UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-750
Exact name of registrant as specified in charter: Delaware Group Equity Funds II
Address of principal executive offices: 2005 Market Street
Philadelphia, PA 19103
Name and address of agent for service: Richelle S. Maestro, Esq.
2005 Market Street
Philadelphia, PA 19103
Registrant's telephone number, including area code: (800) 523-1918
Date of fiscal year end: November 30
Date of reporting period: May 31, 2004
Item 1. Reports to Stockholders
STRUCTURED EQUITY Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
Semiannual Report MAY 31, 2004
- --------------------------------------------------------------------------------
DELAWARE DIVERSIFIED VALUE FUND
[LOGO] POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
- ---------------------------------------------------------------------
FINANCIAL STATEMENTS:
Statement of Net Assets 1
Statement of Operations 4
Statements of Changes in Net Assets 5
Financial Highlights 6
Notes to Financial Statements 9
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Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
(C) 2004 Delaware Distributors, L.P.
Statement DELAWARE DIVERSIFIED VALUE FUND
OF NET ASSETS May 31, 2004 (Unaudited)
Number of Market
Shares Value
COMMON STOCK - 98.96%
Aerospace & Defense - 2.30%
Goodrich (B.F.) 5,200 $ 145,756
Honeywell International 8,800 296,560
Northrop Grumman 3,300 340,329
Raytheon 4,900 162,925
United Technologies 4,800 406,128
----------
1,351,698
----------
Automobiles & Automotive Parts - 2.11%
Ford Motor 12,000 178,200
General Motors 9,400 426,666
Johnson Controls 5,200 280,384
Lear 1,600 94,768
Paccar 4,700 262,260
----------
1,242,278
----------
Banking - 13.71%
AmSouth Bancorp 5,300 135,044
Associated Banc-Corp 7,500 219,375
Bank of America 26,585 2,210,011
Bank One 9,100 440,895
First Horizon National 6,200 288,734
Golden West Financial 2,500 271,925
Mellon Financial 7,000 206,080
National City 12,400 440,076
PNC Financial Services Group 4,300 237,403
Union Planters 10,800 325,188
US Bancorp 17,700 497,370
Wachovia 20,300 958,363
Washington Mutual 15,000 655,200
Wells Fargo 16,000 940,800
Zions Bancorporation 3,900 239,070
----------
8,065,534
----------
Basic Industry/Capital Goods - 1.05%
General Electric 4,900 152,488
SPX 3,200 139,904
Textron 3,700 202,205
Tyco International 3,900 120,081
----------
614,678
----------
Buildings & Materials - 1.03%
D.R. Horton 6,750 195,075
KB Home 3,000 197,640
Masco 7,300 211,335
----------
604,050
----------
Cable, Media & Publishing - 6.70%
Clear Channel Communications 6,800 269,960
+Comcast Class A 26,200 758,490
+DIRECTV Group 12,200 214,842
Disney (Walt) 13,800 323,886
Knight-Ridder 3,300 250,734
+Liberty Media Class A 32,000 351,360
+Time Warner 61,900 1,054,776
Viacom Class B 19,400 715,666
----------
3,939,714
----------
Number of Market
Shares Value
COMMON STOCK (continued)
Chemicals - 2.50%
Dow Chemical 12,200 $ 486,780
DuPont (E.I.) deNemours 6,500 280,800
Engelhard 7,200 217,944
Lubrizol 4,800 158,928
PPG Industries 2,900 173,420
Sigma-Aldrich 2,700 154,197
----------
1,472,069
----------
Computers & Technology - 3.25%
+Agilent Technologies 3,800 97,660
Factset Research Systems 4,000 174,840
Hewlett-Packard 31,100 660,564
International Business Machines 5,900 522,681
+Sandisk 6,100 150,365
Seagate Technology 5,800 71,340
+Storage Technology 4,600 129,950
Tektronix 3,300 104,148
----------
1,911,548
----------
Consumer Products - 2.96%
Clorox 3,900 204,204
Colgate-Palmolive 2,400 137,280
Deluxe 3,200 137,024
Eastman Kodak 3,600 94,248
Fortune Brands 4,600 346,380
Gillette 4,700 202,523
Kimberly-Clark 4,800 316,320
Procter & Gamble 2,800 301,896
----------
1,739,875
----------
Consumer Services - 0.58%
Cendant 14,800 339,512
----------
339,512
----------
Electronics & Electrical Equipment - 0.79%
+Energizer Holdings 4,400 199,540
Koninklijke Philips Electronics ADR 6,700 183,245
+Sanmina-SCI 7,900 83,582
----------
466,367
----------
Energy - 10.87%
Amerada Hess 1,400 98,826
Anadarko Petroleum 6,000 327,120
Apache 2,600 104,936
Burlington Resources 5,900 394,946
ChevronTexaco 11,600 1,048,640
ConocoPhillips 8,100 593,973
Devon Energy 5,900 350,224
El Paso 29,200 210,532
Exxon Mobil 65,200 2,819,900
Marathon Oil 6,900 230,046
Occidental Petroleum 4,900 216,580
----------
6,395,723
----------
Environmental Services - 0.41%
Waste Management 8,300 238,708
----------
238,708
----------
1
Statement DELAWARE DIVERSIFIED VALUE FUND
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value
COMMON STOCK (continued)
Finance - 12.73%
Bear Stearns 4,500 $ 364,770
Capital One Financial 1,000 70,060
CIT Group 10,100 378,447
Citigroup 62,300 2,892,589
Countrywide Financial 7,000 451,500
Doral Financial 4,400 142,604
Freddie Mac 4,000 233,560
Goldman Sachs Group 4,500 422,595
J.P. Morgan Chase 22,700 836,268
Lehman Brothers Holdings 3,900 295,035
MBNA 9,000 228,600
Merrill Lynch 10,600 602,080
Morgan Stanley 10,500 561,855
+Piper Jaffray 143 6,921
----------
7,486,884
----------
Food, Beverage & Tobacco - 3.48%
Albertson's 5,500 128,865
Altria Group 18,500 887,445
Anheuser-Busch 3,000 159,810
Coca-Cola 1,300 66,755
Hershey Foods 1,200 106,476
Kellogg 4,600 195,040
Kraft Foods Class A 7,800 232,908
RJ Reynolds Tobacco Holdings 1,900 106,780
Tyson Foods Class A 8,000 164,160
----------
2,048,239
----------
Healthcare & Pharmaceuticals - 4.36%
+Anthem 2,900 256,737
Becton Dickinson 900 45,288
Bristol-Myers Squibb 14,500 366,415
GlaxoSmithKline ADR 3,300 140,085
+Health Net Class A 5,600 131,600
Hillenbrand Industries 1,500 88,350
+Lincare Holdings 5,300 178,133
+Medimmune 7,000 168,490
Merck 12,700 600,710
Mylan Laboratories 6,600 147,246
+Tenet Healthcare 14,500 172,840
Wyeth 7,400 266,400
----------
2,562,294
----------
Insurance - 5.26%
Allstate 10,500 461,790
American International Group 9,000 659,700
Berkley (W.R.) 6,300 262,395
MBIA 3,200 177,248
MetLife 9,800 348,390
Nationwide Financial Services Class A 4,900 179,095
Old Republic International 5,800 132,008
Principal Financial Group 4,500 157,275
Progressive 1,600 137,232
Prudential Financial 9,700 429,710
Torchmark 2,800 151,732
----------
3,096,575
----------
Internet Services - 0.34%
+InterActiveCorp 6,400 200,064
----------
200,064
----------
Number of Market
Shares Value
COMMON STOCK (continued)
Leisure, Lodging & Entertainment - 0.49%
Marriott International Class A 5,800 $ 286,114
----------
286,114
----------
Machinery - 1.43%
Black & Decker 2,100 125,853
Caterpillar 4,400 331,540
Cummins 2,900 168,896
Rockwell Automation 6,400 216,704
----------
842,993
----------
Metals & Mining - 0.83%
Alcoa 12,200 381,860
Freeport-McMoRan Copper & Gold Class B 3,200 107,616
----------
489,476
----------
Packaging & Containers - 0.25%
Sonoco Products 5,800 144,420
----------
144,420
----------
Paper & Forest Products - 1.33%
Domtar 9,200 113,528
International Paper 7,500 314,475
Weyerhaeuser 5,900 356,832
----------
784,835
----------
REITs - 2.28%
Apartment Investment & Management 5,200 150,176
Archstone-Smith Trust 4,800 139,440
Duke Realty 4,800 155,328
Equity Office Properties Trust 9,900 266,805
Equity Residential 3,800 111,872
Heritage Property Investment 5,100 137,394
Mack-Cali Realty 4,400 175,824
New Plan Excel Realty Trust 5,400 128,574
ProLogis 2,300 73,738
----------
1,339,151
----------
Retail - 4.04%
+AutoNation 8,700 145,029
Best Buy 4,900 258,524
CVS 8,100 337,608
Federated Department Stores 2,900 138,359
Gap 9,700 234,255
Home Depot 4,100 147,272
Limited Brands 10,100 194,930
McDonald's 20,100 530,640
Sears Roebuck 4,600 174,800
Staples 2,100 57,918
+Yum Brands 4,200 157,500
----------
2,376,835
----------
Technology/Semiconductors - 1.00%
+Agere Systems Class A 13,500 34,290
+Agere Systems Class B 21,700 53,165
+Amkor Technology 4,200 43,176
Intel 9,000 256,950
+Lam Research 1,900 47,747
Linear Technology 3,800 150,708
----------
586,036
----------
2
Statement DELAWARE DIVERSIFIED VALUE FUND
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value
COMMON STOCK (continued)
Technology/Software - 1.09%
Adobe Systems 5,300 $ 236,539
+Citrix Systems 6,300 132,615
Microsoft 6,500 171,275
+Oracle 9,000 101,880
----------
642,309
----------
Telecommunications - 5.94%
BellSouth 21,800 544,128
CenturyTel 5,200 155,428
+Ciena 18,900 68,040
+Cisco Systems 7,100 157,265
+Foundry Networks 2,700 33,318
+Level 3 Communications 26,100 101,790
+Lucent Technologies 20,400 72,828
Motorola 4,700 92,919
Nokia ADR 12,900 177,246
SBC Communications 38,400 910,080
+UTStarcom 5,900 183,579
Verizon Communications 28,800 995,904
----------
3,492,525
----------
Transportation & Shipping - 0.81%
FedEx 4,100 301,678
Union Pacific 3,000 174,960
----------
476,638
----------
Utilities - 5.04%
CenterPoint Energy 13,000 140,920
Dominion Resources 4,800 302,256
Edison International 10,200 246,228
Exelon 12,400 412,920
FPL Group 4,700 299,625
Oneok 7,100 151,727
PPL 7,400 319,310
Public Service Enterprise Group 8,000 337,280
Sempra Energy 5,000 166,850
Southern 5,300 153,276
TECO Energy 8,700 105,792
TXU 8,800 328,856
----------
2,965,040
----------
TOTAL COMMON STOCK (cost $52,302,633) 58,202,182
----------
Principal
Amount
REPURCHASE AGREEMENTS - 0.68%
With BNP Paribas 0.98% 6/1/04
(dated 5/28/04, to be repurchased at
$156,517 collateralized by $117,600
U.S. Treasury Bills due 11/4/04,
market value $116,949, and $42,900
U.S. Treasury Bills due 11/26/04,
market value $42,690) $156,500 156,500
With J.P. Morgan Securities 0.92% 6/1/04
(dated 5/28/04, to be repurchased at
$114,612 collateralized by $114,600
U.S. Treasury Notes 2.875% due 6/30/04,
market value $116,225, and $700
U.S. Treasury Notes 4.75% due 11/15/08,
market value $718) 114,600 114,600
REPURCHASE AGREEMENTS (continued)
Principal Market
Amount Value
With UBS Warburg 0.97% 6/1/04
(dated 5/28/04, to be repurchased at
$129,914 collateralized by $38,200
U.S. Treasury Notes 3.25% due 5/31/04,
market value $38,819, $38,200 U.S. Treasury
Notes 10.75% due 8/15/05, market value
$43,424, $7,900 U.S. Treasury Notes 7.00%
due 7/15/06, market value $8,905,
and $38,200 U.S. Treasury Notes 5.625%
due 5/15/08, market value $41,419) $129,900 $ 129,900
----------
TOTAL REPURCHASE AGREEMENTS (cost $401,000) 401,000
----------
TOTAL MARKET VALUE OF SECURITIES - 99.64%
(cost $52,703,633) 58,603,182
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.36% 211,723
----------
NET ASSETS APPLICABLE TO 5,837,772 SHARES
OUTSTANDING - 100.00% $58,814,905
===========
Net Asset Value - Delaware Diversified Value Fund
Class A ($1,944,177 / 193,099 Shares) $10.07
------
Net Asset Value - Delaware Diversified Value Fund
Class B ($814,242 / 81,157 Shares) $10.03
------
Net Asset Value - Delaware Diversified Value Fund
Class C ($279,026 / 27,809 Shares) $10.03
------
Net Asset Value - Delaware Diversified Value Fund
Institutional Class ($55,777,460 / 5,535,707 Shares) $10.08
------
COMPONENTS OF NET ASSETS AT MAY 31, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $53,548,385
Undistributed net investment income 328,950
Accumulated net realized loss on investments (961,979)
Net unrealized appreciation of investments 5,899,549
-----------
Total net assets $58,814,905
===========
+Non-income producing security for the period ended May 31, 2004.
