<PAGE>
DELAWARE(SM)
INVESTMENTS
-----------
DELAWARE BLUE CHIP FUND
Total Return
2000 SEMI-ANNUAL REPORT
(Total Return Artwork)
<PAGE>
A TRADITION OF SOUND INVESTING SINCE 1929
TABLE OF CONTENTS
Letter to Shareholders 1
Portfolio Management
Review 3
Performance Summary 5
Financial Statements
Statement of Net Assets 6
Statement of Operations 9
Statements of Changes in
Net Assets 10
Financial Highlights 11
Notes to Financial
Statements 15
A Commitment To Our Investors
Experienced
o Our seasoned investment professionals average more than 15 years' experience.
o We began managing investments in 1929 and opened our first mutual fund in
1938. Over the past 70 years, we have weathered a full range of economic and
market environments.
Disciplined
o We follow strict investment policies and clear buy/sell guidelines.
o We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.
Consistent
o We clearly articulate our investment policies and follow them consistently.
o Our commitment to consistency has earned us the confidence of discriminating
institutional and individual investors to manage approximately $45 billion in
assets as of June 30, 2000.
Comprehensive
o We offer more than 70 mutual funds in these asset classes.
o Large-cap equity o High-yield bonds
o Mid-cap equity o Investment grade bonds
o Small-cap equity o Municipal bonds (23 single-state funds)
o International equity o International fixed-income
o Balanced
o Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C)Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
July 10, 2000
Recap of Events - If markets had titles, the last six-month period would
probably be called A Tale of Two Markets as investors experienced both the best
of times and the worst of times. As the end of 1999 approached, the U.S. stock
markets experienced a powerful rally led by shares of growth stocks in general
and technology companies in particular.
That bull run persisted through February, 2000. Then in March, April and May,
investor sentiment seemed to make an about-face. Fear of rising interest rates
brought all of the major indexes down in an often swift retreat that negated
many of those unprecedented gains. In most instances the high P/E momentum
stocks that led the market on the way up also bore the brunt of the correction.
At its lowest point, the tech-heavy Nasdaq Composite Index lost 37% from its
peak. By comparison, Delaware Blue Chip Fund's benchmark, the Standard & Poor's
500 Index, had retreated approximately 11% from its high.
Delaware Blue Chip Fund returned 1.81% (Class A shares at net asset value with
distributions reinvested) during the six-month period ended May 31, 2000. The
Fund's benchmark, the S&P 500 Index returned 2.90% for the same period. True to
its name, the Fund allocated a high percentage of its portfolio to companies
with very large market capitalizations. These companies include large technology
and growth companies, which were affected by the market's recent downturn.
Market Outlook - Delaware Blue Chip Fund's portfolio management maintains a
cautiously optimistic stance going into the latter half of the Fund's fiscal
year. Recent economic data suggests that the economy might be slowing. If a
slowdown materializes, and impacts corporate earnings, it could have an
influence on stock prices. But if the Federal Reserve manages to engineer
another soft landing for the economy, the outlook could be bullish.
"IF THE FEDERAL RESERVE MANAGES TO ENGINEER ANOTHER SOFT LANDING FOR THE
ECONOMY, THE OUTLOOK COULD BE BULLISH."
Total Return
For Period Ended May 31, 2000 Six Months
--------------------------------------------------------------------------------
Delaware Blue Chip Fund Class A +1.81%
--------------------------------------------------------------------------------
Lipper Multi-Cap Core Funds Average (415 funds) +6.38%
Standard & Poor's 500 Index +2.90%
--------------------------------------------------------------------------------
All performance shown above is at net asset value without effect of sales
charges and assumes reinvestment of distributions. Performance information for
all Fund classes can be found on page 5. The Lipper category represents the
average returns of Multi-Cap Core Funds tracked by Lipper Analytical (Source:
Lipper Analytical Services, Inc.). The Standard & Poor's 500 Index is an
unmanaged composite of mostly large-capitalization U.S. companies. You cannot
invest directly in an index. Past performance does not guarantee future results.
1
<PAGE>
In June, Paul Dokas took over as lead portfolio manager of Delaware Blue Chip
Fund. Mr. Dokas, who joined Delaware in 1997, is a chartered financial analyst
with expertise in asset allocation and quantitative research for global
investments. He is Director of Delaware Management's structured research team.
We are very excited to have Paul running the portfolio, and look forward to his
contributions in further refining the quantitative investment model that is used
to manage Delaware Blue Chip Fund. At present, investors can expect the Fund's
process, style and risk/return characteristics to remain generally unchanged.
Thank you for your continued confidence in Delaware Investments. We look forward
to the second half of 2000, and to seeing your Fund take advantage of new
opportunities as they arise in the market.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
------------------------------------ --------------------------------------
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family of Funds Delaware Investments Family of Funds
(Total Return Artwork)
2
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
J. Paul Dokas
Portfolio Manager
Delaware Management
July 10, 2000
The Fund's Results
Delaware Blue Chip Fund returned 1.81% for the six-month period ended
May 31, 2000 (Class A shares at net asset value with distributions reinvested).
