N-30D 1 n30d.txt N-30D Delaware Investments(SM) ------------------------------------- A member of Lincoln Financial Group(R) [BLEND ARTWORK] BLEND Semiannual Report 2002 DELAWARE Social Awareness Fund [LOGO] POWERED BY RESEARCH.(SM) A Commitment to Our Investors Experience o Our seasoned investment professionals average 12 years experience, bringing a wealth of knowledge and expertise to our management team. o We trace our origins to 1929 and opened our first mutual fund in 1938. Over the past 73 years, we have weathered a wide range of economic and market environments. Performance o We strive to deliver consistently good performance in all asset classes. o We believe that hiring the best and the brightest in the industry, conducting fundamental research, and working in a disciplined investment process are essential to quality investment management. Service o We are committed to providing the highest standards of client service. o You can count on quick and courteous service, easy access to information about your accounts, and hassle-free transaction processing. o We make our funds available through financial advisors who can offer you individualized attention and valuable investment advice. Diversification o Our comprehensive family of funds gives you the opportunity to diversify your portfolio effectively. o We offer mutual funds in virtually every asset class from domestic equity and fixed income to international securities. Our commitments have earned us the confidence of discriminating institutional and individual investors. Delaware Management Company and its affiliates managed more than $87 billion in assets as of June 30, 2002. 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)Delaware Distributors, L.P. Table of Contents Letter to Shareholders 1 Portfolio Management Review 2 At Delaware 4 Performance Summary 5 Financial Statements: Statement of Net Assets 6 Statement of Operations 9 Statements of Changes in Net Assets 10 Financial Highlights 11 Notes to Financial Statements 15 Letter Delaware Social Awareness Fund to Shareholders June 11, 2002 Recap of Events During the six months ended May 31, 2002, the economy showed signs of renewed strength after a brief and mild recession that appeared to end in November. In the first quarter of 2002, the U.S. economy grew by an annualized rate of +6.1% as measured by gross domestic product (GDP). However, unemployment rates continued to rise, peaking at a 7 1/2 year high of six% in April. Meanwhile, corporations struggled to resume steady and strong sales and earnings growth. The Federal Reserve's aggressive interest rate cuts (11 reductions to the fed funds rate throughout 2001) seem to be beginning to take effect. It can take nine months or longer for interest rate reductions to be felt throughout the economy. However, the effects have yet to be reflected in rising corporate profits or renewed investor confidence. Complicating things is the skepticism investors have displayed regarding corporate accounting practices in the aftermath of the Enron meltdown and discouraging revelations elsewhere. Clearly, it will take time to shake off the negativity surrounding market news coming out of this very difficult period. Delaware Social Awareness Fund returned -3.95% during the six months ended May 31, 2002 (Class A shares at net asset value with distributions reinvested), while the S&P 500 Index lost -5.67% and the Lipper Multi-Cap Core Funds Average fell -3.05%. Market Outlook We continue to expect market volatility, as investors remain skeptical in the wake of the Enron collapse and other corporate accounting and reporting uncertainties. Investors will need compelling reasons to begin buying and holding stocks again, which should happen naturally once corporations begin accurately reporting profit growth amidst the economic recovery. Barring an energy crisis or a worsening of the situation in the Middle East, we think investors could see strong earnings improvements in the second half of 2002, within the context of a fairly modest economic recovery. Ultimately, we expect that steady economic growth, low inflation, low interest rates and high levels of productivity will lead to improved profitability. Due to the modest expected rate of economic recovery, we currently do not expect to see any fed funds rate increases for at least several months. Overall, we see plenty of investment opportunities beginning to unfold. We expect that long-term investors will continue to benefit from the broad diversification and conservative, value-oriented investment style that Delaware Social Awareness Fund offers. Thank you for your continued confidence in, and commitment to, Delaware Investments. Sincerely, /s/ Charles E. Haldeman, Jr. -------------------------------------- Charles E. Haldeman, Jr. Chairman, Delaware Investments Family of Funds /s/ David K. Downes -------------------------------------- David K. Downes President and Chief Executive Officer, Delaware Investments Family of Funds Total Return For the period ended May 31, 2002 Six Months Delaware Social Awareness Fund -- Class A Shares -3.95% Lipper Multi-Cap Core Funds Average (409 funds) -3.05% Standard & Poor's 500 Index -5.67% ------------------------------------------------------------------------------- All performance shown above is at net asset value without the effect of sales charges and assumes reinvestment of all distributions. Performance information for all Fund classes can be found on page 5. The Lipper Multi-Cap Core Funds Average represents the average return of multi-cap core funds tracked by Lipper (Source: Lipper Inc.). The S&P 500 Index is an unmanaged composite of mostly large-capitalization U.S. companies. You cannot invest directly in an index. Past performance is not a guarantee of future results. 