<PAGE>
FOR TOTAL RETURN
DELAWARE GROUP
Quantum Fund
Blue Chip Fund
1997
Semi-Annual Report
professional management
service and guidance
goals
[PICTURE OF BROKEN PAINTING]
DELAWARE
GROUP
- --------
<PAGE>
professional management
professional management
More Than 68 Years Of Investment Experience
has taught us that disciplined strategies and
prudent risk management are a
sound approach to any market environment.
goals
goals
Whatever Your Goals,
the years ahead will be shaped by choices you make today. Delaware offers
many options that can be an appropriate part of a sound investment plan.
service and guidance
service and guidance
Delaware Believes That The Guidance of a professional financial adviser is
vital to your long-term success. We are committed to providing you and your
adviser with the highest quality information and service.
<PAGE>
- --------------------------------------------------------------------------------
JUNE 20, 1997
Dear Shareholder:
I am pleased to present the inaugural report for two Delaware Group Funds
that seek capital appreciation from equity investments -- Quantum Fund, which
invests in mid-size and large companies deemed socially responsible and Blue
Chip Fund which focuses on a diverse mix of large companies.
Vantage Global Advisors, our affiliate in New York, is the subadviser
to these Funds, and uses technology-driven quantitative analysis to identify
investment candidates that appear to have exceptional growth and value
characteristics.
These Funds were launched during a period marked by both an
impressive rally in their unmanaged benchmark -- the S&P 500 Index and the
highest degree of market volatility in seven years.
From the Funds' inception on February 24, 1997, to May 31, stocks of
larger companies, such as those represented by the S&P 500, generally
outperformed stocks of mid-size companies. Valuations of large consumer
growth companies reached historically high levels. This challenged investors
seeking companies with attractive earnings growth and reasonable stock
prices.
From inception to May 31, 1997, Quantum Fund's A Class shares
provided total return of +3.06% (net asset value). Blue Chip Fund's A shares
had a total return of +2.59% for the same period.
While this was less than the return of the unmanaged S&P 500 during
the period, as shown on page 2, you should keep in mind that management was
building long-term portfolios during a period of exceptional short-term
market turbulence. Of course, the performance of any equity mutual fund
should be judged over a longer term period of at least several years.
VALUATIONS OF LARGE CONSUMER GROWTH COMPANIES REACHED HISTORICALLY HIGH LEVELS.
THIS CHALLENGED INVESTORS SEEKING COMPANIES WITH ATTRACTIVE EARNINGS GROWTH AND
REASONABLE STOCK PRICES.
discipline
1997 SEMI-ANNUAL REPORT 1
<PAGE>
- -------------------------------------------------------------------------------
TOTAL RETURN
- -------------------------------------------------------------------------------
FEBRUARY 24, 1997
THROUGH MAY 31, 1997
- -------------------------------------------------------------------------------
Blue Chip Fund A +2.59%
Lipper Growth and Income Fund Average +4.15% (653 funds)
- -------------------------------------------------------------------------------
Quantum Fund A +3.06%
Lipper Growth Fund Average +4.22% (851 funds)
- -------------------------------------------------------------------------------
Standard & Poor's 500 Index +5.26%
Domini Social 400 Index +9.22%
- -------------------------------------------------------------------------------
THE DOMINI SOCIAL INDEX IS AN UNMANAGED BENCHMARK OF 400 U.S. CORPORATIONS
THAT PASS MULTIPLE, BROAD BASED SOCIAL SCREENS SET BY KINDER, LYNDENBERG,
DOMINI & CO., AN INVESTMENT RESEARCH FIRM IN CAMBRIDGE, MASS. FUND
PERFORMANCE QUOTED ABOVE IS BASED ON NET ASSET VALUE WITHOUT EFFECT OF SALES
CHARGES. SEC-MANDATED PERFORMANCE INFORMATION FOR ALL CLASSES OF BOTH FUNDS
CAN BE FOUND ON PAGE 7. PERFORMANCE FOR THIS SHORT TIME FRAME MAY NOT BE
REPRESENTATIVE OF LONGER TERM RESULTS.
In the pages that follow, T. Scott Wittman, the Funds' portfolio
manager, explains why he believes Quantum and Blue Chip are well-positioned for
the coming months. In our opinion, the Funds' holdings exhibit attractive
long-term growth potential relative to the broad stock market.
In closing, I welcome you as charter shareholders of these two new
Funds and thank you for choosing to make our technology-based investment
strategies part of your portfolio. We appreciate your confidence in Delaware
Group.
Sincerely,
/s/ Wayne A. Stork
- -----------------------------------------
Wayne A. Stork
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Q.
WHAT IS QUANTUM FUND'S SOCIAL SCREEN?
a.
The Fund does not invest in companies involved in weapons, alcoholic
beverages, tobacco, nuclear energy and businesses believed to pollute the
environment, as determined by Kinder, Lyndenberg, Domini & Co., an investment
research firm in Cambridge, Mass.
2 1997 SEMI-ANNUAL REPORT
<PAGE>
Introducing Your Fund's Portfolio Manager
Mr. Wittman joined Vantage Global Advisors in 1991 and holds bachelor's and
master's degrees in business administration from Indiana University. His 15
years of investment experience includes serving as a managing director at TSA
Capital Management and Vice President and Manager of Quantitative Analysis at
Mellon Bank. Vantage Global Advisors, founded in 1979, is a
technology-driven, full-service investment management firm that uses
proprietary computer software to systematically identify investment opportunit
ies. Based in New York, Vantage Global Advisors manages more than $6 billion
in assets for individual and institutional investors.
[Picture of T. Scott Wittman]
T. SCOTT WITTMAN
PRESIDENT AND
CHIEF INVESTMENT OFFICER
VANTAGE GLOBAL ADVISORS
Portfolio Manager's Review
INVESTMENT STRATEGY
Quantum and Blue Chip Funds use technology to evaluate and compare the
opportunities offered by various stocks. Sell decisions are based purely on a
stock's attractiveness relative to the rest of the market, although we tend to
hold our selections until they reach our price target. We focus on stocks that
show high growth potential and are selling at reasonable prices based on our
computer analysis. Stocks generally fall into two categories: growth or value.
Growth investors search for stocks whose historic growth patterns and future
growth prospects seem superior to other companies. Value investors look to buy
stocks of established companies when they're selling at relatively low prices.
Our proprietary computer software directs Quantum and Blue Chip Funds' buy and
sell choices and combines both of these concepts for a growth plus value
investment strategy.
In our search for companies with both excellent growth
WE FOCUS ON STOCKS THAT SHOW HIGH GROWTH POTENTIAL AND ARE SELLING AT
REASONABLE PRICES BASED ON COMPUTER ANALYSIS.
