<PAGE>
For Total Return
Decatur Equity Income Fund
Growth and Income Fund
(photo of illustration from
For Total Return Brochure)
service and guidance
professional management
goals
1999
Semi-Annual
Report
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
<PAGE>
for total
return
2 June 15, 1999
Dear Shareholder:
The U.S. stock market moved higher during the first half of fiscal 1999, with
major market indexes setting new records. The Dow Jones Industrial Average
closed above 10,000 for the first time in late March. Performance through March
was driven primarily by a select group of large capitalization growth stocks
that have dominated stock performance since the second half of 1998. In early
May, the Dow crossed 11,000. This latest milestone was driven, in part, by
renewed investor demand for value stocks and for economically sensitive (or
cyclical) stocks.
As we began fiscal 1999 last December, concerns about a U.S. recession and
continuing financial crises in emerging markets caused investors to focus almost
exclusively on stocks of a few very large, highly successful U.S. companies.
These companies were chosen for their perceived ability to sustain earnings and
revenue growth in a slower economic environment, with little regard for the
price being paid. Delaware's large-cap value strategy had difficulty achieving
positive results in this environment.
Perceptions changed in early April. Reports of strong first quarter U.S.
economic growth and better than expected corporate earnings restored investor
confidence in the economy, dispelling the notion that just a few dozen large-cap
companies would be able to provide earnings and revenue growth. Investors
shifted from high priced growth stocks to economically sensitive stocks--energy,
aluminum, manufacturing,
We believe the shift in investor sentiment during April and May could be the
beginning of a favorable market environment for your Funds.
CUMULATIVE AND AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
For Periods Ended May 31, 1999
At Net Asset Value
Five Year
Six Months Average Annual Return
- --------------------------------------------------------------------------------
Decatur Equity Income Fund A Class +3.82% +18.41%
Growth and Income Fund A Class +4.28% +19.45%
- --------------------------------------------------------------------------------
Lipper Equity Income Fund Average +9.38% (680 funds) +18.45% (214 funds)
- --------------------------------------------------------------------------------
S&P 500/BARRA Value Index +13.60% +22.03%
Standard & Poor's 500 Index +12.60% +25.86%
- --------------------------------------------------------------------------------
All performance shown above is at net asset value without effect of sales
charges and assumes reinvestment of dividends and capital gains. Complete Fund
performance information for all classes can be found on page 12. The Standard &
Poor's 500 is an unmanaged measure of large-capitalization U.S. stocks. The
unmanaged S&P 500/BARRA Value Index measures the performance of S&P 500 stocks
that meet BARRA International's definition of value stocks. Past performance
does not guarantee future results.
<PAGE>
for total
return
3
chemical, and paper companies. They also bought value stocks that were selling
at deep discounts relative to company earnings.
Delaware's large capitalization value-oriented investment strategy, which is
used to manage both Decatur Equity Income Fund and Delaware Growth and Income
Fund, thrived during the months of April and May. We believe this shift in
investor sentiment could be the beginning of a favorable market environment for
your Funds. However, because the shift came so late in our reporting period, our
strong recent performance was not able to offset weaker performance early in the
period.
For the six months ended May 31, 1999, Decatur Equity Income Fund had a total
return of 3.82%, while Growth and Income Fund returned 4.28% (for A Class shares
at net asset value with distributions reinvested). The Funds' returns fell short
of the 9.40% average return of their peers in the Lipper Equity Income Average.
Some of our competitors define value more broadly than we do, sometimes
including stocks with growth characteristics. Our strict buy and sell guidelines
keep our value approach consistent even at times when our style is out of favor.
The Standard & Poor's 500 Index, which includes a high concentration of
large-company stocks, returned 12.60% for the six-month period. Much of this
return can be attributed to strong gains in the Index's largest 20 stocks early
in the period. Many of these same stocks fizzled in April as value stocks--those
with low price-to-earnings ratios--staged a bold rally, as shown in the chart
below.
We believe April marked a turning point for value-based investing.
Historically, our value style has experienced a multi-year period of
outperformance following periods when select big cap growth stocks have
dominated market performance--like the
MARKET CYCLES CAN CHANGE QUICKLY
- --------------------------------------------------------------------------------
March 1999 April 1999 May 1999
S&P/Barra Growth Index Total Return 4.84% -0.19% -2.92%
S&P/Barra Value Index Total Return 3.03% 8.62% -1.77%
Although there is no guarantee that any fund will perform like any index, the
style of management used for your Funds is a value style. Companies in the
unmanaged S&P 500 Index are split into two groups based on price-to-earnings
ratios to create unmanaged growth and value indexes. The S&P/BARRA Growth Index
consists of companies with higher P/Es, while the S&P BARRA/Value Index consists
of companies with lower P/Es.
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4
one we have just experienced. This was true after the bull markets of the
mid-1970s, the early 1980s and the early 1990s. We believe the events of this
past spring suggest the beginning of another extended period that favors value
style investing.
On the pages that follow, John B. Fields, the Funds' lead portfolio manager,
reviews changing investor perceptions that have led to the recent shift in U.S.
equity performance, as well as changes to each portfolio's positioning since our
last report. He also shares his outlook for the portfolios' yield-oriented
strategy in the months and years ahead.
We believe Decatur Equity Income Fund and Delaware Growth and Income Fund are
sound core investments in a long-term financial plan. We applaud you for
sticking with your investment during such a challenging period, and we look
forward to reporting our full results for fiscal 1999 next winter.
Sincerely,
/s/ Wayne A. Stork
- -------------------------
Wayne A. Stork
Chairman,
Delaware Investments Family of Funds
/s/ David K. Downes
- --------------------------
David K. Downes
President and Chief Executive Officer,
Delaware Investments Family of Funds
<TABLE>
<CAPTION>
TOP PORTFOLIO HOLDINGS
DECATUR EQUITY INCOME FUND & DELAWARE GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------------------------------------------
May 31, 1999
As a Percentage of Assets*
Dividend Decatur Equity Growth and
Company Yield Industry Income Fund Income Fund
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BankAmerica 2.8% Financials 3.64% 3.49%
McGraw-Hill Cos. 1.7% Publishing 3.14% 3.06%
American General Corp. 2.2% Insurance 2.90% 2.78%
GTE 3.0% Telecommunications 2.74% 2.73%
Pitney Bowes Corp. 1.6% Office Products 2.75% 2.69%
International Paper 2.0% Paper/Wood Products 2.65% 2.59%
Ameritech 1.9% Telecommunications 2.74% 2.57%
Bestfoods 2.0% Processed Food 2.45% 2.48%
Royal Dutch Petroleum 2.8% Energy 2.39% 2.42%
AT&T 1.6% Telecommunications - 2.35%
- --------------------------------------------------------------------------------------------------------------------
S&P 500 Index 1.23%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Bloomberg Business News
* Portfolio percentages are shown as a percentage of net assets for Delaware
Growth and Income Fund and as a percentage of net equity assets for Decatur
Equity Income Fund. Holdings are listed in order of size as a percentage of
net assets within Growth and Income Fund. Holdings are subject to change.
SEC yields for A, B, C and Institutional Class shares were 1.99%, 1.32%, 1.31%
and 2.34%, respectively for Decatur Equity Income Fund and 0.91%, 0.25%, 0.25%
and 1.27%, respectively for Delaware Growth and Income Fund as of May 31,
1999. See page 12 for each Fund's complete performance information.
<PAGE>
for total
return
5
Portfolio Manager's Review
By John B. Fields
Vice President, Senior Portfolio Manager
June 15, 1999
The New Quest for Value
Since last year's global outbreak of financial and economic weakness, investors
thought that few U.S. companies would be able to provide strong earnings growth.
Fearful of dire economic conditions in the U.S., investors seemed willing to pay
any price for select companies with strong earnings growth. This buying frenzy
focused on stocks of the largest U.S. companies. Investors believed these
companies were the most likely to maintain earnings growth if worldwide economic
conditions became more difficult.
Such a narrow focus meant that other stocks, many with comparable earnings
growth, were ignored, creating a substantial disparity in stock prices. Price to
earnings ratios, or P/Es are an indicator of how much investors are paying for a
company's anticipated earning power--generally the higher the P/E, the more they
are paying; the lower the P/E, the less they are paying.
The difference between the average P/E of the largest 50 stocks in the S&P
500 compared to the average P/E of the remaining 450 stocks is larger than it
has ever been in the past four decades. This is evidence that the top 50 stocks
were richly priced relative to their future earnings potential, while the
remaining stocks in the S&P 500 were relatively inexpensive compared to
earnings. We believe fears of economic recession in late 1998 and early 1999
kept investors from buying the stocks with lower price to earnings ratios.
Robust first quarter U.S. economic growth and stronger than expected
corporate earnings in April calmed those fears. Almost instantly, investors
began to reallocate their money to areas of the market where stocks with strong
earnings growth potential could be bought at much lower prices. The large-cap
growth leaders, including big technology and internet-related companies, stalled
as a result.
(Portfolio Manager's Review continues on page 9).
In April, investors began to reallocate their money to areas of the market where
stocks with strong earnings growth potential could be bought at much lower
prices.
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6
[GRAPHIC OMITTED: WORK CHART OF STANDING THE TEST OF TIME
DECATUR EQUITY INCOME FUND'S LIFETIME PERFORMANCE]
STANDING THE TEST OF TIME
DECATUR EQUITY INCOME FUND'S LIFETIME PERFORMANCE
- --------------------------------------------------------------------------------
Growth of a $100,000 Investment Since March 18, 1957
<TABLE>
<CAPTION>
Decatur Equity Standard & Poor's Consumer Price
Income Fund A Class 500 Index Index - (Inflation)
------------------- ------------------ -------------------
Period End Market Value Value Value
- ----------- ------------ ----- -----
<S> <C> <C> <C>
3/18/1957 $ 96,288 $ 100,000 $100,000 Decatur Income Fund first offered on March 18, 1957
5/31/1958 95,875 104,914 103,999
5/31/1959 131,150 144,440 104,322
5/31/1960 127,941 142,046 106,257 Dow Jones Industrial Average at 597
5/31/1961 156,723 174,833 107,224 Berlin Wall Built
5/31/1962 150,265 161,394 108,663
5/31/1963 179,931 198,251 109,623 Kennedy Assassinated
5/31/1964 200,040 232,021 111,306
5/31/1965 235,494 262,922 113,107
5/31/1966 251,887 264,107 116,229
5/31/1967 282,733 282,785 119,350 Viet Nam War Escalates
5/31/1968 362,467 323,321 124,154
5/31/1969 399,857 349,358 130,878 First Man on the Moon
5/31/1970 321,722 267,786 138,923
5/31/1971 431,334 361,051 145,047 Wage and Price Controls
5/31/1972 476,163 409,196 149,729
5/31/1973 420,390 403,333 157,895
5/31/1974 393,009 347,050 174,825 Steepest Market Decline in Four Decades
5/31/1975 456,294 380,165 191,273
5/31/1976 579,496 434,640 203,161
5/31/1977 682,088 433,704 216,851
5/31/1978 706,492 461,207 232,098
5/31/1979 761,062 495,320 257,075
5/31/1980 944,176 587,212 294,056 Dow at 993 Interest Rates at All-Time Highs
5/31/1981 1,150,285 735,076 322,993
5/31/1982 1,148,659 656,026 344,727 Start of Great Bull Market of the 80s
5/31/1983 1,663,355 1,002,496 356,733
5/31/1984 1,681,929 971,989 371,862
5/31/1985 2,239,018 1,280,544 385,792
5/31/1986 2,847,075 1,737,101 391,794 Dow Nears 2000
5/31/1987 3,536,326 2,104,643 406,685 Sharpest One-Day Decline in Market History
5/31/1988 3,420,052 1,968,101 422,525
5/31/1989 4,306,348 2,495,560 445,180
5/31/1990 4,476,059 2,910,169 464,598 Persian Gulf Crisis Worldwide Recession
5/31/1991 4,588,197 3,253,322 487,612 Break up of Soviet Union
5/31/1992 4,990,121 3,573,849 502,355
5/31/1993 5,703,336 3,988,782 518,537
5/31/1994 6,047,376 4,158,683 530,404 Fed Begins Raising Short-Term Interest Rates
5/31/1995 6,979,452 4,998,285 547,305
5/31/1996 8,621,871 6,419,671 562,717 Dow Reaches 6500
5/31/1997 10,858,670 8,307,984 575,713
5/31/1998 13,705,517 11,047,126 584,347
5/31/1999 14,652,580 13,141,480 601,980 Dow Surpasses 11,000
</TABLE>
Average Annual Returns Since March 18, 1957 to May 31, 1999
Decatur Equity Income Fund A Class 12.38%
S&P 500 Index 12.25%
Consumer Price Index (Inflation) 4.35%
Includes reinvestment of dividends and capital gains. See page 12 for complete
Fund performance.