The Fund's unmanaged benchmark, the Standard & Poor's 500 Index, fared better,
returning 2.90% for the same period.
The Fund fell short of its benchmark for the period primarily because it had a
higher percentage of holdings in very large companies. As the Fund's name
suggests, our focus is on the largest U.S. companies, generally those whose
market capitalization is greater than $2.5 billion at the time we invest in
them. Our selection process seeks out companies with an established history of
profit growth and shareholder dividends. Large-cap companies were among the
biggest underperformers during the retreat that hit the markets in early April.
This downslide followed a strong run-up for large technology and growth stocks,
which had continued into January and February. At the outset of the Fund's
six-month fiscal period, in a climate that strongly favored growth, the
technology sector was outpacing the market. By the close of this period, events
such as the U.S. Justice Department's ruling on Microsoft, had a profound
negative impact on this sector.
Portfolio Highlights
In a market that has been difficult for investors seeking a high degree of
growth, your Fund was buoyed by management's dynamic, bottom-up stock selection
model. This model does not guess which sector will outperform, but rather seeks
the best stocks within each sector.
Despite the sharp sell-off among technology stocks in April and May, a number of
technology stocks in the portfolio were among the market leaders for the period
December through May, 2000, including Intel and Symantec. Intel, a global
computer chipmaker, and Symantec, a leading software vendor whose stock we've
since sold from the portfolio, were the Fund's top performers.
Two other holdings -- CDW Computer Centers, a Fortune 1000 direct provider of
computer solutions, and Oxford Health, a health plan provider serving employers
in New York, New Jersey and Connecticut -- delivered earnings above analysts'
expectations, causing the stocks to rally. These two stocks, in which we sold
our positions at a profit in May, were also among the portfolio's top performers
for the period.
In the consumer products sector, our holding of Procter & Gamble hurt the Fund's
performance. P&G, which has historically delivered predictable earnings,
announced that earnings would fall short of expectations after having previously
stated they would be on target. This mixed message from the company prompted
many investors to sell the stock, even though our selection model suggests that
P&G is still a promising stock in its sector.
3
<PAGE>
When using a quantitative stock selection model to identify the best companies
in each sector, the definition of sectors is critical. Management continues to
refine its model to accurately reflect sub-sectors that might move independently
of the larger industry sector.
Outlook
The American economy, now in its tenth year of expansion, has continued to grow
rapidly with relatively little inflation. Economic data released in early June,
however, showed visible signs that the U.S. economy may finally be slowing. This
came as welcome news on Wall Street, where hope is that the Federal Reserve will
end its campaign of raising interest rates, intended to cool the economy and
head off inflation. While we expect that a slowdown in the domestic economy may
occur late in 2000, we believe that economic expansion in the rest of the world
could produce strong earnings surprises for many of the large, global companies
in which the Fund invests. A slower domestic economy should also bring about a
welcome broadening of the market and its leading sectors.
We are confident that our disciplined, objective approach to selecting stocks
with the potential for long-term captial appreciation positions us to take
advantage of new opportunities as they arise in the markets.
(Total Return Artwork)
4
<PAGE>
FUND BASICS
Fund Objective
The Fund seeks long-term capital
appreciation. Current income is a
secondary objective.
Total Fund Assets
$54.61 million
Number of Holdings
142
Fund Start Date
February 24, 1997
Your Fund Manager
J. Paul Dokas joined Delaware Investments in 1997. He was previously Director of
Trust Investment Management at Bell Atlantic Corp. Mr. Dokas earned a bachelor's
degree at Loyola College in Baltimore and an MBA degree at the University of
Maryland. He is a Chartered Financial Analyst.
Nasdaq Symbols
Class A DEBAX
Class B DEBBX
Class C DEBCX
DELAWARE BLUE CHIP FUND PERFORMANCE
Average Annual Total Returns
Through May 31, 2000 Lifetime Three Years One Year
--------------------------------------------------------------------------------
Class A (Est. 2/24/97)
Excluding Sales Charge +14.04% +14.40% +8.27%
Including Sales Charge +11.99% +12.17% +2.05%
--------------------------------------------------------------------------------
Class B (Est. 2/24/97)
Excluding Sales Charge +13.28% +13.66% +7.50%
Including Sales Charge +12.58% +12.88% +2.50%
--------------------------------------------------------------------------------
Class C (Est. 2/24/97)
Excluding Sales Charge +13.28% +13.61% +7.50%
Including Sales Charge +13.28% +13.61% +6.50%
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
results excluding sales charge assume either that contingent deferred sales
charges were not applied or the investment was not redeemed. Past performance is
not a guarantee of future results.
Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes of Delaware Blue Chip Fund
during the period. Performance would have been lower if the expense limitation
was not in effect.
The average annual total returns for the lifetime, three-year and one-year
periods ended May 31, 2000 for Delaware Blue Chip Fund Institutional Class (est.
