<PAGE>
June 7, 1999
Dear Shareholder,
Continued economic expansion has contributed to healthy returns for U.S. equity
investors over the past six months. Led by low inflation and high consumer
confidence, the stock market continued to rise over the past six months. As a
result, the Dow Jones Industrial Average, a widely followed stock market
indicator, closed at over 10,000 points for the first time ever on March 29,
1999.
During the past few months we have seen a resurgence of value-style
stocks - a style Delaware Investments is well recognized for. The S&P Barra
Value Index, an index of S&P 500 stocks with low price-to-book ratios, provided
a 13.60% return for the six month period ended May 31, 1999. For this period, it
outperformed the 11.44% return of the S&P Barra Growth Index, which tracks the
performance of stocks in the S&P 500 Index that have higher price-to-book
ratios. While a battle for market leadership could continue throughout the
remainder of 1999, we believe the resurgence of value-orientated investing
suggests we are in the early stages of what could be a more prolonged value
cycle.
In light of recent favorable market conditions, particularly for value
style stocks, we are pleased to present you with the 1999 semi-annual report for
Delaware's Diversified Value, Mid-Cap Value, Retirement Income and Small Cap
Contrarian Funds. To provide a wider range of value-style investment
opportunities, we opened the Mid-Cap Value and Small Cap Contrarian Funds on
December 29, 1998.
Diversified Value Fund, which seeks capital appreciation with current
income as a secondary objective, performed well during the period. The Fund
provided a 11.68% return (Class A shares at NAV with all distributions
reinvested) for the six-month period ended May 31, 1999, outpacing the 11.04%
average return of its peers in the Growth and Income fund category (according to
Lipper Analytical Services).
One of our newest funds, Small Cap Contrarian Fund, took advantage of
attractive opportunities that abound in small company stocks. Since its
inception on December 29, 1998, the Fund returned a robust 14.00% (Class A
shares at NAV with all distributions reinvested), significantly outperforming
the average returns of its peers in the Small-Cap fund category (according to
Lipper Analytical Services) and its benchmark index, the Russell 2000 Index.
Full performance information can be found on page 3. The Fund seeks to provide
long-term capital appreciation by investing in small company stocks that we
believe to be undervalued.
Retirement Income Fund, which seeks to achieve high current income with
the potential for capital appreciation, returned 8.29% (for Class A shares at
NAV with all distributions reinvested) for the period, substantially
outperforming its peers in the Income fund category (according to Lipper
Analytical Services).
<PAGE>
Mid-Cap Value Fund did not benefit from the recent market conditions to
the extent of the other funds covered in this report. The Fund provided a 3.77%
(Class A shares at NAV with all distributions reinvested) return since its
inception on 12/29/98. We do, however, see future potential in medium-sized
companies. Mid-sized companies are, in our opinion, large enough to be
established as successful businesses, yet small enough that we see attractive
growth potential.
We expect the remainder of 1999 to be a time of cautious optimism. We
believe the economy will continue on an upward trend, although at a less robust
rate than the past few years. Despite speculation that the Federal Reserve Board
may raise interest rates to slow growth and curb a possible inflationary spurt,
we expect the economy will continue to grow. Worker productivity is on the rise,
corporate profits continue to increase and GDP rose 4.1% during the first
quarter of 1999 (Source: Bloomberg Business News). Looking ahead to the second
half of 1999, we believe equity market appreciation will continue to broaden to
include more small and undervalued companies. We believe such changes should put
Delaware Investments' value-style funds in an attractive position for strong
performance going forward.
Sincerely,
Wayne A. Stork
Director,
Delaware Investments Family of Funds
Chairman,
Delaware Management Holdings, Inc.
David K. Downes
Executive Vice President and
Chief Operating Officer
Delaware Investments Family of Funds
Christopher S. Beck
Delaware Management Company
Mid-Cap Value Fund
Small Cap Contrarian Fund
J. Paul Dokas
Delaware Management Company
Diversified Value Fund
Michael Dugan
Delaware Management Company
Retirement Income Fund
Gerald T. Nichols
Delaware Management Company
Retirement Income Fund
This semi-annual report is for the information of Diversified Value Fund,
Mid-Cap Value Fund, Retirement Income Fund and Small Cap Contrarian Fund
shareholders only. The current prospectus for each Fund sets forth details about
charges, expenses, investment objectives and operating policies of each Fund.
You should read any prospectus carefully before you invest or send money.
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
- ------------------------------------------------------------------------------------------------------
Six Months Ended One Year Lifetime
May 31, 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Diversified Value Fund A Class (Est. 9/14/98) +11.68% +32.76%
Lipper Growth and Income Fund Average (888 funds) +11.04% +30.85%
Standard & Poor's 500 Stock Index +12.60% +36.29%
- ------------------------------------------------------------------------------------------------------
Retirement Income Fund A Class (Est. 12/2/96) +8.29% +5.55% +16.95%
Lipper Income Fund Average (97 Funds) +4.09% +5.56% +11.38%
Standard & Poor's 500 Stock Index +12.60% +22.76% +30.01%
- ------------------------------------------------------------------------------------------------------
Mid-Cap Value Fund A Class (Est. 12/29/98) +3.77%
Lipper Mid-Cap Fund Average (407 Funds) +5.92%
Russell Mid-Cap Value Index +6.50%
- ------------------------------------------------------------------------------------------------------
Small-Cap Contrarian Fund A Class (Est. 12/29/98) +14.00%
Lipper Small-Cap Fund Average (761 Funds) +1.78%
Russell 2000 Index +4.56%
- ------------------------------------------------------------------------------------------------------
</TABLE>
The results shown above are based on net asset value and assume reinvestment of
distributions. The returns and value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. The unmanaged
Standard & Poor's 500 Stock Index is a measure of large capitalization domestic
stocks. The unmanaged Russell 2000 Index is a measure of small company stocks.
The unmanaged Russell Mid-Cap Value Index contains stocks from the Russell
Mid-Cap Index with less-than-average growth orientation. It is not possible to
invest directly in any index. Past performance does not guarantee future
results.
This information is for shareholder use only.
<PAGE>
DELAWARE GROUP EQUITY FUNDS II, INC.
DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS
MAY 31, 1999
(Unaudited)
Number Market
of Shares Value
---------- ----------
COMMON STOCK-100.19%
Aerospace & Defense-2.75%
Allied-Signal 300 $ 17,419
General Dynamics 300 19,725
Northrop Grumman 200 13,500
United Technologies 300 18,618
--------
69,262
--------
Automobiles & Auto Parts-3.70%
Delphi Automotive Systems 559 10,972
Ford Motor 300 17,119
General Motors 800 55,200
Meritor Automotive 400 9,750
--------
93,041
--------
Banking & Finance-20.95%
American Express 200 24,238
Bank of America 1,000 64,687
Chase Manhattan 700 50,750
Citigroup 1,300 86,125
Countrywide Credit Industries 300 12,338
Federal Home Loan 1,000 58,313
First Union 500 23,031
Fleet Financial Group 900 37,013
GreenPoint Financial 200 6,900
Merrill Lynch & Company 300 25,200
Morgan (J.P.) 200 27,863
Morgan Stanley Dean Witter 200 19,300
Old Kent Financial 200 8,988
Popular 300 9,244
U.S. Bancorp 900 29,250
Wells Fargo 1,100 44,000
--------
527,240
--------
Buildings & Materials-1.34%
Carlisle Companies 100 4,675
Centex 200 7,413
Johns Manville 500 6,563
Lafarge 200 6,688
York International 200 8,438
--------
33,777
--------
Page 4
<PAGE>
DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS (Continued)
Number Market
of Shares Value
--------- --------
Cable, Media & Publishing-5.40%
CBS 300 $12,525
*ChrisCraft Industries 203 9,363
Donnelley & Sons 400 14,500
KnightRidder 300 15,806
*MetroGoldwynMayer 600 9,300
New York Times 200 6,825
The News Corporation 400 13,275
Time Warner 400 27,225
*Viacom Class B 700 26,950
---------
135,769
---------
Chemicals-3.59%
Air Products & Chemicals 300 12,300
Dow Chemical 100 12,150
DuPont(E.I.)deNemours 500 32,719
Nalco Chemical 200 6,700
Praxair 400 19,525
Witco 400 7,000
---------
90,394
---------
Computers & Technology-4.76%
Computer Associates International 300 14,194
International Business Machines 800 93,050
*Oracle 500 12,391
---------
119,635
---------
Electronics & Electrical Equipment-3.33%
Intel 900 48,769
Rockwell International 400 22,075
Whirlpool 200 12,900
---------
83,744
---------
Energy-10.60%
Ashland 200 8,150
Chevron 600 55,613
Coastal 400 15,425
El Paso Energy 400 14,425
Exxon 800 63,900
Kerr-McGee 300 13,950
Mobil 400 40,500
Phillips Petroleum 100 5,244
Texaco 500 32,750
Transocean Offshore 200 4,925
Unocal 300 11,925
---------
266,807
---------
Page 5
<PAGE>
DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS (Continued)
Number Market
of Shares Value
--------- ---------
Environmental Services-1.13%
Honeywell 300 $28,388
--------
28,388
--------
Food, Beverage & Tobacco-3.57%
Anheuser Busch 400 29,225
ConAgra 600 15,637
General Mills 200 16,075
IBP 300 6,431
Philip Morris 300 11,569
*Suiza Foods 100 3,663
SUPERVALU 300 7,275
--------
89,875
--------
Healthcare & Pharmaceuticals-2.21%
Abbott Laboratories 300 13,555
Bergen Brunswig Class A 300 6,600
Merck & Company 400 27,000
*PacifiCare Health Systems Class B 100 8,634
--------
55,789
--------
Industrial Machinery-1.64%
Black & Decker 200 11,388
IngersollRand 400 25,475
Pentair 100 4,413
--------
41,276
--------
Insurance-6.71%
Aetna 200 18,163
AFLAC 400 20,400
Allstate 900 32,793
American International Group 300 34,294
Cigna 200 18,650
Equitable 300 21,056
Everest Reinsurance Holdings 300 9,863
JeffersonPilot 200 13,538
--------
168,757
--------
Metals & Mining-1.51%
ALCOA 400 22,000
Barrick Gold 400 6,900
Phelps Dodge 100 5,181
Worthington Industries 300 3,852
--------
37,933
--------
Page 6
<PAGE>
DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS (Continued)
Number Market
of Shares Value
----------- ---------
Paper & Forest Products-2.70%
Georgia-Pacific 300 $25,931
International Paper 200 10,000
Temple-Inland 200 13,400
Weyerhaeuser 300 18,619
--------
67,950
--------
Real Estate-0.88%
AMB Property 300 6,750
Crescent Real Estate Equity 300 6,918
Equity Office Properties Trust 300 8,475
--------
22,143
--------
Retail-3.24%
American Stores . 700 23,100
*Brinker International 200 5,612
Dillard 200 7,025
Sears,Roebuck 700 33,469
Sherwin-Williams 400 12,325
--------
81,531
--------
Telecommunications-13.57%
ALLTEL 200 14,337
Ameritech 600 39,488
AT&T 1,100 61,050
BellSouth 600 28,313
*General Instrument 200 7,738
GTE 1,100 69,369
MCI Worldcom 600 51,806
SBC Communications 600 30,674
Sprint 200 22,550
U.S.West 300 16,219
--------
341,544
--------
Textiles, Apparel & Furniture-0.36%
Miller (Herman) 200 4,031
Shaw Industries 300 5,062
--------
9,093
--------
Transportation & Shipping-2.50%
Delta Air Lines 200 11,474
Union Pacific 900 51,356
--------
62,830
--------
Page 7
<PAGE>
DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS (Continued)
Number Market
of Shares Value
----------- ----------
Utilities-3.75%
Allegheny Energy 300 $10,462
Central & South West 600 15,450
Energy East 400 11,100
Entergy 300 9,731
Public Service Enterprise Group 600 25,162
Texas Utilities 500 22,500
---------
94,405
---------
Total Common Stock (cost $2,250,514) 2,521,183
Principal Market
Amount Value
----------- ----------
REPURCHASE AGREEMENT-0.08%
With Chase Manhattan 4.78% 6/1/99
(dated 5/31/99, collateralized by $200
U.S. Treasury Notes 5.50% due 2/28/03, market
value $248 and $200 U.S. Treasury Notes 6.25%
due 2/28/02, market value $167 and $300
U.S. Treasury Notes 7.50% due 5/15/02, market
value $276) $700 700
With PaineWebber 4.78% 6/1/99
(dated 5/31/99, collateralized by $100
U.S. Treasury Notes 5.375% due 6/30/03,
market value $137 and $300 U.S. Treasury
Notes 6.25% due 1/31/02, market value $272 and
$300 U.S. Treasury Notes 6.375% due 5/15/00,
market value $266) 700 700
With Prudential 4.75% 6/1/99
(dated 5/31/99, collateralized by $600
U.S. Treasury Notes 15.75% due 11/15/01,
market value $675) 600 600
----------
Total Repurchase Agreement (cost $2,000) 2,000
----------
TOTAL MARKET VALUE OF SECURITIES-100.27%
(cost $2,252,514) $2,523,183
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS-(0.27%) (6,671)
----------
NET ASSETS APPLICABLE TO 237,389 SHARES
($.01 PAR VALUE) OUTSTANDING 100.00% $2,516,512
==========
Page 8
<PAGE>
DIVERSIFIED VALUE FUND
STATEMENT OF NET ASSETS (Continued)
NET ASSET VALUE DIVERSIFIED VALUE FUND A CLASS
($10.60 /1 share) $10.60
======
NET ASSET VALUE DIVERSIFIED VALUE FUND INSTITUTIONAL CLASS
($2,516,501 /237,388 shares) $10.60
======
COMPONENTS OF NET ASSETS AT MAY 31, 1999
Common stock $.01 par value, 200,000,000 shares
authorized with 100,000,000 shares allocated to the
Diversified Value Fund A Class, 25,000,000 shares
allocated to the Diversified Value Fund B Class,
25,000,000 shares allocated to the Diversified Value
Fund C Class, 50,000,000 shares allocated to the
Diversified Value Fund Institutional Class $2,020,488
Undistributed net investment income 11,377
Accumulated net realized gain on investments 213,978
Net unrealized appreciation of investments 270,669
----------
Total Net Assets $2,516,512
==========
*Non-income producing security.
Top 10 holdings, representing 26.19% of net assets, are in bold face.
- --------------------------------------------------------------------------------
NET ASSET VALUE AND OFFERING PRICE PER SHARE
DIVERSIFIED VALUE FUND A CLASS
Net asset value A Class (A) $10.60
Sales charge (5.75% of offering price or 6.13% of the amount
invested per share) (B) 0.65
------
Offering price $11.25
======
-------------------------------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000
or more.
See Notes to Financial Statements for change in frontend sales charge
effective November 2, 1998.
See accompanying notes
Page 9
<PAGE>
DELAWARE GROUP EQUITY FUNDS II, INC.
DIVERSIFIED VALUE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends $ 22,502
Interest 348 $ 22,850
-------- --------
EXPENSES:
Management fees 7,730
Registration fees 2,049
Custodian fees 1,460
Reports and statements to shareholders 1,002
Dividend disbursing and transfer agent fees and expenses 662
Accounting and administration 437
Directors' fees 397
Professional fees 295
Taxes (other than taxes on income) 117
Other 192 14,341
-------- ---------
Less expenses absorbed or waived by Delaware Management Company (5,403)
Less expenses paid indirectly (40)
---------
Total expenses 8,898
---------
NET INVESTMENT INCOME 13,952
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments 213,980
Net change in unrealized appreciation of
investments 44,753
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 258,733
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 272,685
=========
</TABLE>
________________________
See accompanying notes
Page 10
<PAGE>
DELAWARE GROUP EQUITY FUNDS II, INC.
DIVERSIFIED VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months 9/15/1998*
Ended To
5/31/99 11/31/98
(Unaudited)
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 13,952 $ 6,131
Net realized gain on investments 213,980 11,763
Net change in unrealized appreciation of investments 44,753 225,916
----------- -----------
Net increase in net assets resulting from operations 272,685 243,810
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Institutional Class (8,706) -
Net realized gain from security transactions:
Institutional Class (11,765) -
----------- -----------
(20,471) -
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class - 9
Institutional Class - 2,000,008
----------- -----------
- 2,000,017
----------- -----------
Net asset value of shares issued upon
reinvestment of distributions from
net realized gain on investments:
Institutional Class 20,471 -
----------- -----------
20,471 -
----------- -----------
Increase in net assets derived from capital
share transactions 20,471 2,000,017
----------- -----------
NET INCREASE IN NET ASSETS 272,685 2,243,827
NET ASSETS:
Beginning of period 2,243,827 -
----------- -----------
End of period $ 2,516,512 $ 2,243,827
=========== ===========
</TABLE>
__________________________________________________
* Date of commencement of operations.
