N-CSR 1 n-csr.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4997 Exact name of registrant as specified in charter: Delaware Group Equity Funds V Address of principal executive offices: 2005 Market Street Philadelphia, PA 19103 Name and address of agent for service: Richelle S. Maestro, Esq. 2005 Market Street Philadelphia, PA 19103 Registrant's telephone number, including area code: (800) 523-1918 Date of fiscal year end: November 30 Date of reporting period: May 30, 2004
Item 1. Reports to Stockholders Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) VALUE-EQUITY SEMIANNUAL REPORT MAY 31, 2004 -------------------------------------------------------------------------------- DELAWARE DIVIDEND INCOME FUND [LOGO OMITTED] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS ---------------------------------------------------------- FINANCIAL STATEMENTS: Statement of Net Assets 1 Statement of Operations 6 Statements of Changes in Net Assets 7 Financial Highlights 8 Notes to Financial Statements 13 ---------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2004 Delaware Distributors, L.P. STATEMENT DELAWARE DIVIDEND INCOME FUND OF NET ASSETS May 31, 2004 (Unaudited) Number of Market Shares Value (U.S.$) COMMON STOCK - 53.99% Aerospace & Defense - 1.01% Goodrich (B.F.) 38,200 $1,070,746 ---------- 1,070,746 ---------- Banking, Finance & Insurance - 8.45% Bank of America 14,618 1,215,194 Friedman Billings Ramsey Group Class A 38,725 755,138 JP Morgan Chase 41,000 1,510,440 MBNA 63,300 1,607,820 Mellon Financial 41,700 1,227,648 Morgan Stanley 25,000 1,337,750 US Bancorp 45,000 1,264,500 ---------- 8,918,490 ---------- Chemicals - 1.26% Dow Chemical 33,400 1,332,660 ---------- 1,332,660 ---------- Computers & Technology - 3.16% Intel 41,500 1,184,825 +Intuit 26,200 1,026,516 Pitney Bowes 25,400 1,125,982 ---------- 3,337,323 ---------- Consumer Products - 1.28% Clorox 25,800 1,350,888 ---------- 1,350,888 ---------- Electronics & Electrical Equipment - 2.58% Emerson Electric 18,700 1,116,390 General Electric 42,700 1,328,824 +Solectron 50,968 280,324 ---------- 2,725,538 ---------- Energy - 3.97% ChevronTexaco 10,500 949,200 Exxon Mobil 32,900 1,422,925 Kerr-McGee 36,800 1,812,400 ---------- 4,184,525 ---------- Food, Beverage & Tobacco - 3.68% Anheuser-Busch 23,300 1,241,191 General Mills 20,900 962,445 PepsiCo 31,500 1,681,155 ---------- 3,884,791 ---------- Healthcare & Pharmaceuticals - 5.71% Gladstone Capital 50,000 1,005,000 Merck 27,400 1,296,020 Pfizer 39,500 1,395,930 +Tenet Healthcare 100,500 1,197,960 Wyeth 31,500 1,134,000 ---------- 6,028,910 ---------- Leisure, Lodging & Entertainment - 1.12% Starwood Hotels & Resorts Worldwide 28,000 1,181,040 ---------- 1,181,040 ---------- Metals & Mining - 1.28% Alcoa 43,100 1,349,030 ---------- 1,349,030 ---------- Number of Market Shares Value (U.S.$) COMMON STOCK (continued) Packaging & Containers - 1.04% Packaging Corp of America 46,700 $ 1,097,450 ----------- 1,097,450 ----------- Paper & Forest Products - 1.96% International Paper 21,700 909,881 Weyerhaeuser 19,100 1,155,168 ----------- 2,065,049 ----------- REITs - 14.01% American Home Mortgage Investment 34,900 889,950 Apartment Investment & Management 20,000 577,600 BRE Properties Class A 42,100 1,456,660 CarrAmerica Realty 39,300 1,152,276 CBL & Associates Properties 8,200 437,224 Crescent Real Estate Equities 53,000 890,400 Developers Diversified Realty 12,100 416,119 Duke Realty 22,400 724,864 Equity Office Properties Trust 31,300 843,535 Federal Realty Investment Trust 21,400 853,860 +*Fieldstone Investments 144A 20,000 345,000 First Potomac Realty Trust 38,500 716,100 Government Properties Trust 4,100 42,640 Hersha Hospitality Trust 49,100 489,036 Liberty Property Trust 15,800 630,262 +*Medical Properties Trust 144A 11,300 113,000 Prentiss Properties Trust 27,400 904,200 Rouse 22,800 1,040,820 Simon Property Group 17,700 912,789 +Sunset Financial 43,600 454,748 Vornado Realty Trust 16,200 885,330 ----------- 14,776,413 ----------- Telecommunications - 1.17% Alltel 24,400 1,235,372 ----------- 1,235,372 ----------- Utilities - 2.31% Duke Energy 60,500 1,206,370 FPL Group 19,400 1,236,750 ----------- 2,443,120 ----------- TOTAL COMMON STOCK (cost $57,541,079) 56,981,345 ----------- Principal Amount (U.S.$) CORPORATE BONDS - 23.19% Aerospace & Defense - 0.15% Armor Holdings 8.25% 8/15/13 $ 145,000 155,513 ----------- 155,513 ----------- Automobiles & Automotive Parts - 0.50% Advanced Accessory Systems 10.75% 6/15/11 185,000 186,850 Collins & Aikman Products 10.75% 12/31/11 150,000 150,000 11.50% 4/15/06 195,000 190,125 ----------- 526,975 ----------- 1 STATEMENT DELAWARE DIVIDEND INCOME FUND OF NET ASSETS (CONTINUED) Principal Market Amount (U.S.$) Value (U.S.$) CORPORATE BONDS (continued) Banking, Finance & Insurance - 0.85% *Farmers Exchange Capital 144A 7.20% 7/15/48 $ 227,000 $ 211,564 *LaBranche & Company 144A 11.00% 5/15/12 235,000 240,875 Midland Funding II 11.75% 7/23/05 117,305 121,410 *Sheridan Acquisition 144A 10.25% 8/15/11 246,000 259,530 *UGS 144A 10.00% 6/1/12 65,000 68,575 ---------- 901,954 ---------- Building & Materials - 0.26% *Lone Star Industries 144A 8.85% 6/15/05 161,000 168,261 Standard-Pacific 7.75% 3/15/13 110,000 110,000 ---------- 278,261 ---------- Business Services - 0.14% Brickman Group 11.75% 12/15/09 130,000 148,850 ---------- 148,850 ---------- Cable, Media & Publishing - 1.58% American Media Operation 10.25% 5/1/09 220,000 229,350 *Charter Communications Operating 144A 8.00% 4/30/12 405,000 396,900 CSC Holdings 10.50% 5/15/16 325,000 368,063 *Echostar DBS 144A 5.75% 10/1/08 255,000 250,538 Lodgenet Entertainment 9.50% 6/15/13 390,000 427,049 ---------- 1,671,900 ---------- Chemicals - 0.75% Huntsman International 9.875% 3/1/09 140,000 151,900 Lyondell Chemical 9.875% 5/1/07 200,000 209,500 *Nalco 144A 7.75% 11/15/11 215,000 225,750 Resolution Performance Products 8.00% 12/15/09 195,000 201,338 ---------- 788,488 ---------- Computers & Technology - 0.99% Activant Solutions 10.50% 6/15/11 275,000 290,125 Amkor Technology 9.25% 2/15/08 335,000 354,262 Fairchild Semiconductor 10.50% 2/1/09 235,000 257,913 *Stratus Technologies 144A 10.375% 12/1/08 140,000 137,900 ---------- 1,040,200 ---------- Consumer Products - 0.13% *Samsonite 144A 8.875% 6/1/11 135,000 137,025 ---------- 137,025 ---------- Consumer Services - 0.57% Alderwoods Group 12.25% 1/2/09 210,000 233,100 Corrections Corporation of America 7.50% 5/1/11 40,000 40,600 9.875% 5/1/09 25,000 27,750 *Service Corp International 144A 6.75% 4/1/16 330,000 303,600 ---------- 605,050 ---------- Principal Market Amount (U.S.$) Value (U.S.$) CORPORATE BONDS (continued) Energy - 1.81% *Chesapeake Energy 144A 7.50% 6/15/14 $ 240,000 $ 249,000 *Dynegy Holdings 144A 10.125% 7/15/13 158,000 168,270 El Paso Natural Gas 7.625% 8/1/10 100,000 101,500 El Paso Production Holding 7.75% 6/1/13 255,000 242,250 *Hilcorp Energy 144A 10.50% 9/1/10 235,000 257,913 Hornbeck Offshore Services 10.625% 8/1/08 280,000 306,600 *KCS Energy 144A 7.125% 4/1/12 265,000 259,700 Sonat 6.875% 6/1/05 150,000 150,000 Tennessee Gas Pipeline 8.375% 6/15/32 185,000 179,450 ---------- 1,914,683 ---------- Environmental Services - 0.34% IESI 10.25% 6/15/12 331,000 359,135 ---------- 359,135 ---------- Food, Beverage & Tobacco - 2.31% B&G Foods 9.625% 8/1/07 335,000 342,538 Chiquita Brands 10.56% 3/15/09 300,000 327,375 *Commonwealth Brands 144A 10.625% 9/1/08 190,000 196,650 Constellation 8.125% 1/15/12 245,000 258,475 *Gold Kist 144A 10.25% 3/15/14 260,000 273,000 Hines Nurseries 10.25% 10/1/11 155,000 165,850 *Le-Natures 144A 9.50% 6/15/13 290,000 297,250 National Beef Packing 10.50% 8/1/11 90,000 96,750 PPC Escrow 9.25% 11/15/13 160,000 167,200 *Standard Commercial 144A 8.00% 4/15/12 300,000 307,500 ---------- 2,432,588 ---------- Healthcare & Pharmaceuticals - 0.56% *Curative Health Services 144A 10.75% 5/1/11 120,000 117,600 Province Healthcare 7.50% 6/1/13 280,000 270,200 *VWR International 144A 8.00% 4/15/14 200,000 201,500 ---------- 589,300 ---------- Industrial Machinery - 0.24% *Aearo Company 144A 8.25% 4/15/12 110,000 111,650 *MAAX 144A 9.75% 6/15/12 135,000 139,050 ---------- 250,700 ---------- Leisure, Lodging & Entertainment - 3.35% Ameristar Casinos 10.75% 2/15/09 295,000 337,775 *Aztar 144A 7.875% 6/15/14 310,000 312,325 Boyd Gaming 9.25% 8/1/09 230,000 252,425 Caesars Entertainment 9.375% 2/15/07 80,000 87,200 Hard Rock Hotel 8.875% 6/1/13 190,000 192,850 Herbst Gaming 10.75% 9/1/08 231,000 266,805 *Herbst Gaming 144A 8.125% 6/1/12 285,000 287,138 Mandalay Resort 10.25% 8/1/07 35,000 39,375 Penn National Gaming 8.875% 3/15/10 535,000 575,124 Royal Caribbean Cruise 7.25% 3/15/18 315,000 302,400 Station Casinos 6.50% 2/1/14 85,000 79,688 *Warner Music Group 144A 7.375% 4/15/14 415,000 406,699 Wheeling Island Gaming 10.125% 12/15/09 375,000 396,563 ---------- 3,536,367 ---------- 2 STATEMENT DELAWARE DIVIDEND INCOME FUND OF NET ASSETS (CONTINUED) Principal Market Amount (U.S.$) Value (U.S.$) CORPORATE BONDS (continued) Metals & Mining - 0.25% AK Steel 7.75% 6/15/12 $ 171,000 $ 150,480 *Autocam 144A 10.875% 6/15/14 120,000 118,500 ---------- 268,980 ---------- Packaging & Containers - 1.00% AEP Industries 9.875% 11/15/07 160,000 164,000 Pliant 11.125% 9/1/09 130,000 138,450 *Port Townsend 144A 11.00% 4/15/11 255,000 252,450 *Portola Packaging 144A 8.25% 2/1/12 255,000 214,200 Radnor Holdings 11.00% 3/15/10 165,000 142,725 *Radnor Holdings 144A 7.92% 4/15/09 140,000 140,700 ---------- 1,052,525 ---------- Paper & Forest Products - 1.41% Bowater 9.00% 8/1/09 375,000 407,978 Buckeye Technologies 8.00% 10/15/10 285,000 266,475 Fort James 7.75% 11/15/23 485,000 499,550 Potlatch 12.50% 12/1/09 265,000 318,578 ---------- 1,492,581 ---------- REITs - 1.11% BF Saul 7.50% 3/1/14 265,000 261,688 Felcor Lodging 10.00% 9/15/08 250,000 268,125 Tanger Properties 7.875% 10/24/04 450,000 456,749 9.125% 2/15/08 163,000 179,708 ---------- 1,166,270 ---------- Retail - 0.91% *O'Charleys 144A 9.00% 11/1/13 190,000 195,700 Office Depot 10.00% 7/15/08 182,000 211,120 Petco Animal Supplies 10.75% 11/1/11 167,000 189,545 Remington Arms 10.50% 2/1/11 180,000 174,600 *VICORP Restaurants 144A 10.50% 4/15/11 190,000 189,050 ---------- 960,015 ---------- Telecommunications - 1.49% Alaska Communications Systems Holdings 9.875% 8/15/11 195,000 199,875 Centennial Cellular Operating 10.125% 6/15/13 230,000 235,750 Cincinnati Bell 8.375% 1/15/14 300,000 270,000 Citizens Communications 8.50% 5/15/06 90,000 96,116 Nextel Communications 7.375% 8/1/15 320,000 324,000 Northern Telecom Capital 7.875% 6/15/26 290,000 252,300 PanAmSat 8.50% 2/1/12 170,000 191,250 ---------- 1,569,291 ---------- Textiles, Apparel & Furniture - 0.23% Warnaco 8.875% 6/15/13 230,000 244,375 ---------- 244,375 ---------- Transportation & Shipping - 0.47% Kansas City Southern Railway 9.50% 10/1/08 175,000 191,625 Overseas Shipholding Group 8.25% 3/15/13 125,000 134,531 Seabulk International 9.50% 8/15/13 164,000 169,125 ---------- 495,281 ---------- Principal Market Amount (U.S.$) Value (U.S.$) CORPORATE BONDS (continued) Utilities - 1.79% Avista 9.75% 6/1/08 $ 178,000 $ 211,927 *Calpine Corporate 144A 8.75% 7/15/13 30,000 25,125 *Calpine Generating 144A 7.00% 4/1/10 290,000 278,400 Cogentrix Energy 8.75% 10/15/08 200,000 208,500 Elwood Energy 8.159% 7/5/26 82,390 83,213 Midwest Generation 8.30% 7/2/09 165,000 165,000 *Midwest Generation 144A 8.75% 5/1/34 205,000 202,950 *Nevada Power Company 144A 6.50% 4/15/12 210,000 198,975 *NRG Energy 144A 8.00% 12/15/13 200,000 200,500 PSEG Energy Holdings 7.75% 4/16/07 154,000 160,930 Reliant Energy 9.50% 7/15/13 140,000 149,100 ---------- 1,884,620 ---------- TOTAL CORPORATE BONDS (cost $24,734,330) 24,470,927 ---------- CONVERTIBLE BONDS - 7.83% Banking, Finance & Insurance - 1.10% PMI Group 2.50% 7/15/21 1,000,000 1,161,250 ---------- 1,161,250 ---------- Cable, Media & Publishing - 1.20% Mediacom Communications 5.25% 7/1/06 1,000,000 952,500 Quebecor World USA 6.00% 10/1/07 300,000 312,375 ---------- 1,264,875 ---------- Computers & Technology - 1.20% *++ON Semiconductor 144A 9.815% 4/15/24 1,500,000 1,273,125 ---------- 1,273,125 ---------- Consumer Services - 0.47% Fluor 1.50% 2/15/24 500,000 495,000 ---------- 495,000 ---------- Electronics & Electrical Equipment - 0.22% *Solectron 144A 0.50% 2/15/34 275,000 231,688 ---------- 231,688 ---------- Healthcare & Pharmaceuticals - 0.94% Wyeth 0.716% 1/15/24 1,000,000 990,000 ---------- 990,000 ---------- Leisure, Lodging & Entertainment - 0.38% *Regal Entertainment 144A 3.75% 5/15/08 350,000 403,375 ---------- 403,375 ---------- Metals & Mining - 0.90% *Apex Silver Mines 144A 2.875% 3/15/24 1,000,000 950,000 ---------- 950,000 ---------- REITs- 0.11% Meristar Hospitality 9.50% 4/1/10 100,000 119,875 ---------- 119,875 ---------- Retail - 0.89% *Saks 144A 2.00% 3/15/24 925,000 935,406 ---------- 935,406 ---------- 3 STATEMENT DELAWARE DIVIDEND INCOME FUND OF NET ASSETS (CONTINUED) Principal Market Amount (U.S.$) Value (U.S.