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: November 30, 2006
Item 1. Reports to Stockholders
Annual Report Delaware
Dividend Income Fund
November 30, 2006
Value equity mutual fund
[DELAWARE INVESTMENTS LOGO] [LOGO] POWERED BY RESEARCH(R)
Table of contents
> Portfolio management review .................................................1
> Performance summary. ........................................................6
> Disclosure of Fund expenses .................................................8
> Sector allocation and top 10 holdings .......................................9
> Statement of net assets ....................................................11
> Statement of operations ....................................................20
> Statements of changes in net assets ........................................21
> Financial highlights .......................................................22
> Notes to financial statements ..............................................27
> Report of independent registered public accounting firm ....................31
> Board of trustees/directors and officers addendum ..........................32
> About the organization .....................................................34
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) 2007 Delaware Distributors, L.P.
Portfolio management review
Delaware Dividend Income Fund
November 30, 2006
The managers of Delaware Dividend Income Fund provided the answers to the
questions below as a review of the Fund's activities for the fiscal year that
ended November 30, 2006. Please see page 3 to learn more about the portfolio
managers.
Q: Can you please discuss the investment environment during the year ended
November 30, 2006?
A: On the whole, the U.S. stock market performed well and turned in higher
returns than we anticipated at the outset of the year.
Investors largely saw two different sets of conditions during the year. Roughly
through June 2006, U.S. stocks faced headwinds. Energy costs continued to rise
and put downward pressure on corporate earnings and consumer spending. Interest
rates rose as well. Stronger-than-expected inflation reports in the spring made
it more likely that the Federal Reserve Board (Fed) would continue to raise
short-term rates. The threat of a weakening economy coupled with uncertainty
about the inflation picture was a negative influence on equity prices, and
market performance was particularly weak in May and June 2006.
By July conditions had improved noticeably. Corporate earnings, though slowing,
remained relatively solid, as did consumer spending in the face of a weakening
housing market. In addition, oil prices began declining sharply from their
historic highs and the Fed finally decided not to raise interest rates in August
and beyond, boosting performance in both the stock and bond markets through the
end of the year.
Q: How did the Fund perform during the year ended November 30, 2006?
A: Delaware Dividend Income Fund returned +18.34% at net asset value and +11.53%
at its maximum offer price (both figures are for Class A shares and reflect all
distributions reinvested). For complete annualized performance for Delaware
Dividend Income Fund, please see the table on page 6. By comparison, the Fund's
benchmark - the Standard and Poor's 500 Index - returned +14.22%, and its peer
group, as measured by the Lipper Mixed Asset Target Allocation Moderate Funds
Average, gained 11.16% (source: Lipper).
Delaware Dividend Income Fund is invested primarily in four types of assets:
large-cap value equities, real estate investment trusts (REITs), high-yield
bonds, and convertible securities, the last of which have some features of both
equity and fixed income securities. Each security type in the Fund produces a
measure of income for investors, and each may perform differently from the
others in different types of market environments.
During the year, dividend-oriented equity investors generally fared well, and as
the year progressed investors appeared to become increasingly risk averse. Also
of note, REITs strongly outperformed the broad U.S. stock market during the
year. For instance, the NAREIT Equity REIT Index, which tracks the performance
of U.S. REITs, gained 36.93%. This strong performance by REITs as a group was
generally advantageous to the Fund when comparing its returns against the S&P
500 Index, as that index includes just several of the largest U.S. REITs.
Q: What factors influenced performance in the Fund?
A: Expecting a slowdown in the economy, and a reduced rate of corporate earnings
growth, we believed it was prudent to position the equity portion of the
investment portfolio even more defensively than might be typical. As a result,
we focused on less economically sensitive sectors, such as healthcare and
consumer staples. The Fund was also underweight in more economically sensitive
areas, such as consumer discretionary.
We regularly look to invest in undervalued companies with good businesses that
we believe are priced well below their intrinsic value. During the most recent
period, we focused on companies that we believed to have particularly sound
balance sheets, strong dividend yields, and the potential to continue generating
relatively stable earnings, even in a weaker economy.
The views expressed are current as of the date of this report and are subject to
change.
(continues) 1
Portfolio management review
Delaware Dividend Income Fund
This approach led us to hold small positions in the energy and industrial
sectors, both of which tend to be relatively sensitive to economic changes. As
the fiscal year progressed, however, we found an increasing number of
opportunities among technology stocks that we believed to be attractively
valued, adding a new position in Intel, for example. More technology stocks were
passing our strict screening process, as a number of companies established
shareholder-friendly policies in the midst of successful turnarounds.
After several years of robust REIT performance, we continued to exercise caution
in this portion of the Fund, emphasizing companies with strong or improving
fundamentals and attractive valuations. We concentrated on several key areas of
the REIT market, beginning with economically sensitive holdings such as
industrial REITs. These cyclical companies generally benefit from steady gross
domestic product growth during the year.
We also were more heavily weighted than the NAREIT Equity REIT Index in REITs
with exposure to office property markets. We felt higher construction costs
would limit development in this category. In urban markets, certain office
stocks benefited during the year as increased demand drove rental rates higher.
Rising real estate prices in recent years forced many would-be homebuyers to
rent, creating what we believed were attractive prospects for apartment REITs.
We generally tried to capitalize on these and other trends.
REIT valuations have been propelled to all-time highs. Although we remained
optimistic at fiscal year end about the general long-term prospects for REITs,
we also remained skeptical about whether valuations can be sustained. By fiscal
year end, we had begun planning to focus on new opportunities only very
selectively, especially in the apartment and office sectors.
The Fund's various fixed income investments continued to provide another source
of income for shareholders as well as a measure of diversification for the Fund.
While stocks generally outperformed bonds for the year, total return performance
from high yield bonds was competitive. High yield bonds are noninvestment grade
securities issued by organizations with noninvestment grade credit ratings; as
such, they offer investors higher yields but an increased risk of default by the
issuer.
Especially during the late-year rally, lower-rated bonds outperformed other
types of fixed income investments, as a general search for yield could be
detected in the marketplace. As always, our approach to high yield investing
remained based on the selection of individual securities, analyzing the credits
available to us in the marketplace one bond issue at a time. Although the
economic climate and other big-picture factors were influential in the market
this year, we believe that company-specific characteristics generally played a
larger role in performance. We avoided making significant sector bets,
preferring to focus our research efforts on uncovering securities that we
thought offered value and yield advantages.
Q: Could you provide an example of a high yield bond that influenced
performance?
A: Charter Communications is a major telecommunications company that provides
broadband services to its customers. The company's bonds traded lower early in
the fiscal year on concerns about its subscriber base that stemmed from
Adelphia's bankruptcy proceedings. Later, the company posted stabilized earnings
and the bonds bounced back. Charter remained in the Fund at year end and
represented one of the larger fixed income positions.
Q: Could you please name specific equity securities that influenced performance?
A: Among large-cap value stocks, several consumer discretionary stocks were
noteworthy for generating strong gains during the fiscal period. Toy
manufacturer Mattel benefited from the success of key brands and better supply
chain management, as well as from lower energy prices, which resulted in reduced
production costs for the company. Limited Brands performed well, in part on a
turnaround in its apparel businesses, as well as from its personal care segment,
Bath and Body Works. In healthcare, the Fund gained from its holding in Merck.
The pharmaceutical company's stock recovered off a low, as investors' concerns
about legal liability surrounding its Vioxx pain medication abated.
2
Our holdings in the financial sector were often among our weakest equity
performers. For example, one stock that gained modest ground but trailed the
performance of the broad equity market was bank company Huntington Bancshares.
As with other banks, Huntington encountered difficulty as the company's earnings
suffered from less profitable lending activities, caused by a challenging
interest rate environment. Insurance company Hartford Financial Services also
underperformed relative to the overall stock market, hindered by increased
competition and a slowdown in the growth of auto insurance premiums, among other
factors.
Fund managers
D. Tysen Nutt Jr.
Senior Vice President, Senior Portfolio Manager,
Team Leader - Large-Cap Value Focus Equity
Mr. Nutt joined Delaware Investments in 2004 as senior vice president and senior
portfolio manager for the firm's Large-Cap Value Focus strategy. Before joining
the firm, Mr. Nutt led the U.S. Active Large-Cap Value team within Merrill Lynch
Investment Managers (MLIM), where he managed mutual funds and separate accounts
for institutions and private clients. Mr. Nutt departed MLIM as a managing
director. Prior to joining MLIM in 1994, Mr. Nutt was with Van Deventer & Hoch
(V&H) where he managed large-cap value portfolios for institutions and private
clients. He began his investment career at Dean Witter Reynolds, where he
eventually became vice president, investments. Mr. Nutt earned his bachelor's
degree from Dartmouth College, and he is a member of the New York Society of
Security Analysts and the CFA Institute.
Timothy L. Rabe, CFA
Senior Vice President, Head of High Yield Investments,
Senior Portfolio Manager
Mr. Rabe joined Delaware Investments in 2000. He is head of the High Yield team,
responsible for investing strategy for all high yield fixed income funds and
strategies at the firm. Prior to joining Delaware Investments, Mr. Rabe was a
high yield portfolio manager for Conseco Capital Management for five years.
Prior to that, he worked as a tax analyst for the Northern Trust Company. Mr.
Rabe received a bachelor's degree in finance from the University of Illinois.
Babak (Bob) Zenouzi
Senior Vice President, Senior Portfolio Manager
Mr. Zenouzi rejoined Delaware Investments in May 2006. He left the firm in 1999
after seven years as an analyst and portfolio manager. Currently, he leads the
firm's REIT group, including the team, its process, and its institutional and
retail products, which he created during his prior time with the firm. He also
serves as lead portfolio manager for the firm's Dividend Income products, which
he helped create in the 1990s. Most recently, Mr. Zenouzi worked at Chartwell
Investment Partners from 1999 to 2006, where he was a partner and senior
portfolio manager on Chartwell's Small-Cap Value portfolio. He began his career
with The Boston Company, where he held several positions in accounting and
financial analysis. Mr. Zenouzi earned a master's degree in finance from Boston
College and a bachelor's degree from Babson College. He is a member of the
National Association of Real Estate Investment Trusts.
Damon J. Andres, CFA
Vice President, Senior Portfolio Manager
Mr. Andres, who joined Delaware Investments in 1994, currently serves as a
portfolio manager for REIT investments and convertibles. From 1991 to 1994, he
performed investment-consulting services as a consulting associate with
Cambridge Associates. Mr. Andres earned a bachelor's degree in business
administration with an emphasis in finance and accounting from the University of
Richmond.
Jordan L. Irving
Vice President, Senior Portfolio Manager
Mr. Irving joined Delaware Investments in 2004 as a vice president, senior
portfolio manager for the firm's Large-Cap Value Focus strategy. Previously, he
worked for the U.S. Active Large-Cap Value team within Merrill Lynch Investment
Managers for six years, where he managed mutual funds and separate accounts for
institutions and private clients. Mr. Irving graduated from Yale University with
a bachelor's degree in American studies and earned a special diploma in social
studies at Oxford University in England. He competed for the United States
National Rowing Team, winning a gold medal at the 1997 World Rowing
Championships in Aiguebelette, France.
(continues) 3
Portfolio management review
Delaware Dividend Income Fund
Anthony A. Lombardi, CFA
Vice President, Senior Portfolio Manager
Mr. Lombardi joined Delaware Investments in 2004 as a vice president and senior
portfolio manager for the firm's Large-Cap Value Focus strategy. Previously, Mr.
Lombardi worked at Merrill Lynch Investment Managers from 1998 to 2004, where he
rose to the position of director and portfolio manager for the U.S. Active
Large-Cap Value team, managing mutual funds and separate accounts for
institutions and private clients. Prior to that he worked at Dean Witter
Reynolds for seven years as a sell-side equity research analyst, and he began
his career as an investment analyst with Crossland Savings in 1989. Mr. Lombardi
graduated from Hofstra University, receiving a bachelor's degree in finance and
an MBA with a concentration in finance. He is a member of the New York Society
of Security Analysts and the CFA Institute.
Robert A. Vogel Jr., CFA
Vice President, Senior Portfolio Manager
Mr. Vogel joined Delaware Investments in 2004 as a vice president, senior
portfolio manager for the firm's Large-Cap Value Focus strategy. He previously
worked at Merrill Lynch Investment Managers for more than seven years, where he
rose to the position of director and portfolio manager within the U.S. Active
Large-Cap Value team. He began his career in 1992 as a financial consultant at
Merrill Lynch. Mr. Vogel graduated from Loyola College in Maryland, earning both
bachelor's and master's degrees in finance. He also earned an MBA with a
concentration in finance from The Wharton School of the University of
Pennsylvania, and he is a member of the New York Society of Security Analysts
and the CFA Society of Philadelphia.
Nikhil G. Lalvani, CFA
Vice President, Portfolio Manager
Mr. Lalvani is a portfolio manager with the firm's Large-Cap Value Focus team.
At Delaware Investments, Mr. Lalvani has served as both a fundamental and
quantitative analyst. Prior to joining the firm in 1997, he was a research
associate with Bloomberg. Mr. Lalvani holds a bachelor's degree in finance from
Penn State University and is a member of the CFA Society of Philadelphia.
Nashira S. Wynn
Vice President, Portfolio Manager
Ms. Wynn is a portfolio manager with the firm's Large-Cap Value Focus team.
Prior to joining Delaware Investments in 2004, she was an equity research
analyst for Merrill Lynch Investment Managers. Ms. Wynn earned a bachelor's
degree in finance, with a minor in economics, from The College of New Jersey,
and she attended England's Oxford University as a presidential scholar. Ms. Wynn
is also a CFA Level I candidate.
4
Performance summary
Delaware Dividend Income Fund
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 523-1918 or visiting www.delawareinvestments.com/performance.
You should consider the investment objectives, risks, charges, and expenses of
the investment carefully before investing. The Delaware Dividend Income Fund
prospectus contains this and other important information about the Fund. Please
request a prospectus through your financial advisor or by calling 800 523-1918
or visiting our Web site at www.delawareinvestments.com. Read the prospectus
carefully before you invest or send money.
Fund performance
Average annual total returns
Through November 30, 2006 1 year 5 years Lifetime
________________________________________________________________________________
Class A (Est. 12-2-96)
Excluding sales charge +18.34% +11.32% +10.80%
Including sales charge +11.53% +10.01% +10.14%
________________________________________________________________________________
Class B (Est. 10-1-03)
Excluding sales charge +17.46% NA +11.16%
Including sales charge +13.46% NA +10.59%
________________________________________________________________________________
Class C (Est. 10-1-03)
Excluding sales charge +17.46% NA +11.16%
Including sales charge +16.46% NA +11.16%
________________________________________________________________________________
High-yielding, noninvestment grade bonds (junk bonds) involve higher risk than
investment grade bonds. Adverse conditions may affect the issuer's ability to
pay interest and principal on these securities. The Fund may invest up to 45% of
its assets in high yield, higher risk corporate bonds.
Funds that invest in REITs are subject to the many risks associated with direct
real estate ownership and, as such, may be adversely affected by declines in
real estate values and general and local economic conditions.
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below.
Performance for Class B and C shares, excluding sales charges, assumes either
that contingent deferred sales charges did not apply or the investment was not
redeemed.
The Fund offers Class A, B, C, R, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 5.75% and have an annual
distribution and service fee of up to 0.30% of average daily net assets, but
such fee is currently subject to a contractual cap of 0.25% of average daily net
assets through March 31, 2007.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending on the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1% of average daily net assets.
Class C shares are sold with a contingent deferred sales charge of 1% if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1% of average daily net assets.
The average annual total returns for the 1-year and lifetime (since October 1,
2003) periods ended November 30, 2006 for the Delaware Dividend Income Fund
Class R shares was +18.06% and +11.66%, respectively. Class R shares were first
made available on October 1, 2003 and are available only for certain retirement
plan products. They are sold without a sales charge and have an annual
distribution and service fee of 0.60%, but such fee is currently subject to a
contractual cap of 0.50% of average daily net assets through March 31, 2007.
The average annual total returns for the 1-year, 5-year, and lifetime (since
December 2, 1996) periods ended November 30, 2006 for Delaware Dividend Income
Fund Institutional Class shares were +18.72%, +11.50%, and +10.89%,
respectively. Institutional Class shares were first made available on December
2, 1996 and are available without sales or asset-based distribution charges only
to certain eligible institutional accounts.
An expense limitation was in effect for all classes during the periods shown
above and on the next page. Performance would have been lower had the expense
limitation not been in effect.
The performance table above and the graph on the next page do not reflect the
deduction of taxes the shareholder would pay on Fund distributions or
redemptions of Fund shares.
6
Fund basics
As of November 30, 2006
________________________________________________________________________________
Fund objective
________________________________________________________________________________
The Fund seeks to provide high current income and an investment that has the
potential for capital appreciation.
________________________________________________________________________________
Total Fund net assets
________________________________________________________________________________
$752 million
________________________________________________________________________________
Number of holdings
________________________________________________________________________________
340
________________________________________________________________________________
Fund start date
________________________________________________________________________________
December 2, 1996
________________________________________________________________________________
Nasdaq symbols CUSIPs
________________________________________________________________________________
Class A DDIAX 24610B107
Class B DDDBX 24610B206
Class C DDICX 24610B305
Class R DDDRX 24610B842
Institutional Class DDIIX 24610B404
Performance of a $10,000 Investment
December 2, 1996 (Fund's inception) through November 30, 2006
[PERFORMANCE OF A $10,000 INVESTMENT LINE GRAPH]
Chart assumes $10,000 invested on December 2, 1996 and includes the effect of a
5.75% front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to different charges and
expenses. The chart also assumes $10,000 invested in the S&P 500 Index on
December 2, 1996. The S&P 500 Index is a composite of mostly
large-capitalization U.S. companies. An index is unmanaged and does not reflect
the costs of operating a mutual fund, such as the costs of buying, selling, and
holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
7
Disclosure of Fund expenses
For the period June 1, 2006 to November 30, 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 June 1, 2006 to November 30, 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 6/1/06 to
6/1/06 11/30/06 Ratios 11/30/06
________________________________________________________________________________
Actual Fund Return
Class A $1,000.00 $1,125.20 1.02% $5.43
Class B 1,000.00 1,121.00 1.77% 9.41
Class C 1,000.00 1,120.00 1.77% 9.41
Class R 1,000.00 1,123.80 1.27% 6.76
Institutional Class 1,000.00 1,127.40 0.77% 4.11
________________________________________________________________________________
Hypothetical 5% Return (5% return before expenses)
Class A $1,000.00 $1,019.95 1.02% $5.16
Class B 1,000.00 1,016.19 1.77% 8.95
Class C 1,000.00 1,016.19 1.77% 8.95
Class R 1,000.00 1,018.70 1.27% 6.43
Institutional Class 1,000.00 1,021.21 0.77% 3.90
________________________________________________________________________________
* "Expenses Paid During Period" are equal to the Fund's annualized expense
ratio, multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
8
Sector allocation and top 10 holdings
Delaware Dividend Income Fund
As of November 30, 2006
Sector designations may be different than the sector designations presented in
other Fund materials.
Percentage
Sector of Net Assets
________________________________________________________________________________
Common Stock 59.08%
Consumer Discretionary 3.91%
Consumer Staples 5.02%
Diversified REITs 2.71%
Energy 2.65%
Financials 9.91%
Health Care 7.42%
Health Care REITs 1.08%
Industrial REITs 1.73%
Industrials 3.19%
Information Technology 4.84%
Lodging/Resorts REITs 0.51%
Mall REITs 2.59%
Manufactured Housing REITs 0.24%
Materials 1.22%
Mortgage REITs 0.54%
Multifamily REITs 0.98%
Office/Industrial REITs 1.31%
Office REITs 2.42%
Self-Storage REITs 0.73%
Shopping Center REITs 1.77%
Specialty REITs 0.51%
Telecommunications 2.49%
Utilities 1.31%
________________________________________________________________________________
Corporate Bonds 21.76%
Basic Industries 2.75%
Brokerage 0.48%
Capital Goods 1.56%
Consumer Cyclical 1.73%
Consumer Non-Cyclical 1.70%
Energy 1.33%
Finance & Investments 0.08%
Media 1.79%
Real Estate 0.32%
Services Cyclical 3.96%
Services Non-cyclical 1.75%
Technology & Electronics 0.94%
Telecommunications 2.36%
Utilities 1.01%
________________________________________________________________________________
Convertible Bonds 8.84%
Aerospace & Defense 0.50%
Basic Industries 0.12%
Cable, Media & Publishing 0.80%
Computers & Technology 2.06%
Electronics & Electrical Equipment 0.37%
Energy 0.85%
Health Care & Pharmaceuticals 1.81%
Leisure, Lodging & Entertainment 0.07%
Media 0.07%
Real Estate 0.08%
Retail 1.22%
Telecommunications 0.15%
Transportation 0.47%
Utilities 0.27%
________________________________________________________________________________
Convertible Preferred Stock 3.80%
Banking, Finance & Insurance 2.02%
Basic Materials 0.39%
Cable, Media & Publishing 0.22%
Energy 0.41%
Telecommunications 0.14%
Utilities 0.62%
________________________________________________________________________________
Preferred Stock 0.91%
Leisure, Lodging & Entertainment 0.05%
Real Estate 0.86%
________________________________________________________________________________
Senior Secured Loans 0.14%
________________________________________________________________________________
Exchange Traded Funds 0.33%
________________________________________________________________________________
Warrants 0.00%
________________________________________________________________________________
Commercial Mortgage-Backed Securities 0.10%
________________________________________________________________________________
Repurchase Agreements 4.62%
________________________________________________________________________________
Total Market Value of Securities 99.58%
________________________________________________________________________________
Receivables and Other Assets Net of Liabilities 0.42%
________________________________________________________________________________
Total Net Assets 100.00%
(continues) 9
Sector allocation and top 10 holdings
Delaware Dividend Income Fund
________________________________________________________________________________
Holdings are for informational purposes only and are subject to change at any
time. They are not a recommendation to buy, sell, or hold any security.