See accompanying notes
Page 11
<PAGE>
DELAWARE GROUP EQUITY FUNDS II, INC.
DIVERSIFIED VALUE FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout the period were
as follows:
<TABLE>
<CAPTION>
Diversified Value Fund Institutional Class
------------------------------------------------
Six Months 9/15/98(1)
Ended to
5/31/99 11/30/98
(Unaudited)
----------- -----------
<S> <C> <C>
Net asset value, beginning of period $ 9.540 $ 8.500
Income from investment operations:
Net investment income 0.059 0.026
Net realized and unrealized gain on investments 1.088 1.014
-------- -------
Total from investment operations 1.147 1.040
-------- -------
Less dividends and distributions:
Dividends from net investment income (0.037) -
Distributions from net realized gain on investments (0.050) -
-------- -------
Total dividends and distributions (0.087) -
-------- -------
Net asset value, end of period $ 10.600 $ 9.540
======== =======
Total return(3) 11.68% 12.24%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 2,517 $ 2,244
Ratio of expenses to average net assets 0.75%(2) 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.20%(2) 1.24%
Ratio of net investment income to average net assets 1.17%(2) 1.41%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 0.72%(2) 0.92%
Portfolio turnover 142% 74%
</TABLE>
- ------------------
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(2) Annualized
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of the sales charge.
As of May 31,1999, the A Class had one share outstanding, representing the
initial seed purchase. Data for this class is excluded because the data is not
believed to be meaningful.
See accompanying notes
Page 12
<PAGE>
DELAWARE GROUP EQUITY FUNDS II, INC.
DIVERSIFIED VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
(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 Delaware Business Trust and
offers five series: the Decatur Equity Income Fund, the Growth & Income Fund,
the Blue Chip Fund, the Social Awareness Fund and the Diversified Value Fund.
These financial statements and related notes pertain to the Diversified Value
Fund (the "Fund"). The Fund offers four classes of shares. The Diversified Value
Fund A Class carries a front-end sales charge of 5.75%. The Diversified Value
Fund B Class carries a back-end deferred sales charge. The Diversified Value
Fund C Class carries a level load deferred sales charge and the Diversified
Value Fund Institutional Class has no sales charge. As of May 31, 1999 only the
A and Institutional Classes have commenced operations.
The objective of the Fund is capital appreciation with current income as a
secondary objective.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation- Securities listed on an exchange are valued at the last
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. 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- The Fund intends 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 Fund on
the basis of daily net assets of each class. Distribution expenses relating to a
specific class are charged directly to that class.
Page 13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Repurchase Agreements- The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 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.
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.
Other- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. The Fund declares and pays dividends from net
investment income and capital gains, if any, annually.
Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $27 for the six months ended May 31,
1999. The Fund may receive earnings credit used to offset custody fees when
positive balances are maintained at the custodian. These credits were $13 for
the six months ended May 31, 1999. The "soft dollar" reimbursement and the
earnings credit are combined as expenses paid indirectly in the Statement of
Operations.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company ("DMC"), the Investment Manager of the Fund, an
annual fee which is calculated at the rate of 0.65% on the first $500 million of
average daily net assets, 0.60% on the next $500 million, 0.55% on the next $1.5
billion and 0.50% on average daily net assets in excess of $2.5 billion. At May
31, 1999, the Fund had a liability for other expenses payable to DMC of $31.
Page 14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
DMC has elected to waive that portion, if any, of the management fee and
reimburse the Fund to the extent that annual operating expenses, exclusive of
taxes, interest, distribution fees, brokerage commissions and extraordinary
expenses, exceed 0.75% of average daily net assets of the Fund through July 31,
1999.
The Fund has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent and accounting and
administration services. The Fund pays DSC a monthly fee based on the number of
shareholder accounts, shareholder transactions and average net assets, subject
to certain minimums. At May 31, 1999, the Fund had a liability for such fees and
other expenses payable to DSC of $169.
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 assets of the A Class and 1.00% of the average
daily net assets of the B and C Classes. At May 31, 1999, the Fund had a payable
for distribution fees and other expenses payable to DDLP of $47.
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, 1999, the Fund made purchases of $1,700,775
and sales of $1,673,956 of investment securities other than U.S. government
securities and temporary cash investments.
The cost of investments for federal income tax purposes approximates cost for
book purposes. At May 31, 1999, the aggregate cost of securities was $2,252,514.
At May 31, 1999, the net unrealized appreciation was $270,669 of which $297,598
related to unrealized appreciation of securities and $26,929 related to
unrealized depreciation of securities.
Page 15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
4. Capital Stock
<TABLE>
<CAPTION>
Six Months 9/15/1998*
Ended to
5/31/99 11/30/98
(Unaudited)
----------- ----------
<S> <C> <C>
Shares sold:
Diversified Value A Class - 1
Diversified Value Institutional Class - 235,295
----------- ----------
- 235,296
Shares issued upon reinvestment of dividends from
net investment income and net realized gains from
security transactions:
Diversified Value Institutional Class 2,093 -
----------- ----------
2,093 235,296
----------- ----------
Net Increase 2,093 235,296
=========== ==========
</TABLE>
* Commencement of operations
Page 16
<PAGE>
Proxy Results
(Unaudited)
For the period ended May 31, 1999, the Delaware Group Equity Funds II, Inc.
shareholders voted on the following proposals at the annual meeting of
shareholders on December 21, 1998. The description of each proposal and number
of shares voted are as follows:
Shares Shares Voted
Voted Withheld
For Authority
----------- ------------
1. To elect the Fund's Board of Directors:
Jeffrey J. Nick 120,048,642 10,795,652
Walter P. Babich 120,063,759 10,780,535
John H. Durham 120,200,558 10,643,736
Anthony D. Knerr 120,239,747 10,604,547
Ann R. Leven 120,273,627 10,570,667
Thomas F. Madison 120,229,855 10,614,439
Charles E. Peck 120,200,223 10,644,071
Wayne A. Stork 120,203,878 10,640,416
Jan L.Yeomans 120,291,396 10,552,898
2. To approve a new investment management agreement with Delaware Management
Company for the Fund
Shares Shares Shares
Voted Voted Voted
For Against Abstain
------- ------- -------
235,294 - -
Page 17
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC.-
SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS
May 31, 1999
(Unaudited)
Number Market
of Shares Value
--------- -------
COMMON STOCK - 91.63%
Aerospace & Defense - 3.05%
Cordant Technologies 800 $38,800
*Triumph Group 1,000 30,625
--------
69,425
--------
Automobiles & Automotive Parts - 2.91%
Borg-Warner Automotive 600 33,262
CLARCOR 1,800 33,075
--------
66,337
--------
Banking, Finance & Insurance- 14.15%
*Avis Rent-A-Car 1,200 34,425
FNB 1,155 31,041
Everest Reinsurance Holdings 1,000 32,875
*Farm Family Holdings 1,100 37,950
*Golden State Bancorp 1,700 41,756
Harleysville Group 1,500 29,062
Horace Mann Educators 1,900 49,163
Provident Bankshares 1,470 34,086
Republic Bancorp 2,500 32,109
--------
322,467
--------
Cable, Media & Publishing - 2.31%
*Carmike Cinemas-Class A 1,400 24,587
*World Color Press 1,100 28,050
--------
52,637
--------
Chemicals - 3.14%
Crompton & Knowles 1,600 28,900
Hanna (M.A.) 2,900 42,775
--------
71,675
--------
Electronics & Electrical Equipment - 5.24%
AVX 1,900 38,831
Cohu 1,300 38,756
*Kemet 2,600 41,762
--------
119,349
