1.047)
_______ _______ _______ _______ _______ _______
Net asset value, end of period $36.540 $ 36.670 $37.680 $33.810 $26.250 $28.670
_______ _______ _______ _______ _______ _______
Total return(3) 8.59% 10.65% 19.69% 33.22% 0.91% 16.88%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $146,112 $119,968 $66,313 $48,453 $34,140 $31,823
Ratio of expenses to average net assets 2.10% 2.14% 2.24% 2.33% 2.33% 2.28%
Ratio of net investment loss to average net assets (1.05%) (0.90%) (1.00%) (1.17%) (0.91%) (0.49%)
Portfolio turnover 31% 33% 35% 42% 47% 72%
____________________________________________________________________________________________________________________________________
(1) 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.
See accompanying notes
10
Delaware Small Cap Value Fund Class R
Selected data for each share of the Fund outstanding throughout each period
were as follows:
Six Months
Ended Year Ended 6/2/03(2)
5/31/06(1) ___________________ to
(Unaudited) 11/30/05 11/30/04 11/30/03
_______________________________________________________________________________________________________________________
Net asset value, beginning of period $38.840 $39.480 $35.190 $29.000
Income (loss) from investment operations:
Net investment loss(3) (0.106) (0.169) (0.209) (0.160)
Net realized and unrealized gain on investments 3.309 4.154 6.853 6.350
_______ _______ _______ _______
Total from investment operations 3.203 3.985 6.644 6.190
_______ _______ _______ _______
Less dividends and distributions from:
Net realized gain on investments (3.053) (4.625) (2.354) -
_______ _______ _______ _______
Total dividends and distributions (3.053) (4.625) (2.354) -
_______ _______ _______ _______
Net asset value, end of period $38.990 $38.840 $39.480 $35.190
_______ _______ _______ _______
Total return(4) 8.85% 11.15% 20.15% 21.35%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $17,023 $10,574 $4,539 $1,740
Ratio of expenses to average net assets 1.60% 1.70% 1.84% 1.97%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.70% 1.74% 1.84% 1.97%
Ratio of net investment loss to average net assets (0.55%) (0.46%) (0.60%) (0.97%)
Ratio of net investment loss to average net assets prior to expense
limitation and expenses paid indirectly (0.65%) (0.50%) (0.60%) (0.97%)
Portfolio turnover 31% 33% 35% 42%
_______________________________________________________________________________________________________________________
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized.
(2) Date of commencement of operations, ratios have been annualized and total return has not been annualized.
(3) The average shares outstanding method has been applied for per share information.
(4) 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 waivers and payment of fees by the distributor,
as applicable. Performance would have been lower had the expense limitation not been in effect.
See accompanying notes
(continues) 11
Financial highlights
Delaware Small Cap Value Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Six Months Year Ended
Ended ________________________________________________________
5/31/06(1) 11/30/05 11/30/04 11/30/03 11/30/02 11/30/01
(Unaudited)
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $40.020 $40.350 $35.700 $27.400 $29.540 $26.130
Income (loss) from investment operations:
Net investment income (loss)(2) (0.001) 0.036 - (0.050) 0.026 0.144
Net realized and unrealized gain on investments 3.414 4.259 7.004 9.193 0.578 4.458
_______ _______ _______ _______ _______ _______
Total from investment operations 3.413 4.295 7.004 9.143 0.604 4.602
_______ _______ _______ _______ _______ _______
Less dividends and distributions:
From net investment income - - - - - (0.100)
From net realized gain on investments (3.053) (4.625) (2.354) (0.843) (2.744) (1.047)
In excess of net realized gain on investments - - - - - (0.045)
_______ _______ _______ _______ _______ _______
Total dividends and distributions (3.053) (4.625) (2.354) (0.843) (2.744) (1.192)
_______ _______ _______ _______ _______ _______
Net asset value, end of period $40.380 $40.020 $40.350 $35.700 $27.400 $29.540
_______ _______ _______ _______ _______ _______
Total return(3) 9.13% 11.77% 20.88% 34.57% 1.88% 18.09%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $35,691 $30,918 $23,731 $33,387 $19,459 $18,224
Ratio of expenses to average net assets 1.10% 1.14% 1.24% 1.33% 1.33% 1.28%
Ratio of net investment income (loss) to average net assets (0.05%) 0.10% - (0.17%) 0.09% 0.51%
Portfolio turnover 31% 33% 35% 42% 47% 72%
____________________________________________________________________________________________________________________________________
(1) 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.