2/24/97) were +14.37%, +14.76% and +8.51%, respectively. Institutional Class
shares are available without sales or asset-based distribution charges only to
certain eligible institutional accounts.
Nasdaq Symbol Institutional Class: DEBIX
5
<PAGE>
Statement of Net Assets
DELAWARE BLUE CHIP FUND
Number of Market
May 31, 2000 (Unaudited) Shares Value
--------------------------------------------------------------------------------
Common Stock - 96.57%
Aerospace & Defense - 1.30%
B.F.Goodrich .................................. 5,855 $ 207,853
Boeing ........................................ 6,600 257,813
General Dynamics .............................. 2,800 165,375
United Technologies ........................... 1,340 80,986
----------
712,027
----------
Automobiles & Auto Parts - 1.19%
Ford Motor .................................... 13,335 647,581
----------
647,581
----------
Banking, Finance & Insurance - 14.78%
AFLAC ......................................... 4,700 242,931
A.G. Edwards .................................. 9,600 335,400
American International Group .................. 3,925 441,808
Bank One ...................................... 2,646 87,483
Bank of America ............................... 18,745 1,041,519
Countrywide Credit ............................ 3,100 95,325
Chase Manhattan ............................... 5,160 385,388
Cigna ......................................... 4,900 435,181
Citigroup ..................................... 13,710 852,591
Comerica ...................................... 2,855 144,534
Dime Bancorp .................................. 5,100 93,075
Federal National Mortgage ..................... 3,800 228,475
Fleet Boston Financial ........................ 8,900 336,531
Golden West Financial ......................... 5,600 233,800
Hartford Financial Services ................... 2,700 159,638
J.P. Morgan ................................... 3,600 463,500
Loews ......................................... 1,500 98,813
Merrill Lynch ................................. 4,600 453,675
Morgan Stanley Dean Witter .................... 11,700 841,669
PNC Financial Services ........................ 13,100 659,913
Paine Webber .................................. 5,295 237,944
Washington Mutual ............................. 6,972 200,445
----------
8,069,638
----------
Business Services - 0.39%
Deluxe ........................................ 8,580 211,819
----------
211,819
----------
Cable, Media & Publishing - 3.80%
Donnelley & Sons .............................. 7,900 195,031
Gannett ....................................... 7,300 472,675
Knight-Ridder ................................. 4,795 254,135
McGraw-Hill ................................... 4,750 244,328
New York Times ................................ 6,600 253,275
Omnicom Group ................................. 4,400 369,325
Time Warner ................................... 1,000 78,938
*Viacom ........................................ 3,364 208,537
----------
2,076,244
----------
<PAGE>
Number of Market
Shares Value
--------------------------------------------------------------------------------
Common Stock (continued)
Chemicals - 1.26%
Dow Chemical .................................... 3,035 $ 324,935
Englehard ....................................... 8,700 151,706
Lubrizol ........................................ 9,100 210,438
----------
687,079
----------
Computers & Technology - 17.11%
*America Online .................................. 14,200 752,600
*Apple Computer .................................. 3,200 268,800
Automatic Data Processing ....................... 2,400 131,850
Compaq Computer ................................. 2,800 73,500
*Cisco Systems ................................... 32,200 1,835,400
Computer Associates International ............... 4,300 221,450
*Compuware ....................................... 6,600 67,238
*Dell Computer ................................... 4,000 172,500
*EMC ............................................. 6,600 767,663
*Electronics Arts ................................ 1,400 89,425
Hewlett-Packard ................................. 3,600 432,450
International Business Machines ................. 9,500 1,019,453
*Lexmark International ........................... 1,500 104,625
*Microsoft ....................................... 21,100 1,320,069
*ORACLE .......................................... 13,500 970,313
*Opus360 ......................................... 150 741
*Priceline.com ................................... 1,300 49,563
*Sun Microsystems ................................ 7,700 590,013
Xerox ........................................... 8,300 225,138
*Yahoo ........................................... 2,250 254,391
----------
9,347,182
----------
Consumer Products - 2.96%
Avon Products ................................... 7,400 305,713
Keebler Foods ................................... 5,800 210,250
Minnesota Mining & Manufacturing ................ 5,400 463,050
Procter & Gamble ................................ 3,830 254,695
Tyco International .............................. 8,100 381,206
----------
1,614,914
----------
Electronics & Electrical Equipment - 12.95%
*Applied Materials ............................... 6,400 534,400
Corning ......................................... 1,800 348,188
General Electric ................................ 45,210 2,379,176
Honeywell ....................................... 46 2,516
Intel ........................................... 19,800 2,467,575
Motorola ........................................ 5,097 477,844
*Solectron ....................................... 5,400 178,538
Texas Instruments ............................... 9,500 686,375
----------