SUMMARY OF ABBREVIATIONS:
ADR - American Depositary Receipt
REIT - Real Estate Investment Trust
NET ASSET VALUE AND OFFERING PRICE PER SHARE --
DELAWARE DIVERSIFIED VALUE FUND
Net asset value Class A (A) $10.07
Sales charge (5.75% of offering or 6.06%
of the amount invested per share) (B) 0.61
------
Offering price $10.68
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
3
Statement DELAWARE DIVERSIFIED VALUE FUND
OF OPERATIONS Six Months Ended May 31, 2004 (Unaudited)
INVESTMENT INCOME:
Dividends $591,810
Interest 2,499
Foreign tax withheld (121) $ 594,188
-------- ----------
EXPENSES:
Management fees 171,306
Registration fees 19,985
Accounting and administration expenses 8,845
Reports and statements to shareholders 8,000
Distribution expenses -- Class A 2,202
Distribution expenses -- Class B 2,944
Distribution expenses -- Class C 851
Legal and professional fees 2,882
Dividend disbursing and transfer agent fees and expenses 2,810
Trustees' fees 1,423
Custodian fees 1,186
Other 1,195 223,629
--------
Less expenses absorbed or waived (19,422)
Less waiver of distribution expenses - Class A (367)
Less expenses paid indirectly (468)
----------
Total expenses 203,372
----------
NET INVESTMENT INCOME 390,816
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on Investments 1,425,276
Net change in unrealized appreciation/depreciation of investments 1,322,165
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2,747,441
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,138,257
==========
See accompanying notes
4
Statements DELAWARE DIVERSIFIED VALUE FUND
OF CHANGES IN NET ASSETS
Six Months Year
Ended Ended
5/31/04 11/30/03
(Unaudited)
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 390,816 $ 502,811
Net realized gain (loss) on investments 1,425,276 (267,031)
Net change in unrealized appreciation/depreciation of investments 1,322,165 5,422,498
---------- -----------
Net increase in net assets resulting from operations 3,138,257 5,658,278
---------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (7,702) (664)
Class B (1,151) (496)
Class C (360) (60)
Institutional Class (520,206) (280,307)
---------- -----------
(529,419) (281,527)
---------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 2,369,150 642,162
Class B 439,563 366,291
Class C 145,201 122,624
Institutional Class 12,985,640 19,558,554
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 7,395 590
Class B 1,013 400
Class C 360 --
Institutional Class 520,206 280,307
---------- -----------
16,468,528 20,970,928
---------- -----------
Cost of shares repurchased:
Class A (1,181,397) (20,527)
Class B (32,461) (34,406)
Class C (7,739) (30,321)
Institutional Class (1,321,265) (7,339,770)
---------- -----------
(2,542,862) (7,425,024)
---------- -----------
Increase in net assets derived from capital share transactions 13,925,666 13,545,904
---------- -----------
NET INCREASE IN NET ASSETS 16,534,504 18,922,655
NET ASSETS:
Beginning of period 42,280,401 23,357,746
---------- -----------
End of period (including undistributed net investment income of $328,950 and $467,553, respectively) $58,814,905 $42,280,401
----------- -----------
See accompanying notes
5
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Diversified Value Fund Class A
Six Months
Ended Year Ended
5/31/04(2) 11/30/03 11/30/02 11/30/01 11/30/00(1)
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $9.480 $8.300 $9.490 $10.150 $10.690
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income(3) 0.063 0.110 0.113 0.116 0.125
Net realized and unrealized gain (loss) on investments 0.621 1.151 (1.231) (0.309) 0.092
------ ------ ------- ------- -------
Total from investment operations 0.684 1.261 (1.118) (0.193) 0.217
------ ------ ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.094) (0.081) (0.072) (0.103) (0.070)
Net realized gain on investments -- -- -- (0.147) (0.687)
In excess of net realized gain on investments -- -- -- (0.217) --
------ ------ ------- ------- -------
Total dividends and distributions (0.094) (0.081) (0.072) (0.467) (0.757)
------ ------ ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.070 $9.480 $8.300 $9.490 $10.150
======= ====== ======= ======= =======
TOTAL RETURN(4) 7.24% 15.37% (11.88%) (2.11%) 2.32%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $1,944 $717 $42 $22 $23
Ratio of expenses to average net assets 1.00% 1.00% 1.03% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.12% 1.26% 1.60% 1.08% 1.10%
Ratio of net investment income to average net assets 1.25% 1.29% 1.27% 1.18% 1.23%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 1.13% 1.03% 0.70% 0.85% 0.88%
Portfolio turnover 45% 101% 61% 101% 130%
(1) Shares of the Delaware Diversified Value Fund Class A were initially offered
on September 15, 1998. Prior to the fiscal year ended November 30, 2000,
there was a balance of 1 share representing the initial seed purchase.
Financial Highlights for the period ended November 30, 1999 is not presented
because the data is not believed to be meaningful.
(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(3) The average shares outstanding method has been applied for per share
information.
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager and
distributor. Performance would have been lower had the expense limitation
not been in effect.
See accompanying notes
6
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Diversified Delaware Diversified
Value Fund Class B Value Fund Class C
Six Months 5/1/02(1) Six Months 5/1/02(1)
Ended Year Ended to Ended Year Ended to
5/31/04(2) 11/30/03 11/30/02 5/31/04(2) 11/30/03 11/30/02
(Unaudited) (Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $9.420 $8.310 $9.700 $9.420 $8.280 $9.700
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income(3) 0.025 0.044 0.030 0.025 0.044 0.032
Net realized and unrealized gain (loss) on investments 0.612 1.147 (1.420) 0.612 1.155 (1.452)
------ ------ ------- ------- ------- -------
Total from investment operations 0.637 1.191 (1.390) 0.637 1.199 (1.420)
------ ------ ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.027) (0.081) -- (0.027) (0.059) --
------ ------ ------- ------- ------- -------
Total dividends and distributions (0.027) (0.081) -- (0.027) (0.059) --
------ ------ ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.030 $9.420 $8.310 $10.030 $9.420 $8.280
======= ====== ======= ======= ====== =======
TOTAL RETURN(4) 6.77% 14.50% (14.33%) 6.77% 14.60% (14.64%)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $814 $383 $13 $279 $133 $27
Ratio of expenses to average net assets 1.75% 1.75% 1.93% 1.75% 1.75% 1.93%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.82% 1.96% 2.62% 1.82% 1.96% 2.62%
Ratio of net investment income to average net assets 0.50% 0.54% 0.59% 0.50% 0.54% 0.59%
Ratio of net investment income (loss) to average net assets
prior to expense limitation and expenses paid indirectly 0.43% 0.33% (0.10%) 0.43% 0.33% (0.10%)
Portfolio turnover 45% 101% 61% 45% 101% 61%
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(3) The average shares outstanding method has been applied for per share
information.
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
7
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Diversified Value Fund Institutional Class
Six Months
Ended Year Ended
5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $9.500 $8.310 $9.490 $10.150 $10.690 $9.540
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.076 0.132 0.126 0.116 0.125 0.129
Net realized and unrealized gain (loss) on investments 0.621 1.155 (1.234) (0.309) 0.092 1.108
------- ------ ------- ------- ------- -------
Total from investment operations 0.697 1.287 (1.108) (0.193) 0.217 1.237
------- ------ ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.117) (0.097) (0.072) (0.103) (0.070) (0.037)
Net realized gain on investments -- -- -- (0.147) (0.687) (0.050)
In excess of net realized gain on investments -- -- -- (0.217) -- --
------- ------ ------- ------- ------- -------
Total dividends and distributions (0.117) (0.097) (0.072) (0.467) (0.757) (0.087)
------- ------ ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.080 $9.500 $8.310 $9.490 $10.150 $10.690
======= ====== ======= ======= ======= =======
TOTAL RETURN(3) 7.37% 15.70% (11.77%) (2.11%) 2.32% 13.05%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $55,778 $41,047 $23,276 $13,980 $15,327 $5,143
Ratio of expenses to average net assets 0.75% 0.75% 0.87% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 0.82% 0.96% 1.30% 0.78% 0.80% 1.24%
Ratio of net investment income to average net assets 1.50% 1.54% 1.43% 1.18% 1.23% 1.25%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 1.43% 1.33% 1.00% 1.15% 1.18% 0.76%
Portfolio turnover 45% 101% 61% 101% 130% 111%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value. Total investment return reflects a waiver and payment of
fees by the manager. Performance would have been lower had the expense
limitation not been in effect.
See accompanying notes
8
Notes DELAWARE DIVERSIFIED VALUE FUND
TO FINANCIAL STATEMENTS May 31, 2004 (Unaudited)
Delaware Group Equity Funds II (the "Trust") is organized as a Delaware
statutory trust and offers four series: Delaware Diversified Value Fund,
Delaware Large Cap Value Fund (formerly Delaware Decatur Equity Income Fund),
Delaware Growth and Income Fund and Delaware Social Awareness Fund. These
financial statements and the related notes pertain to Delaware Diversified Value
Fund (the "Fund"). The Trust is an open-end investment company. The Fund is
considered diversified under the Investment Company Act of 1940, as amended, and
offers Class A, Class B, Class C, Class R and Institutional Class shares. Class
A shares are sold with a front-end sales charge of up to 5.75%. Class B shares
are sold with a contingent deferred sales charge that declines from 4% to zero
depending upon the period of time the shares are held. Class B shares will
automatically convert to Class A shares on a quarterly basis approximately 8
years after purchase. Class C shares are sold with a contingent deferred sales
charge of 1%, if redeemed during the first twelve months. Class R and
Institutional Class shares are not subject to a sales charge and are offered for
sale exclusively to a limited group of investors. Class R shares have not
commenced operations.
The investment objective of the Fund is to achieve capital appreciation with
current income as a secondary objective.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with U.S. generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation -- Equity securities, except those traded on the Nasdaq Stock
Market, Inc. (NASDAQ), are valued at the last quoted sales price as of the time
of the regular close of the New York Stock Exchange (NYSE) on the valuation
date. Securities traded on the NASDAQ are valued in accordance with the NASDAQ
Official Closing Price, which may not be the last sales price. If on a
particular day an equity security does not trade, then the mean between the bid
and asked prices will be used. Short-term debt securities having less than 60
days to maturity are valued at amortized cost, which approximates market value.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith under the
direction of the Fund's Board of Trustees.
Federal Income Taxes -- The Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements -- The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 102% collateralized. However, in the
event of default or bankruptcy by the counterparty to the agreement, realization
of the collateral may be subject to legal proceedings.
Use of Estimates -- The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and other expenses are paid monthly. Security transactions are
recorded on the date the securities are purchased or sold (trade date). Costs
used in calculating realized gains and losses on the sale of investment
securities are those of the specific securities sold. Dividend income is
recorded on the ex-dividend date and interest income is recorded on the accrual
basis. The Fund declares and pays dividends from net investment income and
distributions from net realized gain from investments, if any, annually.
Through March 31, 2004, certain expenses of the Fund were paid through
commission arrangements with brokers. These transactions are done subject to
best execution. The amount of these expenses was approximately $422 for the
period ended May 31, 2004. In addition, the Fund receives earnings credits from
its custodian when positive cash balances are maintained, which are used to
offset custody fees. The earnings credits for the period ended May 31, 2004 were
approximately $46. The expenses paid under the above arrangements are included
in their respective expense captions on the Statement of Operations with the
corresponding expense offset shown as "expenses paid indirectly".
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENT AND OTHER TRANSACTIONS WITH
AFFILIATES
In accordance with the terms of its investment management agreement, the Fund
pays Delaware Management Company (DMC), a series of Delaware Management Business
Trust and the investment manager, an annual fee which is calculated daily at the
rate of 0.65% on the first $500 million of average daily net assets of the Fund,
0.60% on the next $500 million, 0.55% on the next $1.5 billion and 0.50% on
average daily net assets in excess of $2.5 billion.
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse the Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs and extraordinary expenses, do not
exceed 0.75% of average daily net assets of the Fund through January 31, 2005.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting,
administration, dividend disbursing and transfer agent services. The Fund pays
DSC a monthly fee based on average net assets subject to certain minimums for
accounting and administration services. The Fund pays DSC a monthly fee based on
the number of shareholder accounts for dividend disbursing and transfer agent
services.
