<PAGE>
For Total Return
DELAWARE GROUP
Decatur Income Fund
Decatur Total Return Fund
1997
Semi-Annual Report
professional management
service and guidance
goals
DELAWARE
GROUP
- --------
<PAGE>
- --------------------------------------------------------------------------------
JULY 3, 1997
Dear Shareholder:
When Delaware Group first offered the Decatur investment strategy to the public
in 1957, Sputnik had not yet been launched. Alaska and Hawaii were not yet
states. The average worker earned only $2.05 an hour.
Four decades later, the world is a much freer, more prosperous place.
Still, I believe the Decatur strategy - a consistent, time-tested discipline
based on dividend yield and fundamental value - is as relevant for today's
market environment as it was when I was in college.
I am pleased to report that Decatur Income Fund marked its 40th
anniversary by outperforming the average of its equity income peers for the six
months ended May 31, 1997. As you'll see on page 3, the Fund's younger sibling,
Decatur Total Return Fund, turned in equally robust results during the period.
I BELIEVE THE DECATUR STRATEGY - A CONSISTENT, TIME-TESTED DISCIPLINE BASED ON
DIVIDEND YIELD AND FUNDAMENTAL VALUE - IS AS RELEVANT FOR TODAY'S MARKET
ENVIRONMENT AS IT WAS WHEN I WAS IN COLLEGE.
For the past six- and 12-month periods, both Decatur Funds also provided
superior returns relative to the unmanaged S&P BARRA Value Index, which includes
stocks that meet BARRA International's definition of value stocks and accounts
for 50% of the market capitalization of the unmanaged Standard & Poor's 500
Index.
Since November, stock prices have continued to advance at a remarkable
rate. In just three years, the Dow Jones Industrial Average has more than
doubled to nearly 7900 points, a pace that substantially exceeds the market's
average annual historical returns.
In fiscal 1997, both Decatur Funds have benefited from the strong
performance of financial, drug and capital goods stocks. This has occurred
against a backdrop of strong U.S. economic growth, a modest increase in interest
rates and, despite the lowest rate of unemployment since 1973, a benign 3%
annual rate of inflation.
This best of all possible worlds cannot last forever. Any prudent,
long-term investment strategy acknowledges the historical fact that stock
markets move in cycles. Periods of expansion and prosperity can be followed by
uncertain times, when an effective stock selection strategy is especially
valuable.
2
1997 semi-annual report
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS 12 MONTHS
ENDED May 31, 1997 ENDED May 31, 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Decatur Income Fund A Class +11.94% +25.94%
Decatur Total Return Fund A Class +12.55% +27.45%
- ----------------------------------------------------------------------------------------------------------
Lipper Equity Income Fund Average +10.11% (185 funds) +22.43% (169 funds)
- ----------------------------------------------------------------------------------------------------------
S&P BARRA Value Index +10.37% +25.44%
Standard & Poor's 500 Index +13.15% +29.42%
</TABLE>
THE DECATUR FUNDS' PERFORMANCE AS WELL AS THAT OF THE LIPPER EQUITY INCOME FUND
AVERAGE IS BASED ON NET ASSET VALUE WITHOUT THE EFFECT OF SALES CHARGES AND
ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE S&P 500 AND S&P BARRA
VALUE INDEX ARE UNMANAGED. A DIRECT INVESTMENT IN AN INDEX IS NOT POSSIBLE. PAST
PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. PERFORMANCE INFORMATION FOR ALL
CLASSES OF BOTH FUNDS CAN BE FOUND ON PAGES 10 AND 11.
For 40 years, the Decatur management team has helped investors harvest
opportunity by focusing on established companies with above average dividend
yields - oaks with the potential to yield plenty of acorns. In fact, $1 invested
in Decatur Income Fund at its inception would have grown more than a
hundred-fold as of May 31, 1997, as shown on pages 12 and 13.
In the pages that follow, your Funds' portfolio manager -John B. Fields
- - says there are still many acorns to be gathered in today's market even though
the average dividend yield of the S&P 500 on November 30 was 1.71%, an historic
low. He describes his positioning of the Funds as well as his outlook for the
balance of 1997.
We appreciate your confidence in Delaware Group's flagship funds, which
have grown to more than $3 billion in assets, from just over $2 million at the
time of Decatur Income Fund's first semi-annual report.
Sincerely,
/s/ Wayne A. Stork
- -----------------------------------------------
Wayne A. Stork
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Our 40th
Anniversary
3
1997 semi-annual report
<PAGE>
PORTFOLIO MANAGER'S REVIEW
During the first half of fiscal 1997, America's economy was a powerful
locomotive racing ahead under a full head of steam. The nation's output of goods
and services grew at a robust annual rate of 5.8%. The unemployment rate was
only 4.9%, the lowest level since 1973. Corporate profits in many sectors
exceeded expectations.
At the helm of this engine was a Federal Reserve Board whose effective
monetary policy controlled inflation and thus prevented growth from becoming a
runaway train. Between November and May, investors in established, large
capitalization companies were rewarded with returns that far exceeded historical
averages.
It was nonetheless a bumpy ride. When the Federal Reserve Board modestly
raised its target for short-term U.S. interest rates on March 13, the U.S. stock
market suffered its first full-fledged correction in seven years. Bond prices
also temporarily slumped, with yields on 30-year U.S. Treasury securities rising
to 7.18% before settling back down to 6.91% as of May 31.
Still, it took only a few weeks for the equity market to get back on
track. As of May 31, most unmanaged benchmarks of market performance were near
or at all-time highs. However, as you can see below, the dividend yields on most
of Decatur's top 10 holdings were much higher than that of the S&P 500 Index, an
indicator of our value focus.
<TABLE>
<CAPTION>
TOP 10 HOLDINGS
Decatur Income and Decatur Total Return Funds
- -----------------------------------------------------------------------------------------
May 31, 1997
DIVIDEND
INDUSTRY YIELD
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Pitney Bowes Corp. office products 2.23%
American Home Products pharmaceuticals 2.09%
McGraw-Hill Cos. publishing 2.90%
Baxter International health care equipment 2.09%
Aon Corp. life insurance 2.07%
Bristol-Myers Squibb pharmaceuticals 1.93%
Union Pacific Corp. railroads 2.52%
Pharmacia & Upjohn pharmaceuticals 3.22%
Texaco Corp.** oil 3.02%
Xerox Corp. photocopiers 1.80%
duPont de Nemours & Co.* chemicals 2.12%
- -----------------------------------------------------------------------------------------
S&P 500 INDEX 1.71%
</TABLE>
HOLDINGS OTHER THAN DUPONT ARE LISTED IN ORDER OF SIZE AS A PERCENTAGE OF NET
ASSETS WITHIN DECATUR INCOME FUND.
*TOP 10 IN DECATUR TOTAL RETURN FUND ONLY. ** TOP 10 IN DECATUR INCOME FUND
ONLY. SEE PAGES 10 AND 11 FOR EACH FUND'S 30-DAY SEC YIELD.
4
1997 semi-annual report
<PAGE>
FAVORABLE FINDINGS: PHARMACEUTICALS, FINANCIALS AND OFFICE EQUIPMENT Most of the
Decatur Funds' largest holdings as of May 31 were stocks we held at the start of
the 1997 fiscal year. The Funds had strong positions in pharmaceutical,
financial services and capital goods companies, and many stocks in each of these
high-yielding sectors provided superior returns.
Rather than bet on the direction of interest rates or the U.S. economy,
we select companies with above-average dividend yields that we believe are
well-managed and have capital appreciation potential. Since November, we
concluded that many drug companies and financial firms offered strong earnings
potential based on a combination of new products, cost-cutting programs and
stock buybacks.
IN A STOCK MARKET WITH INCREASING VOLATILITY, IT IS NOT ENOUGH JUST TO FIND
CHEAP COMPANIES WITH ATTRACTIVE DIVIDENDS. WE'RE CONCENTRATING OUR EFFORTS ON
BUSINESSES WE BELIEVE ARE IMPROVING IN WAYS LIKELY TO ATTRACT THE MARKET'S
ATTENTION.
Another area of opportunity was office products makers such as XEROX
CORP and PITNEY BOWES. In our opinion, these dividend-paying stocks offered an
excellent way for your Funds to participate in business' efforts to increase
office productivity through technology with much less price risk than an
investor would have by buying more expensive, non-dividend paying technology
stocks.
While we maintained our historic discipline of seeking yields greater
than the S&P 500, we have also been paying more attention to catalysts that
could potentially unlock the value of individual companies. In a stock market
with increasing volatility, it is not enough just to find cheap companies with
attractive dividends. We're concentrating our efforts on businesses we believe
are improving in ways likely to attract the market's attention. In each Fund,
we've reduced the number of holdings by more than 15% so we can focus on the
most promising investment opportunities.
Although we had many successes since autumn, we had a few
disappointments, too. Chief among them was FRONTIER CORP., a long distance
telephone services provider. While the company's dividend yield was attractive,
its earnings and business prospects did not meet our expectations. We've
retained our position because we believe recent industry activity has increased
prospects for either an internal turnaround or a merger with another telephone
company.
discipline
5
1997 semi-annual report
<PAGE>
WE INCREASED INCOME POTENTIAL
Decatur Income Fund seeks to maintain a higher yield than the S&P 500 through a
combination of stock selection and the effective use of a small complement of
high-yield bonds. We increased the Fund's weighting in high-yield bonds from 10%
in November to 14% as of May 31. This strategy worked well as high-yield bonds
outperformed other fixed-income investments as well as some aggressive growth
stocks.
High-yield bonds add to the Fund's income potential; however, they are
issued by companies whose ability to pay interest and repay principal is not as
strong as companies with "investment-grade" ratings. The strength of the U.S.
economy helped high-yield bonds perform well since autumn.
Our high-yield bonds are managed by Gerald T. Nichols, a senior Delaware
Group fixed-income portfolio manager. He and his team generally follow a
"quality first" philosophy and focus on bonds rated BB and B, the top two tiers
of high-yield credit ratings.
Since November, Decatur Income Fund focused primarily on high-yield
bonds rated B to maximize income potential. We increased our bond weighting
because we believe the U.S. economy can remain healthy,
TWO WELL-DIVERSIFIED PORTFOLIOS
- -------------------------------------------------------------------------
ASSET AND SECTOR ALLOCATION MAY 31, 1997
DECATUR INCOME FUND*
* The chart below represents equity holdings only. As of May 31, high-yield
bonds represented 14% of the fund's net assets.
Food, Beverages & Tobacco 9.5%
Energy 11.9%
Banking, Finance & Insurance 22.2%
Autos & Aerospace 6.1%
Healthcare & Pharmaceticals 15.1%
Telecom & Media 8.3%
Chemicals 5.5%
Electronic Equipment 6.0%
Other Cyclicals 10.3%
Miscellaneous 5.1%
DECATUR TOTAL RETURN FUND
Food, Beverages & Tobacco 9.4%
Energy 11.4%
Banking, Finance & Insurance 21.8%
Autos & Aerospace 5.7%
Healthcare & Pharmaceticals 14.6%
Telecom & Media 8.2%
Chemicals 5.2%
Electronic Equipment 5.9%
Other Cyclicals 12.3%
Miscellaneous 5.0%
6
1997 semi-annual report
<PAGE>
allowing bond issuers to meet their obligations. In our view, the 10% yield
available from many high-yield bonds is an attractive complement to stocks,
especially given the fact that the stock market has come so far so fast during
the past three years. We believe the possibility of a more volatile stock market
in the months ahead has risen, and we see the high-yield market as an effective
way to provide an additional element of diversification to reduce potential
risk.