1 Portfolio Delaware Social Awareness Fund Management Review June 11, 2002 Fund Managers J. Paul Dokas Senior Portfolio Manager Timothy G. Connors Senior Portfolio Manager The Fund's Results For the six-month period ended May 31, 2002, your Fund's total return of -3.95% (Class A shares at net asset value with distributions reinvested) outpaced the unmanaged S&P 500 Index, which lost -5.97%. The Fund's peer group, as represented by the Lipper Multi-Cap Core Funds Average, posted a negative return, slipping -3.05% While there was considerable volatility in the markets, we did not see significant fundamental shifts in the stock market during the period that led us to make notable changes in the general composition of the portfolio. Relative to the benchmark index, the Fund did well among capital goods stocks, where aerospace and medical products manufacturer Teleflex had the most significant impact on return. Close on its heels was Pentair also among the Fund's best performers for the six months. Stocks in the energy sector also contributed positively to overall performance, with Smith International and Noble Corporation leading the way among the gainers. The Fund lost ground relative to its benchmark due to several of its holdings in the cable, media and publishing sector. The Fund could not escape the troubles stemming from Adelphia Communications', overstated earnings and accounting irregularities, which have forced the cable operator into chapter 11 reorganization. We sold our Adelphia positions before the stock hit bottom, but the Fund's performance was still negatively impacted. The loss of investor demand for AOL Time Warner and the resulting drop in the stock price was another drag on the Fund's performance during the six-month period. Technology stocks continued to be the markets' trouble spot during the period. A key performance detractor for the Fund was EMC, the dominant storage hardware vendor, which continues to suffer from weak corporate capital spending. Sprint was down, in part to profit taking but also due to uncertain prospects for long-distance providers. Portfolio Highlights All stock portfolios possess an element of systemic risk, the risk that an equity portfolio will move to some degree of correlation with broad stock market movements. The management team for your Fund, believes that a disciplined integration of quantitative and fundamental research can help to lessen the impact of this risk element. In managing the Fund, we use a proprietary, quantitative model that looks at several characteristics. We start with stocks found in the Russell 1000 Index that also pass the Fund's criteria of social responsibility, as determined by the Social Investment Database published by KLD Research & Analytics, Inc, a specialist social research consultant. Stocks that are initial candidates for inclusion in the Fund will generally exhibit either attractive value characteristics, such as low price-to-earnings ratio, or attractive growth characteristics. An example of this inclusion process would be companies that grow their earnings at a rate faster than the general market. In some cases, an issue may possess both general qualities. The team then evaluates stocks that pass the initial screening process against comprehensive fundamental research tools. The securities are also assessed in the context of the how they may affect portfolio performance. Through a process of bottom-up stock selection and risk management, the team seeks to avoid strong biases within the portfolio, such as any heavy concentration in a particular industry sector. 2 Outlook We expect to see continued stock market volatility until corporate sales and profitability clearly return. Extreme negative investor sentiment currently seems to be impacting stocks, and we believe it will take some time for the market to fully regain its confidence in a post-Enron world. The Fund's management team is looking beyond the short-term and optimistically toward renewed economic vigor. We believe anticipated increases in sales and earnings among U.S. corporations will eventually translate into rising equity prices. We expect to see some earnings improvement by the fall of 2002, as a modest economic recovery takes hold. We believe strongly in our investment process, and will continue to execute it with discipline, seeking at all times a well-structured and well-diversified portfolio. 3 At Delaware Powered by Research At Delaware Investments, our long history of asset management has taught us the importance of two key principles: o Astute security selection is essential when seeking a performance advantage. o Superior fundamental research is the key to astute security selection. Using these core principles, we have built an organization that is Powered by Research. We believe our organization represents an effective model for conducting and capitalizing on independent fundamental research and analysis. Five Specialized Centers of Expertise While many organizations single handedly try to be all things across all investment disciplines, we at Delaware Investments have elected instead to decentralize and have structured ourselves into five distinct Centers of Expertise, each focused on a specific investment discipline: o U.S. growth equity o U.S. value equity o U.S. fixed income o International and global o U.S. structured equity products Each Center of Expertise is led by a team of seasoned management professionals who embrace our belief in superior fundamental research. The Independent Research Advantage Each Center of Expertise is responsible for its own investment process and conducts its own independent research rather than rely on the one-size-fits-all recommendations of a single, centralized research team. We believe our decentralized approach