$) CONVERTIBLE BONDS (continued) Utilities - 0.42% CenterPoint Energy 3.75% 3.75% 5/15/23 $ 400,000 $ 442,000 ---------- 442,000 ---------- TOTAL CONVERTIBLE BONDS (cost $8,410,660) 8,266,594 ---------- Number of Shares CONVERTIBLE PREFERRED STOCK - 5.35% Automobiles & Automotive Parts - 0.69% General Motors 5.25% 30,000 729,600 ---------- 729,600 ---------- Banking, Finance & Insurance - 0.72% Chubb 7.00% 20,000 555,800 XL Capital 6.50% 8,000 200,320 ---------- 756,120 ---------- Cable, Media & Publishing - 1.09% Interpublic Group 5.375% 22,000 1,157,640 ---------- 1,157,640 ---------- Energy - 0.44% Chesapeake Energy 6.00% 6,500 466,375 ---------- 466,375 ---------- Food, Beverage & Tobacco - 0.56% Constellation Brands 5.75% 18,200 586,222 ---------- 586,222 ---------- Paper & Forest Products - 0.76% Temple-Inland 7.50% 14,000 801,360 ---------- 801,360 ---------- Telecommunications - 1.09% Lucent 7.75% 1,000 1,146,690 ---------- 1,146,690 ---------- TOTAL CONVERTIBLE PREFERRED STOCK (cost $5,867,842) 5,644,007 ---------- PREFERRED STOCK - 3.05% Energy - 0.20% Chesapeake Energy 5.00% 2,000 210,000 ---------- 210,000 ---------- Leisure, Lodging & Entertainment - 0.57% WestCoast Hospital 9.50% 24,000 606,720 ---------- 606,720 ---------- REITs - 2.12% Equity Inns Series B 8.75% 18,300 457,500 LaSalle Hotel Properties 10.25% 29,700 795,662 Ramco-Gershenson Properties 9.50% 15,700 416,443 SL Green Realty 7.625% 23,000 566,375 ---------- 2,235,980 ---------- Utilities - 0.16% Public Service Enterprise Group 10.25% 2,400 138,600 TNP Enterprises PIK 14.50% 270 31,033 ---------- 169,633 ---------- TOTAL PREFERRED STOCK (cost $3,285,534) 3,222,333 ---------- Principal Market Amount (U.S.$) Value (U.S.$) FOREIGN BONDS - 1.89% Canada - 0.69% Abitibi-Consolidated 6.95% 12/15/06 $ 245,000 $ 252,093 *Ainsworth Lumber 144A 6.75% 3/15/14 135,000 125,213 *Hollinger 144A 11.875% 3/1/11 110,000 125,538 Rogers Cablesystems 10.00% 3/15/05 210,000 221,549 ---------- 724,393 ---------- Cayman Islands - 0.17% Bluewater Finance 10.25% 2/15/12 168,000 173,040 ---------- 173,040 ---------- France - 0.23% *Rhodia 144A 8.875% 6/1/11 320,000 246,400 ---------- 246,400 ---------- Ireland - 0.08% Smurfit Capital Funding 7.50% 11/20/25 95,000 87,638 ---------- 87,638 ---------- Marshall Islands - 0.15% OMI 7.625% 12/1/13 165,000 160,875 ---------- 160,875 ---------- Norway - 0.10% Petroleum Geo-Services 8.00% 11/5/06 105,000 107,100 ---------- 107,100 ---------- Sweden - 0.20% Stena 9.625% 12/1/12 190,000 213,750 ---------- 213,750 ---------- United Kingdom - 0.07% *Inmarsat Finance 144A 7.625% 6/30/12 70,000 69,475 ---------- 69,475 ---------- Virgin Islands - 0.20% Chippac International 12.75% 8/1/09 190,000 208,050 ---------- 208,050 ---------- TOTAL FOREIGN BONDS (cost $2,028,754) 1,990,721 ---------- Number of Shares EXCHANGE TRADED FUNDS - 0.99% Ishares Dow Jones U.S. Real Estate Index 10,500 1,044,120 --------- TOTAL EXCHANGE TRADED FUNDS (cost $1,082,921) 1,044,120 --------- WARRANTS - 0.00% +*Solutia 144A 12 0 --------- TOTAL WARRANTS (cost $1,021) 0 --------- 4 STATEMENT DELAWARE DIVIDEND INCOME FUND OF NET ASSETS (CONTINUED) Principal Market Amount (U.S.$) Value (U.S.$) REPURCHASE AGREEMENTS - 5.29% With BNP Paribas 0.98% 6/1/04 (dated 5/28/04, to be repurchased at $2,180,237 collateralized by $1,638,000 U.S. Treasury Bills due 11/4/04, market value $1,629,411, and $599,000 U.S. Treasury Bills due 11/26/04, market value $594,790) $2,180,000 $2,180,000 With J.P. Morgan Securities 0.92% 6/1/04 (dated 5/28/04, to be repurchased at $1,597,163 collateralized by $1,597,000 U.S. Treasury Notes 2.875% due 6/30/04, market value $1,619,325, and $10,000 U.S. Treasury Notes 4.75% due 11/15/08, market value $10,004) 1,597,000 1,597,000 With UBS Warburg 0.97% 6/1/04 (dated 5/28/04, to be repurchased at $1,810,195 collateralized by $532,000 U.S. Treasury Notes 3.25% due 5/31/04, market value $540,852, $532,000 U.S. Treasury Notes 10.75% due 8/15/05, market value $605,015, $111,000 U.S. Treasury Notes 7.00% due 7/15/06, market value $124,075, and $532,000 U.S. Treasury Notes 5.625% due 5/15/08, market value $577,070) 1,810,000 1,810,000 ------------ TOTAL REPURCHASE AGREEMENTS (cost $5,587,000) 5,587,000 ------------ TOTAL MARKET VALUE OF SECURITIES - 101.58% (cost $108,539,141) 107,207,048 LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (1.58%) (1,669,965) ------------ NET ASSETS APPLICABLE TO 10,181,630 SHARES OUTSTANDING - 100.00% $105,537,083 ============ Net Asset Value - Delaware Dividend Income Fund Class A ($49,341,929 / 4,759,272 Shares) $10.37 ------ Net Asset Value - Delaware Dividend Income Fund Class B ($15,980,719 / 1,542,126 Shares) $10.36 ------ Net Asset Value - Delaware Dividend Income Fund Class C ($35,920,437 / 3,466,248 Shares) $10.36 ------ Net Asset Value - Delaware Dividend Income Fund Class R ($178,612 / 17,234 Shares) $10.36 ------ Net Asset Value - Delaware Dividend Income Fund Institutional Class ($4,115,386 / 396,750 Shares) $10.37 ------ COMPONENTS OF NET ASSETS AT MAY 31, 2004: Shares of beneficial interest (unlimited authorization - no par) $106,332,648 Undistributed net investment income 399,851 Accumulated net realized gain on investments 136,677 Net unrealized depreciation of investments (1,332,093) ------------ Total net assets $105,537,083 ============ * Securities exempt from registration under 144A of the Securities Act of 1933. See Note 7 in "Notes to Financial Statements." + Non-income producing security for the period ended May 31, 2004. ++Step coupon bond. SUMMARY OF ABBREVIATIONS: PIK - Pay-in-kind REITs - Real Estate Investment Trust NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE DIVIDEND INCOME FUND Net asset value Class A (A) $10.37 Sales charge (5.75% of offering price, or 6.08% of the amount invested per share) (B) 0.63 ------ Offering price $11.00 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon the redemption or repurchase of shares. (B) See the current prospectus for purchases of $50,000 or more. See accompanying notes 5 STATEMENT DELAWARE DIVIDEND INCOME FUND OF OPERATIONS Six Months Ended May 31, 2004 (Unaudited) INVESTMENT INCOME: Dividends $763,346 Interest 586,332 $1,349,678 --------- ---------- EXPENSES: Management fees 202,967 Distribution expenses-- Class A 40,319 Distribution expenses-- Class B 44,882 Distribution expenses-- Class C 103,721 Distribution expenses-- Class R 235 Registration fees 38,068 Dividend disbursing and transfer agent fees and expenses 26,429 Reports and statements to shareholders 11,840 Accounting and administration expenses 7,962 Custodian fees 5,166 Legal and professional fees 2,995 Trustees' fees 1,430 Other 951 486,965 -------- Less expenses absorbed or waived (64,726) Less waiver of distribution expenses-- Class A (6,720) Less expenses paid indirectly (991) ---------- Total expenses 414,528 ---------- NET INVESTMENT INCOME 935,150 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 245,797 Net change in unrealized appreciation/depreciation of investments (1,718,924) ---------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (1,473,127) ---------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($537,977) ========== See accompanying notes 6 STATEMENTS DELAWARE DIVIDEND INCOME FUND OF CHANGES IN NET ASSETS Six Months Year Ended Ended 5/31/04 11/30/03 (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 935,150 $ 195,849 Net realized gain on investments 245,797 115,690 Net change in unrealized appreciation/depreciation of investments (1,718,924) 433,193 ------------ ----------- Net increase (decrease) in net assets resulting from operations (537,977) 744,732 ------------ ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A (399,676) (83) Class B (104,213) -- Class C (241,541) -- Class R (1,353) -- Institutional Class (84,959) (172,891) Net realized gain on investments: Class A (32,120) -- Class B (11,519) -- Class C (24,930) -- Class R (10) -- Institutional Class (13,041) -- ------------ ----------- (913,362) (172,974) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 46,421,956 5,863,682 Class B 14,276,441 2,117,277 Class C 32,937,834 4,302,013 Class R 179,949 3,010 Institutional Class 82,571 15,207 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 327,275 83 Class B 94,454 -- Class C 195,550 -- Class R 1,363 -- Institutional Class 96,646 172,891 ------------ ----------- 94,614,039 12,474,163 ------------ ----------- Cost of shares repurchased: Class A (2,506,857) (98,673) Class B (311,670) (12,463) Class C (974,814) (989) Institutional Class (15) (15) ------------ ----------- (3,793,356) (112,140) ------------ ----------- Increase in net assets derived from capital share transactions 90,820,683 12,362,023 ------------ ----------- NET INCREASE IN NET ASSETS 89,369,344 12,933,781 NET ASSETS: Beginning of period 16,167,739 3,233,958 ------------ ----------- End of period (including undistributed net investment income of $399,851 and $191,505, respectively) $105,537,083 $16,167,739 ============ =========== See accompanying notes 7 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Dividend Income Fund Class A Six Months Ended Year Ended 5/31/04(2) 11/30/03 11/30/02(1) 11/30/01 11/30/00 11/30/99 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.210 $9.030 $9.230 $9.600 $9.430 $10.160 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income(3) 0.177 0.450 0.429 0.405 0.403 0.431 Net realized and unrealized gain (loss) on investments 0.224 1.213 (0.196) (0.041) 0.285 (0.156) -------- -------- -------- -------- ------- ------- Total from investment operations 0.401 1.663 0.233 0.364 0.688 0.275 -------- -------- -------- -------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.207) (0.483) (0.433) (0.400) (0.420) (0.620) Net realized gain on investments (0.034) -- -- (0.334) (0.098) (0.385) -------- -------- -------- -------- ------- ------- Total dividends and distributions (0.241) (0.483) (0.433) (0.734) (0.518) (1.005) -------- -------- -------- -------- ------- ------- NET ASSET VALUE, END OF PERIOD $10.370 $10.210 $9.030 $9.230 $9.600 $ 9.430 ======== ======== ======== ======== ======= ======= TOTAL RETURN(4) 3.93% 19.45% 2.58% 3.87% 7.66% 3.14% Ratios and supplemental data: Net assets, end of period (000 omitted) $49,342 $5,821 $1 $-- $24 $22 Ratio of expenses to average net assets 1.00% 0.79% 0.75% 0.75% 0.75% 0.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.26% 2.05% 1.30% 1.05% 1.24% 1.17% Ratio of net investment income to average net assets 3.36% 4.69% 4.71% 4.38% 4.22% 4.46% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.10% 3.43% 4.16% 4.08% 3.73% 4.03% Portfolio turnover 119% 212% 188% 89% 41% 42%
(1) As required, effective December 1, 2001, the Portfolio adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of this change for the year ended November 30, 2002 was a decrease in net investment income per share of $0.048, an increase in net realized and unrealized gain (loss) per share of $0.048, and a decrease in the ratio of net investment income to average net assets of 0.53%. Per share data and ratios for periods prior to December 1, 2001 have not been restated to reflect this change in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) The average shares outstanding method has been applied for per share information. (4) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager and distributor, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 8 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Dividend Income Fund Class B Six Months 10/1/03(1) Ended to 5/31/04(2) 11/30/03 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.200 $ 9.950 INCOME FROM INVESTMENT OPERATIONS: Net investment income(3) 0.138 0.051 Net realized and unrealized gain on investments 0.221 0.199 -------- -------- Total from investment operations 0.359 0.250 -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.165) -- Net realized gain on investments (0.034) -- -------- -------- Total dividends and distributions (0.199) -- -------- -------- NET ASSET VALUE, END OF PERIOD $10.360 $10.200 ======== ======== Total return(4) 3.51% 2.51% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $15,981 $2,125 Ratio of expenses to average net assets 1.75% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.96% 4.10% Ratio of net investment income to average net assets 2.61% 3.65% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.40% 1.30% Portfolio turnover 119% 212%
(1) Date of commencement of operations; ratios have been annualized and total return has not been annualized. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) The average shares outstanding method has been applied for per share information. (4) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 9 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Dividend Income Fund Class C Six Months 10/1/03(1) Ended to 5/31/04(2) 11/30/03 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.200 $ 9.950 INCOME FROM INVESTMENT OPERATIONS: Net investment income(3) 0.138 0.051 Net realized and unrealized gain on investments 0.221 0.199 -------- -------- Total from investment operations 0.359 0.250 -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.165) -- Net realized gain on investments (0.034) -- -------- -------- Total dividends and distributions (0.199) -- -------- -------- NET ASSET VALUE, END OF PERIOD $10.360 $10.200 ======== ======== TOTAL RETURN(4) 3.51% 2.51% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $35,920 $4,341 Ratio of expenses to average net assets 1.75% 1.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.96% 4.10% Ratio of net investment income to average net assets 2.61% 3.65% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.40% 1.30% Portfolio turnover 119% 212%