--------
Energy - 10.51%
Page 4
<PAGE>
SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS (Continued)
Number Market
of Shares Value
--------- -------
BJ Services 1,300 $35,831
*Cooper Cameron 900 32,569
Helmerich & Payne 1,100 25,644
New Jersey Resources 500 18,875
NUI 800 19,900
*Oceaneering International 1,700 26,244
Oneok 500 15,000
Santa Fe International 1,700 34,425
*Veritas DGC 1,700 31,025
--------
239,513
--------
Food, Beverage & Tobacco - 5.40%
*CKE Restaurants 1,500 27,563
Dole Food 1,000 30,687
Richfood Holdings 2,200 28,188
Universal Foods 1,600 36,700
--------
123,138
--------
Healthcare & Pharmaceuticals - 1.00%
*Sierra Health Services 1,500 22,875
--------
22,875
--------
Industrial Machinery - 7.87%
Columbus McKinnon 1,600 39,950
IDEX 1,200 33,975
Precision Castparts 900 36,450
Regal-Beloit 1,300 30,225
United Dominion Industries 1,500 38,906
--------
179,506
--------
Metals & Mining - 4.80%
*Bethlehem Steel 2,800 23,275
*Freeport-McMoRan Copper & Gold Class B 2,000 28,250
LTV 2,900 17,762
Texas Industries 1,100 40,013
--------
109,300
--------
Paper & Forest Products - 1.38%
Caraustar Industries 1,200 31,537
--------
31,537
--------
REITS - 9.13%
Cabot Industrial Trust 2,100 45,150
Chateau Communities 1,300 39,244
Meristar Hospitality 1,700 37,187
Pan Pacific Retail Properties 2,100 41,738
Prentiss Properties Trust 1,900 44,888
--------
208,207
--------
Page 5
<PAGE>
SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS (Continued)
Number Market
of Shares Value
--------- -------
Casey's General Stores 2,200 $29,494
*Discount Auto Parts 900 22,275
Great Atlantic & Pacific Tea 700 22,925
*Michael Stores 1,700 45,581
Pier 1 Imports 3,200 35,400
---------
155,675
---------
Textiles, Apparel & Furniture - 4.31%
*Furniture Brands International 1,400 33,950
Kellwood 1,200 28,500
Spring Industries Class A 900 35,663
---------
98,113
---------
Transportation & Shipping - 4.76%
Alexander & Baldwin 1,400 31,675
CNF Transportation 900 37,350
US Freightways 1,000 39,469
---------
108,494
---------
Utilities - 2.38%
Rochester Gas & Electric 900 25,144
Sierra Pacific Resources 800 29,100
---------
54,244
---------
Miscellaneous - 2.46%
*Metamor Worldwide 600 16,406
*NFO Worldwide 2,800 39,725
---------
56,131
---------
Total Common Stock (cost $1,857,414) 2,088,623
---------
Principal
Amount
---------
Repurchase Agreements - 8.68%
With Chase Manhattan 4.78% 6/01/99 (dated 5/28/99,
collateralized by $27,000 U.S. Treasury Notes 5.50%
due 2/28/03, market value $27,367 and
$24,000 U.S. Treasury Notes 6.25% due 2/28/02,
market value $24,593 and $16,000 U.S. Treasury Notes
7.50% due 5/15/02, market value $16,491) $67,000 $67,000
Page 6
<PAGE>
SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS (Continued)
<TABLE>
<CAPTION>
Principal Market
Amount Value
--------- -------
<S> <C> <C>
With PaineWebber 4.78% 6/01/99 (dated 5/28/99,
collateralized by $13,000 U.S. Treasury Notes 5.375%
due 6/30/03, market value $13,565 and
$26,000 U.S. Treasury Notes 6.25% due 1/31/02,
market value $29,942 and $26,000 U.S. Treasury Notes
6.375% due 5/15/00, market value $26,322) $65,000 $65,000
With Prudential Securities 4.75% 6/01/99 (dated 5/28/99,
collateralized by $66,000 U.S. Treasury Notes 15.75%
due 11/15/01, market value $66,846) 66,000 66,000
----------
Total Repurchase Agreements (cost $198,000) 198,000
----------
TOTAL MARKET VALUE OF SECURITIES - 100.31%
(COST $2,055,414) $2,286,623
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.31%) (7,178)
----------
NET ASSETS APPLICABLE TO 235,296 SHARES ($1 PAR VALUE)
OUTSTANDING - 100.00% $2,279,445
==========
NET ASSET VALUE - SMALL CAP CONTRARIAN FUND A CLASS
($9.69 / 1 share) $9.69
==========
NET ASSET VALUE - SMALL CAP CONTRARIAN FUND INSTITUTIONAL CLASS
($2,279,435 / 235,295 shares) $9.69
==========
- -----------------------------------------------------------------------------------------------------------
SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS (Continued)
COMPONENTS OF NET ASSETS AT MAY 31, 1999:
Common Stock, $.01 par value, 200,000,000 shares
authorized to the Fund with 100,000,000 shares allocated to the
Small Cap Contrarian Fund A Class, 25,000,000 shares allocated to the
Small Cap Contrarian Fund B Class, 25,000,000 shares allocated to the
Small Cap Contrarian Fund C Class, and 50,000,000 shares
allocated to the Small Cap Contrarian Fund Institutional Class $2,000,017
Undistributed net investment income 8,418
Accumulated net realized gain on investments 39,801
Net unrealized appreciation of investments 231,209
----------
Total net assets $2,279,445
==========
</TABLE>
- --------------------
* Non-income producing security for the period ended 5/31/99
Top ten holdings representing 18.90% of net assets, are printing in bold face.
Page 7
<PAGE>
SMALL CAP CONTRARIAN FUND
STATEMENT OF NET ASSETS (Continued)
NET ASSET VALUE AND OFFERING PRICE PER SHARE-
SMALL CAP CONTRARIAN FUND A CLASS
Net asset value per share (A) $9.69
Sales charge (5.75% of offering price, or 6.09% of
amount invested per share) (B) 0.59
------
Offering price $10.28
======
- ----------------
(A) Net Asset Value per share, as illustrated, is the estimated amount
which would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current prospectus for purchases of
$50,000 or more.
See accompanying notes
Page 8
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC.
SMALL CAP CONTRARIAN FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1999
(Unaudited)
INVESTMENT INCOME:
Dividends $ 13,137
Interest 1,743
---------
14,880
---------
EXPENSES:
Management fees 6,367
Professional fees 2,260
Registration fees 1,814
Accounting and administration 1,275
Reports and statements to shareholders 1,271
Taxes (other than taxes on income) 838
Custodian fees 1,084
Dividend disbursing, transfer agent fees and other expenses 345
Directors' fees 50
Other 430
---------
15,734
Less expenses waived or absorbed by Delaware Management Company (8,568)
Less expenses paid indirectly (704)
---------
Total expenses 6,462
NET INVESTMENT INCOME 8,418
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments 39,801
Net change in unrealized appreciation of investments 231,209
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 271,010
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 279,428
=========
See accompanying notes
Page 9
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC.
SMALL CAP CONTRARIAN FUND
STATEMENT OF CHANGES IN NET ASSETS
12/29/98(*)
To
5/31/99
(Unaudited)
---------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 8,418
Net realized gain on investments 39,801
Net change in unrealized appreciation of investments 231,209
-----------
Net increase in net assets resulting from operations 279,428
-----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class 409
Institutional Class 2,000,008
-----------
2,000,417
-----------
Cost of shares repurchased:
A Class (400)
Institutional Class -
-----------
(400)
-----------
Increase in net assets derived from capital
share transactions 2,000,017
-----------
NET INCREASE IN NET ASSETS 2,279,445
NET ASSETS:
Beginning of period -
-----------
End of period $ 2,279,445
===========
- ------------------------------------
*Date of commencement of operations
See accompanying notes
Page 10
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC.
SMALL CAP CONTRARIAN FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
Small Cap Contrarian Fund
Institutional Class
----------------------
12/29/98(1)
to
5/31/99
(Unaudited)
-------------------------
<S> <C>
Net asset value, beginning of period $ 8.500
Income from investment operations:
Net investment gain 0.036
Net realized and unrealized gain on investments 1.154
---------------------
Total from investment operations 1.190
---------------------
Net asset value, end of period $ 9.690
=====================
Total return(2) 14.00%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $2,279
Ratio of expenses to average net assets 0.75%
Ratio of expenses to average net assets prior to expense limitation and
expenses paid indirectly 1.81%
Ratio of net investment income to average net assets 0.97%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly (.10%)
Portfolio turnover 58%
</TABLE>
- -------------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of the sales charge.
See accompanying notes
On March 16, 1999, Small Cap Contrarian Fund A Class sold shares which were
subsequently repurchased on March 23, 1999. This shareholder activity is not
being disclosed in the Financial Highlights due to its immateriality.
Page 11
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC.