1997 SEMI-ANNUAL REPORT 3
<PAGE>
prospects and underpriced stocks, we conduct daily quantitative analysis,
comparing issues on a number of market measures. Factors such as operating
earnings, earnings surprises and revisions, dividend yields and
price-to-earnings ratios enter into our computer's strategic comparisons. From
there, the quantitative advantage that one stock shows over others drives both
our buy and sell decisions.
STRATEGIC POSITIONING AND OUTLOOK
We believe the Funds have underperformed the S&P 500 since February because
of the market's "irrational exuberance." We were focused on building a
prudent long-term portfolio rather than simply participating in a short-term
rally. Emotional speculation prompted some investors to bid up some
share prices to levels that were not justified, according to our computer's
fundamental measures of value.
Nevertheless, our technology-driven investment approach led
us to stocks that provided positive returns.
We earned above average returns from healthcare and technology stocks.
For example one selection for both Funds was Schering-Plough Corp., a large
pharmaceutical company that also met Quantum Fund's social screens. Based in New
Jersey, Schering-Plough appears to show superior capital appreciation potential
based on our computer analysis. The company's products include drugs to treat
hepatitis C, a communicable disease that can lead to liver cancer.
<TABLE>
<CAPTION>
PORTFOLIO HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------
May 31, 1997
QUANTUM FUND BLUE CHIP FUND
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Market Value of Companies*
Less than $1.5 billion (small and mid cap) 11.1% 3.6%
Greater than $1.5 billion (large cap) 88.9% 96.4%
Median Market Capitalization $4.35 billion $8 billion
Number of Stocks 111 100
Average Stock
Price-to-Earnings Ratio** 16.9x 15.9x
* PERCENT OF NET ASSETS.
** BASED ON A CONSENSUS OF ANALYSTS' EARNINGS ESTIMATE FOR 1998.
</TABLE>
4 1997 SEMI-ANNUAL REPORT
<PAGE>
Quantitative Investing:
How We Harness The Power of Technology
- ---------------------------------- ---------------------
Quantum Fund Blue Chip Fund
800 Stock Universe, Social Screen 1200 Stock Universe
Mid-Size and Large Companies Large Cap Companies
- ---------------------------------- ---------------------
---------------------------------------------------------
Analysis Based on Fundamental Growth and Value Parameters
---------------------------------------------------------
[ART]
----------------------------------------------------
Ranking of Stocks based on Financial Characteristics
----------------------------------------------------
-------------------------------------
100-120 Stocks Selected for Portfolio
-------------------------------------
THE QUANTITATIVE ADVANTAGE THAT ONE STOCK
SHOWS OVER OTHERS DRIVES BOTH OUR
BUY AND SELL DECISIONS.
1997 SEMI-ANNUAL REPORT 5
<PAGE>
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
- --------------------------------------------------------------------------------------------
May 31, 1997
QUANTUM FUND
COMPANY INDUSTRY SHARE OF NET ASSETS
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Ameritech Corp. Telephone 2.3%
Travelers Group Insurance 1.9%
Johnson & Johnson Health Care 1.9%
SBC Communications Telephone 1.7%
Marsh & McLennan Insurance 1.6%
BLUE CHIP FUND
COMPANY INDUSTRY SHARE OF NET ASSETS
- --------------------------------------------------------------------------------------------
Philip Morris Cos. Food/Tobacco 2.8%
General Electric Aerospace/Appliances/Finance 2.7%
Exxon Corp. Oil 2.3%
Bristol-Myers-Squibb Pharmaceuticals 2.3%
Schering-Plough Corp. Pharmaceuticals 1.8%
</TABLE>
outlook
In the technology sector, both Funds also benefited from owning shares
of Compaq Computer Corp. Amid concern about a reduction in orders at other
consumer computer makers, Compaq attracted increased investor attention by
showing a solid ability to manage its business and exceed most analysts'
earnings estimates.
A disappointment for both Funds was Boston Chicken Corp. In late
spring, the restaurant chain reported stagnant sales, scaled back its
expansion plans and announced a restructuring charge. Such situations show
that companies sometimes lay an egg that can't be anticipated. The increase
in U.S. interest rates since February also negatively affected holdings in
electric utility stocks in Blue Chip Fund as well as cyclical and other
interest-rate sensitive stocks in both Funds.
For the coming months, we have positioned each Fund to benefit from a
return to what we hope will be a more rational stock market. Within Quantum
and Blue Chip Funds, we have significant positions in financial, technology
and consumer stocks. Our computer modeling suggests these sectors generally
have promising growth and value characteristics.
T. Scott Wittman
SENIOR PORTFOLIO MANAGER
VANTAGE GLOBAL ADVISORS
6 1997 SEMI-ANNUAL REPORT
<PAGE>
PORTFOLIO DIVERSIFICATION
May 31, 1997
<TABLE>
<CAPTION>
Quantum Fund Blue Chip Fund
<S> <C> <C> <C>
Banking and Finance 18.3% Banking & Finance 10.7%
Insurance 10.9% Insurance 5.1%
Technology & Telecom 21.8% Energy, Utilities & Transportation 14.8%
Retail & Consumer Cyclicals 8.1% Technology & Telecom 13.3%
Food & Non-Alcoholic Beverages 8.8% Basic Industry & Capital Goods 10.3%
Basic Industry & Capital Goods 8.4% Healthcare 9.9%
Cash 7.1% Food, Beverage & Tobacco 9.4%
Other Consumer Growth 5.8% Other Consumer Growth 9.0%
Healthcare 6.3% Retail & Consumer Cyclicals 8.0%
Energy & Transportation 4.5% Cash 5.9%
Autos 3.6%
</TABLE>
LIFETIME PERFORMANCE
- --------------------------------------------------------------------------------
Aggregate Return February 24, 1997, Through May 31, 1997
QUANTUM FUND BLUE CHIP FUND
- --------------------------------------------------------------------------------
Class A (Est.2/24/97)
Excluding Sales Charge +3.06% +2.59%
Including Sales Charge -1.79% -2.24%
- --------------------------------------------------------------------------------
Class B (Est.2/24/97)
Excluding Sales Charge +2.94% +2.35%
Including Sales Charge -1.06% -1.65%
- --------------------------------------------------------------------------------
Class C (Est.2/24/97)
Excluding Sales Charge +2.94% +2.47%
Including Sales Charge +1.94% +1.47%
ALL PERFORMANCE INCLUDES REINVESTMENT OF DISTRIBUTIONS AND APPLICABLE SALES
CHARGES AS DESCRIBED BELOW. RETURN AND SHARE VALUE WILL FLUCTUATE SO THAT SHARES
WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST. PAST PERFORMANCE
IS NOT A GUARANTEE OF FUTURE RESULTS. PERFORMANCE FOR CLASS B AND C SHARES
"EXCLUDING SALES CHARGE" ASSUMES THE INVESTMENT WAS NOT REDEEMED.