(1) Date of commencement of operations; ratios have been annualized and total return has not been annualized. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) The average shares outstanding method has been applied for per share information. (4) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects waivers and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 10 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Dividend Income Fund Class R Six Months 10/1/03(1) Ended to 5/31/04(2) 11/30/03 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.220 $ 9.950 INCOME FROM INVESTMENT OPERATIONS: Net investment income(3) 0.158 0.056 Net realized and unrealized gain on investments 0.212 0.214 -------- -------- Total from investment operations 0.370 0.270 -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.196) -- Net realized gain on investments (0.034) -- -------- -------- Total dividends and distributions (0.230) -- -------- -------- NET ASSET VALUE, END OF PERIOD $10.360 $10.220 ======== ======== TOTAL RETURN(4) 3.62% 2.71% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $179 $3 Ratio of expenses to average net assets 1.35% 1.35% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.56% 3.70% Ratio of net investment income to average net assets 3.01% 4.05% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.80% 1.70% Portfolio turnover 119% 212%
(1) Date of commencement of operations; ratios have been annualized and total return has not been annualized. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) The average shares outstanding method has been applied for per share information. (4) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects waivers and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 11 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Dividend Income Fund Institutional Class Six Months Ended Year Ended 5/31/04(2) 11/30/03 11/30/02(1) 11/30/01 11/30/00 11/30/99 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $10.220 $ 9.030 $9.230 $9.600 $9.420 $10.150 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income(3) 0.190 0.453 0.429 0.405 0.403 0.431 Net realized and unrealized gain (loss) on investments 0.214 1.220 (0.196) (0.041) 0.295 (0.156) -------- -------- -------- -------- -------- -------- Total from investment operations 0.404 1.673 0.233 0.364 0.698 0.275 -------- -------- -------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.220) (0.483) (0.433) (0.400) (0.420) (0.620) Net realized gain on investments (0.034) -- -- (0.334) (0.098) (0.385) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.254) (0.483) (0.433) (0.734) (0.518) (1.005) -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $10.370 $10.220 $9.030 $9.230 $9.600 $ 9.420 -------- -------- -------- -------- -------- -------- TOTAL RETURN(4) 3.95% 19.56% 2.58% 3.87% 7.78% 3.15% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $4,115 $3,879 $3,233 $3,265 $3,145 $2,924 Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.96% 1.75% 1.00% 0.75% 0.94% 0.87% Ratio of net investment income to average net assets 3.61% 4.73% 4.71% 4.38% 4.22% 4.46% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.40% 3.73% 4.46% 4.38% 4.03% 4.33% Portfolio turnover 119% 212% 188% 89% 41% 42%
(1) As required, effective December 1, 2001, the Portfolio had adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies that required amortization of all premiums and discounts on debt securities. The effect of this change for the year ended November 30, 2002 was a decrease in net investment income per share of $0.048, an increase in net realized and unrealized gain (loss) per share of $0.048, and a decrease in the ratio of net investment income to average net assets of 0.53%. Per share data and ratios for periods prior to December 1, 2001 have not been restated to reflect this change in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) The average shares outstanding method has been applied for per share information. (4) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 12 NOTES DELAWARE DIVIDEND INCOME FUND TO FINANCIAL STATEMENTS May 31, 2004 (Unaudited) Delaware Group Equity Funds V (the "Trust") is organized as a Delaware statutory trust and offers three series: Delaware Dividend Income Fund, (formerly Delaware Retirement Income Fund) Delaware Small Cap Contrarian Fund and Delaware Small Cap Value Fund. These financial statements and the related notes pertain to Delaware Dividend Income Fund (the "Fund"). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class B, Class C, Class R and Institutional Class shares. Class A shares are sold with a front-end sales charge of up to 5.75%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares were held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately 8 years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to a limited group of investors. The investment objective of the Fund is to seek to provide high current income and an investment that has the potential for capital appreciation. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Fund. Security Valuation -- Equity securities, except those traded on the Nasdaq Stock Market, Inc. (NASDAQ), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the NASDAQ are valued in accordance with the NASDAQ Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between bid and asked prices will be used. Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Funds' Board of Trustees. Federal Income Taxes -- The Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting -- Investment income, common expenses and realized and unrealized gain (loss) on investments are allocated to the various classes of each Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Repurchase Agreements -- The Fund may invest in a pooled cash account along with other members of the Delaware Investments Family of Funds. The aggregate daily balance of the pooled cash account is invested in repurchase agreements secured by obligations of the U.S. government. The respective collateral is held by the Fund's custodian bank until the maturity of the respective repurchase agreements. Each repurchase agreement is 102% collateralized. However, in the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral may be subject to legal proceedings. Use of Estimates -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. 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 the character of such distribution by the issuer. The Fund declares and pays dividends from net investment income quarterly and distributions from net realized gain on investments, if any, annually. Through March 31, 2004, certain expenses of the Fund were paid through commission arrangements with brokers. The amount of these expenses was approximately $495 for the period ended May 31, 2004. In addition, the Fund receives earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The earnings credits for the period ended May 31, 2004 were approximately $496. The expenses paid under the above arrangements are included in their respective expense captions on the Statement of Operations with the corresponding expense offset shown as "expenses paid indirectly". 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.65% 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 of the Fund through January 31, 2005. Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Fund pays DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, the Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class B and C shares and 0.60% of the average daily net assets of the Class R shares. DDLP has contracted to waive distribution and service fees through January 31, 2005 in order to prevent distribution and service fees of the Class A shares from exceeding 0.25% of average daily net assets. Institutional Class shares pay no distribution and service expenses. 13 NOTES DELAWARE DIVIDEND INCOME FUND TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED) At May 31, 2004, the Fund had liabilities payable to affiliates as follows: Investment management fee payable to DMC $31,939 Dividend disbursing, transfer agent, accounting and administration fees and other expenses payable to DSC 15,336 Other expenses payable to DMC and affiliates* 6,352 * DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement the Fund bears the cost of certain legal services expenses, including in house legal services provided to the Fund by DMC employees. For the six months ended May 31, 2004, the Fund had costs of $160. For the period ended May 31, 2004, DDLP earned $191,266 for commissions on sales of the Fund's Class A shares. Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust. These officers and trustees are paid no compensation by the Fund. 3. INVESTMENTS For the six months ended May 31, 2004, the Fund made purchases of $123,702,052 and sales of $34,007,894 of investment securities other than short-term investments. At May 31, 2004, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At May 31, 2004, the cost of investments was $108,616,813. At May 31, 2004, the net unrealized depreciation was $1,409,765 of which $1,556,168 related to unrealized appreciation of investments and $2,965,933 related to unrealized depreciation of investments. 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. The tax character of dividends and distributions paid during the period ended May 31, 2004 and the year ended November 30, 2003 was as follows: 5/31/04* 11/30/03 -------- -------- Ordinary income $913,362 $172,974 * Tax information for the period ended May 31, 2004 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end. The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of May 31, 2004, the estimated components of net assets on a tax basis were as follows: Shares of beneficial interest $106,332,648 Undistributed ordinary income 582,142 Undistributed long-term capital gains 32,058 Unrealized depreciation of investments (1,409,765) ------------ Net assets $105,537,083 ============ For financial reporting purposes, capital accounts and distributions to shareholders are adjusted to reflect the tax character of book/tax differences. For the six months ended May 31, 2004, the Fund recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end. Reclassifications are primarily due to tax treatment of market discount and premium on certain debt instruments. Results of operations and net assets were not affected by these reclassifications. Undistributed net investment income Accumulated realized gain (loss) ---------------------------------- -------------------------------- $104,938 $(104,938) 5. CAPITAL SHARES Transactions in capital stock shares were as follows: Six Months Year Ended Ended 5/31/04 11/30/03 Shares sold: Class A 4,399,965 579,601 Class B 1,354,789 209,452 Class C 3,116,215 425,577 Class R 16,807 298 Institutional Class 7,857 1,484 Shares issued upon reinvestment of dividends and distributions: Class A 31,232 10 Class B 9,013 -- Class C 18,653 -- Class R 129 -- Institutional Class 9,262 20,198 --------- --------- 8,963,922 1,236,620 --------- --------- Shares repurchased: Class A (241,968) (9,712) Class B (29,894) (1,234) Class C (94,098) (99) Institutional Class (1) (2) --------- --------- (365,961) (11,047) --------- --------- Net increase 8,597,961 1,225,573 ========= ========= For the six months ended May 31, 2004, 1,442 Class B shares were converted to 1,441 Class A shares valued at $15,455. The amount is included in Class B redemptions and Class A subscriptions in the table above and the Statement of Changes in Net Assets. 6. LINE OF CREDIT The Fund, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $177,300,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each fund's allocation of the entire facility. The Participants may borrow up to a maximum of one-third of their net assets under the agreement. The Fund had no amount outstanding at May 31, 2004, or at any time during the period. 14 NOTES DELAWARE DIVIDEND INCOME FUND TO FINANCIAL STATEMENTS (CONTINUED) 7. CREDIT AND MARKET RISKS The Fund may invest up to 15% of its total assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair each Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. The Fund invests in high-yield fixed-income securities, which carry ratings of BBB or lower by Standard & Poor's Ratings Group and/or Baa or lower by 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 period ended May 31, 2004.The Fund's REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations. 8. CONTRACTUAL OBLIGATIONS The Fund enters into contracts 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. 15 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Dividend Income Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Dividend Income Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the Fund. You should read the prospectus carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in the Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION JUDE T. DRISCOLL JOSEPH H. HASTINGS INVESTMENT MANAGER Chairman Executive Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA INTERNATIONAL AFFILIATE WALTER P. BABICH Delaware International Advisers Ltd. Board Chairman RICHELLE S. MAESTRO London, England Citadel Construction Corporation Executive Vice President, King of Prussia, PA Chief Legal Officer and Secretary NATIONAL DISTRIBUTOR Delaware Investments Family of Funds Delaware Distributors, L.P. JOHN H. DURHAM Philadelphia, PA Philadelphia, PA Private Investor Gwynedd Valley, PA MICHAEL P. BISHOF SHAREHOLDER SERVICING, DIVIDEND Senior Vice President and Treasurer DISBURSING AND TRANSFER AGENT JOHN A. FRY Delaware Investments Family of Funds Delaware Service Company, Inc. President Philadelphia, PA 2005 Market Street Franklin & Marshall College Philadelphia, PA 19103-7094 Lancaster, PA FOR SHAREHOLDERS ANTHONY D. KNERR 800 523-1918 Managing Director Anthony Knerr & Associates FOR SECURITIES DEALERS AND FINANCIAL New York, NY INSTITUTIONS REPRESENTATIVES ONLY 800 362-7500 ANN R. LEVEN Former Treasurer/Chief Fiscal Officer WEB SITE National Gallery of Art www.delawareinvestments.com Washington, DC THOMAS F. MADISON President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN JANET L. YEOMANS Vice President/Mergers & Acquisitions 3M Corporation St. Paul, MN