ONE OF THE BEST WAYS INVESTORS CAN PREPARE THEMSELVES FOR WHAT LIES AROUND THE
BEND IS BY UTILIZING A CONSISTENT, TIME-TESTED INVESTMENT DISCIPLINE.
OUTLOOK
In the 1990s, the U.S. economy has benefited from the Federal Reserve Board's
role as an effective railway engineer. Beginning in 1994, inflation was kept
under control through a consistent application of economic brakes in the form of
modest increases in short-term interest rates. This prudent monetary policy has
helped fuel a period of capital appreciation from stocks that's been as powerful
as any in this century.
We are pleased to report that while our approach has been less
aggressive than that of some equity mutual funds, both Decatur Funds have fully
participated in the market's rewards of the past three and five years, as shown
on pages 10 and 11.
At this point, some investors may be wondering: how much steam can be
left in equity investments for the balance of the 20th century? Will changes in
tax policy or a bubble of speculation derail the stock market?
While any portfolio of stocks is subject to market fluctuations, we
believe one of the best ways investors can prepare themselves for what lies
around the bend is by utilizing a consistent, time-tested investment discipline.
Even as the market has risen, our research has unearthed undervalued companies
with dividend yields of 2% to 4%. In the months ahead, we will seek to find more
undervalued companies with similar total return potential.
John B. Fields
VICE PRESIDENT AND
SENIOR PORTFOLIO MANAGER
July 3, 1997
7
1997 semi-annual report
<PAGE>
A Strategy For All Seasons
A popular song in the 1960s said there was a time for everything - for war and
peace, for love and hate, for taking and giving. When it comes to selecting
stocks for your Funds' portfolios, Decatur's management team believes there is a
time to buy, a time to sell.
Decatur Income Fund and Decatur Total Return Fund follow a very clear
buy/sell strategy that targets stocks with above-average dividend yields as well
as capital gains potential. To be eligible for purchase or holding by the Funds,
stocks must have a current dividend yield greater than that of the Standard &
Poor's 500 Index and capital appreciation potential.
Decatur's management is most attracted to stocks whose yield is "high"
relative to the S&P 500 but not necessarily the "highest" yield available. By
exercising this consistent investment discipline, your Funds' management team
can reduce exposure to overvalued stocks and take advantage of market
opportunities as they arise.
As shown in the chart below, this "high" category of stocks has
historically generated the greatest level of total return by providing
above-average dividend income and the highest degree of capital appreciation.
When a stock's yield falls below the average of the S&P 500, we view
that as a sign that the stock has become fairly priced and that future
appreciation potential is no longer attractive relative to possible risks. So we
begin to sell our position. Sometimes we sell a stock whose yield is still above
that of the S&P 500 average if we find what seems to be a more attractive
candidate for either Fund or when a company's earnings or business operations
have not met our expectations.
LONG-TERM RETURNS OF DIVIDEND
PAYING STOCKS 1929 TO 1996
INCOME CAPITAL TOTAL
Lowest 2.9% 7.3% 10.2%
Low 4.0% 6.7% 10.7%
Mid 5.0% 6.9% 11.9%
High 6.0% 7.3% 13.3%
Highest 7.7% 3.3% 11.0%
The Decatur Funds' investment strategy leads the portfolio manager to select
stocks that fall within the "high" yield category. As you can see, these
income-producing stocks have provided the highest annual average total return
since 1929. The top number represents average annual total return.
SOURCE: CASE STUDIES. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
8
1997 SEMI-ANNUAL REPORT
<PAGE>
Our Dividend-Oriented Buy/Sell Discipline at Work:
VALUE IN VANITY: WARNER-LAMBERT CORP.
Look in your bathroom and you'll probably find Warner-Lambert products such as
Listerine mouthwash, Schick razors and Sudafed cold remedies.
We selected this New Jersey-based consumer goods and pharmaceutical
maker in early 1995 when the company's stock had a yield that was more than
one-and-half times that of the average yield of stocks in the S&P 500 Index.
(yield = dividends/ price).
At the time, the company's stock was suffering a hangover from
government attempts to regulate drug prices and reform the health care industry.
Analysts were concerned about the company's long-term earnings prospects.
We saw something more attractive. To us the increase in Warner-Lambert's
dividend yield above the S&P 500 was a signal of value and potential capital
appreciation. After Decatur's management completed a careful fundamental
analysis of the company, we concluded that Warner-Lambert was a well-managed,
diversified, global business. So we began purchasing shares.
Gradually, the company's prospects improved as it developed and marketed
new drugs to treat high cholesterol, diabetes and prostate cancer.
Warner-Lambert also opened a gum factory to make Chiclets in China.
This past winter, we sold the two funds' entire position as the
company's share price doubled from our purchase price and its dividend yield
dropped to less than that of the S&P 500 Index.
<TABLE>
<CAPTION>
DECATUR FUNDS' POSITIONING IN WARNER-LAMBERT CORP.
- ---------------------------------------------------------------------------------------------------------
MAY 31, 1996 NOVEMBER 30, 1996 MAY 31, 1997
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Market Value of Holding* $32.7 million $44.1 million 0
Company Dividend Yield 2.44% 1.94% 1.44%
S&P 500 Dividend Yield 2.21% 1.92% 1.71%
Market Price Per Share 54 7/8 71 1/2 101
Company P/E Ratio 19.2x 26.2x 37x
*DECATUR INCOME FUND'S AND DECATUR TOTAL RETURN FUND'S COMBINED POSITION.
</TABLE>
9
1997 SEMI-ANNUAL REPORT
<PAGE>
The Decatur Approach
A Discipline That's Made a Difference Over Time
AN INVESTMENT DISCIPLINE BASED ON STOCKS
WITH HIGH DIVIDENDS AND CAPITAL APPRECIATION POTENTIAL
AVERAGE ANNUAL TOTAL RETURNS THROUGH MAY 31, 1997
- -------------------------------------------------------------------------------
One Three Five Ten
Year Year Year Year
Decatur Income Fund A Class 25.94% 21.55% 16.82% 11.87%
Decatur Total Return Fund A Class 27.45% 22.94% 17.47% 13.03%
Lipper Equity Income Fund Average 22.43% 19.37% 14.98% 11.69%
All performance shown is at net asset value and includes reinvestment of all
capital gains and dividends. Sales charges are not included. Performance of
other Fund classes varies due to differing charges and expenses. See page 11 for
further information. There were 169, 96, 60 and 29 funds in the Lipper Equity
Income Fund Average for the one-year, three-year, five-year and 10-year periods
ended May 31, 1997.
Both Decatur Funds have outpaced their equity income peers during each of the
time periods shown above.
<TABLE>
<CAPTION>
PORTFOLIO HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------
May 31, 1997
DECATUR INCOME FUND DECATUR TOTAL RETURN FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Median Market Capitalization $10.5 billion $10.4 billion
Number of Stocks 63 60
Average Price-To-Earnings Ratio* 17.2x 17.3x
High Yield Bonds 14% of net assets None
Dividends Monthly Quarterly
Thirty-Day SEC Yield (Class A) 2.77% 1.55%
Beta** 0.76 0.84
</TABLE>
* BASED ON ANALYSTS EARNINGS ESTIMATES AS REPORTED TO FIRST CALL; P/E RATIO FOR
S&P 500 INDEX STOCKS WAS 20.7X.
**A MEASURE OF VOLATILITY RELATIVE TO THE S&P 500 INDEX FOR THE PAST THREE YEARS
ENDED MAY 31. A NUMBER LESS THAN 1.0 MEANS A SECURITY HAS FLUCTUATED LESS IN
PRICE THAN THE INDEX. A NUMBER MORE THAN 1.0 MEANS THE SECURITY HAS FLUCTUATED
IN PRICE MORE THAN THE INDEX.
10
1997 SEMI-ANNUAL REPORT
<PAGE>
<TABLE>
<CAPTION>
DECATUR INCOME FUND
- ---------------------------------------------------------------------------------------------------------
Average Annual Return through May 31, 1997
LIFETIME TEN YEARS FIVE YEARS ONE YEAR
- ---------------------------------------------------------------------------------------------------------
Class A (Est.3/18/57)
<S> <C> <C> <C> <C>
Excluding Sales Charge +12.48% +11.87% +16.82% +25.94%
Including Sales Charge +12.34% +11.33% +15.69% +19.97%
- ---------------------------------------------------------------------------------------------------------
Class B (Est.9/6/94)
Excluding Sales Charge +21.20% +24.92%
Including Sales Charge +20.41% +20.92%
- ---------------------------------------------------------------------------------------------------------
Class C (Est.11/29/95)
Excluding Sales Charge +23.55% +24.88%
Including Sales Charge +23.55% +23.88%
- ---------------------------------------------------------------------------------------------------------
DECATUR TOTAL RETURN FUND
- ---------------------------------------------------------------------------------------------------------
Average Annual Return through May 31, 1997
LIFETIME TEN YEARS FIVE YEARS ONE YEAR
- ---------------------------------------------------------------------------------------------------------
Class A (Est. 8/27/86)
Excluding Sales Charge +14.15% +13.03% +17.47% +27.45%
Including Sales Charge +13.63% +12.47% +16.33% +21.39%
- ---------------------------------------------------------------------------------------------------------
Class B (Est.9/6/94)
Excluding Sales Charge +22.99% +26.51%
Including Sales Charge +22.22% +22.51%
- ---------------------------------------------------------------------------------------------------------
Class C (Est.11/29/95)
Excluding Sales Charge +24.50% +26.49%
Including Sales Charge +24.50% +25.49%
</TABLE>
RETURN AND SHARE VALUE OF DECATUR TOTAL RETURN FUND AND DECATUR INCOME FUND
FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.
PERFORMANCE ABOVE INCLUDES REINVESTMENT OF DIVIDENDS AND THE EFFECT OF SALES
CHARGES. LIFETIME PERFORMANCE FOR B AND C SHARES "EXCLUDING SALES CHARGE"
ASSUMES THE INVESTMENT WAS NOT REDEEMED.
CLASS A SHARES HAVE A FRONT-END 4.75% MAXIMUM SALES CHARGE, AND A 12B-1 FEE (FOR
DECATUR TOTAL RETURN SINCE INCEPTION; FOR DECATUR INCOME FUND SINCE MAY 1,
1994).
CLASS B SHARES DO NOT CARRY A FRONT-END SALES CHARGE, BUT ARE SUBJECT TO A 1%
ANNUAL DISTRIBUTION AND SERVICE FEE. THEY ARE SUBJECT TO A MAXIMUM DEFERRED
SALES CHARGE OF 4% IF REDEEMED BEFORE THE END OF THE SIXTH YEAR.
CLASS C SHARES HAVE A 1% ANNUAL DISTRIBUTION AND SERVICE FEE AND A 1% CONTINGENT
DEFERRED SALES CHARGE IF REDEEMED WITHIN 12 MONTHS OF PURCHASE.
THIRTY-DAY SEC YIELDS FOR CLASS B, CLASS C AND INSTITUTIONAL CLASS SHARES WERE
2.17%, 2.16% AND 3.17%, RESPECTIVELY, FOR DECATUR INCOME FUND AND 0.93%, 0.94%
AND 1.93%, RESPECTIVELY FOR DECATUR TOTAL RETURN FUND AS OF MAY 31, 1997.