Percentage
Top 10 Holdings of Net Assets
________________________________________________________________________________
ConocoPhillips 1.34%
Chevron 1.31%
Pfizer 1.29%
Limited Brands 1.29%
Simon Properties Group 1.28%
Heinz (H.J.) 1.28%
ConAgra Foods 1.27%
Safeway 1.26%
Washington Mutual 1.26%
AT&T 1.25%
10
Statement of net assets
Delaware Dividend Income Fund
November 30, 2006
Number of Market
Shares Value
________________________________________________________________________________
Common Stock - 59.08%
________________________________________________________________________________
Consumer Discretionary - 3.91%
+ Charter Communications Class A 5,800 $ 17,110
Gap 478,200 8,951,904
+ Idearc 12,705 349,896
Limited Brands 305,100 9,668,619
Mattel 393,300 8,632,935
Starwood Hotels & Resorts Worldwide 27,200 1,745,424
___________
29,365,888
___________
Consumer Staples - 5.02%
ConAgra Foods 371,600 9,550,120
Heinz (H.J.) 215,900 9,596,755
Kimberly-Clark 137,900 9,166,213
Safeway 307,200 9,464,832
___________
37,777,920
___________
Diversified REITs - 2.71%
CentraCore Properties Trust 106,400 3,417,568
iStar Financial 127,300 5,956,367
Spirit Finance 114,700 1,400,487
Vornado Realty Trust 56,000 7,062,160
Washington Real Estate
Investment Trust 58,700 2,516,469
___________
20,353,051
___________
Energy - 2.65%
Chevron 135,800 9,821,056
ConocoPhillips 149,800 10,081,540
___________
19,902,596
___________
Financials - 9.91%
Allstate 145,300 9,223,644
American Campus Communities 47,000 1,395,900
Aon 255,600 9,119,808
Chubb 177,600 9,192,576
Hartford Financial Services 106,000 9,090,560
Huntington Bancshares 368,000 8,946,080
Morgan Stanley 118,100 8,994,496
Wachovia 168,900 9,152,691
Washington Mutual 216,100 9,439,248
___________
74,555,003
___________
Health Care - 7.42%
Abbott Laboratories 200,100 9,336,666
Baxter International 202,900 9,077,746
Bristol-Myers Squibb 374,200 9,291,386
Merck 210,200 9,356,002
Pfizer 352,800 9,698,472
Wyeth 187,000 9,028,360
___________
55,788,632
___________
Health Care REITs - 1.08%
Health Care Property Investors 89,100 3,231,657
Medical Properties Trust 19,700 292,545
Nationwide Health Properties 72,600 2,148,234
Ventas 63,500 2,473,325
___________
8,145,761
___________
Industrial REITs - 1.73%
AMB Property 59,600 3,651,692
First Potomac Realty Trust 87,000 2,671,770
ProLogis 102,300 6,666,891
___________
12,990,353
___________
Industrials - 3.19%
Donnelley (R.R.) & Sons 265,400 9,360,658
+ Foster Wheeler 3,656 197,424
+ Grupo Aeroportuario del Centro
Norte ADR 37,400 805,970
Macquarie Infrastructure 154,400 5,002,560
Waste Management 236,500 8,658,265
___________
24,024,877
___________
Information Technology - 4.84%
Hewlett-Packard 231,500 9,134,990
Intel 434,900 9,285,115
International Business Machines 98,100 9,017,352
+ Xerox 541,400 8,933,100
___________
36,370,557
___________
Lodging/Resort REITs - 0.51%
Hersha Hospitality Trust 279,600 3,226,584
Highland Hospitality 43,500 616,830
___________
3,843,414
___________
Mall REITs - 2.59%
General Growth Properties 91,000 4,999,540
Macerich 56,600 4,837,602
Simon Property Group 94,500 9,637,110
___________
19,474,252
___________
Manufactured Housing REITs - 0.24%
Equity Lifestyle Properties 34,300 1,782,571
___________
1,782,571
___________
Materials - 1.22%
duPont (E.I.) deNemours 196,200 9,207,666
___________
9,207,666
___________
Mortgage REITs - 0.54%
Gramercy Capital 97,100 2,719,771
JER Investors Trust 68,900 1,363,531
___________
4,083,302
___________
Multifamily REITs - 0.98%
AvalonBay Communities 16,500 2,195,820
Equity Residential 78,000 4,154,280
United Dominion Realty Trust 29,700 997,326
___________
7,347,426
___________
Office/Industrial REITs - 1.31%
Duke Realty 120,100 5,226,752
Liberty Property Trust 49,700 2,545,137
PS Business Parks 29,600 2,109,000
___________
9,880,889
___________
Office REITs - 2.42%
Alexandria Real Estate Equities 29,000 2,989,320
Brandywine Realty Trust 119,356 4,195,363
Equity Office Properties Trust 91,500 4,410,300
Highwoods Properties 50,600 2,064,480
(continues) 11
Statement of net assets
Delaware Dividend Income Fund
Number of Market
Shares Value
________________________________________________________________________________
Common Stock (continued)
________________________________________________________________________________
Office REITs (continued)
Mack-Cali Realty 30,100 $ 1,644,664
Parkway Properties 36,700 1,903,996
Reckson Associates Realty 20,200 977,276
____________
18,185,399
____________
Self-Storage REITs - 0.73%
Public Storage 36,400 3,504,592
U-Store-It Trust 91,900 2,010,772
____________
5,515,364
Shopping Center REITs - 1.77%
Cedar Shopping Centers 107,700 1,964,448
Developers Diversified Realty 88,600 5,739,508
Federal Realty Investment Trust 36,900 3,143,142
New Plan Excel Realty Trust 85,200 2,427,348
____________
13,274,446
____________
Specialty REITs - 0.51%
Entertainment Properties Trust 63,500 3,854,450
____________
3,854,450
____________
Telecommunications - 2.49%
AT&T 276,300 9,369,333
Verizon Communications 267,700 9,353,438
____________
18,722,771
____________
Utilities - 1.31%
+ Mirant 19,417 590,665
Progress Energy 194,500 9,291,265
____________
9,881,930
____________
Total Common Stock
(cost $373,409,951) 444,328,518
____________
Principal
Amount
________________________________________________________________________________
Corporate Bonds - 21.76%
________________________________________________________________________________
Basic Industries - 2.75%
Abitibi-Consolidated
6.95% 12/15/06 $ 50,000 50,000
Abitibi-Consolidated Finance
7.875% 8/1/09 515,000 504,700
AK Steel 7.875% 2/15/09 875,000 879,375
Bowater
9.00% 8/1/09 550,000 575,438
9.50% 10/15/12 1,050,000 1,068,375
Donohue Forest Products 7.625%
5/15/07 740,000 743,700
Georgia-Pacific 9.50% 12/1/11 800,000 884,000
Gold Kist 10.25% 3/15/14 750,000 864,375
Huntsman International
9.875% 3/1/09 148,000 153,550
10.125% 7/1/09 235,000 239,700
Lyondell Chemical
8.00% 9/15/14 835,000 865,269
8.25% 9/15/16 850,000 888,250
10.50% 6/1/13 100,000 110,500
# Momentive Performance Materials
144A 9.75% 12/1/14 1,400,000 1,410,500
# Nell AF Sarl 144A 8.375% 8/15/15 840,000 864,150
NewPage
10.00% 5/1/12 1,075,000 1,136,813
12.00% 5/1/13 735,000 779,100
Norske Skog Canada
8.625% 6/15/11 1,705,000 1,730,574
# Port Townsend Paper 144A
11.00% 4/15/11 1,110,000 976,800
Potlatch 13.00% 12/1/09 1,075,000 1,256,777
# Sappi Papier Holding 144A
7.50% 6/15/32 1,400,000 1,304,795
++ Solutia 6.72% 10/15/37 1,215,000 1,081,350
Tembec Industries 8.625% 6/30/09 2,635,000 1,706,162
Witco 6.875% 2/1/26 695,000 622,025
____________
20,696,278
____________
Brokerage - 0.48%
E Trade Financial 8.00% 6/15/11 1,125,000 1,172,813
LaBranche
9.50% 5/15/09 935,000 988,763
11.00% 5/15/12 1,350,000 1,464,749
3,626,325
Capital Goods - 1.56%
Armor Holdings 8.25% 8/15/13 860,000 896,550
# Berry Plastics 144A
8.875% 9/15/14 775,000 785,656
# Bombardier 144A
8.00% 11/15/14 925,000 934,250
Building Materials
8.00% 10/15/07 1,050,000 1,061,813
CPG International I
10.50% 7/1/13 520,000 531,700
Graham Packaging
9.875% 10/15/14 1,600,000 1,591,999
# Hexion Finance 144A
9.75% 11/15/14 975,000 994,500
Interface 10.375% 2/1/10 1,200,000 1,317,000
Intertape Polymer
8.50% 8/1/14 960,000 888,000
{ Mueller Holdings
14.75% 4/15/14 654,000 578,790
{ NTK Holdings 10.75% 3/1/14 950,000 660,250
# RBS Global & Rexnord 144A
11.75% 8/1/16 675,000 713,813
Trimas 9.875% 6/15/12 825,000 796,125
____________
11,750,446
____________
12
Principal Market
Amount Value
________________________________________________________________________________
Corporate Bonds (continued)
________________________________________________________________________________
Consumer Cyclical - 1.73%
Accuride 8.50% 2/1/15 $ 655,000 $ 630,438
# Baker & Taylor 144A
11.50% 7/1/13 600,000 603,750
Carrols 9.00% 1/15/13 700,000 710,500
Denny's 10.00% 10/1/12 850,000 895,688
Ford Motor Credit
7.375% 10/28/09 775,000 774,200
9.875% 8/10/11 805,000 862,041
General Motors 8.375% 7/15/33 825,000 755,906
General Motors
Acceptance Corporation
6.875% 9/15/11 995,000 1,025,455
8.00% 11/1/31 630,000 708,159
Landry's Restaurant 7.50% 12/15/14 600,000 586,500
# Micheals Stores 144A 11.375%
11/1/16 800,000 824,000
# Mobile Services Group 144A
9.75% 8/1/14 650,000 679,250
Neiman Marcus
9.00% 10/15/15 625,000 680,469
10.375% 10/15/15 225,000 250,031
# NPC International 144A
9.50% 5/1/14 790,000 797,900
O'Charleys 9.00% 11/1/13 715,000 754,325
# United Auto Group 144A
7.75% 12/15/16 1,000,000 1,000,000
Visteon 8.25% 8/1/10 450,000 439,875
____________
12,978,487
____________
Consumer Non-Cyclical - 1.70%
Biovail 7.875% 4/1/10 2,075,000 2,100,937
Constellation Brands
8.125% 1/15/12 1,000,000 1,047,500
Cott Beverages 8.00% 12/15/11 1,050,000 1,076,250
# Elan Finance 144A
8.875% 12/1/13 675,000 675,844
Ingles Markets 8.875% 12/1/11 1,200,000 1,257,000
++ # Le-Natures 144A
9.00% 6/15/13 260,000 35,100
National Beef Packing
10.50% 8/1/11 1,350,000 1,417,499
Pilgrim's Pride 9.625% 9/15/11 815,000 859,825
Pinnacle Foods 8.25% 12/1/13 935,000 958,375
Playtex Products 9.375% 6/1/11 1,215,000 1,272,713
Swift 12.50% 1/1/10 675,000 695,250
True Temper Sports
8.375% 9/15/11 475,000 426,313
Warner Chilcott 8.75% 2/1/15 910,000 937,300
____________
12,759,906
____________
Energy - 1.33%
Bluewater Finance
10.25% 2/15/12 518,000 546,490
Chesapeake Energy
6.625% 1/15/16 250,000 248,125
# Complete Product 144A
8.00% 12/15/16 440,000 446,600
Compton Petroleum Finance
7.625% 12/1/13 1,260,000 1,203,299
El Paso Natural Gas
7.625% 8/1/10 390,000 405,600
# El Paso Performance-Linked Trust
144A 7.75% 7/15/11 525,000 546,000
El Paso Production
7.75% 6/1/13 450,000 468,563
# Hilcorp Energy I 144A
7.75% 11/1/15 225,000 222,750
9.00% 6/1/16 775,000 819,563
Inergy Finance
6.875% 12/15/14 350,000 341,250
8.25% 3/1/16 200,000 209,500
Mariner Energy 7.50% 4/15/13 675,000 658,125
# MarkWest Energy 144A
8.50% 7/15/16 425,000 431,375
PetroHawk Energy
9.125% 7/15/13 1,550,000 1,621,687
Pride International
7.375% 7/15/14 345,000 359,663
~ Secunda International
13.374% 9/1/12 655,000 679,563
Whiting Petroleum
7.00% 2/1/14 261,000 262,305
7.25% 5/1/13 505,000 507,525
____________
9,977,983
____________
Finance & Investments - 0.08%
# iPayment 144A 9.75% 5/15/14 600,000 616,500
____________
616,500
____________
Media - 1.79%
{ Adelphia Communications
8.125% 2/1/07 615,000 528,900
CCH I Holdings 13.50% 1/15/14 1,150,000 1,086,750
{ Century Communications
9.50% 2/1/07 1,625,000 1,950,000
Charter Communications Holdings
10.25% 9/15/10 1,000 1,050
13.50% 1/15/11 2,350,000 2,279,499
~ # Cleveland Unlimited 144A
13.64% 12/15/10 150,000 162,000
# CMP Susquehanna 144A
9.875% 5/15/14 375,000 370,313
Dex Media East
12.125% 11/15/12 505,000 560,550
# Idearc 144A 8.00% 11/15/16 550,000 561,688
Insight Communications
12.25% 2/15/11 200,000 210,750
(continues) 13
Statement of net assets
Delaware Dividend Income Fund
Principal Market
Amount Value
________________________________________________________________________________
Corporate Bonds (continued)
________________________________________________________________________________
Media (continued)
Insight Midwest 9.75% 10/1/09 $ 169,000 $ 171,746
Lodgenet Entertainment
9.50% 6/15/13 1,525,000 1,639,375
Mediacom Broadband
8.50% 10/15/15 590,000 593,688
Mediacom Capital
9.50% 1/15/13 1,975,000 2,039,188
Vertis 10.875% 6/15/09 320,000 320,000
WMG Acquisition
7.375% 4/15/14 1,025,000 1,019,875
____________
13,495,372
____________
Real Estate - 0.32%
American Real Estate Partners
8.125% 6/1/12 835,000 865,269
BF Saul REIT 7.50% 3/1/14 975,000 994,500
Rouse 7.20% 9/15/12 550,000 572,282
____________
2,432,051
____________
Services Cyclical - 3.96%
Adesa 7.625% 6/15/12 1,250,000 1,246,875
American Airlines
7.377% 5/23/19 382,016 372,944
Boyd Gaming 8.75% 4/15/12 1,365,000 1,436,662
Brickman Group
11.75% 12/15/09 315,000 336,263
Continental Airlines
8.75% 12/1/11 575,000 581,469
Corrections Corporation of
America 7.50% 5/1/11 875,000 903,438
FTI Consulting 7.625% 6/15/13 1,300,000 1,348,749
# Galaxy Entertainment Finance
144A 9.875% 12/15/12 1,750,000 1,876,874
Gaylord Entertainment
8.00% 11/15/13 875,000 899,063
Grupo Transportacion
Ferroviaria Mexicana
9.375% 5/1/12 750,000 806,250
12.50% 6/15/12 425,000 464,313
Harrah's Operating
6.50% 6/1/16 1,175,000 1,051,070
# Hertz 144A 8.875% 1/1/14 775,000 807,938
{ H-Lines Finance Holdings
11.00% 4/1/13 1,301,000 1,208,304
Horizon Lines 9.00% 11/1/12 457,000 480,993
# Kansas City Southern de Mexico
144A 7.625% 12/1/13 950,000 952,375
Kansas City Southern Railway
9.50% 10/1/08 600,000 630,750
# Knowledge Learning 144A
7.75% 2/1/15 860,000 817,000
Majestic Star Casino
9.50% 10/15/10 900,000 933,750
Mandalay Resort Group
9.375% 2/15/10 1,425,000 1,521,187
9.50% 8/1/08 1,250,000 1,326,563
OMI 7.625% 12/1/13 1,345,000 1,380,305
# Penhall International 144A
12.00% 8/1/14 575,000 623,875
Penn National Gaming
6.75% 3/1/15 350,000 345,625
# Pokagon Gaming Authority 144A
10.375% 6/15/14 1,425,000 1,553,249
# Rental Service 144A
9.50% 12/1/14 1,275,000 1,297,313
Seabulk International
9.50% 8/15/13 469,000 510,624
Stena AB 9.625% 12/1/12 975,000 1,046,906
{ Town Sports International
11.00% 2/1/14 701,000 587,088
# Turning Stone Resort Casino 144A
9.125% 9/15/14 645,000 662,738
Wheeling Island Gaming
10.125% 12/15/09 1,755,000 1,794,487
____________
29,805,040
____________
Services Non-cyclical - 1.75%
Casella Waste Systems
9.75% 2/1/13 1,870,000 1,963,500
CRC Health 10.75% 2/1/16 1,175,000 1,260,188
Geo Subordinate 11.00% 5/15/12 975,000 945,750
HCA
6.50% 2/15/16 1,250,000 1,040,625
# 144A 9.625% 11/15/16 900,000 947,250
# HealthSouth 144A
10.75% 6/15/16 2,325,000 2,487,750
US Oncology 10.75% 8/15/14 1,250,000 1,387,500
{ Vanguard Health
11.25% 10/1/15 2,375,000 1,816,875
WCA Waste
9.25% 6/15/14 200,000 209,000
# 144A 9.25% 6/15/14 1,045,000 1,092,025
____________
13,150,463
____________
Technology & Electronics - 0.94%
# Freescale Semiconductor 144A
9.125% 12/15/14 675,000 678,375
10.125% 12/15/16 2,635,000 2,677,819
MagnaChip Semiconductor
8.00% 12/15/14 2,250,000 1,507,500
# NXP Funding 144A
9.50% 10/15/15 500,000 515,625
Solectron Global Finance 8.00%
3/15/16 450,000 459,000
Sungard Data Systems
10.25% 8/15/15 720,000 766,800
~# UGS Capital II PIK 144A
10.38% 6/1/11 467,660 473,506
____________
7,078,625
____________
14
Principal Market
Amount Value
________________________________________________________________________________
Corporate Bonds (continued)
________________________________________________________________________________
Telecommunications - 2.36%
++ Allegiance Telecom
11.75% 2/15/08 $ 10,000 $ 4,550
American Tower 7.125% 10/15/12 950,000 976,125
American Towers 7.25% 12/1/11 300,000 312,000
# Broadview Networks 144A
11.375% 9/1/12 725,000 757,625
Cincinnati Bell 8.375% 1/15/14 535,000 549,713
# Cricket Communications 144A
9.375% 11/1/14 890,000 914,475
# Digicel Limited 144A
9.25% 9/1/12 855,000 910,575
# Hughes Network Systems 144A
9.50% 4/15/14 1,990,000 2,074,574
{ Inmarsat Finance
10.375% 11/15/12 1,865,000 1,713,468
~ IWO Holdings 9.124% 1/15/12 100,000 102,500
# Level 3 Financing 144A
9.25% 11/1/14 850,000 863,813
# MetroPCS Wireless 144A
9.25% 11/1/14 460,000 469,775
Qwest
~ 8.64% 6/15/13 610,000 664,138
# 144A 7.50% 10/1/14 1,650,000 1,761,374
Rural Cellular
9.875% 2/1/10 915,000 972,188
~ 11.121% 11/1/12 425,000 444,125
# Telcordia Technologies 144A
10.00% 3/15/13 950,000 821,750
Triton PCS
8.50% 6/1/13 500,000 485,000
9.375% 2/1/11 935,000 846,175
~ US LEC 13.87% 10/1/09 535,000 570,444
# Wind Acquisition 144A
10.75% 12/1/15 1,340,000 1,517,550
____________
17,731,937
____________
Utilities - 1.01%
Avista 9.75% 6/1/08 753,000 797,229
#++ Calpine 144A 8.496% 7/15/07 503,413 552,495
Elwood Energy 8.159% 7/5/26 981,394 1,037,466
Midwest Generation
8.30% 7/2/09 1,185,146 1,205,886
8.75% 5/1/34 725,000 790,250
Mirant Americas 8.30% 5/1/11 1,125,000 1,147,500
Mirant North America
7.375% 12/31/13 200,000 203,500
Orion Power Holdings
12.00% 5/1/10 956,000 1,087,450
# Tenaska Alabama Partners 144A
7.00% 6/30/21 775,368 773,783
____________
7,595,559
____________
Total Corporate Bonds
(cost $160,939,552) 163,694,972
____________
________________________________________________________________________________
Convertible Bonds - 8.84%
________________________________________________________________________________
Aerospace & Defense - 0.50%
# AAR 144A 1.75% 2/1/26
exercise price $29.43,
expiration date 2/1/26 $1,150,000 $ 1,260,688
EDO 4.00% 11/15/25
exercise price $34.19,
expiration date 11/15/25 975,000 925,031
# L-3 Communications 144A
3.00% 8/1/35 exercise price
$102.16, expiration date 8/1/35 1,500,000 1,565,625
____________
3,751,344
____________
Basic Industries - 0.12%
# Apex Silver Mines 144A
____________
2.875% 3/15/24 1,000,000 885,000
____________
Cable, Media & Publishing - 0.80%
EchoStar 5.75% 5/15/08
exercise price $43.29,
expiration date 5/15/08 500,000 510,000
Liberty Media 3.25% 3/15/31
exercise price $53.86,
expiration date 3/8/31 3,000,000 2,418,750
# Playboy Enterprises 144A
3.00% 3/15/25 exercise price
$17.02, expiration date 3/15/25 3,240,000 3,082,050
____________
6,010,800
____________
Computers & Technology - 2.06%
Fairchild Semiconductor
5.00% 11/1/08 exercise price
$30.00, expiration date 11/1/08 1,950,000 1,942,688
Hutchinson Technology
3.25% 1/15/26 exercise price
$36.43, expiration date 1/15/26 1,540,000 1,441,825
# Informatica 144A 3.00% 3/15/26
exercise price $20.00,
expiration date 3/15/26 2,315,000 2,294,743
Intel
2.95% 12/15/35
exercise price $31.53,
expiration date 12/15/35 500,000 465,625
# 144A 2.95% 12/15/35
exercise price $31.53,
expiration date 12/15/35 1,140,000 1,061,625
Mercury Interactive 4.75% 7/1/07
exercise price $111.25,
expiration date 7/1/07 3,000,000 3,041,250
^ ON Semiconductor Series B
0.499% 4/15/24
expiration price $9.82,
expiration date 4/15/24 2,725,000 2,469,530
SanDisk 1.00% 5/15/13
exercise price $82.36,
expiration date 5/15/13 775,000 691,688
(continues) 15
Statement of net assets
Delaware Dividend Income Fund
Principal Market
Amount Value
________________________________________________________________________________
Convertible Bonds (continued)
________________________________________________________________________________
Computers & Technology (continued)
# Sybase 144A 1.75% 2/22/25
exercise price $25.22,
expiration date 2/22/25 $1,875,000 $ 2,071,875
____________
15,480,849
____________
Electronics & Electrical Equipment - 0.37%
Fisher Scientific International
3.25% 3/1/24 exercise price
$40.20, expiration date 3/1/24 1,500,000 1,899,375
Solectron 0.50% 2/15/34
exercise price $9.67,
expiration date 2/15/34 1,100,000 900,625
____________
2,800,000
____________
Energy - 0.85%
Halliburton 3.125% 7/15/23
exercise price $18.81,
expiration date 7/15/23 1,250,000 2,312,500
Pride International 3.25% 5/1/33
exercise price $25.70,
expiration date 5/1/33 1,080,000 1,448,550
Schlumberger 2.125% 6/1/23
exercise price $40.00,
expiration date 6/1/23 1,500,000 2,668,125
____________
6,429,175
____________
Health Care & Pharmaceuticals - 1.81%
Allergan
1.50% 4/1/26
exercise price $126.66,
expiration date 4/1/26 600,000 646,500
# 144A 1.50% 4/1/26
exercise price $126.66,
expiration date 4/1/26 1,935,000 2,084,962
# Amgen 144A 0.375% 2/1/13
exercise price $79.48,
expiration date 2/1/13 775,000 778,875
~ Bristol-Myers Squibb
4.89% 9/15/23 exercise price
$41.28, expiration date 9/15/23 1,600,000 1,608,000
CV Therapeutics 3.25% 8/16/13
exercise price $27.00,
expiration date 8/16/13 530,000 447,188
Encysive Pharmaceuticals
2.50% 3/15/12
exercise price $13.95,
expiration date 3/15/12 200,000 161,500
# 144A 2.50% 3/15/12
exercise price $13.95,
expiration date 3/15/12 2,000,000 1,615,000
# Nektar Therapeutics 144A
3.25% 9/28/12 exercise price
$21.52, expiration date 9/28/12 1,525,000 1,587,906
Teva Pharmaceutical Finance
0.25% 2/1/26 exercise price
$47.16, expiration date 2/1/26 1,535,000 1,477,438
~ Wyeth 5.109% 1/15/24
exercise price $60.39,
expiration date 1/15/24 3,000,000 3,191,999
____________
13,599,368
____________
Leisure, Lodging & Entertainment - 0.07%
# Regal Entertainment Group 144A
3.75% 5/15/08 exercise price
$14.65, expiration date 5/15/08 350,000 498,313
____________
498,313
____________
Media - 0.07%
# EchoStar Communications 144A
____________
5.75% 5/15/08 500,000 510,000
____________
Real Estate - 0.08%
MeriStar Hospitality 9.50% 4/1/10
exercise price $10.18,
expiration date 4/1/10 600,000 615,900
____________
615,900
____________
Retail - 1.22%
; Dick's Sporting Goods
1.606% 2/18/24 exercise price
$58.13, expiration date 2/18/24 2,480,000 2,430,400
~ Lowe's Companies
0.861% 10/19/21 exercise price
$29.05, expiration date 10/19/21 1,250,000 1,323,438
# Saks 144A 2.00% 3/15/24
exercise price $11.97,
expiration date 3/15/24 2,200,000 3,107,500
Sonic Automotive 5.25% 5/7/09
exercise price $46.87,
expiration date 5/7/09 1,000,000 952,500
# United Auto Group 144A 3.50%
4/1/26 exercise price $23.69,
expiration date 4/1/26 1,150,000 1,334,000
____________
9,147,838
____________
Telecommunications - 0.15%
Qwest Communications
International 3.50% 11/15/25
exercise price $5.90,
expiration date 11/15/25 750,000 1,110,000
____________
1,110,000
____________
Transportation - 0.47%
# ExpressJet 144A 4.25% 8/1/23
exercise price $18.20,
expiration date 8/1/23 750,000 705,938
16
Principal Market
Amount Value
________________________________________________________________________________
Convertible Bonds (continued)
________________________________________________________________________________
Transportation (continued)
JetBlue Airways
3.50% 7/15/33
exercise price $28.33,
expiration date 8/1/23 $1,625,000 $ 1,560,000
3.75% 3/15/35
exercise price $17.10,
expration date 3/15/35 1,195,000 1,260,725
____________
3,526,663
____________
Utilities - 0.27%
CenterPoint Energy
3.75% 5/15/23
exercise price $11.31,
expiration date 5/15/23 400,000 577,500
# 144A 3.75% 5/15/23
exercise price $11.31,
expiration date 5/15/23 1,030,000 1,487,063
____________
2,064,563
____________
Total Convertible Bonds
(cost $61,935,962) 66,429,813
____________
Number of
Shares
________________________________________________________________________________
Convertible Preferred Stock - 3.80%
________________________________________________________________________________
Banking, Finance & Insurance - 2.02%
Aspen Insurance 5.625%
exercise price $29.28,
expiration date 12/31/49 37,800 2,083,725
~ Citigroup Funding 5.02%
exercise price $29.50,
expiration date 9/27/08 69,000 2,173,500
E Trade Group 6.125%
exercise price $21.82,
expiration date 11/18/08 75,500 2,340,500
Lehman Brothers Holdings 6.25%
exercise price $54.24,
expiration date 10/15/07 66,750 1,835,625
Marshall & Ilsley 6.50%
exercise price $ 46.28,
expiration date 8/15/07 70,500 1,859,790
Merrill Lynch 6.75%
exercise price $40.80,
expiration date 10/15/07 70,000 3,101,874
Sovereign Capital Trust IV 4.375%
exercise price $ 29.07,
expiration date 3/1/34 35,700 1,771,613
____________
15,166,627
____________
Basic Materials - 0.39%
Freeport-McMoRan Copper &
Gold 5.50%
exercise price $48.55
expiration date 12/31/49 545 761,638
Huntsman 5.00%
exercise price $28.29,
expiration date 2/16/08 56,100 $ 2,215,950
____________
2,977,588
____________
Cable, Media & Publishing - 0.22%
# Interpublic Group 5.25% 144A
exercise price $13.66,
expiration date 12/31/49 1,500 1,655,625
____________
1,655,625
____________
Energy - 0.41%
Chesapeake 4.50%
exercise price $44.17,
expiration date 12/31/49 17,075 1,741,650
El Paso Energy Capital Trust I
4.75% exercise price $41.59,
expiration date 3/31/28 34,600 1,337,290
____________
3,078,940
____________
Telecommunications - 0.14%
Lucent Technologies Capital Trust I
7.75% exercise price $24.80,
expiration date 3/15/17 1,000 1,026,500
____________
1,026,500
____________
Utilities - 0.62%
~ CenterPoint Energy 2.00%
exercise price $18.09,
expiration date 9/15/29 26,000 959,920
Entergy 7.625%
exercise price $87.64,
expiration date 2/17/09 37,500 2,226,562
NRG Energy 5.75%
exercise price $60.45,
expiration date 3/16/09 5,335 1,457,789
____________
4,644,271
____________
Total Convertible Preferred Stock
(cost $28,096,853) 28,549,551
____________
________________________________________________________________________________
Preferred Stock - 0.91%
________________________________________________________________________________
Leisure, Lodging & Entertainment - 0.05%
Red Lion Hotels
Capital Trust 9.50% 15,579 421,100
____________
421,100
____________
Real Estate - 0.86%
Equity Inns Series B 8.75% 18,300 478,545
LaSalle Hotel Properties 10.25% 111,500 2,870,010
Ramco-Gershenson
Properties 9.50% 15,700 422,409
SL Green Realty 7.625% 103,000 2,666,670
____________
6,437,634
____________
Total Preferred Stock
(cost $6,825,579) 6,858,734
____________
(continues) 17
Statement of net assets
Delaware Dividend Income Fund
Principal Market
Amount Value
________________________________________________________________________________
<< Senior Secured Loans - 0.14%
________________________________________________________________________________
General Motors 7.745% 11/17/13 $ 500,000 $ 500,625
HCA 8.086% 11/17/13 500,000 503,594
____________
Total Senior Secured Loans
(cost $1,001,875) 1,004,219
____________
Number of
Shares
________________________________________________________________________________
Exchange Traded Funds - 0.33%
________________________________________________________________________________
iShares Dow Jones U.S. Real Estate
Index Fund 29,200 2,505,360
____________
Total Exchange Traded Funds
(cost $1,550,582) 2,505,360
____________
________________________________________________________________________________
Warrants - 0.00%
________________________________________________________________________________
+# Solutia 144A,
exercise price $7.59,
expiration date 7/15/09 12 0
____________
Total Warrants (cost $1,021) 0
____________
Principal
Amount
________________________________________________________________________________
Commercial Mortgage-Backed Securities - 0.10%
________________________________________________________________________________
# First Union National Bank
Commercial Mortgage Trust
Series 2001-C2 L 144A 6.46%
1/12/43 $ 750,000 765,522
____________
Total Commercial Mortgage-
Backed Securities
(cost $761,221) 765,522
____________
________________________________________________________________________________
Repurchase Agreements - 4.62%
________________________________________________________________________________
With BNP Paribas 5.26% 12/1/06
(dated 11/30/06, to be
repurchased at $15,325,239,
collateralized by $15,747,000 U.S.