CLASS A SHARES HAVE A 4.75% MAXIMUM FRONT-END SALES CHARGE AND A 12B-1 FEE.
CLASS B SHARES DO NOT CARRY A FRONT-END SALES CHARGE, BUT ARE SUBJECT TO A 1%
ANNUAL DISTRIBUTION AND SERVICE FEE. THEY ARE ALSO SUBJECT TO A DEFERRED SALES
CHARGE IF REDEEMED BEFORE THE END OF THE SIXTH YEAR. CLASS C SHARES HAVE A 1%
ANNUAL DISTRIBUTION AND SERVICE FEE. IF SHARES ARE REDEEMED WITHIN 12 MONTHS, A
1% CONTINGENT DEFERRED SALES CHARGE APPLIES.
VOLUNTARY FEE CAPS EQUAL 1.50% OF NET ASSETS FOR A CLASS SHARES AND 2.20% FOR B
AND C CLASS SHARES WERE IN EFFECT AS OF FEBRUARY 24, 1997. RETURNS WOULD HAVE
BEEN LOWER WITHOUT THE CAPS.
THE AVERAGE ANNUAL TOTAL RETURN FOR THE LIFETIME PERIOD ENDED MAY 31, 1997, FOR
QUANTUM FUND'S AND BLUE CHIP FUND'S INSTITUTIONAL CLASSES, WHICH IS AVAILABLE
WITHOUT SALES OR ASSET-BASED DISTRIBUTION CHARGES ONLY TO CERTAIN ELIGIBLE
INSTITUTIONAL ACCOUNTS, WERE +3.18% AND +2.59% RESPECTIVELY.
1997 SEMI-ANNUAL REPORT 7
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
DELAWARE GROUP EQUITY FUNDS II, INC. --
BLUE CHIP FUND
STATEMENT OF NET ASSETS -- MAY 31, 1997
(UNAUDITED)
- --------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
--------------------------
COMMON STOCK - 95.04%
AEROSPACE & DEFENSE - 1.95%
<S> <C> <C>
McDonnell Douglas ............................. 415 $ 26,716
United Technologies ........................... 420 33,758
--------
60,474
--------
AUTOMOBILE & AUTO PARTS - 3.57%
B F Goodrich .................................. 305 13,115
Chrysler ...................................... 1,205 38,259
Cooper Industries ............................. 685 34,935
Ford Motor .................................... 385 14,437
General Motors ................................ 175 10,019
--------
110,765
--------
BANKING & FINANCE - 10.71%
Bank of New York .............................. 1,105 47,100
Bank of Boston ................................ 530 38,690
Bear Stearns .................................. 900 29,250
Chase Manhattan ............................... 515 48,667
Comerica ...................................... 250 15,625
First Chicago NBD ............................. 705 41,771
MBIA .......................................... 165 17,717
NationsBank ................................... 495 29,143
Paine Webber Group ............................ 400 14,200
Salomon ....................................... 200 10,725
Student Loan Marketing Association ............ 325 39,528
--------
332,416
--------
BUILDING & MATERIALS - 1.21%
Armstrong World Industries .................... 400 27,200
*USG .......................................... 300 10,462
--------
37,662
--------
CABLE, MEDIA & PUBLISHING - 1.28%
Knight-Ridder ................................. 85 3,666
New York Times ................................ 375 17,273
Omnicom Group ................................. 325 18,850
--------
39,789
--------
CHEMICALS - 1.63%
Avery -Dennison ............................... 270 10,159
Dow Chemical .................................. 485 40,437
--------
50,596
--------
COMPUTERS & TECHNOLOGY - 5.30%
*Cadence Design Systems ....................... 1,100 36,575
*Cisco Systems ................................ 235 15,877
*Compaq Computer .............................. 130 14,072
Deluxe ........................................ 180 5,850
*Read-Rite .................................... 700 14,569
*Sun Microsystems ............................. 1,335 43,137
*Western Digital .............................. 635 34,369
--------
164,449
--------
</TABLE>
Top 10 holdings, representing 20.04% of net assets, are in boldface.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
-------------------------
COMMON STOCK (CONTINUED)
CONSUMER PRODUCTS - 5.68%
<S> <C> <C>
Clorox ....................................... 360 $ 45,450
General Electric ............................. 1,380 83,318
Procter & Gamble ............................. 345 47,567
--------
176,335
--------
ELECTRONICS & ELECTRICAL EQUIPMENT - 0.91%
*American Power Conversion ................... 750 17,390
*Gartner Group Class A ....................... 375 10,922
--------
28,312
--------
ENERGY - 10.03%
Atlantic Richfield ........................... 100 14,550
Exxon ........................................ 1,220 72,285
Halliburton .................................. 250 19,344
Occidental Petroleum ......................... 1,450 33,713
*Oryx Energy ................................. 750 17,344
Royal Dutch Petroleum ........................ 150 29,288
Texaco ....................................... 485 52,926
USX-Marathon Group ........................... 845 25,139
Unocal ....................................... 865 36,871
Williams ..................................... 220 9,707
--------
311,167
--------
ENVIRONMENTAL SERVICES - 1.30%
Honeywell .................................... 555 40,376
--------
40,376
--------
FOOD, BEVERAGE & TOBACCO - 9.43%
American Brands .............................. 310 9,533
*Boston Chicken .............................. 1,200 21,675
Campbell Soup ................................ 130 5,980
Coca-Cola .................................... 690 47,092
ConAgra ...................................... 350 21,044
Gallaher Group PLC ........................... 310 5,502
Heinz (H.J.) ................................ 750 32,250
Hershey Foods ................................ 415 23,292
Philip Morris ................................ 1,960 86,240
RJR Nabisco Holdings ......................... 1,075 34,803
Universal Foods .............................. 150 5,381
--------
292,792
--------
HEALTHCARE & PHARMACEUTICALS - 9.89%
Abbott Laboratories .......................... 135 8,505
*Amgen ....................................... 625 41,836
Bristol-Myers Squibb ......................... 985 72,274
Johnson & Johnson ............................ 455 27,243
Lincare Holdings ............................. 385 14,991
Merck & Co. .................................. 515 46,286
*Oxford Health Plans ......................... 565 39,727
Schering-Plough .............................. 620 56,265
--------
307,127
--------
</TABLE>
8 1997 SEMI-ANNUAL REPORT
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP BLUE CHIP FUND
STATEMENT OF NET ASSETS (CONTINUED)
- -------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
-------------------------
COMMON STOCK (CONTINUED)
INDUSTRIAL MACHINERY - 3.65%
<S> <C> <C>
Caterpillar ................................... 525 $ 51,253
Harris Corp. .................................. 300 26,588
Ingersoll-Rand ................................ 650 35,425
--------
113,266
--------
INSURANCE - 5.09%
Allstate ...................................... 100 7,363
CIGNA ......................................... 265 46,044
Marsh & McLennan .............................. 300 39,525
Torchmark ..................................... 220 14,438
Travelers Group ............................... 920 50,485
--------
157,855
--------
LEISURE, LODGING & ENTERTAINMENT - 1.69%
Callaway Golf ................................. 1,300 41,925
*King World Productions ....................... 280 10,535
--------
52,460
--------
METALS & MINING - 1.38%
Phelps Dodge .................................. 410 34,286
USX-U.S. Steel Group .......................... 260 8,385
--------
42,671
--------
PAPER & FOREST PRODUCTS - 0.28%
James River-Virginia .......................... 250 8,781
--------
8,781
--------
RETAIL - 4.16%
Gap .......................................... 450 15,413
Harcourt General .............................. 75 3,553
Ross Stores ................................... 650 18,484
*Safeway ...................................... 800 36,000
Sears, Roebuck & Co. .......................... 275 13,509
TJX .......................................... 725 34,800
*Woolworth .................................... 300 7,238
--------
128,997
--------
TELECOMMUNICATIONS - 8.93%
