SOCIAL AWARENESS FUND
FOR TOTAL RETURN
service and guidance
goals
professional management
[GRAPHIC OMITTED: ILLUSTRATION OF MAN AND WOMAN HOLDING BROKEN PICTURE]
1998
Semi-Annual Report
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
for total
return
2
DEAR SHAREHOLDER: JUNE 3, 1998
THE U.S. STOCK MARKET HAS OFFERED considerable capital appreciation
prospects for investors since November. Social Awareness Fund
capitalized on a fortuitous environment and provided a total return of
+13.51% (A Class shares at net asset value with distributions
reinvested) for the six months ended May 31, 1998.
A nexus of robust growth, low inflation, low interest rates and low
unemployment propelled stock prices. Social Awareness Fund outperformed
its peer group average and its returns were competitive with two equity
market barometers - the Standard & Poor's 500 Index and Domini Social
400 Index - as shown below.
Your Fund's subadviser - Vantage Investment Advisors of New York -
begins its stock selection process with a slate of some 1,200 mid and
large cap U.S. stocks. Companies that do not meet certain socially
responsible criteria are then eliminated, as explained on page 4.
Socially responsible investing lets Vantage help investors achieve
financial objectives in a manner consistent with specific ethical
concerns.
SOCIALLY RESPONSIBLE INVESTING LETS VANTAGE HELP INVESTORS ACHIEVE
FINANCIAL OBJECTIVES IN A MANNER CONSISTENT WITH SPECIFIC ETHICAL
CONCERNS.
Vantage employs computer driven quantitative methods to conduct
fundamental analysis on the companies that meet the Fund's social
responsibility screens. Vantage's quantitative techniques are an
essential part of Social Awareness Fund's disciplined investment
strategy - an approach that emphasizes stocks with both growth and value
characteristics.
CUMULATIVE TOTAL RETURN
FOR PERIODS ENDED MAY 31, 1998
SIX MONTHS ONE YEAR
Social Awareness Fund A Class +13.51% +33.85%
Standard & Poor's 500 Index +15.07% +30.69%
Domini Social 400 Index +15.16% +33.20%
Lipper Growth Fund Average (970 Funds) +11.98% +25.86%
The Domini Social 400 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, MA. Fund and Lipper performance quoted above is based on net
asset value without effect of sales charges. The S&P 500 Index is an
unmanaged composite of large company stocks. SEC-mandated performance
and fee waiver information for all share classes can be found on page 8.
Past performance does not guarantee future results.
for total
return
3
By combining growth and value investing into one comprehensive
strategy, we believe your Fund can seek attractively priced stocks with
favorable long-term earnings prospects.
At the start of fiscal 1998 in December, we were concerned about
inflation in the U.S. and the effects of economic crises in Asia.
Remarkably, consumer spending and corporate investment has remained
high, U.S. Commerce Department figures show. A drop in oil prices and
corporate productivity improvements have helped keep prices down. Low
inflation enabled the Federal Reserve Board to keep its interest rate
target at 5.5%.
The U.S. economy has been able to weather the Asian economic storm
without much damage through May 31. Still, investors are concerned that
continuing financial problems in Asia may further crimp the region's
demand for U.S. products. In addition, Asian countries have also begun
to increase exports to the U.S. - increasing competition for domestic
producers.
On the following pages, your Fund's manager - T. Scott Wittman,
President and Chief Investment Officer at Vantage - explains Social
Awareness Fund's strategy in detail and provides his outlook for the
remainder of the 1998 fiscal year.
In closing, we thank you for choosing to make our socially
conscious, technology-based investment strategy part of your investment
portfolio.
Sincerely,
/s/Wayne A. Stork
WAYNE A. STORK
Chairman
/s/Jeffrey J. Nick
JEFFREY J. NICK
President and Chief Executive Officer
PORTFOLIO HIGHLIGHTS
MAY 31, 1998
SOCIAL DOMINI
AWARENESS SOCIAL S&P 500
FUND 400 INDEX INDEX
Median Market Capitalization
($billions) $6.0 $3.4 $7.7
Number of Stocks 112 400 500
Average Stock Price-to-Earnings
Ratio 22.2x 28.4x 26.1x
P/E ratio based on a consensus of analysts' estimates for calendar 1998.
for total
return
4
PORTFOLIO MANAGER'S REVIEW
INVESTMENT STRATEGY
Social Awareness Fund's stock picking technique evaluates some 1,200 mid
and large cap U.S. stocks every business day. Companies are first
examined to see whether they meet your Fund's socially responsible
parameters.
Social Awareness Fund avoids companies that:
(bullet) Pollute the environment;
(bullet) Produce nuclear power, design or construct nuclear power plants
or manufacture equipment for the production of nuclear power;
(bullet) Make military weapons;
(bullet) Conduct animal testing for cosmetics or personal care products
(see page 7);
(bullet) Make alcoholic beverages or tobacco products; or
(bullet) Are involved in the gambling industry.
During the first half of the 1998 fiscal year, approximately 800
companies met our social screens. We then employ Vantage's proprietary
computer software, which allows us to evaluate the companies on a
quantitative basis every business day.