offers us an independent research advantage: Focused Expertise Research is always conducted from the viewpoint of a specific asset-class discipline by the professionals best equipped to shape and evaluate it. Direct Accountability The people who do the research are the very same people who actually manage the investments and are accountable for the results. Superior Security Selection We believe this direct approach to fundamental research enables each Center of Expertise to uncover market inefficiencies and underappreciated securities that represent their discipline's most rewarding opportunities. The Investor Advantage Our experience has taught us that, despite ongoing change, knowledgeable investors will continue to need long-range investment plans that have well-defined objectives and diversified asset management. Delaware Investments has put in place the intellectual capital, infrastructure, and organizational commitment to deliver superior asset management to the discriminating investor. For more information about the funds managed by each Center of Expertise and how they might fit into your long-term investment strategy, we encourage you to contact your financial advisor or call us at 800 523-1918. Delaware eDelivery [Graphic omitted] e:delivery LOGO WANT TO REDUCE PAPER CLUTTER? You can receive these fund reports electronically instead of by U.S. mail. To sign up for Delaware eDelivery and get your fund documents online, go to www.delawareinvestments.com/edelivery. If you have questions or need assistance, contact our Shareholder Service Center via e-mail at service@delinvest.com or call 800 523-1918. Representatives are available Monday through Friday from 8:00 a.m. to 8:00 p.m., Eastern Time. 4 Delaware Social Awareness Fund Fund Basics As of May 31, 2002 -------------------------------------------------------------------------------- Fund Objective: The Fund seeks long-term capital appreciation. -------------------------------------------------------------------------------- Total Fund Net Assets: $58.62 million -------------------------------------------------------------------------------- Number of Holdings: 165 -------------------------------------------------------------------------------- Fund Start Date: February 24, 1997 -------------------------------------------------------------------------------- Your Fund Managers: J. Paul Dokas joined Delaware Investments in 1997. He was previously Director of Trust Investment Management at Bell Atlantic Corporation. Mr. Dokas earned a bachelor's degree at Loyola College in Baltimore and an MBA degree at the University of Maryland. He is a CFA charterholder. Timothy G. Connors earned a BA at the University of Virginia and an MBA in finance at Tulane University. He joined Delaware Investments in 1997 after serving as a Principal at Miller, Anderson & Sherrerd, where he managed equity accounts, conducted sector analysis, and directed research. He previously held positions at CoreStates Investment Advisers and Fauquier National Bank. Mr. Connors is a CFA charterholder and a member of the Association for Investment Management and Research. -------------------------------------------------------------------------------- Nasdaq Symbols: Class A DEQAX Class B DEQBX Class C DEQCX Average Annual Total Returns Through May 31, 2002 Lifetime Five Years One Year -------------------------------------------------------------------- Class A (Est. 2/24/97) Excluding Sales Charge +3.89% +3.48% -13.24% Including Sales Charge +2.73% +2.27% -18.23% -------------------------------------------------------------------- Class B (Est. 2/24/97) Excluding Sales Charge +3.11% +2.68% -13.91% Including Sales Charge +2.95% +2.32% -18.22% -------------------------------------------------------------------- Class C (Est. 2/24/97) Excluding Sales Charge +3.13% +2.71% -13.81% Including Sales Charge +3.13% +2.71% -14.68% -------------------------------------------------------------------- Returns reflect the reinvestment of all distributions and any applicable sales charges as noted below. Returns and share values will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Class B and C share results, excluding sales charges, assume either that contingent deferred sales charges did not apply or the investment was not redeemed. Past performance is not a guarantee of future results. The Fund offers Class A, B, C, and Institutional Class shares. Class A shares are sold with a front-end sales charge of up to 5.75% and have an annual distribution and service fee of up to 0.30%. Class B shares are sold with a contingent deferred sales charge that declines from 5% 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. They are also subject to an annual distribution and service fee of 1%. Class C shares are sold with a contingent deferred sales charge of 1% if redeemed during the first 12 months. They are also subject to an annual distribution and service fee of 1%. The average annual total returns for the lifetime, five-year, and one-year periods ended May 31, 2002 for Delaware Social Awareness Fund's Institutional Class were +4.15%, +3.72%, and -13.08%, respectively. Institutional Class shares were first made available on February 24, 1997, and are available without sales or asset-based distribution charges and only to certain eligible institutional accounts. An expense limitation was in effect for all classes of Delaware Social Awareness Fund during the periods shown. Performance would have been lower had the expense limitation not been in effect. The performance table does not reflect the deduction of taxes the shareholder would pay on Fund distributions or redemptions of Fund shares. Nasdaq Institutional Class symbol: DEQNX 5 Statement Delaware Social Awareness Fund of Net Assets May 31, 