See accompanying notes
12
Notes to financial statements
Delaware Smalll Cap Value Fund
May 31, 2006 (Unaudited)
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, and Delaware Small Cap Value 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 the 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. Securities Lending collateral is 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.
Repurchase Agreements - The Fund may invest in a pooled cash account along
with other members of the Delaware Investments Family of Funds pursuant to an
exemptive order issued by the Securities and Exchange Commission. 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) for financial reporting purposes. 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 distributions by the issuer. The Fund declares
and pays dividends from net investment income and distributions from net
realized gains on investments, if any, annually.
Subject to seeking best execution, the Fund may direct certain security trades
to brokers who have agreed to rebate a portion of the related brokerage
commission to the Fund in cash. Such commission rebates are included in
realized gain on investments in the accompanying financial statements and
totaled $21,794 for the six months ended May 31, 2006. In general, best
execution refers to many factors, including the price paid or received for a
security, the commission charged, the promptness and reliability of execution,
the confidentiality and placement accorded the order, and other factors
affecting the overall benefit obtained by the Fund on the transaction.
The Fund receives earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. The expense
paid under the above arrangement is included in custodian fees on the Statement
of Operations with the corresponding expense offset shown as "expense paid
indirectly."
(continues) 13
Notes to financial statements
Delaware Small Cap Value Fund
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 computed at the annual rate of 0.04% of the Fund's average
daily net assets for accounting and administration services. The Fund pays DSC
a monthly fee based on the number of shareholder accounts for dividend and
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. Institutional Class shares pay no distribution and service expenses.
Effective March 27, 2006, DDLP has contracted to limit distribution and service
fees through March 31, 2007 for Class A shares from exceeding 0.25% of average
daily net assets. DDLP has contracted to waive distribution and service fees
through March 31, 2007, in order to prevent distribution and service fees of
Class R shares from exceeding 0.50% of average daily net assets.
At May 31, 2006, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $495,813
Dividend disbursing, transfer agent, accounting
and administration fees and other
expenses payable to DSC 204,008
Distribution fee payable to DDLP 329,843
Other expenses payable to DMC and affiliates* 57,718
*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, including internal legal services provided to the Fund
by DMC employees. For the six months ended May 31, 2006, the Fund was charged
$16,012 for internal legal services provided by DMC.
For the six months ended May 31, 2006, DDLP earned $57,382 for commissions on
sales of the Fund's Class A shares. For the six months ended May 31, 2006, DDLP
received gross contingent deferred sales charge commissions of $337, $45,835
and $12,579 on redemption of the Fund's Class A, Class B, and Class C shares,
respectively, and these commissions were entirely used to offset up-front
commissions previously paid by DDLP to broker-dealers on sales of those
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 six months ended May 31, 2006, the Fund made purchases of $152,027,508
and sales of $112,580,608 of investment securities other than short-term
investments.
At May 31, 2006, the cost of investments for federal income tax purposes has
been estimated since the final tax characteristics cannot be determined until
fiscal year end. At May 31, 2006, the cost of investments was $760,700,537. At
May 31, 2006, the net unrealized appreciation was $182,190,830 of which
$197,007,060 related to unrealized appreciation of investments and $14,816,230
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. Additionally, net short term gains on sales of
investment securities are treated as ordinary income for federal income tax
purposes. The tax character of dividends and distributions paid during the six
months ended May 31, 2006 and the year ended November 30, 2005 were as
follows:
Six Months Year
Ended Ended
5/31/06* 11/30/05
__________ ________
Ordinary Income $ 5,982,465 $12,396,508
Long-term capital gain 49,004,028 44,368,640
___________ ___________
Total $54,986,493 $56,765,148
___________ ___________
*Tax information for the period ended May 31, 2006 is an estimate and the tax
character of dividends and distributions may be redesignated at fiscal year
end.