AT & T ........................................ 345 12,722
Ameritech ..................................... 740 48,470
*Ascend Communications ........................ 430 23,999
Bell Atlantic ................................. 310 21,700
BellSouth ..................................... 665 30,174
GTE .......................................... 910 40,154
*PairGain Technologies ........................ 655 13,714
SBC Communications ............................ 722 42,254
*Tellabs ...................................... 875 44,023
--------
277,210
--------
TEXTILES, APPAREL & FURNITURE - 1.61%
Johnson Controls .............................. 190 8,051
NIKE .......................................... 450 25,650
*Tommy Hilfiger ............................... 365 16,243
--------
49,944
--------
TRANSPORTATIONS & SHIPPING - 2.18%
*AMR .......................................... 245 24,347
Brunswick ..................................... 680 20,740
Tidewater ..................................... 205 8,636
*UAL .......................................... 180 14,040
--------
67,763
--------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
NUMBER OF MARKET
SHARES VALUE
-------------------------
COMMON STOCK (CONTINUED)
UTILITIES - 2.62%
<S> <C> <C>
Baltimore Gas & Electric ..................................... 185 $ 4,856
Consolidated Edison of NY .................................... 125 3,640
Edison International ......................................... 210 4,909
General Public Utilities ..................................... 795 27,825
New York State E & G ......................................... 330 7,177
Texas Utilities .............................................. 630 21,656
Unicom ....................................................... 500 11,375
--------
81,438
--------
MISCELLANEOUS - 0.56%
Olin ......................................................... 350 14,350
Reynolds & Reynolds Class A .................................. 135 3,156
--------
17,506
--------
Total Common Stock (cost $2,848,612) ......................... 2,950,151
--------
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 5.86%
With Chase Manhattan 5.45% 6/02/97
(dated 5/30/97, collateralized by $20,400
U.S. Treasury Notes 6.25% due 7/31/98,
market value $20,862) ...................................... $ 20,500 20,500
With J.P. Morgan Securities 5.50% 6/02/97
(dated 5/30/97, collateralized by $55,300
U.S. Treasury Notes 5.125% due 2/28/98,
market value $55,731) ...................................... 54,600 54,600
With PaineWebber 5.50% 6/02/97
(dated 5/30/97, collateralized by $34,100
U.S. Treasury Notes 5.625% due 11/30/98,
market value$34,810 and $19,400
U.S. Treasury Notes 5.625% due 11/30/00,
market value $19,439) ...................................... 53,100 53,100
With Prudential Securities 5.53% 6/02/97
(dated 5/30/97, collateralized by 10,000
U.S. Treasury Notes 6.25% due 6/30/98,
market value $10,265 and $42,900
U.S. Treasury Notes 8.875% due 11/15/98,
market value $44,734) ...................................... 53,800 53,800
--------
Total Repurchase Agreement
(cost $182,000) ............................................ 182,000
--------
</TABLE>
1997 SEMI-ANNUAL REPORT 9
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP BLUE CHIP FUND
STATEMENT OF NET ASSETS (CONTINUED)
- -------------------------------------------------------------------------------------
MARKET
VALUE
------------
<S> <C>
TOTAL MARKET VALUE OF SECURITIES OWNED - 100.90%
(cost $3,030,612) ............................................ $ 3,132,151
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS - (0.90%) ................................... (27,968)
-----------
NET ASSETS APPLICABLE TO 356,065 SHARES
($1.00 par value) OUTSTANDING - 100.00% ....................... $ 3,104,183
===========
NET ASSETS VALUE - BLUE CHIP FUND A CLASS
($997,220 / 114,425 shares) .................................. $8.72
=====
NET ASSETS VALUE - BLUE CHIP FUND B CLASS
($425,831 / 48,922 shares) .................................... $8.70
=====
NET ASSETS VALUE - BLUE CHIP FUND C CLASS
($63,546 / 7,298 shares) ...................................... $8.71
=====
NET ASSETS VALUE - BLUE CHIP FUND INSTITUTIONAL CLASS
($1,617,586 / 185,420 shares) ................................ $8.72
=====
- --------
*Non-income producing securities for the period ended 05/31/97
COMPONENTS OF NET ASSETS AT MAY 31, 1997:
Common stock, $1.00 par value, 200,000,000 shares
authorized to the Fund with 100,000,000 shares
allocated to Blue Chip Fund A Class, 25,000,000 shares
allocated to Blue Chip Fund B Class, 25,000,000 shares
allocated to Blue Chip Fund C Class and 50,000,000 shares
allocated to Blue Chip Fund Institutional Class ............... 3,003,734
Accumulated undistributed:
Net investment income ......................................... 6,002
Net realized loss on investments .............................. (7,092)
Net unrealized appreciation of investments .................... 101,539
-----------
Total net assets .............................................. $ 3,104,183
===========
</TABLE>
See accompanying notes
<PAGE>
DELAWARE GROUP
EQUITY FUNDS II, INC. -
QUANTUM FUND
STATEMENTS OF NET ASSETS -
MAY 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
----------------------------
<S> <C> <C>
COMMON STOCK - 91.59%
AUTOMOBILES & AUTOMOTIVE PARTS - 0.60%
PACCAR ...................................... 800 $ 36,100
----------
36,100
----------
BANKING & FINANCE - 18.29%
Ahmanson (H.F.) & Co. ....................... 1,550 63,163
AmSouth Bancorporation ...................... 1,522 59,548
Bank of Boston .............................. 655 47,815
Bank of New York ............................ 2,005 85,463
BankAmerica ................................. 750 87,656
Bear Stearns ................................ 2,105 68,413
Chase Manhattan ............................. 710 67,095
City National ............................... 2,050 49,456
Comerica .................................... 965 60,313
Edwards (A.G.) ............................. 1,230 45,664
First Chicago NBD ........................... 745 44,141
First of America Bank ....................... 855 58,888
First Union ................................. 310 26,621
Mellon Bank ................................. 1,000 87,500
NationsBank ................................. 1,350 79,481
Paine Webber Group .......................... 1,465 52,008
*Republic New York .......................... 400 39,900
*Student Loan Marketing Association ......... 600 72,975
----------
1,096,100
----------
BUILDINGS & MATERIALS - 0.95%
Oakwood Homes ............................... 2,400 57,000
----------
57,000
----------
CABLE, MEDIA & PUBLISHING - 2.96%
Ennis Business Forms ........................ 875 8,641
Harland (John H.) .......................... 865 19,787
New York Times .............................. 1,525 70,245
Omnicom Group ............................... 1,360 78,880
----------
177,553
----------
CHEMICALS - 0.59%
Avery-Dennison .............................. 670 25,209
International Flavors & Fragrances .......... 230 10,206
----------
35,415
----------
COMPUTERS & TECHNOLOGY - 9.55%
*Cadence Design Systems ..................... 2,315 76,974
*Cisco Systems .............................. 1,045 70,603
*Compaq Computer ............................ 655 70,904
Deluxe ...................................... 1,350 43,875
*Gartner Group Class A ...................... 2,485 72,376
HBO ........................................ 1,265 81,197
*Micron Electronics ......................... 400 6,075
*Microsoft .................................. 400 49,625
*Quantum .................................... 1,350 52,566
*Western Digital ............................ 880 47,630
----------
571,825
----------
</TABLE>
- ------------------
Top 10 holdings, representing 17.12% of net assets, are in boldface.