-------------------------------------------------------------------------------- A description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on the Fund's website at http://www.delawareinvestments.com; and (iii) on the Commission's website at http://www.sec.gov; and beginning no later than August 31, 2004, information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.delawareinvestments.com; and (ii) on the Commission's website at http://www.sec.gov. -------------------------------------------------------------------------------- (8784) Printed in the USA SA-129 [5/04] IVES 7/04 J9725 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) STATEMENT OF NET ASSETS DELAWARE SMALL CAP CONTRARIAN FUND May 31, 2004 (unaudited) NUMBER OF MARKET SHARES VALUE COMMON STOCK - 93.78% Aerospace & Defense - 0.64% +Herley Industries 1,300 $ 26,715 --------- 26,715 --------- Banking & Finance - 9.66% Boston Private Financial Holdings 1,600 36,624 Colonial BancGroup 2,800 50,344 Commercial Federal 1,300 36,426 Compass Bancshares 1,200 50,460 First Republic Bank 900 36,684 Greater Bay Bancorp 1,600 45,936 MAF Bancorp 900 39,645 Provident Bankshares 1,300 37,505 Republic Bancorp 1,700 22,593 Riggs National 1,100 24,024 +Sterling Financial 641 20,457 --------- 400,698 --------- Basic Industry/Capital Goods - 10.67% Arch Coal 1,300 42,250 Crane 1,200 36,228 Federal Signal 800 14,248 +Griffon 2,600 60,527 Harsco 800 34,728 +Insituform Technologies Class A 1,100 16,830 +Jacobs Engineering Group 600 26,760 Kaydon 1,400 37,562 Mueller Industries 700 22,890 Smith (A.O.) 600 17,670 +Terex 700 20,643 Texas Industries 1,000 36,850 Universal Forest Products 400 11,584 Wabtec 2,100 34,629 Walter Industries 2,300 29,279 --------- 442,678 --------- Buildings & Materials - 2.19% KB Home 600 39,528 Thor Industries 1,200 33,372 +WCI Communities 800 17,800 --------- 90,700 --------- Business Services - 2.13% +Integrated Alarm Services 400 2,344 The Brink's Company 1,800 55,674 +United Stationers 800 30,168 --------- 88,186 --------- Cable, Media & Publishing - 0.64% Belo Class A 900 26,478 --------- 26,478 --------- Chemicals - 2.99% Fuller (H.B.) 1,000 26,790 MacDermid 1,400 43,624 +PolyOne 3,500 24,115 Spartech 1,300 29,744 --------- 124,273 --------- STATEMENT OF NET ASSETS (CONTINUED) NUMBER OF MARKET SHARES VALUE COMMON STOCK (CONTINUED) Consumer Products - 2.11% Bunge Limited 1,000 $ 37,140 +Constellation Brands 1,400 50,400 --------- 87,540 --------- Electronics & Electrical Equipment - 2.59% +Plexus 1,800 26,442 Symbol Technologies 2,400 35,352 +Technitrol 2,200 45,782 --------- 107,576 --------- Energy - 7.48% Chesapeake Energy 3,100 40,920 +FMC Technologies 1,000 26,970 +Grey Wolf 6,400 23,360 +Magnum Hunter Resources 3,400 34,238 +Newfield Exploration 1,000 49,750 +Newpark Resources 4,700 26,555 Southwest Gas 1,300 29,380 +W-H Energy Services 2,000 36,960 +Whiting Petroleum 1,800 42,210 --------- 310,343 --------- Environmental Services - 1.34% +Casella Waste Systems 1,800 25,164 +Tetra Tech 1,800 30,528 --------- 55,692 --------- Healthcare & Pharmaceuticals - 7.25% +Alderwoods Group 2,200 28,402 +America Service Group 800 28,800 Cooper Companies 400 22,080 +Genesis HealthCare 600 15,534 +Idexx Laboratories 500 32,870 Oakley 1,700 22,814 +Ocular Sciences 1,300 43,433 Owens & Minor 1,500 36,300 +Province Healthcare 1,000 16,020 +RehabCare Group 1,000 24,980 +Service Corp International 4,100 29,520 --------- 300,753 --------- Insurance - 4.44% AmerUs Group 1,100 43,285 Berkley (W.R.) 1,350 56,228 Harleysville Group 1,100 20,779 Platinum Underwriters Holdings 700 21,770 RenaissanceRe Holdings 800 42,280 --------- 184,342 --------- Metals & Mining - 1.91% Gibraltar Steel 1,100 31,845 +Golden Star Resources 4,300 21,371 +Meridian Gold 2,000 26,000 --------- 79,216 --------- Packaging & Containers - 1.77% +Crown Holdings 2,700 24,111 +Pactiv 2,100 49,518 --------- 73,629 --------- Paper & Forest Products - 1.79% Louisiana-Pacific 2,100 48,510 Wausau-Mosinee Paper 1,700 25,857 --------- 74,367 --------- STATEMENT OF NET ASSETS (CONTINUED) NUMBER OF MARKET SHARES VALUE COMMON STOCK (CONTINUED) REITs - 5.25% Ashford Hospitality Trust 1,500 $ 13,320 Camden Property Trust 900 42,039 +Highland Hospitality 2,400 25,776 Pan Pacific Retail Properties 800 36,800 Prentiss Properties Trust 1,100 36,300 Reckson Associates Realty 1,100 28,622 The St. Joe Company 900 35,145 --------- 218,002 --------- Retail - 7.68% +AnnTaylor Stores 1,950 55,205 +Barnes & Noble 1,100 32,934 Cato Class A 1,200 26,436 +Department 56 800 12,640 +Electronics Boutique Holdings 1,400 38,584 +Jo-Ann Stores 1,035 29,632 Movie Gallery 1,300 24,167 Pier 1 Imports 1,400 26,390 +Shoe Carnival 100 1,378 +ShopKo Stores 1,400 19,096 +Sports Authority 744 25,370 +Take-Two Interactive Software 900 26,793 --------- 318,625 --------- Technology/Hardware - 7.60% +Actel 1,300 25,948 +ASM International 1,000 21,790 +Bell Microproducts 2,200 14,014 +Entegris 3,200 36,320 +Ingram Micro Class A 2,300 33,235 +Insight Enterprises 1,700 31,212 +International Rectifier 900 39,843 +Overland Storage 1,600 22,912 +Photronics 1,100 19,448 +Storage Technology 1,500 42,375 +Tech Data 700 28,098 --------- 315,195 --------- Technology/Software - 2.00% +Datastream Systems 3,000 18,780 +Filenet 900 24,615 +QAD 1,800 19,026 +SYNNEX 1,200 20,448 --------- 82,869 --------- Telecommunications - 0.93% +Netgear 3,200 38,720 --------- 38,720 --------- Textiles, Apparel & Furniture - 5.39% +Carter's 400 12,496 Furniture Brands International 2,100 54,117 K-Swiss 1,800 36,000 Kellwood 1,000 40,700 Phillips-Van Heusen 900 17,037 Reebok International 800 29,000 Wolverine World Wide 1,300 34,255 --------- 223,605 --------- Transportation - 3.66% Alexander & Baldwin 1,600 50,992 +Continental Airlines Class B 1,200 12,828 +Kirby 1,000 35,400 +SCS Transportation 550 12,513 Skywest 900 15,057 +Yellow Roadway 700 24,997 --------- 151,787 --------- STATEMENT OF NET ASSETS (CONTINUED) NUMBER OF MARKET SHARES VALUE COMMON STOCK (CONTINUED) Utilities - 1.67% Black Hills 500 $14,650 +El Paso Electric 1,700 24,565 PNM Resources 1,000 30,050 --------- 69,265 --------- TOTAL COMMON STOCK (COST $3,075,621) 3,891,254 --------- EXCHANGE TRADED FUNDS - 1.58% iShares Russell 2000 Value Index Fund 400 65,760 --------- TOTAL EXCHANGE TRADED FUNDS (COST $57,699) 65,760 --------- PRINCIPAL AMOUNT REPURCHASE AGREEMENTS - 4.87% With BNP Paribas 0.98% 6/1/04 (dated 5/28/04, to be repurchased at $78,834 collateralized by $59,225 U.S. Treasury Bills due 11/4/04, market value $58,912, $21,625 U.S. Treasury Bills due 11/26/04, market value $21,505) $78,825 78,825 With J.P. Morgan Securities 0.92% 6/1/04 (dated 5/28/04, to be repurchased at $57,731 collateralized by $57,725 U.S. Treasury Notes 2.875% due 6/30/04, market value $58,547, $325 U.S. Treasury Notes 4.75% due 11/15/08, market value $362) 57,725 57,725 With UBS Warburg 0.97% 6/1/04 (dated 5/28/04, to be repurchased at $64,457 collateralized by $19,250 U.S. Treasury Notes 3.25% due 5/31/04, market value $19,555, $19,250 U.S. Treasury Notes 10.75% due 8/15/05, market value $21,875, $4,050 U.S. Treasury Notes 7.00% due 7/15/06, market value $4,486, $19,250 U.S. Treasury Notes 5.625% due 5/15/08, market value $20,864) 65,450 65,450 ---------- TOTAL REPURCHASE AGREEMENTS (COST $202,000) 202,000 ---------- TOTAL MARKET VALUE OF SECURITIES - 100.23% (cost $3,335,320) 4,159,014 LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.23%) (9,437) ---------- NET ASSETS APPLICABLE TO 327,625 SHARES OUTSTANDING - 100.00% $4,149,577 ---------- Net Asset Value - Delaware Small Cap Contrarian Fund Class A ($16,918 / 1,335.8 Shares) $12.67 ====== Net Asset Value - Delaware Small Cap Contrarian Fund Institutional Class ($4,132,659 / 326,289 Shares) $12.67 ====== COMPONENTS OF NET ASSETS AT MAY 31, 2004: Shares of beneficial interest (unlimited authorization - no par) $2,948,511 Accumulated net realized gain on investments 377,372 Net unrealized appreciation of investments 823,694 ---------- Total net assets $4,149,577 ========== +Non-income producing security for the period ended May 31, 2004. SUMMARY OF ABBREVIATION: REIT - Real Estate Investment Trust STATEMENT OF NET ASSETS (CONTINUED) NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE SMALL CAP CONTRARIAN FUND Net asset value Class A (A) $12.67 Sales charge (5.75% of offering price, or 6.08% of the amount invested per share) (B) 0.77 ------ Offering price $13.44 ------ ---------------- (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon the redemption or repurchase of shares. (B) See the current prospectus for purchases of $50,000 or more. See accompanying notes DELAWARE SMALL CAP CONTRARIAN FUND STATEMENT OF OPERATIONS SIX MONTHS ENDED MAY 31, 2004 (UNAUDITED)
INVESTMENT INCOME: Dividends $16,398 Interest 679 $ 17,077 --------- --------- EXPENSES: Management fees 15,573 Trustees' fees 1,353 Registration fees 986 Accounting and administration expenses 769 Legal and professional fees 369 Custodian fees 337 Reports and statements to shareholders 221 Dividend disbursing and transfer agent fees and expenses 93 Distribution expenses - Class A 25 Other 229 19,955 --------- Less expenses absorbed or waived (4,293) Less waiver of distribution expenses - Class A (25) Less expenses paid indirectly (37) --------- Total expenses 15,600 --------- Net Investment Income 1,477 --------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 378,709 Net change in unrealized appreciation/depreciation of investments (195,377) --------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 183,332 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $184,809 =========
See accompanying notes DELAWARE SMALL CAP CONTRARIAN FUND STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year 5/31/04 Ended (Unaudited) 11/30/04 ----------- ----------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 1,477 $ 10,692 Net realized gain on investments 378,709 287,735 Net change in unrealized appreciation/depreciation of investments (195,377) 730,117 ----------- ----------- Net increase in net assets resulting from operations 184,809 1,028,544 ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A (43) - Institutional Class (13,286) (21,293) Net realized gain on investments: Class A (928) (1) ----------- ----------- Institutional Class (284,731) (147,913) ----------- ----------- (298,988) (169,207) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 3,405 14,346 Institutional Class - 4 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 971 1 Institutional Class 298,017 169,206 ----------- ----------- 302,393 183,557 ----------- ----------- Cost of shares repurchased: Class A - (2,303) ----------- ----------- - (2,303) ----------- ----------- Increase in net assets derived from capital share transactions 302,393 181,254 ----------- ----------- Net Increase in Net Assets 188,214 1,040,591 NET ASSETS: Beginning of period 3,961,363 2,920,772 ----------- ----------- End of period (includng undistributed net investment income of ($-) and $10,627, respectively) $4,149,577 $3,961,363 =========== ===========