AVERAGE ANNUAL INSTITUTIONAL CLASS RETURNS THROUGH MAY 31, 1997
<TABLE>
<CAPTION>
10 YEARS FIVE YEARS ONE YEAR SIX MONTHS
<S> <C> <C> <C> <C>
DECATUR INCOME FUND +11.92% +16.92% +26.15% +12.01%
DECATUR TOTAL RETURN FUND +13.15% +17.73% +27.79% +12.68%
</TABLE>
THE INSTITUTIONAL CLASS SHARES ARE AVAILABLE WITHOUT SALES OR ASSET-BASED
DISTRIBUTION CHARGES ONLY TO CERTAIN ELIGIBLE INSTITUTIONAL ACCOUNTS.
INSTITUTIONAL CLASS RETURNS HAVE NOT BEEN ADJUSTED TO ELIMINATE THE IMPACT OF
12B-1 FEES IN EFFECT FROM 1987 TO 1992 FOR DECATUR TOTAL RETURN FUND.
11
1997 SEMI-ANNUAL REPORT
<PAGE>
DECATUR INCOME FUND
The Power of 40 Years of Dividends
Growth of a $10,000 Investment Since March 18, 1957
- --------------------------------------------------------------------------------
Mar. '57 to May '78
Decatur Income Fund A Class $10,000 $80,000
S&P 500 Index $10,000 $58,000
U.S. Consumer Price Index $10,000 $30,000
Delaware
Group
Period Decatur S&P 500 U.S. Consumer
End Income A Index Price Index
- ------- -------- ------- -------------
3/18/57 $ 9,525 $ 10,000 $10,000
5/31/57 $ 9,579 $ 11,075 $10,090
5/30/58 $ 9,484 $ 10,717 $10,426
5/29/59 $ 12,973 $ 14,754 $10,459
5/31/60 $ 12,656 $ 14,509 $10,653
5/31/61 $ 15,503 $ 17,859 $10,750
5/31/62 $ 14,864 $ 16,486 $10,894
5/31/63 $ 17,799 $ 20,251 $10,990
5/29/64 $ 19,788 $ 23,700 $11,159
5/31/65 $ 23,295 $ 26,857 $11,340
5/31/66 $ 24,917 $ 26,978 $11,653
5/31/67 $ 27,917 $ 28,886 $11,966
5/31/68 $ 35,855 $ 33,026 $12,447
5/30/69 $ 39,554 $ 35,686 $13,121
5/29/70 $ 31,825 $ 27,353 $13,928
5/31/71 $ 42,668 $ 36,880 $14,542
5/31/72 $ 47,102 $ 41,798 $15,011
5/31/73 $ 41,585 $ 41,199 $15,830
5/31/74 $ 38,876 $ 35,450 $17,527
5/30/75 $ 45,137 $ 38,833 $19,176
5/31/76 $ 57,324 $ 44,397 $20,368
5/31/77 $ 67,472 $ 44,302 $21,741
5/31/78 $ 69,886 $ 47,111 $23,269
5/31/79 $ 75,284 $ 50,595 $25,773
5/30/80 $ 93,398 $ 59,982 $29,481
5/29/81 $ 113,786 $ 75,086 $32,382
5/31/82 $ 113,625 $ 67,047 $34,561
5/31/83 $ 164,539 $102,436 $35,765
5/31/84 $ 166,377 $ 99,203 $37,281
5/31/85 $ 221,484 $130,612 $38,678
5/30/86 $ 281,633 $177,134 $39,280
5/29/87 $ 349,814 $214,511 $40,773
5/31/88 $ 338,312 $200,384 $42,361
5/31/89 $ 425,984 $253,817 $44,632
5/31/90 $ 442,772 $295,786 $46,579
5/31/91 $ 453,865 $330,725 $48,886
5/29/92 $ 493,623 $363,276 $50,364
5/31/93 $ 564,174 $405,363 $51,986
5/31/94 $ 598,207 $422,516 $53,176
5/31/95 $ 690,408 $507,505 $54,871
5/31/96 $ 852,876 $651,158 $56,416
5/30/97 $1,074,141 $842,303 $57,802
One dollar was half an hour's pay for the average American worker in 1957. A $1
invested in Decatur Income Fund at inception 40 years ago would have grown to
more than $100 as of May 31, 1997, with dividends and capital gains reinvested.
12
1997 SEMI-ANNUAL REPORT
<PAGE>
$1,074,141 With reinvestment of dividends and capital gains
$467,238 = Return from income
$606,903 = Principal and return from capital gains
- --------------------------------------------------------------------------------
May '78 to May '97
Decatur Income Fund A Class $80,000 $1,074,141
S&P 500 Index $58,000 $ 842,303
U.S. Consumer Price Index $30,000 $ 57,802
DECATUR INCOME FUND'S RETURN AND SHARE VALUE FLUCTUATE SO THAT SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COSTS. PAST
PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.
PERFORMANCE OF OTHER CLASSES OF DECATUR INCOME FUND DIFFER FROM THE ABOVE DUE
TO DIFFERING CHARGES AND EXPENSES. SEE PAGES 10 AND 11 FOR COMPLETE
PERFORMANCE INFORMATION.
13
1997 SEMI-ANNUAL REPORT
<PAGE>
Financial Statements
DELAWARE GROUP EQUITY FUNDS II, INC. --
DECATUR INCOME FUND
STATEMENT OF NET ASSETS -- MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
-----------------------------------
COMMON STOCK - 83.60%
AEROSPACE & DEFENSE - 1.37%
<S> <C> <C>
General Dynamics ............................... 386,800 $ 28,961,650
------------
28,961,650
------------
AUTOMOBILES & AUTOMOTIVE PARTS - 3.77%
Ford Motor ..................................... 1,118,900 41,958,750
General Motors ................................. 296,600 16,980,350
ITT Industries ................................. 839,800 20,785,050
------------
79,724,150
------------
BANKING, FINANCE & INSURANCE - 18.82%
American General ............................... 462,100 20,447,925
Aon ............................................ 1,009,950 49,235,062
Banc One ....................................... 622,700 26,931,775
BankBoston ..................................... 405,100 29,572,300
Chase Manhattan ................................ 373,400 35,286,300
CIGNA .......................................... 182,400 31,692,000
Crestar Financial .............................. 802,800 30,506,400
Fleet Financial Group .......................... 447,000 27,322,875
Hartford Financial Services .................... 252,300 19,679,400
Mellon Bank .................................... 313,400 27,422,500
Mercantile Bancorporation ...................... 402,900 23,771,100
Signet Banking ................................. 562,900 18,505,338
Summit Bancorp ................................. 671,000 33,130,625
U.S. Bancorp ................................... 398,800 24,501,275
------------
398,004,875
------------
CABLE, MEDIA, & PUBLISHING - 2.41%
McGraw-Hill .................................... 933,400 50,986,975
------------
50,986,975
------------
CHEMICALS - 4.67%
duPont (E.I.) deNemours ........................ 396,800 43,201,600
Imperial Chemical Industries ADR ............... 360,700 19,658,150
Rhone-Poulenc ADR .............................. 601,100 19,385,475
Witco .......................................... 447,300 16,550,100
------------
98,795,325
------------
ELECTRONICS & ELECTRICAL EQUIPMENT - 5.13%
Eaton .......................................... 454,700 36,262,325
Thomas & Betts ................................. 565,000 28,744,375
Xerox .......................................... 643,100 43,570,025
------------
108,576,725
------------
ENERGY - 10.09%
Atlantic Richfield ............................. 170,900 24,865,950
British Petroleum ADR .......................... 257,666 37,329,433
Consolidated Natural Gas ....................... 393,200 20,888,750
Mobil .......................................... 259,560 36,305,955
Texaco ......................................... 406,900 44,402,963
USX-Marathon Group ............................. 761,100 22,642,725
Williams ....................................... 612,500 27,026,562
------------
213,462,338
------------
</TABLE>
- ----------------
Top 10 stock holdings, representing 23.06% of net assets, are in boldface.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
-----------------------------------
COMMON STOCK (CONTINUED)
ENVIRONMENTAL SERVICES - 1.66%
<S> <C> <C>
Browning Ferris Industries ..................... 1,073,200 $ 35,147,300
-------------
35,147,300
-------------
FOOD, BEVERAGE & TOBACCO - 8.07%
American Brands ................................ 523,800 25,666,200
Anheuser-Busch ................................. 762,500 32,692,187
Heinz (H.J.) .................................. 818,350 35,189,050
Philip Morris .................................. 736,500 32,406,000
Quaker Oats .................................... 436,200 17,993,250
RJR Nabisco Holdings ........................... 826,440 26,755,995
-------------
170,702,682
-------------
HEALTHCARE & PHARMACEUTICALS - 12.80%
American Home Products ......................... 673,500 51,354,375
Bausch & Lomb .................................. 612,400 24,649,100
Baxter International ........................... 939,400 49,553,350
Bristol-Myers Squibb ........................... 655,800 48,119,325
Glaxo Wellcome ADR ............................. 664,100 26,730,025
Pharmacia & Upjohn ............................. 1,317,300 45,611,513
SmithKline Beecham ADR unit .................... 283,300 24,788,750
-------------
270,806,438
-------------
METALS & MINING - 0.73%
Freeport McMoran Copper & Gold Class A ......... 553,829 15,368,755
-------------
15,368,755
-------------
PAPER & FOREST PRODUCTS - 0.94%
Temple-Inland .................................. 329,800 19,952,900
-------------
19,952,900
-------------
REAL ESTATE - 0.84%
Simon DeBartolo Group .......................... 588,400 17,799,100
-------------
17,799,100
-------------
RETAIL - 0.87%
May Department Stores .......................... 391,500 18,449,437
-------------
18,449,437
-------------
TELECOMMUNICATIONS - 4.09%
ALLTEL ......................................... 615,000 20,218,125
BCE ............................................ 911,000 24,141,500
BellSouth ...................................... 322,900 14,651,588
Frontier ....................................... 1,493,600 27,444,900
-------------
86,456,113
-------------
TRANSPORTATION & SHIPPING - 3.00%
Norfolk Southern ............................... 178,300 17,317,388
Union Pacific .................................. 679,640 46,045,610
-------------
63,362,998
-------------
MISCELLANEOUS - 4.34%
BOC Group ...................................... 153,300 5,135,550
Minnesota Mining & Manufacturing ............... 301,100 27,625,925
Pitney Bowes ................................... 839,400 58,967,850
-------------
91,729,325
-------------
Total Common Stock
(cost $1,446,871,566) ......................... 1,768,287,086
-------------
</TABLE>
14
1997 semi-annual report
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP EQUITY FUNDS II, INC. DECATUR INCOME FUND (CONTINUED)
STATEMENT OF NET ASSETS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
-----------------------------------
PREFERRED STOCK - 0.47%
CABLE, MEDIA & PUBLISHING -
<S> <C> <C>
American Radio Systems ........................................ 28,664 $ 3,045,505
Chancellor Radio Broadcasting ................................. 25,000 2,693,750
Granite Broadcasting .......................................... 4,500 4,297,307
-----------
Total Preferred Stock (cost $9,805,859) ....................... 10,036,562
-----------
WARRANTS - 0.00%
NS Group warrants 7/15/03 .................................... 1,000 30,000
-----------
Total Warrants (cost $1,630) .................................. 30,000
-----------
PRINCIPAL
AMOUNT
CORPORATE BONDS - 14.18%