10 1997 SEMI-ANNUAL REPORT
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP QUANTUM FUND
STATEMENT OF NET ASSETS (CONTINUED)
- -------------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
----------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
CONSUMER PRODUCTS - 2.19%
Avon Products ................................ 1,130 $ 72,038
Clorox ....................................... 470 59,338
--------
131,376
--------
ELECTRONICS & ELECTRICAL EQUIPMENT - 1.01%
*American Power Conversion ................... 2,600 60,288
--------
60,288
--------
ENERGY - 3.02%
*Global Marine ............................... 2,200 49,500
Helmerich & Payne ............................ 470 26,379
*Oryx Energy ................................. 2,330 53,881
Union Texas Petroleum ........................ 2,550 51,319
--------
181,079
--------
FOOD & BEVERAGE - 8.77%
*Boston Chicken .............................. 3,800 68,637
Campbell Soup ................................ 1,375 63,250
Coca Cola .................................... 1,435 97,939
Coca-Cola Enterprises ........................ 1,215 25,667
Flowers Industries ........................... 3,520 62,040
Hershey Foods ................................ 1,455 81,662
Hormel Foods ................................. 375 9,469
International Multifoods ..................... 255 7,204
Interstate Bakeries .......................... 1,150 61,813
Ralston-Purina Group ......................... 470 40,068
Universal Foods .............................. 220 7,893
--------
525,642
--------
HEALTHCARE & PHARMACEUTICALS - 6.27%
*Amgen ....................................... 735 49,199
*HEALTHSOUTH ................................. 2,450 56,044
Johnson & Johnson ............................ 1,860 111,367
*Lincare Holdings ............................ 955 37,185
*PhyCor ...................................... 920 26,277
Schering-Plough .............................. 1,050 95,288
--------
375,360
--------
INSURANCE - 10.88%
Allstate ..................................... 875 64,422
CIGNA ........................................ 510 88,613
Marsh & McLennan ............................. 750 98,813
Mercury General .............................. 805 58,966
Mid Ocean .................................... 155 7,033
OldRepublic International .................... 1,125 33,891
*Oxford Health Plans ......................... 1,075 75,586
*Reliance Group Holdings ..................... 4,000 49,000
SunAmerica ................................... 1,275 60,244
Travelers Group .............................. 2,100 115,238
--------
651,806
--------
LEISURE, LODGING & ENTERTAINMENT - 1.78%
Callaway Golf ................................ 2,210 71,273
Fleetwood Enterprises ........................ 260 7,020
King World Productions ....................... 750 28,219
--------
106,512
--------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
----------------------------
<S> <C> <C>
COMMON STOCK (CONTINUED)
METALS & MINING - 0.35%
Cleveland Cliffs Iron ......................... 500 $ 21,125
---------
21,125
---------
PACKAGING & CONTAINERS - 0.77%
*Sealed Air ................................... 1,010 46,334
---------
46,334
---------
RETAIL - 8.07%
Gap ........................................... 1,005 34,421
Pier 1 Imports ................................ 2,610 58,399
Ross Stores ................................... 2,355 66,970
*Safeway ...................................... 1,300 58,500
Sears, Roebuck ................................ 1,690 83,021
TJX ........................................... 1,675 80,400
Tiffany ....................................... 1,410 65,389
*Woolworth .................................... 1,500 36,178
---------
483,278
---------
TELECOMMUNICATIONS - 12.22%
*ADC Telecommunications ....................... 1,805 61,934
Ameritech ..................................... 2,135 139,843
*Ascend Communications ........................ 520 29,022
Bell Atlantic ................................. 1,150 80,500
Cincinnati Bell ............................... 685 42,128
*PairGain Technologies ........................ 2,710 56,741
*PictureTel ................................... 1,040 12,935
SBC Communications ............................ 1,770 103,545
*Tellabs ...................................... 1,470 73,959
U.S. West Communications Group ................ 1,890 69,221
*WorldCom ..................................... 2,100 62,344
---------
732,172
---------
TEXTILES, APPAREL & FURNITURE - 1.51%
NIKE .......................................... 650 37,050
*Tommy Hilfiger ............................... 1,200 53,400
---------
90,450
---------
TRANSPORTATION & SHIPPING - 1.47%
*AMR .......................................... 540 53,663
Tidewater ..................................... 185 7,793
*UAL .......................................... 340 26,520
---------
87,976
---------
MISCELLANEOUS - 0.34%
Jostens ....................................... 825 20,316
---------
20,316
---------
Total Common Stock (cost $5,199,946) .......... 5,487,707
---------
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 7.09%
With Chase Manhattan 5.45% 6/02/97
(dated 5/30/97, collateralized by $48,000
U.S. Treasury Notes 6.25% due 7/31/98,
market value $48,717) ....................... $ 48,000 48,000
With J.P. Morgan Securities 5.50% 6/02/97
(dated 5/30/97, collateralized by $129,000
U.S Treasury Notes 5.125% due 2/28/98,
market value $130,142) ...................... 127,000 127,000
</TABLE>
1997 SEMI-ANNUAL REPORT 11
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP QUANTUM FUND
STATEMENT OF NET ASSETS (CONTINUED)
- -------------------------------------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT (CONTINUED)
With PaineWebber 5.50% 6/02/97
(dated 5/30/97, collateralized by $80,000
U.S. Treasury Notes 5.625% due 11/30/98,
market value $81,288 and $45,000
U.S. Treasury Notes 5.625% due 11/30/00,
market value $45,394) ........................................ $ 124,000 $ 124,000
With Prudential Securities 5.53% 6/02/97
(dated 5/30/97, collateralized by 23,000
U.S. Treasury Notes 6.25% due 6/30/98,
market value $23,970 and $100,000
U.S. Treasury Notes 8.875% due 11/15/98,
market value $104,461) ....................................... 126,000 126,000
-----------
Total Repurchase Agreement
(cost $425,000) .............................................. 425,000
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED -
(cost $5,624,946) - 98.68% .................................. $ 5,912,707
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 1.32% .................................. 78,889
-----------
NET ASSETS APPLICABLE TO 683,990 SHARES
($1 par value ) OUTSTANDING - 100.00% ........................ $ 5,991,596
===========
NET ASSETS VALUE - QUANTUM FUND A CLASS
($2,341,521 / 267,177 shares) ............................... $8.76
=====
NET ASSETS VALUE - QUANTUM FUND B CLASS
($1,757,416 / 200,908 shares) ............................... $8.75
=====
NET ASSETS VALUE - QUANTUM FUND C CLASS
($280,479 / 32,058 shares) .................................. $8.75
=====
NET ASSETS VALUE - QUANTUM FUND INSTITUTIONAL CLASS
($1,612,180 / 183,847 shares) ............................... $8.77
=====
- ----------------
*Non-income producing securities for the period ended 05/31/97
COMPONENTS OF NET ASSETS AT MAY 31, 1997:
Common stock, $1.00 par value, 200,000,000 shares
authorized to the Fund with 100,000,000 shares
allocated to Quantum Fund A Class, 25,000,000 shares
allocated to Quantum Fund B Class, 25,000,000 shares
allocated to Quantum Fund C Class and 50,000,000
shares allocated to Quantum Fund Institutional Class ......... 5,716,969
Accumulated undistributed :
Net investment income ........................................ 3,985
Net realized loss on investments ............................. (17,119)
Net unrealized appreciation of investments ................... 287,761
-----------
Total net assets ............................................. $ 5,991,596
===========
</TABLE>
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP
EQUITY FUNDS II, INC.
STATEMENTS OF ASSETS AND LIABILITIES -
MAY 31, 1997
(UNAUDITED)
- -----------------------------------------------------------------------------------------
BLUE CHIP QUANTUM
FUND FUND
-----------------------------
ASSETS:
<S> <C> <C>
Investments at market (cost $3,030,612
and $5,624,946) ............................. $3,132,151 $5,912,707
Subscriptions receivable ...................... 273,516 271,375
Dividends and interest receivable ............. 3,474 3,840
Cash .......................................... 1,481 1,085
Receivable for securities sold- ............... - 41,219
Other assets .................................. 1 159
---------- ----------
Total assets .................................. 3,410,623 6,230,385
---------- ----------
LIABILITIES:
Payable for securities purchased .............. 299,323 224,989
Other accounts payable and accrued expenses ... 7,117 13,800
---------- ----------
Total liabilities ............................ 306,440 238,789
---------- ----------
TOTAL NET ASSETS .............................. $3,104,183 $5,991,596
========== ==========
</TABLE>
See accompanying notes
12 1997 SEMI-ANNUAL REPORT
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP
EQUITY FUNDS II, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MAY 31, 1997
- ------------------------------------------------------------------------------------------
BLUE CHIP QUANTUM
FUND FUND
---------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................... $ 10,869 $ 13,690
Interest ..................................... 2,249 4,095
--------- ---------
13,118 17,785
--------- ---------
EXPENSES:
Management fees .............................. 3,517 6,904
Dividend disbursing and transfer agent fees
and expenses ................................ 3,520 6,652
Distribution expense ......................... 1,002 5,293
Custodian fees ............................... 950 442
Registration fees ............................ 450 70
Reports and statements to shareholders280 .... 330
Accounting fees and salaries ................. 251 426
Directors' fees .............................. 247 250
Taxes (other than taxes on income) ........... 110 80
Professional fees ............................ 80 80
Other ........................................ 546 222
--------- ---------
10,953 20,749
Less expenses absorbed by Delaware
Management Company, Inc. .................... (3,837) (6,949)
--------- ---------
7,116 13,800
NET INVESTMENT INCOME ........................ $ 6,002 $ 3,985
--------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss from security transactions . (7,092) (17,119)
Net unrealized appreciation of investments
during the period ........................... 101,539 287,761
--------- ---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS .............................. 94,447 270,642
--------- ---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................. $ 100,449 $ 274,627
========= =========
</TABLE>
See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP
EQUITY FUNDS II, INC.
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
- -------------------------------------------------------------------------------------------
FOR THE PERIOD ENDED MAY 31, 1997
BLUE CHIP QUANTUM
FUND FUND
------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income ...................... $ 6,002 $ 3,985
Net realized loss from security transactions (7,092) (17,119)
Net unrealized appreciation of investments
during the period ......................... 101,539 287,761
----------- -----------
Net increase in net assets
resulting from operations ................. 100,449 274,627
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ................................... 989,005 2,278,315
B Class ................................... 459,311 1,682,574
C Class ................................... 59,925 266,881
Institutional Class ....................... 1,573,919 1,563,380
----------- -----------
3,082,160 5,791,150
----------- -----------
Cost of shares repurchased:
A Class ................................... (27,117) (63,253)
B Class ................................... (51,234) (8,883)
C Class ................................... (75) (45)
Institutional Class ....................... 0 (2,000)
----------- -----------
(78,426) (74,181)
----------- -----------
Increase in assets derived from capital
share transactions ........................ 3,003,734 5,716,969
----------- -----------
NET INCREASE IN NET ASSETS ................. 3,104,183 5,991,596
NET ASSETS:
Beginning of year .......................... 0 0
----------- -----------
End of year ................................ $ 3,104,183 $ 5,991,596
=========== ===========
</TABLE>
See accompanying notes
1997 SEMI-ANNUAL REPORT 13
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP EQUITY FUNDS II, INC.