2002 (Unaudited) Number of Market Shares Value --------- -------- Common Stock - 100.22% Automobiles & Automotive Parts - 0.22% Genuine Parts 3,500 $ 127,925 ---------- 127,925 ---------- Banking & Finance - 16.26% American Express 13,500 573,885 AmSouth Bancorporation 9,600 213,120 Bank of America 13,900 1,053,759 Bank One 6,900 280,347 Citigroup 38,200 1,649,475 Comerica 5,700 365,370 Fannie Mae 13,900 1,112,139 J.P. Morgan Chase 20,000 719,000 Mellon Financial 4,700 174,370 Merrill Lynch & Company 8,400 341,964 Mony Group 5,900 205,202 Morgan Stanley Dean Witter 10,200 463,692 Stilwell Financial 8,900 192,240 SunTrust Banks 4,800 327,840 UnumProvident 8,400 212,520 US Bancorp 22,295 527,277 Wachovia 5,500 211,035 Washington Mutual 14,700 571,389 Wells Fargo 6,500 340,600 ---------- 9,535,224 ---------- Basic Industry/Capital Goods - 9.25% +American Standard 4,900 369,950 Avery Dennison 4,600 300,702 Ecolab 9,300 443,424 Emerson Electric 9,200 532,220 Federal Signal 13,900 351,670 Hillenbrand Industries 6,700 407,025 Hitachi Limited ADR 1,800 136,980 Ingersoll-Rand 6,800 342,380 Martin Marietta Materials 6,700 268,000 Pentair 8,100 380,619 Philips Electronics 6,600 201,960 Praxair 6,000 336,000 Sigma-Aldrich 7,000 333,970 Sonoco Products 4,800 134,112 Sony ADR 3,600 209,196 Teleflex 6,400 367,680 +York International 8,700 308,415 ---------- 5,424,303 ---------- Business Services - 1.75% Pitney Bowes 6,400 262,080 +Republic Services 17,700 372,054 ServiceMaster 26,200 390,380 ---------- 1,024,514 ---------- Number of Market Shares Value --------- -------- Common Stock (continued) Cable, Media & Publishing - 5.07% +AOL Time Warner 43,000 $ 804,100 +Cablevision Systems 14,600 271,852 +Cablevision Systems-Rainbow Media Group 2,700 56,079 +Clear Channel Communications 4,400 234,212 +Comcast Special Class A 11,500 323,840 +Metro-Goldwyn-Mayer 9,800 159,250 The News Corporation 15,400 449,372 Walt Disney 29,300 671,263 ---------- 2,969,968 ---------- Consumer Non-Durable - 7.91% Avon Products 4,930 261,044 Cadbury Schweppes 6,600 194,370 Callaway Golf 12,400 207,948 +Clorox 8,400 384,720 Coca-Cola Enterprises 11,600 252,300 +Energizer Holdings 8,000 215,600 General Mills 9,400 427,700 Gillette 15,300 544,221 Heinz (H.J.) 8,800 357,544 Kellogg Company 9,100 333,970 +McDonald's 8,000 239,520 Newell Rubbermaid 10,096 344,778 Pepsi Bottling Group 8,400 277,368 Tupperware 14,200 314,246 Wrigley, (WM) Jr. 4,900 280,819 ---------- 4,636,148 ---------- Consumer Services/Other - 1.11% +Cendant 21,600 394,848 +Host Marriott 22,400 257,152 ---------- 652,000 ---------- Energy - 6.02% Apache 6,950 386,976 +BJ Services 10,900 408,968 Burlington Resources 9,800 397,880 EOG Resources 9,800 401,800 Equitable Resources 9,800 352,996 +Noble Corporation 7,600 325,432 Noble Energy 7,700 293,832 Questar 9,500 261,915 Smith International 4,900 359,562 Tidewater 8,300 338,225 ---------- 3,527,586 ---------- Healthcare & Pharmaceuticals - 13.91% AmerisourceBergen 3,096 238,671 +Amgen 6,800 323,884 AstraZeneca ADR 11,600 507,152 Baxter International 5,900 316,830 Becton Dickinson 7,000 263,200 Cardinal Health 6,200 412,052 +Caremark RX 12,800 247,552 Eli Lilly 23,900 1,546,329 +Genentech 6,000 213,000 6 Statement Delaware Social Awareness Fund of Net Assets (continued) Number of Market Shares Value --------- -------- Common Stock (continued) Healthcare & Pharmaceuticals (continued) +Guidant 9,700 $ 388,000 HCA - The Healthcare Company 4,600 225,998 +Health Management Associates 13,400 275,906 +Healthsouth 17,400 246,210 IMS Health 12,400 261,020 +IVAX 17,300 226,284 McKesson 8,859 332,213 +Medimmune 6,000 195,120 Medtronic 7,046 325,173 +Millennium Pharmaceuticals 4,500 67,905 Novartis ADR 15,700 672,274 PerkinElmer 25,000 349,250 +Tenet Healthcare 3,300 245,850 +Wellpoint Health Networks 3,700 274,392 ---------- 8,154,265 ---------- Insurance - 3.96% Allstate 12,600 484,848 American International Group 11,662 781,004 Cigna 3,700 392,385 Fidelity National Financial 11,880 363,647 +John Hancock Financial Services 3,300 121,077 +Nationwide Financial Services 4,200 181,230 ---------- 2,324,191 ---------- Real Estate - 3.07% AMB Property 5,200 151,580 AvalonBay Communities 4,400 208,384 Crescent Real Estate Equities 5,100 99,450 Duke-Weeks Realty 7,800 211,068 Equity Office Properties Trust 12,300 370,722 Equity Residential Properties Trust 5,700 164,958 Kimco Realty 5,850 186,615 ProLogis Trust 8,800 210,760 +Simon Property Group 5,700 194,199 ---------- 1,797,736 ---------- Retail - 7.51% +BJ's Wholesale Club 4,900 211,925 CVS 11,100 355,533 +Federated Department Stores 7,900 327,139 Home Depot 19,300 804,617 J.C. Penney 7,100 173,666 +Kroger 14,400 321,840 May Department Stores 7,200 253,296 +Nordstrom 12,600 310,212 +Safeway 9,300 378,045 +Saks 19,400 270,824 Sears, Roebuck 8,900 525,545 +Toys R Us 13,100 239,075 Winn-Dixie Stores 12,000 232,920 ---------- 4,404,637 ---------- Number of Market Shares Value --------- -------- Common Stock (continued) Technology/Communications - 2.97% +Cisco Systems 63,500 $1,002,030 +Comverse Technology 15,100 178,935 +Crown Castle 43,800 197,100 Nokia ADR 15,500 215,140 +Qualcomm 4,700 148,708 ---------- 1,741,913 Technology/Components - 0.55% +Arrow Electronics 6,700 167,634 AVX 7,200 154,440 ---------- 322,074 ---------- Technology/Hardware - 4.02% +Dell Computer 26,900 722,265 +EMC 36,200 262,450 +Gemstar-TV Guide International 15,800 150,416 Hewlett-Packard 18,532 353,776 +Lexmark International Group A 3,500 218,575 +Palm 58,758 93,425 Scientific-Atlanta 13,700 266,465 Symbol Technologies 33,500 287,095 ---------- 2,354,467 ---------- Technology/Semiconductors - 3.67% +Altera 10,600 191,118 +Applied Materials 19,300 428,074 Intel 31,800 878,316 +Microchip Technology 6,375 190,613 +Micron Technology 