<PAGE>
for total
return
7
Each dollar invested in Decatur Income Fund at inception 42 years ago would have
grown to more than $138 as of May 31, 1999, with dividends and capital gains
reinvested.
Decatur Equity Income Fund's return and share value 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 of other classes of Decatur Equity Income Fund differ from the above
due to differing charges and expenses. See page 12 for complete performance
information.
<PAGE>
for total
return
8
Delaware's Value Approach:
Dividend Yield Dictates Buy/Sell Decisions
When to Buy
We believe that a stock's yield relative to the average dividend yield of the
unmanaged Standard & Poor's 500 Index can be an important indicator of a stock's
future value. By focusing on stocks with above-average dividend yields, we try
to uncover strong, well-managed companies whose underlying growth potential may
not be fairly reflected in the stock's price. Dividends can contribute to total
return while we wait for capital appreciation.
We typically select stocks that fall within the "high" yield category, as
shown in the chart below. We divide the universe of dividend-paying stocks into
five categories ranked by yield and select stocks from the group with the second
highest dividend yields. This category has historically provided the highest
total return over the long term.
LONG-TERM RETURNS OF DIVIDEND PAYING STOCKS 1929 TO 1998
Lowest Low Mid Yields High Highest
- -------------------------------------------------------------------------------
Income 2.9% 4.1% 4.9% 5.9% 7.7%
- -------------------------------------------------------------------------------
Capital appreciation 7.4% 5.9% 7.1% 7.4% 3.5%
- -------------------------------------------------------------------------------
10.3% 11.0% 12.0% 13.3% 11.2%
- -------------------------------------------------------------------------------
Source: Delaware Investments
When to Sell
When a stock's yield falls below the average yield of the S&P 500, we typically
sell it. We believe a lower yield indicates that the stock is fairly priced and
future appreciation potential is no longer attractive relative to possible
risks.
Though a low yield is usually our basis for selling, we may sell a stock with
an above-average yield because of negative changes affecting the individual
company, which might potentially reduce its future growth.
<PAGE>
for total
return
9
Portfolio Positioning
At the end of the 1998 fiscal year, our management team conducted a complete
review of all holdings in the Decatur Equity Income Fund and the Delaware Growth
and Income Fund portfolios. This is standard procedure at times when our
investment style is out of favor. We wanted to position the portfolios for
capital appreciation potential should our value-oriented strategy regain appeal.
Following our evalution, we:
o Consolidated our holdings. We modestly reduced the number of stocks in each
portfolio. We identified our "best ideas" and increased those allocations so
that if investor sentiment shifted in our favor, we would be rewarded. For
example, we sold PPG Industries, a chemical company, and added to our holdings
in Aluminum Company of America (ALCOA).
o Upgraded quality. We set out last winter to further upgrade quality--i.e.,
quality of company management--in every industry group represented in the
portfolios. We benefited from this upgrade in April when our holdings in
economically sensitive (cyclical) sectors--including energy, paper, chemicals
and metals--performed well compared to other stocks in these sectors.
o Reviewed holdings within specific industries. Within our basic industry
allocation, we not only sold PPG and increased our position in ALCOA, but we
further upgraded our holdings with a new position in Weyerhaeuser Co., a
forest products company under new management (See page 11). In the banking
industry, we sold First Union, whose recent acquisitions have missed earnings
targets, and increased positions in Wells Fargo and BankAmerica. BankAmerica
is now the largest holding in both portfolios.
<TABLE>
<CAPTION>
Sector allocation
- ---------------------------------------------------------------------------------------------
As of May 31, 1999
Decatur Equity Income Fund* Growth and Income Fund
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Banking, Finance & Insurance 22.0% 21.1%
Energy 14.1% 13.7%
Telecommunications 9.4% 9.7%
Food & Tobacco 7.5% 8.1%
Healthcare & Pharmaceuticals 7.3% 6.9%
Automobiles & Auto Parts 4.9% 4.8%
Paper & Forest Products 4.7% 4.6%
Computers & Technology 4.2% 4.1%
Electronic & Electrical Equipment 3.9% 3.8%
Chemicals 3.9% 3.9%
Transportation & Shipping 3.4% 3.2%
- ---------------------------------------------------------------------------------------------
High-Yield Bonds 14.3% --
- ---------------------------------------------------------------------------------------------
</TABLE>
* Please note that the sector percentages for Decatur Equity Income Fund
represent the percentage of the equity portion of the Fund that is invested in
that sector. The high-yield bond segment is reported separately.
<PAGE>
for total
return
10
As we sought to improve our positioning, the portfolios became more economically
sensitive with a larger percentage of holdings in cyclical companies. These
stocks generally had low expectations among analysts, but have continued to
deliver big earnings surprises. We expect this to continue given our outlook for
ongoing expansion of the world's economies. We maintain this view in spite of
the possibility that the Federal Reserve Board might nudge interest rates
slightly higher. We don't believe modestly higher interest rates will
single-handedly dampen future economic growth.
High-Yield Bonds
High-yield bonds lagged stocks during the six-month period. The Merrill Lynch
High-Yield Bond Index returned 1.98%. Decatur Equity Income Fund invests in
high-yield bonds in an attempt to generate a high level of current income to
supplement the income from our stock holdings. High-yield bonds can also give us
a defensive edge during periods of increased price volatility in the stock
market.
As of May 31, Decatur Equity Income Fund held 14% of net assets in high-yield
bonds. We continue to focus on bonds rated B and BB--the highest quality tiers
of the high yield market. These bonds, commonly known as junk bonds, are issued
by companies whose ability to pay interest and repay principal is not as strong
as companies with investment-grade ratings.
Outlook
During certain periods in each of the past three decades, capital appreciation
from a select group of stocks drove U.S. stock returns to unusually high levels.
We saw this in the mid-1970s, the early 1980s and twice in the 1990s.
The most recent period of narrow market leadership by large-cap growth stocks
began in the second half of 1998 amid fears of economic recession. We believe
renewed investor optimism this past spring sparked a new appetite for "growth at
reasonable prices." This could trigger a new phase in the market cycle--one that
might have favorable implications for Delaware's large-cap
value strategy.
Though we could experience more price volatility going forward, we believe
that April marked a turning point for high yielding value stocks. Many companies
that were out of favor have gotten their cost structures under control,
increasing the likelihood that they can deliver strong earnings and dividend
growth against the backdrop of an expanding world economy.
Cyclical companies had
low expectations but have
continued to deliver big
earnings surprises.
<PAGE>
for total
return
11
Weyerhaeuser Co. Refines Forest Operations
Earlier in this report, we told you about our efforts to further upgrade
portfolio quality with well-managed companies. Weyerhaeuser Co., the world's
largest private owner of softwood timber and the top forest products exporter in
the U.S., fit that bill following a management change last year.
For the first time in the company's nearly 100-year history, Weyerhaeuser
hired an outsider, Steven Rogel, to serve as chief executive officer. Under his
leadership, the company has been cutting costs to improve its operating margins.
This past spring, Weyerhaeuser began to deliver surprisingly good earnings after
years of repeated disappointments.
We bought Weyerhaeuser in late 1998 when its dividend yield was around 3%,
nearly three times the average dividend yield of the S&P 500 Index. Its price
per share was $49. We added to our position in early 1999 as we consolidated
portfolio holdings to focus more on the stocks we thought were most promising.
By May 31, Weyerhaeuser's share price had increased to $62 per share. Its
dividend yield fell modestly to 2.6%, still well above the average yield of the
S&P 500.
We believe Weyerhaeuser will continue to deliver strong earnings given both
new cost controls established by company management and our expectations for
continued worldwide economic growth.