The components of net assets are estimated since final tax characteristics
cannot be determined until fiscal year end. As of May 31, 2006, the estimated
components of net assets on a tax basis were as follows:
Shares of beneficial interest $572,345,016
Undistributed ordinary income 7,205,209
Undistributed long-term capital gains 19,373,743
Unrealized appreciation/depreciation of
investments and foreign currencies 182,190,830
____________
Net assets $781,114,798
____________
The differences between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales. The
undistributed earnings for Delaware Small Cap Value Fund are estimated pending
final notification of the tax character of distributions received from
investments in REITs.
For financial reporting purposes, capital accounts are adjusted to reflect the
tax character of permanent book/tax differences. Reclassifications are
primarily due to tax treatment of net operating losses. Results of operations
and net assets were not affected by these reclassifications. For the six months
ended May 31, 2006, the Fund recorded an estimate of these differences since
the final tax characteristics cannot be determined until fiscal year end.
Accumulated net investment loss $ 2,112,700
Accumulated net realized gain (2,112,700)
5. Capital Shares
Transactions in capital shares were as follows:
Six Months Year
Ended Ended
5/31/06 11/30/05
Shares sold:
Class A 2,252,079 4,580,248
Class B 138,164 410,074
Class C 804,757 1,810,137
Class R 188,269 238,720
Institutional Class 142,243 375,009
Shares issued upon reinvestment of
dividends and distributions:
Class A 832,528 835,591
Class B 243,243 367,867
Class C 283,381 223,532
Class R 23,806 15,416
Institutional Class 64,569 73,902
_________ _________
4,973,039 8,930,496
_________ _________
Shares repurchased:
Class A (1,444,061) (1,764,729)
Class B (502,669) (715,069)
Class C (361,343) (522,361)
Class R (47,784) (96,840)
Institutional Class (95,533) (264,582)
_________ _________
(2,451,390) (3,363,581)
_________ _________
Net increase (decrease) 2,521,649 5,566,915
_________ _________
For the six months ended May 31, 2006, and the year ended November 30, 2005,
177,173 Class B shares were converted to 165,378 Class A shares valued at
$6,499,780 and 116,955 Class B shares were converted to 110,188 Class A shares
valued at $4,191,667, 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 $225,000,000 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 May 31, 2006, or at
any time during the period.
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 & Poor's 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 changes 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 May 31, 2006, the market value of the securities on loan was
$154,770,586, 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."
(continues) 15
Notes to financial statements
Delaware Small Cap Value Fund
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. 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. There were no direct
holdings during the six months ended May 31, 2006.
The Fund may invest up to 10% of its total assets in illiquid securities,
which may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of 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.
While maintaining oversight, the Fund's Board of Trustees has delegated to DMC
the day-to-day functions of determining whether individual securities are liquid
for purposes of the Fund's limitation on investments in illiquid assets. At
May 31, 2006, there were no Rule 144A securities and no securities have been
determined to be illiquid under the Fund's Liquidity Procedures.
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.
16
Other Fund information
Delaware Small Cap Value Fund
Board Consideration of Delaware Small Cap Value Investment Advisory Agreement
At a meeting held on May 17-18, 2006 (the "Annual Meeting"), the Board of
Trustees, including a majority of disinterested or independent Trustees,
approved the renewal of the Investment Advisory Agreement for the Delaware
Small Cap Value Fund (the "Fund"). In making its decision, the Board considered
information furnished throughout the year at regular Board meetings, as well as
information prepared specifically in connection with the Annual Meeting.
