<PAGE>
JUNE 6, 1996
DEAR
- -----------------------------
SHAREHOLDER:
- -----------------------------
During the six months ended May 31, volatility in the U.S. financial markets
returned to historical norms amid concern about inflation. Unmanaged equity
indexes such as the Standard & Poor's 500 Index continued to set record highs
while the bond market generally provided lackluster returns. For both Decatur
Funds, the period proved fruitful, even though the stocks of smaller companies
that tend not to pay dividends generally offered greater capital appreciation
than the stocks of larger, established businesses that provide cash dividends.
Decatur Income Fund and Decatur Total Return Fund each outperformed the
average of their 149 equity income fund peers through May 31 as shown above
(based on Class A net asset value with dividends and capital gains reinvested).
Both Funds have also achieved higher returns than the average of other equity
income funds over their respective lifetimes, as you'll see on page 6 of our
report.
As explained in our 1995 annual report, stocks included in the unmanaged S&P
BARRA Value Index -- those stocks in the S&P 500 Index that are trading at a
historical discount to some financial measure -- are the kind of stocks
typically found in the portfolios of the Decatur Funds.
=============================================================================
TOTAL RETURN
SIX MONTHS ENDED
MAY 31, 1996
------------------
Decatur Income Fund Class A +10.63%
Decatur Total Return Fund Class A +10.30%
Lipper Equity Income Fund Average +10.11%
Standard & Poor's BARRA Value Index +9.91%
Standard & Poor's 500 Index +11.78%
The Decatur Funds' performance as well as that of the funds in the Lipper
Equity Income Fund Average is based on net asset value without the effect
of sales charges and assumes reinvestment of dividends and capital gains.
Performance information for all classes of both Funds can be found on page 7.
=============================================================================
We are pleased to report both Decatur Funds outperformed this yardstick of
"value" in the six months ended May 31.
Since November, the stock market has been easily swayed by conflicting
indicators about U.S. economic growth. Given the difficulties some portfolio
managers have faced this year as they shifted strategies to anticipate
short-term market movements, we are reminded of Abraham Lincoln's maxim that it
is best not to swap horses when crossing a river.
The Decatur Funds achieved positive results by maintaining a consistent,
long-term investment focus on stocks with above-average dividend yields, and
without exposure to volatile "hot sectors" such as technology stocks and initial
public offerings. The Decatur Funds focus on individual companies whose earnings
and dividends cause us to believe they are undervalued by the market.
Your Funds' portfolio manager, John B. Fields, has had no difficulty finding
"value" even though the average dividend yield on the S&P 500 was 2.13% as of
May 31, a historic low. In the pages that follow, he describes his positioning
of the Funds as well as his outlook for the balance of fiscal 1996.
Stock investors have enjoyed an unusual level of rapid capital appreciation
during the past 18
1
<PAGE>
months. As 1996 unfolds, slower economic growth could translate into slower
corporate earnings growth, and consequently less price appreciation.
In such an environment, dividends can be expected to take on a much greater
role in the total return of stock investments. We believe the Decatur Funds'
strict adherence to a time-tested strategy that emphasizes the compounding power
of dividends should serve shareholders well.
Decatur Total Return Fund will celebrate its 10th birthday in August while
Decatur Income Fund will turn 40 next March. Over the years, we have to come
believe that the Decatur strategy can be an effective part of a prudent
investment plan at any stage of life. In our opinion, prudence and consistency
never go out of style.
Sincerely,
/s/ Wayne A. Stork
- ------------------
Wayne A. Stork
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
PORTFOLIO
- -------------------------------
MANAGER'S REVIEW
- -------------------------------
Since November 1995, the Federal Reserve Board has lowered its target for
short-term interest rates by 50 basis points (0.50%) to 5.25%. The latest
move came on January 31 amid signs that U.S. economic growth was slowing.
Less than a month later, however, the release of robust job growth statistics
convinced bond investors that the opposite was true -- economic growth was
accelerating. Fear of inflation then prompted a sharp rise in long-term interest
rates to more than 7%. Securities analysts believed the Fed would also raise its
target interest rate on loans between banks, hurting corporate earnings by
raising the cost of capital that many companies need to expand.
As of this writing, there is no market consensus about U.S. economic growth.
The nation's housing market remains strong even as some industries face a
slowdown in orders. Overall consumer inflation remains less than 3%, but prices
of commodities such as gasoline and corn have risen sharply. Banks are reporting
an increase in problem loans, prompting some to reduce consumer credit by
raising credit standards.
===============================================================================
Portfolio Highlights
(May 31, 1996)
DECATUR DECATUR TOTAL
INCOME FUND RETURN FUND
Median Market Capitalization $8.5 billion $9.1 billion
Number of Stocks 66 68
Average Price-To-Earnings Ratio* 19.5 20.8
Top Sector -- Consumer Growth 22.8%** 24.9%**
High-Yield Bonds 94%** not applicable
* Based on latest 12-month earnings; P/E ratio for S&P 500 Index stocks
was 22.9
** of total net assets
===============================================================================
2
<PAGE>
A FOCUS ON COMPANIES, NOT SECTORS
Rather than bet which way the economic wind will blow, we focus on individual
companies whose operations and dividend yields make them attractive candidates
for both Decatur Income Fund and Decatur Total Return Fund.
In the past six months, the Funds benefited from holding stocks of industrial
companies which paid above-average dividends and which we believe are
well-managed. Among the Funds' largest holdings were two such stocks whose
performance was better than the market as a whole -- DUPONT and GENERAL
ELECTRIC.
Our dividend-driven investment guidelines led us to railroad and
pharmaceutical stocks that we believe have the potential to perform well. Our
energy holdings did well and we slightly reduced our position in companies such
as EXXON CORP. as oil stock prices reached our objectives. We reduced
commitments to some "interest rate sensitive" stocks such as banks that provided
superior returns in 1995 but have underperformed the market in recent months.
Although the U.S. dollar rose in value against major world currencies in
1996, potentially making our products more expensive for foreigners to buy, we
believe many large U.S. companies are still well-positioned to compete globally.
In recent months, we purchased stocks of globally oriented U.S. consumer
growth companies with strong earnings potential that appeared to be temporarily
depressed as a result of the dollar's climb. One example -- pharmaceutical firms
represented 11% of Decatur Total Return Fund's net assets and 9.9% of Decatur
Income Fund's net assets as of May 31. This industry represented 7% of each
Fund's net assets last fall.
DIVIDEND SIGNAL AT WORK:
UNION PACIFIC CORP.
In 1869, UNION PACIFIC CORP., together with Southern Pacific Corp., completed
America's Transcontinental Railroad with a symbolic golden spike.
This past winter, the "spike" that attracted us to the modern Union Pacific
was a rise in the railroad company's dividend yield above that of the S&P 500
Index. Union Pacific's stock price was depressed by concerns that rising energy
costs and bad weather would negatively affect its earnings.
As of mid-June, the stock market was worried about regulatory decisions that
might affect a pending $4 billion merger between Union Pacific and Southern
Pacific, a deal that would create the nation's largest rail network.
To us, a rise in dividend yield above the S&P 500 is a signal of value and
potential capital appreciation. Union Pacific became a major holding in Decatur
Income Fund and Decatur Total Return Fund (2.6% of each Fund's net assets as of
May 31) after Decatur's management completed a careful fundamental analysis of
the company. We concluded that, even if the merger didn't happen, Union Pacific
was a well-managed, efficient company whose stock was temporarily out of favor.
Like the telephone and banking industries, America's railroads have been
consolidating to increase competitiveness as new technology and products have
emerged. Of course, changing market conditions may at any time prompt us to
reevaluate Union Pacific. And if the stock's price rises and its yield falls
below the S&P 500, Decatur's sell discipline could "kick in."
- ----------------------------------------------------------------------------
STOCK HIGHLIGHTS (May 31, 1996)
UNION PACIFIC CORP.
Dividend Yield 2.46%
Yield Relative to S&P 500 Index 115%
Business Railroads
1995 Revenues $7.5 billion
- ----------------------------------------------------------------------------
3
<PAGE>
OUR INCOME STRATEGY
Over the years, the Decatur Funds' focus on dividend income has enabled us
to:
* Generate a stream of income that has kept pace with inflation
* Uncover capital appreciation potential
* Enhance long-term total return
Historically, dividends have been a more reliable component of total
return than capital appreciation, and we are mindful of this fact when we
select stocks. We are pleased to report that Decatur Income Fund's Class A
yield was 3.08% as of May 31 - a full percentage point higher than the S&P
500 Index. Decatur Total Return Fund's Class A yield was 1.97%. (Yields are
computed using Securities and Exchange Commission guidelines and are net of
all expenses, including sales charges. See page 7 for yields for all classes).
Decatur Income Fund seeks to maintain a higher yield than the S&P 500 through
a combination of stock selection and the effective use of a small complement of
high-yield bonds. This strategy worked well during the past six months as
high-yield bonds outperformed other fixed-income investments.
High-yield bonds add to that Fund's income potential; however, they are
issued by companies whose ability to pay interest and repay principal is not as
strong as companies with "investment grade" ratings.
Our high-yield bonds, 9.4% of Decatur Income Fund's net assets as of May 31,
are managed by Gerald T. Nichols, a Delaware Group fixed-income portfolio
manager. He and his team generally follow a "quality first" philosophy and focus
on bonds rated BB and B, the top two tiers of high-yield credit ratings.