<PAGE>
Weyerhaeuser Co. Stock Price and Yield
Relative to the S&P Index
S&P Index = 1.0x
<TABLE>
<CAPTION>
Stock Price Relative Yield
Date High Low
- ---- ---- ---
<S> <C> <C> <C> <C>
May-94 $ 43.500 $ 40.750 May-94 1.01%
Jun-94 $ 42.375 $ 40.000 Jun-94 0.99%
Jul-94 $ 42.125 $ 40.750 Jul-94 1.06%
Aug-94 $ 44.000 $ 40.000 Aug-94 1.06%
Sep-94 $ 46.125 $ 43.875 Sep-94 1.07%
Oct-94 $ 40.375 $ 38.625 Oct-94 1.23%
Nov-94 $ 37.625 $ 35.750 Nov-94 1.27%
Dec-94 $ 39.125 $ 37.500 Dec-94 1.26%
Jan-95 $ 40.125 $ 38.500 Jan-95 1.33%
Feb-95 $ 42.500 $ 40.625 Feb-95 1.25%
Mar-95 $ 40.000 $ 37.500 Mar-95 1.46%
Apr-95 $ 42.375 $ 39.875 Apr-95 1.39%
May-95 $ 44.250 $ 42.500 May-95 1.36%
Jun-95 $ 47.375 $ 45.250 Jun-95 1.3%
Jul-95 $ 48.000 $ 46.500 Jul-95 1.34%
Aug-95 $ 47.500 $ 45.000 Aug-95 1.36%
Sep-95 $ 46.500 $ 45.125 Sep-95 1.44%
Oct-95 $ 46.375 $ 44.250 Oct-95 1.41%
Nov-95 $ 44 $ 42.375 Nov-95 1.51%
Dec-95 $ 43.375 $ 41.875 Dec-95 1.55%
Jan-96 $ 43.25 $ 41 Jan-96 1.58%
Feb-96 $ 45.25 $ 42.75 Feb-96 1.58%
Mar-96 $ 47.375 $ 46.125 Mar-96 1.5%
Apr-96 $ 48.875 $ 47.5 Apr-96 1.45%
May-96 $ 48.25 $ 45.375 May-96 1.57%
Jun-96 $ 46.75 $ 42.5 Jun-96 1.67%
Jul-96 $ 43.875 $ 41.5 Jul-96 1.58%
Aug-96 $ 47.625 $ 44.125 Aug-96 1.54%
Sep-96 $ 47 $ 45.375 Sep-96 1.58%
Oct-96 $ 46.875 $ 45.125 Oct-96 1.6%
Nov-96 $ 47.125 $ 45.5 Nov-96 1.71%
Dec-96 $ 47.375 $ 45.875 Dec-96 1.67%
Jan-97 $ 47.375 $ 44.875 Jan-97 1.79%
Feb-97 $ 47.75 $ 45.75 Feb-97 1.77%
Mar-97 $ 49.125 $ 45.5 Mar-97 1.76%
Apr-97 $ 46.75 $ 44.125 Apr-97 1.74%
May-97 $ 50.625 $ 49.375 May-97 1.74%
Jun-97 $ 54.625 $ 52.25 Jun-97 1.72%
Jul-97 $61.1875 $ 58.375 Jul-97 1.57%
Aug-97 $60.8125 $ 57.75 Aug-97 1.56%
Sep-97 $ 61.125 $58.9375 Sep-97 1.57%
Oct-97 $ 52.375 $46.0625 Oct-97 1.89%
Nov-97 $53.3125 $ 51.5 Nov-97 1.79%
Dec-97 $48.6875 $47.3125 Dec-97 1.93%
Jan-98 $ 51.25 $47.4375 Jan-98 1.95%
Feb-98 $50.6875 $ 49.125 Feb-98 2.08%
Mar-98 $57.9375 $55.8125 Mar-98 1.91%
Apr-98 $61.4375 $57.5625 Apr-98 1.88%
May-98 $ 55.125 $ 50.75 May-98 2.09%
Jun-98 $47.1875 $ 45.125 Jun-98 2.37%
Jul-98 $ 44.75 $41.3125 Jul-98 2.61%
Aug-98 $39.9375 $ 37.125 Aug-98 2.69%
Sep-98 $43.8125 $ 39 Sep-98 2.32%
Oct-98 $ 47.75 $43.0625 Oct-98 2.31%
Nov-98 $51.6875 $ 47.375 Nov-98 2.37% The Funds Buy Weyerhaeuser
Dec-98 $51.6875 $49.3125 Dec-98 2.43%
Jan-99 $55.5625 $ 51.625 Jan-99 2.31%
Feb-99 $56.9375 $ 53.75 Feb-99 2.17%
Mar-99 $ 60.75 $ 56 Mar-99 2.24%
Apr-99 $ 70 $ 66.125 Apr-99 1.93%
May-99 $ 71 $61.0625 May-99 2.05%
</TABLE>
<PAGE>
for total
return
12
Performance Summary
<TABLE>
<CAPTION>
Decatur Equity Income Fund
- --------------------------------------------------------------------------------------------------------------
Cumulative and Average Annual Returns Through May 31, 1999
Lifetime Ten Years Five Years One Year Six Months
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A (Est. 3/18/57)
Excluding Sales Charge 12.54% 12.58% 18.41% 3.28% 3.82%
Including Sales Charge 12.38% 11.91% 17.02% -2.66%
- --------------------------------------------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge 17.65% 2.47% 3.40%
Including Sales Charge 17.42% -1.79%
- --------------------------------------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge 17.40% 2.51% 3.44%
Including Sales Charge 17.40% -1.66%
Delaware Growth and Income Fund
- --------------------------------------------------------------------------------------------------------------
Cumulative and Average Annual Returns Through May 31, 1999
Lifetime Ten Years Five Years One Year Six Months
- --------------------------------------------------------------------------------------------------------------
Class A (Est. 8/27/86)
Excluding Sales Charge 14.19% 13.84% 19.45% 3.84% 4.28%
Including Sales Charge 13.66% 13.16% 18.04% -2.14%
- --------------------------------------------------------------------------------------------------------------
Class B (Est. 9/6/94)
Excluding Sales Charge 18.93% 3.08% 3.90%
Including Sales Charge 18.71% -1.44%
- --------------------------------------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge 18.19% 3.15% 3.92%
Including Sales Charge 18.19% 2.24%
</TABLE>
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. B and C Class
results excluding sales charge assume either that contingent sales charges did
not apply or the investment was not redeemed. Past performance is not a
guarantee of future results.
Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee (for
Delaware Growth and Income Fund since inception; for Decatur Equity 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
deferred sales charge of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
<TABLE>
<CAPTION>
Average Annual Institutional Class Returns Through May 31, 1999
Lifetime 10 Years Five Years One Year Six Months
<S> <C> <C> <C> <C> <C>
Decatur Equity Income Fund (Est. 1/31/94) 12.57% 12.67% 18.61% 3.50% 3.91%
Delaware Growth and Income Fund (Est. 7/26/93) 14.34% 14.03% 19.81% 4.12% 4.43%
</TABLE>
Institutional Class shares are available without sales charge or asset-based
distribution charges only to certain eligible institutional accounts.
Institutional Class performance prior to 1/13/94 for Decatur Equity Income Fund
and 7/26/93 for Delaware Growth and Income Fund is based on Class A performance
adjusted to eliminate the sales charges. Delaware Growth and Income Fund's
Institutional Class performance prior to 7/26/93 has not been adjusted to
eliminate the impact of the 12b-1 fees that were in effect.
<PAGE>
for total return 13
Financial Statements
Delaware Group Equity Funds II, Inc. -
Decatur Equity Income Fund
Statement of Net Assets
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
-----------------------
COMMON STOCK - 83.61%
Aerospace & Defense - 2.05%
General Dynamics ................................... 321,900 $ 21,164,925
Lockheed Martin .................................... 655,900 26,522,956
------------
47,687,881
------------
Automobiles & Auto Parts - 4.13%
Dana ............................................... 105,400 5,441,275
Delphi Automotive Systems .......................... 247,137 4,850,071
Ford Motor ......................................... 819,400 46,757,012
General Motors ..................................... 563,200 38,860,800
------------
95,909,158
------------
Banking, Finance & Insurance - 18.39
American General ................................... 779,300 56,304,425
Aon ................................................ 900,975 38,741,925
BankAmerica ........................................ 1,091,382 70,598,773
Bank One ........................................... 699,560 39,568,862
Block (H&R) ........................................ 131,600 6,341,475
Chase Manhattan .................................... 436,500 31,646,250
Freddie Mac ........................................ 648,900 44,125,200
Mellon Bank ........................................ 1,194,200 42,618,012
Summit Bancorp ..................................... 588,700 24,099,906
U.S. Bancorp ....................................... 1,359,700 44,190,250
Wells Fargo ........................................ 721,800 28,872,000
------------
427,107,078
------------
Cable, Media & Publishing - 2.63%
McGraw-Hill ........................................ 1,176,200 61,015,375
------------
61,015,375
------------
Chemicals - 3.22%
DuPont (E.I.) deNemours ............................ 553,300 36,206,569
Imperial Chemical ADR .............................. 879,600 38,647,425
------------
74,853,994
------------
Computers & Technology - 3.53%
Pitney Bowes ....................................... 836,800 53,346,000
Xerox .............................................. 510,100 28,661,244
------------
82,007,244
------------
Consumer Products - 2.19%
Avon Products ...................................... 168,400 8,325,275
Kimberly-Clark ..................................... 724,100 42,495,619
------------
50,820,894
------------
Electronics & Electrical Equipment - 3.27%
Emerson Electric ................................... 500,600 31,975,825
Rockwell International ............................. 434,000 23,951,375
Thomas & Betts ..................................... 466,700 19,980,594
------------
75,907,794
------------
<PAGE>
- --------------------------------------------------------------------------------
Number Market
of Shares Value
-----------------------
COMMON STOCK (Continued)
Energy - 11.78%
BP Amoco ADR ....................................... 363,533 $ 38,943,472
Chevron ............................................ 436,200 40,430,287
Duke Energy ........................................ 137,000 8,262,812
Enron .............................................. 355,500 25,373,812
Mobil .............................................. 420,500 42,575,625
Royal Dutch Petroleum .............................. 820,100 46,386,906
Sonat .............................................. 1,158,800 41,064,975
Unocal ............................................. 766,400 30,464,400
------------
273,502,289
------------
Food, Beverage & Tobacco - 6.30%
Bestfoods .......................................... 950,900 47,545,000
Heinz (H.J.) ....................................... 660,750 31,922,484
PepsiCo ............................................ 739,900 26,497,669
Philip Morris ...................................... 338,600 13,057,262
RJR Nabisco Holdings ............................... 879,800 27,218,812
------------
146,241,227
------------
Healthcare & Pharmaceuticals - 6.11%
AstraZeneca ADR .................................... 813,400 32,027,625
Baxter International ............................... 677,000 43,708,812
Glaxo Wellcome ADR ................................. 458,300 25,779,375
Pharmacia & Upjohn ................................. 730,000 40,469,375
------------
141,985,187
------------
Industrial Machinery - 1.58%
Deere & Co. ........................................ 962,100 36,619,931
------------
36,619,931
------------
Metals & Mining - 2.35%
Alcan Aluminum ..................................... 535,800 15,002,400
Alcoa .............................................. 721,800 39,699,000
------------
54,701,400
------------
Paper & Forest Products - 3.95%
International Paper ................................ 1,027,819 51,390,934
Weyerhaeuser ....................................... 648,400 40,241,325
------------
91,632,259
------------
Retail - 1.42%
May Department Stores .............................. 762,600 33,030,113
------------
33,030,113
------------
Telecommunications - 7.89%
AT&T ............................................... 664,900 36,901,950
ALLTEL ............................................. 240,700 17,255,181
Ameritech .......................................... 808,300 53,196,244
Cable & Wireless ADR ............................... 594,200 22,728,150
GTE ................................................ 843,100 53,167,994
------------
183,249,519
------------
<PAGE>
14 for total return
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
----------------------------
COMMON STOCK (Continued)
Transportation & Shipping - 2.82%
British Airways ADR .............................. 527,600 $ 38,251,000
Norfolk Southern ................................. 831,900 27,244,725
--------------
65,495,725
--------------
Total Common Stock
(cost $1,696,272,568) ......................... 1,941,767,068
--------------
Preferred Stock - 0.26%
Granite Broadcasting 12.75% 04/01/09 ............. 5,885 5,973,542
TCR Holdings Class B ............................. 3,511 211
TCR Holdings Class C ............................. 1,931 108
TCR Holdings Class D ............................. 5,092 270
TCR Holdings Class E ............................. 10,534 664
Total Preferred Stock
(cost $5,222,948) ............................. 5,974,795
--------------
Warrants - 0.00%
American Banknote Warrant ........................ 500 5,000
--------------
Total Warrants (cost $5,038) ..................... 5,000
--------------
Principal
Amount
-----------
Corporate Bonds - 14.33%
Aerospace & Defense - 0.12%
DERLAN Manufacturing sr nts
10.00% 01/15/07 ............................... $2,800,000 2,744,000
--------------
2,744,000
--------------
Automobile & Auto Parts - 0.38%
American Axle & Manufacturing 144A sr sub nts
9.75% 03/01/09 ................................ 5,500,000 5,568,750
Federal Mogul 144A nts 7.50% 01/15/09 ............ 400,000 377,500