Information furnished and discussed throughout the year included reports
detailing Fund performance, investment strategies, expenses, compliance matters
and other services provided by Delaware Management Company ("DMC"), the
investment advisor. Information furnished specifically in connection with the
Annual Meeting included materials provided by DMC and its affiliates ("Delaware
Investments") concerning, among other things, the level of services provided to
the Fund, the costs of such services to the Fund, economies of scale and the
financial condition and profitability of Delaware Investments. In addition, in
connection with the Annual Meeting, the Board considered independent historical
and comparative reports prepared by Lipper Inc. ("Lipper"), an independent
statistical compilation organization. The Board also considered industry
comparative information presented by representatives from Lipper. The Lipper
reports compared the Fund's investment performance and expenses with those of
other comparable mutual funds. The Board also received certain supplemental
information regarding management's policy with respect to advisory fee levels
and its philosophy with respect to breakpoints; the structure of portfolio
manager compensation; and any constraints or limitations on the availability of
securities in certain investment styles which might inhibit DMC's ability to
fully invest in accordance with Fund policies.
In considering such materials, the independent Trustees received assistance and
advice from and met separately with independent counsel and representatives from
Lipper. At the meeting with representatives from Lipper, Mr. Driscoll, Chairman
of the Delaware Investments(R) Family of Funds, and Chairman and Chief Executive
Officer of the investment advisor, was present to respond to questions by Lipper
and the independent Trustees. While the Board considered the Investment Advisory
Agreements for all of the funds in the Delaware Investments Family of Funds at
the same Board meeting, information was provided and considered by the Board for
each fund individually. In approving the continuance of the Investment Advisory
Agreement for the Fund, the Board, including a majority of independent Trustees,
determined that the existing advisory fee structure was fair and reasonable and
that the continuance of the Investment Advisory Agreement was in the best
interests of the Fund and its shareholders. While attention was given to all
information furnished, the following discusses the primary factors relevant to
the Board's deliberations and determination, including those relating to the
selection of the investment advisor and the approval of the advisory fee.
Nature, Extent And Quality Of Service. Consideration was given to the services
provided by Delaware Investments to the Fund and its shareholders. In reviewing
the nature, extent and quality of services, the Board emphasized reports
furnished to it throughout the year at regular Board meetings covering matters
such as the relative performance of the Fund, compliance of portfolio managers
with the investment policies, strategies and restrictions for the Fund, the
compliance of management personnel with the Code of Ethics adopted throughout
the Delaware Investments Family of Funds complex, the adherence to fair value
pricing procedures as established by the Board, and the accuracy of net asset
value calculations. The Board noted that it was pleased with the current
staffing of the Fund's investment advisor and management's efforts to
strengthen and deepen portfolio management teams during the past year, the
emphasis on research and the compensation system for advisory personnel.
Favorable consideration was given to DMC's efforts to maintain, and in some
instances increase, financial and human resources committed to fund matters.
Other factors taken into account by the Board were Delaware Investments'
preparedness for, and response to, legal and regulatory matters. The Board also
considered the transfer agent and shareholder services provided to Fund
shareholders by Delaware Investments' affiliate, Delaware Service Company,
Inc., noting DSC's commitment to maintain a high level of service in keeping
with its past receipt of the DALBAR Pyramid Award, and the continuing
expenditures by Delaware Investments to improve the delivery of shareholder
services. Additionally, the Board noted the extent of benefits provided to Fund
shareholders for being part of the Delaware Investments Family of Funds,
including the privilege to exchange investments between the same class of
shares of funds without a sales charge, the ability to reinvest Fund dividends
into other funds and the privilege to combine holdings in other funds to obtain
a reduced sales charge. The Board was satisfied with the nature, extent and
quality of the overall services provided by Delaware Investments.
Investment Performance. The Board considered the investment performance of DMC
and the Fund. The Board was pleased with DMC's investment performance. The
Board placed significant emphasis on the investment performance of the Fund in
view of its importance to shareholders. While consideration was given to
performance reports and discussions with portfolio managers at Board meetings
throughout the year, particular weight was given to the Lipper reports
furnished for the Annual Meeting. The Lipper reports prepared for the Fund
showed the investment performance of its Class A shares in comparison to a
group of similar funds as selected by Lipper (the "Performance Universe"). A
fund with the best performance is ranked first, and a fund with the poorest
performance is ranked last. The highest/best performing 25% of funds in the
Performance Universe make up the first quartile; the next 25% - the second
quartile; the next 25% - the third quartile; and the poorest/worst performing
25% of funds in the Performance Universe make up the fourth quartile.