Treasury Notes 2.75% due
8/15/07, market value
$15,640,613) 15,323,000 15,323,000
With Cantor Fitzgerald 5.26%
12/1/06 (dated 11/30/06, to be
repurchased at $9,346,365,
collateralized by $7,577,000 U.S.
Treasury Bills due 12/28/06,
market value $7,549,871 and
$1,945,000 U.S. Treasury Notes
6.25% due 2/15/07, market
value $1,984,758) 9,345,000 9,345,000
With UBS Warburg 5.26%
12/1/06 (dated 11/30/06, to be
repurchased at $10,104,476,
collateralized by $10,559,000
U.S. Treasury Bills due 5/24/07,
market value $10,311,513) 10,103,000 10,103,000
____________
Total Repurchase Agreements
(cost $34,771,000) 34,771,000
____________
Market
Value
________________________________________________________________________________
________________________________________________________________________________
Total Market Value of Securities - 99.58%
(cost $669,293,596) $748,907,689
Receivables and Other Assets
Net of Liabilities - 0.42% 3,178,633
____________
Net Assets Applicable to 59,759,754
Shares Outstanding - 100.00% $752,086,322
____________
Net Asset Value - Delaware Dividend Income Fund
Class A ($398,124,258 / 31,630,206 Shares) $12.59
______
Net Asset Value - Delaware Dividend Income Fund
Class B ($77,757,604 / 6,180,623 Shares) $12.58
______
Net Asset Value - Delaware Dividend Income Fund
Class C ($269,273,658 / 21,398,311 Shares) $12.58
______
Net Asset Value - Delaware Dividend Income Fund
Class R ($4,275,192 / 339,769 Shares) $12.58
______
Net Asset Value - Delaware Dividend Income Fund
Institutional Class ($2,655,610 / 210,845 Shares) $12.60
______
Components of Net Assets at November 30, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $680,871,527
Undistributed net investment income 3,893,574
Accumulated net realized loss on investments (12,292,872)
Net unrealized appreciation of investments 79,614,093
_____________
Total net assets $752,086,322
_____________
} 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 year ended November 30, 2006.
++ Non-income producing security. Security is currently in default.
~ Variable rate security. The rate shown is the rate as of November 30, 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.
; Step coupon bond. Coupon increases periodically based on a predetermined
schedule. Stated interest rate in effect at November 30, 2006.
# Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. At November 30, 2006, the aggregate amount of Rule 144A
securi- ties equaled $74,010,908, which represented 9.84% of the Fund's net
assets. See Note 9 in "Notes to Financial Statements."
<< Senior Secured Loans generally pay interest at rates which are periodically
redetermined by reference to a base lending rate plus a premium. These base
lending rates are generally (i) the prime rate offered by one or more United
States banks, (ii) the lending rate offered by one or more European banks
such as the London Inter-Bank Offered Rate ('LIBOR') and (iii) the
certificate of deposit rate. Senior Secured Loans may be subject to
restrictions on resale.
18
________________________________________________________________________________
________________________________________________________________________________
Summary of Abbreviations:
ADR - American Depositary Receipts
REIT - Real Estate Investment Trust
Net Asset Value and Offering Price Per Share -
Delaware Dividend Income Fund
Net asset value Class A (A) $12.59
Sales charge (5.75% of offering price) (B) 0.77
______
Offering price $13.36
______
(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
19
Statement of operations
Delaware Dividend Income Fund
Year Ended November 30, 2006
Investment Income:
Dividends $12,617,485
Interest 14,920,952 $ 27,538,437
___________ ____________
Expenses:
Management fees 3,801,735
Distribution expenses - Class A 972,189
Distribution expenses - Class B 649,583
Distribution expenses - Class C 2,012,661
Distribution expenses - Class R 20,154
Dividend disbursing and transfer agent fees and expenses 972,317
Accounting and administration expenses 236,783
Reports and statements to shareholders 121,571
Trustees' fees and benefits 114,627
Registration fees 106,017
Legal fees 62,110
Audit and taxes 29,917
Insurance fees 26,898
Custodian fees 18,467
Consulting fees 16,499
Pricing fees 9,306
Dues and services 6,417
Trustees' expenses 3,598
Taxes (other than taxes on income) 2,466 9,183,315
___________
Less expenses absorbed or waived (1,026,166)
Less waiver of distribution expenses - Class A (160,482)
Less waiver of distribution expenses - Class R (3,352)
Less expense paid indirectly (7,146)
____________
Total expenses 7,986,169
____________
Net Investment Income 19,552,268
____________
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments 7,715,241
Net change in unrealized appreciation/depreciation of investments 74,465,702
____________
Net Realized and Unrealized Gain on Investments 82,180,943
____________
Net Increase in Net Assets Resulting from Operations $101,733,211
____________
See accompanying notes
20
Statements of changes in net assets
Delaware Dividend Income Fund
Year Ended
11/30/06 11/30/05
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 19,552,268 $ 13,476,249
Net realized gain on investments 7,715,241 4,692,803
Net change in unrealized appreciation/depreciation of investments 74,465,702 (2,561,963)
____________ ____________
Net increase in net assets resulting from operations 101,733,211 15,607,089
____________ ____________
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (12,346,220) (6,111,307)
Class B (2,012,242) (1,112,078)
Class C (6,099,994) (3,064,142)
Class R (102,054) (21,534)
Institutional Class (51,228) (12,391)
Net realized gain on investments:
Class A (1,682,444) (829,375)
Class B (342,772) (249,797)
Class C (981,242) (644,998)
Class R (8,517) (2,737)
Institutional Class (5,576) (1,641)
____________ ____________
(23,632,289) (12,050,000)
____________ ____________
Capital Share Transactions:
Proceeds from shares sold:
Class A 133,284,524 155,512,307
Class B 21,478,794 30,360,760
Class C 105,550,977 95,529,471
Class R 2,559,798 1,064,376
Institutional Class 1,573,726 919,948
Net asset value of shares issued upon reinvestment of dividends and
distributions:
Class A 10,288,514 5,175,642
Class B 1,934,390 1,092,408
Class C 5,828,929 2,975,103
Class R 110,569 24,272
Institutional Class 52,127 11,878
Net assets from reorganization (1):
Class A - 85,145,873
____________ ____________
282,662,348 377,812,038
____________ ____________
Cost of shares repurchased:
Class A (72,655,974) (68,079,584)
Class B (11,934,293) (6,143,372)
Class C (34,751,604) (15,879,276)
Class R (307,016) (49,450)
Institutional Class (123,737) (98,155)
____________ ____________
(119,772,624) (90,249,837)
____________ ____________
Increase in net assets derived from capital share transactions 162,889,724 287,562,201
____________ ____________
Net Increase in Net Assets 240,990,646 291,119,290
Net Assets:
Beginning of year 511,095,676 219,976,386
____________ ____________
End of year (including undistributed net investment income $ 752,086,322 $511,095,676
of $3,893,574 and $5,363,184, respectively) ____________ ____________
(1) See Note 7 in "Notes to Financial Statements."
See accompanying notes
21
Financial highlights
Delaware Dividend Income Fund Class A
Selected data for each share of the Fund outstanding throughout each period
were as follows:
Year Ended
______________________________________________________________
11/30/06 11/30/05 11/30/04 11/30/03 11/30/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.140 $11.050 $10.210 $ 9.030 $9.230
Income (loss) from investment operations:
Net investment income (1) 0.422 0.450 0.345 0.450 0.429
Net realized and unrealized gain (loss) on investments 1.551 0.081 0.891 1.213 (0.196)
_______ _______ _______ _______ ______
Total from investment operations 1.973 0.531 1.236 1.663 0.233
_______ _______ _______ _______ ______
Less dividends and distributions from:
Net investment income (0.457) (0.360) (0.362) (0.483) (0.433)
Net realized gain on investments (0.066) (0.081) (0.034) - -
_______ _______ _______ _______ ______
Total dividends and distributions (0.523) (0.441) (0.396) (0.483) (0.433)
_______ _______ _______ _______ ______
Net asset value, end of period $12.590 $11.140 $11.050 $10.210 $9.030
_______ _______ _______ _______ ______
Total return (2) 18.34% 4.89% 12.38% 19.45% 2.58%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $398,124 $285,159 $105,253 $5,821 $1
Ratio of expenses to average net assets 1.01% 1.00% 1.00% 0.79% 0.75%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.23% 1.27% 1.32% 2.05% 1.30%
Ratio of net investment income to average net assets 3.64% 4.05% 3.26% 4.69% 4.71%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 3.42% 3.78% 2.94% 3.43% 4.16%
Portfolio turnover 51% 85% 95% 212% 188%
__________________________________________________________________________________________________________________________________
(1) The average shares outstanding method has been applied for per share information.
(2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return
reflects 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
22
Delaware Dividend Income Fund Class B
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
__________________________________ 10/1/03 (1)
to
11/30/06 11/30/05 11/30/04 11/30/03
__________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.130 $11.040 $10.200 $9.950
Income from investment operations:
Net investment income (2) 0.335 0.367 0.267 0.051
Net realized and unrealized gain on investments 1.552 0.079 0.889 0.199
_______ _______ _______ _______
Total from investment operations 1.887 0.446 1.156 0.250
_______ _______ _______ _______
Less dividends and distributions from:
Net investment income (0.371) (0.275) (0.282) -
Net realized gain on investments (0.066) (0.081) (0.034) -
_______ _______ _______ _______
Total dividends and distributions (0.437) (0.356) (0.316) -
_______ _______ _______ _______
Net asset value, end of period $12.580 $11.130 $11.040 $10.200
_______ _______ _______ _______
Total return (3) 17.46% 4.09% 11.54% 2.51%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $77,757 $57,904 $32,165 $2,125
Ratio of expenses to average net assets 1.76% 1.75% 1.75% 1.75%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.93% 1.97% 2.02% 4.10%
Ratio of net investment income to average net assets 2.89% 3.30% 2.51% 3.65%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 2.72% 3.08% 2.25% 1.30%
Portfolio turnover 51% 85% 95% 212% (4)
___________________________________________________________________________________________________________________________________
(1) Date of commencement of operations; ratios have been annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share information.
(3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. 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.
(4) Portfolio turnover is representative of the Fund for the entire year.
See accompanying notes
(continues) 23
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
_____________________________________ 10/1/03 (1)
to
11/30/06 11/30/05 11/30/04 11/30/03
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.130 $11.040 $10.200 $ 9.950
Income from investment operations:
Net investment income (2) 0.335 0.367 0.267 0.051
Net realized and unrealized gain on investments 1.552 0.079 0.889 0.199
_______ _______ _______ _______
Total from investment operations 1.887 0.446 1.156 0.250
_______ _______ _______ _______
Less dividends and distributions from:
Net investment income (0.371) (0.275) (0.282) -
Net realized gain on investments (0.066) (0.081) (0.034) -
_______ _______ _______ _______
Total dividends and distributions (0.437) (0.356) (0.316) -
_______ _______ _______ _______
Net asset value, end of period $12.580 $11.130 $11.040 $10.200
_______ _______ _______ _______
Total return (3) 17.46% 4.09% 11.53% 2.51%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $269,274 $165,663 $82,083 $4,341
Ratio of expenses to average net assets 1.76% 1.75% 1.75% 1.75%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.93% 1.97% 2.02% 4.10%
Ratio of net investment income to average net assets 2.89% 3.30% 2.52% 3.65%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 2.72% 3.08% 2.25% 1.30%
Portfolio turnover 51% 85% 95% 212% (4)
____________________________________________________________________________________________________________________________________
(1) Date of commencement of operations; ratios have been annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share information.
(3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. 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.
(4) Portfolio turnover is representative of the Fund for the entire year.
See accompanying notes
24
Delaware Dividend Income Fund Class R
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
_____________________________________ 10/1/03 (1)
to
11/30/06 11/30/05 11/30/04 11/30/03
____________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.130 $11.040 $10.220 $9.950
Income from investment operations:
Net investment income (2) 0.394 0.416 0.308 0.056
Net realized and unrealized gain on investments 1.551 0.078 0.879 0.214
_______ _______ _______ _______
Total from investment operations 1.945 0.494 1.187 0.270
_______ _______ _______ _______
Less dividends and distributions from:
Net investment income (0.429) (0.323) (0.333) -
Net realized gain on investments (0.066) (0.081) (0.034) -
_______ _______ _______ _______
Total dividends and distributions (0.495) (0.404) (0.367) -
_______ _______ _______ _______
Net asset value, end of period $12.580 $11.130 $11.040 $10.220
_______ _______ _______ _______
Total return (3) 18.06% 4.55% 11.86% 2.71%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $4,275 $1,429 $373 $3
Ratio of expenses to average net assets 1.26% 1.30% 1.35% 1.35%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.53% 1.57% 1.62% 3.70%
Ratio of net investment income to average net assets 3.39% 3.75% 2.89% 4.05%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 3.12% 3.48% 2.62% 1.70%
Portfolio turnover 51% 85% 95% 212% (4)
____________________________________________________________________________________________________________________________________
(1) Date of commencement of operations; ratios have been annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share information.
(3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value. 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.
(4) Portfolio turnover is representative of the Fund for the entire year.
See accompanying notes
(continues) 25
Financial highlights
Delaware Dividend Income Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
______________________________________________________________
11/30/06 11/30/05 11/30/04 11/30/03 11/30/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.140 $11.050 $10.220 $9.030 $9.230
Income (loss) from investment operations:
Net investment income (1) 0.452 0.477 0.371 0.453 0.429
Net realized and unrealized gain (loss) on investments 1.559 0.082 0.882 1.220 (0.196)
_______ _______ _______ _______ ______
Total from investment operations 2.011 0.559 1.253 1.673 0.233
_______ _______ _______ _______ ______
Less dividends and distributions from:
Net investment income (0.485) (0.388) (0.389) (0.483) (0.433)
Net realized gain on investments (0.066) (0.081) (0.034) - -
_______ _______ _______ _______ ______
Total dividends and distributions (0.551) (0.469) (0.423) (0.483) (0.433)
_______ _______ _______ _______ ______
Net asset value, end of period $12.600 $11.140 $11.050 $10.220 $9.030
_______ _______ _______ _______ ______
Total return (2) 18.72% 5.16% 12.55% 19.56% 2.58%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,656 $941 $102 $3,879 $3,233
Ratio of expenses to average net assets 0.76% 0.75% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 0.93% 0.97% 1.02% 1.75% 1.00%
Ratio of net investment income to average net assets 3.89% 4.30% 3.49% 4.73% 4.71%
Ratio of net investment income to average net assets
prior to expense limitation and expense paid indirectly 3.72% 4.08% 3.22% 3.73% 4.46%
Portfolio turnover 51% 85% 95% 212% 188%
___________________________________________________________________________________________________________________________________
(1) The average shares outstanding method has been applied for per share information.
(2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value. Total investment return reflects waivers and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in effect.
See accompanying notes
26
Notes to financial statements
Delaware Dividend Income Fund
November 30, 2006
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 A share purchases of $1,000,000 or
more will incur a contingent deferred sales charge of 1% if redeemed during the
first year and 0.50% during the second year, provided that Delaware
Distributors, L.P. (DDLP) paid a financial advisor commission on the purchase of
those shares. 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 certain eligible 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
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).
In September 2006, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 157, Fair Value Measurements, (Statement 157). Statement 157
establishes a framework for measuring fair value in generally accepted
accounting principles, clarifies the definition of fair value within that
framework, and expands disclosures about the use of fair value measurements.
Statement 157 is intended to increase consistency and comparability among fair
value estimates used in financial reporting. Statement 157 is effective for
fiscal years beginning after November 15, 2007. Management does not expect the
adoption of Statement 157 to have an impact on the amounts reported in the
financial statements.
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.
On July 13, 2006, FASB released FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented, and disclosed
in the financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Fund's tax returns
to determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or expense in
the current year. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of the
effective date. Although the Fund's tax positions are currently being evaluated,
management does not expect the adoption of FIN 48 to have a material impact on
the Fund's 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 at least 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 directly attributable to the Fund are charged directly to the
Fund. Other expenses common to various funds within the Delaware Investments(R)
Family of Funds are generally allocated amongst such 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.
(continues) 27
Notes to financial statements
Delaware Dividend Income Fund
1. Significant Accounting Policies (continued)
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Discounts and premiums are amortized to interest
income over the lives of the respective securities. 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. The financial statements reflect an estimate of the
reclassification of the distribution character. 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 $13,611
for the year ended November 30, 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), 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
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 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 such 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 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%, respectively, of average daily net assets. Institutional Class shares
pay no distribution and service expenses.
At November 30, 2006, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $241,905
Dividend disbursing, transfer agent fees, accounting
and administration fees and other expenses
payable to DSC 119,576
Distribution fee payable to DDLP 357,620
Other expenses payable to DMC and affiliates * 14,547
* 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 and tax services, including internal, legal and tax services
provided to the Fund by DMC and/or its affiliates' employees. For the year ended
November 30, 2006, the Fund was charged $26,351 for internal legal and tax
services provided by DMC and or its affiliates' employees.
For the year ended November 30, 2006, DDLP earned $357,104 for commissions on
sales of the Fund's Class A shares. For the year ended November 30, 2006, DDLP
received gross contingent deferred sales charge commissions of $108, $122,443,
and $23,120 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.
Trustees' Fees and Benefits include expenses accrued by the Fund for each
Trustee's retainer, per meeting fees and retirement benefits. Independent
Trustees with over five years of uninterrupted service are eligible to
participate in a retirement plan that provides for the payment of benefits upon
retirement. The amount of the retirement benefit is determined based on factors
set forth in the plan including the number of years of service. On November 16,
2006, the Board of Trustees of the Fund unanimously voted to terminate the
retirement plan. Payments equal to the net present value of the earned benefits
will be made in 2007 to those independent Trustees so entitled. The retirement
benefit payout for the Fund is $82,474. Certain officers of DMC, DSC and DDLP
are officers and/or trustees of the Trust. These officers and trustees are paid
no compensation by the Fund.
3. Investments
For the year ended November 30, 2006, the Fund made purchases of $433,658,948
and sales of $285,696,928 of investment securities other than short-term
investments.
At November 30, 2006, the cost of investments for federal income tax purposes
was $671,115,810. At November 30, 2006, net unrealized appreciation was
$77,791,879 of which $84,046,270 related to unrealized appreciation of
investments and $6,254,391 related to unrealized depreciation of investments.
28
4. Dividends 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 years
ended November 30, 2006 and 2005 was as follows:
Year Ended
11/30/06 11/30/05
Ordinary income $21,284,131 $11,900,620
Long-term capital gain 2,348,158 149,380
___________ ___________
Total $23,632,289 $12,050,000
___________ ___________
5. Components of Net Assets on a Tax Basis
As of November 30, 2006, the components of net assets on a tax basis were as
follows:
Shares of beneficial interest $680,871,527
Undistributed ordinary income 4,713,130
Undistributed long-term capital gain 3,695,458
Capital loss carryforwards as of 11/30/06 * (14,985,672)
Unrealized appreciation of investments 77,791,879
____________
Net assets $752,086,322
____________
The differences between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales and tax treatment
of market discount and premium on debt instruments and contingent payment debt
instruments.