INVESTMENT OUTLOOK
While it is possible that the stock market's strong upward movement over the
past 18 months may continue, we believe a more likely scenario for the coming
months is a return to a historical performance pattern averaging a 10% total
return per year.
So far in 1996, as U.S. corporate earnings growth has slowed we have begun to
see higher levels of market volatility -- that is, daily price movements of
several percent up AND down in individual stocks. In our opinion, such price
fluctuations are likely to continue.
During periods when the market searches for direction, we believe the
conservative, value-oriented Decatur strategy has the potential to provide
greater rewards to patient long-term investors than strategies built on stocks
thought to be "in favor." In the months ahead, we will continue to view
high-quality stocks temporarily rejected by the market as each Fund's
cornerstone.
/s/ John B. Fields
- -------------------
John B. Fields
VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER
JUNE 6, 1996
4
<PAGE>
THE DECATUR STRATEGY
The Decatur Funds follow a very clear buy/sell discipline that targets stocks
with above-average dividend yields as well as capital gains potential. To be
eligible for purchase or holding by the Funds, stocks must have a current
dividend yield greater than that of the Standard & Poor's 500 Index.
Decatur's management is most attracted to stocks whose yield is "high"
relative to the S&P 500 but not necessarily the "highest" yield available. As
shown in the chart below, this "high" category of stocks has historically
generated the greatest level of total return by providing above-average dividend
income without giving up potential for capital appreciation.
THE IMPORTANCE OF A SELL DISCIPLINE
When a stock's yield falls below the average of the S&P 500, we view that as
a sign that the stock has become fairly priced and that future appreciation
potential is no longer attractive relative to possible risks. Sometimes we
sell a stock whose yield is still above that of the S&P 500 average if we
find what seems to be a more attractive candidate for either Fund's portfolio
or when a company's earnings or business operations have not met our
expectations.
The Decatur Funds' strict sell discipline can be especially valuable for
today's heady market environment because it forces us to make tough sell
decisions involving "good companies."
"Long-Term Returns of Dividend-Paying Stocks, 1928 through 1995"
YIELD Dividends Capital
CATEGORY Reinvested Gains Total
Lowest 2.9% 7.1% 10.0%
Low 4.2% 6.5% 10.7%
Mid 5.1% 6.7% 11.8%
High 6.1% 7.1% 13.2%
Highest 7.7% 3.1% 10.8%
This illustration is not intended to represent the actual
return of either Decatur Fund. Source: Case Studies
THE DECATUR STRATEGY OF INVESTING IN STOCKS YIELDING MORE THAN THE AVERAGE OF
THE S&P 500 AND SELLING STOCKS WHEN THEIR YIELD FALLS BELOW THE
S&P 500 LEADS US PRIMARILY TO STOCKS IN THE "HIGH" CCATEGORY, HIGHLIGHTED IN
THE CHART TO THE LEFT. THIS CATEGORY HAS PROVIDED THE HIGHEST TOTAL RETURN
SINCE 1928 BY PROVIDING GREATER DIVIDEND INCOME WITHOUT GIVING UP POTENTIAL
FOR CAPITAL APPRECIATION.
5
<PAGE>
FUNDS FOR ALL SEASONS
A TIME-TESTED STRATEGY OF SELECTING
STOCKS WITH HIGH DIVIDENDS AND
CAPITAL APPRECIATION POTENTIAL
DECATUR INCOME FUND
*Dividends paid monthly
*Strives for a yield one percentage point higher than the S&P 500 Index
*Uses a small complement of high-yield bonds to provide more income
IF A SHAREHOLDER INVESTED $100,000 IN DECATUR INCOME FUND CLASS A SHARES ON
MARCH 18, 1957 (ASSUMING A 4.75% SALES CHARGE) AND RECEIVED ANNUAL DIVIDENDS IN
CASH WHILE REINVESTING CAPITAL GAINS, ANNUAL DIVIDENDS WOULD HAVE GROWN FROM
$4,970 IN THE FIRST YEAR TO $37,570 FOR THE 12 MONTHS ENDED MAY 31, 1996. THE
PORTFOLIO WOULD BE WORTH $1,088,710.
DECATUR TOTAL RETURN FUND
*Dividends paid quarterly
*Designed for investors whose primary goal is wealth-building
*Fully invested in stocks
IF A SHAREHOLDER INVESTED $100,000 IN DECATUR TOTAL RETURN FUND CLASS A
SHARES ON AUGUST 27, 1986 (ASSUMING A 4.75% SALES CHARGE) AND REINVESTED
DIVIDENDS AND CAPITAL GAINS, THE PORTFOLIO WOULD BE WORTH $310,390 as of
May 31, 1996
=============================================================================
Decatur Income Fund Class A Performance
"May 18, 1957 to May 31, 1996"
Class A Average Returns
Average Annual Return
Decatur Income Fund Class A +12.15%
Lipper Equity Income Fund Average (5 funds) +9.50%
Inflation (based on the consumer price index)* +3.56%
- ----------------------------------------------------------------------------
============================================================================
Decatur Total Return Fund Class A Performance
August 1986 to May 1996
Class A Average Returns
Decatur Total Return A +12.87%
Lipper Equity Income Fund Average (26 funds) +10.97%
Inflation (based on the consumer price index)* +3.86%
- ----------------------------------------------------------------------------
The above illustrations assume reinvestment of all dividends and capital
gains. Sales charges, which have varied since the Funds began operating, are
not included. Past performance is not a guarantee of future results. See next
page for complete performance for all classes.
*Bloomberg Business News
6
<PAGE>
Average Annual Total Return through May 31, 1996
DECATUR INCOME FUND
<TABLE>
<CAPTION>
LIFETIME 10 YEARS FIVE YEARS ONE YEAR
<S> <C> <C> <C> <C>
Class A (Est. 1957) +12.01% +11.18% +12.35% +17.65%
- -------------------------------------------------------------------------------------------------------
Class B (Est. 1994)
Excluding Sales Charge +19.11% -- -- +22.38%
Including Sales Charge +17.07% -- -- +18.38%
- -------------------------------------------------------------------------------------------------------
Class C* (Est. 1995)
Excluding Sales Charge +10.11% -- -- --
Including Sales Charge +9.11% -- -- --
DECATUR TOTAL RETURN FUND
LIFETIME FIVE YEARS ONE YEAR
Class A (Est. 1986) +12.30% +12.67% +19.47%
- -------------------------------------------------------------------------------------------------------
Class B (Est. 1994)
Excluding Sales Charge +21.01% -- +24.64%
Including Sales Charge +19.00% -- +20.64%
- -------------------------------------------------------------------------------------------------------
Class C* (Est. 1995)
Excluding Sales Charge +9.96% -- --
Including Sales Charge +8.97% -- --
</TABLE>
*aggregate return through May 31, 1996
RETURN AND SHARE VALUE OF DECATUR INCOME FUND AND DECATUR TOTAL RETURN FUND
FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN
THEIR ORIGINAL COST. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.
PERFORMANCE ABOVE INCLUDES REINVESTMENT OF DIVIDENDS AND THE EFFECT OF
SALES CHARGES. LIFETIME PERFORMANCE FOR B AND C SHARES "EXCLUDING SALES
CHARGE" ASSUMES THE INVESTMENT WAS NOT REDEEMED.
CLASS A returns reflect the effect of a front-end 4.75% maximum sales charge
and a 12b-1 fee (for Decatur Total Return since inception; for Decatur Income
Fund since May 1, 1994).
CLASS B shares, initially offered September 6, 1994, do not carry a front-end
sales charge, but are subject to a 1% annual distribution and service fee.
They are subject to a maximum contingent deferred sales charge of 4% if
redeemed before the end of the sixth year. Class B's six-month total return
was +10.12% for Decatur Income Fund and +9.96% for Decatur Total Return Fund
(with dividends and capital gains reinvested, based on net asset value).
CLASS C shares, initially offered on November 29, 1995, have a 1% annual
distribution and service fee and a 1% contingent deferred sales charge if
redeemed within 12 months of purchase. Class C's six-month total return was
+10.20% for Decatur Income Fund and +9.96% for Decatur Total Return Fund
(with dividends and capital gains reinvested, based on net asset value).
Performance for this short period may not be indicative of future
performance.
SEC yield for both Class B and C shares was 2.40% for Decatur Income Fund and
1.37% for Decatur Total Return Fund as of May 31, 1996.
The average annual total returns for Decatur Income Fund Institutional Class
for the 10-year, five-year, one-year periods and the aggregate six-month
return for the period ended May 31, 1996, were, respectively, +11.75%,
+13.51%, +23.65% and +10.68%. For Decatur Total Return Fund's Institutional
Class, the average annual total returns for the lifetime, five-year, one-year
periods and the aggregate six-month return for the period ended May 31, 1996,
were, respectively, +12.97%, +13.97%, +25.79% and +10.43%. The Institutional
Class of both Funds is available without sales or asset-based distribution
charges only to certain eligible institutional accounts. Decatur Total
Return's performance for periods prior to January 13, 1994, has not been
adjusted to eliminate the effect of the 12b-1 fee that applies to Class A
shares. Institutional Class yield as of May 31, 1996 was 3.40% for Decatur
Income Fund and 2.37% for Decatur Total Return Fund.