SMALL CAP CONTRARIAN FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999 (Unaudited)
Delaware Group Equity Funds V, 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 Delaware Business Trust and
offers four series: the Small Cap Value Fund, the Retirement Income Fund, the
Mid-Cap Value Fund, and the Small Cap Contrarian Fund. These financial
statements and related notes pertain to the Small Cap Contrarian Fund (the
"Fund"). The Fund offers four classes of shares. The Small Cap Contrarian Fund A
Class carries a front-end sales charge of 5.75%. The Small Cap Contrarian Fund B
Class carries a back-end deferred sales charge. The Small Cap Contrarian Fund C
Class carries a level load deferred sales charge and the Small Cap Contrarian
Fund Institutional Class has no sales charge. As of May 31, 1999, only the A and
Institutional Classes have commenced operations.
The objective of the Fund is to provide long-term capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation - Securities listed on an exchange are valued at the last
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.
Federal Income Taxes - The Fund intends 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 Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 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.
Page 12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
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.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. The Fund declares and pays dividends from net
investment income and capital gains, if any, annually.
Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $20 for the period ended May 31,
1999. In addition, the Fund receives earnings credits from its custodian when
positive cash balances are maintained, which are used to offset custody fees.
These credits were $684 for the period ended May 31, 1999. The expenses paid
under the above arrangements are included in their respective expense captions
on the statement of operations with the corresponding expense offset shown as
"Expenses paid indirectly".
2. Investment Management and Other Transactions with Affiliates In accordance
with the terms of the Investment Management Agreement, the Fund pays Delaware
Management Company (DMC), the Investment Manager of the Fund, an annual fee
which is calculated daily at the rate of 0.75% on the first $500 million of
average daily net assets, 0.70% on the next $500 million, 0.65% on the next
$1,500 million and 0.60% on average daily net assets in excess of $2,500
million, less fees paid to the unaffiliated directors.
DMC has elected to waive that portion, if any, of the management fee and
reimburse the Fund to the extent that annual operating expenses, exclusive of
taxes, interest, distribution expenses, brokerage commissions and extraordinary
expenses, exceed 0.75% of average daily net assets of the Fund through May 31,
1999.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent and accounting and administration
services. The Fund pays DSC a monthly fee based on the number of shareholder
accounts, shareholder transactions and average net assets, subject to certain
minimums. At May 31, 1999, the Fund had a liability for such fees and other
expenses payable to DSC of $179.
Page 13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
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 assets of the A Class and 1.00% of the average
daily net assets of the B and C Classes. No distribution expenses are paid by
the Institutional Class. DDLP has elected voluntarily to waive such fees through
June 30,1999.
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 period ended May 31, 1999, the Fund made purchases of $2,293,842 and
sales of $476,229 of investment securities other than U.S. government securities
and temporary cash investments.
At May 31, 1999 the aggregate cost of securities for federal income tax purposes
was $2,055,414.
At May 31, 1999, the net unrealized appreciation for federal income tax purposes
aggregated was $231,209 of which $267,089 related to unrealized appreciation of
securities and $35,880 related to unrealized depreciation of securities
Page 14
<PAGE>
4. Capital Stock
Transactions in capital stock shares were as follows:
12/29/98*
to
5/31/99
-----------------
Shares sold:
A Class 49
Institutional Class 235,295
-----------------
235,344
-----------------
Shares repurchased:
A Class (48)
-----------------
(48)
-----------------
Net increase (decrease) 235,296
=================
page 15
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC.-
RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS
MAY 31, 1999
(Unaudited) Number Market
shares Value
------ ------
Common Stock - 39.44%
Aerospace and Defense - 2.61%
Lockheed Martin 2,000 $ 80,875
---------
80,875
---------
Automobiles and Automotive Parts - 3.21%
Delphi Automotive Systems 839 16,460
---------
General Motors 1,200 82,800
---------
99,260
---------
Banking, Finance and Insurance - 10.87%
Bank of America 1,018 65,852
Chubb 1,500 105,094
Mellon Bank 2,800 99,925
Summit Bancorp 1,600 65,500
---------
336,371
---------
Chemicals - 1.90%
DuPont (E.I.) deNemours 900 58,894
---------
58,894
---------
Telecomunications - 0.42%
Winstar Communications 264 13,060
---------
13,060
---------
Energy - 1.80%
Chevron 600 55,613
---------
55,613
---------
Food, Beverage and Tobacco - 1.50%
Philip Morris 1,200 46,275
---------
46,275
---------
Industrial Machinery - 3.08%
Deere & Co. 2,500 95,156
---------
95,156
---------
Paper & Forest Products - 2.17%
Temple-Inland 1,000 67,000
---------
67,000
---------
Real Estate - 6.39%
Corporate Office Properties 5,500 44,000
Grove Property Trust 7,500 96,563
Starwood Hotels & Resorts Trust 1,750 57,313
---------
197,876
---------
Page 4
<PAGE>
RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS (Continued)
Common Stock (Continued)
Number Market
shares Value
------ ------
Transportation & Shipping - 2.19%
Alexander & Baldwin 3,000 $ 67,875
----------
67,875
----------
Miscellaneous - 3.30%
Pitney Bowes 1,600 102,000
----------
102,000
----------
Total Common Stock (cost $1,008,324) 1,220,255
----------
CONVERTIBLE PREFERRED STOCKS - 23.73%
Banking, Finance and Insurance - 4.39%
Newell Financial Trust I 5.25% 12/01/27 2,600 135,850
----------
135,850
----------
Real Estate - 2.13%
General Growth Properties 7.25% 2,600 65,975
----------
65,975
----------
Telecomunications - 6.67%
Comcast 3.35% 1,100 91,988
* Winstar Communications PIK 7.00% 2,000 114,500
----------
206,488
----------
Transportation - 1.89%
Union Pacific Capital Trust 6.25% 1,100 58,300
----------
58,300
----------
Utilities - 6.76%
Houston Industries 7.00% 1,200 137,400
Texas Utilities 9.25% 1,300 71,744
----------
209,144
----------
Miscellaneous - 1.89%
Ingersoll-Rand 6.75% 2,000 58,500
----------
58,500
----------
Total Convertible Preferred Stocks (cost $625,763) 734,257
----------
Principal
Amount
CORPORATE BONDS - 11.69% ---------
Building and Materials - 0.71%
Clark Materials Handling 10.75% 11/15/06 $25,000 21,875
----------
21,875
----------
Page 5
<PAGE>
RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS (Continued)
Corporate Bonds (Continued)
Principal Market
Amount Value
--------- ------
Chemicals - 0.77%
Precise Technology unsec sr sub nts
11.125% 06/15/07 $25,000 $ 23,781
--------
23,781
--------
Consumer Products - 1.57%
Consumers International sr nts 10.25% 04/01/05 25,000 25,750
Riddell Sports 10.50% 07/15/07 25,000 22,750
--------
48,500
--------
Electronics and Electrical Equipment - 0.78%
HCC Industries sr sub nts 10.75% 05/15/07 25,000 24,156
--------
24,156
--------
Environmental Services - 1.42%
Hydrochem Industrial Services 10.375% 08/01/07 50,000 43,938
--------
43,938
--------
Industrial Machinery - 0.61%
Burke Industries unsec sr nts 10.00% 08/15/07 25,000 18,969
--------
18,969
--------
Leisure, Lodging and Entertainment - 2.55%
AFC Enterprises 10.25% 05/15/07 10,000 10,300
Town Sports International 9.75% 10/15/04 25,000 24,438
Trump-Atlantic City 11.25% 05/01/06 50,000 44,188
--------
78,926
--------
Packaging and Containers - 0.81%
Huntsman Packaging 9.125% 10/01/07 25,000 25,031
--------
25,031
--------
Retail - 2.48%
Fleming sr sub nts 10.625% 12/15/01 50,000 50,500
Leslie's Poolmart 10.375% 07/15/04 25,000 26,188
--------
76,688
--------
Total Corporate Bonds (cost $384,000) 361,864
--------
CONVERTIBLE BONDS - 15.32%
Automobiles and Automotive Parts - 1.99%
Magna International 4.875% 02/15/05 60,000 61,650
--------
61,650
--------
Banking, Finance and Insurance - 2.16%
Bell Atlantic Financial Services 5.75% 04/01/03 65,000 66,788
--------
66,788
--------
Page 6
<PAGE>
RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS (Continued)
Convertible Bonds (Continued)
Principal Market
Amount Value
--------- ------
Cable, Media and Publishing - 3.76%
Mindspring Enterprises 5.00% 04/15/06 $80,000 $ 69,100
World Color Press 6.00% 10/01/07 50,000 47,188
-----------
116,288
-----------
Industrial Machinery - 5.07%
Mail-Well 5.00% 11/01/02 100,000 102,375
Thermo Fibertek 4.50% 07/15/04 65,000 54,600
-----------
156,975
-----------
Metals & Mining - 2.34%
MascoTech 4.50% 12/15/03 90,000 72,338
-----------
72,338
-----------
Total Convertible Bonds (cost $485,650) 474,039
-----------
Repurchase Agreements - 7.50%
With Chase Manhattan 4.78% 06/01/99
(dated 05/28/99, collateralized by $19,000
U.S. Treasury Notes 6.25% due 02/28/02,
market value $19,323 and $31,000 U.S. Treasury
Notes 7.50% due 05/15/02, market value $32,067
and $28,000 U.S. Treasury Notes 5.50% due
2/28/2003, market value $28,815) 78,000 78,000
With PaineWebber 4.78% 06/01/99
(dated 05/28/99, collateralized by $31,000
U.S. Treasury Notes 6.375% due 05/15/00,
market value $30,842 and $30,000 U.S.