FINANCIAL HIGHLIGHTS
MAY 31, 1997
- --------------------------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout the period was as follows:
Blue Chip Fund Blue Chip Fund Blue Chip Fund Blue Chip Fund
A Class B Class C Class Institutional Class
---------------------------------------------------------------------------
2/24/1997(1) 2/24/1997(1) 2/24/1997(1) 2/24/1997(1)
To To To To
5/31/97 5/31/97 5/31/97 5/31/97
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 8.5000 $ 8.5000 $ 8.5000 $ 8.5000
Income from investment operations:
Net investment income(2) .............. 0.0212 0.0067 0.0003 0.0275
Net realized and unrealized gain
from investments ...................... 0.1988 0.1933 0.2097 0.1925
-------------- -------------- ------------- ----------------
Net increase in net assets from
investment operations ................. 0.2200 0.2000 0.2100 0.2200
-------------- -------------- ------------- ----------------
Net asset value, end of period .......... $ 8.7200 $ 8.7000 $ 8.7100 $ 8.7200
============== ============== ============= ================
Total return(3) ........................ 2.59% 2.35% 2.47% 2.59%
Ratios and supplemental data:
Net assets, end of period (000 omitted) . $ 997 $ 426 $ 64 $ 1,617
Ratio of expenses to average net assets . 1.50% 2.20% 2.20% 1.20%
Ratio of expenses to average net assets
prior to expense limitation ............ 2.20% 2.90% 2.90% 1.90%
Ratio of net investment income to
average net assets ..................... 1.08% 0.38% 0.38% 1.38%
Ratio of net investment income to average
net assets prior to expense limitation . 0.38% (0.32%) (0.32%) 0.68%
Portfolio turnover ...................... 23% 23% 23% 23%
Average commission rate paid(4).......... $ 0.0378 $ 0.0378 $ 0.0378 $ 0.0378
</TABLE>
- --------
1 Date of commencement of operations, ratios have been annualized and total
return has not been annualized.
2 The average shares outstanding method has been applied for per share
information.
3 Does not include maximum sales charge of 4.75% nor the 1% limited
contingent deferred sales charge that would apply in the event of certain
redemptions within 12 months of purchase of A Class shares. Does not include
contingent deferred sales charge which varies from 1-4% depending upon the
holding period for Class B and Class C shares.
4 Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
14 1997 SEMI-ANNUAL REPORT
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- -----------------------------------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout the period was as follows:
QUANTUM FUND QUANTUM FUND QUANTUM FUND QUANTUM FUND
A CLASS B CLASS C CLASS INSTITUTIONAL CLASS
--------------------------------------------------------------
2/24/1997(1) 2/24/1997(1) 2/24/1997(1) 2/24/1997(1)
TO TO TO TO
5/31/97 5/31/97 5/31/97 5/31/97
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 8.500 $ 8.500 $ 8.500 $ 8.500
Income from investment operations:
Net investment income (loss)(2)......... 0.0101 (0.0043) (0.0043) 0.0164
Net realized and unrealized gain
from investments ...................... 0.2499 0.2543 0.2543 0.2536
--------- --------- --------- --------
Net increase in net assets from
investment operations .................. 0.2600 0.2500 0.2500 0.2700
--------- --------- --------- --------
Net asset value, end of period .......... $ 8.7600 $ 8.7500 $ 8.7500 $8.7700
--------- --------- --------- --------
Total return(3).......................... 3.06% 2.94% 2.94% 3.18%
Ratios and supplemental data:
Net assets, end of period (000 omitted) . $ 2,342 $ 1,757 $ 280 $ 1,613
Ratio of expenses to average net assets . 1.50% 2.20% 2.20% 1.20%
Ratio of expenses to average net assets
prior to expense limitation ............. 2.20% 2.90% 2.90% 1.90%
Ratio of net investment income to average
net assets .............................. 0.63% (0.07%) (0.07%) 0.93%
Ratio of net investment income to average
net assets prior to expense limitation .. (0.12%) (0.82%) (0.82%) 0.18%
Portfolio turnover ....................... 20% 20% 20% 20%
Average commission rate paid(4)........... $ 0.0372 $ 0.0372 $ 0.0372 $0.0372
</TABLE>
- ------
1 Date of commencement of operations, ratios have been annualized and total
return has not been annualized.
2 The average shares outstanding method has been applied for per share
information.
3 Does not include maximum sales charge of 4.75% nor the 1% limited
contingent deferred sales charge that would apply in the event of certain
redemptions within 12 months of purchase of A Class shares. Does not include
contingent deferred sales charge which varies from 1-4% depending upon the
holding period for Class B and Class C shares.
4 Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charged.
See accompanying notes
1997 SEMI-ANNUAL REPORT 15
<PAGE>
DELAWARE GROUP EQUITY FUNDS II, INC.
STANDARD NOTES TO FINANCIAL STATEMENTS - MAY 31, 1997
- --------------------------------------------------------------------------------
Delaware Group Equity Funds II, Inc. (The "Company") is registered as a
diversified open-end investment company under the Investment Company Act of
1940, as amended. The Company is organized as a Maryland Corporation and offers
four series, the Decatur Income Fund, the Decatur Total Return Fund, the Blue
Chip Fund and the Quantum Fund (The "Funds"). Each series offers four classes of
shares.
The investment objective of the Blue Chip Fund is to achieve long-term
capital appreciation. Current income is a secondary objective. It seeks to
achieve these objectives by investing primarily in equity securities and any
securities that are convertible into equity securities.
The investment objective of the Quantum Fund is to achieve long-term capital
appreciation. It seeks to achieve this objective by investing primarily in
equity securities of medium to large-sized companies expected to grow over
time that meets the Fund's "Social Criteria" strategy.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Funds:
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date.
Securities not traded or securities not listed on an exchange are valued at
the mean of the last quoted bid and asked prices. Long-term debt securities
are valued by an independent pricing service and such prices are believed to
reflect the fair value of such securities. Money market instruments having
less than 60 days to maturity are valued at amortized cost which approximates
market value. Other securities and assets for which market quotations are not
readily available are valued at fair value as determined in good faith by or
under the direction of the Fund's Board of Directors.
16 1997 SEMI-ANNUAL REPORT
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Federal Income Taxes - Each Fund intends to qualify as a regulated investment
company and make the requisite distributions to shareholders. Accordingly, no
provision for federal income taxes has been made in the financial statements.
Income and capital gain distributions are determined in accordance with
federal income tax regulations which may differ from generally accepted
accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Funds on the basis of daily net assets of each class. Distribution
expenses relating to a specific class are charged directly to that class.
Repurchase Agreements - Each Fund may invest in a pooled cash account along
with other members of the Delaware Group of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements
secured by obligations of the U.S. government. The respective collateral is
held by the Fund's custodian bank until the maturity of the respective
repurchase agreements. Each repurchase agreement is at least 100%
collateralized. However, in the event of default or bankruptcy by the
counterparty to the agreement, realization of the collateral may be subject
to legal proceedings.
Other - Expenses common to all Funds within the Delaware Group of Funds are
allocated amongst the Funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale
of investment securities are those of the specific securities sold. Dividend
income is recorded on the ex-dividend date and interest income is recorded on
the accrual basis. Original issue discounts are accreted to interest income
over the lives of the respective securities. The Blue Chip Fund and Quantum
Fund declares and pays dividends from net investment income and capital gains
annually.