7,074,612
----------
6
<PAGE>
Statement of Net Assets (continued)
Number of Market
Delaware Blue Chip Fund Shares Value
--------------------------------------------------------------------------------
Common Stock (continued)
Energy - 5.85%
BP Amoco ........................................ 3,116 $ 169,433
Chevron ......................................... 4,000 369,750
Conoco - Class B ................................ 6,300 179,550
Exxon Mobil ..................................... 12,100 1,008,081
Kerr-McGee ...................................... 7,100 423,781
Murphy Oil ...................................... 5,300 343,838
*Royal Dutch Petroleum ........................... 7,445 464,847
Texaco .......................................... 4,070 233,771
----------
3,193,051
----------
Food, Beverage & Tobacco - 3.89%
Bestfoods ....................................... 3,800 245,100
Coca Cola ....................................... 2,020 107,818
ConAgra ......................................... 17,000 392,063
General Mills ................................... 5,400 214,313
Heinz (H.J.) .................................... 10,665 417,935
Philip Morris ................................... 14,800 386,650
Quaker Oats ..................................... 4,900 360,456
----------
2,124,335
----------
Healthcare & Pharmaceuticals - 12.13%
Allergan ........................................ 4,000 274,750
Amgen ........................................... 7,820 497,548
Bausch & Lomb ................................... 2,200 152,900
Bristol-Myers Squibb ............................ 18,000 991,125
Cardinal Health ................................. 3,800 246,525
Eli Lilly ....................................... 2,400 182,700
Johnson & Johnson ............................... 9,100 814,450
Medtronic ....................................... 5,524 285,177
Merck & Company ................................. 20,600 1,537,275
Pharmacia ....................................... 42 2,181
Pfizer .......................................... 24,400 1,087,325
Schering-Plough ................................. 4,620 223,493
Warner-Lambert .................................. 2,700 329,738
----------
6,625,187
----------
Industrial Machinery - 0.27%
Caterpillar ..................................... 3,900 149,175
----------
149,175
----------
Leisure, Lodging & Entertainment - 2.05%
Carnival Cruise Lines ........................... 5,400 146,475
Eastman Kodak ................................... 9,900 591,525
*Outback Steakhouse .............................. 4,050 122,766
Walt Disney ..................................... 6,100 257,344
----------
1,118,110
----------
Paper & Forest Products - 0.96%
Georgia-Pacific ................................. 3,600 117,900
International Paper ............................. 3,300 114,881
Weyerhaeuser .................................... 5,900 292,788
----------
525,569
----------
<PAGE>
Number of Market
Shares Value
--------------------------------------------------------------------------------
Common Stock (continued)
Retail - 3.54%
Albertson's ................................... 3,900 $ 142,838
*CDW Computer Centers .......................... 1,600 187,175
Home Depot .................................... 10,200 497,888
Lowe's ........................................ 2,900 135,031
Sears ......................................... 6,100 225,319
Wal-Mart Stores ............................... 12,900 743,363
-----------
1,931,614
-----------
Telecommunications - 10.44%
A T & T ....................................... 9,100 315,656
Alltel ........................................ 2,700 176,681
Bell Atlantic ................................. 11,070 585,326
BellSouth ..................................... 17,530 818,432
CenturyTel .................................... 2,950 79,650
GTE ........................................... 8,835 558,814
Lucent Technologies ........................... 9,600 550,800
Nortel Networks ............................... 8,000 434,500
*Qualcomm ...................................... 2,600 172,575
SBC Communications ............................ 15,392 672,438
Sprint ........................................ 3,400 205,700
U.S.West ...................................... 9,320 671,040
*Worldcom ...................................... 12,300 462,788
-----------
5,704,400
-----------
Textiles, Apparel & Furniture - 0.13%
*Tommy Hilfiger ................................ 9,830 69,424
-----------
69,424
-----------
Transportation & Shipping - 0.23%
Delta Air Lines ............................... 2,400 123,450
-----------
123,450
-----------
Utilities - 1.34%
Ameren ........................................ 4,000 146,750
Energy East ................................... 5,610 119,914
General Public Utilities ...................... 7,570 213,853
PG&E .......................................... 6,500 168,594
TXU ........................................... 2,280 81,510
-----------
730,621
-----------
Total Common Stock (cost $47,636,461) ......... $52,736,032
-----------
7
<PAGE>
Statement of Net Assets (continued)
Principal Market
Delaware Blue Chip Fund Amount Value
--------------------------------------------------------------------------------
Repurchase Agreements - 3.17%
With Chase Manhattan 6.33% 6/1/00
(dated 5/31/00, collateralized by $596,000
U.S. Treasury Notes 5.875% due 11/14/04,
market value $577,177) ............................... $566,000 $ 566,000
With J.P. Morgan Securities 6.33% 6/1/00
(dated 5/31/00, collateralized by $174,000 U.S.
Treasury Notes 6.375% due 9/30/01, market value
$175,380 and $225,000 U.S. Treasury Notes 6.50% due
5/31/01, market value $223,855 and $35,000 U.S.