We evaluate raw data from each company - its stock's
price/earnings ratio, earnings estimates from many Wall Street analysts
and the amount of profit paid out as dividends each year. A potential
stock is then compared and ranked against all other stocks in its
industry sector. If a stock has growth and value characteristics, it is
a prime candidate for Social Awareness Fund's investment portfolio.
Our analysis leads to:
(bullet) Stocks with a low price/earnings ratio - stocks whose share
price is low in relation to its earnings per share; and,
(bullet) Companies whose earnings growth rates are accelerating and/or
whose earnings results have risen above previous estimates.
STRATEGIC POSITIONING
Screening out certain companies based on social responsibility should
not adversely affect Social Awareness Fund's long-term performance, in
our opinion. We believe that your Fund's ability to select attractive
stocks is the main contributor to total return.
During the first half of fiscal 1998, we sought companies that
appeared to be geared for long-term growth rather than temporarily
benefiting from the current wave of U.S. prosperity. We focused on
stocks that have demonstrated earnings momentum over the past two years.
We found the most promising opportunities in your Fund's two largest
sectors - financial and technology.
The financial sector is benefiting from internal expansion,
restructuring and merger activity. Two of your Fund's top ten holdings
have benefited from such activity - TRAVELERS GROUP and CHASE MANHATTAN.
In April, Travelers Group announced its intention to merge with
Citicorp, which if completed would be the biggest financial services
merger ever. Travelers also announced a partnership with Nikko
Securities, of Japan, this past spring. These moves may enhance
Travelers' earnings potential.
We are especially pleased with the performance of Chase Manhattan,
your Fund's third largest holding as of May 31. Chase announced
expansion plans that have the potential to lead to double digit earnings
growth over the next few years.
for total
return
5
Your Fund has slightly increased its weighting in technology stocks
since 1997 fiscal year-end. We believe the new product lines of some
technology companies bode well for their stocks' long-term capital
appreciation potential.
When evaluating technology stocks, we pay more attention to the
"upgrade cycle" rather than the business cycle. Technology companies are
under intense pressure to improve their products within relatively short
periods of time.
One company that has recently made strides in upgrading its
products is APPLE COMPUTER. In our view, Apple's stock could be poised
for a turnaround after years of weak performance. We bought shares last
winter after our quantitative analysis showed the stock met our growth
and value parameters.
To regain a greater share of the personal computer market, Apple
has introduced a new low priced personal computer. This strategy appears
to be working well and Apple's share of the personal computer market has
grown since November.
One technology company that did not meet our expectations during
the first half was WESTERN DIGITAL. The computer hardware firm has
suffered from an inventory glut and declining profit margins as the
personal computer market has shifted from high-end products to computers
priced in the $1,000 range. We sold your Fund's holdings of Western
Digital this past spring.
On occasion, a company will be sold from your Fund's investment
portfolio if it fails to measure up to our social screens - regardless
of the stock's performance. One such company this past fall was TIMKEN,
a steel fabricator that makes ball bearings - steel balls used to reduce
friction in machinery. Timken contracted with the U.S. military to make
ball bearings for weapons.
[GRAPHIC OMITTED: text within ovals of THE EFFICIENCY OF
QUANTITATIVE INVESTING]
THE EFFICIENCY OF QUANTITATIVE INVESTING
VANTAGE'S QUANTITATIVE APPROACH
OBJECTIVE ANALYSIS OF EACH COMPANY
BASED ON FUNDAMENTAL FACTORS
RANKING OF STOCKS BASED ON BOTH GROWTH AND
VALUE CHARACTERISTICS
STOCKS CHOSEN FOR PORTFOLIO IN RELATION TO ITS
ATTRACTIVENESS TO OTHER STOCKS WITHIN
THE SAME SECTOR
for total
return
6
OUTLOOK
The U.S. stock market has thrived during the past three years amid
rising corporate profits. While the economy remains strong, recent
reports indicate that profits are being squeezed due to rising wage
costs and the inability of some companies to raise prices. U.S.
companies are trying to remain price competitive with lower-priced
imports from Asia.
Although profit growth may be slipping, profits remain high by
historical standards. We believe uncertainty about future earnings for
many companies may lead to increased volatility in the U.S. stock market
in the coming months. However, we believe volatility can allow us to
uncover capital appreciation potential. In our view, volatility provides
an opportunity for our quantitative strategy to identify value stocks
with growth characteristics.
Our approach combines socially responsible investing with an
objective method of picking stocks. We believe the Fund is well-
positioned to capitalize on any market weakness for the remainder of
fiscal 1998.
OUR APPROACH COMBINES SOCIALLY RESPONSIBLE INVESTING WITH AN
OBJECTIVE METHOD OF PICKING STOCKS. WE BELIEVE THE FUND IS WELL-
POSITIONED TO CAPITALIZE ON ANY MARKET WEAKNESS FOR THE REMAINDER OF
FISCAL 1998.