Pursuant to a distribution agreement and distribution plan, the Fund pays
Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an
annual distribution and service fee not to exceed 0.30% of the average daily net
assets of the Class A shares, 1.00% of the average daily net assets of the Class
B and C shares, and 0.60% of the average daily net assets of the Class R shares.
DDLP has contracted to waive distribution and service fees through January 31,
2005 in order to prevent distribution and service fees of the Class A shares
from exceeding 0.25% of average daily net assets. Institutional Class shares pay
no distribution and service expenses.
At May 31, 2004, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $28,319
Dividend disbursing, transfer agent,
accounting and administration fees and
other expenses payable to DSC 2,762
Other expenses payable to DMC and affiliates* 4,660
*DMC, as part of its administrative services, pays operating expenses on behalf
of the Fund and is reimbursed on a periodic basis. Such expenses include items
such as printing of shareholder reports, fees for audit, legal and tax
services, registration fees and trustees' fees.
As provided in the investment management agreement the Fund bears the cost of
certain legal services expenses, including in house legal services provided to
the Fund by DMC employees. For the six months ended May 31, 2004, the
Diversified Value Fund had costs of $1,629.
For the period ended May 31, 2004, DDLP earned $1,610 for commissions on sales
of the Fund's Class A shares.
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust.
These officers and trustees are paid no compensation by the Fund.
9
Notes DELAWARE DIVERSIFIED VALUE FUND
TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
For the six months ended May 31, 2004, the Fund made purchases of $24,986,946
and sales of $11,606,392 of investment securities other than short-term
investments.
At May 31, 2004, the cost of investments for federal income tax purposes has
been estimated since the final tax characteristics cannot be determined until
fiscal year end. At May 31, 2004, the cost of investments was $53,540,548. At
May 31, 2004, the net unrealized appreciation was $5,062,634 of which $6,674,620
related to unrealized appreciation of investments and $1,611,986 related to
unrealized depreciation of investments.
4. DIVIDEND AND DISTRIBUTION INFORMATION
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from U.S. generally
accepted accounting principles . The tax character of dividends and
distributions paid during the period ended May 31, 2004 and the year ended
November 30, 2003 was as follows:
5/31/04* 11/30/03
--------- --------
Ordinary income $529,419 $281,527
*Tax information for the period ended May 31, 2004 is an estimate and the tax
character of dividends and distributions may be redesignated at fiscal year
end.
The components of net assets are estimated since final tax characteristics
cannot be determined until fiscal year end. As of May 31, 2004, the estimated
components of net assets on a tax basis were as follows:
Shares of beneficial interest $53,548,385
Undistributed ordinary income 328,950
Capital loss carryforwards (125,064)
Unrealized appreciation of investments 5,062,634
-----------
Net assets $58,814,905
===========
The difference between book basis and tax basis components of net assets are
primarily attributable to tax deferral of wash sales.
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Such capital loss
carryforwards expire as follows: $1,543,872 expires in 2010.
For the six months ended June 30, 2004, the Fund had capital gains of
$1,418,808, which may be offset by the capital loss carryforwards.
5. CAPITAL
Shares Transactions in capital shares were as follows:
Six Months Year
Ended Ended
5/31/04 11/30/03
Shares sold:
Class A 232,965 73,086
Class B 43,662 42,941
Class C 14,500 14,392
Institutional Class 1,294,568 2,338,783
Shares issued upon reinvestment of
dividends and distributions:
Class A 755 73
Class B 103 50
Class C 37 --
Institutional Class 53,137 34,907
--------- ---------
1,639,727 2,504,232
--------- ---------
Shares repurchased:
Class A (116,283) (2,515)
Class B (3,286) (3,831)
Class C (814) (3,588)
Institutional Class (133,318) (852,729)
--------- ---------
(253,701) (862,663)
--------- ---------
Net increase 1,386,026 1,641,569
========= =========
For the six months ended May 31, 2004, 1,929 Class B shares were converted to
1,918 Class A shares valued at $18,852. The amount is included in Class B
redemptions and Class A subscriptions in the table above and the Statement of
Changes in Net Assets.
6. LINE OF CREDIT
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participates in a $177,300,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one-third of their net assets under the agreement. The
Fund had no amount outstanding at May 31, 2004, or at any time during the
period.
7. CONTRACTUAL OBLIGATIONS
The Fund enters into contracts in the normal course of business that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown . However, the Fund has not had prior claims or losses
pursuant to these contracts. Management has reviewed the Fund's existing
contracts and expects the risk of loss to be remote.
10
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This semiannual report is for the information of Delaware Diversified Value Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware Diversified Value Fund and the
Delaware Investments Performance Update for the most recently completed calendar
quarter. The prospectus sets forth details about charges, expenses, investment
objectives, and operating policies of the Fund. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION
JUDE T. DRISCOLL JOSEPH H. HASTINGS INVESTMENT MANAGER
Chairman Executive Vice President and Delaware Management Company
Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA
Philadelphia, PA Delaware Investments Family of Funds
Philadelphia, PA INTERNATIONAL AFFILIATE
WALTER P. BABICH Delaware International Advisers Ltd.
Board Chairman RICHELLE S. MAESTRO London, England
Citadel Construction Corporation Executive Vice President,
King of Prussia, PA Chief Legal Officer and Secretary NATIONAL DISTRIBUTOR
Delaware Investments Family of Funds Delaware Distributors, L.P.
JOHN H. DURHAM Philadelphia, PA Philadelphia, PA
Private Investor
Gwynedd Valley, PA MICHAEL P. BISHOF SHAREHOLDER SERVICING, DIVIDEND
Senior Vice President and Treasurer DISBURSING AND TRANSFER AGENT
JOHN A. FRY Delaware Investments Family of Funds Delaware Service Company, Inc.
President Philadelphia, PA 2005 Market Street
Franklin & Marshall College Philadelphia, PA 19103-7094
Lancaster, PA
FOR SHAREHOLDERS
ANTHONY D. KNERR 800 523-1918
Managing Director
Anthony Knerr & Associates FOR SECURITIES DEALERS AND FINANCIAL
New York, NY INSTITUTIONS REPRESENTATIVES ONLY
800 362-7500
ANN R. LEVEN
Former Treasurer/Chief Fiscal Officer WEB SITE
National Gallery of Art www.delawareinvestments.com
Washington, DC
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
JANET L. YEOMANS
Vice President/Mergers & Acquisitions
3M Corporation
St. Paul, MN
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund uses to determine how
to vote proxies (if any) relating to portfolio securities is available without
charge (i) upon request, by calling 800 523-1918; (ii) on the Fund's website at
http://www.delawareinvestments.com; and (iii) on the Commission's website at
http://www.sec.gov; and beginning no later than August 31, 2004, information (if
any) regarding how the Fund voted proxies relating to portfolio securities
during the most recent 12-month period ended June 30 is available without charge
(i) through the Fund's website at http://www.delawareinvestments.com; and (ii)
on the Commission's website at http://www.sec.gov.
- --------------------------------------------------------------------------------
(8782) Printed in the USA
SA-456 [5/04] IVES 7/04 J9718
Delaware
Investments(SM)
--------------------------------------
VALUE-EQUITY A member of Lincoln Financial Group(R)
Semiannual Report MAY 31, 2004
- --------------------------------------------------------------------------------
DELAWARE LARGE CAP VALUE FUND
[LOGO] POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
- --------------------------------------------------------------------
FINANCIAL STATEMENTS:
Statement of Net Assets 1
Statement of Operations 4
Statements of Changes in Net Assets 5
Financial Highlights 6
Notes to Financial Statements 11
- --------------------------------------------------------------------
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
(C) 2004 Delaware Distributors, L.P.
Statement DELAWARE LARGE CAP VALUE FUND
OF NET ASSETS May 31, 2004 (Unaudited)
Number of Market
Shares Value
COMMON STOCK - 98.77%
Aerospace & Defense - 0.92%
Honeywell International 444,000 $ 14,962,800
------------
14,962,800
------------
Automobiles & Automotive Parts - 2.15%
*General Motors 317,100 14,393,169
Goodrich (B.F.) 734,700 20,593,641
------------
34,986,810
------------
Banking & Finance - 23.44%
American Express 666,700 33,801,690
Bank of America 613,792 51,024,530
Bank One 190,000 9,205,500
Citigroup 1,053,612 48,919,205
Goldman Sachs Group 346,200 32,511,642
J.P. Morgan Chase 1,107,330 40,794,037
*MBNA 1,326,800 33,700,720
Mellon Financial 752,800 22,162,432
Morgan Stanley 785,300 42,021,403
SLM 12,100 463,793
US Bancorp 1,222,600 34,355,060
Wells Fargo 559,000 32,869,200
------------
381,829,212
------------
Buildings & Materials - 1.81%
Ecolab 13,300 405,783
Masco 1,004,700 29,086,065
------------
29,491,848
------------
Cable, Media & Publishing - 4.86%
Gannett 7,200 632,160
Knight-Ridder 213,100 16,191,338
New York Times 375,000 17,486,250
Viacom Class B 787,163 29,038,443
+Westwood One 586,100 15,900,893
------------
79,249,084
------------
Chemicals - 3.60%
Air Products & Chemicals 418,000 20,887,460
*Dow Chemical 929,300 37,079,070
Praxair 17,300 639,927
------------
58,606,457
------------
Computers & Technology - 8.55%
+Cisco Systems 1,108,200 24,546,630
First Data 171,300 7,415,577
Intel 947,000 27,036,850
+Intuit 406,900 15,942,342
Microsoft 639,400 16,848,190
+National Semiconductor 1,108,000 24,010,360
+Oracle 2,070,300 23,435,796
------------
139,235,745
------------
Consumer Products - 3.06%
Clorox 483,400 25,310,824
Procter & Gamble 228,400 24,626,088
------------
49,936,912
------------
Electronics & Electrical Equipment - 4.92%
Eaton 292,600 17,073,210
Emerson Electric 273,100 16,304,070
General Electric 1,503,914 46,801,804
------------
80,179,084
------------
Number of Market
Shares Value
COMMON STOCK (continued)
Energy - 9.86%
*BP Amoco ADR 303,800 $ 16,101,400
ChevronTexaco 192,300 17,383,920
ConocoPhillips 10,766 789,471
Exxon Mobil 1,059,580 45,826,835
*Kerr-McGee 664,700 32,736,475
*+Noble 722,800 24,907,688
Occidental Petroleum 516,800 22,842,560
------------
160,588,349
------------
Food, Beverage & Tobacco - 6.49%
Anheuser-Busch 700,800 37,331,616
Coca-Cola 585,900 30,085,965
General Mills 451,000 20,768,550
PepsiCo 314,000 16,758,180
*Sysco 21,600 810,000
------------
105,754,311
------------
Healthcare & Pharmaceuticals - 9.63%
Abbott Laboratories 448,900 18,499,169
GlaxoSmithKline ADR 376,300 15,973,935
HCA 407,800 15,834,874
*+Health Net Class A 537,200 12,624,200
Merck 432,800 20,471,440
Pfizer 812,785 28,723,822
*+Tenet Healthcare 1,760,000 20,979,200
Wyeth 659,400 23,738,400
------------
156,845,040
------------
Industrial Machinery - 1.45%
Caterpillar 305,000 22,981,750
Ingersoll-Rand Class A 9,600 626,880
------------
23,608,630
------------
Insurance - 4.96%
AFLAC 15,500 629,300
American International Group 31,137 2,282,342
Cigna 300,900 20,401,020
*PMI Group 666,100 28,755,537
Prudential Financial 648,200 28,715,260
------------
80,783,459
------------
Leisure, Lodging & Entertainment - 1.07%
Starwood Hotels & Resorts Worldwide 412,600 17,403,468
------------
17,403,468
------------
Metals & Mining - 1.33%
*Alcoa 691,000 21,628,300
------------
21,628,300
------------
Paper & Forest Products - 2.29%
International Paper 510,608 21,409,793
Weyerhaeuser 262,000 15,845,760
------------
37,255,553
------------
Retail - 1.66%
Limited Brands 738,900 14,260,770
*TJX 513,000 12,778,830
------------
27,039,600
------------
Telecommunications - 3.46%
Alltel 623,400 31,562,742
*BCE 1,247,600 24,827,240
------------
56,389,982
------------
1
Statement DELAWARE LARGE CAP VALUE FUND
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value
COMMON STOCK (continued)
Textiles, Apparel & Furniture - 1.03%
NIKE 236,500 $ 16,826,975