HDA Parts System 144A sr sub nts
12.00% 08/01/05 ............................... 3,000,000 2,910,000
--------------
8,856,250
--------------
Banking, Finance & Insurance - 0.25%
Olympic Financial units 11.50% 03/15/07 .......... 650,000 526,500
--------------
526,500
--------------
Building & Materials - 0.45%
Advanced Glassfiber Yarn 144A sr sub nts
9.875% 01/15/09 ............................... 5,000,000 4,693,750
Collins & Aikman Floorcovers sr sub nts
10.00% 01/15/07 ............................... 300,000 314,250
Maxim Group sr nts 9.25% 10/15/07 ................ 2,500,000 2,503,125
WESCO Distribution 9.125% 06/01/08 ............... 3,000,000 3,033,750
--------------
10,544,875
--------------
Cable, Media & Publishing - 0.75%
Adelphia Comm 144A sr nts 7.75% 01/15/09 ......... 700,000 664,125
American Lawyer Media sr nts
9.75% 12/15/07 ................................ 575,000 594,406
American Media 144A sr sub nts
10.25% 05/01/09 ............................... 700,000 702,625
Charter Communications sr nts 144A
8.625% 04/01/09 ............................... 5,000,000 4,925,000
Echostar DBS 144A sr nts 9.25% 01/02/06 .......... 5,000,000 5,025,000
Hollinger International Publishing sr sub nts
9.25% 03/15/07 ................................ 2,000,000 2,082,500
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
-------------------------
Corporate Bonds (Continued)
Cable, Media & Publishing (Continued)
Muzac sr sub nts 9.875% 03/15/09 ................. $ 400,000 $ 401,500
Telewest Communications sr debs
9.625% 10/01/06 ............................... 3,000,000 3,075,000
-----------
17,470,156
-----------
Chemicals - 0.62%
BPC Holding sr nts 12.50% 06/15/06 ............... 2,000,000 2,112,500
Envirodyne sr nts 10.25% 12/01/01 ................ 5,000,000 3,743,750
General Chemical 144A sr sub nts
10.625% 05/01/09 .............................. 700,000 714,000
Huntsman sr sub nts 9.50% 07/01/07 ............... 2,000,000 2,025,000
Octel Development 10.00% 05/01/06 ................ 2,000,000 2,090,000
Sterling Chemicals sr sub nts
11.75% 08/15/06 ............................... 1,950,000 1,852,500
Sterling Chemicals sr sub nts
11.25% 04/01/07 ............................... 2,000,000 1,880,000
-----------
14,417,750
Computers & Technology - 0.20% -----------
Axiom Transaction Solutions unsec sr sub nts
9.75% 10/01/07 ................................ 5,225,000 4,669,844
-----------
4,669,844
-----------
Consumer Products - 0.04%
Fedders North America sr sub nts
9.375% 08/15/07 ............................... 1,000,000 1,021,250
-----------
1,021,250
-----------
Electronics & Electrical Equipment - 0.28%
BGF Industries 144A sr sub nts
10.25% 01/15/09 ............................... 4,000,000 3,720,000
HCC Industries sr sub nts 10.75% 05/15/07 ........ 2,925,000 2,826,281
-----------
6,546,281
-----------
Energy - 0.36%
Chesapeake Energy unsec sr sub nts
9.625% 05/01/05 ............................... 1,000,000 888,750
Chiles Offshore sr nts 10.00% 05/01/08 ........... 4,000,000 3,160,000
Continental Resources 10.25% 08/01/08 ............ 1,000,000 750,000
First Wave Marine sr nts 11.00% 02/01/08 ......... 500,000 473,125
Grant Geophysical sr nts 9.75% 02/15/08 .......... 2,000,000 1,000,000
RBF Finance sr sec nts 11.375% 03/15/09 .......... 2,000,000 2,017,500
-----------
8,289,375
-----------
Food, Beverage & Tobacco - 0.72%
Ameriserv Food Distributors sr nts
8.875% 10/15/06 ............................... 5,500,000 5,163,125
Community Distributors unsec sr nts
10.25% 10/15/04 ............................... 2,000,000 1,760,000
Core-Mark International sr sub nts
11.375% 09/15/03 .............................. 400,000 398,000
Cott sr nts 8.50% 05/01/07 ....................... 3,000,000 2,831,250
Delta Beverage Group sr nts 9.75% 12/15/03 ....... 4,500,000 4,629,375
DiGiorgio sr nts 10.00% 06/15/07 ................. 2,000,000 2,002,500
-----------
16,784,250
-----------
Healthcare & Pharmaceuticals - 0.42%
Kinetic Concepts sr sub nts 9.625% 11/01/07 ...... 3,500,000 3,416,875
Paracelsus Healthcare sr sub nts
10.00% 08/15/06 ............................... 1,455,000 1,134,900
<PAGE>
for total return 15
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
-------------------------
Corporate Bonds (Continued)
Healthcare & Pharmaceuticals (Continued)
Team Health Inc 144A sr sub nts
12.00% 03/15/09 ................................ $5,000,000 $ 5,106,250
-----------
9,658,025
-----------
Industrial Machinery - 0.91%
DeCrane Aircraft 12.00% 09/30/08 .................. 6,000,000 6,180,000
Outboard Marine sr nts 10.75% 06/01/08 ............ 3,000,000 2,100,000
Renters Choice 11.00% 08/15/08 .................... 5,000,000 5,250,000
Republic Engineered Steel 9.875% 12/15/01 ......... 6,000,000 6,255,000
Spinnaker Industries sr nts 10.75% 10/15/06 ....... 2,000,000 1,560,000
United Rentals nts 9.00% 04/01/09 ................. 5,000,000 4,975,000
-----------
26,320,000
-----------
Leisure, Lodging & Entertainment - 2.16%
AFC Enterprises sr sub nts 10.25% 05/15/07 ........ 1,450,000 1,493,500
Aztar Corp 144A sr sub nts 8.875% 05/15/07 ........ 5,400,000 5,224,500
Bally Total Fitness Holdings sr sub nts
9.875% 10/15/07 ................................ 5,000,000 4,937,500
Cinemark USA sr sub nts 9.625% 08/01/08 ........... 7,000,000 7,061,250
Hollywood Casino 144A sec
11.25% 05/01/07 ................................ 7,000,000 6,947,500
Hollywood Park 9.25% 02/15/07 ..................... 5,000,000 5,050,000
Park Place Entertainment sr sub nts
7.875% 12/15/05 ................................ 5,000,000 4,818,750
Riddell Sports sr unsec sub nts
10.50% 07/15/07 ................................ 3,279,000 2,983,890
Town Sports International unsec sr nts
9.75% 10/15/04 ................................. 3,000,000 2,932,500
Trump-Atlantic City 1st mtg nts
11.25% 05/01/06 ................................ 1,900,000 1,679,125
United Artists Theatre sr sub nts
9.75% 04/15/08 ................................. 5,000,000 4,093,750
Vail Resorts 144A sr sub nts 8.75% 05/15/09 ....... 3,000,000 2,925,000
-----------
50,147,265
-----------
Metals & Mining - 0.70%
AK Steel Corp 144A 7.875% 02/15/09 ................ 400,000 393,000
Armco sr nts 8.875% 12/01/08 ...................... 1,300,000 1,334,125
Centaur Mining & Exploration nts
11.00% 12/01/07 ................................ 5,000,000 4,750,000
Great Lakes Carbon unsec sr sub nts
10.25% 05/15/08 ................................ 1,600,000 1,652,000
P & L Coal Holdings 9.625% 05/15/08 ............... 4,000,000 4,075,000
Schuff Steel unsec sr nts 10.500% 06/01/08 ........ 2,025,000 1,883,250
Weirton Steel sr nts 11.375% 07/01/04 ............. 1,500,000 1,486,875
WHX sr nts 10.50% 04/15/05 ........................ 750,000 742,500
-----------
16,316,750
-----------
Packaging & Containers - 0.61%
Container Corporation of America sr nts
11.25% 05/01/04 ................................ 5,000,000 5,287,500
Huntsman Packaging sr sub nts
9.125% 10/01/07 ................................ 3,325,000 3,329,156
Riverwood International unsec sr nts
10.25% 04/01/06 ................................ 1,000,000 1,018,750
Riverwood International unsec sr sub nts
10.875% 04/01/08 ............................... 650,000 637,813
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
-------------------------
Corporate Bonds (Continued)
Packaging & Containers (Continued)
Stone Container sr nts 10.75% 10/01/02 ............ $3,785,000 $ 3,936,400
-----------
14,209,619
-----------
Paper & Forest Products - 0.21%
Doman Industries Limited sr nts
8.75% 03/15/04 ................................. 3,120,000 2,191,800
US Office Products 9.75% 06/15/08 ................. 3,450,000 2,259,750
US Timberlands sr nts 9.625% 11/15/07 ............. 400,000 407,500
-----------
4,859,050
-----------
Real Estate - 0.26%
Engle Homes sr nts 9.25% 02/01/08 ................. 700,000 686,000
HMH Properties sr sec nts 7.875% 08/01/08 ......... 5,700,000 5,293,875
-----------
5,979,875
-----------
Retail - 0.71%
Advance Stores sr sub nts 10.25% 04/15/08 ......... 500,000 502,500
Amscan Holdings sr sub nts 9.875% 12/15/07 ........ 650,000 556,563
Cole National Group sr sub nts
9.875% 12/31/06 ................................ 2,500,000 2,600,000
Fleming sr nts 10.625% 12/15/01 ................... 5,000,000 5,050,000
Frank's Nursery and Crafts sr sub nts
10.25% 03/01/08 ................................ 500,000 499,375
Jitney-Jungle Stores 12.00% 03/01/06 .............. 3,150,000 3,220,875
Just for Feet 144A sr sub nts
11.00% 05/01/09 ................................ 400,000 324,000
Shoppers Food Warehouse sr nts
9.75% 06/15/04 ................................. 2,000,000 2,172,500
Wilsons The Leather Expert sr nts
11.25% 08/15/04 ................................ 1,500,000 1,507,500
-----------
16,433,313
-----------
Telecommunications - 1.19%
BTI Telecom sr nts 10.50% 09/15/07 ................ 650,000 611,000
Intermedia Communication sr nts
8.60% 06/01/08 ................................. 5,000,000 4,700,000
Level 3 Communications sr nts
9.125% 05/01/08 ................................ 6,000,000 5,865,000
McLeodUSA sr nts 8.125% 02/15/09 .................. 5,625,000 5,245,313
RCN sr nts 10.00% 10/15/07 ........................ 5,000,000 5,012,500
RSL Communications 10.50% 11/15/08 ................ 5,000,000 4,962,500
Rogers Communications sr nts
8.875% 07/15/07 ................................ 1,165,000 1,197,038
-----------
27,593,351
-----------
Textiles, Apparel & Furniture - 0.24%
GFSI sr sub nts 9.625% 03/01/07 ................... 1,100,000 1,012,000
Norton McNaught 12.50% 06/01/05 ................... 1,000,000 848,750
Ntex sr nts 11.50% 06/01/06 ....................... 2,000,000 1,840,000
Synthetic Industries sr sub nts
9.25% 02/15/07 ................................. 1,750,000 1,800,313
-----------
5,501,063
-----------
Transportation & Shipping - 0.48%
American Commercial Lines nts
10.25% 06/30/08 ................................ 1,375,000 1,411,094
Atlantic Express sr sec nts
10.75% 02/01/04 ................................ 900,000 909,000
Blue Bird Body sr nts 10.75% 11/15/06 ............. 2,700,000 2,885,625
MTL 10.00% 06/15/06 ............................... 2,500,000 2,478,125
<PAGE>
16 for total return
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
-------------------------
Corporate Bonds (Continued)
Transportation & Shipping (Continued)
Navigator Gas Transport units
12.00% 06/30/07 .................................. $1,250,000 $ 487,500
Stena Line AB sr nts 10.625% 06/01/08 ............... 4,050,000 3,093,188
-----------
11,264,532
-----------
Utilities - 0.23%
AES sr sub nts 10.25% 07/15/06 ...................... 3,000,000 3,153,750
Midland Funding II sr sub debs
11.75% 07/23/05 .................................. 2,000,000 2,252,500
-----------
5,406,250
-----------
Miscellaneous - 2.04%
Allied Waste NA 7.375% 01/01/04 ..................... 700,000 671,125
Apple South sr nts 9.75% 06/01/06 ................... 400,000 399,500
Budget Group 144A sr nts
9.125% 04/01/06 .................................. 1,400,000 1,359,750
Building One Services sr sub nts
10.50% 05/01/09 .................................. 400,000 376,000
Caithness 144A sec 9.05% 12/15/09 ................... 3,000,000 3,018,750
Cex Holdings 9.625% 06/01/08 ........................ 5,000,000 4,712,500
Geologistics unsec sub nts 9.75% 10/15/07 ........... 4,000,000 3,225,000
Knoll sr sub nts 10.875% 03/15/06 ................... 1,298,000 1,432,668
Loomis Fargo sr sub nts 10.00% 01/15/04 ............. 7,695,000 7,829,663
Neff sr sub nts 10.25% 06/01/08 ..................... 5,000,000 5,150,000
Pierce Leahy sr sub nts 8.125% 05/15/08 ............. 2,000,000 1,957,500
Protection One 144A sr sub nts
8.125% 01/15/09 .................................. 7,300,000 6,998,875
Pueblo Xtra International sr nts
9.50% 08/01/03 ................................... 950,000 931,000
Rayovac sr sub nts 10.25% 11/01/06 .................. 3,252,000 3,544,680
World Color Press 144A sr sub nts
7.75% 02/15/09 ................................... 6,000,000 5,685,000
-----------
47,292,011
-----------
Total Corporate Bonds
(cost $346,131,405) 332,851,635
-----------
Repurchase Agreements - 0.48%
With Chase Manhattan 4.78% 06/01/99
(dated 05/31/99, collateralized by $907,000
U.S. Treasury Notes 6.25% due 02/28/02,
market value $935,915 and $1,475,000 U.S.