T. SCOTT WITTMAN
President and Chief Investment Officer
Vantage Investment Advisors
June 5, 1998
[PHOTO OF KEYBOARD]
SECTOR DIVERSIFICATION
SOCIAL AWARENESS FUND VS. DOMINI SOCIAL 400 INDEX
MAY 31, 1998
ALLOCATION
SHARE OF CHANGE FROM
FUND'S NOVEMBER 30, SHARE OF
SECTORS NET ASSETS 1997 INDEX
Banking, Finance & Insurance 25.9% -4.1% 20.1%
Retail & Consumer Services 14.7% +4.3% 18.8%
Technology 14.5% +4.1% 17.1%
Telecommunications 11.0% -1.7% 4.6%
Basic Industry & Capital Goods 8.7% +0.7% 13.8%
Food & Beverage 6.1% -1.4% 8.8%
Health Care 6.0% -0.7% 8.6%
Transportation/Energy 5.1% +0.8% 4.3%
Media 4.6% +0.2% 3.9%
Cash 3.4% -2.2% 0
Fund and Index weightings are as of May 31, 1998.
for total
return
7
TOP TEN HOLDINGS
MAY 31, 1998
SHARE OF
COMPANY INDUSTRY NET ASSETS
AT&T Corp. Telecommunications 2.6%
BellSouth Corp. Telecommunications 2.5%
Chase Manhattan Corp. Banking and Finance 2.4%
Allstate Corp. Property/Casualty Insurance 1.9%
First Union Corp. Banking and Finance 1.9%
U.S. West Communications Telecommunications 1.7%
EMC Corp. Technology 1.6%
Schering-Plough Corp. Pharmaceuticals 1.6%
Travelers Group Diversified Financial 1.5%
AMR Corp. Airline 1.5%
TOTAL 19.2%
ANIMAL TESTING FOR COSMETICS:
A NEW SOCIAL SCREEN
On June 18, 1998, your Fund's Board of Directors voted to allow
Social Awareness Fund's subadviser -- Vantage Investment Advisors -- to
screen out companies that conduct testing on animals for cosmetics and
personal care products from consideration for your Fund's investment
portfolio.
Effective July 1, 1998, your Fund's management will avoid investing
in and eliminate from the portfolio any cosmetics or personal products
maker that tests products and/or potentially harmful chemicals on
animals.
Our research has shown that many socially responsible investors
share a common ethical concern about testing on animals for non-medical
purposes. Some cosmetic companies subject animals to chemicals and
cosmetic products in concentrations that lead to an animal's injury or
death. Federal law does not require cosmetics to test products for
safety, but many do to cover potential legal liabilities and reduce
insurance costs.
Your Fund's animal testing screen does not apply to pharmaceutical
products, which must undergo animal testing as a matter of law.
Pharmaceutical companies employ animal testing prior to clinical trials
on people.
As of May 31, 1998, some of the pharmaceutical companies in your
Fund's portfolio had cosmetic-making subsidiaries. Using research data
provided by Kinder, Lyndenberg, Domini & Co., we are determining if
these subsidiaries meet the Fund's animal testing screen. We will sell
our positions if they do not.
for total
return
8
[GRAPHIC OMITTED: WORM CHART OF SOCIAL AWARENESS FUND'S LIFETIME PERFORMANCE]
SOCIAL AWARENESS FUND'S LIFETIME PERFORMANCE
GROWTH OF A $10,000 INVESTMENT
FEBRUARY 24, 1997 THROUGH MAY 31, 1998
MONTH SOCIAL AWARENESS S&P 500
AND YEAR FUND A CLASS INDEX
2/24/97 $ 9,529 $10,000
3/31/97 $ 8,800 $ 9,589
4/30/97 $ 9,294 $10,162
5/31/97 $ 9,821 $10,780
6/30/97 $10,112 $11,263
7/31/97 $11,099 $12,159
8/31/97 $10,673 $11,478
9/30/97 $11,446 $12,107
10/31/97 $11,065 $11,702
11/30/97 $11,581 $12,244
12/31/97 $11,862 $12,454
1/31/97 $11,828 $12,592
2/28/98 $12,807 $13,500
3/31/98 $13,438 $14,192
4/30/98 $13,574 $14,334
5/31/98 $13,146 $14,089
Chart assumes $10,000 invested on February 24, 1997 and includes the
effect of a 4.75% front-end sales charge and reinvestment of
distributions. Returns for other classes will differ due to different
charges and expenses. Past performance does not guarantee future
results.
SOCIAL AWARENESS FUND PERFORMANCE
AVERAGE ANNUAL RETURNS THROUGH MAY 31, 1998
LIFETIME ONE YEAR
Class A (Est. 2/24/97)
Excluding Sales Charge +28.94% +33.85%
Including Sales Charge +24.12% +27.45%
Class B (Est. 2/24/97)
Excluding Sales Charge +28.07% +32.86%
Including Sales Charge +25.10% +28.86%
Class C (Est. 2/24/97)
Excluding Sales Charge +28.07% +32.86%
Including Sales Charge +28.07% +31.86%
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 EITHER THE
INVESTMENT WAS NOT REDEEMED OR CONTINGENT SALES CHARGES DID NOT APPLY.
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 of up to 4% 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.
Expense limitations were in effect for the periods shown. Performance
would have been lower if the limitations were not in effect.