-------------
16,826,975
-------------
Utilities - 2.23%
Dominion Resources 330,100 20,786,397
*FPL Group 242,600 15,465,750
-------------
36,252,147
-------------
TOTAL COMMON STOCK (cost $1,437,613,820) 1,608,853,766
-------------
Principal
Amount
REPURCHASE AGREEMENTS - 1.33%
With BNP Paribas 0.98% 6/1/04
(dated 5/28/04, to be repurchased at
$8,475,923 collateralized by $6,368,000
U.S. Treasury Bills due 11/4/04,
market value $6,334,201, $2,327,000
U.S. Treasury Bills due 11/26/04,
market value $2,312,199) $8,475,000 8,475,000
With J.P. Morgan Securities 0.92% 6/1/04
(dated 5/28/04, to be repurchased at
$6,208,635 collateralized by
$6,208,000 U.S. Treasury Notes 2.875%
due 6/30/04, market value $6,294,991,
$37,000 U.S. Treasury Notes 4.75%
due 11/15/08, market value $38,890) 6,208,000 6,208,000
With UBS Warburg 0.97% 6/1/04
(dated 5/28/04, to be repurchased at
$7,036,758 collateralized by $2,069,000
U.S. Treasury Notes 3.25% due 5/31/04,
market value $2,102,519, $2,069,000
U.S. Treasury Notes 10.75% due
8/15/05, market value $2,351,947,
$432,000 U.S. Treasury Notes 7.00%
due 7/15/06, market value $482,332,
$2,069,442 U.S. Treasury Notes 5.625%
due 5/15/08, market value $2,243,313) 7,036,000 7,036,000
-------------
TOTAL REPURCHASE AGREEMENTS
(cost $21,719,000) 21,719,000
-------------
TOTAL MARKET VALUE OF SECURITIES BEFORE
SECURITIES LENDING COLLATERAL - 100.10%
(cost $1,459,332,820) 1,630,572,766
-------------
SECURITIES LENDING COLLATERAL** - 1.12%
Short-Term Investments
Abbey National New York
1.10% 6/07/04 337,217 337,209
1.19% 10/15/04 311,752 319,609
ABN AMRO Bank Chicago 1.07% 6/07/04 471,349 471,349
ABN AMRO Bank Tokyo 1.10% 7/20/04 336,690 336,687
Barclays 1.10% 8/19/04 511,857 511,790
Bayerische Landesbank 1.154% 8/30/04 269,288 269,306
CDC Ixis 1.485% 11/12/04 538,631 538,699
Citibank 1.06% 7/06/04 538,698 538,699
Citigroup Global Markets 5,521,288 5,521,288
Credit Suisse First Boston 1.60% 12/13/04 538,559 538,699
Deutsche Bank Financial 1.33% 2/22/05 134,651 134,777
Fortis Bank 1.10% 7/26/04 677,989 678,158
Principal Market
Amount Value
SECURITIES LENDING COLLATERAL** (continued)
Short-Term Investments (continued)
General Electric Capital
1.103% 10/25/04 $229,046 $ 229,303
1.118% 2/3/05 202,016 202,295
1.132% 10/04/04 202,039 202,206
Goldman Sachs Group
1.14% 7/20/04 538,673 538,699
1.245% 12/08/03 316,486 316,486
ING Bank
1.06% 6/03/04 269,348 269,349
1.10% 9/30/04 539,063 538,699
Marsh & McLennan 1.291% 6/15/04 344,866 345,590
Merrill Lynch Mortgage Capital
1.163% 7/12/04 538,699 538,699
Morgan Stanley Dean Witter 1.22% 6/28/05 134,675 134,675
Robabank 1.065% 3/02/05 673,366 673,204
Royal Bank of Scotland London
1.06% 7/02/04 673,589 673,584
Societe Generale
1.06% 6/03/04 269,349 269,350
1.148% 12/08/04 538,597 538,597
Svenska Stockholm 1.10% 8/09/04 673,446 673,374
Union Bank of Switzerland 1.13% 12/20/04 674,927 673,374
Wachovia Bank NA 1.127% 11/15/04 538,712 538,930
Wells Fargo Bank 1.04% 6/30/04 673,373 673,374
--------------
TOTAL SECURITIES LENDING COLLATERAL
(cost $18,226,058) 18,226,058
--------------
TOTAL MARKET VALUE OF SECURITIES - 101.22%
(cost $1,477,558,878) 1,648,798,824++
OBLIGATION TO RETURN SECURITIES
LENDING COLLATERAL - (1.12%)** (18,226,058)
LIABILITIES NET OF RECEIVABLES AND
OTHER ASSETS - (0.10%) (1,648,592)
--------------
NET ASSETS APPLICABLE TO 94,996,141
SHARES OUTSTANDING - 100.00% $1,628,924,174
==============
Net Asset Value - Delaware Large Cap Value Fund
Class A ($1,286,411,662 / 74,962,764 Shares) $17.16
------
Net Asset Value - Delaware Large Cap Value Fund
Class B ($198,801,839 / 11,657,576 Shares) $17.05
------
Net Asset Value - Delaware Large Cap Value Fund
Class C ($45,756,203 / 2,666,690 Shares) $17.16
------
Net Asset Value - Delaware Large Cap Value Fund
Class R ($1,043,223 / 60,861 Shares) $17.14
------
Net Asset Value - Delaware Large Cap Value Fund
Institutional Class ($96,911,247 / 5,648,250 Shares) $17.16
------
2
Statement DELAWARE LARGE CAP VALUE FUND
OF NET ASSETS (CONTINUED)
COMPONENTS OF NET ASSETS AT MAY 31, 2004:
Shares of beneficial interest
(unlimited authorization - no par) $1,683,334,306
Undistributed net investment income*** 1,779,283
Accumulated net realized loss on investments (227,429,361)
Net unrealized appreciation of investments 171,239,946
--------------
Total net assets $1,628,924,174
--------------
*Security is fully or partially on loan.
**See Note #8 in "Notes to Financial Statements."
***Undistributed net investment income includes net realized losses on foreign
currencies. Net realized losses on foreign currencies are treated as net
investment income in accordance with provisions of the Internal Revenue Code.
+Non-income producing security for the period ended May 31, 2004.
++Includes $17,933,809 of securities loaned.
+++See Note #4 in "Notes to Financial Statements."
SUMMARY OF ABBREVIATIONS:
ADR - American Depositary Receipts
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE LARGE CAP VALUE FUND
Net asset value Class A (A) $17.16
Sales charge (5.75% of offering price,
or 6.12% of amount invested per share) (B) 1.05
------
Offering price $18.21
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
3
Statement DELAWARE LARGE CAP VALUE FUND
OF OPERATIONS Six Months Ended May 31, 2004 (Unaudited)
INVESTMENT INCOME:
Dividends $13,428,099
Interest 103,230
Securities lending income 57,783 $ 13,589,112
----------- ------------
EXPENSES:
Management fees 3,947,991
Distribution expenses - Class A 1,380,866
Distribution expenses - Class B 602,581
Distribution expenses - Class C 143,328
Distribution expenses - Class R 2,665
Dividend disbursing and transfer agent fees and expenses 1,329,140
Reports and statements to shareholders 287,157
Accounting and administration expenses 239,275
Registration fees 157,267
Legal and professional fees 36,693
Custodian fees 23,164
Trustees' fees 22,000
Other 91,430 8,263,557
-----------
Less expenses paid indirectly (9,683)
------------
Total operating expenses 8,253,874
------------
NET INVESTMENT INCOME 5,335,238
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investments 76,768,467
Foreign currencies (4,144)
------------
Net realized gain 76,764,323
Net change in unrealized appreciation/depreciation of investments (9,654,354)
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES 67,109,969
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $72,445,207
============
See accompanying notes
4
Statements DELAWARE LARGE CAP VALUE FUND
OF CHANGES IN NET ASSETS
Six Months Year
Ended Ended
5/31/04 11/30/03
(Unaudited)
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 5,335,238 $ 12,928,693
Net realized gain (loss) on investments and foreign currencies 76,764,323 (8,142,049)
Net change in unrealized appreciation/depreciation of investments (9,654,354) 123,764,997
------------- --------------
Net increase in net assets resulting from operations 72,445,207 128,551,641
------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (8,584,442) (6,955,180)
Class B (469,649) (36,646)
Class C (89,784) (5,500)
Class R (6,013) (62)
Institutional Class (529,972) (353,397)
------------- --------------
(9,679,860) (7,350,785)
------------- --------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 63,003,492 32,982,623
Class B 6,823,659 8,422,733
Class C 12,936,947 3,775,235
Class R 444,620 647,752
Institutional Class 17,175,879 13,838,801
Net assets from merger(1):
Class A 354,886,323 -
Class B 129,663,370 -
Class C 21,894,855 -
Institutional Class 35,905,405 -
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 7,369,221 5,931,383
Class B 413,644 32,222
Class C 82,376 5,093
Class R 529,932 60
Institutional Class 5,992 353,397
------------- --------------
651,135,715 65,989,299
------------- --------------
Cost of shares repurchased:
Class A (87,877,164) (120,101,777)
Class B (17,283,581) (18,873,009)
Class C (3,724,225) (2,684,627)
Class R (4,733,652) (12,990)
Institutional Class (94,104) (6,647,382)
------------- --------------
(113,712,726) (148,319,785)
------------- --------------
Increase (decrease) in net assets derived from capital share transactions 537,422,989 (82,330,486)
------------- --------------
NET INCREASE IN NET ASSETS 600,188,336 38,870,370
NET ASSETS:
Beginning of period 1,028,735,838 989,865,468
------------- --------------
End of period (including undistributed net investment income of $1,779,283 and
$6,128,049, respectively) $1,628,924,174 $1,028,735,838
============== ==============
(1) See Note #6 in "Notes to Financial Statements."
See accompanying notes
5
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Large Cap Value Fund Class A
Six Months
Ended Year Ended
5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $16.240 $14.320 $16.730 $16.770 $17.200 $21.400
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.077 0.205 0.170 0.182 0.370 0.476
Net realized and unrealized gain (loss) on investments 0.999 1.835 (2.381) (0.062) 0.050 (0.916)
------- ------- ------- ------- ------- -------
Total from investment operations 1.076 2.040 (2.211) 0.120 0.420 (0.440)
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.156) (0.120) (0.199) (0.160) (0.378) (0.540)
Net realized gain on investments -- -- -- -- (0.472) (3.220)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.156) (0.120) (0.199) (0.160) (0.850) (3.760)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $17.160 $16.240 $14.320 $16.730 $16.770 $17.200
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 6.64% 14.34% (13.34%) 0.75% 2.72% (2.50%)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $1,286,412 $895,108 $870,132 $1,132,147 $1,258,738 $1,658,696
Ratio of expenses to average net assets 1.20% 1.20% 1.11% 1.07% 1.12% 1.03%
Ratio of net investment income to average net assets 0.88% 1.40% 1.10% 1.06% 2.30% 2.59%
Portfolio turnover 101% 77% 99% 111% 77% 92%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge.
See accompanying notes
6
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Large Cap Value Fund Class B
Six Months
Ended Year Ended
5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $16.150 $14.240 $16.630 $16.690 $17.120 $21.320
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.014 0.096 0.054 0.054 0.248 0.333
Net realized and unrealized gain (loss) on investments 0.992 1.821 (2.364) (0.063) 0.059 (0.918)
------- ------- ------- ------- ------- -------
Total from investment operations 1.006 1.917 (2.310) (0.009) 0.307 (0.585)
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.106) (0.007) (0.080) (0.051) (0.265) (0.395)
Net realized gain on investments -- -- -- -- (0.472) (3.220)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.106) (0.007) (0.080) (0.051) (0.737) (3.615)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $17.050 $16.150 $14.240 $16.630 $16.690 $17.120
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 6.24% 13.47% (13.96%) (0.05%) 2.01% (3.27%)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $198,802 $74,019 $75,707 $100,419 $99,266 $151,332
Ratio of expenses to average net assets 1.94% 1.94% 1.86% 1.82% 1.88% 1.81%
Ratio of net investment income to average net assets 0.14% 0.66% 0.35% 0.31% 1.54% 1.81%
Portfolio turnover 101% 77% 99% 111% 77% 92%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge.
See accompanying notes
7
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Large Cap Value Fund Class C
Six Months
Ended Year Ended
5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $16.250 $14.320 $16.730 $16.780 $17.220 $21.420
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.013 0.095 0.054 0.053 0.247 0.332
Net realized and unrealized gain (loss) on investments 1.003 1.842 (2.384) (0.052) 0.050 (0.917)
------- ------- ------- ------- ------- -------
Total from investment operations 1.016 1.937 (2.330) 0.001 0.297 (0.585)
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.106) (0.007) (0.080) (0.051) (0.265) (0.395)
Net realized gain on investments -- -- -- -- (0.472) (3.220)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.106) (0.007) (0.080) (0.051) (0.737) (3.615)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $17.160 $16.250 $14.320 $16.730 $16.780 $17.220
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 6.26% 13.53% (14.00%) 0.02% 1.94% (3.25%)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $45,756 $13,764 $11,098 $13,442 $11,372 $19,511
Ratio of expenses to average net assets 1.94% 1.94% 1.86% 1.82% 1.88% 1.81%
Ratio of net investment income to average net assets 0.14% 0.66% 0.35% 0.31% 1.54% 1.81%
Portfolio turnover 101% 77% 99% 111% 77% 92%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge.