Treasury Notes 6.25% due 01/31/02, market
value $31,569 and $15,000 U.S. Treasury
Notes 5.375% due 06/30/03, market value $15,894) 77,000 77,000
With Prudential Securities 4.75% 06/01/99
(dated 05/28/99, collateralized by $63,000
U.S. Treasury Notes 15.75% due 11/15/01,
market value $78,325). 77,000 77,000
-----------
Total Repurchase Agreements (cost $232,000) 232,000
-----------
TOTAL MARKET VALUE OF SECURITIES - 97.68%
(cost $2,735,737) $ 3,022,415
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES - 2.32%
NET ASSETS APPLICABLE TO 313,028 SHARES 71,886
-----------
($0.01 PAR VALUE) OUTSTANDING - 100.00% $ 3,094,301
===========
NET ASSET VALUE - RETIREMENT INCOME FUND
A CLASS ($24,655 / 2,491 shares) $ 9.90
===========
NET ASSET VALUE - RETIREMENT INCOME FUND
INSTITUTIONAL CLASS ($3,069,647 / 310,537 shares) $ 9.88
===========
Page 7
<PAGE>
RETIREMENT INCOME FUND
STATEMENT OF NET ASSETS (Continued)
COMPONENTS OF NET ASSETS AT MAY 31, 1999:
Common stock, $0.01 par value, 200,000,000 shares
authorized to the Fund with 100,000,000 shares
allocated to Retirement Income Fund A Class,
25,000,000 shares allocated to Retirement Income
Fund B Class, 25,000,000 shares allocated to Retirement
Income Fund C Class and 50,000,000 shares allocated
to Retirement Income Fund Institutional Class $ 2,746,727
Undistributed net investment income 56,164
Accumulated net realized gain on investments 4,732
Net unrealized appreciation of investments 286,678
-----------
Total net assets $ 3,094,301
===========
- ------------------------------------------------------------
* Non-income producing security.
nts - notes sub - subordinate sr - senior
unsec - unsecured
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
RETIREMENT INCOME FUND A CLASS:
Net asset value A Class (A) $ 9.90
Sales charge (5.75% of offering price or 6.06% of the amount
invested per share)(B) 0.60
-----------
Offering price $ 10.50
===========
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current prospectus for purchases of $100,000
or more.
See accompanying notes
Page 8
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC. -
RETIREMENT INCOME FUND
STATEMENT OF OPERATIONS
For The Six Months Ended May 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Interest $43,185
Dividends 36,080 $ 79,265
------- --------
EXPENSES:
Management fees 9,705
Reports and statements to shareholders 785
Custodian fees 305
Dividend disbursing and transfer agent fees and expenses 662
Registration fees 142
Directors' fees 1,049
Professional fees 56
Accounting and administration 582
Taxes (other than taxes on income) 14
Other 660 13,960
------- --------
Less expenses absorbed or waived (2,751)
Less expenses paid indirectly (168)
--------
Total expenses 11,041
--------
NET INVESTMENT INCOME 68,224
--------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments 4,742
Net change in unrealized appreciation/depreciation of investments 158,455
--------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 163,197
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $231,421
========
</TABLE>
See accompanying notes
Page 9
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC. -
RETIREMENT INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended
5/31/99 Year ended
(Unaudited) 11/30/98
----------- ----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
<S> <C> <C>
Net investment income $ 68,224 $ 175,964
Net realized gain on investments 4,742 108,694
Net change in unrealized appreciation/depreciation of investments 158,455 (219,218)
---------- ----------
Net increase in net assets resulting from operations 231,421 65,440
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class (1,392) (263)
Institutional Class (173,404) (134,766)
Net realized gain on investments:
A Class (864) (553)
Institutional Class (107,679) (283,718)
---------- ----------
(283,339) (419,300)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class - 21,843
Institutional Class - 13,498
Net asset value of shares issued upon reinvestment
of distributions from net investment income and net
realized gain on investments:
A Class 2,256 816
Institutional Class 281,083 418,484
---------- ----------
283,339 454,641
---------- ----------
Cost of shares repurchased:
A Class - (7,629)
Institutional Class (15) (2,000)
---------- ----------
(15) (9,629)
---------- ----------
Increase in net assets derived from capital
share transactions 283,324 445,012
---------- ----------
NET INCREASE IN NET ASSETS 231,406 91,152
NET ASSETS:
Beginning of period 2,862,895 2,771,743
---------- ----------
End of period $3,094,301 $2,862,895
========== ==========
</TABLE>
See accompanying notes
Page 10
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC. -
RETIREMENT INCOME FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Retirement Income Fund A Class
------------------------------------------------
Six Months
Ended 12/02/96(2)
5/31/1999(1) Year ended to
(Unaudited) 11/30/98 11/30/97
------------ ---------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.16 $ 11.700 $ 8.500
Income from investment operations:
Net investment income (3) 0.292 0.632 0.558
Net realized and unrealized gain (loss) on investments 0.453 (0.402) 2.685
------- -------- -------
Total from investment operations 0.745 0.230 3.243
------- -------- -------
Less dividends and distributions:
Dividends from net investment income (0.620) (0.570) (0.043)
Distributions from net realized gain on investments (0.385) (1.200) none
------- -------- -------
Total dividends (1.005) (1.770) (0.043)
------- -------- -------
Net asset value, end of period $ 9.900 $ 10.160 $11.700
======= ======== =======
Total return (4) 8.29% 2.22% 38.31%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 25 $ 23 $ 9
Ratio of expenses to average net assets 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 0.94% 1.62% 2.18%
Ratio of net investment income to average net assets 4.57% 6.01% 5.48%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 4.38% 5.14% 4.05%
Portfolio turnover 39% 91% 196%
</TABLE>
<PAGE>
[RESTUB]
<TABLE>
<CAPTION>
Retirement Income Fund Institutional Class
-----------------------------------------------------------
Six Months
Ended 12/02/96(2)
5/31/1999(1) Year ended to
(Unaudited) 11/30/98 11/30/97
------------ ---------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 10.15 $ 11.690 $ 8.500
Income from investment operations:
Net investment income (3) 0.292 0.632 0.558
Net realized and unrealized gain (loss) on investments 0.443 (0.402) 2.675
------- -------- -------
Total from investment operations 0.735 0.230 3.233
------- -------- -------
Less dividends and distributions:
Dividends from net investment income (0.620) (0.570) (0.043)
Distributions from net realized gain on investments (0.385) (1.200) none
------- -------- -------
Total dividends (1.005) (1.770) (0.043)
------- -------- -------
Net asset value, end of period $ 9.880 $ 10.150 $11.690
======= ======== =======
Total return (4) 8.18% 2.22% 38.19%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 3,070 $ 2,840 $ 2,763
Ratio of expenses to average net assets 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 0.94% 1.32% 1.88%
Ratio of net investment income to average net assets 4.57% 6.01% 5.48%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 4.38% 5.44% 4.35%
Portfolio turnover 39% 91% 196%
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(3) Per share information was based on the average shaes outstanding method.
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
Page 11
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC. - RETIREMENT INCOME FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
(Unaudited)
Delaware Group Equity Funds V, Inc. is registered as a diversified open-end
investment company under the Investment Company Act of 1940, as amended.