The average annual total return for the lifetime period, and cumulative
returns for the one-year and six-month periods ended May 31, 1998 for
Social Awareness Fund's Institutional Class, which is available without
sales or asset-based distribution charges only to certain eligible
institutional accounts, were +29.28%, +34.16% and +13.68%, respectively.
for total return 9
FINANCIAL STATEMENTS
DELAWARE GROUP EQUITY FUNDS II, INC. -
SOCIAL AWARENESS FUND
STATEMENT OF NET ASSETS
MAY 31, 1998 (UNAUDITED)
NUMBER OF MARKET
SHARES VALUE
COMMON STOCK - 96.81%
AUTOMOBILES & AUTO PARTS - 0.20%
PACCAR 1,600 $ 88,350
------------
88,350
------------
BANKING & FINANCE - 19.44%
Ahmanson (H.F.) & Co. 3,270 249,337
AmSouth Bancorporation 10,203 392,178
Bank of Boston 2,475 260,803
BankAmerica 3,525 291,473
Bankers Trust New York 4,675 577,362
Bear Stearns 6,095 330,654
Chase Manhattan 8,150 1,107,891
City National 7,905 290,509
Comerica 8,070 530,602
Commerce Bancshares 7,200 350,100
Edwards (A.G.) 10,955 442,993
First Chicago NBD 1,260 110,171
First Union 15,590 862,322
Mellon Bank 6,720 453,180
National City 4,712 319,265
NationsBank 2,820 213,615
PaineWebber Group 11,505 493,996
Republic New York 2,025 260,086
SLM Holding 12,902 515,274
T. Rowe Price Associates 4,000 141,750
Travelers Group 11,635 709,735
------------
8,903,296
------------
BUILDINGS AND MATERIALS - 2.21%
Kaufman & Broad Home 24,500 629,344
Masco 4,400 247,500
Oakwood Homes 4,990 135,666
------------
1,012,510
------------
CABLE, MEDIA & PUBLISHING - 4.63%
Dun & Bradstreet 14,690 495,787
Ennis Business Forms 2,475 27,225
Gannett 8,860 584,206
McGraw-Hill 4,100 320,569
New York Times 5,485 386,692
Omnicom Group 6,560 307,090
------------
2,121,569
------------
CHEMICALS - 0.01%
International Flavors & Fragrances 460 22,080
------------
22,080
------------
COMPUTERS & TECHNOLOGY - 13.52%
* American Power Conversion 14,420 432,149
* Apple Computer 21,700 577,084
Compaq Computer 12,054 329,225
* Dell Computer 7,600 626,287
Deluxe 10,925 366,670
* EMC 17,400 721,012
HBO 10,630 613,550
* Lexmark International Group A 8,900 493,950
* Microsoft 6,000 509,062
* PeopleSoft 11,400 497,325
* Storage Technology 5,810 487,314
* Symantec 22,500 537,187
------------
6,190,815
------------
CONSUMER PRODUCTS - 4.33%
Avon Products 3,015 246,665
Brinker International 21,800 474,150
Clorox 2,690 224,615
Maytag 10,800 544,725
Premark International 2,800 89,775
Rubbermaid 12,300 401,287
------------
1,981,217
------------
ELECTRONICS & ELECTRICAL - 1.02%
* Anixter International 5,940 119,543
Xerox 3,400 349,350
------------
468,893
------------
ENERGY - 3.40%
Helmerich & Payne 14,800 373,700
* Oryx Energy 5,180 120,759
Sun 13,420 570,350
US Industries 18,600 490,575
------------
1,555,384
------------
ENVIRONMENTAL SERVICES - 0.83%
Republic Industries 15,500 381,688
------------
381,688
------------
FOOD & BEVERAGE - 6.14%
* Agribrands International 80 2,740
Campbell Soup 4,285 233,533
Coca Cola 5,555 435,373
Cracker Barrell Old Country Store 600 19,369
Flowers Industries 26,180 539,963
Hershey Foods 4,245 293,966
International Multifoods 1,000 29,750
Interstate Bakeries 10,150 327,338
McCormick and Company 11,400 380,119
Quaker Oats 5,490 316,704
Ralston-Purina Group 800 89,050
Universal Foods 5,440 129,540
* Vlassic Foods International 429 9,293
------------
2,806,738
------------
10 for total return
HEALTHCARE & PHARMACEUTICALS - 6.03%
* Agouron Pharmaceuticals 4,050 137,953
* Arterial Vascular Engineering 17,600 543,950
* Beverly Enterprises 32,330 462,723
* Health Management Associates 8,200 244,463
Johnson & Johnson 5,600 386,750
* Lincare Holdings 2,985 225,368
* PharMerica 3,882 47,191
Schering-Plough 8,510 712,181
------------
2,760,579
------------
INDUSTRIAL MACHINERY - 3.92%
Cincinnati Milacron 17,700 529,894
Deere & Co. 12,700 658,813
Ingersoll-Rand 13,400 603,838
------------
1,792,545
------------
INSURANCE - 6.52%
Allstate 9,215 867,362