The undistributed earnings for Delaware Dividend Income Fund are estimated
pending final notification of tax character of distributions received from
investments in Real Estate Investment Trusts.
For Financial reporting purposes, capital accounts are adjusted to reflect the
tax character of permanent book/tax differences. Reclassifications are primarily
due to market discount and premium on certain debt instruments and contingent
payment debt instruments. Results of operations and net assets were not affected
by these reclassifications. For the year ended November 30, 2006, the Fund
recorded the following reclassifications:
Undistributed net investment income (410,140)
Accumulated net realized gain 284,748
Unrealized appreciation of investments ** $125,392
* The amount of this loss which can be utilized in subsequent years is subject
to an annual limitation in accordance with the Internal Revenue Code due to
the Fund merger with Lincoln Convertible Securities Fund in 2005.
** Adjustment to cost basis of securities.
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. The Fund utilized $3,746,418
of capital loss carryforwards in 2006. Such capital loss carryforwards expire as
follows: $6,921,228 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.
6. Capital Shares
Transactions in capital shares were as follows:
Year Ended
11/30/06 11/30/05
Shares sold:
Class A 11,418,053 14,033,811
Class B 1,845,212 2,744,286
Class C 9,016,333 8,613,965
Class R 228,242 96,885
Institutional Class 132,589 83,093
Shares issued upon reinvestment of
dividends and distributions:
Class A 909,798 467,873
Class B 171,290 98,641
Class C 515,139 268,682
Class R 9,703 2,197
Institutional Class 4,596 1,076
Shares issued from reorganization (1): - 7,705,509
__________ __________
24,250,955 34,116,018
__________ __________
Shares repurchased:
Class A (6,305,076) (6,128,075)
Class B (1,038,106) (554,170)
Class C (3,013,453) (1,436,755)
Class R (26,556) (4,499)
Institutional Class (10,828) (8,958)
__________ __________
(10,394,019) (8,132,457)
__________ __________
Net increase 13,856,936 25,983,561
__________ __________
(1) See Note 7.
For the years ended November 30, 2006 and 2005, 136,491 Class B shares were
converted to 136,372 Class A shares valued at $1,573,078 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.
(continues) 29
Notes to financial statements
Delaware Dividend Income Fund
7. 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
was 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. 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.
8. 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 Participant's allocation of the entire facility. The
Participants may borrow up to a maximum of one third of their net assets under
the agreement. The Fund had no amounts outstanding as of November 30, 2006, or
at any time during the year then ended.
9. Credit and Market Risk
The Fund may invest up to 15% of its total assets in illiquid securities, which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of these securities may impair 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
November 30, 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 year ended November 30,
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.
10. 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.
11. Tax Information (Unaudited)
The information set forth below is for the Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended November 30, 2006, the Fund designates distributions
paid during the year as follows:
(A) (B)
Long-Term Ordinary
Capital Gain Income Total (C)
Distributions Distributions * Distributions Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends (1)
_____________ ______________ _____________ _____________
10% 90% 100% 36%
(A) and (B) are based on a percentage of the Fund's total distributions.
(C) is based on a percentage of the Fund's ordinary income distributions.
(1) Qualifying dividends represent dividends, which qualify for the corporate
dividends received deduction.
* For the fiscal year ended November 30, 2006, certain dividends paid by the
Fund may be subject to a maximum tax rate of 15%, as provided by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. The Fund intends to designate up
to a maximum amount of $21,284,131 to be taxed at a maximum rate of 15%.
Complete information will be computed and reported in conjunction with your
2006 Form 1099-DIV.
30
Report of independent registered public accounting firm
To the Shareholders and Board of Trustees
Delaware Group Equity Funds V - Delaware Dividend Income Fund
We have audited the accompanying statement of net assets of Delaware Dividend
Income Fund (one of the series constituting Delaware Group Equity Funds V) (the
"Fund") as of November 30, 2006, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of November 30, 2006, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Delaware Dividend Income Fund of Delaware Group Equity Funds V at November 30,
2006, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and its financial
highlights for each of the periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
January 16, 2007
31
Board of trustees/directors and officers addendum
Delaware Investments(R) Family of Funds
A mutual fund is governed by a Board of Trustees/Directors ("Trustees"), which
has oversight responsibility for the management of a fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor, and others who perform services for the
fund. The independent fund trustees, in particular, are advocates for
shareholder interests. Each trustee has served in that capacity since he or she
was elected to or appointed to the Board of Trustees, and will continue to serve
until his or her retirement or the election of a new trustee in his or her
place. The following is a list of the Trustees and Officers with certain
background and related information.
Number of
Portfolios in Fund Other
Name, Complex Overseen Directorships
Address, Position(s) Length of Principal Occupation(s) by Trustee Held by
and Birth Date Held with Fund(s) Time Served During Past 5 Years or Officer Trustee or Officer
____________________________________________________________________________________________________________________________________
Interested Trustees
____________________________________________________________________________________________________________________________________
Patrick P. Coyne (1) Chairman, Chairman and Trustee Patrick P. Coyne has served in 83 None
2005 Market Street President, since August 16, 2006 various executive capacities
Philadelphia, PA Chief Executive at different times at
19103 Officer, and President and Delaware Investments. (2)
Trustee Chief Executive Officer
April 14, 1963 since August 1, 2006
____________________________________________________________________________________________________________________________________
Independent Trustees
____________________________________________________________________________________________________________________________________
Thomas L. Bennett Trustee Since Private Investor - 83 None
2005 Market Street March 2005 (March 2004-Present)
Philadelphia, PA
19103 Investment Manager -
Morgan Stanley & Co.
October 4, 1947 (January 1984-March 2004)
____________________________________________________________________________________________________________________________________
John A. Fry Trustee Since President - 83 Director -
2005 Market Street January 2001 Franklin & Marshall College Community Health
Philadelphia, PA (June 2002-Present) Systems
19103
Executive Vice President - Director -
May 28, 1960 University of Pennsylvania Allied Barton
(April 1995-June 2002) Security Holdings
____________________________________________________________________________________________________________________________________
Anthony D. Knerr Trustee Since Founder and Managing Director - 83 None
2005 Market Street April 1990 Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990-Present)
December 7, 1938
____________________________________________________________________________________________________________________________________
Lucinda S. Landreth Trustee Since Chief Investment Officer - 83 None
2005 Market Street March 2005 Assurant, Inc.
Philadelphia, PA (Insurance)
19103 (2002-2004)
June 24, 1947
____________________________________________________________________________________________________________________________________
Ann R. Leven Trustee Since Consultant - 83 Director and
2005 Market Street September 1989 ARL Associates Audit Committee
Philadelphia, PA (1983-Present) Chairperson - Andy
19103 Warhol Foundation
November 1, 1940 Director and Audit
Committee Member -
Systemax, Inc.
____________________________________________________________________________________________________________________________________
32
Number of
Portfolios in Fund Other
Name, Complex Overseen Directorships
Address, Position(s) Length of Principal Occupation(s) by Trustee Held by
and Birth Date Held with Fund(s) Time Served During Past 5 Years or Officer Trustee or Officer
____________________________________________________________________________________________________________________________________
Independent Trustees (continued)
____________________________________________________________________________________________________________________________________
Thomas F. Madison Trustee Since President and Chief 83 Director -
2005 Market Street May 1999 Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
February 25, 1936 (January 1993-Present)
Director and Audit
Committee Member -
Digital River, Inc.
Director and Audit
Committee Member -
Rimage
Corporation
Director - Valmont
Industries, Inc.
____________________________________________________________________________________________________________________________________
Janet L. Yeomans Trustee Since Vice President 83 None
2005 Market Street April 1999 (January 2003-Present)
Philadelphia, PA and Treasurer
19103 (January 2006-Present)
3M Corporation
July 31, 1948
Ms. Yeomans has held
various management positions
at 3M Corporation since 1983.
____________________________________________________________________________________________________________________________________
J. Richard Zecher Trustee Since Founder - 83 Director and Audit
2005 Market Street March 2005 Investor Analytics Committee Member -
Philadelphia, PA (Risk Management) Investor Analytics
19103 (May 1999-Present)
Director and Audit
July 3, 1940 Founder - Committee Member -
Sutton Asset Management Oxigene, Inc.
(Hedge Fund)
(September 1998-Present)
____________________________________________________________________________________________________________________________________
Officers
____________________________________________________________________________________________________________________________________
David F. Connor Vice President, Vice President since David F. Connor has served as 83 None (3)
2005 Market Street Deputy General September 21, 2000 Vice President and Deputy
Philadelphia, PA Counsel, and Secretary General Counsel of
19103 and Secretary since Delaware Investments
October 2005 since 2000.
December 2, 1963
____________________________________________________________________________________________________________________________________
David P. O'Connor Senior Vice Senior Vice President, David P. O'Connor has served in 83 None (3)
2005 Market Street President, General Counsel, and various executive and legal
Philadelphia, PA General Counsel, Chief Legal Officer capacities at different times
19103 and Chief since at Delaware Investments.
Legal Officer October 2005
February 21, 1966
____________________________________________________________________________________________________________________________________
John J. O'Connor Senior Vice President Treasurer John J. O'Connor has served in 83 None (3)
2005 Market Street and Treasurer since various executive capacities
Philadelphia, PA February 2005 at different times at
19103 Delaware Investments.
June 16, 1957
____________________________________________________________________________________________________________________________________
Richard Salus Senior Chief Financial Richard Salus has served in 83 None (3)
2005 Market Street Vice President Officer since various executive capacities
Philadelphia, PA and November 1, 2006 at different times at
19103 Chief Financial Delaware Investments.
Officer
October 4, 1963
____________________________________________________________________________________________________________________________________
(1) Patrick P. Coyne is considered to be an "Interested Trustee" because he is an executive officer of the Fund's(s') investment
advisor.
(2) Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund's(s')
investment advisor, principal underwriter, and its transfer agent.
(3) David F. Connor, David P. O'Connor, John J. O'Connor, and Richard Salus serve in similar capacities for the six portfolios of
the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
John J. O'Connor also serves in a similar capacity for Lincoln Variable Insurance Products Trust, which has the same investment
advisor as the registrant.
The Statement of Additional Information for the Fund(s) includes additional
information about the Trustees and Officers and is available, without charge,
upon request by calling 800 523-1918.
33
About the organization
This annual report is for the information of Delaware Dividend Income Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware Dividend Income Fund and the
Delaware Investments(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
Patrick P. Coyne
Chairman, President, and
Chief Executive Officer
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
Consultant
ARL Associates
New York, NY
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
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
Richard Salus
Senior Vice President and
Chief Financial Officer
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.
34
Get shareholder reports and prospectuses online instead of in the mail.
> Visit www.delawareinvestments.com/edelivery
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! Please visit us at
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 INVESTMENTS LOGO]
(1184) Printed in the USA
AR-129 [11/06] CGI 1/07 MF-06-12-013 PO11491
Annual Report Delaware
Small Cap Value
Fund
November 30, 2006
Value equity fund
[DELAWARE INVESTMENTS LOGO] [LOGO] POWERED BY RESEARCH(R)
<page>
Table of contents
> Portfolio management review .................................................1
> Performance summary .........................................................4
> Disclosure of Fund expenses .................................................6
> Sector allocation & top 10 holdings .........................................7
> Statement of net assets .....................................................8
> Statement of operations ....................................................11
> Statements of changes in net assets ........................................12
> Financial highlights .......................................................13
> Notes to financial statements ..............................................18
> Report of independent registered public accounting firm ....................22
> Board of trustees/directors and officers addendum ..........................23
> About the organization .....................................................25
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) 2007 Delaware Distributors, L.P.
<page>
Portfolio management review
Delaware Small Cap Value Fund
November 30, 2006
The managers of Delaware Small Cap Value Fund provided the answers to the
questions below as a review of the Fund's activities for the fiscal year that
ended November 30, 2006. Please see pages 2 and 3 to learn more about the
investment management team.
Q: Please discuss the investment environment during the year ended November 30,
2006.
A: The market climate was generally favorable for value investors during the
year. Performance was led by more economically sensitive areas of the market,
including basic industries and capital spending, as well as real estate
investment trusts (REITs), whose strong performance was enhanced by their
above-average yields (source: Russell Investment Company). The combined effects
of higher energy prices and rising interest rates early in the period resulted
in some volatility among consumer cyclical stocks, including auto parts and
homebuilders. As a group, these were some of the weakest performers in the
market.
In June, the U.S. Federal Reserve (Fed) raised short-term interest rates for the
17th consecutive time. This increase was part of the Fed's prolonged strategy
to manage inflationary pressures. Following a very strong first quarter,
pessimism gripped the markets through July as investors grappled with weakening
economic data, interest rate uncertainty, and recessionary concerns.
Despite these headwinds, there was plenty of positive economic news, including
reports of solid corporate profits and strong spending in the consumer,
technology, utilities, and capital goods sectors. At its August meeting, the Fed
decided to leave interest rates unchanged. The move was welcomed by investors,
and coupled with falling gas prices contributed to a more favorable outlook and
stronger stock market performance for the remainder of the period.
Although it appears that U.S. economic growth is indeed slowing, we believe that
economic activity will remain relatively healthy and stable. At the same time,
we expect a deceleration in the rate of corporate profit growth.
Q: How did the Fund perform relative to its benchmark index and peer group for
the year ended November 30, 2006?
A: Class A shares of Delaware Small Cap Value Fund returned +16.26% at net asset
value and +9.56% at their maximum offer price (both figures reflect all
distributions reinvested). During the same year, the Fund's benchmark, the
Russell 2000 Value Index, gained 21.47% and its peer group, as measured by the
Lipper Small Cap Value Funds Average, returned +15.58% (source: Lipper, Inc.).
Q: What factors influenced performance?
A: It was a challenging year overall for small-cap value managers, as
lower-quality companies and REITs were often among the market's top performers.
The Fund held a smaller weighting than the benchmark index in REITs, based on
our belief that the sector remains overpriced. Our underweight position relative
to the benchmark had a negative impact on overall Fund performance.
We believe the general outperformance of companies with lower-quality financial
health also contributed to the Fund's underperformance. We remain committed to
investing in high-quality, undervalued companies that are generating strong cash
flows and which we believe offer the potential for long-term appreciation.
During the year, we maintained overweight positions versus the index in basic
industry and capital spending stocks, as well as the energy, technology, and
healthcare sectors. However, we trimmed exposure to capital spending and energy
during the period due to economic and valuation concerns. We also increased
consumer services to a slightly heavier weighting than the index and maintained
an underweight position in financial services and real estate.
Although sector weightings do influence performance, we are committed to
conducting bottom-up research (in which we seek attractive companies first, with
lesser emphasis on particular industries) and choosing investments one stock at
a time. The small-cap universe is comprised of more than 2,000 companies, many
of
The views expressed are current as of the date of this report and are subject to
change.
(continues) 1
<page>
Portfolio management review
Delaware Small Cap Value Fund
these relatively new and unknown businesses. Therefore, uncovering quality
investment opportunities requires a highly disciplined strategy. In order to
identify those companies with the most attractive growth prospects, we employ
exhaustive fundamental research.
We look for high-quality companies that generate sustainable revenues, maintain
healthy balance sheets, and realize excess cash flow. We also evaluate each
company's management, its product pipeline, and its competition. We also aim to
avoid large positions in any single company, thereby minimizing the effects of
an underperformer on the portfolio.
Q: What holdings contributed positively to performance?
A: Chaparral Steel, a manufacturer of steel beams used in non-residential
construction, generated strong performance for the Fund during the period.
Previously a division of Texas Industries, the company was spun off in 2005.
Chaparral has generated significant cash and may have the ability to lower debt
levels substantially. The company has also recently initiated a dividend,
authorized a share repurchase, and is benefiting from increased demand for
steel.
Another strong performer was Brocade Communications Systems, a company that
provides sophisticated systems for storing and managing large amounts of
electronic data. In our opinion, the stock reached a valuation at which it was
appropriate to realize profits by selling a portion of our holdings. We sold
some of our Brocade position late in the fiscal year.
Albemarle Corporation, a leading producer of bromine-based flame retardants, was
also a noteworthy contributor. The company benefited from an increase in prices
for its products, which contributed to higher profits during the period. The
company is paying down debt and currently benefiting from strong free cash flow.
Merger and acquisition activity was robust during the fiscal year, a trend that
is expected to continue. Delaware Small Cap Value Fund gained from several such
transactions, including Motorola's acquisition of Symbol Technologies. The Fund
sold its Symbol position shortly after Motorola announced the acquisition.
Q: What issues detracted from performance?
A: The Fund's position in specialty retailer Pier 1 Imports suffered
considerably during the year. Anticipated improvement in customer traffic failed
to materialize and we sold our position in Pier 1 Imports. Par Pharmaceuticals,
a generic drug maker, also hurt Fund performance and we eliminated our position
in July as our outlook for the company changed. Challenged by legal issues, the
company posted weaker than expected financials.
Despite negative returns, we held our position in Alpha Natural Resources, a
leading coal producer in central Appalachia. Although coal prices have risen
substantially, production costs have also increased considerably. The company's
margins were therefore not as strong as expected, although we think the stock
remains attractive, keeping in mind the general increase in energy consumption
in the U.S. We remain optimistic that production improvements and
cost-management measures have the potential to lead the stock to higher
valuations over time.
Investment Management Team
Christopher S. Beck, CFA
Senior Vice President, Senior Portfolio Manager
Mr. Beck, who joined Delaware Investments in 1997, leads the firm's
Small/Mid-Cap Value team. Previously, he served as a vice president at Pitcairn
Trust from 1995 to 1997, where he managed small-capitalization stocks and
analyzed equity sectors. Before that he was chief investment officer of the
University of Delaware from 1992 to 1995 and held management positions during
his seven years at Cypress Capital Management and four years at Wilmington
Trust. Mr. Beck earned a bachelor's degree at the University of Delaware and an
MBA from Lehigh University, and he is a member of the CFA Society of
Philadelphia.
2
<page>
Michael E. Hughes, CFA
Vice President, Senior Equity Analyst
Mr. Hughes is responsible for the analysis, purchase, and sale recommendations
of consumer staples, healthcare, and technology securities for the firm's
Small-Cap Value and Mid-Cap Value portfolios. Prior to joining Delaware
Investments in 2002, Mr. Hughes was a vice president of equity research at
Raymond James & Associates and a limited partner of equity research at J.C.
Bradford. He received a bachelor's degree in finance from Siena College and an
MBA from Vanderbilt University.
Kent P. Madden, CFA
Equity Analyst
Mr. Madden is responsible for equity research of consumer services, consumer
cyclicals, transportation, and business services stocks for the firm's Small-Cap
Value and Mid-Cap Value portfolios. Prior to joining Delaware Investments in
2004, he was an equity analyst at Gartmore Global Investments, where he
specialized in technology and telecommunications. He has also worked as an
equity analyst for Federated Investors, where he gained experience covering
small-capitalization consumer stocks, and Lehman Brothers as a corporate finance
analyst. Mr. Madden holds a bachelor's degree in economics from DePauw
University and an MBA from the University of Chicago.
Kelley A. McKee, CFA
Equity Analyst
Ms. McKee joined Delaware Investments in July 2005 as an equity analyst for the
firm's Small-Cap Value and Mid-Cap Value portfolios, where she assists the
portfolio manager with financial modeling and coverage of various sectors. For
the three years prior, she participated in Lincoln Financial Group's rotational
Professional Development Program. Ms. McKee earned a bachelor's degree in
finance from Georgetown University.
3
<page>
Performance summary
Delaware Small Cap Value Fund
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 523-1918 or visiting www.delawareinvestments.com/performance.
You should consider the investment objectives, risks, charges, and expenses of
the investment carefully before investing. The Delaware Small Cap Value Fund
prospectus contains this and other important information about the Fund. Please
request a prospectus through your financial advisor or by calling 800 523-1918
or visiting our Web site at www.delawareinvestments.com. Read the prospectus
carefully before you invest or send money.
Fund performance
Average annual total returns
Through November 30, 2006 1 year 5 years 10 years Lifetime
________________________________________________________________________________
Class A (Est. 6-24-87)
Excluding sales charge +16.26% +16.31% +12.67% +13.65%
Including sales charge +9.56% +14.94% +12.01% +13.30%
________________________________________________________________________________
Class B (Est. 9-6-94)
Excluding sales charge +15.38% +15.49% +12.04% +12.57%
Including sales charge +11.38% +15.24% +12.04% +12.57%
________________________________________________________________________________
Class C (Est. 11-29-95)
Excluding sales charge +15.39% +15.49% +11.89% +12.56%
Including sales charge +14.39% +15.49% +11.89% +12.56%
________________________________________________________________________________
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below.
Performance for Class B and C shares, excluding sales charges, assumes either
that contingent deferred sales charges did not apply or the investment was not
redeemed.
The Fund offers Class A, B, C, R, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 5.75% and have an annual
distribution and service fee of up to 0.30% of average daily net assets, but
such fee is currently subject to a contractual cap of 0.25% of average daily net
assets through March 31, 2007.
Class B shares are sold with a contingent deferred sales charge that declines
from 4% to zero depending on the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately eight years after purchase. They are also subject to an annual
distribution and service fee of 1% of average daily net assets. Ten-year and
lifetime performance figures for Class B shares reflect conversion to Class A
shares after eight years.
Class C shares are sold with a contingent deferred sales charge of 1% if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1% of average daily net assets.
The average annual returns for the one-year and lifetime (since June 2, 2003)
periods ended November 30, 2006 for the Delaware Small Cap Value Fund Class R
shares were 15.97% and 19.76%, respectively. Class R shares were first made
available on June 2, 2003 and are available only for certain retirement plan
products. They are sold without a sales charge and have an annual distribution
and service fee of 0.60% of average daily net assets, but such fee is currently
subject to a contractual cap of 0.50% of average daily net assets through March
31, 2007.
The average annual total returns for the 1-year, 5-year, 10-year, and lifetime
(since June 24, 1987) periods ended November 30, 2006 for Delaware Small Cap
Value Fund Institutional Class shares were +16.56%, +16.64%, +13.01%, and
+13.90%, respectively. Institutional Class shares were first made available on
November 9, 1992 and are available without sales or asset-based distribution
charges only to certain eligible institutional accounts. Institutional Class
performance prior to November 9, 1992 is based on Class A performance and was
adjusted to eliminate the sales charges, but not the asset-based distribution
charge of Class A shares.
The performance table above and the graph on the next page do not reflect the
deduction of taxes the shareholder would pay on Fund distributions or
redemptions of Fund shares.
4
<page>
Fund basics
As of November 30, 2006
________________________________________________________________________________
Fund objective
________________________________________________________________________________
The Fund seeks capital appreciation.
________________________________________________________________________________
Total Fund net assets
________________________________________________________________________________
$791 million
________________________________________________________________________________
Number of holdings
________________________________________________________________________________
121
________________________________________________________________________________
Fund start date
________________________________________________________________________________
June 24, 1987
________________________________________________________________________________
Nasdaq symbols CUSIPs
________________________________________________________________________________
Class A DEVLX 246097109
Class B DEVBX 246097307
Class C DEVCX 246097406
Class R DVLRX 246097505
Institutional Class DEVIX 246097208
Performance of a $10,000 Investment
November 30, 1996 through November 30, 2006
[PERFORMANCE OF A $10,000 INVESTMENT LINE GRAPH]
Chart assumes $10,000 invested on November 30, 1996 and includes the effect of a
5.75% front-end sales charge and the reinvestment of all distributions. The
chart also assumes $10,000 invested in the Russell 2000 Value Index on November
30, 1996.
Funds that invest in small and/or medium-sized company stocks typically involve
greater risk, particularly in the short term, than those investing in larger,
more established companies.
Performance of other Fund classes will vary due to different charges and
expenses.
The Russell 2000 Value Index generally measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth
values. An index is unmanaged and does not reflect the costs of operating a
mutual fund, such as the costs of buying, selling, and holding securities. You
cannot invest directly in an index.
Past performance is not a guarantee of future results.