7
<PAGE>
FINANCIAL
- -------------------------------
STATEMENTS
- -------------------------------
DELAWARE GROUP DECATUR FUND, INC.-
DECATUR INCOME FUND
STATEMENT OF NET ASSETS
MAY 31, 1996
(UNAUDITED)
Number Market
of Shares Value
COMMON STOCK - 85.63%
Aerospace & Defense - 1.62%
General Dynamics ................................. 452,800 $ 27,903,800
------------
27,903,800
------------
Automobiles & Auto Parts - 4.88%
Chrysler ......................................... 437,812 29,169,225
Dana ............................................. 500,000 16,750,000
Ford Motor ....................................... 619,400 22,608,100
General Motors ................................... 281,200 15,501,150
------------
84,028,475
------------
Banking, Finance & Insurance - 14.52%
American General ................................. 483,200 17,153,600
AmSouth Bancorporation ........................... 270,300 10,271,400
Aon .............................................. 573,800 28,905,175
Bank of Boston ................................... 493,000 24,588,375
BankAmerica ...................................... 27,900 2,099,475
CIGNA ............................................ 142,800 16,404,150
Crestar Financial ................................ 401,400 22,628,925
First Chicago NBD ................................ 607,644 26,508,469
ITT Hartford Group ............................... 335,400 17,356,950
Mercantile Bancorporation ........................ 349,900 16,445,300
St. Paul ......................................... 444,300 23,492,363
Summit Bancorp ................................... 554,400 20,166,300
U.S. Bancorp ..................................... 671,900 23,978,431
------------
249,998,913
------------
Cable, Media & Publishing - 2.36%
MCGRAW-HILL ...................................... 868,400 40,706,250
------------
40,706,250
------------
Chemicals - 6.11%
DUPONT (E.I.) deNEMOURS .......................... 493,500 39,356,625
Imperial Chemical Industries ADR ................. 564,400 29,983,750
PPG Industries ................................... 293,600 15,193,800
Witco ............................................ 649,300 20,696,438
------------
105,230,613
------------
Consumer Products - 2.44%
General Electric ................................. 160,500 13,281,375
TOP 10 STOCK HOLDINGS REPRESENTING 21.59% OF NET ASSETS ARE IN BOLDFACE.
8
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Consumer Products (Continued)
Maytag ......................................... 960,000 $ 20,640,000
Tambrands ...................................... 175,000 8,071,875
------------
41,993,250
------------
Electronics & Electrical - 0.79%
Eaton .......................................... 235,500 13,629,563
------------
13,629,563
------------
Energy - 10.57%
Amoco .......................................... 320,500 23,236,250
British Petroleum ADR .......................... 210,500 22,181,438
Exxon .......................................... 282,700 23,958,825
Occidental Petroleum ........................... 928,100 24,014,588
Phillips Petroleum ............................. 620,500 25,750,750
Sonat .......................................... 329,900 13,979,513
Ultramar ....................................... 639,900 20,556,788
Williams ....................................... 565,000 28,391,250
------------
182,069,402
------------
Food, Beverage & Tobacco - 7.02%
General Mills .................................. 424,200 24,338,475
Heinz (H.J.) .................................. 761,950 25,334,838
PHILIP MORRIS .................................. 373,600 37,126,500
RJR NABISCO HOLDINGS ........................... 1,026,440 34,000,825
------------
120,800,638
------------
Healthcare & Pharmaceuticals - 9.68%
AMERICAN HOME PRODUCTS ......................... 631,000 33,758,500
Bristol-Myers Squibb ........................... 342,300 29,223,863
PHARMACIA & UPJOHN ............................. 837,100 34,216,463
SMITHKLINE BEECHAM PLC-ADR UNIT ................ 843,300 43,008,300
Warner-Lambert ................................. 397,400 22,254,400
Zeneca Group PLC-ADR ........................... 65,600 4,206,600
------------
166,668,126
------------
Packaging & Containers - 1.49%
Minnesota Mining & Manufacturing ............... 376,100 25,668,825
------------
25,668,825
------------
Paper & Paper Products - 5.87%
Georgia-Pacific ................................ 280,100 20,237,225
Kimberly-Clark ................................. 352,300 25,673,863
Temple-Inland .................................. 295,400 14,548,450
Union Camp ..................................... 195,200 10,272,400
WEYERHAEUSER ................................... 668,100 30,315,038
------------
101,046,976
------------
Real Estate - 2.34%
Liberty Property Trust ......................... 818,300 16,672,863
Simon Property Group ........................... 973,400 23,604,950
------------
40,277,813
------------
Retail - 2.91%
May Department Stores .......................... 498,000 23,592,750
Penney (J.C.) ................................. 511,800 26,549,625
------------
50,142,375
------------
9
<PAGE>
Decatur Income Fund
Statement of Net Assets (Continued)
Number Market
of Shares Value
COMMON STOCK (Continued)
Telecommunications - 5.92%
ALLTEL ........................................... 630,000 $ 19,845,000
BCE .............................................. 555,100 22,065,225
Frontier ......................................... 811,500 25,968,000
GTE .............................................. 549,400 23,486,850
Royal PTT Nederland-SP ADR ....................... 290,500 10,494,313
------------
101,859,388
------------
Transportation & Shipping - 3.57%
Conrail .......................................... 300,800 21,131,200
UNION PACIFIC .................................... 574,640 40,296,630
------------
61,427,830
------------
Utilities - 1.28%
PECO Energy ...................................... 897,000 22,088,625
------------
22,088,625
------------
Miscellaneous - 2.26%
PITNEY BOWES ..................................... 783,500 38,881,188
------------
38,881,188
------------
Total Common Stock
(cost $1,306,687,216)............................. 1,474,422,050
------------
CONVERTIBLE PREFERRED STOCK - 1.99%
Banking, Finance & Insurance - 0.79%
Salomon 7.625% pfd cv series FSA ................. 495,000 13,612,500
------------
13,612,500
------------
Metals & Mining - 1.20%
Freeport McMoRan Copper & Gold 7.0% pfd cv ....... 620,900 20,644,925
------------
20,644,925
------------
Total Convertible Preferred Stock
(cost $30,097,494) .............................. 34,257,425
------------
Principal
Amount
CORPORATE BONDS - 10.04%
Aerospace & Defense - 0.23%
BE Aerospace sr nts 9.75% 2003 .................. $1,960,000 1,994,300
Sequa sr sub nts 9.375% 2003 .................... 2,000,000 1,995,000
------------
3,989,300
------------
Automobiles & Auto Parts - 0.39%
Exide sr nts 10.00% 2005 ....................... 2,000,000 1,975,000
JPS Automotive Products sr nts
11.125% 2001 ................................... 2,000,000 2,065,000
SPX sr sub nts 11.75% 2002 ...................... 2,500,000 2,706,250
------------
6,746,250
------------
Banking, Finance & Insurance - 0.17%
AIM Management sr sec nts
9.00% 2003 ..................................... 1,500,000 1,533,750
10
<PAGE>
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Banking, Finance & Insurance (Continued)
*First Nationwide Holdings 144A sr sec nts
9.125% 2003 ................................... $ 1,500,000 $ 1,455,000
------------
2,988,750
------------
Building & Materials - 0.24%
American Standard sr nts
10.875% 1999 ................................... 2,750,000 2,935,625
USG sr nts 8.50% 2005 .......................... 1,250,000 1,246,875
------------
4,182,500
------------
Cable, Media & Publishing - 1.78%
Adelphia Communications sr nts debs
9.875% 2005 .................................... 3,000,000 2,790,000
Cablevision Industries sr sub debs
10.75% 2004 .................................... 1,500,000 1,573,125
Cablevision Systems sr nts
9.875% 2006 .................................... 2,000,000 1,995,000
Calmar sr sub nts 11.50% 2005 .................. 1,000,000 991,250
Century Communications sr sub debs
11.875% 2003 ................................... 1,500,000 1,612,500
Comcast Cellular sr part nts
0.00% 2000 ..................................... 2,000,000 1,405,000
Jones Intercable sr nts 9.625% 2002 ............ 2,500,000 2,562,500
K-III Communications sr sec nts
10.625% 2002 ................................... 2,500,000 2,634,375
Lamar Advertising sr sec nts
11.00% 2003 .................................... 1,495,000 1,566,013
Lenfest Communications sr nts
8.375% 2005 .................................... 2,000,000 1,840,000
Paging Network sr sub nts
10.125% 2007 ................................... 1,000,000 1,030,000
Rogers Cablesystems sr sec nts
10.00% 2005 .................................... 2,500,000 2,518,750
Rogers Cablesystems sr sec debs
10.00% 2007 .................................... 1,350,000 1,350,000
Rogers Cablesystems sr sub nts
11.00% 2015 .................................... 840,000 882,000
Sullivan Graphics sr sub nts
12.75% 2005 .................................... 2,000,000 1,945,000
Telewest Communications PLC sr debs