AEROSPACE & DEFENSE - 0.32%
BE Aerospace sr nts 9.75% 03/01/03 ............................ $ 1,960,000 2,028,600
*DERLAN Manufacturing sr nts
10.00% 01/15/07 ............................................. 2,800,000 2,821,000
Sequa sr sub nts 9.375% 12/15/03 .............................. 2,000,000 2,037,500
-----------
6,887,100
-----------
AUTOMOBILES & AUTOMOTIVE PARTS - 1.05%
Aetna Industries sr nts 11.875% 10/01/06 ...................... 2,000,000 2,150,000
*Collins & Aikman sr sub nts
10.00% 01/15/07 ............................................. 3,000,000 2,947,500
*Delco Remy International sr sub nts
10.625% 08/01/06 ............................................ 2,000,000 2,105,000
JPS Automotive Products sr nts
11.125% 06/15/01 ............................................ 2,000,000 2,197,500
*Key Plastics sr sub nts 10.25% 03/15/07 ...................... 1,000,000 1,043,750
Motors and Gears sr nts 10.75% 11/15/06 ....................... 2,000,000 2,072,500
Ryder Transportation sr sub nts
10.00% 12/01/06 ............................................. 5,000,000 5,137,500
Speedy Muffler King nts
10.875% 10/01/06 ............................................ 1,850,000 1,937,875
Venture Holdings Trust sr sub nts
9.75% 04/01/04 .............................................. 2,800,000 2,688,000
-----------
22,279,625
-----------
BANKING, FINANCE & INSURANCE - 0.42%
DVI sr nts 9.875% 02/01/04 .................................... 4,000,000 3,970,000
First Nationwide Holdings sr sec nts
9.125% 01/15/03 ............................................. 2,500,000 2,575,000
Imperial Credit Industries sr nts
9.875% 01/15/07 ............................................. 1,775,000 1,761,687
Olympic Financial units 11.50% 03/15/07 ....................... 525,000 522,375
-----------
8,829,062
-----------
BUILDINGS & MATERIALS - 0.55%
American Standard sr nts
10.875% 05/15/99 ............................................ 2,750,000 2,928,750
Atrium sr sub nts 10.50% 11/15/06 ............................. 2,150,000 2,209,125
*MMI Products sr sub nts 11.25% 04/15/07 ...................... 1,000,000 1,060,000
*Nortek sr nts 9.25% 03/15/07 ................................. 2,000,000 2,035,000
USG sr nts 8.50% 08/01/05 .................................... 1,250,000 1,293,750
*Williams Scotsman sr nts
9.875% 06/01/07 ............................................. 2,000,000 2,020,000
-----------
11,546,625
-----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------
CORPORATE BONDS (CONTINUED)
CABLE, MEDIA & PUBLISHING - 1.62%
Adelphia Communications sr debs
<S> <C> <C>
11.875% 09/15/04 ................................ $ 5,000,000 $ 5,262,500
Cablevision Industries sr sub debs
10.75% 04/01/04 ................................. 1,500,000 1,552,500
Cablevision Systems sr nts
9.875% 05/15/06 ................................. 3,925,000 4,082,000
Comcast sr sub nts 9.125% 10/15/06 ................ 4,000,000 4,100,000
Hollinger International Publishing sr sub nts
9.25% 03/15/07 .................................. 2,000,000 2,025,000
Jones Intercable sr nts 9.625% 03/15/02 ........... 2,500,000 2,625,000
Katz Media sr sub nts 10.50% 01/15/07 ............. 1,000,000 955,000
Lenfest Communications
sr nts 8.375% 11/01/05 .......................... 3,000,000 2,925,000
sr nts 10.50% 06/15/06 .......................... 800,000 858,000
Muzak LP/Muzak Capital unsec sr nts
10.00% 10/01/03 ................................. 180,000 187,650
Rogers Cablesystems
sr sec nts 10.00% 12/01/07 ....................... 1,350,000 1,431,000
sr sub nts 11.00% 12/01/15 ....................... 840,000 898,800
Sullivan Graphics sr sub nts
12.75% 08/01/05 ................................. 2,000,000 2,065,000
Telewest Communications sr debs
9.625% 10/01/06 ................................. 3,000,000 3,052,500
*Von Hoffman Press sr sub nts
10.375% 05/15/07 ................................ 2,100,000 2,184,000
----------
34,203,950
----------
CHEMICALS - 0.74%
Astor sr sub nts 10.50% 10/15/06 .................. 2,500,000 2,637,500
BPC Holding sr nts 12.50% 06/15/06 ................ 2,000,000 2,145,000
Carbide Graphite sr nts 11.50% 09/01/03 ........... 1,818,000 1,981,620
ISP Holdings sr nts 9.75% 02/15/02 ................ 1,082,000 1,136,100
NL Industries sr sec nts 11.75% 10/15/03 .......... 765,000 843,413
Scotts sr sub nts 9.875% 08/01/04 ................. 950,000 1,018,875
Sterling Chemicals
*sr sub nts 11.25% 04/01/07 ...................... 2,000,000 2,115,000
sr sub nts 11.75% 08/15/06 ....................... 1,000,000 1,080,000
UCC Investors sr sub nts 11.00% 05/01/03 .......... 2,500,000 2,675,000
----------
15,632,508
----------
COMPUTERS & TECHNOLOGY - 0.16%
Unisys
sr nts 11.75% 10/15/04 .......................... 1,700,000 1,831,750
sr nts 12.00% 04/15/03 .......................... 1,500,000 1,616,250
----------
3,448,000
----------
CONSUMER PRODUCTS - 0.67%
American Safety Razor sr nts
9.875% 08/01/05 .................................. 2,825,000 2,952,125
Calmar sr sub nts 11.50% 08/15/05 ................. 1,000,000 1,040,000
*Consumers International sr nts
10.25% 04/01/05 ................................. 1,000,000 1,060,000
*Pen-Tab Industries sr sub nts
10.875% 02/01/07 ................................ 2,350,000 2,388,188
Revlon sr nts 9.50% 06/01/99 ...................... 1,500,000 1,541,250
</TABLE>
15
1997 semi-annual report
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP EQUITY FUNDS II, INC. DECATUR INCOME FUND (CONTINUED)
STATEMENT OF NET ASSETS (CONTINUED)
- ------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------------
CORPORATE BONDS (CONTINUED)
CONSUMER PRODUCTS (CONTINUED)
Revlon Worldwide sr sec nt
<S> <C> <C>
0.00% 03/15/98 .............................. $ 2,000,000 $ 1,920,000
Shop Vac sr nts 10.625% 09/01/03 .............. 3,000,000 3,195,000
-----------
14,096,563
-----------
ELECTRONICS & ELECTRICAL EQUIPMENT - 0.48%
Advanced Micor Devices Notes sr nts
11.00% 08/01/03 ............................. 2,000,000 2,230,000
Essex Group sr nts 10.00% 05/01/03 ............ 1,450,000 1,515,250
*Fairchild Semiconductor sr sub nts
10.125% 03/15/07 ............................ 1,230,000 1,273,050
*HCC Industries sr sub nts
10.75% 05/15/07 ............................. 2,925,000 3,049,312
IMO Industries sr sub nts
11.75% 05/01/06 ............................. 510,000 512,550
Mark IV Industries sub nt 8.75% 04/01/03 ...... 1,500,000 1,533,750
-----------
10,113,912
-----------
ENERGY - 0.77%
California Energy sr sec nts
9.875% 06/30/03 ............................. 1,500,000 1,593,750
Clark USA sr nts 10.875% 12/01/05 ............. 5,000,000 5,262,500
Costilla Energy sr nts 10.25% 10/01/06 1,440,000 1,490,400
Falcon Drilling sr nts 8.875% 03/15/03 2,500,000 2,537,500
MESA Operating nts 10.625% 07/01/06 ........... 1,000,000 1,127,500
Pride Petroleum Services sr nts
9.375% 05/01/07 ............................. 2,175,000 2,256,563
*Wiser Oil sr sub nts 9.50% 05/15/07 .......... 2,000,000 2,007,500
-----------
16,275,713
-----------
ENVIRONMENTAL SERVICES - 0.05%
*Petro Stopping Centers sr nts
10.50% 02/01/07 ............................. 1,000,000 1,040,000
-----------
1,040,000
-----------
FOOD, BEVERAGE & TOBACCO - 1.01%
*AFC Enterprises sr sub nts
10.25% 05/15/07 ............................. 1,450,000 1,457,250
*CFP Holdings sr nts 11.625% 01/15/04 ......... 2,000,000 2,045,000
Core-Mark International sr sub nts
11.375% 09/15/03 ............................ 650,000 679,250
Delta Beverage Group sr nts
9.75% 12/15/03 .............................. 4,500,000 4,702,500
International Home Foods sr sub nt
10.375% 11/01/06 ............................ 5,000,000 5,162,500
*MBW Foods sr sub nts 9.875% 02/15/07 ......... 1,200,000 1,212,000
Mafco sr sub nts 11.875% 11/15/02 ............. 2,800,000 3,010,000
PMI Acquisition sr sub nts
10.25% 09/01/03 ............................. 3,000,000 3,142,500
-----------
21,411,000
-----------
HEALTHCARE & PHARMACEUTICALS - 0.41%
HEALTHSOUTH Rehabilitation sr sub nts
9.50% 04/01/01 .............................. 1,500,000 1,580,625
MAXXIM Medical sr sub nts
10.50% 08/01/06 ............................. 4,850,000 5,056,125
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------------
CORPORATE BONDS (CONTINUED)
HEALTHCARE & PHARMACEUTICALS (CONTINUED)
*Packard Bioscience sr sub nts
<S> <C> <C>
9.375% 03/01/07 ......................... $ 600,000 $ 603,000
Paracelsus Healthcare sr sub nts
10.00% 08/15/06 ......................... 1,455,000 1,444,088
----------
8,683,838
----------
INDUSTRIAL MACHINERY - 0.84%
*American Builders & Contractors sr sub nts
10.625% 05/15/07 ........................ 3,225,000 3,321,750
Hawk sr nts 10.25% 12/01/03 ............... 5,000,000 5,137,500
Interlake sr nts 12.125% 03/01/02 ......... 1,200,000 1,254,000
Jordan Industries sr nts 10.375% 08/01/03 . 6,000,000 6,030,000
Spinnaker Industries sr nts
10.75% 10/15/06 ......................... 2,000,000 2,030,000
----------
17,773,250
----------
LEISURE, LODGING & ENTERTAINMENT - 0.83%
*AMC Entertainment sr sub nts
9.50% 03/15/09 .......................... 1,900,000 1,938,000
American Skiing sr sub nts
12.00% 07/15/06 ......................... 500,000 521,250
Casino America sr nts 12.50% 08/01/03 ..... 2,000,000 2,025,000
Cinemark USA sr sub nts
9.625% 08/01/08 ......................... 5,000,000 5,112,500
Eldorado Resorts LLC sr sub nts
10.50% 08/15/06 ......................... 2,000,000 2,135,000
Hollywood Casino sr nts 12.75% 11/01/03 ... 650,000 689,000
Trump-Atlantic City 1st mtg nts
11.25% 05/01/06 ......................... 5,250,000 5,145,000
----------
17,565,750
----------
METALS & MINING - 0.52%
Armco sr nts 11.375% 10/15/99 ............. 1,250,000 1,303,125
Commonwealth Aluminum sr sub nts
10.75% 10/01/06 ......................... 1,000,000 1,045,000
G.S.Technologies sr nts 12.25% 10/01/05 ... 3,000,000 3,277,500
NS Group sr nts 13.50% 07/15/03 ........... 1,000,000 1,112,500
Oregon Steel Mills 1st mtg nts
11.00% 06/15/03 ......................... 1,000,000 1,086,250
Weirton Steel sr nts 11.375% 07/01/04 ..... 1,500,000 1,590,000
Westmin Resources sr nts
11.00% 03/15/07 ......................... 1,500,000 1,560,000