See accompanying notes
8
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Large Cap Value Fund Class R
Six Months 6/2/03(1)
Ended to
5/31/04(2) 11/30/03
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $16.230 $15.150
INCOME FROM INVESTMENT OPERATIONS:
Net investment income(3) 0.047 0.072
Net realized and unrealized gain on investments 1.005 1.063
------- -------
Total from investment operations 1.052 1.135
------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.142) (0.055)
------- -------
Total dividends and distributions (0.142) (0.055)
------- -------
NET ASSET VALUE, END OF PERIOD $17.140 $16.230
======= =======
TOTAL RETURN(4) 6.50% 7.51%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $1,043 $654
Ratio of expenses to average net assets 1.54% 1.54%
Ratio of net investment income to average net assets 0.54% 0.91%
Portfolio turnover 101% 77%
(1) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(3) The average shares outstanding method has been applied for per share
information.
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value.
See accompanying notes
9
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Large Cap Value Fund Institutional Class
Six Months Year
Ended Ended
5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $16.240 $14.320 $16.730 $16.770 $17.200 $21.400
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income(2) 0.099 0.242 0.209 0.224 0.408 0.516
Net realized and unrealized gain (loss) on investments 1.000 1.835 (2.380) (0.065) 0.054 (0.913)
------- ------- ------- ------- ------- -------
Total from investment operations 1.099 2.077 (2.171) 0.159 0.462 (0.397)
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.179) (0.157) (0.239) (0.199) (0.420) (0.583)
Net realized gain on investments -- -- -- -- (0.472) (3.220)
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.179) (0.157) (0.239) (0.199) (0.892) (3.803)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $17.160 $16.240 $14.320 $16.730 $16.770 $17.200
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 6.79% 14.64% (13.11%) 1.00% 2.99% (2.27%)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $96,911 $45,191 $32,928 $48,192 $52,020 $89,128
Ratio of expenses to average net assets 0.94% 0.94% 0.86% 0.82% 0.88% 0.81%
Ratio of net investment income to average net assets 1.14% 1.66% 1.35% 1.31% 2.54% 2.81%
Portfolio turnover 101% 77% 99% 111% 77% 92%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value.
See accompanying notes
10
Notes DELAWARE LARGE CAP VALUE FUND
TO FINANCIAL STATEMENTS May 31, 2004 (Unaudited)
Delaware Group Equity Funds II (the "Trust") is organized as a Delaware
statutory trust and offers three series: Delaware Diversified Value Fund,
Delaware Large Cap Value Fund (formerly Delaware Decatur Equity Income Fund),
and Delaware Social Awareness Fund. These financial statements and related notes
pertain to the Delaware Large Cap Value Fund (the "Fund"). The Trust is an
open-end investment company. The Fund is considered diversified under the
Investment Company Act of 1940, as amended, and offers Class A, Class B, Class
C, Class R and Institutional Class shares. Class A shares are sold with a
front-end sales charge of up to 5.75%. Class B shares are sold with a contingent
deferred sales charge that declines from 4% to zero depending upon the period of
time the shares were held. Class B shares will automatically convert to Class A
shares on a quarterly basis approximately eight years after purchase. Class C
shares are sold with a contingent deferred sales charge of 1%, if redeemed
during the first 12 months. Class R and Institutional Class shares are not
subject to a sales charge and are offered for sale exclusively to a limited
group of investors.
The investment objective of the Fund is to seek total return.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with U.S. generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation -- Equity securities, except those traded on the Nasdaq Stock
Market, Inc. (NASDAQ), are valued at the last quoted sales price as of the time
of the regular close of the New York Stock Exchange (NYSE) on the valuation
date. Securities traded on the NASDAQ are valued in accordance with the NASDAQ
Official Closing Price, which may not be the last sales price. If on a
particular day an equity security does not trade, then the mean between the bid
and asked prices will be used. Short-term debt securities having less than 60
days to maturity are valued at amortized cost, which approximates market value.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith under the
direction of the Fund's Board of Trustees.
Federal Income Taxes -- The Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements -- The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 102% collateralized. However, in the
event of default or bankruptcy by the counterparty to the agreement, realization
of the collateral may be subject to legal proceedings.
Use of Estimates -- The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and other expenses are paid monthly. Security transactions are
recorded on the date the securities are purchased or sold (trade date). Costs
used in calculating realized gains and losses on the sale of investment
securities are those of the specific securities sold. Dividend income is
recorded on the ex-dividend date and interest income is recorded on the accrual
basis. The Fund declares and pays dividends from net investment income quarterly
and distributions from net realized gain on investments, if any, annually.
Through March 31, 2004, certain expenses of the Fund were paid through
commission arrangements with brokers. The amount of these expenses was
approximately $9,019 for the six months ended May 31, 2004. In addition, the
Fund receives earnings credits from its custodian when positive cash balances
are maintained, which are used to offset custody fees. The earnings credits for
the six months ended May 31, 2004 were approximately $664. The expenses paid
under the above arrangements are included in their respective expense captions
on the Statement of Operations with the corresponding expense offset shown as
"expenses paid indirectly."
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES
In accordance with the terms of the investment management agreement, the Fund
pays Delaware Management Company (DMC), a series of Delaware Management Business
Trust and the investment manager, an annual fee which is calculated daily at the
rate of 0.65% on the first $500 million of average daily net assets of the Fund,
0.60% on the next $500 million, 0.55% on the next $1.5 billion and 0.50% on
average daily net assets in excess of $2.5 billion.
Effective March 29, 2004, DMC has contractually agreed to waive that portion, if
any, of its management fee and reimburse the Fund to the extent necessary to
ensure that annual operating expenses, exclusive of taxes, interest, brokerage
commissions, distribution fees, certain insurance costs and extraordinary
expenses, do not exceed 0.91% of average daily net assets of the Fund through
March 26, 2005.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting,
administration, dividend disbursing and transfer agent services. The Fund pays
DSC a monthly fee based on average net assets subject to certain minimums for
accounting and administration services. The Fund pays DSC a monthly fee based on
the number of shareholder accounts for dividend disbursing and transfer agent
services.
Pursuant to a distribution agreement and distribution plan, the Fund pays
Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an
annual distribution and service fee not to exceed 0.30% of the average daily net
assets of the Class A shares, 1.00% of the average daily net assets of the Class
B and C shares and 0.60% of the average daily net assets of the Class R shares.
DDLP has contracted to waive distribution and service fees through March 26,
2005 in order to prevent distribution and service fees of Class A shares from
exceeding 0.26% of average daily net assets. Institutional class shares pay no
distribution and service expenses.
At May 31, 2004, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $822,976
Dividend disbursing, transfer agent,
accounting and administration fees
and other expenses payable to DSC 163,619
Other expenses payable to DMC and affiliates* 42,634
*DMC, as part of its administrative services, pays operating expenses on behalf
of the Fund and is reimbursed on a periodic basis. Such expenses include items
such as printing of shareholder reports, fees for audit, legal and tax
services, registration fees and trustees' fees.
11
Notes DELAWARE LARGE CAP VALUE FUND
TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES (CONTINUED)
As provided in the investment management agreement, the Fund bears the cost of
certain legal services expenses, including in-house legal services, provided to
the Fund by DMC employees. For the six months ended May 31, 2004, the Fund had
costs of $2,143.
For the six months ended May 31, 2004, DDLP earned $308,804 for commissions on
sales of the Fund's Class A shares.
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust.
These officers and trustees are paid no compensation by the Fund.
3. INVESTMENTS
For the six months ended May 31, 2004, the Fund made purchases of $658,552,997
and sales of $670,761,436 of investment securities other than U.S. government
securities and short-term investments.
At May 31, 2004, the cost of investments for federal income tax purposes has
been estimated since the final tax characteristics cannot be determined until
fiscal year end. At May 31, 2004, the cost of investment was $1,485,876,130. At
May 31, 2004, net unrealized appreciation was $144,696,636 of which $182,876,280
related to unrealized appreciation of investments and $38,179,644 related to
unrealized depreciation of investments.
4. DIVIDEND AND DISTRIBUTION INFORMATION
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from U.S. generally
accepted accounting principles. The tax character of dividends and distributions
paid during the six months ended May 31, 2004 and the year ended November 30,
2003 was as follows:
Six Months Year
Ended Ended
5/31/04* 11/30/03
------------ ----------
Ordinary income $9,679,860 $7,350,785
*Tax information for the period ended May 31, 2004 is an estimate and the tax
character of dividends and distributions may be redesignated at fiscal year
end.
The components of net assets are estimated since final tax characteristics
cannot be determined until fiscal year end. As of May 31, 2004, the estimated
components of net assets on a tax basis were as follows:
Shares of beneficial interest $1,683,334,306
Undistributed ordinary income 1,779,283
*Capital loss carryforwards (200,886,051)
Unrealized appreciation of investments 144,696,636
--------------
Net assets $1,628,924,174
==============
*The amount of this loss which can be utilized in subsequent years is subject to
an annual limitation due to the Fund merger with Delaware Core Equity Fund,
Delaware Devon Fund and Delaware Growth and Income Fund.
The differences between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales.
At November 30, 2003, for federal income tax purposes, the Fund had capital loss
carryforwards of $277,654,518 which may be carried forward and applied against
future capital gains. Such capital loss carryforwards expire as follows:
$3,323,231 expires in 2006, $2,189,111 expires in 2007, $158,563,995 expires in
2008, $17,089,590 expires in 2009, $55,878,978 expires in 2010, $40,219,972
expires in 2011 and $389,641 expires in 2012. For the six months ended May 31,
2004, the Fund had capital gains of $76,768,467, which may be offset by the
capital loss carryforwards.
5. CAPITAL SHARES
Transactions in capital shares were as follows:
Six Months Year
Ended Ended
5/31/04 11/30/03
Shares sold:
Class A 3,637,757 2,284,578
Class B 400,573 583,138
Class C 744,711 255,741
Class R 25,673 41,125
Institutional Class 995,067 917,732
Shares issued from merger(1):
Class A 20,875,666 --
Class B 7,663,320 --
Class C 1,286,419 --
Institutional Class 2,113,326 --
Shares issued upon reinvestment
of dividends and distributions:
Class A 437,870 407,803
Class B 24,710 2,350
Class C 4,891 369
Class R 356 4
Institutional Class 31,499 24,293
---------- ---------
38,241,838 4,517,133
---------- ---------
Shares repurchased:
Class A (5,113,798) (8,338,255)
Class B (1,014,738) (1,319,726)
Class C (216,440) (183,907)
Class R (5,478) (819)
Institutional Class (275,115) (458,715)
---------- ---------
(6,625,569) (10,301,422)
---------- ---------
Net increase (decrease) 31,616,269 (5,784,289)
========== ==========
(1) See Note #6
For the period ended May 31, 2004, and the year ended November 30, 2003, 194,162
Class B shares were converted to 192,958 Class A shares valued at $3,303,878 and
211,325 Class B shares were converted to 209,990 Class A shares valued at
$3,118,790, respectively. The respective amounts are included in Class B
redemptions and Class A subscriptions in the table above and the Statements of
Changes in Net Assets.
12
Notes DELAWARE LARGE CAP VALUE FUND
TO FINANCIAL STATEMENTS (CONTINUED)
6. FUND MERGER
Effective March 29, 2004, the Fund acquired all of the assets and assumed all of
the liabilities of Delaware Core Equity Fund, Delaware Devon Fund and Delaware
Growth and Income Fund respectively, each an open-end investment company,
pursuant to a Plan and Agreement of Reorganization (the "Reorganization"). The
shareholders of Delaware Core Equity Fund, Delaware Devon Fund and Delaware
Growth and Income Fund received shares of the respective class of the Fund equal
to the aggregate net asset value of their shares prior to the Reorganization
based on the net asset value per share of the respective classes of the Fund.
The Reorganization was treated as a non-taxable event and, accordingly, the
Fund's basis in the securities acquired reflected the historical cost basis as
of the date of transfer. The net assets, net unrealized appreciation and
accumulated net realized loss of Delaware Core Equity Fund, Delaware Devon Fund
and Delaware Growth and Income Fund as of the close of business on March 26,
2004 were as follows:
Accumulated
Net Unrealized Net Realized
Net Assets Appreciation Losses
---------- -------------- ------------
Delaware Core Equity Fund $24,162,687 $3,890,995 $(2,438,179)
Delaware Devon Fund 85,017,709 6,162,170 (64,550,847)
Delaware Growth and
Income Fund 433,169,557 46,754,264 (88,845,597)
------------ ------------ -------------
$542,349,953 $56,807,429 $(155,834,623)
============ ============ =============
The net assets of the Fund prior to the Reorganization were $1,110,631,768.
7. LINE OF CREDIT
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participates in a $177,300,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Fund had no amounts outstanding as of May 31, 2004, or at any time during the
period.