9.625% 2006 .................................... 3,000,000 2,962,500
Western Wireless sr sub nts
10.50% 2006 .................................... 1,000,000 1,007,500
------------
30,665,513
------------
Chemicals - 0.74%
Carbide Graphite sr nts 11.50% 2003 ............. 1,818,000 1,977,075
Interlakes sr sub nts 12.00% 2001 ............... 1,500,000 1,567,500
G-I Holdings sr disc nts 0.00% 1998 ............. 1,138,000 918,935
11
<PAGE>
Decatur Income Fund
Statement of Net Assets (Continued)
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Chemicals (Continued)
*G-I Holdings 144A sr nts 10.00% 2006 .......... $ 1,082,000 $ 1,091,468
NL Industries sr sec nts 11.75% 2003 ........... 1,290,000 1,339,988
Polymer Group sr nts 12.25% 2002 ............... 2,000,000 2,200,000
Scotts sr sub nts 9.875% 2004 .................. 950,000 992,750
UCC Investors sr sub nts 11.00% 2003 ........... 2,500,000 2,668,750
-----------
12,756,466
-----------
Computers & Technology - 0.19%
Unisys credit-sensitive nts 13.50% 1997 ........ 1,620,000 1,729,350
*Unisys 144A sr nts 12.00% 2003 ................ 1,500,000 1,548,750
-----------
3,278,100
-----------
Consumer Products - 0.36%
American Safety Razor sr nts
9.875% 2005 .................................. 3,000,000 3,075,000
Revlon sr nts 9.50% 1999 ...................... 1,500,000 1,511,250
Revlon Worldwide sr sec nts 0.00% 1998 ......... 2,000,000 1,647,500
-----------
6,233,750
-----------
Electronics & Electrical - 0.17%
Essex Group sr nts 10.00% 2003 ................. 1,450,000 1,444,563
Mark IV Industries sub debs
8.75% 2003 ................................... 1,500,000 1,507,500
-----------
2,952,063
-----------
Energy - 0.59%
California Energy sr sec nts
9.875% 2003 .................................. 1,500,000 1,530,000
Falcon Drilling sr nts 8.875% 2003 ............. 2,500,000 2,456,250
Gulf Canada Resources sr sub debs
9.25% 2004 ................................... 2,500,000 2,500,000
Global Marine sr sec nts
12.75% 1999 .................................. 2,000,000 2,175,000
*Plains Resources 144A sr nts
10.25% 2006 .................................. 1,500,000 1,530,000
-----------
10,191,250
-----------
Environmental Services - 0.10%
Allied Waste Industrial sr sub nts
12.00% 2004 .................................. 1,500,000 1,627,500
-----------
1,627,500
-----------
Food, Beverage & Tobacco - 0.53%
Chiquita Brands sub nts 11.50% 2001 ............ 2,250,000 2,368,125
Mafco sr sub nts 11.875% 2002 .................. 2,800,000 2,954,000
PMI Acquisition sr sub nts
10.25% 2003 .................................. 3,000,000 3,060,000
Specialty Foods sr nts 11.125% 2002 ............ 850,000 779,875
-----------
9,162,000
12 -----------
<PAGE>
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Healthcare & Pharmaceuticals - 0.28%
HEALTHSOUTH Rehabilitation sr sub nts
9.50% 2001 ................................... $ 2,500,000 $ 2,600,000
Tenet Healthcare sr sub nts
10.125% 2005 ................................. 2,000,000 2,135,000
-----------
4,735,000
-----------
Industrial Machinery - 0.03%
*IMO Industries 144A sr sub nts
11.75% 2006 .................................. 510,000 529,125
-----------
529,125
-----------
Leisure, Lodging & Entertainment - 0.51%
ACT III Theatres sr sub nts
11.875% 2003 ................................. 2,150,000 2,327,375
Bally's Grand 1st mtg 10.375% 2003 ............. 2,000,000 2,085,000
Cinemark U.S.A. sr nts 12.00% 2002 ............. 2,925,000 3,180,938
MGM Grand Hotel 1st mtg nts
12.00% 2002 .................................. 1,000,000 1,100,000
-----------
8,693,313
-----------
Metals & Mining - 0.56%
AK Steel sr nts 10.75% 2004 .................... 3,300,000 3,613,500
Armco sr nts 11.375% 1999 ...................... 1,250,000 1,293,750
G.S. Technologies sr nts 12.25% 2005 ........... 3,000,000 3,090,000
Magma Copper sr sub nts 8.70% 2005 ............. 1,500,000 1,646,250
-----------
9,643,500
-----------
Packaging & Containers - 0.68%
Container Corporation of America sr nts
11.25% 2004 .................................. 2,000,000 2,075,000
Gaylord Container sr nts 11.50% 2001 ........... 1,500,000 1,552,500
Ivex Packaging sr sub nts
12.50% 2002 .................................. 1,330,000 1,399,825
Owens-Illinois sr debs 11.00% 2003 ............. 2,000,000 2,177,500
Stone Container sr nts 12.625% 1998 ............ 1,000,000 1,063,750
Stone Container 1st mtg nts
10.75% 2002 .................................. 785,000 796,775
U.S. Can sr sub nts 13.50% 2002 ................ 2,500,000 2,675,000
-----------
11,740,350
-----------
Paper & Forest Products - 0.59%
Doman Industries Limited sr nts
8.75% 2004 ................................... 3,000,000 2,760,000
Pacific Lumber sr nts 10.50% 2003 .............. 2,000,000 1,960,000
Repapa New Brunswick sr sec nts
10.625% 2005 ................................. 2,000,000 1,865,000
13
<PAGE>
Decatur Income Fund
Statement of Net Assets (Continued)
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Paper & Forest Products (Continued)
Repapa Wisconsin sr nts 9.25% 2002 ........... $ 625,000 $ 582,813
Riverwood International sr sub nts
10.875% 2008 ............................... 3,000,000 2,992,500
------------
10,160,313
------------
Retail - 0.48%
Cort Furniture sr nts 12.00% 2000 ............ 967,000 1,008,098
Fleming Companies sr nts
10.625% 2001 ............................... 2,000,000 1,780,000
P&C Food Markets sr nts 11.50% 2001 .......... 2,000,000 2,040,000
Penn Traffic sr nts 10.25% 2002 .............. 1,500,000 1,447,500
Ralph's Grocery sr nts 10.45% 2004 ........... 2,000,000 1,935,000
------------
8,210,598
------------
Telecommunications - 0.37%
CAI Wireless Systems sr nts
12.25% 2002 ................................ 1,000,000 1,057,500
Galaxy Telecomm L.P. sr sub nts
12.375% 2005 ............................... 1,000,000 1,040,000
*IXC Communications 144A sr nts
13.00% 2005 ................................ 2,500,000 2,650,000
ProNet sr sub nts 11.875% 2005 ............... 1,000,000 1,065,000
Rogers Cantel Mobile Communications
sr sub nts 11.125% 2002 .................... 550,000 585,750
------------
6,398,250
------------
Transportation & Shipping - 0.27%
Teekay Shipping 1st pfd mtg nts
8.32% 2008 ................................. $ 1,500,000 1,410,000
Trans Ocean Container sr sub nts
12.25% 2004 ................................ 600,000 619,500
Viking Star Shipping 1st pfd mtg nts
9.625% 2003 ................................ 2,600,000 2,626,000
------------
4,655,500
------------
Utilities - 0.38%
*Calpine 144A sr nts 10.50% 2006 ............. 2,000,000 2,005,000
Midland Funding II sr sub debs
11.75% 2005 ................................ 2,000,000 2,112,500
TransTexas Gas sr sec nts
11.50% 2002 ................................ 2,500,000 2,437,500
------------
6,555,000
------------
Miscellaneous - 0.40%
*Clark-Schwebel 144A sr nts
10.50% 2006 ................................ 2,000,000 2,080,000
Graphic Controls sr sub nts 12.00% 2005 ...... 2,500,000 2,681,250
*Knoll 144A sr sub nts 10.875% 2006 .......... 2,000,000 2,045,000
------------
6,806,250
------------
Total Corporate Bonds
(cost $170,677,009) ........................ $172,900,641
------------
14
<PAGE>
Principal Market
Amount Value
REPURCHASE AGREEMENTS - 2.21%
With Chase Manhattan 5.30% 6/3/96
(dated 5/31/96, collateralized by
$10,922,000 U.S. Treasury Notes 7.875%
due 7/15/96, market value $11,276,363
and $12,794,000 U.S. Treasury Notes
7.125% due 9/30/99, market value
$13,179,761) ................................. $23,964,000 $23,964,000
With J.P. Morgan Securities 5.30%
6/3/96 (dated 5/31/96, collateralized
by $1,405,000 U.S. Treasury Notes 4.75%
due 2/15/97, market value $1,415,429
and $10,922,000 U.S. Treasury Notes
5.50% due 2/28/99, market value
$10,845,130) ................................. 12,014,000 12,014,000
With PaineWebber 5.30% 6/3/96
(dated 5/31/96, collateralized by $946,000
U.S. Treasury Notes 6.75% due 2/28/97,
market value $968,893 and $1,218,000
U.S. Treasury Notes 6.125% due 9/30/00,
market value $1,207,203 ...................... 2,131,000 2,131,000
-------------
Total Repurchase Agreements
(cost $38,109,000) ........................... 38,109,000
----------- -------------
TOTAL MARKET VALUE OF SECURITIES OWNED -
99.87% (cost $1,545,570,719) .................. 1,719,689,116
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.13% .................... 2,138,983
-------------
NET ASSETS APPLICABLE TO 89,312,283 SHARES
($1 PAR VALUE) OUTSTANDING;
PER SHARE - 100.00% .......................... $1,721,828,099
==============
15
<PAGE>
Decatur Income Fund
Statement of Net Assets (Continued)
Market
Value
NET ASSETS VALUE - DECATUR INCOME FUND A CLASS
($1,470,420,951 / 76,264,582 SHARES) ....................... $ 19.28
=========
NET ASSETS VALUE - DECATUR INCOME FUND B CLASS
($36,310,567 / 1,888,044 SHARES ............................ $ 19.23
=========
NET ASSETS VALUE - DECATUR INCOME FUND C CLASS
($1,515,986 / 78,563 SHARES) .............................. $ 19.30
=========
NET ASSETS VALUE - DECATUR INCOME FUND
INSTITUTIONAL CLASS
($213,580,595 / 11,081,094 SHARES) ......................... $ 19.27
=========
- ----------
* These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
May 31, 1996, these securities amounted to $14,934,343 or 0.87% of net
assets.