Treasury Notes 7.50% due 05/15/02, market value
$1,553,165 and $1,386,000 U.S. Treasury Notes
5.50% due 02/28/03, market value
$1,395,688) ...................................... 3,805,000 3,805,000
With PaineWebber 4.78% 06/01/99
(dated 05/31/99, collateralized by $1,475,000
U.S. Treasury Bills due 5/15/00, market value
$1,493,825 and $1,475,000 U.S. Treasury Notes
6.25% due 01/31/02, market value $1,529,047
and $762,000 U.S. Treasury Notes 5.375% due
06/30/03, market value $769,831) ................. 3,716,000 3,716,000
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
-------------------------
Repurchase Agreements (Continued)
With Prudential Securities 4.78% 06/01/99
(dated 05/31/99, collateralized by $3,067,000
U.S. Treasury Notes 15.75% due 11/15/01,
market value $3,793,714) ......................... $3,716,000 $ 3,716,000
--------------
Total Repurchase Agreements
(cost $11,237,000) ............................... 11,237,000
--------------
Total Market Value of Securities - 98.68%
(COST $2,058,868,959) ............................ $2,291,835,498
Receivables and Other Assets Net of
Liabilities - 1.32% .............................. 30,575,824
--------------
Net Assets Applicable to 125,191,693 Shares
($1 Par Value) Outstanding - 100.00% ............. $2,322,411,322
==============
Net Asset Value - Decatur Equity Income Fund A Class
($1,897,832,025 / 102,266,384 shares) ............ $18.56
======
Net Asset Value - Decatur Equity Income Fund B Class
($175,177,865 / 9,484,018 shares) ................ $18.47
======
Net Asset Value - Decatur Equity Income Fund C Class
($24,122,884 / 1,298,635 shares) ................. $18.58
======
Net Asset Value - Decatur Equity Income Fund
Institutional Class ($225,278,548 / 12,142,656
shares) .......................................... $18.55
======
- --------------------------
Summary of Abbreviations:
ADR - American Depository Receipt
debs - debentures
mtg - mortgage
nts - notes
sec - secured
sr - senior
sub - subordinated
unsec - unsecured
Components of Net Assets at MAY 31, 1999:
Common stock, $1 par value, 250,000,000 shares
authorized to the Fund with 100,000,000 shares
allocated to Decatur Equity Income Fund A Class,
50,000,000 shares allocated to Decatur Equity
Income Fund B Class, 50,000,000 shares allocated
to Decatur Equity Income Fund C Class, and
50,000,000 shares allocated to Decatur Equity
Income Fund Institutional Class .................. $2,053,696,305
Undistributed net investment income ................. 4,273,473
Accumulated net realized gain on investments ........ 31,475,005
Net unrealized appreciation of investments .......... 232,966,539
--------------
Total net assets .................................... $2,322,411,322
==============
Net Asset Value and Offering Price Per Share -
Decatur Equity Income Fund
Net asset value A Class (A) ......................... $18.56
Sales charge (5.75% of offering price or 6.09% of the
amount invested per share) (B) ................... 1.13
------
Offering price ...................................... $19.69
======
- ----------
(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>
for total return 17
Delaware Group Equity Funds II, Inc. -
Growth and Income Fund
Statement of Net Assets
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
----------------------------
COMMON STOCK - 98.46%
Aerospace & Defense - 2.38%
General Dynamics ................................ 227,100 $ 14,931,825
Lockheed Martin ................................. 455,900 18,435,456
------------
33,367,281
------------
Automobiles & Auto Parts - 4.77%
Dana ............................................ 74,300 3,835,738
Delphi Automotive Systems ....................... 174,205 3,418,779
Ford Motor ...................................... 566,300 32,314,494
General Motors .................................. 396,900 27,386,100
------------
66,955,111
------------
Banking, Finance & Insurance - 21.05%
American General ................................ 539,900 39,007,775
Aon ............................................. 605,625 26,041,875
Bank of America ................................. 757,948 49,029,761
Bank One ........................................ 471,586 26,674,083
Block (H&R) ..................................... 92,900 4,476,619
Chase Manhattan ................................. 298,800 21,663,000
Freddie Mac ..................................... 438,800 29,838,400
Mellon Bank ..................................... 825,000 29,442,188
Summit Bancorp .................................. 441,920 18,091,100
U.S. Bancorp .................................... 958,500 31,151,250
Wells Fargo ..................................... 499,900 19,996,000
------------
295,412,051
------------
Cable, Media & Publishing - 3.06%
McGraw-Hill ..................................... 828,100 42,957,688
------------
42,957,688
------------
Chemicals - 3.88%
DuPont(E.I.)deNemours ........................... 428,500 28,039,969
Imperial Chemical ADR ........................... 600,800 26,397,650
------------
54,437,619
------------
Computers & Technology - 4.13%
Pitney Bowes .................................... 591,200 37,689,000
Xerox ........................................... 361,400 20,306,163
------------
57,995,163
------------
Consumer Products - 2.50%
Avon Products ................................... 117,000 5,784,188
Kimberly-Clark .................................. 499,700 29,326,144
------------
35,110,332
------------
Electronics & Electrical Equipment - 3.77%
Emerson Electric ................................ 349,200 22,305,150
Rockwell International .......................... 301,600 16,644,550
Thomas & Betts .................................. 326,700 13,986,844
------------
52,936,544
------------
Energy - 13.74%
BP Amoco ADR .................................... 245,972 26,349,751
Chevron ......................................... 300,300 27,834,056
Duke Energy ..................................... 97,000 5,850,313
<PAGE>
- --------------------------------------------------------------------------------
Number Market
of Shares Value
----------------------------
COMMON STOCK (Continued)
Energy (Continued)
Enron ........................................... 271,700 $ 19,392,588
Mobil ........................................... 295,800 29,949,750
Royal Dutch Petroleum ........................... 601,300 34,011,031
Sonat ........................................... 798,200 28,286,213
Unocal .......................................... 530,000 21,067,500
--------------
192,741,202
--------------
Food, Beverage & Tobacco - 8.07%
Bestfoods ....................................... 697,200 34,860,000
Heinz (H.J.) .................................... 459,450 22,197,178
PepsiCo ......................................... 513,900 18,404,044
Philip Morris ................................... 490,300 18,907,194
RJR Nabisco Holdings ............................ 609,800 18,865,688
--------------
113,234,104
--------------
Healthcare & Pharmaceuticals - 6.94%
AstraZeneca ADR ................................. 559,900 22,046,063
Baxter International ............................ 460,500 29,731,031
Glaxo Wellcome ADR .............................. 316,200 17,786,250
Pharmacia & Upjohn .............................. 502,500 27,857,344
--------------
97,420,688
--------------
Industrial Machinery - 1.80%
Deere & Co. ..................................... 664,000 25,273,500
--------------
25,273,500
--------------
Metals & Mining - 3.07%
Alcan Aluminum .................................. 379,700 10,631,600
Alcoa ........................................... 590,900 32,499,500
--------------
43,131,100
--------------
Paper & Forest Products - 4.56%
International Paper ............................. 726,491 36,324,540
Weyerhaeuser .................................... 446,600 27,717,113
--------------
64,041,653
--------------
Retail - 1.80%
May Department Stores ........................... 583,200 25,259,850
--------------
25,259,850
--------------
Telecommunications - 9.72%
AT&T ............................................ 593,400 32,933,700
ALLTEL .......................................... 166,800 11,957,475
Ameritech ....................................... 548,800 36,117,900
Cable & Wireless ................................ 444,000 16,983,000
GTE ............................................. 608,400 38,367,225
--------------
136,359,300
--------------
Transportation & Shipping - 3.20%
British Airways ADR ............................. 360,900 26,165,250
Norfolk Southern ................................ 574,200 18,805,050
--------------
44,970,300
--------------
Total Common Stock
(cost of $1,193,924,126) ..................... 1,381,603,486
--------------
<PAGE>
18 for total return
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
-------------------------
Repurchase Agreements - 0.71%
With Chase Manhattan 4.78% 06/01/99
(dated 05/31/99, collateralized by $805,000 U.S.