Certain Fund expenses are paid through "soft dollar" arrangements with
brokers. The amount of these expenses is less than 0.01% of the Fund's
average daily net assets.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the
Funds pay Delaware Management Company, Inc. (DMC), the Investment Manager of
the Funds, an annual fee which is calculated daily at the rate of 0.65% on
the first $500 million of average daily net assets, 0.625% on the next $500
million and 0.60% on the average daily net assets in excess of $1 billion for
Blue Chip Fund and 0.75% on the first $500 million of average daily net
assets, 0.725% on the next $500 million and 0.70% on the average daily net
assets in excess of $1 billion for Quantum Fund.
DMC has entered into a sub-advisory agreement with Vantage Global Advisors,
Inc. with respect to the management of the Funds. For the services provided
to DMC, DMC pays the subadviser 0.15% and 0.20% of the fee paid to DMC for
Blue Chip Fund and Quantum Fund, respectively. The Funds do not pay any fees
to the sub-advisers.
DMC has elected to waive that portion if any of the management fee and reimburse
the Funds to the extent that annual operating expenses exclusive of taxes,
interest, brokerage commissions, extraordinary expenses and distribution
expenses exceed 1.20% of average daily net assets of the Funds through May 31,
1997. Total expenses absorbed by DMC for the period ended May 31, 1997, were
$3,837 and $6,949 for Blue Chip Fund and Quantum Fund, respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Funds has engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to serve as dividend disbursing and transfer agent for the Funds. The
Funds also engaged DSC to provide accounting services for the Funds. For the
period ended May 31, 1997, the Blue Chip Fund and Quantum Fund expensed
$3,520 and $6,652 for dividend disbursing and transfer agent services and
$207 and $339 for accounting services and had liabilities for such fees and
other expenses payable to DSC for $3,164 and $6,636, respectively.
Pursuant to the Distribution Agreement, the Funds pay Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Class for each Fund. For the period
ended May 31, 1997, DDLP earned $2,899 and $6,621 for commissions on sales of
Blue Chip Fund A Class shares and Quantum Fund A Class shares, respectively.
Certain officers of DMC, DSC and DDLP are officers, directors and/or
employees of the Funds. These officers, directors and employees are paid no
compensation by the Funds.
3. Investments
During the period ended May 31, 1997, the Funds made purchases and sales of
investment securities other than U.S. government securities and temporary
cash investments as follows:
Blue Chip Fund Quantum Fund
-------------- ------------
Purchases. . . . . . . . . . . . . . . . . $2,982,036 $5,389,334
Sales. . . . . . . . . . . . . . . . . . . $133,424 $189,388
Investment securities based on cost for federal income tax purposes at May
31, 1997 are as follows:
Blue Chip Fund Quantum Fund
-------------- ------------
Cost of investments. . . . . . . . . . . . $2,848,613 $5,627,053
Aggregate unrealized appreciation $155,753 $368,111
Aggregate unrealized depreciation $54,215 $82,457
---------- ----------
Net unrealized appreciation $101,538 $285,654
4. Capital Stock
Transactions in capital stock were as follows:
Blue Chip Fund Quantum Fund
-------------- ------------
Shares sold:
A Class. . . . . . . . . . . . . . . . . . 117,786 274,602
B Class. . . . . . . . . . . . . . . . . . 55,338 201,988
C Class. . . . . . . . . . . . . . . . . . 7,307 32,063
Institutional Class. . . . . . . . . . . . 185,420 184,099
---------- ----------
365,851 692,752
---------- ----------
Shares repurchased:
A Class. . . . . . . . . . . . . . . . . . (3,361) (7,425)
B Class. . . . . . . . . . . . . . . . . . (6,416) (1,080)
C Class. . . . . . . . . . . . . . . . . . (9) (5)
Institutional Class. . . . . . . . . . . . 0 (252)
---------- ----------
(9,786) (8,762)
---------- ----------
Net Increase (Decrease). . . . . . . . . . 356,065 683,990
========== ==========
1997 SEMI-ANNUAL REPORT 17
<PAGE>
DELAWARE GROUP OF FUNDS
For Growth of Capital
Aggressive Growth Fund
Trend Fund
DelCap Fund
Value Fund
U.S. Growth Fund
Tax-Efficient Equity Fund
Growth Stock Fund
For Total Return
Quantum Fund
Blue Chip Fund
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
Delaware Fund
For International Diversification
Emerging Markets Fund
New Pacific Fund
World Growth Fund
International Equity Fund
Global Assets Fund
Global Bond Fund
[PICTURE OF KEYBOARD]
funds
For Current Income
Delchester Fund
Strategic Income Fund
U.S. Government Fund
U.S. Government Securities Fund
Limited-Term Government Fund
For Tax-Exempt Current Income
National High Yield Municipal Bond Fund
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
State Tax-Free Funds*
Money Market Funds
Delaware Cash Reserve
U.S. Government Money Fund
Tax-Free Money Fund
* Available for the following states: AZ, CA, CO, FL, ID, IA, KS, MN, MO, NM,
NY, ND, OR, PA, UT, WA, WI.
<PAGE>
THIS SEMI-ANNUAL REPORT IS FOR THE INFORMATION OF QUANTUM FUND AND BLUE CHIP
FUND SHAREHOLDERS, BUT IT MAY BE USED WITH PROSPECTIVE INVESTORS WHEN
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS FOR QUANTUM FUND AND BLUE
CHIP FUND, WHICH SETS FORTH DETAILS ABOUT CHARGES, EXPENSES, INVESTMENT
OBJECTIVES AND OPERATING POLICIES OF THE FUNDS. YOU SHOULD READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST. SUMMARY INVESTMENT RESULTS ARE
DOCUMENTED IN THE FUND'S CURRENT STATEMENT OF ADDITIONAL INFORMATION. THE FIGU
RES 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.
[PICTURE OF GLOBE]
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia, PA
SUBADVISER
Vantage Global Advisors, Inc.
630 Fifth Avenue
New York, NY 10111
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, PA
SHAREHOLDER SERVICING, DIVIDEND DISBURSING AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, PA
1818 Market Street
Philadelphia, PA 19103-3682
FOR SHAREHOLDERS
1.800.523.1918
FOR SECURITIES DEALERS
1.800.362.7500
FOR FINANCIAL INSTITUTIONS
REPRESENTATIVES
1.800.659.2265
Be sure to consult your financial adviser when making investments. Mutual
funds can be a valuable part of your financial plan: however, shares of the
Fund are not FDIC or NCUSIF insured, are not guaranteed by any bank or any
credit union, and involve investment risk, including the possible loss of the
principal amount invested. Shares of the Fund are not bank or credit union
deposits.
Copy Rights Delaware Distributors, L.P.
DELAWARE
GROUP
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Printed in the USA on
recycled paper
(74-DDLP)
SA-143 [5/97] PP 7/97