Summary of Abbreviations:
cv - convertible jr - junior sec - secured
debs - debentures mtg - mortgage sr - senior
def - deferred nts - notes sub - subordinated
disc - discount part - participation unsec - unsecured
frn - floating rate note pfd - preferred
- ----------
COMPONENTS OF NET ASSETS AT MAY 31, 1996:
Common stock, $1 par value, 500,000,000 shares
authorized to the Fund with 350,000,000 shares
allocated to Decatur Income Fund A Class, 50,000,000
shares allocated to Decatur Income Fund B Class,
50,000,000 shares allocated to Decatur Income Fund
C Class and 50,000,000 shares allocated to Decatur
Income Fund Institutional Class ................... $1,394,056,137
Accumulated undistributed income:
Net investment income ............................. 2,659,784
Net realized gain on investments .................. 150,993,781
Net unrealized appreciation of investments ........ 174,118,397
--------------
Total net assets ................................... $1,721,828,099
==============
See accompanying notes
16
<PAGE>
DELAWARE GROUP DECATUR FUND, INC.-
DECATUR TOTAL RETURN FUND
STATEMENT OF NET ASSETS
MAY 31, 1996
(UNAUDITED)
Number Market
of Shares Value
COMMON STOCK - 96.98%
Aerospace & Defense - 1.68%
General Dynamics ................................. 175,300 $ 10,802,863
------------
10,802,863
------------
Automobiles & Automotive Parts - 4.39%
Chrysler ......................................... 184,516 12,293,379
Ford Motor ....................................... 258,000 9,417,000
General Motors ................................... 118,100 6,510,263
------------
28,220,642
------------
Banking, Finance & Insurance - 17.03%
American General ................................. 234,000 8,307,000
AmSouth Bancorp .................................. 161,300 6,129,400
AON .............................................. 247,700 12,477,888
Bank of Boston ................................... 200,400 9,994,950
BankAmerica ...................................... 17,700 1,331,925
CIGNA ............................................ 78,900 9,063,638
Crestar Financial ................................ 167,500 9,442,813
First Chicago NBD ................................ 216,816 9,458,598
ITT Hartford Group ............................... 135,600 7,017,300
Mercantile Bancorp ............................... 134,800 6,335,600
St. Paul ......................................... 191,500 10,125,563
Summit Bancorp ................................... 252,280 9,176,685
U.S. Bancorp ..................................... 294,000 10,492,125
------------
109,353,485
------------
Buildings & Materials - 1.09%
Armstrong World Industries ....................... 119,000 7,006,125
------------
7,006,125
------------
Cable, Media & Publishing - 2.66%
MCGRAW-HILL ...................................... 364,800 17,100,000
------------
17,100,000
------------
Chemicals - 6.94%
DUPONT (E.I.) DENEMOURS .......................... 202,800 16,173,300
Imperial Chemical Industries ADR ................. 221,400 11,761,875
PPG Industries ................................... 136,300 7,053,525
Witco ............................................ 299,100 9,533,813
------------
44,522,513
------------
Consumer Products - 2.28%
General Electric ................................. 76,500 6,330,375
Maytag ........................................... 386,000 8,299,000
------------
14,629,375
------------
Electronics & Electrical - 3.06%
Eaton ............................................ 93,700 5,422,888
Hubbell Class B .................................. 51,600 3,605,550
TOP 10 HOLDINGS REPRESENTING 23.29% OF NET ASSETS ARE IN BOLDFACE.
17
<PAGE>
Decatur Total Return Fund
Statement of Net Assets (Continued)
Number Market
of Shares Value
COMMON STOCK (Continued)
Electronics & Electrical (Continued)
Thomas & Betts ................................... 242,400 $ 9,332,400
Xerox ............................................ 8,200 1,290,475
-----------
19,651,313
-----------
Energy - 10.87%
Amoco ............................................ 135,700 9,838,250
British Petroleum ADR ............................ 86,100 9,072,788
Exxon ............................................ 97,200 8,237,700
Mobil ............................................ 53,300 6,016,238
Occidental Petroleum ............................. 420,600 10,883,025
Phillips Petroleum ............................... 256,600 10,648,900
Sonat ............................................ 160,000 6,780,000
Williams ......................................... 165,000 8,291,250
-----------
69,768,151
-----------
Food, Beverage & Tobacco - 8.26%
General Mills .................................... 189,700 10,884,038
Heinz (H.J.) .................................... 348,350 11,582,638
PHILIP MORRIS .................................... 169,200 16,814,250
RJR NABISCO HOLDINGS ............................. 414,220 13,721,038
-----------
53,001,964
-----------
Healthcare & Pharmaceuticals - 11.34%
AMERICAN HOME PRODUCTS ........................... 244,000 13,054,000
Bristol-Myers Squibb ............................. 146,000 12,464,750
Glaxo Wellcome plc-ADR ........................... 270,700 7,072,038
PHARMACIA & UPJOHN ............................... 343,100 14,024,213
SMITHKLINE BEECHAM PLC-ADR ....................... 269,600 13,749,600
Warner-Lambert ................................... 191,000 10,696,000
Zeneca Group plc-ADR ............................. 27,000 1,731,375
-----------
72,791,976
-----------
Metals & Mining - 1.23%
Freeport-McMoRan Copper & Gold Class B ........... 236,764 7,872,403
-----------
7,872,403
-----------
Packaging & Containers - 1.51%
Minnesota Mining & Manufacturing ................. 142,500 9,725,625
-----------
9,725,625
-----------
Paper & Forest Products - 6.44%
Georgia-Pacific .................................. 124,200 8,973,450
Kimberly-Clark ................................... 138,700 10,107,763
Temple-Inland .................................... 134,100 6,604,425
Union Camp ....................................... 102,500 5,394,063
Weyerhaeuser ..................................... 226,500 10,277,438
-----------
41,357,139
-----------
Retail - 3.21%
May Department Stores ............................ 238,000 11,275,250
Penney (J.C.) ................................... 179,400 9,306,375
-----------
20,581,625
-----------
18
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Telecommunications - 7.54%
ALLTEL ........................................... 267,800 $ 8,435,700
BCE .............................................. 222,900 8,860,275
BellSouth ........................................ 162,800 6,613,750
Frontier ......................................... 312,400 9,996,800
GTE .............................................. 170,200 7,276,050
Royal PTT Nederland ADR .......................... 200,000 7,225,000
----------
48,407,575
----------
Transportation & Shipping - 3.87%
Conrail .......................................... 119,900 8,422,975
UNION PACIFIC .................................... 234,000 16,409,250
----------
24,832,225
----------
Utilities - 1.18%
PECO Energy ...................................... 307,000 7,559,875
----------
7,559,875
----------
Miscellaneous - 2.40%
PITNEY BOWES ..................................... 310,300 15,398,638
----------
15,398,638
----------
Total Common Stock
(cost $542,525,161) ............................ 622,583,512
----------
CONVERTIBLE PREFERRED STOCK - 0.73%
Banking, Finance & Insurance - 0.73%
Salomon 7.625% pfd cv Series FSA ............... 170,000 4,675,000
----------
Total Convertible Preferred Stock
(cost $4,526,250) ............................... 4,675,000
----------
Principal
Amount
REPURCHASE AGREEMENTS - 1.88%
With Chase Manhattan 5.30% 6/3/96
(dated 5/31/96, collateralized by
$3,450,000 U.S. Treasury Notes 7.875%
due 7/15/96, market value
$3,561,719 and $4,041,000 U.S.
Treasury Notes 7.125% due 9/30/99,
market value $4,162,922) ....................... $7,569,000 7,569,000
With J.P. Morgan Securities 5.30% 6/3/96
(dated 5/31/96, collateralized by
$444,000 U.S. Treasury Notes 4.75% due
2/15/97, market value $447,074 and
$3,450,000 U.S. Treasury Notes 5.50%
due 2/28/99, market value
$3,425,512) .................................... 3,795,000 3,795,000
19
<PAGE>
Decatur Total Return Fund
Statement of Net Assets (Continued)
Principal Market
Amount Value
REPURCHASE AGREEMENTS (Continued)
With PaineWebber 5.30% 6/3/96
(dated 5/31/96, collateralized by $299,000
U.S. Treasury Notes 6.75% due 2/28/97,
market value $306,032 and $385,000 U.S.