5
<page>
Disclosure of Fund expenses
For the period June 1, 2006 to November 30, 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 June 1, 2006 to November 30, 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, as applicable. 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 6/1/06 to
6/1/06 11/30/06 Ratios 11/30/06 *
________________________________________________________________________________
Actual Fund Return
Class A $1,000.00 $1,066.80 1.43% $ 7.41
Class B 1,000.00 1,062.90 2.18% 11.27
Class C 1,000.00 1,062.70 2.18% 11.27
Class R 1,000.00 1,065.40 1.68% 8.70
Institutional Class 1,000.00 1,068.10 1.18% 6.12
________________________________________________________________________________
Hypothetical 5% Return (5% return before expenses)
Class A $1,000.00 $1,017.90 1.43% $ 7.23
Class B 1,000.00 1,014.14 2.18% 11.01
Class C 1,000.00 1,014.14 2.18% 11.01
Class R 1,000.00 1,016.65 1.68% 8.49
Institutional Class 1,000.00 1,019.15 1.18% 5.97
________________________________________________________________________________
* "Expenses Paid During Period" are equal to the Fund's annualized expense
ratio, multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
6
<page>
Sector allocation & top 10 holdings
Delaware Small Cap Value Fund
As of November 30, 2006
Sector designations may be different than the sector designations presented in
other Fund materials.
Percentage
Sector of Net Assets
________________________________________________________________________________
Common Stock 97.77%
Basic Industry 13.22%
Business Services 1.83%
Capital Spending 6.24%
Consumer Cyclical 2.70%
Consumer Services 13.36%
Consumer Staples 3.00%
Energy 6.10%
Financial Services 18.68%
Health Care 6.30%
Real Estate 5.07%
Technology 14.22%
Transportation 3.49%
Utilities 3.56%
________________________________________________________________________________
Repurchase Agreements 2.89%
________________________________________________________________________________
Securities Lending Collateral 8.44%
Fixed Rate Notes 0.87%
Variable Rate Notes 7.57%
________________________________________________________________________________
Total Market Value of Securities 109.10%
________________________________________________________________________________
Obligation to Return Securities Lending Collateral (8.44%)
________________________________________________________________________________
Liabilities Net of Receivables and Other Assets (0.66%)
________________________________________________________________________________
Total Net Assets 100.00%
________________________________________________________________________________
Holdings are for informational purposes only and are subject to change at any
time. They are not a recommendation to buy, sell, or hold any security.
Percentage
Top 10 Holdings of Net Assets
________________________________________________________________________________
Colonial BancGroup 1.48%
Brandywine Realty Trust 1.42%
Whiting Petroleum 1.42%
Berkley (W.R.) 1.37%
Emulex 1.37%
Wabtec 1.33%
Bank of Hawaii 1.32%
Newfield Exploration 1.25%
W-H Energy Services 1.24%
Crown Holdings 1.21%
________________________________________________________________________________
7
<page>
Statement of net assets
Delaware Small Cap Value Fund
November 30, 2006
Number of Market
Shares Value
________________________________________________________________________________
Common Stock - 97.77%
________________________________________________________________________________
Basic Industry - 13.22%
Albemarle 129,000 $ 8,996,460
+ Alpha Natural Resources 250,500 3,945,375
Arch Coal 160,200 5,751,180
Bowater 253,400 5,524,120
Chaparral Steel 155,800 7,244,700
Crane 167,600 6,385,560
+ Crown Holdings 465,700 9,593,420
FMC 104,500 7,406,960
+ Griffon 202,860 4,836,182
IPSCO 88,800 9,086,904
* MacDermid 235,900 7,702,135
*+ PolyOne 614,000 4,715,520
Spartech 212,700 6,363,984
* Texas Industries 86,700 5,917,275
Valspar 213,900 5,984,922
Westlake Chemical 155,100 5,079,525
_____________
104,534,222
_____________
Business Services - 1.83%
Brink's 162,300 9,111,522
*+ United Stationers 115,859 5,373,540
_____________
14,485,062
_____________
Capital Spending - 6.24%
+ Casella Waste Systems 345,700 3,771,587
Gibraltar Industries 203,314 4,454,610
Harsco 98,800 7,709,364
+ Insituform Technologies Class A 119,000 3,060,680
* Mueller Industries 187,900 6,407,390
Mueller Water Products Class A 213,700 3,312,350
Timken 171,900 5,112,306
* Wabtec 319,000 10,479,150
Walter Industries 103,900 4,996,551
_____________
49,303,988
_____________
Consumer Cyclical - 2.70%
* Beazer Homes USA 139,100 6,351,306
Furniture Brands International 153,800 2,648,436
* KB HOME 72,800 3,763,032
* MDC Holdings 97,400 5,564,462
+ WCI Communities 163,600 3,039,688
_____________
21,366,924
_____________
Consumer Services - 13.36%
Applebee's International 322,800 7,343,700
* Belo Class A 237,300 4,318,860
Borders Group 325,700 7,458,530
* Cato Class A 326,300 7,746,362
*+ CEC Entertainment 201,500 8,021,715
+ Dollar Tree Stores 245,000 7,352,450
* Kenneth Cole Productions Class A 126,900 3,032,910
*+ Lenox Group 92,600 564,860
* Men's Wearhouse 143,100 5,480,730
Meredith 128,700 6,962,670
PETsMART 170,300 5,037,474
Ross Stores 238,100 7,378,719
* Stage Stores 224,500 7,417,480
* Thor Industries 111,800 5,060,068
+ Timberland 83,000 2,593,750
Tuesday Morning 233,900 4,116,640
* Wolverine World Wide 224,350 6,519,611
+ Zale 298,300 9,178,691
_____________
105,585,220
_____________
Consumer Staples - 3.00%
American Greetings Class A 227,200 5,409,632
Bunge Limited 65,700 4,631,850
+ Constellation Brands 244,200 6,832,716
Del Monte Foods 607,200 6,855,288
_____________
23,729,486
_____________
Energy - 6.10%
+ Grey Wolf 745,100 5,275,308
+ Newfield Exploration 198,700 9,889,299
Southwest Gas 195,600 7,342,824
*+ TODCO 118,800 4,753,188
*+ W-H Energy Services 204,900 9,783,975
+ Whiting Petroleum 233,500 11,208,000
_____________
48,252,594
_____________
Financial Services - 18.68%
* Bank of Hawaii 202,200 10,439,586
BankUnited Financial Class A 283,600 7,231,800
Berkley (W.R.) 309,200 10,843,644
* Boston Private Financial Holdings 289,300 7,854,495
Colonial BancGroup 479,100 11,690,041
* First Midwest Bancorp 131,400 4,894,650
First Republic Bank 230,400 9,243,648
* Greater Bay Bancorp 298,200 7,675,668
* Harleysville Group 124,300 4,420,108
* Independent Bank 87,300 2,999,628
* Infinity Property & Casualty 143,500 6,479,025
*+ KBW 13,500 359,505
MAF Bancorp 150,000 6,598,500
NBT Bancorp 143,600 3,554,100
* Ohio Casualty 263,200 7,688,072
Platinum Underwriters Holdings 266,200 8,100,466
Protective Life 137,900 6,511,638
Provident Bankshares 233,000 8,590,710
StanCorp Financial Group 148,500 6,743,385
Sterling Financial 229,868 7,712,070
+ Triad Guaranty 150,400 8,091,520
_____________
147,722,259
_____________
Health Care - 6.30%
Arrow International 188,700 6,593,178
+ Community Health Systems 164,500 5,757,500
* Owens & Minor 223,600 6,938,308
+ Pediatrix Medical Group 190,900 9,191,835
Service Corp International 831,200 8,203,944
STERIS 267,100 6,875,154
Universal Health Services Class B 112,900 6,233,209
_____________
49,793,128
_____________
8
<page>
Number of Market
Shares Value
________________________________________________________________________________
Common Stock (continued)
________________________________________________________________________________
Real Estate - 5.07%
* Ashford Hospitality Trust 400,200 $ 5,250,624
Brandywine Realty Trust 318,937 11,210,636
Camden Property Trust 108,600 8,658,678
* Education Realty Trust 184,900 2,908,477
* Highland Hospitality 401,300 5,690,434
* Washington Real Estate
Investment Trust 149,100 6,391,917
_____________
40,110,766
_____________
Technology - 14.22%
Acxiom 321,400 8,009,288
+ BEA Systems 636,400 8,763,228
+ Bell Microproducts 387,000 2,662,560
+ Brocade Communications
Systems 498,200 4,608,350
*+ Checkpoint Systems 265,600 5,094,208
+ CommScope 291,200 8,785,504
+ Compuware 1,130,300 9,483,217
+ Emulex 517,900 10,808,573
+ Entegris 454,800 4,848,168
*+ Insight Enterprises 230,400 4,631,040
+ NETGEAR 188,300 4,895,800
*+ Parametric Technology 482,400 9,339,264
*+ Premiere Global Services 665,100 5,420,565
* QAD 242,800 1,990,960
*+ Sybase 319,800 7,656,012
+ Synopsys 310,100 7,923,055
Technitrol 274,000 7,529,520
_____________
112,449,312
_____________
Transportation - 3.49%
Alexander & Baldwin 192,200 8,485,630
+ Kirby 225,200 8,116,208
*+ Saia 88,000 2,181,520
SkyWest 197,400 4,982,376
+ YRC Worldwide 97,800 3,789,750
_____________
27,555,484
_____________
Utilities - 3.56%
Black Hills 110,100 3,931,671
*+ El Paso Electric 275,600 6,845,904
* FairPoint Communications 227,200 4,196,384
* Otter Tail 181,700 5,585,458
PNM Resources 247,000 7,582,900
_____________
28,142,317
_____________
Total Common Stock
(cost $577,329,225) 773,030,762
_____________
Principal
Amount
________________________________________________________________________________
Repurchase Agreements - 2.89%
________________________________________________________________________________
With BNP Paribas 5.26%
12/1/06 (dated 11/30/06,
to be repurchased at
$10,085,473, collateralized
by $10,363,000 U.S. Treasury
Notes 2.75% due 8/15/07,
market value $10,293,179) $10,084,000 10,084,000
With Cantor Fitzgerald 5.26%
12/1/06 (dated 11/30/06,
to be repurchased at
$6,150,899, collateralized
by $4,987,000 U.S. Treasury
Bills due 12/28/06, market
value $4,968,615 and
$1,280,000 U.S. Treasury
Notes 6.25% due 2/15/07,
market value $1,306,181) 6,150,000 6,150,000
With UBS Warburg 5.26%
12/1/06 (dated 11/30/06,
to be repurchased at
$6,649,971, collateralized
by $6,949,000 U.S. Treasury
Bills due 5/24/07, market
value $6,786,068) 6,649,000 6,649,000
_____________
Total Repurchase Agreements
(cost $22,883,000) 22,883,000
_____________
Total Market Value of Securities Before
Securities Lending Collateral - 100.66%
(cost $600,212,225) 795,913,762
_____________
________________________________________________________________________________
Securities Lending Collateral ** - 8.44%
________________________________________________________________________________
Short-Term Investments - 8.44%
Fixed Rate Notes - 0.87%
Citigroup Global Markets
5.32% 12/1/06 4,071,800 4,071,800
Credit Suisse First Boston
5.29% 12/13/06 2,827,957 2,827,957
_____________
6,899,757
_____________
~ Variable Rate Notes - 7.57%
American Honda Finance
5.32% 2/21/07 1,817,972 1,817,972
ANZ National 5.32% 12/31/07 403,994 403,994
Australia New Zealand
5.32% 12/31/07 2,019,969 2,019,969
Bank of America 5.32% 2/23/07 2,625,960 2,625,960
Bank of New York
5.31% 12/31/07 1,615,976 1,615,976
Barclays New York
5.31% 5/18/07 2,625,960 2,625,960
Bayerische Landesbank
5.37% 12/31/07 2,019,969 2,019,969
(continues) 9
<page>
Statement of net assets
Delaware Small Cap Value Fund
Principal Market
Amount Value
________________________________________________________________________________
Securities Lending Collateral (continued)
________________________________________________________________________________
~ Variable Rate Notes (continued)
Bear Stearns 5.38% 5/31/07 $2,423,963 $ 2,423,963
BNP Paribas 5.35% 12/31/07 2,019,969 2,019,969
Canadian Imperial Bank
5.30% 12/31/07 1,009,985 1,009,985
CDC Financial Products
5.36% 1/2/07 2,625,960 2,625,960
Citigroup Global Markets
5.38% 12/7/06 2,625,960 2,625,960
Commonwealth Bank
5.32% 12/31/07 2,019,969 2,019,969
Deutsche Bank London
5.34% 2/23/07 2,423,963 2,423,963
Dexia Bank 5.33% 9/28/07 2,827,860 2,827,402
Goldman Sachs
5.45% 11/30/07 2,625,960 2,625,960
Marshall & Ilsley Bank
5.30% 12/31/07 2,221,966 2,221,966
Merrill Lynch Mortgage Capital
5.41% 1/8/07 2,625,960 2,625,960
Morgan Stanley
5.49% 12/31/07 2,625,960 2,625,960
National Australia Bank
5.29% 3/7/07 2,504,762 2,504,762
National City Bank
5.32% 3/2/07 2,424,179 2,424,405
National Rural Utilities
5.31% 12/31/07 3,191,551 3,191,551
Nordea Bank New York
5.31% 5/16/07 1,009,960 1,009,960
Nordea Bank Norge
5.33% 12/31/07 2,020,015 2,019,969
Royal Bank of Scotland
5.31% 12/31/07 2,019,969 2,019,969
Societe Generale
5.29% 12/31/07 1,009,985 1,009,985
Toronto Dominion
5.32% 5/29/07 2,423,963 2,423,963
Wells Fargo 5.33% 12/31/07 2,019,969 2,019,969
____________
59,831,350
____________
Total Securities Lending Collateral
(cost $66,731,107) 66,731,107
_____________
Total Market Value of Securities - 109.10%
(cost $666,943,332) 862,644,869 !
Obligation to Return Securities Lending
Collateral ** - (8.44%) (66,731,107)
Liabilities Net of Receivables and
Other Assets - (0.66%) (5,243,454)
_____________
Net Assets Applicable to 19,280,361
Shares Outstanding - 100.00% $790,670,308
____________
Net Asset Value - Delaware Small Cap Value Fund
Class A ($493,192,785 / 11,752,383 Shares) $41.97
______
Net Asset Value - Delaware Small Cap Value Fund
Class B ($94,494,976 / 2,431,687 Shares) $38.86
______
Net Asset Value - Delaware Small Cap Value Fund
Class C ($145,385,501 / 3,742,947 Shares) $38.84
______
Net Asset Value - Delaware Small Cap Value Fund
Class R ($20,563,588 / 494,926 Shares) $41.55
______
Net Asset Value - Delaware Small Cap Value Fund
Institutional Class ($37,033,458 / 858,418 Shares) $43.14
______
Components of Net Assets at November 30, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $532,284,056
Accumulated net realized gain on investments 62,684,715
Net unrealized appreciation of investments 195,701,537
____________
Total net assets $790,670,308
____________
+ Non-income producing security for the year ended November 30, 2006.
* Fully or partially on loan.
~ Variable rate security. The interest rate shown is the rate as of November
30, 2006.
** See Note 8 in "Notes to Financial Statements."
! Includes $66,528,821 of securities loaned.
Net Asset Value and Offering Price per Share -
Delaware Small Cap Value Fund
Net asset value Class A (A) $41.97
Sales charge (5.75% of offering price) (B) 2.56
______
Offering price $44.53
______
(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 Small Cap Value Fund
Year Ended November 30, 2006
Investment Income:
Dividends $7,802,159
Interest 1,835,818
Securities lending income 185,550
Foreign tax withheld (6,100) $ 9,817,427
__________ ____________
Expenses:
Management fees 5,593,161
Distribution expenses - Class A 1,400,483
Distribution expenses - Class B 1,031,056
Distribution expenses - Class C 1,406,397
Distribution expenses - Class R 97,607
Dividend disbursing and transfer agent fees and expenses 2,126,852
Accounting and administration expenses 305,324
Reports and statements to shareholders 175,791
Trustees' fees and benefits 138,733
Registration fees 100,276
Legal fees 90,837
Audit and tax 43,343
Custodian fees 29,443
Insurance fees 28,875
Consulting fees 23,645
Dues and services 9,274
Pricing fees 2,752
Trustees expenses 2,548 12,606,397
__________
Less waiver of distribution expenses - Class A (161,878)
Less waiver of distribution expenses - Class R (16,188)
Less expenses paid indirectly (3,051)
____________
Total expenses 12,425,280
____________
Net Investment Loss (2,607,853)
____________
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currencies:
Net realized gain (loss) on:
Investments 65,387,973
Foreign currencies (301)
____________
Net realized gain 65,387,672
Net change in unrealized appreciation/depreciation of investments 48,589,690
____________
Net Realized and Unrealized Gain on Investments 113,977,362
____________
Net Increase in Net Assets Resulting from Operations $111,369,509
____________
See accompanying notes
11
<page>
Statements of changes in net assets
Delaware Small Cap Value Fund
Year Ended
11/30/06 11/30/05
Increase (Decrease) in Net Assets from Operations:
Net investment loss $ (2,607,853) $ (2,407,279)
Net realized gain on investments and foreign currencies 65,387,672 57,318,859
Net change in unrealized appreciation/depreciation of investments 48,589,690 5,620,978
_____________ _____________
Net increase in net assets resulting from operations 111,369,509 60,532,558
_____________ _____________
Dividends and Distributions to Shareholders from:
Net realized gain on investments:
Class A (32,439,821) (31,763,824)
Class B (8,943,393) (13,514,764)
Class C (10,293,335) (8,240,031)
Class R (867,999) (548,342)
Institutional Class (2,440,490) (2,698,187)
_____________ _____________
(54,985,038) (56,765,148)
_____________ _____________
Capital Share Transactions:
Proceeds from shares sold:
Class A 125,942,610 169,715,275
Class B 6,039,544 14,236,482
Class C 32,923,286 63,480,297
Class R 12,295,960 8,843,862
Institutional Class 13,937,387 14,240,093
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 30,500,487 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
_____________ _____________
242,914,559 323,642,825
_____________ _____________
Cost of shares repurchased:
Class A (109,663,657) (65,214,888)
Class B (36,107,010) (24,899,314)
Class C (26,385,778) (18,127,279)
Class R (4,587,529) (3,578,256)
Institutional Class (13,595,454) (10,142,609)
_____________ _____________
(190,339,428) (121,962,346)
_____________ _____________
Increase in net assets derived from capital share transactions 52,575,131 201,680,479
_____________ _____________
Net Increase in Net Assets 108,959,602 205,447,889
Net Assets:
Beginning of year 681,710,706 476,262,817
_____________ _____________
End of year (there was no undistributed net investment income at either year end) $ 790,670,308 $ 681,710,706
_____________ _____________
See accompanying notes
12
<page>
Financial highlights
Delaware Small Cap Value Fund Class A
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
____________________________________________________________________
11/30/06 11/30/05 11/30/04 11/30/03 11/30/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $39.110 $39.640 $35.220 $27.120 $29.350
Income (loss) from investment operations:
Net investment loss (1) (0.047) (0.075) (0.105) (0.136) (0.060)
Net realized and unrealized gain on investments 5.960 4.170 6.879 9.079 0.574
_______ _______ _______ _______ _______
Total from investment operations 5.913 4.095 6.774 8.943 0.514
_______ _______ _______ _______ _______
Less dividends and distributions:
From net realized gain on investments (3.053) (4.625) (2.354) (0.843) (2.744)
_______ _______ _______ _______ _______
Total dividends and distributions (3.053) (4.625) (2.354) (0.843) (2.744)
_______ _______ _______ _______ _______
Net asset value, end of period $41.970 $39.110 $39.640 $35.220 $27.120
_______ _______ _______ _______ _______
Total return (2) 16.26% 11.42% 20.52% 34.17% 1.60%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $493,193 $409,567 $270,332 $240,322 $180,696
Ratio of expenses to average net assets 1.41% 1.44% 1.54% 1.63% 1.63%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.44% 1.44% 1.54% 1.63% 1.63%
Ratio of net investment loss to average net assets (0.12%) (0.20%) (0.30%) (0.47%) (0.21%)
Ratio of net investment loss to average net assets
prior to expense limitation and expenses paid indirectly (0.15%) (0.20%) (0.30%) (0.47%) (0.21%)
Portfolio turnover 36% 33% 35% 42% 47%
___________________________________________________________________________________________________________________________________
(1) The average shares outstanding method has been applied for per share information.
(2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return
reflects 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) 13
<page>
Financial highlights
Delaware Small Cap Value Fund Class B
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
____________________________________________________________________
11/30/06 11/30/05 11/30/04 11/30/03 11/30/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $36.690 $37.690 $33.820 $26.260 $28.680
Income (loss) from investment operations:
Net investment loss (1) (0.306) (0.311) (0.334) (0.327) (0.252)
Net realized and unrealized gain on investments 5.529 3.936 6.558 8.730 0.576
_______ _______ _______ _______ _______
Total from investment operations 5.223 3.625 6.224 8.403 0.324
_______ _______ _______ _______ _______
Less dividends and distributions from:
Net realized gain on investments (3.053) (4.625) (2.354) (0.843) (2.744)
_______ _______ _______ _______ _______
Total dividends and distributions (3.053) (4.625) (2.354) (0.843) (2.744)
_______ _______ _______ _______ _______
Net asset value, end of period $38.860 $36.690 $37.690 $33.820 $26.260
_______ _______ _______ _______ _______
Total return (2) 15.38% 10.68% 19.69% 33.21% 0.91%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $94,495 $110,684 $111,348 $107,136 $86,641
Ratio of expenses to average net assets 2.14% 2.14% 2.24% 2.33% 2.33%
Ratio of net investment loss to average net assets (0.85%) (0.90%) (1.00%) (1.17%) (0.91%)
Portfolio turnover 36% 33% 35% 42% 47%
___________________________________________________________________________________________________________________________________
(1) The average shares outstanding method has been applied for per share information.
(2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge.
See accompanying notes
14
<page>
Delaware Small Cap Value Fund Class C
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
____________________________________________________________________
11/30/06 11/30/05 11/30/04 11/30/03 11/30/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $36.670 $37.680 $33.810 $26.250 $28.670
Income (loss) from investment operations:
Net investment loss (1) (0.306) (0.313) (0.333) (0.326) (0.251)
Net realized and unrealized gain on investments 5.529 3.928 6.557 8.729 0.575
_______ _______ _______ _______ _______
Total from investment operations 5.223 3.615 6.224 8.403 0.324
_______ _______ _______ _______ _______
Less dividends and distributions from:
Net realized gain on investments (3.053) (4.625) (2.354) (0.843) (2.744)
_______ _______ _______ _______ _______
Total dividends and distributions (3.053) (4.625) (2.354) (0.843) (2.744)
_______ _______ _______ _______ _______
Net asset value, end of period $38.840 $36.670 $37.680 $33.810 $26.250
_______ _______ _______ _______ _______
Total return (2) 15.39% 10.65% 19.69% 33.22% 0.91%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $145,385 $119,968 $66,313 $48,453 $34,140
Ratio of expenses to average net assets 2.14% 2.14% 2.24% 2.33% 2.33%
Ratio of net investment loss to average net assets (0.85%) (0.90%) (1.00%) (1.17%) (0.91%)
Portfolio turnover 36% 33% 35% 42% 47%
___________________________________________________________________________________________________________________________________
(1) The average shares outstanding method has been applied for per share information.
(2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge.
See accompanying notes
(continues) 15
<page>
Financial highlights
Delaware Small Cap Value Fund Class R
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended 6/2/03 (1)
______________________________________ to
11/30/06 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 (2) (0.138) (0.169) (0.209) (0.160)
Net realized and unrealized gain on investments 5.901 4.154 6.853 6.350
_______ _______ _______ _______
Total from investment operations 5.763 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 $41.550 $38.840 $39.480 $35.190
_______ _______ _______ _______
Total return (3) 15.97% 11.15% 20.15% 21.35%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $20,564 $10,574 $4,539 $1,740
Ratio of expenses to average net assets 1.64% 1.70% 1.84% 1.97%
Ratio of expenses to average net assets
prior to expense limitation and expenses paid indirectly 1.74% 1.74% 1.84% 1.97%
Ratio of net investment loss to average net assets (0.35%) (0.46%) (0.60%) (0.97%)
Ratio of net investment loss to average net assets
prior to expense limitation and expenses paid indirectly (0.45%) (0.50%) (0.60%) (0.97%)
Portfolio turnover 36% 33% 35% 42% (4)
____________________________________________________________________________________________________________________________________
(1) Date of commencement of operations, ratios have been annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share information.