Delaware Group Equity Funds V, Inc. currently offers two Funds: Small Cap Value
Fund and Retirement Income Fund. These financial statements and related notes
pertain to Retirement Income Fund (the "Fund"). The Fund is organized as a
Maryland Corporation and offers four classes of shares. The Retirement Income
Fund A Class carries a front-end sales charge of 5.75%. The Retirement Income
Fund B Class carries a back-end deferred sales charge. The Retirement Income
Fund C Class carries a level load deferred sales charge and Retirement Income
Fund Institutional Class has no sales charge. As of May 31, 1999, only the
Retirement Income Fund A Class and the Retirement Income Fund Institutional
Class have commenced operations.
The objective of the Fund is to seek to provide investors with high current
income and an investment that has the potential for capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation- Securities listed on an exchange are valued at the last
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. 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- The 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 Fund on
the basis of daily net assets of each class. Distribution expenses relating to a
specific class are charged directly to that class.
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.
Repurchase Agreements - The fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 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 Investments Family 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
recorded on the accrual basis. Original issue discounts are accreted to interest
income over the lives of the respective securities.
Page 12
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC. - RETIREMENT INCOME FUND NOTES TO FINANCIAL
STATEMENTS (Continued)
Certain expenses of the Series are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price execution. The amount
of these expenses was approximately $69 for the period ended May 31, 1999. In
addition, the fund may receive earnings credits when positive cash balances are
maintained, which are used to offset custody fees. These credits were $99 for
the period ended May 31, 1999. The expenses paid under the above arrangements
are included in their respective expense captions on the Statements of
Operations with the corresponding expense offset shown as "expenses paid
indirectly".
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company (DMC), the Investment Manager of the Fund, an
annual fee which is calculated daily at the rate of 0.65% on the first $500
million of average daily net assets, 0.60% on the next $500 million, 0.55% on
the next $1,500 million and 0.50% on the average daily net assets in excess of
$2,500 million. At May 31, 1999 the Fund had a liability for expenses payable to
DMC of $1,593.
DMC has elected to waive that portion if any of the management fee and reimburse
the Fund to the extent that annual operating expenses exclusive of taxes,
interest, distribution fees, brokerage commissions and extraordinary expenses,
exceed 0.75% of average daily net assets of the Fund through November 30, 1999.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent and accounting services. The Fund
pays DSC a monthly fee based on the number of shareholder accounts, shareholder
transactions and average net assets, subject to certain minimums. At May 31,
1999, the Fund had a liability for such fees and other expenses payable to DSC
of $648.
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 B and C Classes. DDLP has elected voluntarily to
waive its rights to receive 12b-1 Plan fees (including service fees) from the
commencement of operations of A Class shares of the Fund through November 30,
1999.
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 year ended May 31, 1999, the Fund made purchases of $558,792 and
sales of $914,981 of investment securities other than U.S. government securities
and temporary cash investments.
At May 31, 1999, the cost of investments for federal income tax purposes
approximates cost for book purposes. At May 31, 1999, the aggregate cost of
securities was $2,735,737.
At May 31, 1999, net unrealized appreciation $286,678 of which $364,982 related
to unrealized appreciation of securities and $78,304 related to unrealized
depreciation of securities.
Page 13
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC. - RETIREMENT INCOME FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
4. Capital Stock
Transactions in capital stock shares were as follows:
Six Months Year Ended
Ended
05/31/99 11/30/98
---------- ----------
Shares sold:
A Class - 2,120
Institutional Class - 1,251
Shares issued upon reinvestment of distributions
from net investment income and net realized gain
on investments:
A Class 246 83
Institutional Class 30,854 42,186
------ ------
31,100 45,640
------ ------
Shares repurchased:
Retirement Income Fund A Class - (700)
Retirement Income Fund Institutional Class (1) (185)
------ ------
(1) (885)
------ ------
Net increase 31,099 44,755
====== ======
5. Line of Credit
The Fund has a committed line of credit for $100,000. No amount was outstanding
at May 31, 1999, or at anytime during the fiscal period.
6. Market and Credit Risk
The Fund may invest up to 10% of its total assets in illiquid securities which
may include securities with contractual restrictions on resale, securities
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and other securities which may not be readily marketable. The relative
illiquidity of 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.
Page 15
<PAGE>
DELAWARE GROUP V FUNDS, INC.
MID-CAP VALUE FUND
STATEMENT OF NET ASSET
MAY 31, 1999
(Unaudited)
Number of Market
Shares Value
--------- --------
Common Stock - 94.60%
Aerospace - 1.88%
* Litton Industries 600 $ 38,963
--------
38,963
--------
Automobiles & Automotive Parts - 3.92%
* Avis Rent-A-Car 1,100 31,556
Borg-Wagner Automotive 900 49,894
--------
81,450
--------
Banking, Finance & Insurance - 18.52%
Compass Bancshares 1,350 39,952
Dime Bancorp 1,300 26,488
Edwards (A.G.) 1,100 36,988
Everest Re Holdings 1,100 36,163
Horace Mann Educators 1,600 41,400
North Fork Bancorporation 1,500 31,969
Peoples Heritage Financial Group 1,800 33,694
Protective Life 800 28,950
SouthTrust 800 31,175
Summit Bancorp 1,000 40,938
Unionbancal Corporation 1,000 36,969
--------
384,686
--------
Buildings & Materials - 5.45%
D.R. Horton 2,400 40,800
Masco 1,200 34,275
Southdown 600 38,025
--------
113,100
--------
Cable, Media & Publishing - 5.16%
Knight-Ridder 700 36,881
Reynolds & Reynolds Class A 1,700 37,188
* World Color Press 1,300 33,150
--------
107,219
--------
<PAGE>
MID-CAP VALUE FUND
STATEMENT OF NET ASSET(Continued)
Chemicals - 1.56%
Crompton & Knowles 1,800 $ 32,513
--------
32,513
--------
Computers & Technology - 3.54%
Computer Sciences 200 12,938
* Sterling Software 1,400 34,038
* Synopsys 600 26,587
--------
73,563
--------
Consumer Products - 1.78%
US Industries 2,100 37,012
--------
37,012
--------
Electronics & Electrical Equipment - 6.16%
Honeywell 400 37,850
Symbol Technologies 500 25,000
Teleflex 900 39,319
Thomas & Betts 600 25,687
--------
127,856
--------
Energy - 7.92%
* Cooper Cameron 700 25,331
Nicor 800 30,100
Noble Affliates 1,300 34,450
Valero Energy 1,500 30,093
Weatherford Interntional 1,350 44,550
--------
164,524
--------
Food, Beverage & Tobacco - 3.25%
Corn Products 1,200 35,400
Universal Foods 1,400 32,112
--------
67,512
--------
Healthcare & Pharmaceuticals - 1.84%
* Trigon Healthcare 1,000 38,125
--------
38,125
--------
Industrial Machinery - 4.58%
Ingersoll-Rand 800 50,950
Pentair 1,000 44,125
--------
95,075
--------
Page 4
<PAGE>
MID-CAP VALUE FUND
STATEMENT OF NET ASSET(Continued)
Leisure, Lodging, & Entertainment - 3.95%
Viad 1,200 $ 35,700
Wendy's International 1,700 46,325
----------
82,025
----------
Metals & Mining - 1.30%
USX-U.S. Steel Group 1,000 26,937
----------
26,937
----------
Paper & Forest Products - 1.38%
Westvaco 1,000 28,562
----------
28,562
----------
Real Estate - 2.04%
Equity Office Properties Trust 1,500 42,375
----------
42,375
----------
Retail - 7.88%
* BJ's Wholesale Club 1,600 41,600
Pier 1 Imports 3,900 43,144
Ross Stores 1,000 45,844
Tiffany 400 33,150
----------
163,738
----------
Textiles, Apparel, & Furniture - 4.33%
* Furniture Brands International 2,000 48,500
HON Industries 1,700 41,437
----------
89,937
----------
Transportation & Shipping - 3.28%
CNF Transportation 500 20,750
CSX 600 28,162
Southwest Airlines 600 19,237
----------
68,149
----------
Utilities - 4.88%
DQE 800 34,200
Rochester Gas & Electric 1,100 30,731
Sierra Pacific Resources 1,000 36,375
----------
101,306
----------
Total Common Stock
(cost $1,846,414) 1,964,627
----------
Page 5
<PAGE>
MID-CAP VALUE FUND
STATEMENT OF NET ASSET(Continued)
Principal
Amount
----------
Repurchase Agreements - 4.05%
With Chase Manhattan 4.78% 6/01/99 (dated 5/28/99,
collateralized by $11,000 U.S. Treasury Notes 7.50%
due 5/15/02, market value $11,610 and
$10,000 U.S. Treasury Notes 5.50% due 2/28/03,
market value $10,433 and $7,000 U.S. Treasury Notes
6.25% due 2/28/02, market value $6,996) $28,443 $28,000
With PaineWeber 4.78% 6/01/99 (dated 5/28/99,
collateralized by $6,000 U.S. Treasury Notes 5.375%
due 6/30/03, market value $5,755 and
$11,000 U.S. Treasury Notes 6.25% due 1/31/02,
market value $11,430 and $11,000 U.S. Treasury Notes
6.375% due 5/15/00, market value $11,167) 27,778 28,000
With Prudential 4.75% 6/01/99 (dated 5/28/99,
collateralized by $28,000 U.S. Treasury Notes 15.75%
due 11/15/01, market value $28,360) 27,779 28,000
----------
Total Repurchase Agreements (cost $84,000) 84,000
----------
Total Market Value of Securities - 98.65%
(cost $1,930,414) $2,048,627
Liabilities Net of Receivable and Other Assets: 1.35% 27,975
----------
Net Assets Applicable to 235,352 Shares ($0.01 Par Value)
Outstanding; Equivalent to $8.82 Per Share: 100.00% $2,076,602
==========
Net Asset Value - Mid-Cap Value Fund Institutional Class
($2,076,099 / 235,295 shares) $8.82
==========
Net Asset Value - Mid Cap-Value Fund A Class
($503 / 57 shares) $8.82
==========
Page 6
<PAGE>
MID-CAP VALUE FUND
STATEMENT OF NET ASSET(Continued)
Components of Net Assets at May 31, 1999:
Common stock, $0.01 par value, 2,000,000,000 shares
authorized to the Fund with 50,000,000
allocated to the Mid-Cap Value Fund Portfolio $ 2,000,517
Undistributed net investment income 6,462
Accumulated net realized loss on investments (48,590)
Net unrealized appreciation of investments 118,213
-----------
Total Net Assets $ 2,076,602
===========
- --------------------------------------------------------------------------------
*Non-Income producing security.