Treasury Notes 6.125% due 9/30/00,
market value $381,304). . . ....................... $673,000 $ 673,000
-----------
Total Repurchase Agreements
(cost $12,037,000) ................................ 12,037,000
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED -
99.59% (COST $559,088,411) ........................ 639,295,512
------------
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.41%......................... 2,644,773
------------
NET ASSETS APPLICABLE TO 41,068,139 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% .............. $641,940,285
============
NET ASSET VALUE - DECATUR TOTAL RETURN FUND A
CLASS ($583,748,781 / 37,342,541 SHARES) .......... $15.63
=======
NET ASSET VALUE - DECATUR TOTAL RETURN FUND B
CLASS ($29,669,190 / 1,902,187 SHARES) ............ $15.60
=======
NET ASSET VALUE - DECATUR TOTAL RETURN FUND C
CLASS ($2,853,618 / 183,297 SHARES) ............... $15.57
=======
NET ASSET VALUE - DECATUR TOTAL RETURN FUND
INSTITUTIONAL CLASS
($25,668,696 / 1,640,114 SHARES)................... $15.65
=======
COMPONENTS OF NET ASSETS AT MAY 31, 1996:
Common stock, $1 par value, 250,000,000 shares
authorized to the Fund with 100,000,000 shares
allocated to Decatur Total Return Fund A Class,
50,000,000 shares allocated to Decatur Total Return
Fund B Class, 50,000,000 shares allocated to
Decatur Total Return Fund C Class and 50,000,000
allocated to Decatur Total Return Fund Institutional
Class .............................................. $510,721,178
Accumulated undistributed income:
Net investment income................................ 3,344,456
Net realized gain on investments..................... 47,667,550
Net unrealized appreciation of investments .......... 80,207,101
------------
Total net assets..................................... $641,940,285
============
See accompanying notes
20
<PAGE>
DELAWARE GROUP DECATUR FUND, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996
(UNAUDITED)
Decatur Decatur Total
Income Fund Return Fund
INVESTMENT INCOME:
Dividends .................................. $ 27,963,612 $ 10,175,701
Interest ................................... 9,309,192 351,143
------------- -------------
37,272,804 10,526,844
------------- -------------
EXPENSES:
Management fees ............................ 4,110,558 1,796,032
Dividend disbursing and transfer agent fees
and expenses .............................. 1,153,015 475,844
Distribution expenses ...................... 1,232,606 967,970
Reports to shareholders .................... 169,300 84,292
Salaries ................................... 224,135 87,018
Taxes (other than taxes on income) ......... 48,750 6,825
Federal and state registration fees ........ 33,500 24,671
Professional fees .......................... 27,300 17,700
Custodian fees ............................. 7,329 1,998
Directors' fees ............................ 10,598 10,598
Other ...................................... 90,492 36,517
------------- -------------
7,107,583 3,509,465
------------- -------------
NET INVESTMENT INCOME ...................... 30,165,221 7,017,379
------------- -------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain from security
transactions .............................. 155,885,269 48,099,909
Net unrealized appreciation (depreciation)
of investments during the period .......... (17,646,044) 3,555,191
------------- -------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ....................... 138,239,225 51,655,100
------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. $ 168,404,446 $ 58,672,479
============= =============
See accompanying notes
21
<PAGE>
DELAWARE GROUP DECATUR FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended 5/31/96
(Unaudited)
----------------------------------
Decatur Decatur Total
Income Fund Return Fund
------------ --------------
OPERATIONS:
<S> <C> <C>
Net investment income ............................ $ 30,165,221 $ 7,017,379
Net realized gain from security transactions ..... 155,885,269 48,099,909
Net appreciation (depreciation) during the period (17,646,044) 3,555,191
--------------- ---------------
Net increase in net assets resulting
from operations ................................. 168,404,446 58,672,479
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
A Class ......................................... (26,754,186) (6,783,526)
B Class ......................................... (406,778) (155,987)
C Class ......................................... (9,085) (7,766)
Institutional Class ............................. (4,075,935) (188,422)
Net realized gain from security transactions:
A Class ......................................... (96,771,467) (44,125,949)
B Class ......................................... (1,466,813) (1,305,455)
C Class ......................................... (4,214) (14,393)
Institutional Class ............................. (14,913,705) (953,579)
--------------- ---------------
(144,402,183) (53,535,077)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ......................................... 40,892,098 57,497,677
B Class ......................................... 15,620,549 14,408,220
C Class ......................................... 1,496,838 2,792,230
Institutional Class ............................. 13,771,504 13,973,625
Net asset value of shares issued upon reinvestment
of dividends from net investment income and
realized securities profits:
A Class ......................................... 109,376,670 48,481,991
B Class ......................................... 1,596,655 1,374,684
C Class ......................................... 11,630 21,312
Institutional Class ............................. 18,771,780 1,142,001
--------------- ---------------
201,537,724 139,691,740
--------------- ---------------
Cost of shares repurchased:
A Class ......................................... (83,116,814) (60,834,492)
B Class ......................................... (1,179,083) (1,298,147)
C Class ......................................... (24,953) (23,720)
Institutional Class ............................. (33,162,631) (1,344,102)
--------------- ---------------
(117,483,481) (63,500,461)
--------------- ---------------
Increase in net assets derived from capital
share transactions .............................. 84,054,243 76,191,279
--------------- ---------------
NET INCREASE IN NET ASSETS ....................... 108,056,506 81,328,681
NET ASSETS:
Beginning of period .............................. 1,613,771,593 560,611,604
--------------- ---------------
End of period (including undistributed net
investment income of $2,659,784 and
$3,344,456, respectively) ....................... $ 1,721,828,099 $ 641,940,285
=============== ===============
</TABLE>
See accompanying notes
22
<PAGE>
DELAWARE GROUP DECATUR FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended 11/30/95
-----------------------------------
Decatur Decatur Total
Income Fund Return Fund
--------------- ----------------
OPERATIONS:
<S> <C> <C>
Net investment income ........................... $ 59,061,657 $ 13,098,131
Net realized gain from security transactions .... 117,113,362 47,547,702
Net appreciation during the period .............. 217,167,735 81,983,460
--------------- ---------------
Net increase in net assets resulting
from operations................................. 393,342,754 142,629,293
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
A Class ........................................ (51,112,035) (12,097,109)
B Class ........................................ (320,672) (114,525)
C Class ........................................ -- --
Institutional Class ............................ (7,925,823) (181,571)
Net realized gain from security transactions:
A Class ........................................ (30,907,169) (13,655,359)
B Class ........................................ (85,820) (70,859)
C Class ........................................ -- --
Institutional Class ............................ (4,868,512) (46,914)
--------------- ---------------
(95,220,031) (26,166,337)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ........................................ 65,059,932 78,281,294
B Class ........................................ 15,750,776 11,806,856
C Class ........................................ 5,030 5,030
Institutional Class ............................ 43,751,896 7,957,834
Net asset value of shares issued upon
reinvestment of dividends from net investment
income and realized securities profits:
A Class ........................................ 70,989,710 24,347,338
B Class ........................................ 305,545 171,844
C Class ........................................ -- --
Institutional Class ............................ 12,326,277 228,573
--------------- ---------------
208,189,166 122,798,769
--------------- ---------------
Cost of shares repurchased:
A Class ........................................ (167,065,887) (83,705,933)
B Class ........................................ (1,184,376) (616,336)
C Class ........................................ -- --
Institutional Class ............................ (63,043,722) (291,178)
--------------- ---------------
(231,293,985) (84,613,447)
--------------- ---------------
Increase (Decrease) in net assets derived
from capital share transactions ................ (23,104,819) 38,185,322
--------------- ---------------
NET INCREASE IN NET ASSETS ...................... 275,017,904 154,648,278
NET ASSETS:
Beginning of period ............................. 1,338,753,689 405,963,326
--------------- ---------------
End of period (including undistributed net
investment income of $3,740,547 and
$3,462,778, respectively) ...................... $ 1,613,771,593 $ 560,611,604
=============== ===============
</TABLE>
See accompanying notes
23
<PAGE>
DELAWARE GROUP DECATUR FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996
(UNAUDITED)
Delaware Group Decatur Fund, 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 two series, the Decatur Income Fund and the Decatur Total Return Fund
(the "Funds"). Each series offers four classes of shares.
The investment objective of the Decatur Income Fund is to achieve the highest
possible current income by investing primarily in common stocks that provide
the potential for income and capital appreciation without undue risk to
principal.
The investment objective of the Decatur Total Return Fund is to achieve
long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to
principal.
1. Significant Accounting Policies
The following accounting policies are in accordance with general accounting
principles and are consistently followed by the Funds:
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 p.m. EST on the valuation date. Securities not
traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service when 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.
Federal Income Taxes - Each 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 is required in the financial
statements.
Repurchase Agreements - Each Fund may invest in a pooled cash account along with
other members of the Delaware Group of Funds. The aggregated 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
Funds' 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.
Class Accounting - Investment income, common expenses and gain (losses) on
investments are allocated to the various classes of the Funds on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Other - Expenses common to all funds within the Delaware Group of Funds are
allocated amongst the funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale of
investment securities are those of the specific securities sold. Dividend income
is recorded on the ex-dividend date and interest income is recorded on the
accrual basis. Original issue discounts are accreted to interest income over the
lives of the respective securities. The Decatur Income Fund declares and pays
dividends from net investment income on a monthly basis and the Decatur Total
Return Fund declares and pays dividends from net investment income on a
quarterly basis.
Certain fund expenses are paid directly by brokers. The amount of those expenses
was less than 0.01 percent of each Fund's average net assets.