8. SECURITIES LENDING
The Fund, along with other funds in the Delaware Investments Family of Funds,
may lend its securities pursuant to a security lending agreement (Lending
Agreement) with J.P. Morgan Chase. Initial security loans made pursuant to the
Lending Agreement are required to be secured by U.S. Treasury obligations and/or
cash collateral not less than 102% of the market value of the securities issued
in the United States. With respect to each loan, if the aggregate market value
of the collateral held on any business day is less than the aggregate market
value of the securities which are the subject of such loan, the borrower will be
notified to provide additional collateral not less than the applicable
collateral requirements. Cash collateral received is invested in fixed-income
securities, with a weighted average maturity not to exceed 90 days, rated in one
of the top two tiers by Standard & Poor's Ratings Group or Moody's Investors
Service, Inc. or repurchase agreements collateralized by such securities.
However, in the event of default or bankruptcy by the lending agent, realization
and/or retention of the collateral may be subject to legal proceedings. In the
event the borrower fails to return loaned securities and the collateral received
is insufficient to cover the value of the loaned securities and provided such
collateral shortfall is not the result of investment losses, the lending agent
has agreed to pay the amount of the shortfall to the Fund, or at the discretion
of the lending agent, replace the loaned securities. The Fund continues to
record dividends on the securities loaned and is subject to changes in fair
value of the securities loaned that may occur during the term of the loan. The
Fund has the right under the Lending Agreement to recover the securities from
the borrower on demand. The security lending agent and the borrower retain a
portion of the earnings from the collateral investments. The Fund records
security lending income net of such allocation.
At May 31, 2004, the market value of the securities on loan was $17,933,809, for
which cash collateral was received and invested in accordance with the Lending
Agreement. Such investments are presented on the Statement of Net Assets under
the caption "Securities Lending Collateral."
9. CONTRACTUAL OBLIGATIONS
The Fund enters into contracts in the normal course of business that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts. Management has reviewed the Fund's existing
contracts and expects the risk of loss to be remote.
13
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This semiannual report is for the information of Delaware Large Cap Value Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware Large Cap Value Fund and the
Delaware Investments Performance Update for the most recently completed calendar
quarter. The prospectus sets forth details about charges, expenses, investment
objectives, and operating policies of the Fund. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION
JUDE T. DRISCOLL JOSEPH H. HASTINGS INVESTMENT MANAGER
Chairman Executive Vice President and Delaware Management Company
Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA
Philadelphia, PA Delaware Investments Family of Funds
Philadelphia, PA INTERNATIONAL AFFILIATE
WALTER P. BABICH Delaware International Advisers Ltd.
Board Chairman RICHELLE S. MAESTRO London, England
Citadel Construction Corporation Executive Vice President,
King of Prussia, PA Chief Legal Officer and Secretary NATIONAL DISTRIBUTOR
Delaware Investments Family of Funds Delaware Distributors, L.P.
JOHN H. DURHAM Philadelphia, PA Philadelphia, PA
Private Investor
Gwynedd Valley, PA MICHAEL P. BISHOF SHAREHOLDER SERVICING, DIVIDEND
Senior Vice President and Treasurer DISBURSING AND TRANSFER AGENT
JOHN A. FRY Delaware Investments Family of Funds Delaware Service Company, Inc.
President Philadelphia, PA 2005 Market Street
Franklin & Marshall College Philadelphia, PA 19103-7094
Lancaster, PA
FOR SHAREHOLDERS
ANTHONY D. KNERR 800 523-1918
Managing Director
Anthony Knerr & Associates FOR SECURITIES DEALERS AND FINANCIAL
New York, NY INSTITUTIONS REPRESENTATIVES ONLY
800 362-7500
ANN R. LEVEN
Former Treasurer/Chief Fiscal Officer WEB SITE
National Gallery of Art www.delawareinvestments.com
Washington, DC
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
JANET L. YEOMANS
Vice President/Mergers & Acquisitions
3M Corporation
St. Paul, MN
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund uses to determine how
to vote proxies (if any) relating to portfolio securities is available without
charge (i) upon request, by calling 800 523-1918; (ii) on the Fund's website at
http://www.delawareinvestments.com; and (iii) on the Commission's website at
http://www.sec.gov; and beginning no later than August 31, 2004, information (if
any) regarding how the Fund voted proxies relating to portfolio securities
during the most recent 12-month period ended June 30 is available without charge
(i) through the Fund's website at http://www.delawareinvestments.com; and (ii)
on the Commission's website at http://www.sec.gov.
- --------------------------------------------------------------------------------
(8777) Printed in the USA
SA-001 [5/04] IVES 7/04 J9716
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
BLEND
Semiannual Report MAY 31, 2004
- --------------------------------------------------------------------------------
DELAWARE SOCIAL AWARENESS FUND
[LOGO] POWERED BY RESEARCH.(SM)
Table
OF CONTENTS
- --------------------------------------------------------------------
FINANCIAL STATEMENTS:
Statement of Net Assets 1
Statement of Operations 4
Statements of Changes in Net Assets 5
Financial Highlights 6
Notes to Financial Statements 10
- --------------------------------------------------------------------
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
(C) 2004 Delaware Distributors, L.P.
Statement DELAWARE SOCIAL AWARENESS FUND
OF NET ASSETS May 31, 2004 (Unaudited)
Number of Market
Shares Value
COMMON STOCK - 99.53%
Automobiles & Automotive Parts - 1.03%
+Advance Auto Parts 1,200 $ 51,444
ArvinMeritor 5,600 104,160
Johnson Controls 4,300 231,856
Lear 2,100 124,383
---------
511,843
---------
Banking & Finance - 17.59%
American Express 5,700 288,990
AmSouth Bancorp 9,900 252,252
Bank of America 13,832 1,149,857
Bank One 3,000 145,350
Bear Stearns 2,800 226,968
Capital One Financial 1,800 126,108
Charles Schwab 4,100 40,180
CIT Group 6,700 251,049
Citigroup 31,200 1,448,615
Countrywide Financial 2,700 174,150
Doral Financial 3,000 97,230
First Horizon National 3,300 153,681
Freddie Mac 6,000 350,340
Goldman Sachs Group 2,200 206,602
J.P. Morgan Chase 11,400 419,976
KeyCorp 4,100 128,781
MBNA 5,900 149,860
Mellon Financial 8,400 247,296
Merrill Lynch 7,200 408,960
Morgan Stanley 7,900 422,729
National City 2,800 99,372
+Piper Jaffray 138 6,679
PNC Financial Services Group 2,400 132,504
SLM 3,100 118,823
Union Planters 4,800 144,528
US Bancorp 12,995 365,160
Wachovia 6,200 292,702
Washington Mutual 8,100 353,808
Wells Fargo 6,400 376,320
Zions Bancorporation 2,600 159,380
---------
8,738,250
---------
Basic Industry/Capital Goods - 1.64%
+American Standard 10,200 382,704
Teleflex 5,200 241,644
York International 5,100 188,598
---------
812,946
---------
Buildings & Materials - 1.00%
KB HOME 3,700 243,756
Masco 8,800 254,760
---------
498,516
---------
Business Services - 1.64%
Pitney Bowes 5,600 248,248
Republic Services Class A 11,400 328,890
ServiceMaster 19,600 238,336
---------
815,474
---------
Cable, Media & Publishing - 5.67%
Clear Channel Communications 9,100 361,270
+Comcast Class A 5,600 162,120
+Comcast Special Class A 28,000 793,800
Knight-Ridder 1,000 75,980
Number of Market
Shares Value
COMMON STOCK (continued)
Cable, Media & Publishing (continued)
+Liberty Media Class A 33,100 $ 363,438
Omnicom Group 1,600 127,792
+Time Warner 42,200 719,088
Walt Disney 9,100 213,577
----------
2,817,065
----------
Chemicals - 2.37%
Ecolab 13,100 399,681
Lubrizol 2,900 96,019
Praxair 8,600 318,114
Sigma-Aldrich 6,400 365,504
----------
1,179,318
----------
Consumer Non-Durable - 9.56%
Clorox 6,500 340,340
+Coach 5,300 231,133
Coca-Cola Enterprises 10,800 297,540
Deluxe 3,900 166,998
+Energizer Holdings 5,600 253,960
General Mills 3,500 161,175
Gillette 14,400 620,496
Heinz (H.J.) 7,400 276,316
Kellogg 8,700 368,880
McDonald's 15,400 406,560
Newell Rubbermaid 10,496 247,391
Nike 3,600 256,140
Pepsi Bottling Group 7,100 205,900
Sara Lee 12,000 274,800
Sysco 3,500 131,250
Wrigley, (W.M.) Jr. 4,000 251,200
Yum! Brands 6,900 258,750
----------
4,748,829
----------
Consumer Services - 0.48%
Cendant 10,400 238,576
----------
238,576
----------
Electronics & Electrical Equipment - 1.42%
Emerson Electric 7,400 441,780
Koninklijke Philips Electronics ADR 4,900 134,015
Sony ADR 3,500 129,045
----------
704,840
----------
Energy - 4.60%
Apache 10,300 415,708
+BJ Services 7,000 293,230
Burlington Resources 7,000 468,580
EOG Resources 6,000 320,580
+Noble 8,000 275,680
Noble Energy 5,600 253,904
Questar 7,100 260,215
----------
2,287,897
----------
Healthcare & Pharmaceuticals - 17.98%
Abbott Laboratories 27,900 1,149,758
Allergan 2,900 257,810
+American Pharmaceutical Partners 2,300 81,190
+Amgen 9,900 541,530
+Anthem 1,500 132,795
Bard (C.R.) 1,900 213,123
Baxter International 7,600 238,944
Beckman Coulter 2,100 127,050
1
Statement DELAWARE SOCIAL AWARENESS FUND
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value
COMMON STOCK (continued)
Healthcare & Pharmaceuticals (continued)
Becton Dickinson 5,500 $ 276,760
Biomet 2,700 108,324
+Boston Scientific 2,800 124,040
Cardinal Health 3,600 243,756
Eli Lilly 13,300 979,811
+Genentech 5,000 299,050
+Genzyme 4,600 200,468
+Gilead Sciences 3,900 255,294
GlaxoSmithKline ADR 20,800 882,960
Guidant 4,200 228,228
+Health Net Class A 4,600 108,100
Hillenbrand Industries 3,900 229,710
+Hospira 2,850 73,074
+Lincare Holdings 5,800 194,938
+Medimmune 8,900 214,223
Medtronic 10,600 507,740
Mylan Laboratories 7,200 160,632
PerkinElmer 12,000 234,120
+Tenet Healthcare 19,850 236,612
UnitedHealth Group 3,100 202,275
+Wellpoint Health Networks 2,800 312,312
+Zimmer Holdings 1,400 119,490
----------
8,934,117
----------
Insurance - 3.45%
Allstate 4,600 202,308
American International Group 10,262 752,205
Marsh & McLennan 1,900 83,828
MBIA 1,600 88,624
Nationwide Financial Services Class A 3,600 131,580
Old Republic International 3,300 75,108
Principal Financial Group 4,500 157,275
Progressive 1,500 128,655
Prudential Financial 2,200 97,460
----------
1,717,043
----------
Internet Services - 0.94%
+Amazon.com 2,200 106,238
+eBay 1,300 115,440
+InterActiveCorp 7,900 246,954
----------
468,632
----------
Packaging & Containers - 0.77%
+Pactiv 5,000 117,900
Sonoco Products 10,700 266,430
----------
384,330
----------
REITs - 2.21%
Apartment Investment & Management 8,000 231,040
Archstone-Smith Trust 1,800 52,290
Crescent Real Estate Equities 14,300 240,240
Duke Realty 4,000 129,440
Equity Office Properties Trust 8,900 239,855
Equity Residential 2,900 85,376
Heritage Property Investment 3,000 80,820
ProLogis 1,200 38,472
----------
1,097,533
----------
Number of Market
Shares Value
COMMON STOCK (continued)
Retail - 6.54%
Best Buy 9,300 $ 490,668
CVS 9,200 383,456
Dollar General 4,700 91,180
Federated Department Stores 3,100 147,901
Gap 12,300 297,045
Home Depot 14,100 506,472
+Kohl's 5,700 271,092
Limited 7,300 140,890
Nordstrom 7,000 283,850
RadioShack 4,800 145,872
Saks 14,200 213,142
Sears Roebuck 2,800 106,400
Staples 1,900 52,402
Walgreen 3,500 122,535
----------
3,252,905
----------
Technology/Communications - 2.95%
+Ciena 18,100 65,160
+Cisco Systems 54,900 1,216,035
Nokia ADR 13,600 186,864
----------
1,468,059
----------
Technology/Hardware - 3.42%
+Dell 22,400 788,032
+EMC 21,400 240,536
Factset Research Systems 5,100 222,921
Hewlett-Packard 13,332 283,172
+Sandisk 6,800 167,620
----------
1,702,281
----------
Technology/Semiconductors - 4.63%
+Altera 7,700 176,253
+Amkor Technology 3,700 38,036
+Applied Materials 9,100 181,636
Intel 48,800 1,393,240
+Lam Research 1,900 47,747
Texas Instruments 17,800 464,758
----------
2,301,670
----------
Technology/Software - 4.94%
Adobe Systems 6,600 294,558
+Citrix Systems 6,000 126,300
+Electronic Arts 4,000 203,320
+Intuit 2,200 86,196
Microsoft 54,300 1,430,805
+Oracle 27,800 314,696
----------
2,455,875
----------
Telecommunications - 3.67%
BellSouth 9,100 227,136
CenturyTel 3,600 107,604
+Foundry Networks 2,100 25,914
+Juniper Networks 3,900 81,549
+Level 3 Communications 22,200 86,580
+Lucent Technologies 15,800 56,406
+Nextel Communications Class A 11,200 259,056
SBC Communications 24,100 571,170
Telefonos De Mexico ADR 7,400 248,936
+Utstarcom 5,200 161,798
----------
1,826,149
----------
2
Statement DELAWARE SOCIAL AWARENESS FUND
OF NET ASSETS (CONTINUED)
Number of Market
Shares Value
COMMON STOCK (continued)
Transportation & Shipping - 1.03%
FedEx 5,600 $ 412,048
Southwest Airlines 6,300 97,713
-----------
509,761
-----------
TOTAL COMMON STOCK (cost $40,170,046) 49,471,909
-----------
TOTAL MARKET VALUE OF SECURITIES - 99.53%
(cost $40,170,046) 49,471,909
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.47% 235,269
-----------
NET ASSETS APPLICABLE TO 5,090,556 SHARES
OUTSTANDING - 100.00% $49,707,178
===========
Net Asset Value - Delaware Social Awareness Fund
Class A ($19,862,126 / 1,967,079 Shares) $10.10
------
Net Asset Value - Delaware Social Awareness Fund
Class B ($21,666,151 / 2,273,600 Shares) $9.53
------
Net Asset Value - Delaware Social Awareness Fund
Class C ($7,145,574 / 749,507 Shares) $9.53
------
Net Asset Value - Delaware Social Awareness Fund
Institutional Class ($1,033,327 / 100,370 Shares) $10.30
------
COMPONENTS OF NET ASSETS AT MAY 31, 2004:++
Shares of beneficial interest
(unlimited authorization - no par) $57,246,478
Accumulated net realized loss on investments (16,841,163)
Net unrealized appreciation of investments 9,301,863
-----------
Total net assets $49,707,178
-----------
+Non-income producing security for the six months ended May 31, 2004.