(3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value. 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.
(4) The portfolio turnover is representative for the entire fund for the year ended November 30, 2003.
See accompanying notes
16
<page>
Delaware Small Cap Value Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
____________________________________________________________________
11/30/06 11/30/05 11/30/04 11/30/03 11/30/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $40.020 $40.350 $35.700 $27.400 $29.540
Income (loss) from investment operations:
Net investment income (loss) (1) 0.058 0.036 - (0.050) 0.026
Net realized and unrealized gain on investments 6.115 4.259 7.004 9.193 0.578
_______ _______ _______ _______ _______
Total from investment operations 6.173 4.295 7.004 9.143 0.604
_______ _______ _______ _______ _______
Less dividends and distributions:
From net realized gain on investments (3.053) (4.625) (2.354) (0.843) (2.744)
_______ _______ _______ _______ _______
Total dividends and distributions (3.053) (4.625) (2.354) (0.843) (2.744)
_______ _______ _______ _______ _______
Net asset value, end of period $43.140 $40.020 $40.350 $35.700 $27.400
_______ _______ _______ _______ _______
Total return (2) 16.56% 11.77% 20.88% 34.57% 1.88%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $37,033 $30,918 $23,731 $33,387 $19,459
Ratio of expenses to average net assets 1.14% 1.14% 1.24% 1.33% 1.33%
Ratio of net investment income (loss) to average net assets 0.15% 0.10% - (0.17%) 0.09%
Portfolio turnover 36% 33% 35% 42% 47%
___________________________________________________________________________________________________________________________________
(1) The average shares outstanding method has been applied for per share information.
(2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value.
See accompanying notes
17
<page>
Notes to financial statements
Delaware Small Cap Value Fund
November 30, 2006
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 A share purchases of $1,000,000 or
more will incur a contingent deferred sales charge of 1% if redeemed during the
first year and 0.50% during the second year, provided that Delaware
Distributors, L.P. (DDLP) paid a financial advisor a commission on the purchase
of those shares. 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 certain eligible 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).
In September 2006, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 157, Fair Value Measurements, (Statement 157). Statement 157
establishes a framework for measuring fair value in generally accepted
accounting principles, clarifies the definition of fair value within that
framework, and expands disclosures about the use of fair value measurements.
Statement 157 is intended to increase consistency and comparability among fair
value estimates used in financial reporting. Statement 157 is effective for
fiscal years beginning after November 15, 2007. Management does not expect the
adoption of Statement 157 to have an impact on the amounts reported in the
financial statements.
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.
On July 13, 2006, FASB released FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented, and disclosed
in the financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Fund's tax returns
to determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or expense in
the current year. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of the
effective date. Although the Fund's tax positions are currently being evaluated,
management does not expect the adoption of FIN 48 to have a material impact on
the Fund's 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 at least 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 directly attributable to the Fund are charged directly to the
Fund. Other expenses common to various funds within the Delaware Investments
Family of Funds are generally allocated amongst such 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.
18
<page>
1. Significant Accounting Policies (continued)
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 $40,168
for the year ended November 30, 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), 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 disbursing
and transfer agent services.
Pursuant to a distribution agreement and distribution plan, the Fund pays 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. 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%,
respectively, of average daily net assets. Prior to March 27, 2006, there was no
waiver on Class A distribution and service fees.
At November 30, 2006, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $471,685
Dividend disbursing, transfer agent, accounting
and administration fees and other expenses
payable to DSC 214,279
Distribution fees payable to DDLP 303,190
Other expenses payable to DMC and affiliates* 18,140
* 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 and tax services, including internal legal and tax services
provided to the Fund by DMC and/or its affiliates' employees. For the year ended
November 30, 2006, the Fund was charged $35,742 for internal legal and tax
services provided by DMC and/or its affiliates' employees.
For the year ended November 30, 2006, DDLP earned $68,291 for commissions on
sales of the Fund's Class A shares. For the year ended November 30, 2006, DDLP
received gross contingent deferred sales charge commissions of $432, $84,109 and
$20,081 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.
Trustees' fees and benefits include expenses accrued by the Fund for each
Trustee's retainer, per meeting fees and retirement benefits. Independent
Trustees with over five years of uninterrupted service are eligible to
participate in a retirement plan that provides for the payment of benefits upon
retirement. The amount of the retirement benefit is determined based on factors
set forth in the plan, including the number of years of service. On November 16,
2006, the Board of Trustees of the Fund unanimously voted to terminate the
retirement plan. Payments equal to the net present value of the earned benefits
will be made in 2007 to those independent Trustees so entitled. The retirement
benefit payout for the Fund is $96,525. Certain officers of DMC, DSC and DDLP
are officers and/or trustees of the Trust. These officers and trustees are paid
no compensation by the Fund.
3. Investments
For the year ended November 30, 2006, the Fund made purchases of $273,133,116
and sales of $262,661,519 of investment securities other than short-term
investments.
At November 30, 2006, the cost of investments for federal income tax purposes
was $667,034,483. At November 30, 2006, the net unrealized appreciation was
$195,610,386 of which $206,847,259 related to unrealized appreciation of
investments and $11,236,873 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 years ended November 30, 2006 and
2005 was as follows:
Year Ended
11/30/06 11/30/05
Ordinary Income $ 5,424,775 $12,396,508
Long-term capital gain 49,560,263 44,368,640
___________ ___________
Total $54,985,038 $56,765,148
___________ ___________
(continues) 19
<page>
Notes to financial statements
Delaware Small Cap Value Fund
5. Components of Net Assets on a Tax Basis
As of November 30, 2006, the components of net assets on a tax basis were as
follows:
Shares of beneficial interest $532,284,056
Undistributed ordinary income 15,350,008
Undistributed long-term capital gains 47,425,858
Unrealized appreciation of investments 195,610,386
____________
Net assets $790,670,308
____________
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, REIT dividend reclasses, and tax
treatment of gain (loss) on foreign currency transactions. Results of operations
and net assets were not affected by these reclassifications. For the year ended
November 30, 2006, the Fund recorded the following reclassifications:
Accumulated net investment loss $2,607,853
Accumulated net realized gain (2,607,853)
6. Capital Shares
Transactions in capital shares were as follows:
Year Ended
11/30/06 11/30/05
Shares sold:
Class A 3,248,371 4,580,248
Class B 167,238 410,074
Class C 913,427 1,810,137
Class R 317,280 238,720
Institutional Class 352,145 375,009
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
__________ __________
6,445,988 8,930,496
__________ __________
Shares repurchased:
Class A (2,799,853) (1,764,729)
Class B (995,799) (715,069)
Class C (725,220) (522,361)
Class R (118,418) (96,840)
Institutional Class (330,803) (264,582)
__________ __________
(4,970,093) (3,363,581)
__________ __________
Net increase 1,475,895 5,566,915
__________ __________
For the years ended November 30, 2006 and 2005, 413,129 Class B shares were
converted to 384,420 Class A shares valued at $14,931,874 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.
7. 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 Participant's allocation of the entire facility. The
Participants may borrow up to a maximum of one third of their net assets under
the agreement. The Fund had no amounts outstanding as of November 30, 2006, or
at any time during the year.
8. 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 JP 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 November 30, 2006, the market value of the securities on loan was
$66,528,821, 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."
20
<page>
9. 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 such
companies. Investments in small-sized companies may be more volatile than
investments in larger companies for a number of reasons, which include limited
financial resources or a dependence on narrow product lines.
The Fund invests in REITs and is subject to some of the risks associated with
that industry. If the Fund holds real estate directly as a result of defaults or
receives rental income directly from real estate holdings, its tax status as a
regulated investment company may be jeopardized. There were no direct holdings
during the year ended November 30, 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 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
November 30, 2006, there were no Rule 144A securities and no securities have
been determined to be illiquid under the Fund's Liquidity Procedures.
10. 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.
11. Tax Information (Unaudited)
The information set forth below is for the Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this information.
For the fiscal year ended November 30, 2006, the Fund designates distributions
paid during the year as follows:
(A) (B)
Long-Term Capital Ordinary Income Total (C)
Gain Distributions Distributions * Distributions Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends (1)
__________________ _______________ _____________ _____________
90% 10% 100% 7%
(A) and (B) are based on a percentage of the Fund's total distributions.
(C) is based on a percentage of ordinary income of the Fund.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* For the fiscal year ended November 30, 2006, certain dividends paid by the
Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs
and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to
designate up to a maximum amount of $5,424,775 to be taxed at a maximum rate
of 15%. Complete information will be computed and reported in conjunction with
your 2006 Form 1099-DIV.
21
<page>
Report of independent
registered public accounting firm
To the Shareholders and Board of Trustees
Delaware Group Equity Funds V - Delaware Small Cap
Value Fund
We have audited the accompanying statement of net assets of Delaware Small Cap
Value Fund (one of the series constituting Delaware Group Equity Funds V) (the
"Fund") as of November 30, 2006, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of November 30, 2006, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Delaware Small Cap Value Fund of Delaware Group Equity Funds V at November 30,
2006, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and its financial
highlights for each of the periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
January 16, 2007
22
<page>
Board of trustees/directors
and officers addendum
Delaware Investments(R) Family of Funds
A mutual fund is governed by a Board of Trustees/Directors ("Trustees"), which
has oversight responsibility for the management of a fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor, and others who perform services for the
fund. The independent fund trustees, in particular, are advocates for
shareholder interests. Each trustee has served in that capacity since he or she
was elected to or appointed to the Board of Trustees, and will continue to
serve until his or her retirement or the election of a new trustee in his or
her place. The following is a list of the Trustees and Officers with certain
background and related information.
Number of
Portfolios in Fund Other
Name, Complex Overseen Directorships
Address, Position(s) Length of Principal Occupation(s) by Trustee Held by
and Birth Date Held with Fund(s) Time Served During Past 5 Years or Officer Trustee or Officer
____________________________________________________________________________________________________________________________________
Interested Trustees
____________________________________________________________________________________________________________________________________
Patrick P. Coyne (1) Chairman, Chairman and Trustee Patrick P. Coyne has served in 83 None
2005 Market Street President, since August 16, 2006 various executive capacities
Philadelphia, PA Chief Executive at different times at
19103 Officer, and President and Delaware Investments. (2)
Trustee Chief Executive Officer
April 14, 1963 since August 1, 2006
____________________________________________________________________________________________________________________________________
Independent Trustees
____________________________________________________________________________________________________________________________________
Thomas L. Bennett Trustee Since Private Investor - 83 None
2005 Market Street March 2005 (March 2004-Present)
Philadelphia, PA
19103 Investment Manager -
Morgan Stanley & Co.
October 4, 1947 (January 1984-March 2004)
____________________________________________________________________________________________________________________________________
John A. Fry Trustee Since President - 83 Director -
2005 Market Street January 2001 Franklin & Marshall College Community Health
Philadelphia, PA (June 2002-Present) Systems
19103
Executive Vice President - Director -
May 28, 1960 University of Pennsylvania Allied Barton
(April 1995-June 2002) Security Holdings
____________________________________________________________________________________________________________________________________
Anthony D. Knerr Trustee Since Founder and Managing Director - 83 None
2005 Market Street April 1990 Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990-Present)
December 7, 1938
____________________________________________________________________________________________________________________________________
Lucinda S. Landreth Trustee Since Chief Investment Officer - 83 None
2005 Market Street March 2005 Assurant, Inc.
Philadelphia, PA (Insurance)
19103 (2002-2004)
June 24, 1947
____________________________________________________________________________________________________________________________________
Ann R. Leven Trustee Since Consultant - 83 Director and
2005 Market Street September 1989 ARL Associates Audit Committee
Philadelphia, PA (Financial Planning) Chairperson - Andy
19103 (1983-Present) Warhol Foundation
November 1, 1940 Director and Audit
Committee Member -
Systemax, Inc.
____________________________________________________________________________________________________________________________________
23
<page>
Number of
Portfolios in Fund Other
Name, Complex Overseen Directorships
Address, Position(s) Length of Principal Occupation(s) by Trustee Held by
and Birth Date Held with Fund(s) Time Served During Past 5 Years or Officer Trustee or Officer
____________________________________________________________________________________________________________________________________
Independent Trustees (continued)
____________________________________________________________________________________________________________________________________
Thomas F. Madison Trustee Since President and Chief 83 Director -
2005 Market Street May 1997 Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
February 25, 1936 (January 1993-Present)
Director and Audit
Committee Member -
Digital River, Inc.
Director and Audit
Committee Member -
Rimage
Corporation
Director - Valmont
Industries, Inc.
____________________________________________________________________________________________________________________________________
Janet L. Yeomans Trustee Since Vice President 83 None
2005 Market Street April 1999 (January 2003-Present)
Philadelphia, PA and Treasurer
19103 (January 2006-Present)
3M Corporation
July 31, 1948
Ms. Yeomans has held
various management positions
at 3M Corporation since 1983.
____________________________________________________________________________________________________________________________________
J. Richard Zecher Trustee Since Founder - 83 Director and Audit
2005 Market Street March 2005 Investor Analytics Committee Member -
Philadelphia, PA (Risk Management) Investor Analytics
19103 (May 1999-Present)
Director and Audit
July 3, 1940 Founder - Committee Member -
Sutton Asset Management Oxigene, Inc.
(Hedge Fund)
(September 1998-Present)
____________________________________________________________________________________________________________________________________
Officers
____________________________________________________________________________________________________________________________________
David F. Connor Vice President, Vice President since David F. Connor has served as 83 None (3)
2005 Market Street Deputy General September 21, 2000 Vice President and Deputy
Philadelphia, PA Counsel, and Secretary and Secretary General Counsel of
19103 since Delaware Investments
October 2005 since 2000.
December 2, 1963
____________________________________________________________________________________________________________________________________
David P. O'Connor Senior Vice Senior Vice President, David P. O'Connor has served in 83 None (3)
2005 Market Street President, General Counsel, and various executive and legal
Philadelphia, PA General Counsel, Chief Legal Officer capacities at different times
19103 and Chief since at Delaware Investments.
Legal Officer October 2005
February 21, 1966
____________________________________________________________________________________________________________________________________
John J. O'Connor Senior Vice President Treasurer John J. O'Connor has served in 83 None (3)
2005 Market Street and Treasurer since various executive capacities
Philadelphia, PA February 2005 at different times at
19103 Delaware Investments.
June 16, 1957
____________________________________________________________________________________________________________________________________
Richard Salus Senior Chief Financial Richard Salus has served in 83 None (3)
2005 Market Street Vice President Officer since various executive capacities
Philadelphia, PA and November 1, 2006 at different times at
19103 Chief Financial Delaware Investments.
Officer
October 4, 1963
____________________________________________________________________________________________________________________________________
(1) Patrick P. Coyne is considered to be an "Interested Trustee" because he is an executive officer of the Fund's(s') investment
advisor.
(2) Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund's(s')
investment advisor, principal underwriter, and its transfer agent.
(3) David F. Connor, David P. O'Connor, John J. O'Connor, and Richard Salus serve in similar capacities for the six portfolios of
the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
John J. O'Connor also serves in a similar capacity for Lincoln Variable Insurance Products Trust, which has the same investment
advisor as the registrant.
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is
available, without charge, upon request by calling 800 523-1918.
24
<page>
About the organization
This annual 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
Patrick P. Coyne
Chairman, President, and
Chief Executive Officer
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
Consultant - ARL Associates,
New York, NY
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
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
Richard Salus
Senior Vice President and
Chief Financial Officer
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.
25
<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! Please visit us at
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 INVESTMENTS LOGO]
(1191) Printed in the USA
AR-021 [11/06] CGI 1/07 MF-06-11-020 PO11486
Annual Report Delaware
Small Cap Core Fund
November 30, 2006
Core equity mutual fund
[DELAWARE INVESTMENTS LOGO] [LOGO] POWERED BY RESEARCH(R)
Table of contents
> Portfolio management review ............................................1
> Performance summary ....................................................4
> Disclosure of Fund expenses ............................................6
> Sector allocation and top 10 holdings ..................................7
> Statement of net assets ................................................8
> Statement of operations ...............................................11
> Statements of changes in net assets ...................................12
> Financial highlights ..................................................13
> Notes to financial statements .........................................17
> Report of independent registered public accounting firm ...............21
> Board of trustees/directors and officers addendum .....................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) 2007 Delaware Distributors, L.P.
Portfolio management review
Delaware Small Cap Core Fund
November 30, 2006
The managers of Delaware Small Cap Core Fund provided the answers to the
questions below as a review of the Fund's activities for the fiscal year that
ended November 30, 2006. Please see pages 2 and 3 to learn more about the
portfolio managers.
Q: How did the Fund perform over the year ended November 30, 2006?
A: Class A shares of Delaware Small Cap Core Fund returned +16.83% at net asset
value and +10.15% at its maximum offer price. Both figures reflect all
distributions reinvested. The Fund's benchmark, the Russell 2000 Index, advanced
17.43%. Please see page 4 for a complete performance summary and disclosure.
Q: Please discuss the investment environment during the period.
A: Overall, 2006 was a healthy year for the economy. In the first calendar
quarter of 2006, the growth rate for gross domestic product was 5.1%.
By May, however, the market was rattled by signs that growth was slowing.
Concerns about a weakening housing market, the potential for rising interest
rates, and higher energy prices led to a sell off in late spring and early
summer. The market's subsequent recovery was prompted by the long-awaited pause
in the U.S. Federal Reserve's (Fed) campaign of interest rate increases, which
took place when the central bank elected not to raise rates in August. This
contributed to a more favorable environment as investors became increasingly
confident that the economy would settle into a period of slow growth with
lowered inflation.
Overall, continued economic expansion, high employment, and strong corporate
profits helped to support the market during the year. The rise in merger and
acquisition activity also provided strength as many businesses were sold at
healthy premiums by private equity buyers and larger companies.
Q: What factors influenced investments during the period?
A: Throughout the year, we sought to identify companies with strong balance
sheets and healthy cash flow. Because companies in the capital goods sector tend
to benefit from global economic development, we maintained an overweight
position relative to our benchmark index. We also held a sector overweight in
healthcare, which continues to benefit from aging populations.
As the year progressed, we anticipated that the economy would continue to slow
and remained cautious through the end of the period. The Fund's underweight
position in consumer discretionary stocks as compared to the benchmark reflects
our view that discretionary spending generally declines in a slowing economy
where energy prices, although down from highs, remain elevated.
Q: Which holdings lent strength to the portfolio during the 12-month period?
A: Companies with high cash flow often helped the Fund's performance. One of the
Fund's stronger performers was TeleTech Holdings, a company that provides
outsourcing of customer support and marketing services via worldwide call
centers. These types of businesses historically do well in the mid-to-latter
part of the economic cycle. The company benefited from a variety of initiatives
and from new clients that allowed for increased productivity, pricing, and usage
of its call centers and office space. The stock delivered strong gains and we
trimmed our position to realize some profits.
The Fund also benefited from its position in Myogen, a biopharmaceutical company
that focuses on the discovery and development of small molecule therapeutics for
cardiovascular disorders. The company was preparing to launch two promising
hypertension drugs to the marketplace - a situation we believed would offer
value. In November, Gilead Sciences acquired Myogen at a sizeable premium,
benefiting our stock position at that time. We subsequently sold the stock.
The views expressed are current as of the date of this report and are subject to
change.
(continues) 1
Portfolio management review
Delaware Small Cap Core Fund
Another strong performer was Veritas DCG. The company is a leading provider of
geophysical services, helping oil and gas exploration companies manage the risks
involved in exploration and enhancing their drilling and production success.
Veritas met our investment criteria - strong business prospects, compelling
valuations, excess cash on balance sheet, and low cost structure. The stock was
sold during the period after it was acquired by Compagnie Generale de
Geophysique.
Q: What holdings failed to meet your expectations?
A: The Fund's position in James River Coal Company was among the most
disappointing performers. The coal company mines, processes, and sells
industrial-grade coal through various subsidiaries. During the year, excess coal
inventory prompted a reduction in prices despite a higher cost environment. This
move had an adverse effect on profit margins. Because we no longer anticipated a
significant upside for the stock, we sold our position in favor of other
opportunities.
Secure Computing was another stock that failed to meet expectations. The company
develops network security solutions that allow businesses to exchange critical
information safely with customers. The stock was negatively impacted by lack of
earnings visibility after two encouraging acquisitions were hampered by
integration problems and delays. Despite these issues, we continue to own the
stock based on our belief that it offers solid long-term prospects and
attractive valuations.
The Fund was also negatively affected by its holdings in Adolor, a healthcare
company that specializes in the discovery and development of prescription pain
management products. Adolor had two promising drugs that we believed were poised
for FDA approval. The stock's price tumbled after the FDA requested additional
safety information and new competition emerged, which we believe further reduced
Adolor's visibility. We exited the stock as our long-term view of this company
had changed.
Fund managers
Francis X. Morris
Senior Vice President, Chief Investment Officer - Core Equity
Mr. Morris joined Delaware Investments in 1997 and is currently the chief
investment officer for Core Equity investments. Prior to joining the firm, Mr.
Morris served as vice president and director of equity research at PNC Asset
Management. He received a bachelor's degree from Providence College and holds an
MBA from Widener University. Mr. Morris is a past president of the CFA Society
of Philadelphia and is a member of the CFA Institute. In addition, he is a
former officer of the National Association of Petroleum Investment Analysts.
Christopher S. Adams, CFA
Vice President, Portfolio Manager, Senior Equity Analyst
Mr. Adams, who joined Delaware Investments in 1995, is a portfolio manager on
the firm's Core Equity team. He also performs analysis and research to support
the portfolio management function. From 1995 to 1998, he served as the firm's
vice president, strategic planning. Prior to joining Delaware Investments, Mr.
Adams had approximately 10 years of experience in the financial services
industry in the U.S. and U.K., including positions with Coopers & Lybrand, The
Sumitomo Bank, Bank of America, and Lloyds Bank. Mr. Adams holds both bachelor's
and master's degrees in history and economics from Oxford University, England,
and received an MBA with dual concentrations in finance and insurance/risk
management from The Wharton School of the University of Pennsylvania. Mr. Adams
is a director and past president of the CFA Society of Philadelphia.
Donald G. Padilla, CFA
Vice President, Portfolio Manager, Senior Equity Analyst
Mr. Padilla joined Delaware Investments in 1994 and is a member of the portfolio
construction group within the firm's Core Equity team. He also performs analysis
and research to support the portfolio management function. Mr. Padilla joined
Delaware Investments as an assistant controller in the firm's treasury function,
responsible for managing corporate cash investments, developing financial
models, and overseeing the financial operations of the Lincoln Life 401(k)
annuities
2
segment. Prior to joining Delaware Investments, he held various positions at The
Vanguard Group. Mr. Padilla holds a bachelor's degree in accounting from Lehigh
University, and he is a member of the CFA Society of Philadelphia.
Michael S. Morris, CFA
Vice President, Portfolio Manager, Senior Equity Analyst
Mr. Morris, who joined Delaware Investments in 1999, is a portfolio manager on
the firm's Core Equity team. He also performs analysis and research to support
the portfolio management function. Prior to joining the firm, he worked as a
senior equity analyst at Newbold's Asset Management, covering financial stocks.
Mr. Morris began his investment career in 1993 at Ohio Casualty. He earned his
bachelor's degree in finance from Indiana University and an MBA with a
concentration in finance from The Wharton School of the University of
Pennsylvania. He is a member of the Bank and Financial Analysts Association.
3
Performance summary
Delaware Small Cap Core Fund
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Please obtain the performance data for the most recent month end by
calling 800 523-1918 or visiting www.delawareinvestments.com/performance.
You should consider the investment objectives, risks, charges, and expenses of
the investment carefully before investing. The Delaware Small Cap Core Fund
prospectus contains this and other important information about the Fund. Please
request a prospectus through your financial advisor or by calling 800 523-1918
or visiting our Web site at www.delawareinvestments.com. Read the prospectus
carefully before you invest or send money.
Fund performance
Average annual total returns
Through November 30, 2006 1 year 5 years Lifetime
________________________________________________________________________________
Class A (Est. 12-29-98)
Excluding sales charge +16.83% +15.99% +15.04%
Including sales charge +10.15% +14.63% +14.18%
________________________________________________________________________________
Class C (Est. 8-1-05)
Excluding sales charge +15.97% NA +10.10%
Including sales charge +14.97% NA +10.10%
________________________________________________________________________________
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below.