Distributions from net investment income were declared in the amount of $0.0567,
$0.045, $0.045 and $0.06 per share for the Decatur Income Fund A Class, Decatur
Income Fund B Class, Decatur Income Fund C Class and Decatur Income Fund
Institutional Class, respectively, payable on July 8, 1996, to shareholders of
record on June 27, 1996. The ex-dividend date was June 28, 1996.
Distributions from net investment income were declared in the amount of $0.80,
$0.06, $0.06 and $0.08 per share for the Decatur Total Return Fund A Class,
Decatur Total Return Fund B Class, Decatur Total Return Fund C Class and Decatur
Total Return Fund Institutional Class, respectively, payable on July 8, 1996, to
shareholders of record on June 27, 1996. The ex-dividend date was June 28, 1996.
2. Investment Management and Distribution Agreements
In accordance with the terms of the Investment Management Agreement, the Funds
pay Delaware Management Company, Inc. (DMC) the Investment Manager of the Fund,
an annual fee which is calculated daily at the following rates less fees paid to
the independent directors; 0.60% on the first $100 million of average daily net
assets, 0.525% on the next $150 million, 0.50% on the next $250 million and
0.475% on the average daily net assets over $500 million for the Decatur Income
Fund, and 0.60% on the first $500 million of average daily net assets of the
Fund, 0.575% on the next $250 million, and 0.55% on the average daily net assets
over $750 million of the Decatur Total Return Fund. At May 31, 1996, the Funds
had a liability for Investment Management fees and other expenses payable to DMC
of $74,175 and $79,957 for the Decatur Income Fund and Decatur Total Return
Fund, respectively.
24
<PAGE>
Notes to Financial Statements (Continued)
Pursuant to the Distribution Agreement, the Funds pay Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of A Class for the Decatur Income
Fund and Decatur Total Return Fund and 1.00% of the average daily net assets of
B Class and C Class for both Funds. At May 31, 1996, the Funds had a liability
for distribution fees and other expenses payable to DDLP of $29,466 and $23,278
respectively, for Decatur Income Fund and Decatur Total Return Fund. For the six
months ended May 31, 1996, the Fund paid DDLP $189,495 and $145,890 for
commissions earned on sales of Decatur Income Fund A Class shares and Decatur
Total Return Fund A Class shares, respectively.
The Funds have engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to serve as dividend disbursing and transfer agent of the Funds. For the
six months ended May 31, 1996, the Decatur Income Fund and the Decatur Total
Return Fund expensed $1,141,575 and $475,844 for these services and had
liabilities for such fees and other expenses payable to DSC of $66,528 and
$35,765, respectively.
Certain officers of DMC are officers, directors and/or employees of the Fund.
These officers, directors and employees are paid no compensation by the Funds.
3. Investments
During the six months ended May 31, 1996, the Funds made purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:
Decatur Decatur Total
Income Fund Return Fund
----------- -----------
Purchases............................. $ 922,003,157 $332,620,793
Sales................................. $ 947,364,585 $302,320,611
At May 31, 1996, unrealized appreciation for financial reporting and federal
income tax purposes as follows:
Decatur Decatur Total
Income Fund Return Fund
----------- -----------
Unrealized appreciation.............. $ 181,054,038 $82,688,268
Unrealized depreciation.............. $ 7,911,229 $ 2,949,233
------------- -----------
Aggregated unrealized appreciation .. $ 173,142,809 $79,739,035
============= ===========
Net realized gain for federal income tax purposes was $153,840,361 for the
Decatur Income Fund and $48,029,418 for the Decatur Total Return Fund for the
six months ended May 31, 1996.
4. Capital Stock
Transactions in capital stock shares of the Fund were as follows:
<TABLE>
<CAPTION>
Decatur Income Fund
-----------------------------
Six Months Year
Ended Ended
5/31/96 11/30/95
<S> <C> <C>
Shares sold:
A Class ............................................ 2,169,483 3,832,322
B Class ............................................ 829,176 904,441
C Class ............................................ 78,965 263
Institutional Class ................................ 729,467 2,480,766
Shares issued upon reinvestment of dividends from net
investment income and distributions of realized gain
from security transactions:
A Class ............................................ 6,007,946 4,341,150
B Class ............................................ 87,833 17,920
C Class ............................................ 623 --
Institutional Class ................................ 1,031,012 754,712
---------- ----------
10,934,505 12,331,574
Shares repurchased:
A Class ............................................ (4,401,169) (9,773,875)
B Class ............................................ (62,544) (66,590)
C Class ............................................ (1,288) --
Institutional Class ................................ (1,771,173) (3,828,087)
---------- ----------
(6,236,174) (13,668,552)
---------- ----------
Net increase (decrease) ............................ 4,698,331 (1,336,978)
========= ==========
</TABLE>
25
<PAGE>
Notes to Financial Statements (Continued)
4. Capital Stock (Continued)
Transactions in capital stock shares of the Fund were as follows:
<TABLE>
<CAPTION>
Decatur Total Return Fund
-----------------------------
Six Months Year
Ended Ended
5/31/96 11/30/95
<S> <C> <C>
Shares sold:
A Class ............................................ 3,763,098 5,675,772
B Class ............................................ 945,276 836,434
C Class ............................................ 183,057 322
Institutional Class ................................ 914,039 628,702
Shares issued upon reinvestment of dividends from net
investment income and distributions of realized gain
from security transactions:
A Class ............................................ 3,320,687 1,934,048
B Class ............................................ 94,191 13,126
C Class ............................................ 1,437 --
Institutional Class ................................ 78,181 17,010
---------- ----------
9,299,966 9,105,414
---------- ----------
Shares repurchased:
A Class ............................................ (3,970,429) (6,091,530)
B Class ............................................ (84,833) (43,212)
C Class ............................................ (1,519) --
Institutional Class ................................ (88,387) (20,876)
---------- ----------
(4,145,168) (6,155,618)
---------- ----------
Net increase ........................................ 5,154,798 2,949,796
========= =========
</TABLE>
5. Securities Lending
The market value of securities on loan to broker/dealers at May 31, 1996, was
$13,225,060 and for which Decatur Income Fund received cash collateral of
$13,413,800.
6. Lines of Credit
The Funds have committed lines of credit of $25 million for Decatur Income
Fund and $10 million for Decatur Total Return Fund. No amount was outstanding
at May 31, 1996, or at any time during the last fiscal period.
7. Concentration of Credit Risk
The Decatur Income Fund may invest in high-yield, fixed-income securities
which carry ratings of BB or lower by Standard & Poor's and/or Baa or lower
by Moody's. Investments in these higher yielding securities may be
accompanied by a greater degree of credit risk than higher rated securities.
Additionally, lower rated securities may be susceptible to adverse economic
and competitive industry conditions than investment grade securities.
The Decatur Income Fund may invest up to 10% of its net assets in illiquid
securities which 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. These
securities have been denoted in the Statement of Net Assets and are an
aggregate of 0.75% of net assets.
26
<PAGE>
Notes to Financial Statements (Continued)
8. Financial Highlights
Selected data for each share of the Decatur Income Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Decatur Income Fund A Class
------------------------------------------------------------------
Six Months
Ended Year Ended November 30,
5/31/96(1) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............... $19.07 $15.57 $18.24 $17.20 $15.76 $14.53
Income from investment operations:
Net investment income(2)......................... 0.34 0.70 0.67 0.78 0.78 0.83
Net realized and unrealized gain (loss) on
security transactions .......................... 1.56 3.91 (0.73) 1.79 1.47 1.37
------ ------ ------ ------ ------ ------
Total from investment operations................... 1.90 4.61 (0.06) 2.57 2.25 2.20
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income.............. (0.35) (0.69) (0.86) (0.68) (0.81) (0.97)
Distributions from net realized gain on
security transactions ........................... (1.34) (0.42) (1.75) (0.85) none none
------ ------ ------ ------ ------ ------
Total distributions............................... (1.69) (1.11) (2.61) (1.53) (0.81) (0.97)
------ ------ ------ ------ ------ ------
Net asset value, end of period.................... $19.28 $19.07 $15.57 $18.24 $17.20 $15.76
====== ====== ====== ====== ====== ======
Total return(3).................................... 10.63% 31.02% (0.57%) 15.85% 14.55% 15.46%
Ratios/supplemental data:
Net assets, end of period (000 omitted)...........$1,470,421 $1,382,69 $1,153,884 $1,512,194 $1,508,206 $1,579,521
Ratio of expenses to average net assets........... 0.85% 0.87% 0.81% 0.71% 0.72% 0.70%
Ratio of net investment income to average
net assets ...................................... 3.59% 4.03% 3.92% 4.34% 4.55% 5.18%
Portfolio turnover................................ 112% 74% 92% 80% 79% 78%
</TABLE>
- -----------
1 Ratios have been annualized and total return has not been annualized.
2 The six months ended 5/31/96 per share information was based on the
average shares outstanding method.
3 Does not reflect any maximum sales charges that are or were in effect
nor the 1% limited contingent deferred sales charge that would apply in
the event of certain redemptions within 12 months of purchase.