Treasury Notes 6.50% due 8/31/01, market value
$35,452 and and $157,000 U.S. Treasury Notes 6.625%
due 6/30/01, market value 161,220) ................... 584,000 584,000
With PaineWebber 6.63% 6/1/00
(dated 5/31/00, collateralized by $225,000
U.S. Treasury Notes 5.00% due 4/30/01,
market value $221,952 and $143,000
U.S. Treasury Notes 6.25% due 1/31/02,
market value $144,462 and $225,000
U.S. Treasury Notes 7.25% due 5/15/04,
market value $229,493) ............................... 584,000 584,000
-----------
Total Repurchase Agreements
(cost $1,734,000) ...................................... 1,734,000
===========
Total Market Value Of Securities - 99.74%
(cost $49,370,461) ..................................... $54,470,032
Receivables And Other Assets
Net of Liabilities - 0.26% ............................. 139,672
-----------
Net Assets Applicable To 4,253,032 Shares
Outstanding - 100.00% ................................ $54,609,704
===========
Net Asset Value - Delaware Blue Chip
A Class ($21,912,671 / 1,690,960 shares) ............. $12.96
------
Net Asset Value - Delaware Blue Chip
B Class ($28,733,991 / 2,252,667 shares) ............. $12.76
------
Net Asset Value - Delaware Blue Chip
C Class ($3,132,981 / 245,611 shares) ................ $12.76
------
Net Asset Value - Delaware Blue Chip
Instititutional Class
($830,061 / 63,794 shares) ........................... $13.01
------
----------------------
* Non-income producing security for the six months ended May 31, 2000.
--------------------------------------------------------------------------------
Components Of Net Assets at May 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) .............................. $49,019,913
Accumulated net investment loss ........................ (76,612)
Accumulated net realized gain on investments ........... 566,832
Net unrealized appreciation of investments ............. 5,099,571
-----------
Total net assets ....................................... $54,609,704
===========
Net Asset Value And Offering Price Per Share -
Delaware Blue Chip Fund
Net asset value A Class (A) ............................ $12.96
Sales charge (5.75% of offering price, or 6.10%
of amount invested per share) (B) .................... 0.79
------
Offering price ......................................... $13.75
======
----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.
See accompanying notes
8
<PAGE>
Statement of Operations
Six Months Ended May 31, 2000 (Unaudited) Delaware Blue Chip Fund
--------------------------------------------------------------------------------
Investment Income:
Dividends $ 344,676
Interest 50,249 $394,925
---------
Expenses:
Distribution expense ................................. 162,169
Management fees ...................................... 156,607
Dividend disbursing and transfer agent fees and
expenses ........................................... 131,642
Registration fees .................................... 20,025
Reports and statements to shareholders ............... 15,319
Accounting and administration ........................ 7,922
Trustees' fees ....................................... 739
Custodian fees ....................................... 650
Professional fees .................................... 538
Taxes (other than taxes on income) ................... 496
Other ................................................ 2,927
---------
499,034
Less expenses absorbed or waived ..................... (26,542)
Less expenses paid indirectly ........................ (955)
---------
Total expenses ....................................... 471,537
---------
Net Investment Loss .................................. (76,612)
---------
Net Realized And Unrealized Gain (Loss) On Investments:
Net realized gain on investments ..................... 868,305
Net change in unrealized appreciation/depreciation of
investments ........................................ (217,923)
---------
Net Realized And Unrealized Gain On Investments ...... 650,382
---------
Net Increase in Net Assets Resulting from Operations . $573,770
=========
See accompanying notes
9
<PAGE>
Statements of Changes in Net Assets
Delaware Blue Chip Fund
--------------------------------------------------------------------------------
Six Months Year
Ended Ended
5/31/00 11/30/99
(Unaudited)
Increase (Decrease) in Net Assets from Operations:
Net investment loss .................................. ($76,612) ($125,878)
Net realized gain (loss) on investments .............. 868,305 (68,264)
Net change in unrealized appreciation/depreciation
of investments ..................................... (217,923) 3,515,686
----------- ----------
Net increase in net assets resulting from operations . 573,770 3,321,544
----------- ----------
Distributions to Shareholders from:
Net investment income:
A Class ............................................ -- (17,788)
B Class ............................................ -- --
C Class ............................................ -- --
Institutional Class ................................ -- (5,697)
----------- ----------
-- (23,485)
----------- ----------
Capital Share Transactions:
Proceeds from shares sold:
A Class ............................................ 10,660,380 8,682,916
B Class ............................................ 11,169,443 16,976,477
C Class ............................................ 1,278,106 1,663,367
Institutional Class ................................ 456,715 693,527
Net asset value of shares issued upon reinvestment of
distributions from net investment income and net
realized gain on investments:
A Class ............................................ -- 16,844
B Class ............................................ -- --
C Class ............................................ -- --
Institutional Class ................................ -- 5,697
----------- ----------
23,564,644 28,038,828
----------- ----------
Cost of shares repurchased:
A Class ............................................ (3,261,330) (3,435,862)
B Class ............................................ (3,833,074) (2,685,785)
C Class ............................................ (754,316) (541,156)
Institutional Class ................................ (129,342) (1,339,002)
----------- ----------
(7,978,062) (8,001,805)
----------- ----------
Increase in net assets derived from capital share