++See Note 4 in "Notes to Financial Statements."
SUMMARY OF ABBREVIATIONS:
ADR - American Depositary Receipts
REIT - Real Estate Investment Trust
NET ASSET VALUE AND OFFERING PRICE PER SHARE --
DELAWARE SOCIAL AWARENESS FUND
Net assets value Class A (A) $10.10
Sales charge (5.75% of offering price, or 6.14%
of the amount invested per share) (B) 0.62
------
Offering price $10.72
======
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
3
Statement DELAWARE SOCIAL AWARENESS FUND
OF OPERATIONS Six Months Ended May 31, 2004 (Unaudited)
INVESTMENT INCOME:
Dividends $387,210
Interest 327 $ 387,537
-------- ----------
EXPENSES:
Management fees 188,653
Distribution expenses - Class A 30,308
Distribution expenses - Class B 112,151
Distribution expenses - Class C 34,436
Dividend disbursing and transfer agent fees and expenses 160,900
Registration fees 23,750
Reports and statements to shareholders 21,795
Accounting and administration expenses 9,275
Legal and professional fees 3,086
Custodian fees 1,773
Trustees' fees 1,572
Other 1,912 589,611
--------
Less expenses absorbed or waived by investment manager (97,332)
Less waiver of distribution expenses - Class A (5,051)
Less expenses paid indirectly (403)
----------
Total expenses 486,825
----------
NET INVESTMENT LOSS (99,288)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 1,576,472
Net change in unrealized appreciation/depreciation of investments 1,101,367
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2,677,839
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,578,551
==========
See accompanying notes
4
Statements DELAWARE SOCIAL AWARENESS FUND
OF CHANGES IN NET ASSETS
Six Months Year
Ended Ended
5/31/04 11/30/03
(Unaudited)
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment loss $ (99,288) $ (214,557)
Net realized gain (loss) on investments 1,576,472 (3,078,229)
Net change in unrealized appreciation/depreciation of investments 1,101,367 11,081,813
----------- -----------
Net increase in net assets resulting from operations 2,578,551 7,789,027
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Class A 2,232,511 2,961,003
Class B 809,313 1,417,132
Class C 1,210,510 969,314
Institutional Class 260,329 205,257
----------- -----------
4,512,663 5,552,706
----------- -----------
Cost of shares repurchased:
Class A (3,128,820) (4,853,548)
Class B (2,412,998) (4,557,684)
Class C (645,182) (1,077,760)
Institutional Class (40,145) (106,021)
----------- -----------
(6,227,145) (10,595,013)
----------- -----------
Decrease in net assets derived from capital share transactions (1,714,482) (5,042,307)
----------- -----------
NET INCREASE IN NET ASSETS 864,069 2,746,720
NET ASSETS:
Beginning of period 48,843,109 46,096,389
----------- -----------
End of period (there is no undistributed net investment income at each period end) $49,707,178 $48,843,109
=========== ===========
See accompanying notes
5
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Social Awareness Fund Class A
Six Months
Ended Year Ended
5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $9.570 $8.030 $9.620 $11.820 $13.010 $11.260
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)(2) 0.001 (0.004) (0.007) (0.039) (0.064) (0.043)
Net realized and unrealized gain (loss) on investments 0.529 1.544 (1.583) (0.991) (0.981) 1.793
------- ------- ------- ------- ------- -------
Total from investment operations 0.530 1.540 (1.590) (1.030) (1.045) 1.750
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net realized gain on investments -- -- -- (1.170) (0.145) --
------- ------- ------- ------- ------- -------
Total dividends and distributions -- -- -- (1.170) (0.145) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.100 $9.570 $8.030 $9.620 $11.820 $13.010
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 5.54% 19.18% (16.53%) (9.80%) (8.15%) 15.44%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $19,862 $19,670 $18,391 $26,043 $36,206 $46,354
Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.50% 1.50% 1.49%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.94% 2.00% 1.90% 1.75% 1.63% 1.69%
Ratio of net investment income (loss) to average net assets 0.04% (0.04%) (0.08%) (0.39%) (0.45%) (0.35%)
Ratio of net investment loss to average net assets prior
to expense limitation and expenses paid indirectly (0.40%) (0.54%) (0.48%) (0.64%) (0.58%) (0.55%)
Portfolio turnover 37% 60% 34% 50% 68% 28%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager and
distributor. Performance would have been lower had the expense limitation
not been in effect.
See accompanying notes
6
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Social Awareness Fund Class B
Six Months
Ended Year Ended
5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $9.060 $7.670 $9.250 $11.490 $12.740 $11.120
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss(2) (0.034) (0.062) (0.069) (0.113) (0.155) (0.133)
Net realized and unrealized gain (loss) on investments 0.504 1.452 (1.511) (0.957) (0.950) 1.753
------- ------- ------- ------- ------- -------
Total from investment operations 0.470 1.390 (1.580) (1.070) (1.105) 1.620
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net realized gain on investments -- -- -- (1.170) (0.145) --
------- ------- ------- ------- ------- -------
Total dividends and distributions -- -- -- (1.170) (0.145) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $9.530 $9.060 $7.670 $9.250 $11.490 $12.740
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 5.19% 18.12% (17.08%) (10.49%) (8.80%) 14.57%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $21,666 $22,145 $21,737 $30,376 $36,301 $41,091
Ratio of expenses to average net assets 2.25% 2.25% 2.25% 2.25% 2.25% 2.24%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 2.64% 2.70% 2.60% 2.45% 2.33% 2.39%
Ratio of net investment loss to average net assets (0.71%) (0.79%) (0.83%) (1.14%) (1.20%) (1.10%)
Ratio of net investment loss to average net assets prior
to expense limitation and expenses paid indirectly (1.10%) (1.24%) (1.18%) (1.34%) (1.28%) (1.25%)
Portfolio turnover 37% 60% 34% 50% 68% 28%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
7
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Social Awareness Fund Class C
Six Months
Ended Year Ended
5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $9.070 $7.670 $9.260 $11.490 $12.740 $11.120
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss(2) (0.033) (0.062) (0.069) (0.113) (0.154) (0.133)
Net realized and unrealized gain (loss) on investments 0.493 1.462 (1.521) (0.947) (0.951) 1.753
------- ------- ------- ------- ------- -------
Total from investment operations 0.460 1.400 (1.590) (1.060) (1.105) 1.620
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net realized gain on investments -- -- -- (1.170) (0.145) --
------- ------- ------- ------- ------- -------
Total dividends and distributions -- -- -- (1.170) (0.145) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $9.530 $9.070 $7.670 $9.260 $11.490 $12.740
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 5.07% 18.25% (17.17%) (10.39%) (8.80%) 14.57%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $7,146 $6,258 $5,418 $9,115 $10,459 $9,673
Ratio of expenses to average net assets 2.25% 2.25% 2.25% 2.25% 2.25% 2.24%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 2.64% 2.70% 2.60% 2.45% 2.33% 2.39%
Ratio of net investment loss to average net assets (0.71%) (0.79%) (0.83%) (1.14%) (1.20%) (1.10%)
Ratio of net investment loss to average net assets prior
to expense limitation and expenses paid indirectly (1.10%) (1.24%) (1.18%) (1.34%) (1.28%) (1.25%)
Portfolio turnover 37% 60% 34% 50% 68% 28%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager.
Performance would have been lower had the expense limitation not been in
effect.
See accompanying notes
8
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
Delaware Social Awareness Fund Institutional Class
Six Months
Ended Year Ended
5/31/04(1) 11/30/03 11/30/02 11/30/01 11/30/00 11/30/99
(Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $9.740 $8.160 $9.750 $11.930 $13.090 $11.310
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income (loss)(2) 0.014 0.017 0.015 (0.014) (0.024) (0.012)
Net realized and unrealized gain (loss) on investments 0.546 1.563 (1.605) (0.996) (0.991) 1.792
------- ------- ------- ------- ------- -------
Total from investment operations 0.560 1.580 (1.590) (1.010) (1.015) 1.780
------- ------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net realized gain on investments -- -- -- (1.170) (0.145) --
------- ------- ------- ------- ------- -------
Total dividends and distributions -- -- -- (1.170) (0.145) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $10.300 $9.740 $8.160 $9.750 $11.930 $13.090
======= ======= ======= ======= ======= =======
TOTAL RETURN(3) 5.75% 19.36% (16.31%) (9.52%) (7.87%) 15.74%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $1,033 $770 $550 $533 $337 $329
Ratio of expenses to average net assets 1.25% 1.25% 1.25% 1.25% 1.25% 1.24%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly 1.64% 1.70% 1.60% 1.45% 1.33% 1.39%
Ratio of net investment income (loss) to average net assets 0.29% 0.21% 0.17% (0.14%) (0.20%) (0.10%)
Ratio of net investment loss to average net assets prior
to expense limitation and expenses paid indirectly (0.10%) (0.24%) (0.18%) (0.34%) (0.28%) (0.25%)
Portfolio turnover 37% 60% 34% 50% 68% 28%
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) The average shares outstanding method has been applied for per share
information.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value. Total investment return reflects a waiver and payment of
fees by the manager. Performance would have been lower had the expense
limitation not been in effect.
See accompanying notes
9
Notes DELAWARE SOCIAL AWARENESS FUND
TO FINANCIAL STATEMENTS May 31, 2004 (Unaudited)
Delaware Group Equity Funds II (the "Trust") is organized as a Delaware
statutory trust and offers three series: Delaware Diversified Value Fund,
Delaware Large Cap Value (formerly Delaware Decatur Equity Income Fund), and
Delaware Social Awareness Fund. These financial statements and the related notes
pertain to Delaware Social Awareness Fund (the "Fund"). The Trust is an open-end
investment company. The Fund is considered diversified under the Investment
Company Act of 1940, as amended, and offers Class A, Class B, Class C, Class R
and Institutional Class shares. Class A shares are sold with a front-end sales
charge of up to 5.75%. Class B shares are sold with a contingent deferred sales
charge that declines from 4% to zero depending upon the period of time the
shares are held. Class B shares will automatically convert to Class A shares on
a quarterly basis approximately eight years after purchase. Class C shares are
sold with a contingent deferred sales charge of 1%, if redeemed during the first
12 months. Class R and Institutional Class shares are not subject to a sales
charge and are offered for sale exclusively to a limited group of investors. As
of May 31, 2004, Class R had not commenced operations.