27
<PAGE>
Notes to Financial Statements (Continued)
8. Financial Highlights (Continued)
Selected data for each share of the Decatur Income Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Decatur Decatur Decatur
Income Fund Income Fund Income Fund
B Class C Class Institutional Class
----------------------------- --------------------- -----------------------------
Six Months Year 9/6/94(2) Six Months 11/29/95(3) Six Months Year 1/13/94(4)
Ended Ended to Ended to Ended Ended to
5/31/96(1) 11/30/95 11/30/94 5/31/96(1) 11/30/95 5/31/96(1) 11/30/95 11/30/94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $19.03 $15.55 $16.59 $19.08 $19.15 $19.06 $15.59 $16.72
Income from investment of
operations:
Net investment income(5). . . . 0.26 0.56 0.15 0.26 0.04 0.35 0.71 0.59
Net realized and unrealized
gain (loss) on
security transactions. . . . . . . 1.55 3.89 (1.02) 1.58 (0.06) 1.56 3.92 (1.10)
Total from investment
operations. 1.81 4.45 (0.87) 1.84 (0.02) 1.91 4.63 (0.51)
Less distributions:
Dividends from net
investment income (0.27) (0.55) (0.17) (0.28) (0.05) (0.36) (0.74) (0.62)
Distributions from net
realized gain
on security transactions. . . . . . (1.34) (0.42) none (1.34) none (1.34) (0.42) none
Total distributions. . . . . . . . (1.61) (0.97) (0.17) (1.62) (0.05) (1.70) (1.16) (0.62)
Net asset value,
end of period. . . $19.23 $19.03 $15.55 $19.30 $19.08 $19.27 $19.06 $15.59
Total return(6). . . . . . . . . . 10.12% 29.85% (5.27%) 10.20% (7) 10.68% 31.14% (0.45%)
Ratios/supplemental data:
Net assets, end of period
(000 omitted) $36,310 $19,665 $2,765 $1,516 $ 5 $213,581 $211,409 $182,105
Ratio of expenses to average
net assets 1.70% 1.74% 1.70% 1.70% (7) 0.70% 0.74% 0.70%
Ratio of net investment
income
to average net assets. . . . . . . 2.78% 3.16% 3.03% 2.78% (7) 3.73% 4.16% 4.03%
Portfolio turnover. . . . . . . . 112% 74% 92% 112% (7) 112% 74% 92%
</TABLE>
- ---------
1 Ratios have been annualized and total return has not been annualized.
2 Date of initial public offering; ratios have been annualized and total
return has not been annualized.
3 Date of initial public offering.
4 Date of initial public offering; ratios and total return have been
annualized.
5 The six months ended 5/31/96 per share information was based on the
average shares outstanding method.
6 Does not include the contingent deferred sales charge which varies
from 1% - 4% depending upon the holding period for Decatur
Income Fund B Class.
7 The ratios of expenses and net investment income to average net assets,
portfolio turnover and total return have been omitted as management
believes that such ratios and return for this relatively short period
are not meaningful.
28
<PAGE>
Notes to Financial Statements (Continued)
8. Financial Highlights (Continued)
Selected data for each share of the Decatur Total Return Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Decatur Total Return Fund A Class
-----------------------------------------------------------------
Six Months
Ended Year Ended November 30,
5/31/96(1) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $15.61 $12.32 $14.38 $13.98 $12.73 $11.71
Income from investment of operations:
Net investment income(2)........................ 0.18 0.37 0.37 0.45 0.47 0.53
Net realized and unrealized gain (loss)
on security transactions....................... 1.32 3.70 (0.34) 1.45 1.30 1.07
Total from investment operations................ 1.50 4.07 0.03 1.90 1.77 1.60
Less distributions:
Dividends from net investment income........... (0.19) (0.36) (0.43) (0.45) (0.52) (0.58)
Distributions from net realized gain on security
transactions (1.29) (0.42) (1.66) (1.05) none none
Total distributions............................ (1.48) (0.78) (2.09) (1.50) (0.52) (0.58)
Net asset value, end of period................. $15.63 $15.61 $12.32 $14.38 $13.98 $12.73
Total return(3)................................ 10.30% 34.68% (0.04%) 14.74% 14.12% 13.94%
Ratios/supplemental data:
Net assets, end of period (000 omitted)........$583,749 $534,342 $402,849 $431,638 $408,986 $394,338
Ratio of expenses to average net assets...... 1.14% 1.19% 1.26% 1.22% 1.23% 1.23%
Ratio of net investment income to average
net assets 2.34% 2.72% 2.88% 3.15% 3.44% 4.20%
Portfolio turnover........................... 103% 81% 74% 119% 98% 67%
</TABLE>
- ----------
1 Ratios have been annualized and total return has not been annualized.
2 The per share information for the six months ended 5/31/96 was based
on the average shares outstanding method.
3 Does not reflect any maximum sales charges that are or were in effect
nor the 1% limited contingent deferred sales charge that would apply in
the event of certain redemptions within 12 months of purchase.
29
<PAGE>
Notes to Financial Statements (Continued)
8. Financial Highlights (Continued)
Selected data for each share of the Decatur Total Return Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Decatur Total Decatur Total Decatur Total
Return Fund Return Fund Return Fund
B Class C Class Institutional Class
----------------------------- -------------------- ---------------------------------------
Six Months Year 9/6/94(2) Six Months 11/29/95(3) Six Months Year Year Ended 7/26/93(4)
Ended Ended to Ended to Ended Ended to to
5/31/96(1) 11/30/95 11/30/94 5/31/96(1) 11/30/95 5/31/96(1) 11/30/95 11/30/94 11/30/93
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ........................... $15.56 $12.31 $13.11 $15.61 $15.61 $15.65 $12.35 $14.40 $14.10
Income from investment of
operations:
Net investment income(5).......... 0.13 0.30 0.12 0.13 none 0.20 0.47 0.43 0.15
Net realized and unrealized
gain (loss) on security
transactions. . . . .............. 1.32 3.67 (0.82) 1.32 none 1.32 3.65 (0.37) 0.25
Total from investment
operations ....................... 1.45 3.97 (0.70) 1.45 none 1.52 4.12 0.06 0.40
Less distributions:
Dividends from net investment
income ........................... (0.12) (0.30) (0.10) (0.20) none (0.23) (0.40) (0.45) (0.10)
Distributions from net
realized gain
on security transactions.......... (1.29) (0.42) none (1.29) none (1.29) (0.42) (1.66) none
Total distributions............... (1.41) (0.72) (0.10) (1.49) none (1.52) (0.82) (2.11) (0.10)
Net asset value, end of period.... $15.60 $15.56 $12.31 $15.57 $15.61 $15.65 $15.65 $12.35 $14.40
Total return(6) .................. 9.96% 33.79% (5.37%) 9.96% (7) 10.43% 35.13% 0.19% 14.89%
Ratios/supplemental data:
Net assets, end of period
(000 omitted) ....................$29,669 $14,745 $1,768 $2,853 $5 $25,669 $11,520 $1,376 $1,181
Ratio of expenses to average
net assets ....................... 1.84% 1.89% 1.96% 1.84% (7) 0.84% 0.89% 0.96% 0.92%
Ratio of net investment income
to average net assets............. 1.64% 2.02% 2.18% 1.64% (7) 2.64% 3.02% 3.18% 3.45%
Portfolio turnover................ 103% 81% 74% 103% (7) 103% 81% 74% 119%
</TABLE>
- ----------
1 Ratios have been annualized and total return has not been annualized.
2 Date of initial public offering; ratios have been annualized and
total return has not been annualized.
3 Date of initial public offering.
4 Date of initial public offering; ratios and total return have been
annualized.
5 The per share information for the six months ended 5/31/96 was based on
the average shares outstanding method.
6 Does not include the contingent deferred sales charge which varies from
1% - 4% depending upon the holding period for Decatur Total Return Fund B
Class and 1% for Decatur Total Return C Class depending upon the holding
period.
7 The ratios of expenses and net investment income to average net assets,
portfolio turnover and total return have been omitted as management believes
that such ratios and return for this relatively short period are not
meaningful.
30
<PAGE>
- --------------------------------------------------------------------------------
This semi-annual report is for the information of Decatur Income Fund and
Decatur Total Return Fund shareholders, but it may be used with prospective
investors when preceded or accompanied by a current PROSPECTUS, which sets
forth details about charges, expenses, investment objectives and operating
policies of each Fund. Summary investment results are documented in the
Funds' 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 Funds will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost.
<PAGE>
Be sure to consult your financial adviser when making investment decisions.
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, are not obligations of or deposits of any bank or any credit
union, and involve investment risk, including the possible loss of principal.
Shares of the Fund are not bank or credit union deposits.
This report must be preceded or accompanied by a current Decatur Fund PROSPECTUS
and the Delaware Group Fund Performance Update for the most recently completed
calendar quarter.
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia
1818 Market Street
Philadelphia, PA 19103-3682
Nationwide (800) 523-4640
SECURITIES DEALERS ONLY
Nationwide (800) 362-7500
FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY
Nationwide (800) 659-BANK (2265)
Copy Rights Delaware Distributors, L.P.
Printed in the U.S.A. on recycled paper.
SA - 118 [5/96] PP7/96
- ------------------
DELAWARE
GROUP
DECATUR FUND
DECATUR INCOME
FUND
DECATUR TOTAL
RETURN FUND
- ------------------
1996
SEMI-ANNUAL
REPORT
A Tradition of Sound Investing Since 1929
DELAWARE
GROUP
- ------------------
Philadelphia * London