transactions ......................................... 15,586,582 20,037,023
----------- ----------
Net Increase In Net Assets ........................... 16,160,352 23,335,082
Net Assets:
Beginning of period .................................. 38,449,352 15,114,270
----------- ----------
End of period ........................................$54,609,704 $38,449,352
=========== ===========
See accompanying notes
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Blue Chip Fund A Class
---------------------------------------------------------------------------------------------------------
Six Months 2/24/97(2)
Ended Year Ended to
5/31/00(1) 11/30/99 11/30/98 11/30/97
(Unaudited)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $12.730 $10.970 $9.850 $8.500
Income (loss) from investment operations:
Net investment income (loss) (3) ....................... 0.006 (0.015) 0.048 0.041
Net realized and unrealized gain on investments ........ 0.224 1.800 1.122 1.309
--------------------------------------------
Total from investment operations ....................... 0.230 1.785 1.170 1.350
--------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... -- (0.025) (0.040) --
Distributions from net realized gain on investments .... -- -- (0.010) --
--------------------------------------------
Total dividends and distributions ...................... -- (0.025) (0.050) --
--------------------------------------------
Net asset value, end of period ........................... $12.960 $12.730 $10.970 $9.850
============================================
Total return (4) ......................................... 1.81% 16.30% 11.94% 15.88%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $21,913 $14,257 $7,480 $2,272
Ratio of expenses to average net assets ................ 1.54% 1.54% 1.50% 1.50%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.66% 2.00% 2.03% 2.95%
Ratio of net investment income (loss) to average
net assets ........................................... 0.10% (0.12%) 0.45% 0.69%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ...................................... (0.02%) (0.58%) (0.08%) (0.76%)
Portfolio turnover ..................................... 43% 11% 27% 25%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) The average shares outstanding method has been applied for per share
information.
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
11
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Blue Chip Fund B Class
---------------------------------------------------------------------------------------------------------
Six Months 2/24/97(2)
Ended Year Ended to
5/31/00(1) 11/30/99 11/30/98 11/30/97
(Unaudited)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $12.580 $10.880 $9.800 $8.500
Income (loss) from investment operations:
Net investment income (loss) (3) ....................... (0.039) (0.099) (0.025) (0.009)
Net realized and unrealized gain on investments ........ 0.219 1.799 1.115 1.309
--------------------------------------------
Total from investment operations ....................... 0.180 1.700 1.090 1.300
--------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... -- -- -- --
Distributions from net realized gain on investments .... -- -- (0.010) --
--------------------------------------------
Total dividends and distributions ...................... -- (0.025) (0.050) --
--------------------------------------------
Net asset value, end of period ........................... $12.760 $12.580 $10.880 $9.800
============================================
Total return (4) ......................................... 1.43% 15.63% 11.14% 15.29%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $28,734 $21,115 $5,375 $1,444
Ratio of expenses to average net assets ................ 2.24% 2.24% 2.20% 2.20%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 2.36% 2.70% 2.73% 3.65%
Ratio of net investment income (loss) to average
net assets ........................................... (0.60%) (0.82%) (0.25%) (0.01%)
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ...................................... (0.72%) (1.28%) (0.78%) (1.46%)
Portfolio turnover ..................................... 43% 11% 27% 25%
</TABLE>
----------------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) The average shares outstanding method has been applied for per share
information.
(4) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
12
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Blue Chip Fund C Class
---------------------------------------------------------------------------------------------------------
Six Months 2/24/97(2)
Ended Year Ended to
5/31/00(1) 11/30/99 11/30/98 11/30/97
(Unaudited)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $12.580 $10.880 $9.800 $8.500
Income (loss) from investment operations:
Net investment income (loss) (3) ....................... (0.039) (0.098) (0.025) (0.011)
Net realized and unrealized gain on investments ........ 0.219 1.798 1.115 1.311
--------------------------------------------
Total from investment operations ....................... 0.180 1.700 1.090 1.300
--------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... -- -- -- --
Distributions from net realized gain on investments .... -- -- (0.010) --
--------------------------------------------
Total dividends and distributions ...................... -- -- (0.010) --
--------------------------------------------
Net asset value, end of period ........................... $12.760 $12.580 $10.880 $9.800
============================================
Total return (4) ......................................... 1.43% 15.63% 11.14% 15.29%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $3,133 $2,578 $1,217 $239
Ratio of expenses to average net assets ................ 2.24% 2.24% 2.20% 2.20%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 2.36% 2.70% 2.73% 3.65%
Ratio of net investment income (loss) to average
net assets ........................................... (0.60%) (0.82%) (0.25%) (0.01%)
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ...................................... (0.72%) (1.28%) (0.78%) (1.46%)
Portfolio turnover ..................................... 43% 11% 27% 25%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) The average shares outstanding method has been applied for per share
information.