The investment objective of the Fund is to seek long-term capital appreciation.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with U.S. generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation -- Equity securities, except those traded on the Nasdaq Stock
Market, Inc. ("NASDAQ") are valued at the last quoted sales price as of the time
of the regular close of the New York Stock Exchange (NYSE) on the valuation
date. Securities traded on the NASDAQ are valued in accordance with the NASDAQ
Official Closing Price, which may not be the last sales price. If on a
particular day an equity security does not trade, then the mean between the bid
and asked prices will be used. Short-term debt securities having less than 60
days to maturity are valued at amortized cost, which approximates market value.
Other securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith under the
direction of the Fund's Board of Trustees.
Federal Income Taxes -- The Fund intends to continue to qualify for federal
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements -- The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 102% collateralized. However, in the
event of default or bankruptcy by the counterparty to the agreement, realization
of the collateral may be subject to legal proceedings.
Use of Estimates -- The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Other -- Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Management fees and other expenses are paid monthly. Security transactions are
recorded on the date the securities are purchased or sold (trade date). Costs
used in calculating realized gains and losses on the sale of investment
securities are those of the specific securities sold. Dividend income is
recorded on the ex-dividend date and interest income is recorded on the accrual
basis. Distributions received from investments in Real Estate Investment Trusts
(REITs) are recorded as dividend income on the ex-dividend date, subject to
reclassification upon notice of the character of such distribution by the
issuer. The Fund declares and pays dividends from net investment income and
distributions from net realized gain on investments, if any, annually.
Through March 31, 2004, certain expenses of the Fund were paid through
commission arrangements with brokers. The amount of these expenses was
approximately $402 for the six months ended May 31, 2004. In addition, the Fund
may receive earnings credits from its custodian when positive cash balances are
maintained, which are used to offset custody fees. There were no earnings
credits for the six months ended May 31, 2004. The expenses paid under the above
arrangements are included in their respective expense captions on the Statement
of Operations with the corresponding expense offset shown as "expenses paid
indirectly."
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES
In accordance with the terms of its investment management agreement, the Fund
pays Delaware Management Company (DMC), a series of Delaware Management Business
Trust and the investment manager, an annual fee which is calculated daily at the
rate of 0.75% on the first $500 million of average daily net assets of the Fund,
0.70% on the next $500 million, 0.65% on the next $1.5 billion, and 0.60% on
average daily net assets in excess of $2.5 billion.
DMC has contractually agreed to waive that portion, if any, of its management
fee and reimburse the Fund to the extent necessary to ensure that annual
operating expenses, exclusive of taxes, interest, brokerage commissions,
distribution fees, certain insurance costs and extraordinary expenses, do not
exceed 1.25% of average daily net assets of the Fund through January 31, 2005.
Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting,
administration, dividend disbursing and transfer agent services. The Fund pays
DSC a monthly fee based on average net assets subject to certain minimums for
accounting and administration services. The Fund pays DSC a monthly fee based on
number of shareholder accounts for dividend disbursing and transfer agent
services.
Pursuant to a distribution agreement and distribution plan, the Fund pays
Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an
annual distribution and service fee not to exceed 0.30% of the average daily net
assets of the Class A shares and 1.00% of the average daily net assets of the
Class B and C shares and 0.60% of the average daily net assets of Class R
shares. Institutional Class shares pay no distribution and service expenses.
DDLP has contracted to waive distribution and service fees through January 31,
2005 in order to prevent distribution and service fees of Class A shares from
exceeding 0.25% of average daily net assets.
At May 31, 2004, the Fund had liabilities payable to affiliates as follows:
Investment management fee payable to DMC $5,976
Dividend disbursing, transfer agent fees,
accounting and administration fees and
other expenses payable to DSC 18,377
Other expenses payable to DMC and affiliates* 11,287
*DMC, as part of its administrative services, pays operating expenses on behalf
of the Fund and is reimbursed on a periodic basis. Such expenses include items
such as printing of shareholder reports, fees for audit, legal and tax
services, registration fees and trustees' fees.
10
Notes DELAWARE SOCIAL AWARENESS FUND
TO FINANCIAL STATEMENTS (CONTINUED)
2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH
AFFILIATES (CONTINUED)
As provided in the investment management agreement the Fund bears the cost of
certain legal services expenses, including in house legal services provided to
the Fund by DMC employees. For the six months ended May 31, 2004, the Fund had
costs of $1,746.
For the six months ended May 31, 2004, DDLP earned $8,140 commissions on sales
of the Fund's Class A shares.
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Trust.
These officers and trustees are paid no compensation by the Fund.
3. INVESTMENTS
For the six months ended May 31, 2004, the Fund made purchases of $9,157,848 and
sales of $11,072,273 of investment securities other than short-term investments.
At May 31, 2004, the cost of investments for federal income tax purposes has
been estimated since the final tax characteristics cannot be determined until
fiscal year end. At May 31, 2004, the cost of investments was $40,498,344. At
May 31, 2004, the net unrealized appreciation was $8,973,565, of which
$10,121,439 relate to unrealized appreciation of investments and $1,147,874
related to unrealized depreciation of investments.
4. DIVIDEND AND DISTRIBUTION INFORMATION
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States. There were no dividends and
distributions paid during the six months ended May 31, 2004 and the year ended
November 30, 2003.
The components of net assets are estimated since final tax characteristics
cannot be determined until fiscal year end. As of May 31, 2004, the components
of net assets on a tax basis were as follows:
Shares of beneficial interest $57,246,478
Capital loss carryforwards (16,512,865)
Unrealized appreciation of investments 8,973,565
-----------
Net assets $49,707,178
===========
The difference between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales.
For financial reporting purposes, capital accounts and distributions to
shareholders are adjusted to reflect the tax character of book/tax differences.
For the six months ended May 31, 2004, the Fund recorded an estimate of these
differences since the final tax characteristics cannot be determined until
fiscal year end. Reclassifications are primarily due to tax treatment of net
operating losses. Results of operations and net assets were not affected by
these reclassifications.
Undistributed net investment income $99,288
Paid-in capital (99,288)
At November 30, 2003, for federal income tax purposes, the Fund had capital loss
carryforwards of $18,089,337 which may be carried forward and applied against
future capital gains. Such capital loss carryforwards expire as follows:
$2,183,250 expires in 2009, $13,031,715 expires in 2010 and $2,874,372 expires
in 2011.
For the six months ended May 31, 2004, the Fund had capital gains of $1,576,472,
which may be offset by the capital loss carryforwards.
5. CAPITAL SHARES
Transactions in capital shares were as follows:
Six Months Year
Ended Ended
5/31/04 11/30/03
Shares sold:
Class A 222,342 353,669
Class B 84,763 181,715
Class C 127,572 120,566
Institutional Class 25,233 24,548
-------- ----------
459,910 680,498
-------- ---------
Shares repurchased:
Class A (311,514) (586,394)
Class B (254,891) (572,463)
Class C (68,344) (136,574)
Institutional ass (3,890) (12,942)
-------- ----------
(638,639) (1,308,373)
-------- ----------
Net decrease (178,729) (627,875)
-------- ----------
For the six months ended May 31, 2004 and the year ended November 30, 2003, 742
Class B shares were converted to 701 Class A shares valued at $7,060 and 3,126
Class B shares were converted to 2,977 Class A shares valued at $24,653,
respectively. The respective amounts are included in Class B redemptions and
Class A subscriptions in the table above and the Statements of Changes in Net
Assets.
6. LINE OF CREDIT
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participates in a $177,300,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Fund had no amounts outstanding as of May 31, 2004, or at any time during the
period.
7. CREDIT AND MARKET RISKS
The Fund only invests in companies that meet its definition of "socially
responsible" and may be subject to certain risks as a result of investing
exclusively in socially responsible companies. By avoiding certain companies not
considered socially responsible, it could miss out on strong performance from
those companies.
The Fund invests in REITs and is subject to some of the risks associated with
that industry. If the Fund holds real estate directly as a result of defaults or
receives rental income directly from real estate holdings, its tax status as a
regulated investment company may be jeopardized. There were no direct holdings
during the six months ended May 31, 2004. The Fund's REIT holdings are also
affected by interest rate changes, particularly if the REITs it holds use
floating rate debt to finance their ongoing operations.
8. CONTRACTUAL OBLIGATIONS
The Fund enters into contracts in the normal course of business that contain a
variety of indemnifications. The Fund's maximum exposure under these
arrangements is unknown. However, the Fund has not had prior claims or losses
pursuant to these contracts. Management has reviewed the Fund's existing
contracts and expects the risk of loss to be remote.
11
Delaware
Investments(SM)
- --------------------------------------
A member of Lincoln Financial Group(R)
This semiannual report is for the information of Delaware Social Awareness Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current prospectus for Delaware Social Awareness Fund and the
Delaware Investments Performance Update for the most recently completed calendar
quarter. The prospectus sets forth details about charges, expenses, investment
objectives, and operating policies of the Fund. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
BOARD OF TRUSTEES AFFILIATED OFFICERS CONTACT INFORMATION
JUDE T. DRISCOLL JOSEPH H. HASTINGS INVESTMENT MANAGER
Chairman Executive Vice President and Delaware Management Company
Delaware Investments Family of Funds Chief Financial Officer Philadelphia, PA
Philadelphia, PA Delaware Investments Family of Funds
Philadelphia, PA INTERNATIONAL AFFILIATE
WALTER P. BABICH Delaware International Advisers Ltd.
Board Chairman RICHELLE S. MAESTRO London, England
Citadel Construction Corporation Executive Vice President,
King of Prussia, PA Chief Legal Officer and Secretary NATIONAL DISTRIBUTOR
Delaware Investments Family of Funds Delaware Distributors, L.P.
JOHN H. DURHAM Philadelphia, PA Philadelphia, PA
Private Investor
Gwynedd Valley, PA MICHAEL P. BISHOF SHAREHOLDER SERVICING, DIVIDEND
Senior Vice President and Treasurer DISBURSING AND TRANSFER AGENT
JOHN A. FRY Delaware Investments Family of Funds Delaware Service Company, Inc.
President Philadelphia, PA 2005 Market Street
Franklin & Marshall College Philadelphia, PA 19103-7094
Lancaster, PA
FOR SHAREHOLDERS
ANTHONY D. KNERR 800 523-1918
Managing Director
Anthony Knerr & Associates FOR SECURITIES DEALERS AND FINANCIAL
New York, NY INSTITUTIONS REPRESENTATIVES ONLY
800 362-7500
ANN R. LEVEN
Former Treasurer/Chief Fiscal Officer WEB SITE
National Gallery of Art www.delawareinvestments.com
Washington, DC
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
JANET L. YEOMANS
Vice President/Mergers & Acquisitions
3M Corporation
St. Paul, MN
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund uses to determine how
to vote proxies (if any) relating to portfolio securities is available without
charge (i) upon request, by calling 800 523-1918; (ii) on the Fund's website at
http://www.delawareinvestments.com; and (iii) on the Commission's website at
http://www.sec.gov; and beginning no later than August 31, 2004, information (if
any) regarding how the Fund voted proxies relating to portfolio securities
during the most recent 12-month period ended June 30 is available without charge
(i) through the Fund's website at http://www.delawareinvestments.com; and (ii)
on the Commission's website at http://www.sec.gov.
- --------------------------------------------------------------------------------
(8779) Printed in the USA
SA-147 [5/04] IVES 7/04 J9717
Item 2. Code of Ethics
Not applicable.
Item 3. Audit Committee Financial Expert
Not applicable.
Item 4. Principal Accountant Fees and Services
Not applicable.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 10. Controls and Procedures
The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures
within 90 days of the filing of this report and have concluded that they are
effective in providing reasonable assurance that the information required to be
disclosed by the registrant in its reports or statements filed under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission.
There were no significant changes in the registrant's internal control
over financial reporting that occurred during the registrant's last fiscal
half-year that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
Item 11. Exhibits
(a) (1) Code of Ethics
Not applicable.
(2) Certifications of Principal Executive Officer and Principal
Financial Officer pursuant to Rule 30a-2 under the Investment
Company Act of 1940 are attached hereto as Exhibit 99.CERT.
(3) Written solicitations to purchase securities pursuant to Rule
23c-1 under the Securities Exchange Act of 1934.
Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 are furnished herewith as Exhibit 99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf, by the undersigned, thereunto duly authorized.
DELAWARE GROUP EQUITY FUNDS II
Jude T. Driscoll
- --------------------------------
By: Jude T. Driscoll
Title: Chairman
Date: July 30, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Jude T. Driscoll
- --------------------------------
By: Jude T. Driscoll
Title: Chairman
Date: July 30, 2004
Joseph H. Hastings
- --------------------------------
By: Joseph H. Hastings
Title: Chief Financial Officer
Date: July 30, 2004