----------
10,974,375
----------
PACKAGING & CONTAINERS - 0.53%
Container Corporation of America sr nts
11.25% 05/01/04 ......................... 2,000,000 2,165,000
Gaylord Container sr nts 11.50% 05/15/01 .. 1,500,000 1,586,250
Ivex Packaging sr sub nts
12.50% 12/15/02 ......................... 1,330,000 1,429,750
Stone Container
1st mtg nts 10.75% 10/01/02 .............. 3,785,000 3,974,250
sr sub units 12.25% 04/01/02 ............. 1,000,000 1,025,000
sr nts 12.625% 07/15/98................... 1,000,000 1,050,000
----------
11,230,250
----------
</TABLE>
16
1997 semi-annual report
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP EQUITY FUNDS II, INC. DECATUR INCOME FUND (CONTINUED)
STATEMENT OF NET ASSETS (CONTINUED)
- -----------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------------
CORPORATE BONDS (CONTINUED)
PAPER & FOREST PRODUCTS - 0.38%
Doman Industries Limited sr nts
<S> <C> <C>
8.75% 03/15/04 .............................. $ 3,120,000 $ 2,979,600
Four M sr nts 12.00% 06/01/06 ................. 450,000 456,750
Pacific Lumber sr nts 10.50% 03/01/03 ......... 3,000,000 3,075,000
Repap Wisconsin sr nts 9.875% 05/01/06......... 1,500,000 1,477,500
----------
7,988,850
----------
RETAIL - 0.77%
Chief Auto Parts sr nts 10.50% 05/15/05 ....... 2,038,000 2,063,475
Central Tractor sr nts 10.625% 04/01/07 ....... 2,000,000 2,085,000
Cole National Group sr sub nts
9.875% 12/31/06 ............................. 2,500,000 2,618,750
Cort Furniture sr nts 12.00% 09/01/00 ......... 967,000 1,070,952
Fleming sr nts 10.625% 12/15/01 ............... 5,000,000 5,231,250
Ralphs Grocery sr nts 10.45% 06/15/04 ......... 3,000,000 3,288,750
----------
16,358,177
----------
TELECOMMUNICATIONS - 0.16%
Galaxy Telecommunication L.P. sr sub nts
12.375% 10/01/05 ............................ 1,000,000 1,057,500
JACOR Communications unsec sr sub nts
9.75% 12/15/06 .............................. 775,000 809,875
Paging Network sr sub nts
10.125% 08/01/07 ............................ 1,000,000 947,500
Rogers Cantel Mobile Communications sr sub nts
11.125% 07/15/02 ............................ 550,000 573,375
----------
3,388,250
----------
TEXTILES, APPAREL & FURNITURE - 0.29%
*Anvil Knitwear sr nts 10.875% 03/15/07 ....... 1,000,000 1,002,500
Clark-Schwebel sr nts 10.50% 04/15/06 ......... 2,000,000 2,145,000
*GFSI sr sub nts 9.625% 03/01/07 .............. 1,100,000 1,102,750
*Synthetic Industries sr sub nts
9.25% 02/15/07 .............................. 1,750,000 1,789,375
----------
6,039,625
----------
TRANSPORTATION & SHIPPING - 0.38%
*Atlantic Express sr sec nts
10.75% 02/01/04 ............................. 900,000 933,750
Blue Bird Body sr nts 10.75% 11/15/06 ......... 2,700,000 2,875,500
Teekay Shipping 1st pfd mtg nts
8.32% 02/01/08 .............................. 1,500,000 1,503,750
Viking Star Shipping 1st pfd mtg nts
9.625% 07/15/03 ............................. 2,600,000 2,710,500
----------
8,023,500
----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------------------------------
CORPORATE BONDS (CONTINUED)
UTILITIES - 0.36%
<S> <C> <C>
AES sr sub nts 10.25% 07/15/06 ............. $ 3,000,000 $ 3,255,000
Calpine sr nts 10.50% 05/15/06 ............. 2,000,000 2,120,000
Midland Funding II sr sub debs
11.75% 07/23/05 .......................... 2,000,000 2,270,000
------------
7,645,000
------------
MISCELLANEOUS - 0.87%
*Dyncorp sr sub nts 9.50% 03/01/07 ......... 1,000,000 1,000,000
*EV International sr sub nts
11.00% 03/15/07 .......................... 2,000,000 2,100,000
Graphic Controls sr sub nts
12.00% 09/15/05 .......................... 2,500,000 2,756,250
Iron Mountain unsec sr sub nts
10.125% 10/01/06 ......................... 330,000 347,325
Knoll sr sub nts 10.875% 03/15/06 .......... 2,000,000 2,202,500
*Loomis Fargo & Co sr sub nts
10.00% 01/15/04 .......................... 3,695,000 3,815,087
Pierce Leahy sr sub nts
11.125% 07/15/06 ......................... 900,000 990,000
Rayovac sr sub nts 10.25% 11/01/06 ......... 5,000,000 5,250,000
------------
18,461,162
------------
Total Corporate Bonds
(cost $290,227,427) ...................... 299,896,085
------------
REPURCHASE AGREEMENTS - 0.99%
With J.P. Morgan Securities 5.50% 6/2/97
(dated 5/30/97, collateralized by $6,073,000
U.S. Treasury Notes 5.125% due 2/28/98,
market value $6,117,999) ................. 5,991,000 5,991,000
With PaineWebber 5.50% 6/2/97
(dated 5/30/97,collateralized by $7,335,000
U.S. Treasury Notes 6.375% due 6/30/97,
market value $7,536,520) ................. 7,384,000 7,384,000
With Prudential Securities 5.53% 6/2/97
(dated 5/30/97,collateralized by $7,622,000
U.S. Treasury Notes 6.125% due 3/31/98,
market value $7,719,981) ................. 7,565,000 7,565,000
------------
Total Repurchase Agreements
(cost $20,940,000) ....................... 20,940,000
------------
</TABLE>
17
1997 semi-annual report
<PAGE>
DELAWARE GROUP FUNDS II, INC.
DECATUR INCOME FUND (CONTINUED)
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES OWNED - 99.24%
(cost $1,767,846,482) ................................. $ 2,099,189,733
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.76% ............................ 16,060,005
----------------
NET ASSETS APPLICABLE TO 103,074,585
SHARES ($1 PAR VALUE)
OUTSTANDING - 100.00% ................................. $ 2,115,249,738
================
NET ASSET VALUE - DECATUR INCOME FUND A CLASS
($1,743,703,076 / 84,948,124 shares) ................... $ 20.53
================
NET ASSET VALUE - DECATUR INCOME FUND B CLASS
($90,783,392 / 4,440,072 shares) ...................... $ 20.45
================
NET ASSET VALUE - DECATUR INCOME FUND C CLASS
($9,886,259 / 481,600 shares) ......................... $ 20.53
================
NET ASSET VALUE - DECATUR INCOME FUND INSTITUTIONAL CLASS
($270,877,011 / 13,204,789 shares) ..................... $ 20.51
================
- ---------------
*These securities are exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At May 31, 1997, these
securities amounted to $51,469,762 or 2.43% of net assets.
Summary of Abbreviations:
ADR - American Depository Receipt
debs - debentures
mtg - mortgage
nts - notes
pfd - preferred
sec - secured
sr - senior
sub - subordinated
unsec - unsecured
- ---------------------
COMPONENTS OF NET ASSETS AT MAY 31, 1997:
Common Stock, $1 par value, 500,000,000 shares authorized
to the Fund with 350,000,000 shares allocated to Decatur
Income Fund A Class, 50,000,000 shares allocated to
Decatur Income Fund B Class, 50,000,000 shares allocated
to Decatur Income Fund C Class and 50,000,000 shares
allocated to Decatur Income Fund Institutional Class ........ $1,651,493,155
Accumulated undistributed:
Net investment income ........................................ 1,313,066
Net realized gain on investments ............................. 131,100,266
Net unrealized appreciation of investments ................... 331,343,251
-------------
Total net assets ............................................. 2,115,249,738
=============
See accompanying notes
<PAGE>
DELAWARE GROUP
EQUITY FUNDS II, INC. -
DECATUR TOTAL RETURN FUND
STATEMENT OF NET ASSETS -
MAY 31, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER MARKET
SHARES VALUE
- --------------------------------------------------------------------------------------------
COMMON STOCK - 96.75%
AEROSPACE & DEFENSE - 1.58%
<S> <C> <C>
General Dynamics ............................... 194,300 $ 14,548,213
------------
14,548,213
------------
AUTOMOBILES & AUTOMOTIVE PARTS - 4.13%
Ford Motor ..................................... 535,200 20,070,000
General Motors ................................. 157,100 8,993,975
ITT Industries ................................. 357,300 8,843,175
------------
37,907,150
------------
BANKING, FINANCE & INSURANCE - 21.78%
American General ............................... 303,000 13,407,750
Aon ............................................ 449,250 21,900,938
Banc One ....................................... 304,800 13,182,600
BankBoston ..................................... 194,500 14,198,500
Chase Manhattan ................................ 185,200 17,501,400
CIGNA .......................................... 92,500 16,071,875
Crestar Financial .............................. 335,000 12,730,000
Fleet Financial Group .......................... 221,000 13,508,625
Hartford Financial Services Group .............. 165,500 12,909,000
Mellon Bank .................................... 166,200 14,542,500
Mercantile Bancorporation ...................... 203,800 12,024,200
Signet Banking ................................. 236,800 7,784,800
Summit Bancorp ................................. 337,880 16,682,825
U.S. Bancorp ................................... 223,000 13,700,563
------------
200,145,576
------------
CABLE, MEDIA & PUBLISHING - 2.85%
McGraw-Hill .................................... 478,800 26,154,450
------------
26,154,450
------------
CHEMICALS - 5.18%
duPont (E.I.) deNemours ........................ 205,100 22,330,263
Imperial Chemical Industries ADR ............... 180,600 9,842,700
Rhone-Poulenc ADR .............................. 315,600 10,178,100
Witco .......................................... 141,800 5,246,600
------------
47,597,663
------------
ELECTRONICS & ELECTRICAL EQUIPMENT - 5.90%
Eaton .......................................... 227,300 18,127,175
Thomas & Betts ................................. 277,400 14,112,725
Xerox .......................................... 324,400 21,978,100
------------
54,218,000
------------
ENERGY - 11.42%
Atlantic Richfield ............................. 85,700 12,469,350
British Petroleum ADR .......................... 121,736 17,636,503
Consolidated Natural Gas ....................... 178,700 9,493,438
Mobil .......................................... 137,600 19,246,800
Texaco ......................................... 199,400 21,759,525
USX-Marathon Group ............................. 384,300 11,432,925
Williams ....................................... 292,500 12,906,563
------------
104,945,104
------------
- --------------------
Top 10 holdings, representing 25.98% of net assets, are in boldface.