See accompanying notes FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Small Cap Contrarian Fund Class A -------------------------------------------------------------------------- Six Months 12/29/98(1) Ended Year Ended to 5/31/04(2) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99 -------------------------------------------------------------------------- (Unaudited) Net asset value, beginning of period $13.080 $10.290 $11.130 $ 9.090 $8.930 $8.500 Income from investment operations: Net investment income(3) 0.005 0.036 0.079 0.111 0.159 0.104 Net realized and unrealized gain on investments 0.572 3.350 0.069 2.082 0.720 0.326 -------------------------------------------------------------------------- Total from investment operations 0.577 3.386 0.148 2.193 0.879 0.430 -------------------------------------------------------------------------- Less dividends and distributions from: Net investment income (0.044) (0.075) (0.108) (0.153) (0.135) - Net realized gain on investments (0.943) (0.521) (0.880) - (0.584) - -------------------------------------------------------------------------- Total dividends and distributions (0.987) (0.596) (0.988) (0.153) (0.719) - -------------------------------------------------------------------------- Net asset value, end of period $12.670 $13.080 $10.290 $11.130 $9.090 $8.930 ========================================================================== Total return(4) 4.68% 35.19% 1.08% 24.42% 10.56% 5.06% Ratios and supplemental data: Net assets, end of period (000 omitted) $17 $13 $ - $ - $ - $ - Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.75% 0.80% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.26% 1.34% 1.34% 1.18% 1.24% 2.14% Ratio of net investment income to average net assets 0.07% 0.33% 0.74% 1.07% 1.81% 1.27% Ratio of net investment income (loss) to average net assets prior to expense limitation and expenses paid indirectly (0.44%) (0.26%) (0.15%) 0.63% 1.32% (0.12%) Portfolio turnover 47% 44% 76% 82% 125% 63%
(1) Date of commencement of operations; ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) The average shares outstanding method has been applied for per share information. (4) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. Total investment return reflects a waiver and payment of fees by the manager and distributor. Performance would have been lower had the expense limitation not been in effect. See accompanying notes FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Small Cap Contrarian Fund Institutional Class -------------------------------------------------------------------------- Six Months 12/29/98(1) Ended Year Ended to 5/31/04(2) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99 -------------------------------------------------------------------------- (Unaudited) Net asset value, beginning of period $13.080 $10.290 $11.130 $ 9.090 $8.930 $8.500 Income from investment operations: Net investment income(3) 0.005 0.036 0.079 0.111 0.159 0.104 Net realized and unrealized gain on investments 0.572 3.350 0.069 2.082 0.720 0.326 -------------------------------------------------------------------------- Total from investment operations 0.577 3.386 0.148 2.193 0.879 0.430 -------------------------------------------------------------------------- Less dividends and distributions from: Net investment income (0.044) (0.075) (0.108) (0.153) (0.135) - Net realized gain on investments (0.943) (0.521) (0.880) - (0.584) - -------------------------------------------------------------------------- Total dividends and distributions (0.987) (0.596) (0.988) (0.153) (0.719) - -------------------------------------------------------------------------- Net asset value, end of period $12.670 $13.080 $10.290 $11.130 $9.090 $8.930 ========================================================================== Total return(4) 4.68% 35.19% 1.08% 24.42% 10.56% 5.06% Ratios and supplemental data: Net assets, end of period (000 omitted) $4,133 $3,948 $2,921 $2,890 $2,322 $2,101 Ratio of expenses to average net assets 0.75% 0.75% 0.75% 0.75% 0.75% 0.80% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.96% 1.04% 1.04% 0.88% 0.94% 1.84% Ratio of net investment income to average net assets 0.07% 0.33% 0.74% 1.07% 1.81% 1.27% Ratio of net investment income (loss) to average net assets prior to expense limitation and expenses paid indirectly (0.14%) (0.04%) (0.45%) 0.93% 1.62% (0.18%) Portfolio turnover 47% 44% 76% 82% 125% 63%
(1) Date of commencement of operations; ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) The average shares outstanding method has been applied for per share information. (4) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes NOTES TO FINANCIAL STATEMENTS MAY 31, 2004 (UNAUDITED) Delaware Group Equity Funds V (the "Trust") is organized as a Delaware statutory trust and offers three series: Delaware Dividend Income Fund (formerly Delaware Retirement Income Fund), Delaware Small Cap Contrarian Fund and Delaware Small Cap Value Fund. These financial statements and the related notes pertain to Delaware Small Cap Contrarian Fund (the "Fund"). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended, and offers Class A, Class B, Class C, Class R and Institutional Class shares. Class A shares are sold with a front-end sales charge of up to 5.75%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately 8 years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first 12 months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to a limited group of investors. As of May 31, 2004, only Class A and Institutional Class have commenced operations. The investment objective of the Fund is to seek long-term capital appreciation. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Fund. SECURITY VALUATION -- Equity securities, except those traded on the Nasdaq Stock Market, Inc. (NASDAQ), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the NASDAQ are valued in accordance with the NASDAQ Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between the bid and asked prices will be used. Short-term debt securities having less than 60 days to maturity are valued at amortized cost, which approximates market value. Other securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith under the direction of the Fund's Board of Trustees. 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. NOTES TO FINANCIAL STATEMENTS (Continued) CLASS ACCOUNTING -- Investment income, common expenses and realized and unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. REPURCHASE AGREEMENTS -- The Fund may invest in a pooled cash account along with other members of the Delaware Investments Family of Funds. The aggregate daily balance of the pooled cash account is invested in repurchase agreements secured by obligations of the U.S. government. The respective collateral is held by the Fund's custodian bank until the maturity of the respective repurchase agreements. Each repurchase agreement is 102% collateralized. However, in the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral may be subject to legal proceedings. USE OF ESTIMATES -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. OTHER -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Distributions received from investments in Real Estate Investment Trusts are recorded as dividend income on ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer. The Fund declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, annually. Through March 31, 2004, certain expenses of the Fund were paid through commission arrangements with brokers. The amount of these expenses was approximately $33 for the period ended May 31, 2004. In addition, the Fund may receive earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The earnings credits for the period ended May 31, 2004 were approximately $4. The expenses paid under the above arrangements are included in their respective expense captions on the Statement of Operations with the corresponding expense offset shown as "expenses paid indirectly." NOTES TO FINANCIAL STATEMENTS (Continued) 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.75% on the first $500 million of average daily net assets of the Fund, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on daily average net assets in excess of $2.5 billion. DMC has contractually agreed to waive that portion, if any, of its management fee and reimburse the Fund to the extent necessary to ensure that annual operating expenses, exclusive of taxes, interest, brokerage commissions, distribution fees, certain insurance costs and extraordinary expenses, do not exceed 0.75% of average daily net assets through November 30, 2004. Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Fund pays DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, the Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class B and C shares, and 0.60% of the average daily net assets of Class R shares. DDLP has elected voluntarily to waive such distribution and service fees at this time. Institutional Class shares pay no distribution and service expenses. At May 31, 2004, the Fund had liabilities payable to affiliates as follows: Investment management fee payable to DMC $1,795 Dividend disbursing, transfer agent, accounting and administration fees and other expenses payable to DSC 165 Other expenses payable to DMC and affiliates* 221 *DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement the Fund bears the cost of certain legal services expenses, including in house legal services provided to the Fund by DMC employees. For the six months ended May 31, 2004, the Fund had costs of $149. NOTES TO FINANCIAL STATEMENTS (Continued) Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust. These officers and trustees are paid no compensation by the Fund. 3. INVESTMENTS For the six months ended May 31, 2004, the Fund made purchases of $943,491 and sales of $1,012,509 of investment securities other than short-term investments. At May 31, 2004, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At May 31, 2004, the cost of investments was $3,335,344. At May 31, 2004, the net unrealized appreciation was $823,670 of which $903,655 related to unrealized appreciation of investments and $79,985 related to unrealized depreciation of investments. 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. The tax character of dividends and distributions paid during the period ended May 31, 2004 and the year ended November 30, 2003 were as follows: 5/31/04* 11/30/03 ------- -------- Ordinary income $95,119 $19,145 Long-term capital gain 203,869 150,062 -------- -------- Total dividends and distributions $298,988 $169,207 -------- -------- *Tax information for the period ended May 31, 2004 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end. The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of May 31, 2004, the estimated components of net assets on a tax basis were as follows: Shares of beneficial interest $2,948,511 Undistributed ordinary income 108,429 Undistributed long-term capital gains 268,967 Unrealized appreciation of investments 823,670 ---------- Net assets $4,149,577 ---------- NOTES TO FINANCIAL STATEMENTS (Continued) For financial reporting purposes, capital accounts and distributions to shareholders are adjusted to reflect the tax character of book/tax differences. For the six months ended May 31 2004, the Fund recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end. Reclassifications are primarily due to reclass of dividends and distributions. Results of operations and net assets were not affected by these reclassifications. Undistributed Accumulated Net Investment Realized Income Gain (Loss) -------------- ----------- ($1,225) $1,225 5. CAPITAL SHARES Transactions in capital shares were as follows: Six Months Ended Year Ended 5/31/04 11/30/03 -------------- ------------- Shares sold: Class A 273 1,177 Shares issued upon reinvestment of dividends and distributions: Class A 79 Institutional Class 24,347 18,039 -------------- ------------- 24,699 19,216 -------------- ------------- Shares repurchased: Class A -- (195) -------------- ------------- -- (195) -------------- ------------- Net increase 24,699 19,021 ============== ============= 6. LINE OF CREDIT The Fund, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $177,300,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each fund's allocation of the entire facility. The Participants may borrow up to a maximum of one-third of their net assets under the agreement. The Fund had no amount outstanding as of May 31, 2004, or at any time during the period. NOTES TO FINANCIAL STATEMENTS (Continued) 7. CREDIT AND MARKET RISK The Fund invests a significant portion of its assets in small companies and may be subject to certain risks associated with ownership of securities of small companies. Investments in small-sized companies may be more volatile than investments in larger companies for a number of reasons, which include more limited financial resources or a dependence on narrow product lines. 8. CONTRACTUAL OBLIGATIONS The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund's existing contracts and expects the risk of loss to be remote. Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) VALUE-EQUITY SEMIANNUAL REPORT MAY 31, 2004 -------------------------------------------------------------------------------- DELAWARE SMALL CAP VALUE FUND [LOGO] POWERED BY RESEARCH.(SM) TABLE OF CONTENTS ------------------------------------------------------------------- FINANCIAL STATEMENTS: Statement of Net Assets 1 Statement of Operations 4 Statements of Changes in Net Assets 5 Financial Highlights 6 Notes to Financial Statements 11 ------------------------------------------------------------------- Funds are not FDIC insured and are not guaranteed. It is possible to lose the principal amount invested. Mutual fund advisory services provided by Delaware Management Company, a series of Delaware Management Business Trust, which is a registered investment advisor. (C) 2004 Delaware Distributors, L.P. STATEMENT DELAWARE SMALL CAP VALUE FUND OF NET ASSETS May 31, 2004 (Unaudited) Number of Market Shares Value COMMON STOCK - 93.37% Aerospace & Defense - 0.65% *+Herley Industries 140,000 $ 2,877,000 ---------- 2,877,000 ---------- Banking & Finance - 9.64% *Boston Private Financial Holdings 169,100 3,870,699 Colonial BancGroup 303,200 5,451,536 *Commercial Federal 128,300 3,594,966 Compass Bancshares 132,800 5,584,239 *First Republic Bank 102,400 4,173,824 *Greater Bay Bancorp 174,700 5,015,637 MAF Bancorp 92,400 4,070,220 *Provident Bankshares 137,200 3,958,220 *Republic Bancorp 178,450 2,371,601 Riggs National 119,000 2,598,960 +Sterling Financial 71,584 2,283,517 ---------- 42,973,419 ---------- Basic Industry/Capital Goods - 10.55% Arch Coal 140,500 4,566,250 Crane 122,300 3,692,237 *Federal Signal 84,900 1,512,069 *+Griffon 262,760 6,117,053 Harsco 88,400 3,837,444 *+Insituform Technologies Class A 107,600 1,646,280 +Jacobs Engineering Group 63,600 2,836,560 Kaydon 150,900 4,048,647 *Mueller Industries 76,300 2,495,010 *Smith (A.O.) 62,900 1,852,405 +Terex 73,402 2,164,625 *Texas Industries 110,800 4,082,980 *Universal Forest Products 45,100 1,306,096 Wabtec 222,800 3,673,972 *Walter Industries 249,800 3,179,954 ---------- 47,011,582 ---------- Buildings & Materials - 2.20% KB HOME 64,400 4,242,672 *Thor Industries 132,900 3,695,949 *+WCI Communities 82,800 1,842,300 ---------- 9,780,921 ---------- Business Services - 2.10% *+Integrated Alarm Services 42,300 247,878 The Brink's Company 187,200 5,790,096 +United Stationers 88,300 3,329,793 ---------- 9,367,767 ---------- Cable, Media & Publishing - 0.62% Belo Class A 94,200 2,771,364 ---------- 2,771,364 ---------- Chemicals - 2.86% *Fuller (H.B.) 97,000 2,598,630 *MacDermid 148,100 4,614,796 +PolyOne 382,900 2,638,181 *Spartech 125,100 2,862,288 ---------- 12,713,895 ---------- Consumer Products - 2.13% Bunge Limited 112,700 4,185,678 +Constellation Brands 147,200 5,299,200 ---------- 9,484,878 ---------- Number of Market Shares Value COMMON STOCK (continued) Electronics & Electrical Equipment - 2.62% +Plexus 198,800 $ 2,920,372 Symbol Technologies 258,300 3,804,759 *+Technitrol 238,400 4,961,104 ---------- 11,686,235 ---------- Energy - 7.44% Chesapeake Energy 326,600 4,311,120 +FMC Technologies 98,000 2,643,060 *+Grey Wolf 696,000 2,540,400 *+Magnum Hunter Resources 374,500 3,771,215 +Newfield Exploration 106,400 5,293,400 +Newpark Resources 517,000 2,921,050 *Southwest Gas 147,200 3,326,720 *+W-H Energy Services 218,900 4,045,272 +Whiting Petroleum 183,100 4,293,695 ---------- 33,145,932 ---------- Environmental Services - 1.37% +Casella Waste Systems 196,200 2,742,876 *+Tetra Tech 198,400 3,364,864 ---------- 6,107,740 ---------- Healthcare & Pharmaceuticals - 7.28% +Alderwoods Group 237,300 3,063,543 +America Service Group 83,100 2,991,600 *Cooper Companies 42,000 2,318,400 *+Genesis HealthCare 80,900 2,094,501 *+IDEXX Laboratories 50,500 3,319,870 *Oakley 167,400 2,246,508 *+Ocular Sciences 143,700 4,801,017 *Owens & Minor 163,600 3,959,120 *+Province Healthcare 112,700 1,805,454 *+RehabCare Group 104,400 2,607,912 +Service Corporation International 443,100 3,190,320 ---------- 32,398,245 ---------- Insurance - 4.46% *AmerUs Group 123,700 4,867,595 Berkley (W.R.) 141,600 5,897,640 *Harleysville Group 115,000 2,172,350 Platinum Underwriters Holdings 74,500 2,316,950 RenaissanceRe Holdings 87,000 4,597,950 ---------- 19,852,485 ---------- Metals & Mining - 1.91% *Gibraltar Steel 118,400 3,427,680 *+Golden Star Resources 464,400 2,308,068 *+Meridian Gold 214,000 2,782,000 ---------- 8,517,748 ---------- Packaging & Containers - 1.81% +Crown Holdings 297,400 2,655,782 +Pactiv 229,100 5,402,178 ---------- 8,057,960 ---------- Paper & Forest Products - 1.73% Louisiana-Pacific 231,400 5,345,340 *Wausau-Mosinee Paper 153,900 2,340,819 ---------- 7,686,159 ---------- 1 STATEMENT DELAWARE SMALL CAP VALUE FUND OF NET ASSETS (CONTINUED) Number of Market Shares Value COMMON STOCK (continued) REITs - 5.28% Ashford Hospitality Trust 160,800 $ 1,427,904 Camden Property Trust 100,100 4,675,671 +Highland Hospitality 259,100 2,782,734 Pan Pacific Retail Properties 89,100 4,098,600 Prentiss Properties Trust 113,500 3,745,500 Reckson Associates Realty 120,500 3,135,410 *The St. Joe Company 93,000 3,631,650 ---------- 23,497,469 ---------- Retail - 7.48% +AnnTaylor Stores 195,600 5,537,435 +Barnes & Noble 116,700 3,493,998 *Cato Class A 134,400 2,960,832 +Department 56 91,700 1,448,860 *+Electronics Boutique Holdings 156,000 4,299,360 *+Jo-Ann Stores 82,685 2,367,272 *Movie Gallery 136,000 2,528,240 Pier 1 Imports 149,800 2,823,730 *+Shoe Carnival 14,000 192,920 *+ShopKo Stores 152,800 2,084,192 +Sports Authority 81,456 2,777,650 *+Take-Two Interactive Software 93,600 2,786,472 ---------- 33,300,961 ---------- Technology/Hardware - 7.59% *+Actel 139,800 2,790,408 *+ASM International 105,500 2,298,845 *+Bell Microproducts 253,300 1,613,521 *+Entegris 347,200 3,940,720 +Ingram Micro Class A 244,100 3,527,245 +Insight Enterprises 188,800 3,466,368 +International Rectifier 96,500 4,272,055 *+Overland Storage 171,000 2,448,720 *+Photronics 96,900 1,713,192 +Storage Technology 167,600 4,734,700 +Tech Data 74,500 2,990,430 ---------- 33,796,204 ---------- Technology/Software - 2.07% *+Datastream Systems 323,300 2,023,858 *+Filenet 101,500 2,776,025 +QAD 201,100 2,125,627 +Synnex 135,200 2,303,808 ---------- 9,229,318 ---------- Telecommunications - 0.95% *+Netgear 348,700 4,219,270 ---------- 4,219,270 ---------- Textiles, Apparel & Furniture - 5.26% +Carter's 44,400 1,387,056 Furniture Brands International 213,100 5,491,587 *K-Swiss 194,100 3,882,000 Kellwood 109,400 4,452,580 *Phillips-Van Heusen 97,500 1,845,675 Reebok International 80,700 2,925,375 Wolverine World Wide 130,000 3,425,500 ---------- 23,409,773 ---------- Number of Market Shares Value COMMON STOCK (continued) Transportation - 3.69% *Alexander & Baldwin 175,200 $ 5,583,624 *+Continental Airlines Class B 132,000 1,411,080 *+Kirby 104,600 3,702,840 +SCS Transportation 59,800 1,360,450 Skywest 91,900 1,537,487 *+Yellow Roadway 79,000 2,821,090 ----------- 16,416,571 ----------- Utilities - 1.68% Black Hills 50,200 1,470,860 *+El Paso Electric 181,900 2,628,455 PNM Resources 112,600 3,383,630 ----------- 7,482,945 ----------- TOTAL COMMON STOCK (cost $323,046,422) 415,785,841 ----------- EXCHANGE TRADED FUNDS - 2.53% *iShares Russell 2000 Value Index Fund 68,600 11,277,840 ----------- TOTAL EXCHANGE TRADED FUNDS (cost $9,845,840) 11,277,840 ----------- WARRANTS- 0.01% +Magnum Hunter Resources 49,500 29,700 ----------- TOTAL WARRANTS (cost $0) 29,700 ----------- Principal Amount REPURCHASE AGREEMENTS - 4.42% With BNP Paribas 0.98% 6/1/04 (dated 5/28/04, to be repurchased at $7,683,837 collateralized by $5,773,000 U.S. Treasury Bills due 11/4/04, market value $5,742,165, $2,110,000 U.S. Treasury Bills due 11/26/04, market value $2,096,086) $7,683,000 7,683,000 With J.P. Morgan Securities 0.92% 6/1/04 (dated 5/28/04, to be repurchased at $5,628,575 collateralized by $5,628,000 U.S. Treasury Notes 2.875% due 6/30/04, market value $5,706,620, $34,000 U.S. Treasury Notes 4.75% due 11/15/08, market value $35,255) 5,628,000 5,628,000 With UBS Warburg 0.97% 6/1/04 (dated 5/28/04, to be repurchased at $6,378,687 collateralized by $1,876,000 U.S. Treasury Notes 3.25% due 5/31/04, market value $1,906,004, $1,876,000 U.S. Treasury Notes 10.75% due 8/15/05, market value $2,132,119, $391,000 U.S. Treasury Notes 7.00% due 7/15/06, market value $437,250, $1,876,000 U.S. Treasury Notes 5.625% due 5/15/08, market value $2,033,638) 6,378,000 6,378,000 ----------- TOTAL REPURCHASE AGREEMENTS (cost $19,689,000) 19,689,000 ----------- 2 STATEMENT DELAWARE SMALL CAP VALUE FUND OF NET ASSETS (CONTINUED) Principal Market Amount Value TOTAL MARKET VALUE OF SECURITIES BEFORE SECURITIES LENDING COLLATERAL - 100.33% (cost $352,581,262) $ 446,782,381 ------------- SECURITIES LENDING COLLATERAL** - 21.74% Short-Term Investments Abbey National 1.10% 06/07/04 1,655,747 1,697,479 1.19% 10/15/04 1,790,992 1,790,951 ABN AMO Bank 1.07% 6/7/04 2,503,384 2,503,384 1.10% 7/20/04 1,788,195 1,788,178 Barclays Capital 1.10% 8/19/04 2,718,523 2,718,169 Bayerische Landesbank 1.154% 8/30/04 1,430,218 1,430,313 CDC IXIS 1.485% 11/12/04 2,860,725 2,861,086 Citibank 1.06% 7/6/04 2,861,079 2,861,086 Citigroup Global Markets 1.04% 6/1/04 29,324,128 29,324,128 Credit Suisse First Boston 1.60% 12/13/04 2,860,342 2,861,086 Deutsche Bank Financial 1.133% 2/22/05 715,148 715,816 Fortis Bank 1.10% 7/26/04 3,600,872 3,601,768 General Electric Capital 1.103% 10/25/04 1,216,487 1,217,854 1.118% 2/3/05 1,072,929 1,074,409 1.132% 10/4/04 1,073,053 1,073,936 Goldman Sachs Group LP 1.14% 7/20/04 2,860,950 2,861,086 1.243% 12/8/04 1,680,888 1,680,888 ING Bank NV 1.06% 6/3/04 1,430,538 1,430,543 1.10% 9/30/04 2,863,019 2,861,086 Marsh & McLennan 1.291% 6/15/04 1,831,616 1,835,463 Merrill Lynch Mortgage Capital 1.163% 7/12/04 2,861,086 2,861,086 Morgan Stanley 1.22% 6/28/05 715,271 715,271 Rabobank 1.065% 3/2/05 3,576,312 3,575,454 Royal Bank of Scotland 1.06% 7/2/04 3,577,498 3,577,472 Societe Generale 1.06% 6/3/04 1,430,538 1,430,543 1.148% 12/8/04 2,860,545 2,860,544 Svenska Handlesbank 1.10% 8/9/04 3,576,783 3,576,357 Union Bank of Switzerland 1.13% 12/20/04 3,584,607 3,576,357 Wachovia Bank 1.127% 11/15/04 2,861,155 2,862,315 Wells Fargo Bank 1.04% 6/30/04 3,576,351 3,576,357 ------------- TOTAL SECURITIES LENDING COLLATERAL (cost $96,800,465) 96,800,465 ------------- TOTAL MARKET VALUE OF SECURITIES - 122.07% (cost $449,381,727) $543,582,846++ OBLIGATION TO RETURN SECURITIES LENDING COLLATERAL - (21.74%)** (96,800,465) LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.33%) (1,468,395) ------------ NET ASSETS APPLICABLE TO 13,215,565 SHARES OUTSTANDING - 100.00% $445,313,986 ============ Net Asset Value - Delaware Small Cap Value Fund Class A ($246,390,336 / 7,196,383 Shares) $34.24 ------ Net Asset Value - Delaware Small Cap Value Fund Class B ($104,601,009 / 3,201,616 Shares) $32.67 ------ Net Asset Value - Delaware Small Cap Value Fund Class C ($55,907,222 / 1,711,875 Shares) $32.66 ------ Net Asset Value - Delaware Small Cap Value Fund Class R ($3,117,524 / 91,275 Shares) $34.16 ------ Net Asset Value - Delaware Small Cap Value Fund Institutional Class ($35,297,895 / 1,014,416 Shares) $34.80 ------ COMPONENTS OF NET ASSETS AT MAY 31, 2004:*** Shares of beneficial interest (unlimited authorization - no par) $313,562,924 Accumulated net realized gain on investments 37,549,943 Net unrealized appreciation of investments 94,201,119 ------------ Total net assets $445,313,986 ============ + Non-income producing security for the six months ended May 31, 2004. ++ Includes $94,935,609 of securities loaned. * Fully or partially on loan. ** See Note 7 in "Notes to Financial Statements." *** See Note 4 in "Notes to Financial Statements." SUMMARY OF ABBREVIATION: REIT - Real Estate Investment Trust NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE SMALL CAP VALUE FUND Net asset value Class A (A) $34.24 Sales charge (5.75% of offering price, or 6.10% of amount invested per share) (B) 2.09 ------ Offering price $36.33 ====== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $50,000 or more. See accompanying notes 3 STATEMENT DELAWARE SMALL CAP VALUE FUND OF OPERATIONS Six Months Ended May 31, 2004 (Unaudited)
INVESTMENT INCOME: Dividends $ 2,184,111 Interest 95,629 Securities lending income 91,412 $ 2,371,152 ------------ ------------ EXPENSES: Management fees 1,692,307 Distribution expenses--Class A 375,979 Distribution expenses--Class B 545,672 Distribution expenses--Class C 266,640 Distribution expenses--Class R 7,628 Dividend disbursing and transfer agent fees and expenses 898,500 Accounting and administration expenses 83,869 Reports and statements to shareholders 63,150 Registration fees 57,414 Legal and professional fees 46,100 Custodian fees 10,706 Trustees' fees 8,000 Other 20,341 4,076,306 ------------ Less expenses paid indirectly (3,851) ------------ Total expenses 4,072,455 ------------ NET INVESTMENT LOSS (1,701,303) ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments 39,285,478 Net change in unrealized appreciation/depreciation of investments (20,692,149) ------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 18,593,329 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 16,892,026 ============