13,900 327,762 +Xilinx 3,800 133,988 ---------- 2,149,871 ---------- Technology/Software - 5.47% Adobe Systems 6,800 245,480 Autodesk 6,700 90,450 +Cadence Design Systems 12,700 244,602 +Intuit 7,000 306,110 +Microsoft 32,400 1,652,724 +Oracle 52,500 414,750 +Siebel Systems 5,600 102,200 +Veritas Software 6,600 149,622 ---------- 3,205,938 ---------- Technology/Systems - 0.71% Automatic Data Processing 3,500 181,720 Electronic Data Systems 4,500 237,690 ---------- 419,410 ---------- Telecommunications - 5.64% +AT&T Wireless Services 18,300 148,413 BellSouth 20,200 672,256 CenturyTel 7,700 238,700 SBC Communications 29,800 1,021,842 +Sprint PCS 23,300 243,252 Verizon Communications 22,800 980,400 ---------- 3,304,863 ---------- 7 Statement Delaware Social Awareness Fund of Net Assets (continued) Number of Market Shares Value --------- -------- Common Stock (continued) Transportation - 0.75% +FedEx 8,200 $ 442,390 ----------- 442,390 ----------- Utilities - 0.40% +Calpine 24,200 233,288 ----------- 233,288 ----------- Total Common Stock (cost $60,146,852) 58,752,711 ----------- Total Market Value of Securities - 100.22% (cost $60,146,852) 58,752,711 Liabilities Net of Receivables and Other Assets - (0.22%) (130,084) ----------- Net Assets Applicable to 6,506,248 Shares Outstanding - 100.00% $58,622,627 =========== Net Asset Value - Delaware Social Awareness Fund Class A ($23,426,832 / 2,534,910 Shares) $9.24 ----- Net Asset Value - Delaware Social Awareness Fund Class B ($27,429,913 / 3,098,069 Shares) $8.85 ----- Net Asset Value - Delaware Social Awareness Fund Class C ($7,188,192 / 811,633 Shares) $8.86 ----- Net Asset Value - Delaware Social Awareness Fund Institutional Class ($577,690 / 61,636 Shares) $9.37 ----- +Non-income producing security for the period ended May 31, 2002. Summary of Abbreviation: ADR -- American Depositary Receipts Components of Net Assets at May 31, 2002: Shares of beneficial interest (unlimited authorization - no par) $69,113,358 Accumulated net investment loss (191,433) Accumulated net realized loss on investments (8,905,157) Net unrealized depreciation of investments (1,394,141) ----------- Total net assets $58,622,627 ----------- Net Asset Value and Offering Price per Share - Delaware Social Awareness Fund Net asset value Class A (A) $9.24 Sales charge (5.75% of offering price, or 6.06% of the amount invested per share) (B) 0.56 ----- Offering price $9.80 ----- (A) Net asset value per share, as illustrated, is the estimated amount, which wouldbe paid upon the redemption or repurchase of shares. (B) See the current prospectus for purchases of $50,000 or more. See accompanying notes 8 Statement Delaware Social Awareness Fund of Operations Period Ended May 31, 2002 (Unaudited)
Investment Income: Dividends $417,057 Interest 1,740 $ 418,797 -------- ----------- Expenses: Management fees 236,522 Distribution expenses-- Class A 37,237 Distribution expenses-- Class B 144,540 Distribution expenses-- Class C 37,540 Dividend disbursing and transfer agent fees and expenses 154,700 Registration fees 43,500 Accounting and administration expenses 13,456 Reports and statements to shareholders 6,500 Professional fees 5,200 Custodian fees 2,500 Trustees' fees 2,301 Other 13,605 697,601 -------- Less expenses absorbed or waived (86,614) Less expenses paid indirectly (757) ----------- Total expenses 610,230 ----------- Net Investment Loss (191,433) ----------- Net Realized and Unrealized Gain (Loss) on Investments: Net realized loss on investments (6,583,668) Net change in unrealized appreciation / depreciation of investments 4,207,114 ----------- Net Realized and Unrealized Loss on Investments (2,376,554) ----------- Net Decrease in Net Assets Resulting from Operations $(2,567,987) ===========
See accompanying notes 9 Statements Delaware Social Awareness Fund of Changes in Net Assets
Period Ended Year Ended 5/31/02 11/30/01 (Unaudited) Increase (Decrease) in Net Assets from Operations: Net investment loss $(191,433) $(612,353) Net realized loss on investments (6,583,668) (2,320,442) Net change in unrealized appreciation/depreciation of investments 4,207,114 (4,991,606) ----------- ----------- Net decrease in net assets resulting from operations (2,567,987) (7,924,401) ----------- ----------- Dividends and Distributions to Shareholders from: Net Realized gain on investments: Class A -- (3,515,698) Class B -- (3,694,091) Class C -- (1,064,173) Institutional Class -- (33,785) ----------- ----------- -- (8,307,747) ----------- ----------- Capital Share Transactions: Proceeds from shares sold: Class A 2,039,878 5,267,908 Class B 1,084,198 3,674,555 Class C 584,479 1,865,034 Institutional Class 95,009 318,784 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A -- 3,326,814 Class B -- 3,478,578 Class C -- 1,018,505 Institutional Class -- 33,785 ----------- ----------- 3,803,564 18,983,963 ----------- ----------- Cost of shares repurchased: Class A (3,666,947) (12,227,647) Class B (2,783,395) (5,607,872) Class C (2,201,704) (2,079,231) Institutional Class (28,639) (71,855) ----------- ----------- (8,680,685) (19,986,605) ----------- ----------- Decrease in net assets derived from capital share transactions (4,877,121) (1,002,642) ----------- ----------- Net Decrease in Net Assets (7,445,108) (17,234,790) Net Assets: Beginning of period 66,067,735 83,302,525 ----------- ----------- End of period $58,622,627 $66,067,735 =========== ===========