</TABLE>
18
1997 semi-annual report
<PAGE>
Delaware Group Equity Funds II, Inc. - Decatur Total Return Fund (Continued)
Statement of Net Assets (Continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
-------------------------------
COMMON STOCK (CONTINUED)
ENVIRONMENTAL SERVICES - 1.91%
<S> <C> <C>
Browning Ferris Industries ...................... 535,800 $17,547,450
-----------
17,547,450
-----------
FOOD, BEVERAGE & TOBACCO - 9.34%
American Brands ................................. 280,100 13,724,900
Anheuser-Busch .................................. 374,700 16,065,263
Heinz (H.J.) ................................... 413,750 17,791,250
Philip Morris ................................... 361,200 15,892,800
Quaker Oats ..................................... 221,500 9,136,875
RJR Nabisco Holdings ............................ 406,820 13,170,798
-----------
85,781,886
-----------
HEALTHCARE & PHARMACEUTICALS - 14.55%
American Home Products .......................... 303,700 23,157,125
Bausch & Lomb ................................... 293,100 11,797,275
Baxter International ............................ 484,800 25,573,200
Bristol-Myers Squibb ............................ 313,200 22,981,050
Glaxo Wellcome ADR .............................. 330,500 13,302,625
Pharmacia & Upjohn .............................. 653,500 22,627,438
SmithKline Beecham ADR unit ..................... 163,600 14,315,000
-----------
133,753,713
-----------
METALS & MINING - 1.17%
Freeport-McMoRan Copper & Gold Class B .......... 369,564 10,763,551
-----------
10,763,551
-----------
PAPER & FOREST PRODUCTS - 2.04%
Georgia-Pacific ................................. 91,000 8,030,750
Temple-Inland ................................... 177,600 10,744,800
-----------
18,775,550
-----------
RETAIL - 1.10%
May Department Stores ........................... 214,300 10,098,888
-----------
10,098,888
-----------
TELECOMMUNICATIONS - 5.35%
ALLTEL .......................................... 305,100 10,030,163
BCE ............................................. 517,800 13,721,700
BellSouth ....................................... 290,500 13,181,438
Frontier ........................................ 667,000 12,256,125
-----------
49,189,426
-----------
TRANSPORTATION & SHIPPING - 3.44%
Norfolk Southern ................................ 83,800 8,139,075
Union Pacific ................................... 346,800 23,495,700
-----------
31,634,775
-----------
MISCELLANEOUS - 5.01%
BOC Group ....................................... 76,400 2,559,400
Minnesota Mining & Manufacturing ................ 162,500 14,909,375
Pitney Bowes .................................... 406,400 28,549,600
-----------
46,018,375
-----------
Total Common Stock (cost $715,744,707) 889,079,770
-----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS - 2.36%
With J.P. Morgan Securities 5.50% 6/2/97
(dated 5/30/97, collateralized by $6,287,000
U.S. Treasury Notes 5.125% due 2/2/98,
market value $6,333,619) ................................ $6,202,000 $ 6,202,000
With PaineWebber 5.50% 6/2/97
(dated 5/30/97, collateralized by $7,593,000
U.S.Treasury Notes 6.375% due 6/30/97,
market value $7,802,134) ................................ 7,645,000 7,645,000
With Prudential Securities 5.50% 6/2/97
(dated 5/30/97, collateralized by $7,891,000
U.S.Treasury Notes 6.125% due 3/31/98,
market value $7,992,061) ................................ 7,831,000 7,831,000
------------
Total Repurchase Agreements
(cost $21,678,000) ....................................... 21,678,000
------------
TOTAL MARKET VALUE OF SECURITIES OWNED - 99.11%
(cost $737,422,707) ..................................... $910,757,770
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.89% .............................. 8,206,400
------------
NET ASSETS APPLICABLE TO 52,808,914 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% ..................... $918,964,170
============
NET ASSET VALUE - DECATUR TOTAL RETURN FUND
A CLASS ($757,702,810 / 43,534,425 shares) ............... $ 17.40
============
NET ASSET VALUE - DECATUR TOTAL RETURN FUND
B CLASS ($88,041,024 / 5,067,049 shares) ................. $ 17.38
============
NET ASSET VALUE - DECATUR TOTAL RETURN FUND
C CLASS ($14,999,285 / 864,902 shares) ................... $ 17.34
============
NET ASSET VALUE - DECATUR TOTAL RETURN FUND
INSTITUTIONAL CLASS
($58,221,051 / 3,342,538 shares) ........................ $ 17.42
============
COMPONENTS OF NET ASSETS AT MAY 31, 1997:
Common stock, $1 par value, 250,000,000 shares authorized
to the Fund with 100,000,000 shares allocated to Decatur
Total Return Fund A Class, 50,000,000 shares allocated
to the Decatur Total Return Fund B Class, 50,000,000
shares allocated to the Decatur Total Return Fund C Class,
and 50,000,000 shares allocated to the Decatur Total Return
Fund Institutional Class ................................. $696,777,009
Accumulated undistributed:
Net investment income .................................... 2,679,369
Net realized gain on investments ......................... 46,172,729
Net unrealized appreciation of investments ............... 173,335,063
------------
Total net assets ......................................... $918,964,170
============
</TABLE>
- ----------------
ADR - American Depository Receipt
See accompanying notes
19
1997 semi-annual report
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP
EQUITY FUNDS II, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------------------
DECATUR DECATUR TOTAL
INCOME FUND RETURN FUND
--------------------------------------
INVESTMENT INCOME:
<S> <C> <C>
Dividends .................................. $ 26,379,227 $ 11,940,509
Interest ................................... 13,608,809 337,638
------------ ------------
39,988,036 12,278,147
------------ ------------
EXPENSES:
Management fees ............................ 4,798,709 2,419,879
Distribution expense ....................... 1,994,617 1,440,741
Dividend disbursing and transfer agent
fees and expenses ......................... 1,304,970 548,115
Accounting fees and salaries ............... 372,264 158,101
Reports and statements to shareholders ..... 87,915 57,280
Taxes (other than taxes on income) ......... 66,885 19,470
Registration fees .......................... 29,250 21,660
Professional fees .......................... 28,275 22,883
Directors' fees ............................ 18,436 9,634
Custodian fees ............................. 10,877 23,861
Other ...................................... 19,324 63,617
------------ ------------
8,731,522 4,785,241
NET INVESTMENT INCOME ...................... 31,256,514 7,492,906
------------ ------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on:
Investment transactions ................... $133,460,699 $ 46,618,042
Net increase in unrealized appreciation on:
Investment transactions ................... 60,480,884 45,777,385
------------ ------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ............................ 193,941,583 92,395,427
------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................... $225,198,097 $ 99,888,333
============ ============
</TABLE>
See accompanying notes
20
1997 semi-annual report
<PAGE>
DELAWARE GROUP
EQUITY FUNDS II, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
DECATUR DECATUR TOTAL
INCOME FUND RETURN FUND
----------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS:
<S> <C> <C>
Net investment income ............................ $ 31,256,514 $ 7,492,906
Net realized gain on investments ................. 133,460,699 46,618,042
Net increase in unrealized appreciation .......... 60,480,884 45,777,385
--------------- ---------------
Net increase in net assets resulting from
operations ...................................... 225,198,097 99,888,333
--------------- ---------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
A Class ......................................... (25,332,044) (7,463,087)
B Class ......................................... (873,524) (369,393)
C Class ......................................... (85,191) (54,936)
Institutional Class ............................. (4,132,765) (693,417)
Net realized gain from security transactions:
A Class ......................................... (202,768,485) (70,806,628)
B Class ......................................... (7,925,263) (5,885,390)
C Class ......................................... (667,227) (833,086)
Institutional Class ............................. (30,836,157) (4,917,869)
--------------- ---------------
(272,620,656) (91,023,806)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ......................................... 60,101,902 70,331,873
B Class ......................................... 26,077,054 30,847,699
C Class ......................................... 4,538,849 6,729,726
Institutional Class ............................. 15,444,955 10,884,097
Net asset value of shares issued upon reinvestment
of dividends from net investment income and net
realized gain on security transactions:
A Class ......................................... 204,028,359 74,691,947
B Class ......................................... 7,841,173 5,937,051
C Class ......................................... 643,731 875,821
Institutional Class ............................. 34,655,271 5,611,286
--------------- ---------------
353,331,294 205,909,500
--------------- ---------------
Cost of shares repurchased:
A Class ......................................... (95,307,269) (63,768,588)
B Class ......................................... (3,509,051) (4,442,126)
C Class ......................................... (245,506) (637,211)
Institutional Class ............................. (17,481,839) (4,890,231)
--------------- ---------------
(116,543,665) (73,738,156)
--------------- ---------------
Increase in assets derived from capital
share transactions .............................. 236,787,629 132,171,344
--------------- ---------------
NET INCREASE IN NET ASSETS ....................... 189,365,070 141,035,871
NET ASSETS:
Beginning of year ................................ 1,925,884,668 777,928,299
--------------- ---------------
End of year ...................................... $ 2,115,249,738 $ 918,964,170
=============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
YEAR ENDED 11/30/96
----------------------------------------------------
DECATUR DECATUR TOTAL
INCOME FUND RETURN FUND
----------------------------------------------------
INCREASE IN NET ASSETS FROM OPERATIONS:
<S> <C> <C>
Net investment income ............................ $ 58,446,582 $ 14,060,387
Net realized gain on investments ................. 244,728,187 82,430,019
Net increase in unrealized appreciation .......... 79,097,926 50,905,768
--------------- ---------------
Net increase in net assets resulting
from operations ................................. 382,272,695 147,396,174
--------------- ---------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
A Class ......................................... (52,522,453) (12,795,454)
B Class ......................................... (1,060,507) (433,825)
C Class ......................................... (51,387) (40,493)
Institutional Class ............................. (8,072,706) (486,097)
Net realized gain from security transactions:
A Class ......................................... (96,771,467) (44,125,949)
B Class ......................................... (1,466,813) (1,305,455)
C Class ......................................... (4,214) (14,393)
Institutional Class ............................. (14,913,705) (953,579)
--------------- ---------------
(174,863,252) (60,155,245)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ......................................... 85,615,510 118,476,946
B Class ......................................... 36,290,471 34,121,733
C Class ......................................... 4,913,360 6,940,880
Institutional Class ............................. 40,544,059 31,044,696
Net asset value of shares issued upon reinvestment
of dividends from net investment income and net
realized gain on security transactions:
A Class ......................................... 131,098,438 54,057,289
B Class ......................................... 2,125,733 1,627,235
C Class ......................................... 44,252 49,360
Institutional Class ............................. 22,540,198 1,439,675
--------------- ---------------
323,172,021 247,757,814
--------------- ---------------
Cost of shares repurchased:
A Class ......................................... (158,444,608) (111,870,841)
B Class ......................................... (3,349,092) (2,728,706)
C Class ......................................... (549,392) (157,130)
Institutional Class ............................. (56,125,297) (2,925,371)
--------------- ---------------
(218,468,389) (117,682,048)
--------------- ---------------
Increase in assets derived from capital
share transactions .............................. 104,703,632 130,075,766
--------------- ---------------
NET INCREASE IN NET ASSETS........................ 312,113,075 217,316,695
NET ASSETS:
Beginning of year ................................ 1,613,771,593 560,611,604
--------------- ---------------
End of year ...................................... $ 1,925,884,668 $ 777,928,299
=============== ===============
</TABLE>
See accompanying notes
21
1997 semi-annual report
<PAGE>
DELAWARE GROUP EQUITY FUNDS II, INC. -
DECATUR INCOME FUND
FINANCIAL HIGHLIGHTS -
MAY 31, 1997
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Decatur Income Fund A Class
- --------------------------------------------------------------------------------------------------------------------------
Six Months Year Ended November 30,
Ended
5/31/97(1) 1996 1995 1994 1993 1992
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .............. $21.3200 $19.0700 $15.5700 $18.2400 $17.2000 $15.7600
Income from investment operations:
Net investment income ............ 0.3100 0.6500 0.7000 0.6700 0.7800 0.7800
Net realized and unrealized
gain (loss) from investments..... 1.8800 3.6300 3.9100 (0.7300) 1.7900 1.4700
-------- -------- -------- -------- -------- --------
Net increase (decrease) in
net assets from investment
operations....................... 2.1900 4.2800 4.6100 (0.0600) 2.5700 2.2500
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment
income........................... (0.3000) (0.6900) (0.6900) (0.8600) (0.6800) (0.8100)
Distributions from net realized
gain on security transactions.... (2.6800) (1.3400) (0.4200) (1.7500) (0.8500) --
-------- -------- -------- -------- -------- --------
Total dividends and
distributions.................... (2.9800) (2.0300) (1.1100) (2.6100) (1.5300) (0.8100)
-------- -------- -------- -------- -------- --------
Net asset value,
end of period .................... $20.5300 $21.3200 $19.0700 $15.5700 $18.2400 $17.2000
======== ======== ======== ======== ======== ========
Total return(3)..................... 11.94% 24.47% 31.02% (0.57%) 15.85% 14.55%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) ................... $1,743,703 $1,616,315 $1,382,693 $1,153,884 $1,512,194 $1,508,206
Ratio of expenses to average
net assets....................... 0.88% 0.85% 0.87% 0.81% 0.71% 0.72%
Ratio of net investment income
to average net assets ........... 3.19% 3.40% 4.03% 3.92% 4.34% 4.55%
Portfolio turnover ............... 86% 101% 74% 92% 80% 79%
Average commission
rate paid(4)..................... $0.0600 $0.0600 -- -- -- --
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
Decatur Income Fund B Class
- ----------------------------------------------------------------------------------------------
Six Months Year Year 9/6/94(2)
Ended Ended Ended to
5/31/97(1) 11/30/96 11/30/95 11/30/94
(Unaudited)
<S> <C> <C> <C> <C>
Net asset value,
beginning of period .............. $21.2600 $19.0300 $15.5500 $16.5900
Income from investment operations:
Net investment income ............ 0.2500 0.5000 0.5600 0.1500
Net realized and unrealized
gain (loss) from investments..... 1.8500 3.6100 3.8900 (1.0200)
-------- -------- -------- --------
Net increase (decrease) in
net assets from investment
operations....................... 2.1000 4.1100 4.4500 (0.8700)
-------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment
income........................... (0.2300) (0.5400) (0.5500) (0.1700)
Distributions from net realized
gain on security transactions.... (2.6800) (1.3400) (0.4200) --
-------- -------- -------- --------
Total dividends and
distributions.................... (2.9100) (1.8800) (0.9700) (0.1700)
-------- -------- -------- --------
Net asset value,
end of period .................... $20.4500 $21.2600 $19.0300 $15.5500
======== ======== ======== ========
Total return(3)..................... 11.45% 23.43% 29.85% (5.27%)
Ratios and supplemental data:
Net assets, end of period
(000 omitted) ................... $90,784 $60,689 $19,665 $2,765
Ratio of expenses to average
net assets....................... 1.69% 1.69% 1.74% 1.70%
Ratio of net investment income
to average net assets ........... 2.38% 2.56% 3.16% 3.30%
Portfolio turnover ............... 86% 101% 74% 92%
Average commission
rate paid(4)..................... $0.0600 $0.0600 -- --
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(3) Does not include maximum sales charge of 4.75% nor the 1% limited
contingent deferred sales charge that would apply in the event of certain
redemptions within 12 months of purchase of A Class shares. Does not
include contingent deferred sales charge which varies from 1-4% depending
upon the holding period for B Class shares.