(4) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
See accompanying notes
13
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Blue Chip Fund Institutional Class
---------------------------------------------------------------------------------------------------------
Six Months 2/24/97(2)
Ended Year Ended to
5/31/00(1) 11/30/99 11/30/98 11/30/97
(Unaudited)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $12.770 $10.990 $9.870 $8.500
Income (loss) from investment operations:
Net investment income (loss) 3 ......................... 0.027 0.022 0.079 0.062
Net realized and unrealized gain on investments ........ 0.213 1.818 1.116 1.308
--------------------------------------------
Total from investment operations ....................... 0.240 1.840 1.195 1.370
--------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... -- (0.060) (0.065) --
Distributions from net realized gain on investments .... -- -- (0.010) --
--------------------------------------------
Total dividends and distributions ...................... -- (0.060) (0.075) --
--------------------------------------------
Net asset value, end of period ........................... $13.010 $12.770 $10.990 $9.870
============================================
Total return ............................................. 1.88% 16.70% 12.31% 16.12%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $830 $499 $1,042 $1,834
Ratio of expenses to average net assets ................ 1.24% 1.24% 1.20% 1.20%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.36% 1.70% 1.73% 2.65%
Ratio of net investment income (loss) to average
net assets ........................................... 0.40% 0.18% 0.75% 0.99%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and expenses
paid indirectly ...................................... 0.28% (0.28%) 0.22% (0.46%)
Portfolio turnover ....................................... 43% 11% 27% 25%
</TABLE>
----------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of commencement of operations; ratios have been annualized and total
return has not been annualized.
(3) The average shares outstanding method has been applied for per share
information.
See accompanying notes
14
<PAGE>
Notes to Financial Statements
May 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
Delaware Group Equity Funds II (the "Company") is organized as a Delaware
business trust and offers five funds: Delaware Decatur Equity Income Fund,
Delaware Growth and Income Fund, Delaware Blue Chip Fund, Delaware Social
Awareness Fund and Delaware Diversified Value Fund. These financial statements
and related notes pertain to Delaware Blue Chip Fund (the "Fund"). Delaware Blue
Chip Fund is registered as a diversified open-end investment company under the
Investment Company Act of 1940, as amended. The Fund offers four classes of
shares. The Delaware Blue Chip Fund A Class carries a front-end sales charge of
5.75%. The Delaware Blue Chip Fund B Class carries a back-end sales charge. The
Delaware Blue Chip Fund C Class carries a level load deferred sales charge and
the Delaware Blue Chip Fund Institutional Class has no sales charge.
The investment objective of the Fund is to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks to achieve these
objectives by investing primarily in stocks of large companies that management
expects to grow significantly faster than the average stock in the S&P 500
Index.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Fund.
Security Valuation - All equity securities are valued at the last quoted sales
price as of the regular close of the New York Stock Exchange (NYSE) on the
valuation date. If on a particular day an equity security does not trade, then
the mean between the bid and asked prices will be used. 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 Trustees.
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 accounting
principles generally accepted in the United States.
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.
<PAGE>
--------------------------------------------------------------------------------
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 102% collateralized. However,
in the event of default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. The Fund declares and pays dividends from net
investment income and capital gains, if any, annually.
Certain expenses of the Fund are paid through commission arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $554 for the six months ended May 31, 2000. In
addition, the Fund receives earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. These
credits were $401 for the six months ended May 31, 2000. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "Expenses
paid indirectly".
2. Investment Management 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 0.65% on the first $500
million of average daily net assets of the Fund, 0.60% on the next $500 million,
0.55% on the next $1,500 million and 0.50% on the average daily net assets in
excess $2,500 million. At May 31, 2000, the Fund had a liability for Investment
Management fees and other expenses payable to DMC of $27,672.
15
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates (continued)
DMC has entered into a sub-advisory agreement with Vantage Investment Advisors,
Inc., an affiliate of DMC, with respect to the management of the Fund. For the
services provided to DMC, DMC pays the sub-adviser an annual fee which is
calculated at the rate of 0.15% of average daily net assets averaging one year
old or less, 0.20% of average daily net assets averaging two years or less but
greater than one year old and 0.35% of average daily net assets averaging over
two years old. The Fund does not pay any fees to the sub-adviser.
DMC has elected to waive the portion, if any, of the management fee and
reimburse the Fund to the extent that annual operating expenses exclusive of
taxes, interest, brokerage commissions, distribution fees and extraordinary
expenses exceed 1.25% of average daily net assets of the Fund through January
31, 2001.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer and accounting services. The Fund pays
DSC a monthly fee based on the number of shareholder accounts, shareholder
transactions and average net assets, subject to certain minimums. At May 31,
2000, the Fund had a liability for such fees and other expenses payable to DSC
of $14,004.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Class. The Institutional Class pays no
distribution expenses. At May 31, 2000, the Fund had a liability for
distribution fees and other expenses payable to DDLP of $563.
For the six months ended May 31, 2000, DDLP earned $12,127 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 Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the six months ended May 31, 2000, the Fund made purchases of $9,961,843
and sales of $26,052,860 of investment securities other than U.S. government
securities and temporary cash investments.