Treasury Notes 6.25% due 02/28/02, market value
$830,638 and $1,309,000 U.S. Treasury Notes
7.50% due 05/15/02, market value $1,378,456
and $1,230,000 U.S. Treasury Notes 5.50% due
02/28/03, market value $1,238,693) ............... $3,377,000 $ 3,377,000
With PaineWebber 4.78% 06/01/99
(dated 05/31/99, collateralized by $1,309,000
U.S. Treasury Bills due 5/15/00, market value
$1,325,791 and $1,309,000 U.S. Treasury Notes
6.25% due 01/31/02, market value $1,357,051
and $676,000 U.S. Treasury Notes 5.375% due
06/30/03, market value $683,236) ................. 3,298,000 3,298,000
With Prudential Securities 4.78% 06/01/99
(dated 05/31/99, collateralized by $2,722,000
U.S. Treasury Notes 15.75% due 11/15/01,
market value $3,366,976) ......................... 3,298,000 3,298,000
--------------
Total Repurchase Agreements
(cost $9,973,000) ................................ 9,973,000
--------------
Total Market Value of Securities - 99.17%
(cost $1,203,897,126) ............................ $1,391,576,486
Receivables and Other Assets Net of
Liabilities - 0.83% .............................. 11,604,343
--------------
Net Assets Applicable to 80,218,200 Shares
($1 Par Value) Outstanding - 100.00% ............. $1,403,180,829
==============
<PAGE>
- --------------------------------------------------------------------------------
Net Asset Value - Growth and Income Fund A Class
($995,393,122 / 56,873,650 shares) .................... $17.50
======
Net Asset Value - Growth and Income Fund B Class
($231,198,024 / 13,246,216 shares) .................... $17.45
======
Net Asset Value - Growth and Income Fund C Class
($50,201,808 / 2,881,946 shares) ...................... $17.42
======
Net Asset Value - Growth and Income Fund Institutional
Class ($126,387,875 / 7,216,388 shares) ............... $17.51
======
- ---------------------
Components of Net Assets at MAY 31, 1999:
Common stock, $1 par value, 250,000,000 shares authorized
to the Fund with 100,000,000 shares allocated to
Growth and Income Fund A Class, 50,000,000 shares
allocated to Growth and Income Fund B Class,
50,000,000 shares allocated to Growth and Income
Fund C Class, and 50,000,000 shares allocated to
Growth and Income Fund Institutional Class ............ $1,186,042,681
Undistributed net investment income ...................... 4,519,757
Accumulated net realized gain on investments ............. 24,939,031
Net unrealized appreciation of investments ............... 187,679,360
--------------
Total net assets ......................................... $1,403,180,829
==============
Net Asset Value and Offering Price Per Share -
Growth and Income Fund
Net asset value A Class (A) .............................. $17.50
Sales charge (5.75% of offering price or 6.11% of the
amount invested per share) (B) ........................ 1.07
------
Offering price ........................................... $18.57
======
- --------------------
(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>
for total return 19
Delaware Group Equity Funds II, Inc. -
Statement of Operations
Six Months Ended May 31, 1999
(Unaudited)
- --------------------------------------------------------------------------------
Decatur Equity Growth and
Income Fund Income Fund
----------------------------
INVESTMENT INCOME:
Interest .......................................... $17,545,650 $ 533,883
Dividends ......................................... 25,181,922 17,157,744
----------- -----------
42,727,572 17,691,627
----------- -----------
EXPENSES:
Management fees ................................... 6,123,649 4,083,716
Distribution expense .............................. 3,099,209 2,878,269
Dividend disbursing and transfer agent fees and
expenses ....................................... 1,648,385 1,444,573
Accounting and administration ..................... 648,764 387,884
Reports and statements to shareholders ............ 255,520 81,380
Professional fees ................................. 65,700 28,200
Registration fees ................................. 59,400 30,000
Taxes (other than taxes on income) ................ 53,258 55,050
Directors' fees ................................... 20,655 12,433
Custodian fees .................................... 40,589 20,556
Other ............................................. 117,291 73,977
----------- -----------
12,132,420 9,096,038
Less expenses paid indirectly ..................... (79,516) (28,775)
----------- -----------
Total expenses .................................... 12,052,904 9,067,263
NET INVESTMENT INCOME ............................. 30,674,668 8,624,364
----------- -----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .................. 35,053,590 25,471,377
Net change in unrealized appreciation/depreciation
of investments ................................. 23,330,685 23,605,699
----------- -----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ... 58,384,275 49,077,076
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ..................................... $89,058,943 $57,701,440
=========== ===========
See accompanying notes
<PAGE>
20 for total return
Delaware Group Equity Funds II, Inc. -
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Decatur Equity Income Fund Growth and Income Fund
--------------------------------------------------------------------------
Six Months Year Six Months Year
Ended 5/31/99 Ended Ended 5/31/99 Ended
(Unaudited) 11/30/98 (Unaudited) 11/30/98
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income .............................. $ 30,674,668 $ 64,187,398 $ 8,624,364 $ 18,339,682
Net realized gain on investments ................... 35,053,590 361,584,308 25,471,377 161,450,447
Net change in unrealized appreciation /
depreciation of investments ..................... 23,330,685 (154,044,350) 23,605,699 (36,538,962)
--------------- --------------- --------------- ---------------
Net increase in net assets resulting from operations 89,058,943 271,727,356 57,701,440 143,251,167
--------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ......................................... (29,952,163) (45,727,459) (7,354,248) (12,123,443)
B Class ......................................... (2,030,339) (2,136,896) (1,069,801) (916,994)
C Class ......................................... (272,218) (281,715) (239,969) (192,210)
Institutional Class ............................. (4,051,313) (6,528,308) (1,134,076) (1,562,741)
Net realized gain on investments:
A Class ......................................... (294,241,868) (258,801,828) (115,549,999) (93,765,337)
B Class ......................................... (25,790,323) (17,106,645) (25,411,948) (15,012,718)
C Class ......................................... (3,465,186) (2,124,083) (5,698,348) (2,946,081)
Institutional Class ............................. (36,564,567) (39,093,334) (12,829,309) (8,735,336)
--------------- --------------- --------------- ---------------
(396,367,977) (371,800,268) (169,287,698) (135,254,860)
--------------- --------------- --------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ......................................... 68,782,971 168,201,945 62,007,876 195,303,575
B Class ......................................... 21,998,720 57,047,914 30,946,864 88,711,551
C Class ......................................... 4,529,252 9,894,966 8,928,807 26,672,866
Institutional Class ............................. 30,482,277 58,405,474 33,083,138 54,756,372
Net asset value of shares issued upon reinvestment of
distributions from net investment income and net
realized gain on investments:
A Class ......................................... 289,847,027 272,677,435 116,680,832 100,880,624
B Class ......................................... 25,365,694 17,281,260 25,354,049 15,076,377
C Class ......................................... 3,416,930 2,166,924 5,718,378 3,040,923
Institutional Class ............................. 40,593,962 45,289,349 13,963,178 10,297,967
--------------- --------------- --------------- ---------------
485,016,833 630,965,267 296,683,122 494,740,255
--------------- --------------- --------------- ---------------
Cost of shares repurchased:
A Class ......................................... (177,525,459) (296,579,034) (109,201,595) (158,209,478)
B Class ......................................... (20,001,392) (22,666,310) (25,699,245) (22,393,120)
C Class ......................................... (3,888,643) (3,726,339) (9,135,236) (7,597,150)
Institutional Class ............................. (59,368,279) (126,067,562) (24,169,554) (32,883,578)
--------------- --------------- --------------- ---------------
(260,783,773) (449,039,245) (168,205,630) (221,083,326)
--------------- --------------- --------------- ---------------
Increase in net assets derived from capital share
transactions ...................................... 224,233,060 181,926,022 128,477,492 273,656,929
--------------- --------------- --------------- ---------------
NET INCREASE/DECREASE IN NET ASSETS ................ (83,075,974) 81,853,110 16,891,234 281,653,236
NET ASSETS:
Beginning of year .................................. 2,405,487,296 2,323,634,186 1,386,289,595 1,104,636,359
--------------- --------------- --------------- ---------------
End of period ...................................... $ 2,322,411,322 $ 2,405,487,296 $ 1,403,180,829 $ 1,386,289,595
=============== =============== =============== ===============
</TABLE>
See accompanying notes
<PAGE>
for total return 21
Delaware Group Equity Funds II, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Decatur Equity Income Fund A Class
---------------------------------------------------------------------------------------
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
5/31/99(2) 11/30/98 11/30/97 11/30/96 11/30/95 11/30/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 21.400 $ 22.580 $ 21.320 $ 19.070 $ 15.570 $ 18.240
Income (loss) from investment operations:
Net investment income ................. 0.245 0.569 0.600 0.650 0.700 0.670
Net realized and unrealized gain (loss)
on investments ....................... 0.435 1.811 3.940 3.630 3.910 (0.730)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations ...... 0.680 2.380 4.540 4.280 4.610 (0.060)
----------- ----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Dividends from net investment income .. (0.300) (0.490) (0.600) (0.690) (0.690) (0.860)
Distributions from net realized gain
on investments ....................... (3.220) (3.070) (2.680) (1.340) (0.420) (1.750)
----------- ----------- ----------- ----------- ----------- -----------
Total dividends and distributions ..... (3.520) (3.560) (3.280) (2.030) (1.110) (2.610)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period ........... $ 18.560 $ 21.400 $ 22.580 $ 21.320 $ 19.070 $ 15.570
=========== =========== =========== =========== =========== ===========
Total return(1) .......................... 3.82% 12.03% 24.78% 24.47% 31.02% (0.57%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 1,897,832 $ 1,969,181 $ 1,906,726 $ 1,616,315 $ 1,382,693 $ 1,153,884
Ratio of expenses to average net assets 0.98% 0.90% 0.88% 0.85% 0.87% 0.81%
Ratio of net investment income to
average net assets ................... 2.64% 2.68% 2.87% 3.40% 4.03% 3.92%
Portfolio turnover .................... 107% 94% 90% 101% 74% 92%
</TABLE>
- ----------
(1) 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.
(2) Ratios have been annualized and total return has not been annualized.
<PAGE>
22 for total return
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Decatur Equity Income Fund B Class
------------------------------------------------------------------------------
Six Months Year Year Year Year 9/6/94(3)
Ended Ended Ended Ended Ended to
5/31/99(2) 11/30/98 11/30/97 11/30/96 11/30/95 11/30/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..... $ 21.320 $ 22.480 $ 21.260 $19.030 $15.550 $16.590
Income (loss) from investment operations:
Net investment income ................. 0.175 0.403 0.450 0.500 0.560 0.150
Net realized and unrealized gain (loss)
on investments ....................... 0.425 1.797 3.900 3.610 3.890 (1.020)
-------- -------- -------- ------- ------- -------
Total from investment operations ...... 0.600 2.200 4.350 4.110 4.450 (0.870)
-------- -------- -------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .. (0.230) (0.290) (0.450) (0.540) (0.550) (0.170)
Distributions from net realized gain
on investments ....................... (3.220) (3.070) (2.680) (1.340) (0.420) --
-------- -------- -------- ------- ------- -------
Total dividends and distributions ..... (3.450) (3.360) (3.130) (1.880) (0.970) (0.170)
-------- -------- -------- ------- ------- -------
Net asset value, end of period ........... $ 18.470 $ 21.320 $ 22.480 $21.260 $19.030 $15.550
======== ======== ======== ======= ======= =======
Total return(1) .......................... 3.40% 11.14% 23.73% 23.43% 29.85% (5.27%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) $175,178 $169,985 $123,180 $60,689 $19,665 $ 2,765
Ratio of expenses to average net assets 1.78% 1.70% 1.68% 1.69% 1.74% 1.70%
Ratio of net investment income to
average net assets ................... 1.84% 1.88% 2.07% 2.56% 3.16% 3.30%
Portfolio turnover .................... 107% 94% 90% 101% 74% 92%
</TABLE>
- ----------
(1) 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.