See accompanying notes 4 STATEMENTS DELAWARE SMALL CAP VALUE FUND OF CHANGES IN NET ASSETS
Six Months Year Ended Ended 5/31/04 11/30/03 (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss $ (1,701,303) $ (2,459,007) Net realized gain on investments 39,285,478 31,761,494 Net change in unrealized appreciation/depreciation of investments (20,692,149) 76,784,485 ------------ ------------ Net increase in net assets resulting from operations 16,892,026 106,086,972 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: From net realized gain on investments: Class A (16,080,554) (5,630,292) Class B (7,388,227) (2,772,312) Class C (3,426,454) (1,095,652) Class R (133,545) -- Institutional Class (2,199,840) (599,160) ------------ ------------ (29,228,620) (10,097,416) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 30,666,707 38,257,242 Class B 7,618,821 14,676,802 Class C 11,769,719 11,886,179 Class R 2,069,020 1,704,178 Institutional Class 6,992,791 9,664,752 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 15,140,848 5,300,403 Class B 6,672,918 2,552,249 Class C 3,179,515 1,028,672 Class R 130,217 -- Institutional Class 2,199,835 599,160 ------------ ------------ 86,440,391 85,669,637 ------------ ------------ Cost of shares repurchased: Class A (33,415,379) (38,593,243) Class B (13,390,725) (20,265,650) Class C (5,839,740) (8,899,510) Class R (752,194) (94,701) Institutional Class (6,429,434) (3,704,109) ------------ ------------ (59,827,472) (71,557,213) ------------ ------------ Increase in net assets derived from capital share transactions 26,612,919 14,112,424 ------------ ------------ NET INCREASE IN NET ASSETS 14,276,325 110,101,980 NET ASSETS: Beginning of period 431,037,661 320,935,681 ------------ ------------ End of period (there is no undistributed net investment income at each period end) $445,313,986 $431,037,661 ============ ============
See accompanying notes 5 FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
---------------------------------------------------------------------------------------------------------------------------------- Delaware Small Cap Value Fund Class A ---------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $35.220 $27.120 $29.350 $25.980 $24.680 $25.480 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income (loss)(2) (0.090) (0.136) (0.060) 0.059 0.091 0.098 Net realized and unrealized gain (loss) on investments 1.464 9.079 0.574 4.429 1.594 (0.735) ------- ------- ------- ------- ------- ------- Total from investment operations 1.374 8.943 0.514 4.488 1.685 (0.637) ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS: From net investment income -- -- -- (0.026) (0.080) (0.163) In excess of net investment income -- -- -- (0.045) -- -- From net realized gain on investments (2.354) (0.843) (2.744) (1.047) (0.305) -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (2.354) (0.843) (2.744) (1.118) (0.385) (0.163) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $34.240 $35.220 $27.120 $29.350 $25.980 $24.680 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 4.10% 34.17% 1.60% 17.66% 7.04% (2.51%) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $246,390 $240,322 $180,696 $182,925 $151,044 $209,886 Ratio of expenses to average net assets 1.57% 1.63% 1.63% 1.58% 1.68% 1.60% Ratio of net investment income (loss) to average net assets (0.52%) (0.47%) (0.21%) 0.21% 0.37% 0.38% Portfolio turnover 48% 42% 47% 72% 56% 37%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) The average shares outstanding method has been applied for per share information. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. See accompanying notes 6 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- Delaware Small Cap Value Fund Class B ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $33.820 $26.260 $28.680 $25.520 $24.340 $25.140 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss(2) (0.204) (0.327) (0.252) (0.138) (0.079) (0.081) Net realized and unrealized gain (loss) on investments 1.408 8.730 0.576 4.345 1.564 (0.719) ------- ------- ------- ------- ------- ------- Total from investment operations 1.204 8.403 0.324 4.207 1.485 (0.800) ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS: From net realized gain on investments (2.354) (0.843) (2.744) (1.047) (0.305) -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (2.354) (0.843) (2.744) (1.047) (0.305) -- ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $32.670 $33.820 $26.260 $28.680 $25.520 $24.340 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 3.75% 33.21% 0.91% 16.83% 6.27% (3.18%) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $104,601 $107,136 $86,641 $83,648 $58,156 $76,894 Ratio of expenses to average net assets 2.27% 2.33% 2.33% 2.28% 2.38% 2.30% Ratio of net investment loss to average net assets (1.22%) (1.17%) (0.91%) (0.49%) (0.33%) (0.32%) Portfolio turnover 48% 42% 47% 72% 56% 37%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) The average shares outstanding method has been applied for per share information. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. See accompanying notes 7 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
----------------------------------------------------------------------------------------------------------------------------------- Delaware Small Cap Value Fund Class C ----------------------------------------------------------------------------------------------------------------------------------- Six Months Ended Year Ended 5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $33.810 $26.250 $28.670 $25.510 $24.320 $25.120 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss(2) (0.204) (0.326) (0.251) (0.135) (0.079) (0.081) Net realized and unrealized gain (loss) on investments 1.408 8.729 0.575 4.342 1.574 (0.719) ------- ------- ------- ------- ------- ------- Total from investment operations 1.204 8.403 0.324 4.207 1.495 (0.800) ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS: From net realized gain on investments (2.354) (0.843) (2.744) (1.047) (0.305) -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (2.354) (0.843) (2.744) (1.047) (0.305) -- ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $32.660 $33.810 $26.250 $28.670 $25.510 $24.320 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 3.75% 33.22% 0.91% 16.88% 6.27% (3.19%) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $55,907 $48,453 $34,140 $31,823 $20,822 $25,818 Ratio of expenses to average net assets 2.27% 2.33% 2.33% 2.28% 2.38% 2.30% Ratio of net investment loss to average net assets (1.22%) (1.17%) (0.91%) (0.49%) (0.33%) (0.32%) Portfolio turnover 48% 42% 47% 72% 56% 37%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) The average shares outstanding method has been applied for per share information. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value and does not reflect the impact of a sales charge. See accompanying notes 8 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows: -------------------------------------------------------------------------------- Delaware Small Cap Value Fund Class R -------------------------------------------------------------------------------- Six Months 6/2/03(1) Ended to 5/31/04(2) 11/30/03 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $35.190 $29.000 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment loss(3) (0.142) (0.160) Net realized and unrealized gain on investments 1.466 6.350 ------- ------- Total from investment operations 1.324 6.190 ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS: From net realized gain on investments (2.354) -- ------- ------- Total dividends and distributions (2.354) -- ------- ------- NET ASSET VALUE, END OF PERIOD $34.160 $35.190 ======= ======= TOTAL RETURN(4) 3.96% 21.35% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $3,118 $1,740 Ratio of expenses to average net assets 1.87% 1.97% Ratio of net investment loss to average net assets (0.82%) (0.97%) Portfolio turnover 48% 42% (1) Date of commencement of operations; ratios and portfolio turnover have been annualized and total return has not been annualized. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) The average shares outstanding method has been applied for per share information. (4) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. See accompanying notes 9 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
------------------------------------------------------------------------------------------------------------------------------------ Delaware Small Cap Value Fund Institutional Class ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $35.700 $27.400 $29.540 $26.130 $24.830 $25.640 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income (loss)(2) (0.038) (0.050) 0.026 0.144 0.165 0.174 Net realized and unrealized gain (loss) on investments 1.492 9.193 0.578 4.458 1.600 (0.741) ------- ------- ------- ------- ------- ------- Total from investment operations 1.454 9.143 0.604 4.602 1.765 (0.567) ------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income -- -- -- (0.100) (0.160) (0.243) In excess of net investment income -- -- -- (0.045) -- -- Net realized gain on investments (2.354) (0.843) (2.744) (1.047) (0.305) -- ------- ------- ------- ------- ------- ------- Total dividends and distributions (2.354) (0.843) (2.744) (1.192) (0.465) (0.243) ------- ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $34.800 $35.700 $27.400 $29.540 $26.130 $24.830 ======= ======= ======= ======= ======= ======= TOTAL RETURN(3) 4.28% 34.57% 1.88% 18.09% 7.35% (2.23%) RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $35,298 $33,387 $19,459 $18,224 $10,992 $10,936 Ratio of expenses to average net assets 1.27% 1.33% 1.33% 1.28% 1.38% 1.30% Ratio of net investment income (loss) to average net assets (0.22%) (0.17%) 0.09% 0.51% 0.67% 0.68% Portfolio turnover 48% 42% 47% 72% 56% 37%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) The average shares outstanding method has been applied for per share information. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. See accompanying notes 10 NOTES DELAWARE SMALL CAP VALUE FUND TO FINANCIAL STATEMENTS May 31, 2004 (Unaudited) Delaware Group Equity Funds V (the "Trust") is organized as a Delaware statutory trust and offers three series: Delaware Small-Cap Contrarian Fund, Delaware Small Cap Value Fund, and Delaware Dividend Income Fund (formerly Delaware Retirement Income Fund). These financial statements and the related notes pertain to Delaware Small Cap Value Fund (the "Fund"). The Trust is an open-end investment company. The Fund is considered diversified under the Investment Company Act of 1940, as amended and offers Class A, Class B, Class C, Class R, and Institutional Class shares. Class A shares are sold with a front-end sales charge of up to 5.75%. Class B shares are sold with a contingent deferred sales charge that declines from 4% to zero depending upon the period of time the shares are held. Class B shares will automatically convert to Class A shares on a quarterly basis approximately eight years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed during the first twelve months. Class R and Institutional Class shares are not subject to a sales charge and are offered for sale exclusively to a limited group of investors. The investment objective of the Fund is to seek capital appreciation. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with U.S. generally accepted accounting principles and are consistently followed by the Fund. Security Valuation -- Equity securities, except those traded on the Nasdaq Stock Market, Inc. (NASDAQ), are valued at the last quoted sales price as of the time of the regular close of the New York Stock Exchange (NYSE) on the valuation date. Securities traded on the NASDAQ are valued in accordance with the NASDAQ Official Closing Price, which may not be the last sales price. If on a particular day an equity security does not trade, then the mean between the bid and asked prices will normally be used. Other 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. Federal Income Taxes -- The Fund intends to continue to qualify for federal income tax purposes as a regulated investment company and make the requisite distributions to shareholders. Accordingly, no provision for federal income taxes has been made in the financial statements. Class Accounting -- Investment income, common expenses and realized and unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Distribution expenses relating to a specific class are charged directly to that class. Repurchase Agreements -- The Fund may invest in a pooled cash account along with other members of the Delaware Investments Family of Funds. The aggregate daily balance of the pooled cash account is invested in repurchase agreements secured by obligations of the U.S. government. The respective collateral is held by the Fund's custodian bank until the maturity of the respective repurchase agreements. Each repurchase agreement is 102% collateralized. However, in the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral may be subject to legal proceedings. Use of Estimates -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and other expenses are paid monthly. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Distributions received from investments in Real Estate Investment Trusts (REITs) are recorded as dividend income on the ex-dividend date, subject to reclassification upon notice of the character of such distribution by the issuer. The Fund declares and pays dividends from net investment income and distributions from net realized gains on investments, if any, annually. Through March 31, 2004, certain expenses of the Fund were paid through commission arrangements with brokers. The amount of these expenses was approximately $3,645 for the six months ended May 31, 2004. In addition, the Fund receives earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The earnings credits for the six months ended May 31, 2004 were approximately $206. The expenses paid under the above arrangements are included in their respective expense captions on the Statement of Operations with the corresponding expense offset shown as "expenses paid indirectly." 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of its investment management agreement, the Fund pays Delaware Management Company (DMC), a series of Delaware Management Business Trust and the investment manager, an annual fee which is calculated daily at the rate of 0.75% on the first $500 million of average daily net assets of the Fund, 0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on average daily net assets in excess of $2.5 billion. Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Fund pays DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Pursuant to a distribution agreement and distribution plan, the Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual distribution and service fee not to exceed 0.30% of the average daily net assets of the Class A shares, 1.00% of the average daily net assets of the Class B and C shares and 0.60% of the average daily net assets of the Class R shares. Institutional Class shares pay no distribution and service expenses. At May 31, 2004, the Fund had liabilities payable to affiliates as follows: Investment management fee payable to DMC $276,759 Dividend disbursing, transfer agent, accounting and administration fees and other expenses payable to DSC 63,506 Other expenses payable to DMC and affiliates* 65,370 * DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. As provided in the investment management agreement the Fund bears the cost of certain legal services expenses, including in house legal services provided to the Fund by DMC employees. For the six months ended May 31, 2004, the Fund had costs of $13,610. For the six months ended May 31, 2004, DDLP earned $44,847 for commissions on sales of the Fund's Class A shares. Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust. These officers and trustees are paid no compensation by the Fund. 11 NOTES DELAWARE SMALL CAP VALUE FUND TO FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS For the six months ended May 31, 2004, the Fund made purchases of $103,657,554 and sales of $107,796,889 of investment securities other than U.S. government securities and short-term investments. At May 31, 2004, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At May 31, 2004, the cost of investments was $352,602,626. At May 31, 2004, the net unrealized appreciation was $94,179,755 of which $102,226,970 related to unrealized appreciation of investments and $8,047,215 related to unrealized depreciation of investments. 4. DIVIDEND AND DISTRIBUTION INFORMATION Income and long-term capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. generally accepted accounting principles. The tax character of dividends and distributions paid during the period ended May 31, 2004 and year ended November 30, 2003, were as follows: Six Months Year Ended Ended 5/31/04* 11/30/03 ----------- ------------ Ordinary income $ 2,197,734 $ -- Long-term capital gain 27,030,886 10,097,416 *Tax information for the period ended May 31, 2004 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end. The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of May 31, 2004, the estimated components of net assets on a tax basis were as follows: Shares of beneficial interest $313,562,924 Undistributed ordinary income 9,282,168 Undistributed long-term capital gain 28,289,139 Unrealized appreciation of investments 94,179,755 ------------ Net assets $445,313,986 ============ For financial reporting purposes, capital accounts and distributions to shareholders are adjusted to reflect the tax character of book/tax differences. For the six months ended May 31, 2004, the Fund recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end. Reclassifications are primarily due to tax treatment of net operating losses. Results of operations and net assets were not affected by these reclassifications. Undistributed net investment income $1,701,303 Accumulated realized gain (loss) (1,701,303) 5. CAPITAL SHARES Transactions in capital shares were as follows: Six Months Year Ended Ended 5/31/04 11/30/03 Shares sold: Class A 885,621 1,317,213 Class B 230,092 516,373 Class C 355,871 421,216 Class R 59,836 52,297 Institutional Class 198,652 327,466 Shares issued upon reinvestment of dividends and distributions: Class A 455,638 208,595 Class B 209,774 103,918 Class C 99,985 41,901 Class R 3,923 -- Institutional Class 65,219 23,322 ----------- ------------ 2,564,611 3,012,301 ----------- ------------ Shares repurchased: Class A (968,769) (1,365,058) Class B (405,725) (752,492) Class C (177,036) (330,789) Class R (21,947) (2,834) Institutional Class (184,573) (125,861) ----------- ------------ (1,758,050) (2,577,034) ----------- ------------ Net increase 806,561 435,267 =========== ============ For the six months ended May 31, 2004, and the year ended November 30, 2003, 47,180 Class B shares were converted to 45,164 Class A shares valued at $1,581,168 and 76,322 Class B shares were converted to 73,585 Class A shares valued at $2,135,097, respectively. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the Statements of Changes in Net Assets. 6. LINE OF CREDIT The Fund, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $177,300,000 revolving line of credit facility to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. The Participants are charged an annual commitment fee, which is allocated across the Participants on the basis of each fund's allocation of the entire facility. The Participants may borrow up to a maximum of one third of their net assets under the agreement. The Fund had no amounts outstanding as of May 31, 2004, or at any time during the period. 12 NOTES DELAWARE SMALL CAP VALUE FUND TO FINANCIAL STATEMENTS (CONTINUED) 7. SECURITIES LENDING The Fund, along with other funds in the Delaware Investments Family of Funds, may lend its securities pursuant to a security lending agreement ("Lending Agreement") with J.P. Morgan Chase. Initial security loans made pursuant to the Lending Agreement are required to be secured by U.S. government obligations and/or cash collateral not less than 102% of the market value of the securities issued in the United States. With respect to each loan, if the aggregate market value of the collateral held on any business day is less than the aggregate market value of the securities which are the subject of such loan, the borrower will be notified to provide additional collateral not less than the applicable collateral requirements. Cash collateral received is invested in fixed-income securities, with a weighted average maturity not to exceed 90 days, rated in one of the top two tiers by Standard & 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 change in fair value of the securities loaned that may occur during the term of the loan. The Fund has the right under the Lending Agreement to recover the securities from the borrower on demand. The security lending agent and the borrower retain a portion of the earnings from the collateral investments. The Fund records security lending income net of such allocation. At May 31, 2004, the market value of securities on loan was $94,935,609, for which cash collateral was received and investment in accordance with the Lending Agreement. Such investments are presented on the Statement of Net Assets under the caption "Securities Lending Collateral." 8. CREDIT AND MARKET RISK The Fund invests a significant portion of its assets in small-sized companies and may be subject to certain risks associated with ownership of securities of small-sized companies. Investments in small-sized companies may be more volatile than investments in larger companies for a number of reasons, which include more limited financial resources or a dependence on narrow product lines. 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 six months ended May 31, 2004. The Fund's REIT holdings are also affected by interest rate changes, particularly if the REITs it holds use floating rate debt to finance their ongoing operations. 9. CONTRACTUAL OBLIGATIONS The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund's existing contracts and expects the risk of loss to be remote. 13 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Diversified Value Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware Diversified Value Fund and the Delaware Investments Performance Update for the most recently completed calendar quarter. The prospectus sets forth details about charges, expenses, investment objectives, and operating policies of the Fund. You should read the prospectus carefully before you invest. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in the Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION JUDE T. DRISCOLL JOSEPH H. HASTINGS INVESTMENT MANAGER Chairman Executive Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA INTERNATIONAL AFFILIATE WALTER P. BABICH Delaware International Advisers Ltd. Board Chairman RICHELLE S. MAESTRO London, England Citadel Construction Corporation Executive Vice President, King of Prussia, PA Chief Legal Officer and Secretary NATIONAL DISTRIBUTOR Delaware Investments Family of Funds Delaware Distributors, L.P. JOHN H. DURHAM Philadelphia, PA Philadelphia, PA Private Investor Gwynedd Valley, PA MICHAEL P. BISHOF SHAREHOLDER SERVICING, DIVIDEND Senior Vice President and Treasurer DISBURSING AND TRANSFER AGENT JOHN A. FRY Delaware Investments Family of Funds Delaware Service Company, Inc. President Philadelphia, PA 2005 Market Street Franklin & Marshall College Philadelphia, PA 19103-7094 Lancaster, PA FOR SHAREHOLDERS ANTHONY D. KNERR 800 523-1918 Managing Director Anthony Knerr & Associates FOR SECURITIES DEALERS AND FINANCIAL New York, NY INSTITUTIONS REPRESENTATIVES ONLY 800 362-7500 ANN R. LEVEN Former Treasurer/Chief Fiscal Officer WEB SITE National Gallery of Art www.delawareinvestments.com Washington, DC THOMAS F. MADISON President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN JANET L. YEOMANS Vice President/Mergers & Acquisitions 3M Corporation St. Paul, MN
-------------------------------------------------------------------------------- A description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on the Fund's website at http://www.delawareinvestments.com; and (iii) on the Commission's website at http://www.sec.gov; and beginning no later than August 31, 2004, information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.delawareinvestments.com; and (ii) on the Commission's website at http://www.sec.gov. -------------------------------------------------------------------------------- (8775) Printed in the USA SA-021 [5/04] IVES 7/04 J9719 Item 2. Code of Ethics Not applicable. Item 3. Audit Committee Financial Expert Not applicable. Item 4. Principal Accountant Fees and Services Not applicable. Item 5. Audit Committee of Listed Registrants Not applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers Not applicable. Item 9. Submission of Matters to a Vote of Security Holders Not applicable. Item 10. Controls and Procedures The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There were no significant changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits (a) (1) Code of Ethics Not applicable. (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. (3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. Not applicable. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized. DELAWARE GROUP EQUITY FUNDS V Jude T. Driscoll --------------------------- By: Jude T. Driscoll Title: Chairman Date: July 30, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Jude T. Driscoll --------------------------- By: Jude T. Driscoll Title: Chairman Date: July 30, 2004 Joseph H. Hastings --------------------------- By: Joseph H. Hastings Title: Chief Financial Officer Date: July 30, 2004