Comparative annualized performance for the Fund was shown for the past one,
three, five and 10-year periods ended January 31, 2006. The Board noted its
objective that the Fund's performance be at or above the median of its
Performance Universe. The following paragraph summarizes the performance
results for the Fund and the Board's view of such performance.
The Performance Universe for the Fund consisted of the Fund and all retail and
institutional small cap value funds as selected by Lipper. The Lipper report
comparison showed that the Fund's total return for the one year period was in
the first quartile of such Performance Universe. The report further showed that
the Fund's total return for the three, five and 10 year periods was in the
second quartile. The Board was satisfied with such performance.
(continues) 17
Other Fund information
Delaware Small Cap Value Fund
Board Consideration of Delaware Small Cap Value Fund Investment Advisory
Agreement (continued)
Comparative Expenses. The Board considered expense data for the Delaware
Investments Family of Funds. Management provided the Board with information on
pricing levels and fee structures for the Funds. The Board focused particularly
on the comparative analysis of the management fees and total expense ratios of
the Fund and the management fees and expense ratios of a group of similar funds
as selected by Lipper (the "Expense Group"). In reviewing comparative costs,
the Fund's contractual management fee and the actual management fee incurred by
the Fund were compared with the contractual management fees (assuming all funds
in the Expense Group were similar in size to the Fund) and actual management
fees (as reported by each fund) of other funds within the Expense Group, taking
into effect any applicable breakpoints and fee waivers. The Fund's total
expenses were also compared with those of its Expense Group. The Lipper total
expenses, for comparative consistency, were shown by Lipper for Class A shares
and compared total expenses including 12b-1 and non-12b-1 service fees. The
Board also considered fees paid to Delaware Investments for non-management
services. The Board noted its objective to limit the Fund's total expense ratio
to an acceptable range as compared to the median of the Expense Group. The
following paragraph summarizes the expense results for the Fund and the Board's
view of such expenses.
The expense comparisons for the Fund showed that its actual management fee was
in the quartile with the lowest expenses of its Expense Group and its total
expenses were in the quartile with the highest expenses of its Expense Group.
The Board gave favorable consideration to the Fund's management fee, but noted
that the Fund's total expenses were not in line with the Board's stated
objective. In evaluating the total expenses, the Board considered recent
initiatives implemented by management, such as the outsourcing of certain
transfer agency services, creating an opportunity for a reduction in expenses.
The Board was satisfied with management's efforts to improve the Fund's total
expense ratio and bring it in line with the Board's objective.
Management Profitability. The Board considered the level of profits, if any,
realized by Delaware Investments in connection with the operation of the Fund.
In this respect, the Board reviewed the Investment Management Profitability
Analysis that addressed the overall profitability of Delaware Investments'
business in providing management and other services to each of the individual
funds and the Delaware Investments(R) Family of Funds as a whole. Specific
attention was given to the methodology followed in allocating costs for the
purpose of determining profitability. Management stated that the level of
profits of Delaware Investments, to a certain extent, reflected operational cost
savings and efficiencies initiated by Delaware Investments. The Board considered
Delaware Investments' expenditures to improve services provided to fund
shareholders and to meet additional regulatory and compliance requirements
resulting from recent SEC initiatives. The Board also considered the extent to
which Delaware Investments might derive ancillary benefits from fund operations,
including the potential for procuring additional business as a result of the
prestige and visibility associated with its role as service provider to the
Delaware Investments Family of Funds, the benefits from allocation of fund
brokerage to improve trading efficiencies and the use of "soft" commission
dollars to pay for proprietary and non-proprietary research. The Board did not
find that the level of profits realized by Delaware Investments from the
relationships with the Fund and the Delaware Investments Family of Funds
required negotiation of reduction of fees.