(2) Ratios have been annualized and total return has not been annualized.
(3) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(4) Date of initial public offering.
(5) 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
<PAGE>
for total return 23
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Decatur Equity Income Fund C Class
----------------------------------------------------------------------
Six Months Year Year Year 11/29/95(4)
Ended Ended Ended Ended to
5/31/99(2) 11/30/98 11/30/97 11/30/96 11/30/95
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $ 21.420 $ 22.570 $21.330 $19.080 $19.150
Income (loss) from investment operations:
Net investment income ................................ 0.175 0.402 0.460 0.510 0.040
Net realized and unrealized gain (loss) on investments 0.435 1.808 3.910 3.630 (0.060)
--------- -------- ------- ------- -------
Total from investment operations ..................... 0.610 2.210 4.370 4.140 (0.020)
--------- -------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ................. (0.230) (0.290) (0.450) (0.550) (0.050)
Distributions from net realized gain on investments .. (3.220) (3.070) (2.680) (1.340) --
--------- -------- ------- ------- -------
Total dividends and distributions .................... (3.450) (3.360) (3.130) (1.890) (0.050)
--------- -------- ------- ------- -------
Net asset value, end of period .......................... $ 18.580 $ 21.420 $22.570 $21.330 $19.080
========= ======== ======= ======= =======
Total return(1) ......................................... 3.44% 11.14% 23.75% 23.47% (5)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .............. $ 24,123 $ 23,076 $15,343 $ 4,833 $ 5
Ratio of expenses to average net assets .............. 1.78% 1.70% 1.68% 1.69% (5)
Ratio of net investment income to average net assets . 1.84% 1.88% 2.07% 2.56% (5)
Portfolio turnover ................................... 107% 94% 90% 101% (5)
</TABLE>
- ----------
(1) 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.
(2) Ratios have been annualized and total return has not been annualized.
(3) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(4) Date of initial public offering.
(5) 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
<PAGE>
24 for total return
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Decatur Equity Income Fund Institutional Class
------------------------------------------------------------------------
Six Months Year Year Year Year 1/13/94(1)
Ended Ended Ended Ended Ended to
5/31/99(2) 11/30/98 11/30/97 11/30/96 11/30/95 11/30/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period..................... $ 21.400 $ 22.570 $ 21.310 $ 19.060 $ 15.590 $ 16.720
Income (loss) from investment operations:
Net investment income................................. 0.279 0.612 0.650 0.690 0.710 0.590
Net realized and unrealized gain (loss)
on investments....................................... 0.419 1.808 3.930 3.620 3.920 (1.100)
-------- -------- -------- -------- -------- --------
Total from investment operations 0.698 2.420 4.580 4.310 4.630 (0.510)
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income.................. (0.328) (0.520) (0.640) (0.720) (0.740) (0.620)
Distributions from net realized gain
on investments....................................... (3.220) (3.070) (2.680) (1.340) (0.420) -
-------- -------- -------- -------- -------- --------
Total dividends and distributions..................... (3.548) (3.590) (3.320) (2.060) (1.160) (0.620)
-------- -------- -------- -------- -------- --------
Net asset value, end of period........................... $ 18.550 $ 21.400 $ 22.570 $ 21.310 $ 19.060 $ 15.590
======== ======== ======== ======== ======== ========
Total return............................................. 3.91% 12.25% 25.02% 24.65% 31.14% (0.45%)
Ratios and supplemental data:
Net assets, end of period (000 omitted)............... $225,279 $243,245 $278,384 $244,048 $211,049 $182,105
Ratio of expenses to average net assets............... 0.78% 0.70% 0.68% 0.69% 0.74% 0.70%
Ratio of net investment income to
average net assets................................... 2.84% 2.88% 3.07% 3.56% 4.16% 4.03%
Portfolio turnover.................................... 107% 94% 90% 101% 74% 92%
</TABLE>
- ----------
(1) Date of initial public offering; ratios and total return have been
annualized.
(2) Ratios have been annualized and total return has not been annualized.
See accompanying notes
<PAGE>
for total return 25
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Growth and Income Fund A Class
---------------------------------------------------------------------------
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
5/31/99(2) 11/30/98 11/30/97 11/30/96 11/30/95 11/30/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 19.120 $ 19.230 $ 17.520 $ 15.610 $ 12.320 $ 14.380
Income (loss) from investment operations:
Net investment income............................. 0.117 0.280 0.280 0.340 0.370 0.370
Net realized and unrealized gain (loss)
on investments................................... 0.598 1.930 3.610 3.210 3.700 (0.340)
-------- ---------- -------- -------- -------- --------
Total from investment operations.................. 0.715 2.210 3.890 3.550 4.070 0.030
-------- ---------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income.............. (0.135) (0.240) (0.330) (0.350) (0.360) (0.430)
Distributions from net realized gain
on investments................................... (2.200) (2.080) (1.850) (1.290) (0.420) (1.660)
-------- ---------- -------- -------- -------- --------
Total dividends and distributions................. (2.335) (2.320) (2.180) (1.640) (0.780) (2.090)
-------- ---------- -------- -------- -------- --------
Net asset value, end of period....................... $ 17.500 $ 19.120 $ 19.230 $ 17.520 $ 15.610 $ 12.320
======== ========== ======== ======== ======== ========
Total return(1)...................................... 4.28% 12.70% 25.26% 24.89% 34.68% (0.04%)
Ratios and supplemental data:
Net assets, end of period (000 omitted)........... $995,393 $1,006,642 $863,855 $670,912 $534,342 $402,849
Ratio of expenses to average net assets........... 1.18% 1.13% 1.13% 1.11% 1.19% 1.26%
Ratio of net investment income to
average net assets............................... 1.34% 1.52% 1.60% 2.21% 2.72% 2.88%
Portfolio turnover................................ 108% 87% 69% 87% 81% 74%
</TABLE>
- ----------
(1) 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.
(2) Ratios have been annualized and total return has not been annualized.
See accompanying notes
<PAGE>
26 for total return
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Growth and Income Fund B Class
------------------------------------------------------------------------
Six Months Year Year Year Year 9/6/94(3)
Ended Ended Ended Ended Ended to
5/31/99(2) 11/30/98 11/30/97 11/30/96 11/30/95 11/30/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 19.090 $ 19.200 $ 17.460 $15.560 $12.310 $13.110
Income (loss) from investment operations:
Net investment income............................ 0.056 0.151 0.170 0.230 0.300 0.120
Net realized and unrealized gain (loss)
on investments.................................. 0.594 1.917 3.600 3.200 3.670 (0.820)
-------- -------- -------- ------- ------- ------
Total from investment operations................. 0.650 2.068 3.770 3.430 3.970 (0.700)
-------- -------- -------- ------- ------- ------
Less dividends and distributions:
Dividends from net investment income............. (0.090) (0.098) (0.180) (0.240) (0.300) (0.100)
Distributions from net realized gain.............
on investments.................................. (2.200) (2.080) (1.850) (1.290) (0.420) -
-------- -------- -------- ------- ------- ------
Total dividends and distributions................ (2.290) (2.178) (2.030) (1.530) (0.720) (0.100)
-------- -------- -------- ------- ------- ------
Net asset value, end of period...................... $ 17.450 $ 19.090 $ 19.200 $17.460 $15.560 $12.310
======== ======== ======== ======= ======= =======
Total return(1)..................................... 3.90% 11.92% 24.45% 24.01% 33.79% (5.37%)
Ratios and supplemental data:
Net assets, end of period (000 omitted).......... $231,198 $218,584 $135,737 $53,467 $14,745 $ 1,738
Ratio of expenses to average net assets.......... 1.88% 1.83% 1.83% 1.81% 1.89% 1.96%
Ratio of net investment income to
average net assets.............................. 0.64% 0.82% 0.90% 1.53% 2.02% 2.18%
Portfolio turnover............................... 108% 87% 69% 87% 81% 74%
</TABLE>
- ----------
(1) 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.
(2) Ratios have been annualized and total return has not been annualized.
(3) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(4) Date of initial public offering.
(5) 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
<PAGE>
for total return 27
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Growth and Income Fund C Class
---------------------------------------------------------------
Six Months Year Year Year 11/29/95(4)
Ended Ended Ended Ended to
5/31/99(2) 11/30/98 11/30/97 11/30/96 11/30/95
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period................... $19.050 $19.160 $17.430 $15.610 $15.610
Income (loss) from investment operations:
Net investment income............................... 0.056 0.153 0.170 0.330 --
Net realized and unrealized gain (loss)
on investments..................................... 0.604 1.915 3.590 3.100 --
------- ------- ------- ------- -------
Total from investment operations.................... 0.660 2.068 3.760 3.430 --
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income................ (0.090) (0.098) (0.180) (0.320) --
Distributions from net realized gain
on investments..................................... (2.200) (2.080) (1.850) (1.290) --
------- ------- ------- ------- -------
Total dividends and distributions................... (2.290) (2.178) (2.030) (1.610) --
------- ------- ------- ------- -------
Net asset value, end of period......................... $17.420 $19.050 $19.160 $17.430 $15.610
======= ======= ======= ======= =======
Total return(1)........................................ 3.92% 12.00% 24.44% 24.04% (5)
Ratios and supplemental data:
Net assets, end of period (000 omitted)............. $50,202 $48,683 $26,231 $ 7,591 $ 5
Ratio of expenses to average net assets............. 1.88% 1.83% 1.83% 1.81% (5)
Ratio of net investment income to
average net assets................................. 0.64% 0.82% 0.90% 1.53% (5)
Portfolio turnover.................................. 108% 87% 69% 87% (5)
</TABLE>
- ----------
(1) 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.
(2) Ratios have been annualized and total return has not been annualized.
(3) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(4) Date of initial public offering.
(5) 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
<PAGE>
28 for total return
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Growth and Income Fund Institutional Class
------------------------------------------------------------------------
Six Months Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
5/31/99(1) 11/30/98 11/30/97 11/30/96 11/30/95 11/30/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................ $ 19.150 $ 19.260 $17.570 $15.650 $12.350 $14.400
Income (loss) from investment operations:
Net investment income............................ 0.143 0.346 0.350 0.370 0.470 0.430
Net realized and unrealized gain (loss)
on investments.................................. 0.597 1.917 3.600 3.230 3.650 (0.370)
-------- -------- ------- ------- ------- ------
Total from investment operations................. 0.740 2.263 3.950 3.600 4.120 0.060
-------- -------- ------- ------- ------- ------
Less dividends and distributions:
Dividends from net investment income............. (0.180) (0.293) (0.410) (0.390) (0.400) (0.450)
Distributions from net realized
gain on investments............................. (2.200) (2.080) (1.850) (1.290) (0.420) (1.660)
-------- -------- ------- ------- ------- ------
Total dividends and distributions................ (2.380) (2.373) (2.260) (1.680) (0.820) (2.110)
-------- -------- ------- ------- ------- ------
Net asset value, end of period...................... $ 17.510 $ 19.150 $19.260 $17.570 $15.650 $12.350
======== ======== ======= ======= ======= =======
Total return........................................ 4.43% 13.07% 25.65% 25.24% 35.13% 0.19%
Ratios and supplemental data:
Net assets, end of period (000 omitted).......... $126,388 $112,381 $78,813 $45,958 $11,520 $1,376
Ratio of expenses to average net assets.......... 0.88% 0.83% 0.83% 0.81% 0.89% 0.96%
Ratio of net investment income to
average net assets.............................. 1.64% 1.82% 1.90% 2.53% 3.02% 3.18%
Portfolio turnover............................... 108% 87% 69% 87% 81% 74%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.