See accompanying notes 10 Financial Highlights Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Social Awareness Fund Class A Period Period Ended 2/24/97(2) 5/31/02(1) Year Ended To (Unaudited) 11/30/01 11/30/00 11/30/99 11/30/98 11/30/97 Net asset value, beginning of period $ 9.620 $ 11.820 $ 13.010 $ 11.260 $ 10.330 $ 8.500 Income (loss) from investment operations: Net investment income (loss)(3) (0.008) (0.039) (0.064) (0.043) 0.015 0.007 Net realized and unrealized gain (loss) on investments (0.372) (0.991) (0.981) 1.793 0.955 1.823 ------- -------- -------- -------- -------- ------- Total from investment operations (0.380) (1.030) (1.045) 1.750 0.970 1.830 ------- -------- -------- -------- -------- ------- Less dividends and distributions from: Net realized gain on investments -- (1.170) (0.145) -- (0.040) -- ------- -------- -------- -------- -------- ------- Total dividends and distributions -- (1.170) (0.145) -- (0.040) -- ------- -------- -------- -------- -------- ------- Net asset value, end of period $ 9.240 $ 9.620 $ 11.820 $ 13.010 $ 11.260 $10.330 ======= ======== ======== ======== ======== ======= Total return(4) (3.95%) (9.80%) (8.15%) 15.44% 9.52% 21.53% Ratios and supplemental data: Net assets, end of period (000 omitted) $23,427 $26,043 $36,206 $46,354 $38,858 $ 9,115 Ratio of expenses to average net assets 1.50% 1.50% 1.50% 1.49% 1.45% 1.50% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.80% 1.75% 1.63% 1.69% 1.56% 1.96% Ratio of net investment income (loss) to average net assets (0.17%) (0.39%) (0.45%) (0.35%) 0.14% 0.38% Ratio of net investment income (loss) to average net assets prior to expense limitation and expenses paid indirectly (0.47%) (0.64%) (0.58%) (0.55%) 0.03% (0.08%) Portfolio turnover 39% 50% 68% 28% 22% 29%
(1) Ratios have been annualized and total return has not been annualized. (2) Date of commencement of operations; ratios 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. See accompanying notes 11 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Social Awareness Fund Class B Period Period Ended 2/24/97(2) 5/31/02(1) Year Ended To (Unaudited) 11/30/01 11/30/00 11/30/99 11/30/98 11/30/97 Net asset value, beginning of period $ 9.250 $11.490 $12.740 $11.120 $10.280 $ 8.500 Income (loss) from investment operations: Net investment income (loss)(3) (0.042) (0.113) (0.155) (0.133) (0.066) (0.044) Net realized and unrealized gain (loss) on investments (0.358) (0.957) (0.950) 1.753 0.946 1.824 ------- ------- ------- ------- ------- ------- Total from investment operations (0.400) (1.070) (1.105) 1.620 0.880 1.780 ------- ------- ------- ------- ------- ------- Less dividends and distributions from: Net realized gain on investments -- (1.170) (0.145) -- (0.040) -- ------- ------- ------- ------- ------- ------- Total dividends and distributions -- (1.170) (0.145) -- (0.040) -- ------- ------- ------- ------- ------- ------- Net asset value, end of period $ 8.850 $ 9.250 $11.490 $12.740 $11.120 $10.280 ======= ======= ======= ======= ======= ======= Total return(4) (4.32%) (10.49%) (8.80%) 14.57% 8.60% 20.94% Ratios and supplemental data: Net assets, end of period (000 omitted) $27,430 $30,376 $36,301 $41,091 $30,172 $ 6,919 Ratio of expenses to average net assets 2.25% 2.25% 2.25% 2.24% 2.20% 2.20% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 2.50% 2.45% 2.33% 2.39% 2.26% 2.66% Ratio of net investment loss to average net assets (0.92%) (1.14%) (1.20%) (1.10%) (0.61%) (0.32%) Ratio of net investment loss to average net assets prior to expense limitation and expenses paid indirectly (1.17%) (1.34%) (1.28%) (1.25%) (0.67%) (0.78%) Portfolio turnover 39% 50% 68% 28% 22% 29%
(1) Ratios have been annualized and total return has not been annualized. (2) Date of commencement of operations; ratios 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. See accompanying notes 12 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Social Awareness Fund Class C Period Period Ended 2/24/97(2) 5/31/02(1) Year Ended To (Unaudited) 11/30/01 11/30/00 11/30/99 11/30/98 11/30/97 Net asset value, beginning of period $9.260 $11.490 $12.740 $11.120 $10.280 $ 8.500 Income (loss) from investment operations: Net investment income (loss)(3) (0.042) (0.113) (0.154) (0.133) (0.068) (0.044) Net realized and unrealized gain (loss) on investments (0.358) (0.947) (0.951) 1.753 0.948 1.824 ------ ------- ------- ------- ------- ------- Total from investment operations (0.400) (1.060) (1.105) 1.620 0.880 1.780 ------ ------- ------- ------- ------- ------- Less dividends and distributions from: Net realized gain on investments -- (1.170) (0.145) -- (0.040) -- ------ ------- ------- ------- ------- ------- Total dividends and distributions -- (1.170) (0.145) -- (0.040) -- ------ ------- ------- ------- ------- ------- Net asset value, end of period $8.860 $ 9.260 $11.490 $12.740 $11.120 $10.280 ====== ======= ======= ======= ======= ======= Total return(4) (4.32%) (10.39%) (8.80%) 14.57% 8.60% 20.94% Ratios and supplemental data: Net assets, end of period (000 omitted) $7,188 $ 9,115 $10,459 $ 9,673 $ 8,683 $ 1,290 Ratio of expenses to average net assets 2.25% 2.25% 2.25% 2.24% 2.20% 2.20% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 2.50% 2.45% 2.33% 2.39% 2.26% 2.66% Ratio of net investment loss to average net assets (0.92%) (1.14%) (1.20%) (1.10%) (0.61%) (0.32%) Ratio of net investment loss to average net assets prior to expense limitation and expenses paid indirectly (1.17%) (1.34%) (1.28%) (1.25%) (0.67%) (0.78%) Portfolio turnover 39% 50% 68% 28% 22% 29%