Performance for Class C shares, excluding sales charges, assumes either that
contingent deferred sales charges did not apply or the investment was not
redeemed.
The Fund offers Class A, C, R, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 5.75% and have an annual
distribution and service fee of up to 0.30% of average daily net assets,
although it is subject to a contractual cap of 0.25% through March 31, 2007.
Class C shares are sold with a contingent deferred sales charge of 1% if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1% of average daily net assets.
The average annual total returns for the 1-year and lifetime (since August 1,
2005) period ended November 30, 2006 for the Delaware Small Cap Core Fund Class
R shares were +16.78% and +10.67%, respectively. Class R shares were first made
available on August 1, 2005 and are available only for certain retirement plan
products. They are sold without a sales charge and have an annual distribution
and service fee of 0.60%, but such fee is currently subject to a contractual cap
of 0.50% of average daily net assets through March 31, 2007.
The average annual total returns for the 1-year, 5-year, and lifetime (since
December 29, 1998) periods ended November 30, 2006 for Delaware Small Cap Core
Fund Institutional Class shares were +17.13%, +16.07%, and +15.09%,
respectively. Institutional Class shares were first made available on December
29, 1998 and are available without sales or asset-based distribution charges
only to certain eligible institutional accounts.
Prior to August 1, 2005, the Fund had not engaged in a broad distribution effort
of its shares and had been subject to limited redemption requests. The Fund's
past performance does not necessarily indicate how it will perform in the
future. The returns reflect waivers and expense caps in effect during the
period, which were lower than the current expense caps. The returns would have
been lower without the waivers and expense caps in effect.
An expense limitation was in effect for all classes during the periods shown
above and on the next page. Performance would have been lower had the expense
limitation not been in effect.
The performance table above and the graph on the next page do not reflect the
deduction of taxes the shareholder would pay on Fund distributions or
redemptions of Fund shares.
4
Fund basics
As of November 30, 2006
________________________________________________________________________________
Fund objective
________________________________________________________________________________
The Fund seeks long-term capital appreciation.
________________________________________________________________________________
Total Fund net assets
________________________________________________________________________________
$53 million
________________________________________________________________________________
Number of holdings
________________________________________________________________________________
180
________________________________________________________________________________
Fund start date
________________________________________________________________________________
December 29, 1998
________________________________________________________________________________
Nasdaq symbols CUSIPs
________________________________________________________________________________
Class A DCCAX 24610B883
Class C DCCCX 24610B867
Class R DCCRX 24610B834
Institutional Class DCCIX 24610B859
Performance of a $10,000 Investment
December 29, 1998 through November 30, 2006
[PERFORMANCE OF A $10,000 INVESTMENT LINE GRAPH]
Chart assumes $10,000 invested on December 29, 1998 and includes the effect of a
5.75% front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to different charges and
expenses.
Funds that invest in small and/or medium-sized company stocks typically involve
greater risk, particularly in the short term, than those investing in larger,
more established companies.
The chart also assumes $10,000 invested in the Russell 2000 Index on December
29, 1998. Russell 2000 Index measures the performance of the 2,000 smallest
companies in the Russell 3000 Index, which represents approximately 8% of the
total market capitalization of the Russell 3000 Index. An index is unmanaged and
does not reflect the costs of operating a mutual fund, such as the costs of
buying, selling, and holding securities. You cannot invest directly in an index.
Past performance is not a guarantee of future results.
5
Disclosure of Fund expenses
For the period June 1, 2006 to November 30, 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 June 1, 2006 to November 30, 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 expense shown in the table reflects 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 6/1/06 to
6/1/06 11/30/06 Ratio 11/30/06 *
________________________________________________________________________________
Actual Fund Return
Class A $1,000.00 $1,074.20 1.27% $ 6.60
Class C 1,000.00 1,070.50 2.02% 10.48
Class R 1,000.00 1,072.60 1.52% 7.90
Institutional Class 1,000.00 1,075.00 1.02% 5.31
________________________________________________________________________________
Hypothetical 5% Return (5% return before expenses)
Class A $1,000.00 $1,018.70 1.27% $ 6.43
Class C 1,000.00 1,014.94 2.02% 10.20
Class R 1,000.00 1,017.45 1.52% 7.69
Institutional Class 1,000.00 1,019.95 1.02% 5.16
________________________________________________________________________________
* "Expenses Paid During Period" are equal to the Fund's annualized expense
ratio, multiplied by the average account value over the period, multiplied by
183/365 (to reflect the one-half year period).
6
Sector allocation and top 10 holdings
Delaware Small Cap Core Fund
As of November 30, 2006
Sector designations may be different than the sector designations presented in
other Fund materials.
Percentage
Sector of Net Assets
________________________________________________________________________________
Common Stock 92.31%
Basic Materials 5.91%
Business Services 6.02%
Capital Goods 9.10%
Communication Services 0.57%
Consumer Discretionary 5.91%
Consumer Services 2.85%
Consumer Staples 1.68%
Credit Cyclicals 0.77%
Energy 4.80%
Financials 15.16%
Health Care 12.19%
Media 0.85%
Real Estate 5.36%
Technology 18.14%
Transportation 1.95%
Utilities 1.05%
________________________________________________________________________________
Exchange Traded Funds 3.40%
________________________________________________________________________________
Repurchase Agreements 2.37%
________________________________________________________________________________
Total Market Value of Securities 98.08%
________________________________________________________________________________
Receivables and Other Assets Net of Liabilities 1.92%
________________________________________________________________________________
Total Net Assets 100.00%
________________________________________________________________________________
Holdings are for informational purposes only and are subject to change at any
time. They are not a recommendation to buy, sell, or hold any security.
Percentage
Top 10 Holdings of Net Assets
________________________________________________________________________________
Ishares Russell 2000 Index Fund 3.40%
HUB Group 0.80%
Genlyte Group 0.79%
Casey's General Stores 0.79%
Phillips-Van Heusen 0.78%
Pacer International 0.77%
Stage Stores 0.75%
First Industrial Realty Trust 0.74%
ADVANTA 0.71%
Barnes Group 0.71%
________________________________________________________________________________
7
Statement of net assets
Delaware Small Cap Core Fund
November 30, 2006
Number of Market
Shares Value
________________________________________________________________________________
Common Stock - 92.31%
________________________________________________________________________________
Basic Materials - 5.91%
+ AK Steel Holding 12,100 $ 199,529
+ Century Aluminum 8,500 362,524
Chaparral Steel 2,500 116,250
Chesapeake 11,450 186,406
Cytec Industries 6,550 349,312
Ferro 17,100 356,706
FMC 4,950 350,856
Georgia Gulf 7,850 159,905
+ Lone Star Technologies 3,550 186,233
+ Oregon Steel Mills 1,850 116,439
+ PolyOne 41,050 315,264
Wausau Paper 15,050 225,148
Worthington Industries 10,300 190,550
__________
3,115,122
__________
Business Services - 6.02%
Administaff 8,300 349,264
+ Armor Holdings 6,600 373,229
+ Harris Interactive 43,150 206,689
Healthcare Services Group 11,250 281,250
+ Kforce 19,250 256,218
+ Labor Ready 12,700 240,284
McGrath RentCorp 10,250 322,875
+ TeleTech Holdings 15,200 343,216
UniFirst 6,950 288,425
+ United Stationers 5,550 257,409
+ Williams Scotsman
International 12,650 252,368
__________
3,171,227
__________
Capital Goods - 9.10%
Acuity Brands 7,050 371,324
+ AGCO 11,650 363,830
Applied Industrial Technologies 8,250 234,795
Barnes Group 17,850 373,957
+ Columbus McKinnon 10,850 252,046
Crane 5,050 192,405
DRS Technologies 3,200 159,168
+ Genlyte Group 4,900 415,813
+ Innovative Solutions
& Support 15,450 243,492
Insteel Industries 9,750 187,590
+ Kadant 10,000 236,400
Lawson Products 5,900 296,357
Lincoln Electric Holdings 5,500 334,675
LSI Industries 12,100 206,789
Lufkin Industries 5,650 330,525
+ Rofin-Sinar Technologies 5,050 293,506
+ URS 6,900 304,704
__________
4,797,376
__________
Communications Services - 0.57%
+ Dobson Communications
Class A 34,750 300,587
__________
300,587
__________
Consumer Discretionary - 5.91%
+ Aeropostale 8,850 $ 267,624
+ Charming Shoppes 24,450 330,809
+ Children's Place Retail Stores 5,400 348,408
+ Guitar Center 6,750 296,460
+ Jos A Bank Clothiers 8,200 245,918
Phillips-Van Heusen 8,300 409,439
+ Quiksilver 23,300 339,015
Stage Stores 11,900 393,176
Stride Rite 20,100 314,163
+ True Religion Apparel 11,250 171,000
__________
3,116,012
__________
Consumer Services - 2.85%
+ Buffalo Wild Wings 5,350 285,637
CKE Restaurants 16,200 298,728
IHOP 6,600 347,226
+ Papa John's International 10,000 310,000
+ Shuffle Master 8,300 258,462
__________
1,500,053
__________
Consumer Staples - 1.68%
Casey's General Stores 16,650 414,419
Longs Drug Stores 5,900 242,431
Nu Skin Enterprises Class A 11,900 228,242
__________
885,092
__________
Credit Cyclicals - 0.77%
M/I Homes 5,500 205,040
+ Meritage Homes 4,100 199,096
__________
404,136
__________
Energy - 4.80%
+ Bristow Group 6,600 234,762
+ Grey Wolf 37,150 263,022
+ Hercules Offshore 9,250 315,148
+ Oil States International 7,800 271,518
Penn Virginia 4,250 320,408
+ Petroquest Energy 26,900 337,325
St. Mary Land & Exploration 4,900 196,392
+ Universal Compression
Holdings 5,300 333,635
World Fuel Services 5,250 254,625
__________
2,526,835
__________
Financials - 15.16%
ADVANTA 8,200 374,083
American Home
Mortgage Investment 9,650 341,321
Bancfirst 5,500 292,985
BankUnited Financial Class A 13,200 336,600
Center Financial 12,300 275,889
City Holding 8,550 337,725
+ CompuCredit 8,700 327,642
+ Cowen Group 16,150 273,420
Dime Community Bancshares 17,000 239,190
Direct General 15,650 256,660
FBL Financial Group Class A 7,600 299,440
8
<page>
Number of Market
Shares Value
________________________________________________________________________________
Common Stock (continued)
________________________________________________________________________________
Financials (continued)
First Place Financial - Ohio 12,350 $ 300,723
+ FirstFed Financial 5,300 344,606
Greater Bay Bancorp 11,050 284,427
Kansas City Life Insurance 4,100 211,314
MainSource Financial Group 10,040 183,330
Ohio Casualty 11,700 341,757
PFF Bancorp 10,000 330,000
Presidential Life 11,900 266,441
Republic Bancorp 24,500 334,670
RLI 6,550 362,280
South Financial Group 7,750 201,423
TierOne 11,400 355,565
+ Triad Guaranty 4,950 266,310
Trustmark 8,150 265,853
+ United America Indemnity 10,200 255,918
Waddell & Reed Financial
Class A 13,300 331,569
__________
7,991,141
__________
Health Care - 12.19%
+ Alkermes 13,600 206,448
+ Applera-Celera Genomics 20,450 293,458
+ Bio-Rad Laboratories Class A 4,100 323,694
+ Candela 16,150 213,180
+ Digene 3,050 155,855
+ Gen-Probe 4,950 241,263
+ Geron 25,050 198,647
+ Healthways 7,600 349,371
+ LifePoint Hospitals 6,550 227,351
+ Medarex 25,550 344,669
Mentor 5,900 294,705
+ MGI PHARMA 14,150 268,426
+ Neurometrix 9,450 172,463
+ Noven Pharmaceuticals 8,700 206,277
Owens & Minor 7,950 246,689
+ Panacos Pharmaceutic 22,850 148,068
+ Pharmion 12,650 313,214
PolyMedica 6,700 265,119
+ Res-Care 14,750 271,253
+ Sciele Pharma 15,050 340,280
+ Techne 4,500 241,965
+ Telik 12,750 216,878
+ United Therapeutics 5,500 320,209
Vital Signs 4,500 248,355
West Pharmaceutical Services 6,400 314,239
__________
6,422,076
__________
Media - 0.85%
infoUSA 23,150 281,041
+ Scholastic 5,050 168,266
__________
449,307
__________
Real Estate - 5.36%
Equity Inns 20,450 332,926
First Industrial Realty Trust 7,800 391,949
First Potomac Realty Trust 9,050 277,926
Home Properties 4,800 $ 296,688
Maguire Properties 5,850 250,673
Nationwide Health Properties 12,350 365,437
Pennsylvania Real Estate
Investment Trust 7,950 314,025
Senior Housing Properties Trust 13,600 297,568
Sovran Self Storage 5,050 295,425
__________
2,822,617
__________
Technology - 18.14%
+ Anixter International 5,300 310,685
+ Aspen Technology 19,600 191,100
+ Blackboard 8,300 236,550
+ CACI International 4,950 296,208
+ Cymer 6,450 304,762
+ Digital River 3,800 223,858
+ Digitas 15,150 163,923
+ Dionex 4,600 264,546
+ EarthLink 21,250 138,338
+ FormFactor 5,800 216,688
+ j2 Global Communications 12,050 336,556
+ Kulicke & Soffa Industries 22,450 183,866
+ Lawson Software 27,300 203,112
+ MIPS Technologies 29,950 256,073
+ MTC Technologies 7,950 207,416
+ Netgear 12,050 313,299
+ OmniVision Technologies 16,150 263,084
+ ON Semiconductor 47,350 304,933
+ Palm 20,950 293,510
+ Photronics 16,000 252,320
+ Progress Software 10,000 271,100
+ Quality Systems 4,400 168,124
+ RadiSys 13,950 235,616
+ Secure Computing 22,200 144,078
+ SI International 7,800 268,554
+ Smith Micro Software 18,400 294,400
+ Spansion Class A 12,350 180,434
+ SPSS 6,900 194,649
+ Stratex Networks 40,150 171,842
+ Synaptics 10,300 295,301
+ Tekelec 19,650 316,364
+ Tessera Technologies 7,950 301,066
+ TTM Technologies 14,300 180,323
United Online 14,600 196,078
+ Universal Electronics 8,300 174,300
+ Varian Semiconductor
Equipment 7,350 292,016
+ Verint Systems 7,000 238,840
+ Viasat 9,750 259,643
+ WebEx Communications 7,100 254,890
+ Wind River Systems 15,050 161,186
__________
9,559,631
__________
(continues) 9
<page>
Statement of net assets
Delaware Small Cap Core Fund
Number of Market
Shares Value
________________________________________________________________________________
Common Stock (continued)
________________________________________________________________________________
Transportation - 1.95%
Arkansas Best 5,250 $ 198,975
+ HUB Group 14,750 420,965
Pacer International 13,600 407,320
___________
1,027,260
___________
Utilities - 1.05%
Black Hills 7,000 249,970
Otter Tail 9,900 304,326
___________
554,296
___________
Total Common Stock
(cost $44,995,794) 48,642,768
___________
________________________________________________________________________________
Exchange Traded Funds - 3.40%
________________________________________________________________________________
Ishares Russell 2000 Index Fund 22,900 1,790,322
___________
Total Exchange Traded Funds
(cost $1,797,890) 1,790,322
___________
Principal
Amount
______________________________________________________________________________
Repurchase Agreements - 2.37%
______________________________________________________________________________
With BNP Paribas 5.26%
12/1/06 (dated
11/30/06, to be
repurchased at
$550,480, collateralized
by $565,700 U.S.
Treasury Notes 2.75%
due 8/15/07, market
value $561,822) $550,400 550,400
With Cantor Fitzgerald
5.26% 12/1/06 (dated
11/30/06, to be
repurchased at
$335,749, collateralized
by $272,200 U.S.
Treasury Bills due
12/28/06, market value
$271,197 and $69,900
U.S. Treasury Notes
6.25% due 2/15/07,
market value $71,294) 335,700 335,700
With UBS Warburg 5.26%
12/1/06 (dated
11/30/06, to be
repurchased at
$362,953, collateralized
by $379,300 U.S.
Treasury Bills due
5/24/07, market value
$370,397) 362,900 362,900
___________
Total Repurchase Agreements
(cost $1,249,000) 1,249,000
___________
Total Market Value of Securities - 98.08%
(cost $48,042,684) $51,682,090
Receivables and Other Assets
Net of Liabilities - 1.92% 1,012,368
___________
Net Assets Applicable to 4,050,606
Shares Outstanding - 100.00% $52,694,458
___________
Net Asset Value - Delaware Small Cap Core Fund
Class A ($25,219,527 / 1,934,915 Shares) $13.03
______
Net Asset Value - Delaware Small Cap Core Fund
Class C ($11,777,469 / 912,284 Shares) $12.91
______
Net Asset Value - Delaware Small Cap Core
Fund Class R ($214,986 / 16,534 Shares) $13.00
______
Net Asset Value - Delaware Small Cap Core Fund
Institutional Class ($15,482,476 / 1,186,873 Shares) $13.04
______
Components of Net Assets at November 30, 2006:
Shares of beneficial interest
(unlimited authorization - no par) $47,301,899
Accumulated net realized gain on investments 1,753,153
Net unrealized appreciation of investments 3,639,406
___________
Total net assets $52,694,458
___________
+ Non-income producing security for the year ended November 30, 2006.
Net Asset Value and Offering Price Per Share -
Delaware Small Cap Core Fund
Net asset value Class A (A) $13.03
Sales charge (5.75% of offering price) (B) 0.79
______
Offering price $13.82
______
(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
10
<page>
Statement of operations
Delaware Small Cap Core Fund
Year Ended November 30, 2006
Investment Income:
Dividends $279,890
Interest 44,580 $ 324,470
________ __________
Expenses:
Management fees 214,463
Distribution expenses - Class A 38,212
Distribution expenses - Class C 50,119
Distribution expenses - Class R 437
Registration fees 58,322
Dividend disbursing and transfer agent fees and expenses 48,352
Reports and statements to shareholders 26,349
Dues and services 11,880
Audit and tax 11,757
Accounting and administration expenses 11,438
Custodian fees 8,281
Legal fees 7,068
Trustees' fees and benefits 6,565
Pricing fees 2,808
Insurance fees 1,955
Consulting fees 796
Trustees' expenses 130 498,932
________
Less expenses absorbed or waived (121,036)
Less waived distribution expenses - Class A (6,256)
Less waived distribution expenses - Class R (72)
Less expense paid indirectly (428)
__________
Total operating expenses 371,140
__________
Net Investment Loss (46,670)
__________
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments 1,809,516
Net change in unrealized appreciation/depreciation of investments 2,920,035
__________
Net Realized and Unrealized Gain on Investments 4,729,551
__________
Net Increase in Net Assets Resulting from Operations $4,682,881
__________
See accompanying notes
11
<page>
Statements of changes in net assets
Delaware Small Cap Core Fund
Year Ended
11/30/06 11/30/05
Increase (Decrease) in Net Assets from Operations:
Net investment income (loss) $ (46,670) $ 14,447
Net realized gain on investments 1,809,516 244,228
Net change in unrealized appreciation/depreciation of investments 2,920,035 282,499
___________ ___________
Net increase in net assets resulting from operations 4,682,881 541,174
___________ ___________
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 21,560,413 3,781,560
Class C 10,578,306 844,303
Class R 258,219 12
Institutional Class 7,820,895 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
___________ ___________
40,464,976 7,467,512
___________ ___________
Cost of shares repurchased:
Class A (2,172,311) (9,325)
Class C (472,381) -
Class R (51,844) -
Institutional Class (864,699) (9,039)
___________ ___________
(3,561,235) (18,364)
___________ ___________
Increase in net assets derived from capital share transactions 36,903,741 7,449,148
___________ ___________
Net Increase in Net Assets 41,320,295 6,588,902
Net Assets:
Beginning of year 11,374,163 4,785,261
___________ ___________
End of year (including undistributed net investment income
of $- and $17,534, respectively) $52,694,458 $11,374,163
___________ ___________
See accompanying notes
12
<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:
Year Ended
______________________________________________________________
11/30/06 11/30/05 11/30/04 11/30/03 11/30/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.380 $14.600 $13.080 $10.290 $11.130
Income (loss) from investment operations:
Net investment income (loss) (1) (0.015) 0.022 0.026 0.036 0.079
Net realized and unrealized gain on investments 1.895 1.035 2.481 3.350 0.069
_______ _______ _______ _______ _______
Total from investment operations 1.880 1.057 2.507 3.386 0.148
_______ _______ _______ _______ _______
Less dividends and distributions from:
Net investment income - (0.025) (0.044) (0.075) (0.108)
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)
_______ _______ _______ _______ _______
Net asset value, end of period $13.030 $11.380 $14.600 $13.080 $10.290
_______ _______ _______ _______ _______
Total return (2) 16.83% 9.04% 20.62% 35.19% 1.08%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $25,220 $3,863 $20 $13 $-
Ratio of expenses to average net assets 1.26% 1.02% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.73% 2.53% 1.30% 1.34% 1.34%
Ratio of net investment income (loss) to average net assets (0.13%) 0.20% 0.20% 0.33% 0.74%
Ratio of net investment income (loss) to average net assets
prior to expense limitation and expense paid indirectly (0.60%) (1.31%) (0.35%) (0.26%) 0.15%
Portfolio turnover 121% 104% 136% 44% 76%
___________________________________________________________________________________________________________________________________
(1) The average shares outstanding method has been applied for per share information.
(2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return
reflects waivers and payment of fees by the manager and distributor. Performance would have been lower had the expense
limitations not been in effect.
See accompanying notes
(continues) 13
<page>
Financial highlights
Delaware Small Cap Core Fund Class C
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year 8/1/05 (1)
Ended to
11/30/06 11/30/05
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.360 $11.590
Income (loss) from investment operations:
Net investment loss (2) (0.106) (0.021)
Net realized and unrealized gain (loss) on investments 1.886 (0.209)
_______ _______
Total from investment operations 1.780 (0.230)
_______ _______
Less dividends and distributions from:
Net realized gain on investments (0.230) -
_______ _______
Total dividends and distributions (0.230) -
_______ _______
Net asset value, end of period $12.910 $11.360
_______ _______
Total return (3) 15.97% (1.98%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $11,777 $866
Ratio of expenses to average net assets 2.01% 2.00%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 2.43% 5.14%
Ratio of net investment loss to average net assets (0.88%) (0.56%)
Ratio of net investment loss to average net assets
prior to expense limitation and expense paid indirectly (1.30%) (3.71%)
Portfolio turnover 121% 104% (4)
___________________________________________________________________________________________________________________________________
(1) Date of commencement of operations; ratios have been annualized and total return has not been annualized.
(2) The average shares outstanding method has been applied for per share information.
(3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value 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.
(4) The portfolio turnover is representative for the entire Fund for the year ended November 30, 2005.
See accompanying notes
14
Delaware Small Cap Core Fund Class R
Selected data for each share of the Fund outstanding throughout the period was
as follows:
Year
Ended
11/30/06 (1)
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.360
Income (loss) from investment operations:
Net investment loss (2) (0.047)
Net realized and unrealized gain on investments 1.917
_______
Total from investment operations 1.870
_______
Less dividends and distributions from:
Net realized gain on investments (0.230)
_______
Total dividends and distributions (0.230)
_______
Net asset value, end of period $13.000
_______
Total return (3) 16.78%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $215
Ratio of expenses to average net assets 1.51%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 2.03%
Ratio of net investment loss to average net assets (0.38%)
Ratio of net investment loss to average net assets
prior to expense limitation and expense paid indirectly (0.90%)
Portfolio turnover 121%
___________________________________________________________________________________________________________________________________
(1) 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 prior to December 1, 2005 is not disclosed because management does not believe it to
be meaningful.
(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 limitations not been in effect.