Economies Of Scale. The Trustees considered whether economies of scale are
realized by Delaware Investments as the Fund's assets increase and the extent
to which any economies of scale are reflected in the level of management fees
charged. The Trustees took into account the standardized advisory fee pricing
and structure approved by the Board and shareholders as part of a complex-wide
shareholder meeting conducted in 1998/1999. At that time, Delaware Investments
introduced breakpoints to account for management economies of scale. The Board
noted that the fee under the Fund's management contract fell within the
standard structure. The Board also noted that the Fund's assets exceeded the
first breakpoint level. The Board believed that, given the extent to which
economies of scale might be realized by the advisor and its affiliates, the
schedule of fees under the Investment Advisory Agreement provides a sharing of
benefits with the Fund and its shareholders.
18
About the organization
This semiannual report is for the information of Delaware Small Cap Value Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware Small Cap Value Fund and the
Delaware Investments(R) 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 that 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
Jude T. Driscoll
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
Thomas L. Bennett
Private Investor
Rosemont, PA
John A. Fry
President
Franklin & Marshall College
Lancaster, PA
Anthony D. Knerr
Founder and Managing Director
Anthony Knerr & Associates
New York, NY
Lucinda S. Landreth
Former Chief Investment Officer
Assurant, Inc.
Philadelphia, PA
Ann R. Leven
Owner - ARL Associates,
Financial and Strategic Consultants
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, MN
J. Richard Zecher
Founder
Investor Analytics
Scottsdale, AZ
Affiliated officers
Michael P. Bishof
Senior Vice President and
Chief Financial Officer
Delaware Investments Family of Funds
Philadelphia, PA
David F. Connor
Vice President, Deputy General Counsel,
and Secretary
Delaware Investments Family of Funds
Philadelphia, PA
David P. O'Connor
Senior Vice President, General Counsel,
and Chief Legal Officer
Delaware Investments Family of Funds
Philadelphia, PA
John J. O'Connor
Senior Vice President and Treasurer
Delaware Investments Family of Funds
Philadelphia, PA
Contact information
Investment manager
Delaware Management Company, a series
of Delaware Management Business Trust
Philadelphia, PA
National distributor
Delaware Distributors, L.P.
Philadelphia, PA
Shareholder servicing, dividend
disbursing, and transfer agent
Delaware Service Company, Inc.
2005 Market Street
Philadelphia, PA 19103-7094
For shareholders
800 523-1918
For securities dealers and financial
institutions representatives only
800 362-7500
Web site
www.delawareinvestments.com
Delaware Investments is the marketing name of Delaware Management Holdings,
Inc. and its subsidiaries.
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 are 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, D.C.; information on the
operation of the Public Reference Room may be obtained by calling 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.
19
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one of the highest levels of Web security available. You also get:
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Investments accounts' 1099 information and import it directly into your 1040
tax return. Available only with Turbo Tax(R) Online(SM) and Desktop
software - www.turbotax.com.
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Delaware eDelivery.
Register for Account Access today! Visit www.delawareinvestments.com, select
Individual Investors, and click Account Access.
Please call our shareholder service center at 800 523-1918 Monday through
Friday from 8:00 a.m. to 7:00 p.m., Eastern Time, for assistance with any
questions.
[Delaware Logo]
(564) Printed in the USA
SA-021 [5/-06] CGI 7/06 SEMI-0606 SM CAP VALUE PO11112
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
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
Companies 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
second 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.
Name of Registrant: Delaware Group Equity Funds V
PATRICK P. COYNE
________________________________
By: Patrick P. Coyne
Title: President and Chief Executive Officer
Date: August 3, 2006
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.
PATRICK P. COYNE
________________________________
By: Patrick P. Coyne
Title: President and Chief Executive Officer
Date: August 3, 2006
MICHAEL P. BISHOF
________________________________
By: Michael P. Bishof
Title: Chief Financial Officer
Date: August 3, 2006