Conseco 10,000 466,250
Marsh & McLennan 4,880 427,305
Mercury General 4,130 263,546
Mid Ocean 1,210 92,111
Old Republic International 14,693 418,736
Reliance Group Holdings 24,980 451,201
------------
2,986,511
------------
LEISURE, LODGING & ENTERTAINMENT - 1.31%
Fleetwood Enterprises 13,760 550,400
* King World Productions 1,920 48,960
------------
599,360
------------
METALS AND MINING - 0.28%
Cleveland Cliffs Iron 2,440 129,167
------------
129,167
------------
PACKAGING & CONTAINERS - 0.23%
* Sealed Air 2,010 107,535
------------
107,535
------------
RETAIL - 7.89%
CVS Corporation 3,710 260,396
* Federated Department Stores 6,800 352,325
Fingerhut 11,900 348,819
Gap 5,792 312,768
Jostens 20,650 521,413
Pier 1 Imports 19,465 468,377
Ross Stores 11,615 515,416
* Safeway 10,840 394,982
TJX 9,340 436,645
------------
3,611,141
------------
TELECOMMUNICATIONS - 11.03%
Alltel 9,600 378,600
Ameritech 11,160 473,602
AT&T 19,630 1,194,976
BellSouth 17,800 1,148,100
SBC Communications 12,150 472,331
* Tellabs 9,070 623,279
U.S. West Communications Group 14,980 760,235
------------
5,051,123
------------
TEXTILES, APPAREL & FURNITURE - 1.18%
* Tommy Hilfiger 8,000 538,000
------------
538,000
------------
TRANSPORTATION & SHIPPING - 1.70%
* AMR 4,570 703,494
* UAL 940 74,671
------------
778,165
------------
MISCELLANEOUS - 0.99%
* Input/Output 20,600 453,200
------------
453,200
------------
TOTAL COMMON STOCK (COST $39,285,900) 44,339,866
------------
for total return 11
PRINCIPAL MARKET
AMOUNT VALUE
REPURCHASE AGREEMENTS - 3.95%
With Chase Manhattan 5.53% 6/1/98
(dated 5/29/98, collateralized by
$633,000 U.S Treasury Notes 6.625%
due 4/30/02, market value $658,562) $645,000 $ 645,000
With J.P. Morgan Securities 5.55% 6/1/98
(dated 5/29/98, collateralized by
$597,000 U.S Treasury Notes 6.00%
due 6/30/99, market value $614,926) 602,000 602,000
With PaineWebber 5.55% 6/1/98
(dated 5/29/98, collateralized by
$279,000 U.S. Treasury Notes 5.75% due
11/15/00, market value $280,493 and
$276,000 U.S. Treasury Notes 7.50%
due 11/15/01, market value $293,593) 563,000 563,000
------------
TOTAL REPURCHASE AGREEMENTS
(COST $1,810,000) 1,810,000
------------
TOTAL MARKET VALUE OF SECURITIES OWNED
(COST $41,095,900) - 100.76% $ 46,149,866
LIABILITIES IN EXCESS OF RECEIVABLES
AND OTHER ASSETS - (0.76%) (348,061)
------------
NET ASSETS APPLICABLE TO 3,938,627 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% $ 45,801,805
============
NET ASSET VALUE - SOCIAL AWARENESS FUND A CLASS
($22,371,343 / 1,914,861 SHARES) $11.68
============
NET ASSET VALUE - SOCIAL AWARENESS FUND B CLASS
($18,525,922 / 1,600,456 SHARES) $11.58
============
NET ASSET VALUE - SOCIAL AWARENESS FUND C CLASS
($4,560,619 / 393,964 SHARES) $11.58
============
NET ASSET VALUE - SOCIAL AWARENESS FUND
INSTITUTIONAL CLASS
($343,921 / 29,346 SHARES) $11.72
============
- ------------
*Non-income producing securities for the period ended 5/31/98.
COMPONENTS OF NET ASSETS AT MAY 31, 1998:
Common stock, $1 par value, 200,000,000 shares
authorized to the Fund with 100,000,000 shares
allocated to Social Awareness Fund A Class,
25,000,000 shares allocated to Social Awareness
Fund B Class, 25,000,000 shares allocated to
Social Awareness Fund C Class, and 50,000,000
shares allocated to Social Awareness
Fund Institutional Class $41,074,859
Accumulated net investment loss (33,925)
Accumulated net realized loss on investments (293,097)
Net unrealized appreciation of investments 5,053,968
------------
Total net assets $45,801,805
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
SOCIAL AWARENESS FUND A CLASS
Net asset value A Class (A) $11.68
Sales charge (4.75% of offering price, or 4.97%
of amount invested per share) (B) 0.58
------------
Offering price $12.26
============
- ------------
(A) Net asset value per share, as illustrated, is the estimated
amount which would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of
$100,000 or more.