(4) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
22
1997 semi-annual report
<PAGE>
DECATUR INCOME FUND (CONTINUED)
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Decatur Income Fund C Class
-------------------------------------
Six Months Year 11/29/95(2)
Ended Ended to
5/31/97(1) 11/30/96 11/30/95
(Unaudited)
<S> <C> <C> <C>
Net asset value, beginning of period ......... $ 21.3300 $19.0800 $19.1500
Income from investment operations:
Net investment income ....................... 0.2300 0.5100 0.0400
Net realized and unrealized gain (loss)
from investments ........................... 1.8800 3.6300 (0.0600)
--------- ------- --------
Net increase (decrease) in net assets
from investment operations ................. 2.1100 4.1400 (0.0200)
--------- ------- --------
Less dividends and distributions:
Dividends from net investment income ........ (0.2300) (0.5500) (0.0500)
Distributions from net realized gain
on security transactions ................... (2.6800) (1.3400) --
--------- ------- --------
Total dividends and distributions ............ (2.9100) (1.8900) (0.0500)
--------- ------- --------
Net asset value, end of period ............... $ 20.5300 $21.3300 $19.0800
========= ======== ========
Total return(4) ............................. 11.46% 23.47% (6)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ..... $ 9,886 $ 4,833 $ 5
Ratio of expenses to average net assets ..... 1.69% 1.69% (6)
Ratio of net investment income to
average net assets ......................... 2.38% 2.56% (6)
Portfolio turnover .......................... 86% 101% (6)
Average commission rate paid(5) ............ $0.0600 $0.0600 --
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
Decatur Income Fund Institutional Class
-----------------------------------------------------
Six Months Year Year 1/13/94(3)
Ended Ended Ended to
5/31/97(1) 11/30/96 11/30/95 1/30/94
(Unaudited)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ......... $21.3100 $19.0600 $15.5900 $16.7200
Income from investment operations:
Net investment income ....................... 0.3200 0.6900 0.7100 0.5900
Net realized and unrealized gain (loss)
from investments ........................... 1.8800 3.6200 3.9200 (1.1000)
-------- -------- ------- --------
Net increase (decrease) in net assets
from investment operations ................. 2.2000 4.3100 4.6300 (0.5100)
-------- -------- ------- --------
Less dividends and distributions:
Dividends from net investment income ........ (0.3200) (0.7200) (0.7400) (0.6200)
Distributions from net realized gain
on security transactions ................... (2.6800) (1.3400) (0.4200) --
-------- -------- ------- --------
Total dividends and distributions ........... (3.0000) (2.0600) 1.1600) (0.6200)
-------- -------- ------- --------
Net asset value, end of period ............... $20.5100 $21.3100 $19.0600 $15.5900
======== ======== ======== ========
Total return(4) ............................. 12.01% 24.65% 31.14% (0.45%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ...... $270,877 $244,048 $211,049 $182,105
Ratio of expenses to average net assets ...... 0.69% 0.69% 0.74% 0.70%
Ratio of net investment income to
average net assets .......................... 3.38% 3.56% 4.16% 4.03%
Portfolio turnover ........................... 86% 101% 74% 92%
Average commission rate paid(5) ............. $ 0.0600 $ 0.0600 -- --
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering.
(3) Date of initial public offering; ratios and total return have been
annualized.
(4) Does not include contingent deferred sales charge which varies from 1-4%
depending upon the holding period for C Class shares.
(5) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
(6) The ratios of expenses and net investment income to average net assets,
portfolio turnover and total return have been omitted as management
believes that such ratios and return for this relatively short period are
not meaningful.
See accompanying notes
23
1997 semi-annual report
<PAGE>
DELAWARE GROUP EQUITY FUNDS II, INC. --
DECATUR TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS --
MAY 31, 1997
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Decatur Total Return Fund A Class
- --------------------------------------------------------------------------------------------------------------------------
Six Months Year Ended November 30,
Ended
5/31/97(1) 1996 1995 1994 1993 1992
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ............... $17.5200 $15.6100 $12.3200 $14.3800 $13.9800 $12.7300
Income from investment operations:
Net investment income ............. 0.1500 0.3400 0.3700 0.3700 0.4500 0.4700
Net realized and unrealized
gain (loss) from investments...... 1.7700 3.2100 3.7000 (0.3400) 1.4500 1.3000
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net
assets from investment
operations........................ 1.9200 3.5500 4.0700 0.0300 1.9000 1.7700
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment
income ........................... (0.1900) (0.3500) (0.3600) (0.4300) (0.4500) (0.5200)
Distributions from net realized
gain on security transactions .... (1.8500) (1.2900) (0.4200) (1.6600) (1.0500) --
-------- -------- -------- -------- -------- --------
Total dividends and
distributions .................... (2.0400) (1.6400) (0.7800) (2.0900) (1.5000) (0.5200)
-------- -------- -------- -------- -------- --------
Net asset value,
end of period ..................... $17.4000 $17.5200 $15.6100 $12.3200 $14.3800 $13.9800
======== ======== ======== ======== ======== ========
Total return(3) ..................... 12.55% 24.89% 34.68% (0.04%) 14.74% 14.12%
Ratios and supplemental data:
Net assets, end of period
(000 omitted) .................... $757,703 $670,912 $534,342 $402,849 $431,638 $408,986
Ratio of expenses to average
net assets ....................... 1.12% 1.11% 1.19% 1.26% 1.22% 1.23%
Ratio of net investment income
to average net assets ............ 1.87% 2.21% 2.72% 2.88% 3.15% 3.44%
Portfolio turnover ................ 64% 87% 81% 74% 119% 98%
Average commission
rate paid(4)...................... $0.0600 $0.0600 -- -- -- --
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
Decatur Total Return Fund B Class
- ----------------------------------------------------------------------------------------------
Six Months Year Year 9/6/94(2)
Ended Ended Ended to
5/31/97(1) 11/30/96 11/30/95 11/30/94
(Unaudited)
<S> <C> <C> <C> <C>
Net asset value,
beginning of period ............... $17.4600 $15.5600 $12.3100 $13.1100
Income from investment operations:
Net investment income ............. 0.1000 0.2300 0.3000 0.1200
Net realized and unrealized
gain (loss) from investments...... 1.7700 3.2000 3.6700 (0.8200)
-------- -------- -------- --------
Net increase (decrease) in net
assets from investment
operations........................ 1.8700 3.4300 3.9700 (0.7000)
-------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment
income ........................... (0.1000) (0.2400) (0.3000) (0.1000)
Distributions from net realized
gain on security transactions .... (1.8500) (1.2900) (0.4200) --
-------- -------- -------- --------
Total dividends and
distributions .................... (1.9500) (1.5300) (0.7200) (0.1000)
-------- -------- -------- --------
Net asset value,
end of period ..................... $17.3800 $17.4600 $15.5600 $12.3100
======== ======== ======== ========
Total return(3) ..................... 12.17% 24.01% 33.79% (5.37%)
Ratios and supplemental data:
Net assets, end of period
(000 omitted) .................... $88,041 $53,467 $14,745 $1,738
Ratio of expenses to average
net assets ....................... 1.82% 1.81% 1.89% 1.96%
Ratio of net investment income
to average net assets ............ 1.17% 1.53% 2.02% 2.18%
Portfolio turnover ................ 64% 87% 81% 74%
Average commission
rate paid(4)...................... $0.0600 $0.0600 -- --
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(3) Does not include maximum sales charge of 4.75% nor the 1% limited
contingent deferred sales charge that would apply in the event of certain
redemptions within 12 months of purchase of A Class shares. Does not
include contingent deferred sales charge which varies from 1-4% depending
upon the holding period for B Class shares.