The cost of investments for federal income tax purposes approximates the cost
for book purposes. At May 31, 2000, the aggregate cost of securities for federal
income tax purposes was $49,370,461. At May 31, 2000, net unrealized
appreciation for federal income tax purposes aggregated $5,099,571 of which
$8,220,801 related to unrealized appreciation of securities and $3,121,230
related to unrealized depreciation of securities.
<PAGE>
--------------------------------------------------------------------------------
For federal income tax purposes, the Fund has capital loss carryforwards of
$233,209 and $68,264 expiring in 2006 and 2007, respectively, which may be
carried forward and applied against future gains.
4. Capital Shares
Transactions in capital shares were as follows:
Six Months
Ended Year Ended
5/31/00 11/30/99
Shares sold:
A Class ........................................... 823,168 717,877
B Class ........................................... 874,404 1,407,012
C Class ........................................... 100,077 137,849
Institutional Class ............................... 34,708 56,172
Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class ........................................... -- 1,483
B Class ........................................... -- --
C Class ........................................... -- --
Institutional Class ............................... -- 501
--------- ---------
1,832,355 2,320,894
--------- ---------
Shares repurchased:
A Class ........................................... (251,848) (281,851)
B Class ........................................... (300,514) (222,327)
C Class ........................................... (59,408) (44,784)
Institutional Class ............................... (10,014) (112,310)
--------- ---------
(621,784) (661,272)
--------- ---------
Net increase ........................................ 1,210,571 1,659,622
========= =========
5. Line of Credit
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $683,500,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. No
amount was outstanding at May 31, 2000, or at any time during the fiscal year.
16
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
-------------------------------------
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
<TABLE>
<CAPTION>
<S> <C> <C>
Growth of Capital International and Global Tax-Exempt Income
o Technology and Innovation o Emerging Markets Fund o National High-Yield
Fund o New Pacific Fund Municipal Bond Fund
o Select Growth Fund o Overseas Equity Fund o Tax-Free USA Fund
o Trend Fund o International Equity Fund o Tax-Free Insured Fund
o Growth Opportunities Fund* o Global Equity Fund o Tax-Free USA
o Small Cap Value Fund o Global Bond Fund Intermediate Fund
o U.S. Growth Fund o State Tax-Free Funds**
o Tax-Efficient Equity Fund Current Income
o Social Awareness Fund o Delchester Fund Stability of Principal
o High-Yield o Cash Reserve
Total Return Opportunities Fund o Tax-Free Money Fund
o Blue Chip Fund o Strategic Income Fund
o Devon Fund o Corporate Bond Fund Asset Allocation
o Growth and Income Fund o Extended Duration o Foundation Funds
o Decatur Equity Bond Fund Growth Portfolio
Income Fund o American Government Balanced Portfolio
o REIT Fund Bond Fund Income Portfolio
o Balanced Fund o U.S. Government
Securities Fund
o Limited-Term
Government Fund
</TABLE>
*Formerly known as DelCap Fund.
**Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New Jersey,
New Mexico, New York, Oregon, Pennsylvania and Wisconsin. Insured and
intermediate bond funds are available in selected states.
<PAGE>
DELAWARE(SM) For Shareholders
INVESTMENTS 1.800.523.1918
---------------------
Philadelphia o London For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
This semi-annual report is for the information of Delaware Blue Chip Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus for Delaware Blue Chip Fund and the Delaware
Investments Performance Update for the most recently completed calendar quarter.
The prospectus sets forth details about charges, expenses, investment objectives
and operating policies of the Fund. You should read the prospectus carefully
before you invest. The figures in this report represent past results which are
not a guarantee of future results. The return and principal value of an
investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BOARD OF TRUSTEES Charles E. Peck Investment Manager
Retired Delaware Management Company
Wayne A. Stork Fredericksburg, VA Philadelphia, PA
Chairman
Delaware Investments Family of Funds Janet L. Yeomans International Affiliate
Philadelphia, PA Vice President and Treasurer Delaware International Advisers Ltd.
3M Corporation London, England
Walter P. Babich St. Paul, MN
Board Chairman National Distributor
Citadel Constructors, Inc. AFFILIATED OFFICERS Delaware Distributors, L.P.
King of Prussia, PA Philadelphia, PA
Charles E. Haldeman, Jr.
David K. Downes President and Chief Executive Officer Shareholder Servicing, Dividend
President and Chief Executive Officer Delaware Management Holdings, Inc. Disbursing and Transfer Agent
Delaware Investments Family of Funds Philadelphia, PA Delaware Service Company, Inc.
Philadelphia, PA Philadelphia, PA
Richard J. Flannery
John H. Durham Executive Vice President 1818 Market Street
Private Investor and General Counsel Philadelphia, PA 19103-3682
Horsham, PA Delaware Investments Family of Funds
Philadelphia, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates Bruce D. Barton
New York, NY President and Chief Executive Officer
Delaware Distributors, L.P.
Ann R. Leven Philadelphia, PA
Former Treasurer, National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
</TABLE>
(3367) Printed in the USA
SA-143 [5/00] BP 7/00 (J6046)