See accompanying notes
12 for total return
DELAWARE GROUP EQUITY FUNDS II, INC. -
SOCIAL AWARENESS FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Dividends $ 185,909
Interest 49,425 $ 235,334
------------
EXPENSES:
Management fees 111,938
Distribution expense 87,686
Dividend disbursing and transfer agent
fees and expenses 46,397
Registration fees 20,944
Accounting and administration 7,047
Directors' fees 616
Reports and statements to shareholders 500
Custodian fees 450
Taxes (other than taxes on income) 445
Other 565
------------
276,588
------------
Less expenses absorbed by Delaware
Management Company (7,329)
------------
269,259
------------
NET INVESTMENT LOSS (33,925)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investment transactions (284,606)
Net change in unrealized appreciation/depreciation
of investments 3,082,066
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 2,797,460
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $2,763,535
============
See accompanying notes
DELAWARE GROUP EQUITY FUNDS II, INC. -
SOCIAL AWARENESS FUND
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED 2/24/97*
5/31/98 TO
(UNAUDITED) 11/30/97
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment loss $ (33,925) $ (9,231)
Net realized gain (loss) on
investment transactions (284,606) 75,984
Net change in unrealized appreciation/
depreciation of investments 3,082,066 1,971,902
------------ ------------
Net increase in net assets resulting
from operations 2,763,535 2,038,655
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investment transactions:
Social Awareness Fund A Class (38,406) --
Social Awareness Fund B Cass (30,948) --
Social Awareness Fund C Class (5,476) --
Social Awareness Fund Institutional Class (414) --
------------ ------------
(75,244) --
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Social Awareness Fund A Class 13,357,753 8,566,240
Social Awareness Fund B Class 10,883,365 6,337,744
Social Awareness Fund C Class 3,114,903 1,169,590
Social Awareness Fund Institutional Class 228,572 1,681,093
Net asset value of shares issued upon
reinvestment of distributions from net
realized gain on investment transactions:
Social Awareness Fund A Class 35,864 --
Social Awareness Fund B Class 29,609 --
Social Awareness Fund C Class 5,197 --
Social Awareness Fund Institutional
Class 414 --
------------ ------------
27,655,677 17,754,667
------------ ------------
Cost of shares repurchased:
Social Awareness Fund A Class (1,552,755) (314,600)
Social Awareness Fund B Class (340,916) (94,130)
Social Awareness Fund C Class (79,270) (10,931)
Social Awareness Fund Institutional
Class (1,256) (1,941,627)
------------ ------------
(1,974,197) (2,361,288)
------------ ------------
Increase in net assets derived from
capital share transactions 25,681,480 15,393,379
------------ ------------
NET INCREASE IN NET ASSETS 28,369,771 17,432,034
NET ASSETS:
Beginning of year 17,432,034 --
------------ ------------
End of year $ 45,801,805 $ 17,432,034
============ ============
- ------------
*Date of commencement of operations.
See accompanying notes
for total return 13
<TABLE>
<CAPTION>
DELAWARE GROUP EQUITY FUNDS II, INC. - SOCIAL AWARENESS FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
SOCIAL AWARENESS FUND
A CLASS
-------------------------
SIX MONTHS 2/24/972
ENDED TO
5/31/981 11/30/97
(UNAUDITED)
<S> <C> <C>
Net asset value, beginning of period $10.330 $ 8.500
Income from investment operations:
Net investment income (loss)3 0.007 0.007
Net realized and unrealized
gain on investments 1.383 1.823
------- -------
Total from investment operations 1.390 1.830
------- -------
Less distributions:
Distributions from net realized
gain on investment transactions (0.040) --
------- -------
Total dividends and distributions (0.040) --
------- -------
Net asset value, end of period $11.680 $10.330
======= =======
Total return 4 13.51% 21.53%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $22,371 $ 9,115
Ratio of expenses to average net assets 1.45% 1.50%
Ratio of expenses to average net assets
prior to expense limitation 1.67% 1.96%
Ratio of net investment income
(loss) to average net assets 0.13% 0.38%
Ratio of net investment income (loss) to average
net assets prior to expense limitation (0.09%) (0.08%)
Portfolio turnover 17% 29%
SOCIAL AWARENESS FUND
B CLASS
-------------------------
SIX MONTHS 2/24/972
ENDED TO
5/31/981 11/30/97
(UNAUDITED)
<S> <C> <C>
Net asset value, beginning of period $10.280 $ 8.500
Income from investment operations:
Net investment income (loss)3 (0.034) (0.044)
Net realized and unrealized
gain on investments 1.374 1.824
------- -------
Total from investment operations 1.340 1.780
------- -------
Less distributions:
Distributions from net realized
gain on investment transactions (0.040) --
------- -------
Total dividends and distributions (0.040) --
------- -------
Net asset value, end of period $11.580 $10.280
======= =======
Total return 4 13.09% 20.94%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $18,526 $ 6,919
Ratio of expenses to average net assets 2.20% 2.20%
Ratio of expenses to average net assets
prior to expense limitation 2.42% 2.66%
Ratio of net investment income
(loss) to average net assets (0.58%) (0.32%)
Ratio of net investment income (loss) to average
net assets prior to expense limitation (0.80%) (0.78%)
Portfolio turnover 17% 29%
SOCIAL AWARENESS FUND
C CLASS
-------------------------
SIX MONTHS 2/24/972
ENDED TO
5/31/981 11/30/97
(UNAUDITED)
<S> <C> <C>
Net asset value, beginning of period $10.280 $ 8.500
Income from investment operations:
Net investment income (loss)3 (0.034) (0.044)
Net realized and unrealized
gain on investments 1.374 1.824
------- -------
Total from investment operations 1.340 1.780
------- -------
Less distributions:
Distributions from net realized
gain on investment transactions (0.040) --
------- -------
Total dividends and distributions (0.040) --
------- -------
Net asset value, end of period $11.580 $10.280
------- -------
Total return 4 13.09% 20.94%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $ 4,561 $ 1,290
Ratio of expenses to average net assets 2.20% 2.20%
Ratio of expenses to average net assets
prior to expense limitation 2.42% 2.66%
Ratio of net investment income
(loss) to average net assets (0.58%) (0.32%)
Ratio of net investment income (loss) to average
net assets prior to expense limitation (0.80%) (0.78%)