See accompanying notes
(continues) 15
<page>
Financial highlights
Delaware Small Cap Core Fund Institutional Class
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Year Ended
______________________________________________________________
11/30/06 11/30/05 11/30/04 11/30/03 11/30/02
___________________________________________________________________________________________________________________________________
Net asset value, beginning of period $11.390 $14.600 $13.080 $10.290 $11.130
Income from investment operations:
Net investment income (1) 0.015 0.031 0.026 0.036 0.079
Net realized and unrealized gain on investments 1.895 1.036 2.481 3.350 0.069
_______ _______ _______ _______ _______
Total from investment operations 1.910 1.067 2.507 3.386 0.148
_______ _______ _______ _______ _______
Less dividends and distributions from:
Net investment income (0.030) (0.025) (0.044) (0.075) (0.108)
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)
_______ _______ _______ _______ _______
Net asset value, end of period $13.040 $11.390 $14.600 $13.080 $10.290
_______ _______ _______ _______ _______
Total return (2) 17.13% 9.14% 20.62% 35.19% 1.08%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $15,482 $6,645 $4,765 $3,948 $2,921
Ratio of expenses to average net assets 1.01% 0.94% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets
prior to expense limitation and expense paid indirectly 1.43% 2.23% 1.00% 1.04% 1.04%
Ratio of net investment income to average net assets 0.12% 0.28% 0.20% 0.33% 0.74%
Ratio of net investment income (loss) to average net assets
prior to expense limitation and expense paid indirectly (0.30%) (1.01%) (0.05%) 0.04% 0.45%
Portfolio turnover 121% 104% 136% 44% 76%
___________________________________________________________________________________________________________________________________
(1) The average shares outstanding method has been applied for per share information.
(2) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of
dividends and distributions at net asset value. Total investment return reflects waivers and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in effect. See accompanying notes
16
Notes to financial statements
Delaware Small Cap Core Fund
November 30, 2006
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 A share purchases of
$1,000,000 or more will incur a contingent deferred sales charge of 1% if
redeemed during the first year and 0.50% during the second year, provided that
Delaware Distributors, L.P. (DDLP) paid a financial advisor a commission on the
purchase of those shares. 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 certain eligible 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).
In September 2006, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 157, Fair Value Measurements, (Statement 157). Statement 157
establishes a framework for measuring fair value in generally accepted
accounting principles, clarifies the definition of fair value within that
framework, and expands disclosures about the use of fair value measurements.
Statement 157 is intended to increase consistency and comparability among fair
value estimates used in financial reporting. Statement 157 is effective for
fiscal years beginning after November 15, 2007. Management does not expect the
adoption of Statement 157 to have an impact on the amounts reported in the
financial statements.
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.
On July 13, 2006, FASB released FASB Interpretation No. 48 "Accounting for
Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented, and disclosed
in the financial statements. FIN 48 requires the evaluation of tax positions
taken or expected to be taken in the course of preparing the Fund's tax returns
to determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or expense in
the current year. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of the
effective date. Although the Fund's tax positions are currently being evaluated,
management does not expect the adoption of FIN 48 to have a material impact on
the Fund's 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 directly attributable to the Fund are charged directly to the
Fund. Other expenses common to various funds within the Delaware Investments(R)
Family of Funds are generally 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.
(continues) 17
Notes to financial statements
Delaware Small Cap Core Fund
1. Significant Accounting Policies (continued)
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 $1,152 for the year ended November 30, 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), 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.
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 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 from exceeding 0.25% of
average daily net assets. DDLP has contracted to limit distribution and service
fees through March 31, 2007 for Class R shares to no more than 0.50% of average
daily net assets. Institutional Class shares pay no distribution and services
expenses.
At November 30, 2006, the Fund had liabilities payable to affiliates as
follows:
Investment management fee payable to DMC $ 14,210
Dividend disbursing, transfer agent, accounting
and administration fees and other expenses
payable to DSC 9,982
Distribution fees payable to DDLP 14,025
Other expenses payable to DMC and affiliates* 3,417
* 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 and tax services, including internal legal and tax services
provided to the Fund by DMC and/or its affiliates' employees. For the year
ended November 30, 2006, the Fund was charged $1,470 for internal legal and tax
services provided by DMC and/or its affiliates' employees.
For the year ended November 30, 2006, DDLP earned $42,201 for commissions on
sales of the Fund's Class A shares. For the year ended November 30, 2006, DDLP
received gross contingent deferred sales charge commissions of $4 and $1,768 on
redemption of the Fund's Class A 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.
Trustees' Fees and Benefits include expenses accrued by the Fund for each
Trustee's retainer, per meeting fees and retirement benefits. Independent
Trustees with over five years of uninterrupted service are eligible to
participate in a retirement plan that provides for the payments of benefits
upon retirement. The amount of the retirement benefit is determined based on
factors set forth in the plan, including the number of years of service. On
November 16, 2006, the Board of Trustees of the Fund unanimously voted to
terminate the retirement plan. Payments equal to the net present value of the
earned benefits will be made in 2007 to those independent Trustees so entitled.
The retirement benefit payout for the Fund is $5,151. Certain officers of DMC,
DSC and DDLP are officers and/or trustees of the Trust. These officers and
trustees are paid no compensation by the Fund.
3. Investments
For the year ended November 30, 2006, the Fund made purchases of $68,887,760
and sales of $34,159,376 of investment securities other than short-term
investments.
At November 30, 2006, the cost of investments for federal income tax purposes
was $48,060,729. At November 30, 2006, net unrealized appreciation was
$3,621,361 of which $4,546,196 related to unrealized appreciation of
investments and $924,835 related to unrealized depreciation of investments.
18
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
years ended November 30, 2006 and 2005 were as follows:
Year Ended
11/30/06 11/30/05
Ordinary income $204,444 $ 246,155
Long-term capital gain 61,883 1,155,265
________ __________
Total $266,327 $1,401,420
________ __________
5. Components of Net Assets on a Tax Basis
As of November 30, 2006, the components of net assets on a tax basis were as
follows:
Shares of beneficial interest $47,301,899
Undistributed ordinary income 1,021,374
Undistributed long-term capital gain 749,824
Unrealized appreciation of investments 3,621,361
___________
Net assets $52,694,458
___________
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 net operating losses and dividends and distributions.
Results of operations and net assets were not affected by these
reclassifications. For the year ended November 30, 2006, the Fund recorded the
following reclassifications.
Accumulated net investment loss $ 46,713
Accumulated net realized gain (loss) (46,713)
6. Capital Shares
Transactions in capital shares were as follows:
Year Ended
11/30/06 11/30/05
Shares sold:
Class A 1,767,689 338,367
Class C 872,680 76,257
Class R 20,770 1
Institutional Class 658,523 127,717
Shares issued upon reinvestment of
dividends and distributions:
Class A 6,253 548
Class C 2,157 -
Institutional Class 13,517 130,181
_________ _______
3,341,589 673,071
_________ _______
Shares repurchased:
Class A (178,469) (848)
Class C (38,810) -
Class R (4,237) -
Institutional Class (68,557) (797)
_________ _______
(290,073) (1,645)
_________ _______
Net increase 3,051,516 671,426
_________ _______
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 Participant's allocation of the entire
facility. The Participants may borrow up to a maximum of one third of their net
assets under the agreement. The Fund had no amounts outstanding as of November
30, 2006, or at any time during the year then ended.
(continues) 19
Notes to financial statements
Delaware Small Cap Core 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 such
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 year ended November 30,
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 November 30, 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.
10. Tax Information (Unaudited)
The information set forth below is for the Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for
portions of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in January of each
year. Please consult your tax advisor for proper treatment of this
information.
For the fiscal year ended November 30, 2006, the Fund designates dividends and
distributions paid during the year as follows:
(A) (B)
Long-Term Ordinary
Capital Gain Income Total (C)
Distributions Distributions * Distributions Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends (1)
_____________ _______________ _____________ _____________
23% 77% 100% 98%
(A) and (B) are based on a percentage of the Fund's total distributions.
(C) is based on a percentage of ordinary income distributions.
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* For the fiscal year ended November 30, 2006 certain dividends paid by the
Fund may be subject to a maximum tax rate of 15%, as provided for by the
Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund intends to
designate up to a maximum amount of $204,444 to be taxed at a maximum rate
of 15%. Complete information will be computed and reported in conjunction
with your 2006 Form 1099-DIV.
20
Report of independent
registered public accounting firm
To the Shareholders and Board of Trustees
Delaware Group Equity Funds V - Delaware Small Cap Core Fund
We have audited the accompanying statement of net assets of Delaware Small Cap
Core Fund (one of the series constituting Delaware Group Equity Funds V) (the
"Fund") as of November 30, 2006, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our procedures included
confirmation of securities owned as of November 30, 2006, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Delaware Small Cap Core Fund of Delaware Group Equity Funds V at November 30,
2006, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and its
financial highlights for each of the periods indicated therein, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
January 16, 2007
21
Board of trustees/directors
and officers addendum
Delaware Investments(R) Family of Funds
A mutual fund is governed by a Board of Trustees/Directors ("Trustees"), which
has oversight responsibility for the management of a fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor, and others who perform services for the
fund. The independent fund trustees, in particular, are advocates for
shareholder interests. Each trustee has served in that capacity since he or she
was elected to or appointed to the Board of Trustees, and will continue to
serve until his or her retirement or the election of a new trustee in his or
her place. The following is a list of the Trustees and Officers with certain
background and related information.
Number of
Portfolios in Fund Other
Name, Complex Overseen Directorships
Address, Position(s) Length of Principal Occupation(s) by Trustee Held by
and Birth Date Held with Fund(s) Time Served During Past 5 Years or Officer Trustee or Officer
____________________________________________________________________________________________________________________________________
Interested Trustees
____________________________________________________________________________________________________________________________________
Patrick P. Coyne (1) Chairman, Chairman and Trustee Patrick P. Coyne has served in 83 None
2005 Market Street President, since August 16, 2006 various executive capacities
Philadelphia, PA Chief Executive at different times at
19103 Officer, and President and Delaware Investments. (2)
Trustee Chief Executive Officer
April 14, 1963 since August 1, 2006
____________________________________________________________________________________________________________________________________
Independent Trustees
____________________________________________________________________________________________________________________________________
Thomas L. Bennett Trustee Since Private Investor - 83 None
2005 Market Street March 2005 (March 2004-Present)
Philadelphia, PA
19103 Investment Manager -
Morgan Stanley & Co.
October 4, 1947 (January 1984-March 2004)
____________________________________________________________________________________________________________________________________
John A. Fry Trustee Since President - 83 Director -
2005 Market Street January 2001 Franklin & Marshall College Community Health
Philadelphia, PA (June 2002-Present) Systems
19103
Executive Vice President - Director -
May 28, 1960 University of Pennsylvania Allied Barton
(April 1995-June 2002) Security Holdings
____________________________________________________________________________________________________________________________________
Anthony D. Knerr Trustee Since Founder and Managing Director - 83 None
2005 Market Street April 1990 Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990-Present)
December 7, 1938
____________________________________________________________________________________________________________________________________
Lucinda S. Landreth Trustee Since Chief Investment Officer - 83 None
2005 Market Street March 2005 Assurant, Inc.
Philadelphia, PA (Insurance)
19103 (2002-2004)
June 24, 1947
____________________________________________________________________________________________________________________________________
Ann R. Leven Trustee Since Consultant - 83 Director and
2005 Market Street September 1989 ARL Associates, Audit Committee
Philadelphia, PA (Financial Planning) Chairperson - Andy
19103 (1983-Present) Warhol Foundation
November 1, 1940 Director and Audit
Committee Member -
Systemax, Inc.
____________________________________________________________________________________________________________________________________
22
Number of
Portfolios in Fund Other
Name, Complex Overseen Directorships
Address, Position(s) Length of Principal Occupation(s) by Trustee Held by
and Birth Date Held with Fund(s) Time Served During Past 5 Years or Officer Trustee or Officer
____________________________________________________________________________________________________________________________________
Independent Trustees (continued)
____________________________________________________________________________________________________________________________________
Thomas F. Madison Trustee Since President and Chief 83 Director -
2005 Market Street May 1997 Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
February 25, 1936 (January 1993-Present)
Director and Audit
Committee Member -
Digital River, Inc.
Director and Audit
Committee Member -
Rimage
Corporation
Director - Valmont
Industries, Inc.
____________________________________________________________________________________________________________________________________
Janet L. Yeomans Trustee Since Vice President 83 None
2005 Market Street April 1999 (January 2003-Present)
Philadelphia, PA and Treasurer
19103 (January 2006-Present)
3M Corporation
July 31, 1948
Ms. Yeomans has held
various management positions
at 3M Corporation since 1983.
____________________________________________________________________________________________________________________________________
J. Richard Zecher Trustee Since Founder - 83 Director and Audit
2005 Market Street March 2005 Investor Analytics Committee Member -
Philadelphia, PA (Risk Management) Investor Analytics
19103 (May 1999-Present)
Director and Audit
July 3, 1940 Founder - Committee Member -
Sutton Asset Management Oxigene, Inc.
(Hedge Fund)
(September 1998-Present)
____________________________________________________________________________________________________________________________________
Officers
____________________________________________________________________________________________________________________________________
David F. Connor Vice President, Vice President since David F. Connor has served as 83 None (3)
2005 Market Street Deputy General September 21, 2000 Vice President and Deputy
Philadelphia, PA Counsel, and Secretary and Secretary General Counsel of
19103 since Delaware Investments
October 2005 since 2000.
December 2, 1963
____________________________________________________________________________________________________________________________________
David P. O'Connor Senior Vice Senior Vice President, David P. O'Connor has served in 83 None (3)
2005 Market Street President, General Counsel, and various executive and legal
Philadelphia, PA General Counsel, Chief Legal Officer capacities at different times
19103 and Chief since at Delaware Investments.
Legal Officer October 2005
February 21, 1966
____________________________________________________________________________________________________________________________________
John J. O'Connor Senior Vice President Treasurer John J. O'Connor has served in 83 None (3)
2005 Market Street and Treasurer since various executive capacities
Philadelphia, PA February 2005 at different times at
19103 Delaware Investments.
June 16, 1957
____________________________________________________________________________________________________________________________________
Richard Salus Senior Chief Financial Richard Salus has served in 83 None (3)
2005 Market Street Vice President Officer since various executive capacities
Philadelphia, PA and November 1, 2006 at different times at
19103 Chief Financial Delaware Investments.
Officer
October 4, 1963
____________________________________________________________________________________________________________________________________
(1) Patrick P. Coyne is considered to be an "Interested Trustee" because he is an executive officer of the Fund's(s') investment
advisor.
(2) Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries, including the Fund's(s')
investment advisor, principal underwriter, and its transfer agent.
(3) David F. Connor, David P. O'Connor, John J. O'Connor, and Richard Salus serve in similar capacities for the six portfolios of
the Optimum Fund Trust, which have the same investment advisor, principal underwriter, and transfer agent as the registrant.
John J. O'Connor also serves in a similar capacity for Lincoln Variable Insurance Products Trust, which has the same investment
advisor as the registrant.
The Statement of Additional Information for the Fund(s) includes additional information about the Trustees and Officers and is
available, without charge, upon request by calling 800 523-1918.
23
About the organization
This annual 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
Patrick P. Coyne
Chairman, President, and
Chief Executive Officer
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
Consultant
ARL Associates
New York, NY
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
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
Richard Salus
Senior Vice President and
Chief Financial Officer
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
Get shareholder reports and prospectuses online instead of in the mail.
> Visit www.delawareinvestments.com/edelivery
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! Please visit us at
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 INVESTMENTS LOGO]
(1212) Printed in the USA
AR-480 [11/06] CGI 1/07 MF-06-12-016 PO11494
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. A copy of the registrant's Code of Business Ethics has been posted
on Delaware Investments' internet website at www.delawareinvestments.com. Any
amendments to the Code of Business Ethics, and information on any waiver from
its provisions granted by the registrant, will also be posted on this website
within five business days of such amendment or waiver and will remain on the
website for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant's Board of Trustees/Directors has determined that each
member of the registrant's Audit Committee is an audit committee financial
expert, as defined below. For purposes of this item, an "audit committee
financial expert" is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and
financial statements;
b. The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements, or
experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial
reporting; and
e. An understanding of audit committee functions.
An "audit committee financial expert" shall have acquired such attributes
through:
a. Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience in
one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal
accounting officer, controller, public accountant, auditor, or person performing
similar functions;
c. Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
d. Other relevant experience.
The registrant's Board of Trustees/Directors has also determined that each
member of the registrant's Audit Committee is independent. In order to be
"independent" for purposes of this item, the Audit Committee member may not: (i)
other than in his or her capacity as a member of the Board of Trustees/Directors
or any committee thereof, accept directly or indirectly any consulting, advisory
or other compensatory fee from the issuer; or (ii) be an "interested person" of
the registrant as defined in Section 2(a)(19) of the Investment Company Act of
1940.
The names of the audit committee financial experts on the registrant's
Audit Committee are set forth below:
Thomas L. Bennett (1)
Thomas F. Madison
Janet L. Yeomans (1)
J. Richard Zecher
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
__________
The aggregate fees billed for services provided to the registrant by its
independent auditors for the audit of the registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $70,200 for
the fiscal year ended November 30, 2006.
____________________
(1) The instructions to Form N-CSR require disclosure on the relevant experience
of persons who qualify as audit committee financial experts based on "other
relevant experience." The Board of Trustees/Directors has determined that Mr.
Bennett qualifies as an audit committee financial expert by virtue of his
education, Chartered Financial Analyst designation, and his experience as a
credit analyst, portfolio manager and the manager of other credit analysts and
portfolio managers. The Board of Trustees/Directors has determined that Ms.
Yeomans qualifies as an audit committee financial expert by virtue of her
education and experience as the Treasurer of a large global corporation.
The aggregate fees billed for services provided to the registrant by its
independent auditors for the audit of the registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $66,000 for
the fiscal year ended November 30, 2005.
(b) Audit-related fees.
__________________
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the registrant's financial
statements and not reported under paragraph (a) of this Item were $0 for the
fiscal year ended November 30, 2006.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the registrant's investment adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $33,700 for the registrant's fiscal year ended
November 30, 2006. The percentage of these fees relating to services approved by
the registrant's Audit Committee pursuant to the de minimis exception from the
pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These audit-related services were as follows: issuance of report concerning
transfer agent's system of internal accounting control pursuant to Rule 17Ad-13
of the Securities Exchange Act; and issuance of agreed upon procedures report to
the registrant's Board in connection with the pass-through of internal legal
cost relating to the operations of the registrant.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the registrant's financial
statements and not reported under paragraph (a) of this Item were $0 for the
fiscal year ended November 30, 2005.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the registrant's investment adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $159,700 for the registrant's fiscal year ended
November 30, 2005. The percentage of these fees relating to services approved by
the registrant's Audit Committee pursuant to the de minimis exception from the
pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These audit-related services were as follows: issuance of report concerning
transfer agent's system of internal accounting control pursuant to Rule 17Ad-13
of the Securities Exchange Act; issuance of agreed upon procedures reports to
the registrant's Board in connection with the annual transfer agent and fund
accounting service agent contract renewals and the pass-through of internal
legal cost relating to the operations of the registrant; and preparation of
Report on Controls Placed in Operation and Tests of Operating Effectiveness
Relating to the Retirement Plan Services Division ("SAS 70 report").
(c) Tax fees.
________
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant were $13,700 for the fiscal year
ended November 30, 2006. The percentage of these fees relating to services
approved by the registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These tax-related services were as follows: review of
income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant's investment adviser and other
service providers under common control with the adviser and that relate directly
to the operations or financial reporting of the registrant were $0 for the
registrant's fiscal year ended November 30, 2006.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant were $10,900 for the fiscal year
ended November 30, 2005. The percentage of these fees relating to services
approved by the registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These tax-related services were as follows: review of
income tax returns and review of annual excise distribution calculations.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant's adviser and other service
providers under common control with the adviser and that relate directly to the
operations or financial reporting of the registrant were $0 for the registrant's
fiscal year ended November 30, 2005.
(d) All other fees.
______________
The aggregate fees billed for all services provided by the independent
auditors to the registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended November 30, 2006.
The aggregate fees billed for all services other than those set forth in
paragraphs (b) and (c) of this Item provided by the registrant's independent
auditors to the registrant's adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $0 for the registrant's fiscal year ended
November 30, 2006.
The aggregate fees billed for all services provided by the independent
auditors to the registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended November 30, 2005.
The aggregate fees billed for all services other than those set forth in
paragraphs (b) and (c) of this Item provided by the registrant's independent
auditors to the registrant's adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $0 for the registrant's fiscal year ended
November 30, 2005.
(e) The registrant's Audit Committee has established pre-approval policies
and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the
"Pre-Approval Policy") with respect to services provided by the registrant's
independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee
has pre-approved the services set forth in the table below with respect to the
registrant up to the specified fee limits. Certain fee limits are based on
aggregate fees to the registrant and other registrants within the Delaware
Investments Family of Funds.
______________________________________________________________________________________________________________________
Service Range of Fees
______________________________________________________________________________________________________________________
Audit Services
______________________________________________________________________________________________________________________
Statutory audits or financial audits for new Funds up to $25,000 per Fund
______________________________________________________________________________________________________________________
Services associated with SEC registration statements (e.g., Form N-1A, Form
N-14, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings (e.g., comfort letters up to $10,000 per Fund
for closed-end Fund offerings, consents), and assistance in responding to SEC
comment letters
______________________________________________________________________________________________________________________
Consultations by Fund management as to the accounting or disclosure treatment of
transactions or events and/or the actual or potential impact of final or
proposed rules, standards or interpretations by the SEC, FASB, or other up to $25,000 in the aggregate
regulatory or standard-setting bodies (Note: Under SEC rules, some consultations
may be considered "audit-related services" rather than "audit services")
______________________________________________________________________________________________________________________
Audit-Related Services
______________________________________________________________________________________________________________________
Consultations by Fund management as to the accounting or disclosure treatment of
transactions or events and /or the actual or potential impact of final or
proposed rules, standards or interpretations by the SEC, FASB, or other up to $25,000 in the aggregate
regulatory or standard-setting bodies (Note: Under SEC rules, some consultations
may be considered "audit services" rather than "audit-related services")
______________________________________________________________________________________________________________________
Tax Services
______________________________________________________________________________________________________________________
U.S. federal, state and local and international tax planning and advice (e.g.,
consulting on statutory, regulatory or administrative developments, evaluation up to $25,000 in the aggregate
of Funds' tax compliance function, etc.)
______________________________________________________________________________________________________________________
U.S. federal, state and local tax compliance (e.g., excise distribution up to $5,000 per Fund
reviews, etc.)
______________________________________________________________________________________________________________________
Review of federal, state, local and international income, franchise and other up to $5,000 per Fund
tax returns
______________________________________________________________________________________________________________________
Under the Pre-Approval Policy, the Audit Committee has also pre-approved
the services set forth in the table below with respect to the registrant's
investment adviser and other entities controlling, controlled by or under common
control with the investment adviser that provide ongoing services to the
registrant (the "Control Affiliates") up to the specified fee limit. This fee
limit is based on aggregate fees to the investment adviser and its Control
Affiliates.
______________________________________________________________________________________________________________________
Service Range of Fees
______________________________________________________________________________________________________________________
Non-Audit Services
______________________________________________________________________________________________________________________
Services associated with periodic reports and other documents filed with the SEC up to $10,000 in the aggregate
and assistance in responding to SEC comment letters
______________________________________________________________________________________________________________________
The Pre-Approval Policy requires the registrant's independent auditors to
report to the Audit Committee at each of its regular meetings regarding all
services initiated since the last such report was rendered, including those
services authorized by the Pre-Approval Policy.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's independent
auditors for services rendered to the registrant and to its investment adviser
and other service providers under common control with the adviser were $272,920
and $341,960 for the registrant's fiscal years ended November 30, 2006 and
November 30, 2005, respectively.
(h) In connection with its selection of the independent auditors, the
registrant's Audit Committee has considered the independent auditors' provision
of non-audit services to the registrant's investment adviser and other service
providers under common control with the adviser that were not required to be
pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit
Committee has determined that the independent auditors' provision of these
services is compatible with maintaining the auditors' independence.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Included as part of report to shareholders filed under Item 1 of this Form
N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
(a) 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.
(b) Management has made changes that have materially affected, or are
reasonably likely to materially affect, registrant's internal controls over
financial reporting. To seek to increase the controls' effectiveness, these
changes provide for enhanced review of contracts relating to complex trnsactions
and the applicability of generally accepted accounting principles to such
transactions, including enhanced consultation with registrant's independent
public accountants in connection with such reviews.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
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: Chief Executive Officer
Date: February 6, 2007
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: Chief Executive Officer
Date: February 6, 2007
RICHARD SALUS
_____________________________
By: Richard Salus
Title: Chief Financial Officer
Date: February 6, 2007