(1) Ratios have been annualized and total return has not been annualized. (2) Date of commencement of operations; ratios 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. See accompanying notes 13 Financial Highlights (continued) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Social Awareness Fund Institutional Class Period Period Ended 2/24/97(2) 5/31/02(1) Year Ended To (Unaudited) 11/30/01 11/30/00 11/30/99 11/30/98 11/30/97 Net asset value, beginning of period $9.750 $11.930 $13.090 $11.310 $10.350 $ 8.500 Income (loss) from investment operations: Net investment income (loss)(3) 0.004 (0.014) (0.024) (0.012) 0.043 0.029 Net realized and unrealized gain (loss) on investments (0.384) (0.996) (0.991) 1.792 0.957 1.821 ------ ------- ------- ------- ------- ------- Total from investment operations (0.380) (1.010) (1.015) 1.780 1.000 1.850 ------ ------- ------- ------- ------- ------- Less dividends and distributions from: Net realized gain on investments -- (1.170) (0.145) -- (0.040) -- ------ ------- ------- ------- ------- ------- Total dividends and distributions -- (1.170) (0.145) -- (0.040) -- ------ ------- ------- ------- ------- ------- Net asset value, end of period $9.370 $ 9.750 $11.930 $13.090 $11.310 $10.350 ====== ======= ======= ======= ======= ======= Total return(4) (3.90%) (9.52%) (7.87%) 15.74% 9.70% 21.77% Ratios and supplemental data: Net assets, end of period (000 omitted) $578 $533 $337 $329 $379 $107 Ratio of expenses to average net assets 1.25% 1.25% 1.25% 1.24% 1.20% 1.20% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.50% 1.45% 1.33% 1.39% 1.26% 1.66% Ratio of net investment income (loss) to average net assets 0.08% (0.14%) (0.20%) (0.10%) 0.39% 0.68% Ratio of net investment income (loss) to average net assets prior to expense limitation and expenses paid indirectly (0.17%) (0.34%) (0.28%) (0.25%) 0.33% 0.22% Portfolio turnover 39% 50% 68% 28% 22% 29%
(1) Ratios have been annualized and total return has not been annualized. (2) Date of commencement of operations; ratios have been annualized and total return has not been annualized. (3) The average shares outstanding method has been applied for per share information. (4) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividends and distributions at net asset value. Total investment return reflects a waiver and payment of fees by the manager. See accompanying notes 14 Notes Delaware Social Awareness Fund to Financial Statements May 31, 2002 (Unaudited) Delaware Group Equity Funds II (the "Trust") is organized as a Delaware business trust and offers four series: Delaware Decatur Equity Income Fund, Delaware Diversified Value Fund, Delaware Growth and 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 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 5% 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. 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 achieve long-term capital appreciation. 1. Significant Accounting Policies The following accounting policies are in accordance with accounting principles generally accepted in the United States and are consistently followed by the Fund. Security Valuation -- All equity securities 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. 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 by 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 accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other -- Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Security transactions are recorded on the date the securities are purchased or sold (trade date). Costs used in calculating realized gains and losses on the sale of investment securities are those of the specific securities sold. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. The Fund declares and pays dividends from net investment income and distributions from net realized gain on investments, if any, annually. Certain expenses of the Fund are paid through commission arrangements with brokers. These transactions are done subject to best execution. The amount of these expenses was approximately $757 for the period ended May 31, 2002. In addition, the Fund receives 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 period ended May 31, 2002. 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 elected 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 and extraordinary expenses do not exceed 1.25% of average daily net assets of the Fund through January 31, 2003. The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC, to provide dividend disbursing, transfer agent, accounting and administration services. The Fund pays DSC a monthly fee based on the number of shareholder accounts, shareholder transactions and average net assets, subject to certain minimums. Pursuant to a distribution agreement, the Fund pays Delaware Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual fee not to exceed 0.30% of the average daily net assets of the Class A shares and 1.00% of the average daily net assets of the Class B and C shares. DDLP has elected to waive its fees through January 31, 2003 in order to prevent distribution fees of Class A shares from exceeding 0.25% of average daily net assets. No distribution expenses are paid by Institutional Class shares. 15 Notes Delaware Social Awareness Fund to Financial Statements (continued) 2. Investment Management, Administration Agreements and Other Transactions with Affiliates (continued) At May 31, 2002, the Fund had liabilities payable to affiliates as follows: Investment management fee payable to DMC $22,822 Dividend disbursing, transfer agent fees, accounting and other expenses payable to DSC 20,479 Other expenses payable to DMC and affiliates 12,238 For the period ended May 31, 2002, DDLP earned $6,207 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 Fund. These officers and trustees are paid no compensation by the Fund. 3. Investments For the period ended May 31, 2002, the Fund made purchases of $12,395,030 and sales of $17,381,523 of investment securities other than U.S. government securities and short-term investments. At May 31, 2002, the cost of investments for federal income tax purposes approximates the cost for book purposes. At May 31, 2002, the cost of investments was $60,146,852. At May 31, 2002, the net unrealized depreciation was $1,394,141 of which $8,220,215 related to unrealized appreciation of investments and $9,614,356 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. The tax character of dividends and distributions paid during the period ended May 31, 2002 and the year ended November 31, 2001 was as follows: 5/31/02 11/30/01 ------- -------- Ordinary income -- $1,093,499 Long-term capital gain -- 7,214,248 ------- ---------- Total -- $8,307,747 ------- ========== For federal income tax purposes, capital losses may be carried forward and applied against future capital gains. Such capital loss carryforwards expire as follows: $2,183,250 in 2009. 