Top ten holdings representing 22% of net assets are in bold face.
Net Asset Value and Offering Price Per Share - Mid-Cap Value Fund A Class
Net asset value per share (A) $ 8.82
Sales charge (5.75% of offering price or 6.12% of the amount
invested per share) (B) 0.54
-----------
Offering price $ 9.36
===========
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $50,000 or
more.
See Accompanying Notes
Page 7
<PAGE>
DELAWARE GROUP V FUNDS, INC.
MID-CAP VALUE FUND
STATEMENT OF ASSETS & LIABILITIES
May 31, 1999
(Unaudited)
Assets:
Investments at market $ 1,964,627
Short-term at market 84,000
Cash 1,439
Dividends & interest receivable 2,467
Receivable for securities sold 30,285
Other assets 4,857
-----------
Total Assets 2,087,674
-----------
Liabilites:
Other accounts payable & accrued expense 11,072
-----------
Total Liabilities 11,072
-----------
Total Net Assets $ 2,076,602
===========
Investments at Cost 1,846,414
See accompanying notes
Page 8
<PAGE>
DELAWARE GROUP V FUNDS, INC.
MID-CAP VALUE FUND
STATEMENT OF OPERATIONS
(Unaudited)
12/29/98* to
5/31/99
------------
INVESTMENT INCOME:
Interest $ 598
Dividends 12,080
---------
12,678
---------
EXPENSES:
Management fees 6,110
Professional fees 1,481
Taxes (other than taxes on income) 850
Custodian fees 791
Accounting and administration 778
Directors' fees 500
Dividend disbursing and transfer agent fees and expenses 390
Registration fees 347
Reports and statements to shareholders 316
Other 189
---------
11,752
Less expenses waived or absorbed (4,856)
Less expenses paid indirectly (680)
---------
Total expenses 6,216
---------
Net investment income (gain) 6,462
---------
NET REALIZED AND UNREALIZED GAIN(LOSS)
ON INVESTMENTS:
Net realized loss on investments (48,590)
Net change in unrealized appreciation of investments 118,213
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS: 69,623
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 76,085
=========
- ---------------------------------
*Commencement of operations.
See accompanying notes
Page 9
<PAGE>
DELAWARE GROUP V FUNDS, INC.
MID-CAP VALUE FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
Mid-Cap Value
Mid-Cap Value Value Fund
Fund A Class Institutional Class
------------- -------------------
12/29/98 (1) 12/29/98 (1)
to to
5/31/99 5/31/99
------------- -------------------
<S> <C> <C>
Net asset value, beginning of period $ 8.500 $ 8.500
Income (loss) from investment operations:
Net investment income 0.029 0.027
Net realized and unrealized gain on investments 0.291 0.293
---------- ----------
Total from investment operations 0.320 0.320
---------- ----------
Net asset value, end of period $ 8.820 $ 8.820
========== ==========
Total return(2) 3.77% 3.77%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $1 $2,076
Ratio of expenses to average net assets 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.42% 1.42%
Ratio of net investment income to average net assets 0.78% 0.78%
Ratio of net investment income to average net assets prior
to expense limitation 0.11% 0.11%
Portfolio turnover 31% 31%
</TABLE>
- -----------------------------------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of the sales charge.
See accompanying notes
<PAGE>
DELAWARE GROUP EQUITY FUNDS V, INC.
MID-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
(UNAUDITED)
Delaware Group Equity Funds V, 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 Small Cap Value Fund, the Retirement Income Fund, the Mid-Cap
Value Fund, and the Small Cap Contrarian Fund. These financial statements and
related notes pertain to the Mid-Cap Value Equity (the "Fund"). The Fund offers
two classes of shares. The Mid-Cap Value Equity A Class carries a front-end
sales charge of 5.75%. As of May 31, 1999 only the A Class and Institutional
Class have commenced operations.
The objective of the Fund is to provide long-term capital appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation- Securities listed on an exchange are valued at the last
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. 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- The Fund intends 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 Fund on
the basis of daily net assets of each class. Distribution expenses relating to a
specific class are charged directly to that class.
Page 10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Repurchase Agreements- The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 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.
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.
Other- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. The Fund declares and pays dividends from net
investment income and capital gains, if any, annually.
Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $19 for the period ended May 31,
1999. The Fund receives earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. These credits
were $661 for the period ended May 31, 1999. The expenses paid under the above
arrangements are included in their respective expense captions on the statement
of operations with the corresponding expense offset shown as "Expenses paid
indirectly".
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company (DMC), the Investment Manager of the Fund, an
annual fee which is calculated daily at the rate of 0.75% on the first $500
million of average daily net assets, 0.70% on the next $500 million, 0.65% on
the next $1,500 million and 0.60% on average daily net assets in excess of
$2,500 million, less fees paid to the unaffiliated directors.
Page 11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
DMC has elected to waive that portion, if any, of the management fee and
reimburse the Fund to the extent that annual operating expenses, exclusive of
taxes, interest, distribution expenses, brokerage commissions and extraordinary
expenses, exceed 0.75% of average daily net assets of the Fund through May 31,
1999.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent and accounting and administration
services. The Fund pays DSC a monthly fee based on the number of shareholder
accounts, shareholder transactions and average net assets, subject to certain
minimums. At May 31, 1999, the Fund had a liability for such fees and other
expenses payable to DSC of $172.
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 assets of the A Class and 1.00% of the average
daily net assets of the B and C Classes. No distribution expenses are paid by
the Institutional Class. DDLP has elected voluntarily to waive such fees through
June 30, 1999.
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 period ended May 31, 1999, the Fund made purchases of $2,411,328 and
sales of $564,913 of investment securities other than U.S. government securities
and temporary cash investments.
At May 31, 1999 the aggregate cost of securities for federal income tax purposes
was $1,930,414.
At May 31, 1999, the net unrealized appreciation for federal income tax purposes
aggregated was $118,212 of which $175,671 related to unrealized appreciation of
securities and $(57,459) related to unrealized depreciation of securities.
4. Capital Stock
Transactions in capital stock shares were as follows:
12/29/98*
to
5/31/99
---------
Shares sold:
A Class 57
Institutional Class 235,295
-------
Net increase 235,352
=======
* Date of commencement of operations.
Page 12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
5. Credit and Market Risk
The Fund may invest up to 5% of its total net assets in foreign securities.
These foreign markets may be more volatile than U.S. markets. The Fund may
invest up to 15% of its total net 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.
Page 13