See accompanying notes
<PAGE>
for total return 29
Delaware Group Equity Funds II, Inc. -
Decatur Equity Income Fund and
Growth and Income Fund
Notes to Financial Statements
May 31, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Delaware Group Equity Funds II, Inc. is registered as a diversified open-end
investment company under the Investment Company Act of 1940, as amended. The
Fund is organized as a Maryland Corporation and offers five series: the Decatur
Equity Income Fund, the Growth and Income Fund, the Blue Chip Fund, the Social
Awareness Fund, and the Diversified Value Fund. These financial statements and
related notes pertain to the Decatur Equity Income Fund and Growth & Income
Fund, (collectively, the "Funds" and individually, a "Fund"). The Funds offer
four classes of shares. The A Class carries a front-end sales charge of 5.75%.
The B Class carries a back-end deferred sales charge. The C Class carries a
level load deferred sales charge and the Institutional Class has no sales
charge.
The investment objective of the Decatur Equity 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 undue risk to
principal.
The investment objective of the Growth and Income Fund is to achieve long-term
growth by investing primarily in common stocks that provide the potential for
income and capital appreciation without undue 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 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. 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 market value as determined in good faith or under 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
each Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements - Each 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 each
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>
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. Original issue discounts are accreted to interest
income over the lives of the respective securities. The Decatur Equity Income
Fund declares and pays dividends from net investment income on a monthly basis
and capital gains, if any, annually. The Growth and Income Fund declares and
pays dividends from net investment income on a quarterly basis 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. In
addition, the Fund receives earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. 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". The amount of these expenses and
credits for the period ended May 31, 1999, are as follows:
Decatur Equity Growth and
Income Fund Income Fund
-------------- -----------
"Soft Dollar" expense ........................... $54,477 $23,313
Earnings Credits ................................ $25,039 $5,462
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Funds
pay Delaware Management Company (DMC), the Investment Manager, an annual fee
which is calculated daily based on the net assets. The management fee rates
changed effective April 1, 1999. The new management fee rate for the Decatur
Equity Income and the Growth and Income is 0.65% on the first $500 million of
average daily net assets of each Fund, 0.60% on the next $500 million, 0.55% on
the next $1,500 million and 0.50% on the average daily net assets over $2,500
million. The old management fee rate for the Decatur Equity Income and Growth
and Income Funds was calculated daily based on the net assets, at the following
rates less fees paid to the affiliated directors as follows:
Decatur Equity
Income Fund
--------------
On the first $100 million ............................... 0.600%
On the next $150 million ................................ 0.525%
On the next $250 million ................................ 0.500%
Over $500 million ....................................... 0.475%
Growth and
Income Fund
-----------
On the first $500 million ............................... 0.600%
On the next $250 million ................................ 0.575%
Over $750 million ....................................... 0.550%
<PAGE>
30 for total return
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
At May 31, 1999, the liability for investment management fees and other expenses
payable to DMC were as follows:
Decatur Equity Growth and
Income Fund Income Fund
-------------- -----------
$264,237 $256,637
The Funds have 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 Funds had liabilities for such fees and other expenses payable
to DSC as follows:
Decatur Equity Growth and
Income Fund Income Fund
-------------- -----------
$257,898 $194,453
Pursuant to the Distribution Agreement, the Funds pay 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 for each Fund.
For the period ended May 31, 1999, DDLP earned commissions on sales of the A
Class shares for each Fund as follows:
Decatur Equity Growth and
Income Fund Income Fund
-------------- -----------
$148,230 $171,176
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Funds. These officers, directors and employees are paid no compensation
by the Funds.
3. Investments
During the period ended May 31, 1999, the Funds made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:
Decatur Equity Growth and
Income Fund Income Fund
-------------- -----------
Purchases .................................. $1,241,100,881 $748,607,755
Sales ...................................... $1,379,633,923 $774,733,164
The cost of investments for Federal income tax purposes approximates the cost
for book purposes. At May 31, 1999 the aggregate cost of securities and
unrealized appreciation (depreciation) for federal income tax purposes for each
Fund were as follows:
Decatur Equity Growth and
Income Fund Income Fund
-------------- -----------
Cost of investments ........................ $2,058,868,959 $1,203,897,126
-------------- --------------
Aggregate unrealized appreciation .......... $ 286,878,471 $ 212,997,524
Aggregate unrealized depreciation .......... (53,911,932) (25,318,164)
-------------- --------------
Net unrealized appreciation ................ $ 232,966,539 $ 187,679,360
-------------- --------------
4. Capital Stock
Transactions in capital stock shares were as follows:
Decatur Equity Income Fund
---------------------------
Six Months Year
Ended Ended
05/31/99 11/30/98
(Unaudited)
Shares sold:
A Class ..................................... 3,673,713 8,073,531
B Class ..................................... 1,174,161 2,711,292
C Class ..................................... 240,079 466,462
Institutional Class ......................... 1,642,550 2,749,580
<PAGE>
Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class ..................................... 16,054,814 13,673,317
B Class ..................................... 1,412,727 871,584
C Class ..................................... 189,243 108,759
Institutional Class ......................... 2,249,425 2,272,599
---------- ----------
26,636,712 30,927,124
---------- ----------
Shares repurchased:
A Class ..................................... (9,491,176) (14,169,464)
B Class ..................................... (1,076,498) (1,089,271)
C Class ..................................... (208,022) (177,735)
Institutional Class ......................... (3,116,484) (5,990,464)
---------- ----------
(13,892,180) (21,426,934)
---------- ----------
Net increase ................................... 12,744,532 9,500,190
========== ==========
Decatur Equity Income Fund
---------------------------
Six Months Year
Ended Ended
05/31/99 11/30/98
(Unaudited)
Shares sold:
A Class ..................................... 3,540,051 10,467,477
B Class ..................................... 1,767,924 4,734,652
C Class ..................................... 511,307 1,427,894
Institutional Class ......................... 1,892,081 2,935,169
Shares issued upon reinvestment of
distributions from net investment income
and net realized gains on investments
A Class ..................................... 6,945,360 5,773,026
B Class ..................................... 1,511,492 866,511
C Class ..................................... 341,719 175,049
Institutional Class ......................... 830,961 588,141
---------- ----------
17,340,895 26,967,919
---------- ----------
Shares repurchased:
A Class ..................................... (6,266,091) (8,496,811)
B Class ..................................... (1,485,443) (1,220,198)
C Class ..................................... (526,233) (416,767)
Institutional Class ......................... (1,375,509) (1,746,666)
---------- ----------
(9,653,276) (11,880,442)
---------- ----------
Net increase ................................... 7,687,619 15,087,477
========== ==========
5. Lines of Credit
Committed lines of credit were $68.8 million for Decatur Equity Income Fund and
$33.5 million for Growth and Income Fund. No amounts were outstanding at May 31,
1999, or at any time during the fiscal year.
6. Market and Credit Risk
The Decatur Equity 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 Equity Income 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 Funds' ability to dispose of such securities in a timely manner and
at a fair price when it is necessary to liquidate such securities.
<PAGE>
31 for total return
Proxy Results
(Unaudited)
- --------------------------------------------------------------------------------
For the six months ended May 31, 1999, The Delaware Group Equity Funds II, Inc.
shareholders voted on the following proposals at the annual meeting of
shareholders on March 17, 1999 or as adjourned. The description of each proposal
and number of shares voted are as follows:
1. To elect the Delaware Group Equity Funds II, Inc. Board of Directors.
Shares Shares Voted
Voted Withheld
For Authority
------ ------------
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 the reclassification of the investment objective from fundamental
to non-fundamental.
For Against Abstain
--- ------- -------
Decatur Equity Income 62,214,160 3,522,119 5,191,728
Growth and Income 34,857,150 1,819,826 3,029,854
3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G).
3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.
For Against Abstain
--- ------- -------
Decatur Equity Income 63,829,610 2,335,085 4,763,312
Growth and Income 35,503,543 1,182,862 3,020,425
3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
For Against Abstain
--- ------- -------
Decatur Equity Income 63,122,808 2,851,288 4,953,911
Growth and Income 35,251,905 1,394,934 3,059,991
3C. To adopt a new fundamental investment restriction concerning underwriting.
For Against Abstain
--- ------- -------
Decatur Equity Income 63,264,829 2,523,506 5,139,672
Growth and Income 35,385,371 1,219,237 3,102,222
<PAGE>
3D. To adopt a new fundamental investment restriction concerning investments in
real estate.
For Against Abstain
--- ------- -------
Decatur Equity Income 63,133,947 2,715,807 5,078,253
Growth and Income 35,431,209 1,275,794 2,999,827
3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
For Against Abstain
--- ------- -------
Decatur Equity Income 62,846,443 3,168,589 4,912,975
Growth and Income 35,164,991 1,490,025 3,051,815
3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
For Against Abstain
--- ------- -------
Decatur Equity Income 63,084,989 2,943,038 4,899,981
Growth and Income 35,298,886 1,326,718 3,081,226
3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
For Against Abstain
--- ------- -------
Decatur Equity Income 61,797,361 3,592,798 5,537,847
Growth and Income 34,760,585 1,706,322 3,239,923
4. To approve a new investment management agreement with Delaware Management
Company.
For Against Abstain
--- ------- -------
Decatur Equity Income 62,109,405 3,711,159 5,107,444
Growth and Income 34,850,342 1,769,842 3,086,646
5.To ratify the selection of Ernst & Young LLP, as the independent auditors for
Delaware Group Equity Funds II, Inc.
For Against Abstain
--- ------- -------
119,683,560 1,112,584 10,048,147
6. To approve the restructuring of the Delaware Group Equity Funds II, Inc.
from a Maryland Corporation into a Delaware Business Trust.
For Against Abstain
--- ------- -------
120,472,943 3,703,745 8,483,875
<PAGE>
This Semi-Annual Report is for the information of Decatur Equity Income Fund and
Delaware Growth and Income Fund shareholders, but it may be used with
prospective investors when preceded or accompanied by a current prospectus for
Decatur Equity Income Fund and Delaware Growth and Income Fund and the Delaware
Investments Performance Update for the most recently completed calendar quarter.
The prospectus sets forth details about charges, expenses, investment objectives
and operating policies of the Funds. You should read the prospectus carefully
before you invest or send money. 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 Funds will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
Investment Manager
Delaware Management Company
Philadelphia, Pennsylvania
International Affiliate [PHOTO OF GLOBES]
Delaware International Advisers Ltd.
London, England
National Distributor
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
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
www.delawareinvestments.com
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 Funds 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 Funds are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
DELAWARE9(sm)
INVESTMENTS
- ---------------------
Philadelphia o London
Printed in the USA
on recycled paper
SA-118[5/99] PP7/99
(1882) J4863