(4) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
24
1997 semi-annual report
<PAGE>
DECATUR TOTAL RETURN FUND (CONTINUED)
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Decatur Total Return Fund C Class
---------------------------------
Six Months Year 11/29/95(2)
Ended Ended to
5/31/97(1) 11/30/96 11/30/95
(Unaudited)
<S> <C> <C> <C>
Net asset value, beginning of period $17.4300 $15.6100 $15.6100
Income from investment operations:
Net investment income................ 0.1000 0.3300 --
Net realized and unrealized gain
(loss) from investments............. 1.7600 3.1000 --
-------- -------- --------
Net increase (decrease) in net assets
from investment operations.......... 1.8600 3.4300 --
-------- -------- --------
Less dividends and distributions:
Dividends from net investment income. (0.1000) (0.3200) --
Distributions from net realized gain
on security transactions............ (1.8500) (1.2900) --
-------- -------- --------
Total dividends and distributions.... (1.9500) (1.6100) --
-------- -------- --------
Net asset value, end of period ....... $17.3400 $17.4300 $15.6100
======== ======== ========
Total return(4)....................... 12.13% 24.04% (6)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $14,999 $7,591 $5
Ratio of expenses to average net assets 1.82% 1.81% (6)
average net assets................... 1.17% 1.53% (6)
Portfolio turnover.................... 64% 87% (6)
Average commission rate paid(5)....... $0.0600 $0.0600 --
</TABLE>
<PAGE>
RESTUBBED TABLE
<TABLE>
<CAPTION>
Decatur Total Return Fund Institutional Class
-------------------------------------------------------------------
Six Months Year Year Year 7/26/93(3)
Ended Ended Ended Ended to
5/31/97(1) 11/30/96 11/30/95 11/30/94 11/30/93
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $17.5700 $15.6500 $12.3500 $14.4000 $14.1000
Income from investment operations:
Net investment income. .............. 0.1800 0.3700 0.4700 0.4300 0.1500
Net realized and unrealized gain
(loss) from investments............. 1.7700 3.2300 3.6500 (0.3700) 0.2500
-------- -------- -------- -------- --------
Net increase (decrease) in net assets
from investment operations.......... 1.9500 3.6000 4.1200 0.0600 0.4000
-------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income. (0.2500) (0.3900) (0.4000) (0.4500) (0.1000)
Distributions from net realized gain
on security transactions............ (1.8500) (1.2900) (0.4200) (1.6600) --
-------- -------- -------- -------- --------
Total dividends and distributions.... (2.1000) (1.6800) (0.8200) (2.1100) (0.1000)
-------- -------- -------- -------- --------
Net asset value, end of period ....... $17.4200 $17.5700 $15.6500 $12.3500 $14.4000
======== ======== ======== ======== ========
Total return(4)....................... 12.68% 25.24% 35.13% 0.19% 14.89%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $58,221 $45,958 $11,520 $1,376 $1,181
Ratio of expenses to average net assets 0.82% 0.81% 0.89% 0.96% 0.92%
average net assets................... 2.17% 2.53% 3.02% 3.18% 3.45%
Portfolio turnover.................... 64% 87% 81% 74% 119%
Average commission rate paid(5)....... $0.0600 $0.0600 -- -- --
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering.
(3) Date of initial public offering; ratios and total return have been
annualized.
(4) Does not include contingent deferred sales charge which varies from 1-4%
depending upon the holding period for C Class shares.
(5) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
(6) The ratios of expenses and net investment income to average net assets,
portfolio turnover and total return have been omitted as management
believes that such ratios and return for this relatively short period are
not meaningful.
See accompanying notes
25
1997 semi-annual report
<PAGE>
DELAWARE GROUP
EQUITY FUNDS II, INC. --
NOTES TO FINANCIAL STATEMENTS --
MAY 31, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------
Delaware Group Equity Funds II, Inc. (The "Company") is registered as a
diversified open-end investment company under the Investment Company Act of
1940, as amended. The Company is organized as a Maryland Corporation and offers
four series: the Decatur Income Fund, the Decatur Total Return Fund, the Quantum
Fund and the Blue Chip Fund (the "Funds"). Each series offers four classes of
shares.
The investment objective of the Decatur Income Fund is to achieve the highest
possible current income by investing primarily in common stocks that provide the
potential for income and capital appreciation without undo risk to principal.
The investment objective of the Decatur Total Return Fund is to achieve
long-term growth by investing primarily in common stocks that provide the
potential for income and capital appreciation without undo risk to principal.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Funds.
Security Valuation - Securities listed on an exchange are valued at the lasted
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service and such prices are believed to reflect the fair
value of such securities. Money market instruments 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 by or under the direction of
the Fund's Board of Directors.
Federal Income Taxes - Each Fund intends to continue to qualify 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. Income and capital gain distributions are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Funds 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 - Each Fund may invest in a pooled cash account along with
other members of the Delaware Group 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 custodian bank
until the maturity of the respective repurchase agreements. Each repurchase
agreement is at least 100% 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.
Other - Expenses common to all Funds within the Delaware Group of Funds are
allocated amongst the Funds on the basis of average net assets. 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
<PAGE>
recorded on the accrual basis. Original issue discounts are accreted to interest
income over the lives of the respective securities. The Decatur Income Fund
declares and pays dividends from net investment income on a monthly basis and
capital gains annually. The Decatur Total Return Fund declares and pays
dividends from net investment income on a quarterly basis and capital gains
annually.
Certain Fund expenses are paid through "soft dollar" arrangements with brokers.
The amount of these expenses are less than 0.01% of the Fund's average daily net
assets.
Use of Estimates - The preparation of financial statements in conformity with
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.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Funds
pay Delaware Management Company, Inc.(DMC) the Investment Manager, an annual fee
which is calculated daily at the following rates less fees paid to the
independent directors; 0.60% on the first $100 million of average daily net
assets, 0.525% on the next $150 million, 0.50% on the next $250 million and
0.475% on the average daily net assets over $500 million for the Decatur Income
Fund, and 0.60% on the first $500 million of average daily net assets of the
Fund, 0.575% on the next $250 million, and 0.55% on the average daily net assets
over $750 million of the Decatur Total Return Fund.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to serve as dividend disbursing and transfer agent for the Fund. Effective
August 19, 1996, the Fund also engaged DSC to provide accounting services for
the Series. Previously, Fund personnel provided this service and the related
costs were recorded in salaries and other expense categories in the statement of
operations. For the six months ended May 31, 1997, the amounts expensed for each
Fund were as follows:
Decatur Decatur Total
Income Fund Return Fund
----------- -----------
Dividend disbursing, transfer agent fees and
other expenses........................... 1,304,970 548,115
Accounting fees .......................... 298,151 124,741
On May 31, 1997, the Fund had payables to affiliates as follows:
Decatur Decatur Total
Income Fund Return Fund
----------- -----------
Investment Management fee
payable to DMC .......................... $199,480 $183,972
Dividend disbursing, transfer
agent fees, accounting fees and
other expenses payable to DSC ........... 112,205 63,824
Other expenses payable to DMC
and affiliates .......................... 54,790 23,299
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the
26
1997 semi-annual report
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
B and C Class for each Series. For the six months ended May 31, 1997, DDLP
earned commissions on sales of the Fund A Class shares for each Fund as follows:
Decatur Decatur Total
Income Fund Return Fund
----------- -----------
$265,035 $193,374
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the six months ended May 31, 1997, the Funds made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments for each Fund as follows:
Decatur Decatur Total
Income Fund Return Fund
----------- -----------
Purchases ............................ $839,845,366 $293,251,806
Sales ................................ $842,032,455 $257,404,510
At May 31, 1997, the aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
Decatur Decatur Total
Income Fund Return Fund
----------- -----------
Cost of Investments ............. $ 1,769,462,303 $ 737,913,882
=============== ===============
Aggregate unrealized appreciation 349,951,204 180,820,412
Aggregate unrealized depreciation (20,223,774) (7,976,524)
--------------- ---------------
Net unrealized appreciation ..... $ 329,727,430 $ 172,843,888
=============== ===============
4. Capital Stock
Transactions in capital stock shares were as follows:
Decatur Income Fund
-------------------------------
Six Months Year
Ended Ended
5/31/97 11/30/96
----------- ----------
Shares sold:
Decatur Income Fund A Class ................ 3,077,592 4,444,653
Decatur Income Fund B Class ................ 1,342,141 1,879,641
Decatur Income Fund C Class ................ 232,980 251,293
Decatur Income Fund Institutional Class .... 790,437 2,114,417
Shares issued upon reinvestment of
dividends from net investment income
and net realized gains from
security transactions:
Decatur Income Fund A Class ................ 10,974,133 7,112,272
Decatur Income Fund B Class ................ 423,333 114,679
Decatur Income Fund C Class ................ 34,613 2,260
Decatur Income Fund Institutional Class .... 1,865,310 1,222,480
---------- -----------
18,740,539 17,141,695
---------- -----------
Shares repurchased:
Decatur Income Fund A Class ................ (4,901,142) (8,247,706)
Decatur Income Fund B Class ................ (180,624) (172,677)
Decatur Income Fund C Class ................ (12,630) (27,179)
Decatur Income Fund Institutional Class .... (901,604) (2,978,039)
---------- -----------
(5,996,000) (11,425,601)
---------- -----------
Net Increase ................................ 12,744,539 5,716,094
---------- -----------
<PAGE>
Decatur Total Return Fund
-------------------------------
Six Months Year
Ended Ended
5/31/97 11/30/96
----------- ----------
Shares sold:
Decatur Total Return Fund A Class .......... 4,310,965 7,556,314
Decatur Total Return Fund B Class .......... 1,893,544 2,178,072
Decatur Total Return Fund C Class .......... 411,352 441,779
Decatur Total Return Fund Institutional Class 661,203 1,969,432
Shares issued upon reinvestment of
dividends from net investment income
and net realized gains from
security transactions:
Decatur Total Return Fund A Class .......... 4,843,634 3,674,402
Decatur Total Return Fund B Class .......... 385,322 110,229
Decatur Total Return Fund C Class .......... 56,952 3,217
Decatur Total Return Fund Institutional Class 363,828 96,994
---------- ----------
12,926,800 16,030,439
---------- ----------
Shares repurchased:
Decatur Total Return Fund A Class .......... (3,913,505) (7,166,570)
Decatur Total Return Fund B Class .......... (273,501) (174,170)
Decatur Total Return Fund C Class .......... (38,863) (9,857)
Decatur Total Return Fund Institutional Class (298,546) (186,654)
---------- ----------
(4,524,415) (7,537,251)
---------- ----------
Net Increase ................................ 8,402,385 8,493,188
========== ==========
5. Lines of Credit
Committed lines of credit were $68 million for Decatur Income Fund and $26
million for Decatur Total Return Fund. No amount was outstanding at May 31,
1997, or at any time during the fiscal year.
6. Concentrations of Credit Risk
The Decatur Income Fund may invest in high-yield fixed income securities which
carry ratings of BB or lower by S&P and/or Ba or lower by Moody's. Investments
in these higher yielding securities may be 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 Decatur Income 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 some of these securities may adversely affect the Fund's
ability to dispose of such securities in a timely manner and at a fair price
when it is necessary to liquidate such securities. These securities, if any,
have been denoted in the Statement of Net Assets.
27
1997 semi-annual report
<PAGE>
THIS SEMI-ANNUAL REPORT IS FOR THE INFORMATION OF DECATUR FUND SHAREHOLDERS, BUT
IT MAY BE USED WITH PROSPECTIVE INVESTORS WHEN PRECEDED OR ACCOMPANIED BY A
CURRENT PROSPECTUS FOR DECATUR FUND, WHICH SETS FORTH DETAILS ABOUT CHARGES,
EXPENSES, INVESTMENT OBJECTIVES AND OPERATING POLICIES OF THE FUND. YOU SHOULD
READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. SUMMARY INVESTMENT RESULTS ARE
DOCUMENTED IN THE FUND'S CURRENT STATEMENT OF ADDITIONAL INFORMATION. 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.
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING AND
TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia
1818 Market Street
Philadelphia, PA 19103-3682
FOR SHAREHOLDERS
1.800.523.1918
FOR SECURITIES DEALERS
1.800.362.7500
FOR FINANCIAL INSTITUTIONS
REPRESENTATIVES ONLY
1.800.659.2265
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Fund are not bank or credit union deposits.
Copy Rights Delaware Distributors, L.P.
DELAWARE
GROUP
- --------
Philadelphia o London
Printed in the USA on
recycled paper
(59-DDLP)
SA-118[5/97] PP7/97