Portfolio turnover 17% 29%
- ------------
1 Ratios have been annualized and total return has not been annualized.
2 Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
3 The average shares outstanding method has been applied for per share
information.
4 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 B Class and C Class shares.
See accompanying notes
14 for total return
SOCIAL AWARENESS FUND
INSTITUTIONAL CLASS
-------------------------
SIX MONTHS 2/24/972
ENDED TO
5/31/981 11/30/97
(UNAUDITED)
<S> <C> <C>
Net asset value, beginning of period $10.350 $ 8.500
Income from investment operations:
Net investment income (loss)3 0.022 0.029
Net realized and unrealized gain on
investments 1.388 1.821
------- -------
Total from investment operations 1.410 1.850
------- -------
Less distributions:
Distributions from net realized gain on
investment transactions (0.040) --
------- -------
Total dividends and distributions (0.040) --
------- -------
Net asset value, end of period $11.720 $10.350
======= =======
Total return 13.68% 21.77%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $344 $107
Ratio of expenses to average net assets 1.20% 1.20%
Ratio of expenses to average net assets
prior to expense limitation 1.42% 1.66%
Ratio of net investment income (loss)
to average net assets 0.42% 0.68%
Ratio of net investment income (loss) to average
net assets prior to expense limitation 0.20% 0.22%
Portfolio turnover 17% 29%
- ------------
1 Ratios have been annualized and total return has not been annualized.
2 Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
3 The average shares outstanding method has been applied for per share
information.
See accompanying notes
DELAWARE GROUP EQUITY FUNDS II, INC. -
SOCIAL AWARENESS FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1998
(UNAUDITED)
Delaware Group Equity Funds II, Inc. (the "Company") is registered as
a diversified open-end investment company under the Investment Company
Act of 1940, as amended. The Company is organized as a Maryland
Corporation and offers four series, the Decatur Income Fund, the
Decatur Total Return Fund, the Blue Chip Fund and the Social Awareness
Fund. These financial statements and related notes pertain to the
Social Awareness Fund (the "Fund"). The Fund offers four classes of
shares. The Social Awareness Fund A Class carries a front-end sales
charge of 4.75%. The Social Awareness Fund B Class carries a back-end
sales charge. The Social Awareness Fund C Class carries a level load
deferred sales charge and the Social Awareness Fund Institutional
Class has no sales charge.
The investment objective of the 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 meet 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
Fund:
SECURITY VALUATION - Securities listed on an exchange are valued at
the last quoted sales price as of the close of the NYSE on the valuation
date. Securities not traded or securities not listed on an exchange
are valued at the mean of the last quoted bid and asked prices.
Money market instruments having less than 60 days to maturity are
valued at amortized cost which approximates market value.
FEDERAL INCOME TAXES - The Fund intends to continue to qualify as a
regulated investment company and make the requisite distributions to
shareholders. Accordingly, no provision for federal income taxes has
been made in the financial statements. Income and capital gain
distributions are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting
principles.
CLASS ACCOUNTING - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various
classes of the Fund on the basis of daily net assets of each class.
Distribution expenses relating to a specific class are charged
directly to that class.
REPURCHASE AGREEMENTS - The Fund may invest in a pooled cash account
along with other members of the Delaware Investments Family of Funds.
The aggregate daily balance of the pooled cash account is invested in
repurchase agreements secured by obligations of the U.S. government.
The respective collateral is held by the Fund's custodian bank until
the maturity of the respective repurchase agreements. Each repurchase
agreement is at least 100% collateralized. However, in the event of
default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings.
OTHER - Expenses common to all Funds within the Delaware Investments
Family of Funds are allocated amongst the funds on the basis of average
net assets. Security transactions are recorded on the date the
securities are purchased or sold (trade date). Costs used in
calculating realized gains and losses on the sale of investment
securities are those of the specific securities sold. Dividend income
is recorded on the ex-dividend date and interest income is recorded on
the accrual basis. The Fund declares and pays dividends from net
investment income and capital gains annually.
for total return 15
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 Fund pays Delaware Management Company (DMC), the Investment Manager
of the Fund, an annual fee which is calculated daily at the rate of
0.75% on the first $500 million of average daily net assets, 0.725% on
the next $500 million and 0.70% on the average daily net assets in
excess of $1 billion. At May 31, 1998, the Fund had a liability for
investment management fees and other expenses payable to DMC of $89,635.