5. Capital Shares Transactions in capital shares were as follows: Period Ended Year Ended 5/31/02 11/30/01 Shares sold: Class A 211,348 509,920 Class B 117,918 368,279 Class C 63,436 185,197 Institutional Class 9,872 30,622 Shares issued upon reinvestment of dividends and distributions: Class A -- 308,040 Class B -- 332,579 Class C -- 97,161 Institutional Class -- 3,094 -------- ---------- 402,574 1,834,892 -------- ---------- Shares repurchased: Class A (382,747) (1,175,545) Class B (302,382) (578,845) Class C (236,557) (208,233) Institutional Class (2,957) (7,221) -------- ---------- (924,643) (1,969,844) -------- ---------- Net decrease (522,069) (134,952) ======== ========== 6. Line of Credit The Fund, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $202,300,000 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, 2002, or at any time during the period. 7. Credit & Market Risk 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. 16 Delaware Investments Family of Funds -------------------------------------------------------------------------------- Complete information on any fund offered by Delaware Investments can be found in each fund's current prospectus. Prospectuses for all funds offered by Delaware Investments are available from your financial advisor. Please read the prospectus carefully before you invest or send money. -------------------------------------------------------------------------------- Growth-Equity Group Delaware American Services Fund Delaware Growth Opportunities Fund Delaware Select Growth Fund Delaware Small Cap Growth Fund Delaware Technology and Innovation Fund Delaware Trend Fund Delaware U.S. Growth Fund Value-Equity Group Delaware Decatur Equity Income Fund Delaware Growth and Income Fund Delaware REIT Fund Delaware Small Cap Value Fund International Group (DIAL-Delaware International Advisers Ltd.) Delaware Emerging Markets Fund Delaware International Small Cap Value Fund Delaware International Value Equity Fund (formerly Delaware International Equity Fund) Blend Mutual Funds Delaware Balanced Fund Delaware Core Equity Fund (formerly Delaware Growth Stock Fund) Delaware Devon Fund Delaware Social Awareness Fund Structured Equity Products Group Delaware Diversified Growth Fund Delaware Diversified Value Fund Delaware Group Foundation Funds Delaware Balanced Allocation Portfolio Delaware Growth Allocation Portfolio Delaware Income Allocation Portfolio Fixed Income Group Corporate and Government Delaware American Government Bond Fund Delaware Corporate Bond Fund Delaware Delchester Fund Delaware Extended Duration Bond Fund Delaware High-Yield Opportunities Fund Delaware Limited-Term Government Fund Delaware Strategic Income Fund Money Market Delaware Cash Reserve Fund Delaware Tax-Free Money Fund Municipal (National Tax-Exempt) Delaware National High-Yield Municipal Bond Fund Delaware Tax-Free Insured Fund Delaware Tax-Free USA Fund Delaware Tax-Free USA Intermediate Fund Municipal (State-Specific Tax-Exempt) Delaware Tax-Free Arizona Fund Delaware Tax-Free Arizona Insured Fund Delaware Tax-Free California Fund Delaware Tax-Free California Insured Fund Delaware Tax-Free Colorado Fund Delaware Tax-Free Florida Fund Delaware Tax-Free Florida Insured Fund Delaware Tax-Free Idaho Fund Delaware Minnesota High-Yield Municipal Bond Fund Delaware Tax-Free Minnesota Fund Delaware Tax-Free Minnesota Insured Fund Delaware Tax-Free Minnesota Intermediate Fund Delaware Tax-Free Missouri Insured Fund Delaware Tax-Free New York Fund Delaware Tax-Free Oregon Insured Fund Delaware Tax-Free Pennsylvania Fund 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 Charles E. Haldeman, Jr. William E. Dodge Investment Manager Chairman Executive Vice President and Delaware Management Company Delaware Investments Family of Funds Chief Investment Officer, Equity Philadelphia, PA Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA International Affiliate Walter P. Babich Delaware International Advisers Ltd. Board Chairman Jude T. Driscoll London, England Citadel Constructors, Inc. Executive Vice President and King of Prussia, PA Head of Fixed Income National Distributor Delaware Investments Family of Funds Delaware Distributors, L.P. David K. Downes Philadelphia, PA Philadelphia, PA President and Chief Executive Officer Delaware Investments Family of Funds Richard J. Flannery Shareholder Servicing, Dividend Philadelphia, PA President and Chief Executive Officer Disbursing and Transfer Agent Delaware Distributors, L.P. Delaware Service Company, Inc. John H. Durham Philadelphia, PA 2005 Market Street Private Investor Philadelphia, PA 19103-7094 Gwynedd Valley, PA For Shareholders John A. Fry 800 523-1918 Executive Vice President University of Pennsylvania For Securities Dealers and Financial Philadelphia, PA Institutions Representatives Only 800 362-7500 Anthony D. Knerr Consultant Web site Anthony Knerr & Associates www.delawareinvestments.com New York, NY Ann R. Leven Former Treasurer/Chief Fiscal Officer National Gallery of Art Washington, DC Thomas F. Madison President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN Janet L. Yeomans Vice President and Treasurer 3M Corporation St. Paul, MN (6225) Printed in the USA SA-147 [5/02] BUR 7/02 J8347