DMC has entered into a sub-advisory agreement with Vantage Global
Advisors with respect to the management fee of the Funds. For the
services provided to DMC, DMC pays the sub-adviser an annual fee which
is calculated at the daily rate of 0.20% of average daily net assets
averaging one year old or less and 0.25% of average daily net assets
averaging two years old or less, but greater than one year old. The
Funds do not pay any fees to the sub-advisers.
DMC has elected to waive the 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 Fund through January 31, 1999. Total expenses absorbed by
DMC for the six months ended May 31, 1998, were $7,329.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate
of DMC, to serve as dividend disbursing agent, transfer agent and
accounting services agent for the Fund. For the six months ended May 31,
1998, the Fund expensed $46,397 for dividend disbursing and transfer
agent services and $5,874 for accounting services. At May 31, 1998,
the Fund had a liability for such fees and other expenses payable to
DSC of $94,279.
Pursuant to the Distribution Agreement, the Funds pays Delaware
Distributors, L.P. (DDLP), the Distributor and an affiliate of DMC, an
annual fee not to exceed 0.30% of the average daily net assets of the
A Class and 1.00% of the average daily net assets of the B and C Class.
For the period from February 1, 1998, through July 31, 1998, DDLP has
elected to waive fees to ensure that annual fees received from A Class
do not exceed 0.25% of the average daily net assets of A Class. No
distribution expenses are paid by the Institutional Class. At May 31,
1998, the Fund had a liability for distribution fees and other expenses
payable to DDLP for $226,255.
For the six months ended May 31, 1998, DDLP earned $64,125 for
commissions on sales of the Fund A Class shares.
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 six months ended May 31, 1998, the Fund made purchases of
$27,543,178 and sales of $2,442,369 of investment securities other than
U.S. government securities and temporary cash investments.
At May 31, 1998, net unrealized appreciation for federal income tax
purposes aggregated $5,053,383 of which $5,583,786 related to
unrealized appreciation of securities and $530,403 related to
unrealized depreciation of securities. At May 31, 1998, the aggregate
cost of securities for federal income tax purposes was $41,496,483.
4. CAPITAL STOCK
Transactions in capital stock were as follows:
12/1/97 2/24/97*
TO TO
5/31/98 11/30/97
Shares sold:
Social Awareness Fund A Class 1,164,955 915,132
Social Awareness Fund B Class 954,076 682,677
Social Awareness Fund C Class 275,041 126,620
Social Awareness Fund Institutional
Class 19,064 196,601
Shares issued upon reinvestment of
dividends from net investment income
and net realized gains on investment
transactions:
Social Awareness Fund A Class 3,485 --
Social Awareness Fund B Class 2,897 --
Social Awareness Fund C Class 509 --
Social Awareness Fund Institutional
Class 40 --
------------- -------------
2,420,067 1,921,030
------------- -------------
Shares repurchased:
Social Awareness Fund A Class (135,580) (33,130)
Social Awareness Fund B Class (29,771) (9,424)
Social Awareness Fund C Class (7,140) (1,066)
Social Awareness Fund Institutional
Class (113) (186,246)
------------- -------------
(172,604) (229,866)
------------- -------------
Net Increase 2,247,463 1,691,164
============= =============
- ------------
*Date of commencement of operations.
5. LINES OF CREDIT
The Fund had a committed line of credit of $600,000. No amount was
outstanding at May 31, 1998, or at any time during the fiscal year.
6. MARKET AND CREDIT RISK
The Fund may invest up to 15% of its total assets in illiquid
securities which may include securities with contractual restrictions
on resale, securities exempt from registration under Rule 144A of the
Securities Act of 1933, as amended, and other securities which may
not be readily marketable. The relative illiquidity of some of these
securities may adversely affect the Fund's ability to dispose of such
securities in a timely manner and at a fair price when it is necessary
to liquidate such securities.
THIS SEMI-ANNUAL REPORT IS FOR THE INFORMATION OF SOCIAL AWARENESS
FUND SHAREHOLDERS, BUT IT MAY BE USED WITH prospective investors when
preceded or accompanied by a current Prospectus for Social Awareness
Fund, which sets forth details about charges, expenses, investment
objectives and operating policies of the Fund. You should read the
prospectus carefully before you invest. Summary investment results are
documented in the Fund's current Statement of Additional Information.
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.
INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
SUBADVISER
Vantage Investment Advisors
New York, New York
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
[PHOTO OF GLOBES]
FOR SHAREHOLDERS
1.800.523.1918
FOR SECURITIES DEALERS
1.800.362.7500
FOR FINANCIAL INSTITUTIONS
REPRESENTATIVES ONLY
1.800.659.2265
www.delawarefunds.com
Be sure to consult your financial adviser when making investments.
Mutual funds can be a valuable part of your financial plan; however,
shares of the 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.
(copyright) Delaware Distributors, L.P.
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
Printed in the USA
on recycled paper
SA-147 [5/98] PP7/98
(824)
</TABLE>
