<PAGE> 1
(PHOTO OF COLONIAL OBJECTS)
May 31, 1995
Dear Shareholder:
When last we wrote to you in the 1994 Annual Report, the Federal Reserve had
raised short-term interest rates five times in an effort to slow economic growth
and control the pace of inflation. This had precipitated a decline in the
financial markets that significantly impacted investors' 1994 returns. In the
six months since then -- November 1, 1994, through April 30, 1995 -- the Fed
boosted short-term interest rates twice. Following the February 1995 increase in
short-term interest rates, long-term interest rates declined steadily, and the
stock market responded positively to a more ebullient environment.
For the six month period, Delaware Fund A Class had a total return (capital
change plus income) that fell short of the performance of the broad equity
market. The table below shows the Fund's results for the fiscal period, compared
with the returns of two unmanaged market indexes that we use as benchmarks --
the S&P 500 Stock Index and the Lehman Brothers Government Corporate
Intermediate Index. We also show the return of the 199 balanced funds tracked by
Lipper Analytical Services.
- -------------------------------------------------------------------
TOTAL RETURN
----------------
SIX MONTHS ENDED
APRIL 30, 1995
- -------------------------------------------------------------------
Delaware Fund A Class +5.65%
- -------------------------------------------------------------------
S&P 500 Index +10.46%
Lehman Bros. Government
Corporate Intermediate Index +5.57%
Lipper Balanced Fund Average +6.41%
Delaware Fund and Lipper Balanced Fund performance is based on net asset value
without impact of sales charge. Performance information for all classes of the
Fund can be found on page 4.
- -------------------------------------------------------------------
This year's change in the interest rate environment was spurred by an almost
unbroken string of government statistics, which fueled the markets' perception
of a slowing economy. Data showed that producer level and commodity price
increases of the past year had not been passed on to the consumer, thereby
keeping inflation low. While we expected the Federal Reserve's restrictive
monetary policy to eventually moderate economic growth, we were surprised at the
speed and uniformity of the economy's response.
Delaware Fund is well diversified by design -- that is, it invests in both
stocks (63% of net assets as of April 30, 1995) and bonds (approximately 33% of
net assets) in its objective to provide a balance of current income, capital
appreciation and capital preservation. Because of this allocation, we were able
to navigate the economy's swift change without a significant setback. However,
the defensive positioning of our stock and bond portfolios kept us from
capturing more of the positive returns available during the latest period.
This report contains an update from the portfolio managers of the Fund, who
discuss how the positioning of the Fund's stock and bond portfolios impacted
performance over the past six months. As we move toward completing the Fund's
58th year of serving shareholders, we will make every effort to warrant your
continued support.
/s/ WAYNE A. STORK /s/ BRIAN F. WRUBLE
- ---------------------------- -------------------------------------
Wayne A. Stork Brian F. Wruble
Chairman, Board of Directors President and Chief Executive Officer
Delaware Group Delaware Fund Delaware Group Delaware Fund
1
<PAGE> 2
(PHOTO OF COLONIAL OBJECTS)
Portfolio Manager's Market Review
There were two primary influences on Delaware Fund's six-month performance.
First, our current practice of staying at least 60% invested in equities at all
times benefited the Fund. History tells us that successful short-term market
timing is very difficult (if not impossible) and that long-term returns from the
equity markets are superior to bonds and money market instruments. Our
allocation to stocks -- 63% of the Fund's net assets as of April 30, 1995 --
kept the Fund in step with the equity markets that were surprisingly strong in
spite of widespread pessimism at the end of 1994.
Our allocation to bonds, representing approximately 33% of the Fund's net
assets as of April 30th, performed in line with our expectations.
Intermediate-term bonds, which are currently the primary focus of the Fund's
bond portfolio, benefited from the rise in the fixed-income market, though
certainly not to the extent that long-term bonds did. Because we invest in bonds
as a way to help stabilize principal, we can expect to offset some of the Fund's
equity returns, an effect that is apparent in the Fund's overall performance for
the period.
INSIDE THE EQUITY PORTFOLIO
When we consider a stock for purchase, in addition to looking at
quantitative statistics, such as historical earnings, dividend growth and
price/earnings multiples, we ask ourselves the following qualitative questions:
* Can the company's business perform reasonably well in most economic
environments?
* Is there a company-specific event (e.g., a merger or restructuring)
which can push earnings beyond current expectations or support
earnings if business conditions within the industry soften?
* Is the company generating excess cash, and if so, can the company
invest this cash in their core business in a low-risk manner and grow
dividends?
Our goal is to select stocks within the broad spectrum of industries where
we believe we can answer such questions positively. For example, the highly
cyclical auto and truck parts industry isn't usually well represented in the
Fund's equity portfolio, yet we have a significant position in Eaton Corporation
(1.3% of net assets). Eaton, a leading manufacturer of heavy duty auto and truck
parts, is in the midst of consolidating a major acquisition in the electronic
process controls industry which, when folded into their current operations,
could result in significant cost savings. Further, we believe the addition of
this new revenue should moderate the cyclical influences on Eaton's earnings,
making the long-term value of the stock more attractive in our judgment.
DEFENSIVE POSITIONING IN TECHNOLOGY STOCKS HOLDS BACK FUND RETURN
Currently, the technology sector is one area of the market where neither
quantitative nor qualitative factors lead us to invest. Technology companies
historically have tended to have little, or no, dividend yield and have been
highly sensitive to broad economic and competitive industry dynamics. We believe
that for a relatively conservative fund, the combination of high unit growth and
profitability (which attracts competition), as well as technological change
(which can make large investments quickly obsolete), makes long-term stock
selection too difficult to offset the risks inherent in these stocks.
2
<PAGE> 3
(PHOTO OF COLONIAL OBJECTS)
Our avoidance of technology stocks has negatively impacted the Fund on a
relative basis because this has been one of the strongest performing industry
groups of the past six months, up, on average, more than 18%. Usually technology
stocks rise strongly in a good market and decline steeply in a bad one. Our
long-term stance on this group tends to enhance the defensiveness of our
portfolio, as shown in the first half of 1994 when technology stocks
underperformed the broad market.
STRONG PERFORMANCE OF FINANCIAL STOCKS CONTRIBUTES TO FUND RETURN
On the other hand, our emphasis on financial stocks, another top performing
industry group, was a significant positive influence on performance. As
long-term interest rates began to decline, perceptions that financial company
earnings would be squeezed by higher interest costs abated. The Fund's financial
holdings (6.45% of net assets) were centered around two specialized credit card
companies, MBNA and First USA, as well as two mortgage finance agencies, Fannie
Mae and Freddie Mac. We concentrated on these companies because of their focused
strategies and increasing market shares.
Higher credit losses coupled with moderating loan growth may inhibit
financial companies' earnings growth as the economic cycle moves into its later
stages. Therefore, we have begun to trim our overall holdings in this sector.
INSIDE THE BOND PORTFOLIO
Over the past six months, the yield on 30-year U.S. Treasury securities has
declined dramatically, from 8.21% in November to 7.33% at the end of April. This
caused the prices of longer maturity bonds to rise significantly. Given its
focus on intermediate-term bonds (i.e., maturities of between one and 10 years),
Delaware Fund did not fully benefit from this long bond price rally.
In spite of the strong performance from long maturity bonds in this period,
we believe that intermediate maturity bonds continue to make sense for Delaware
Fund. First, they tend to offer attractive yields, yet still tend to be less
volatile than long-term bonds. Therefore, when interest rates rise, as they did
throughout 1994, our bond portfolio should be less affected by falling bond
prices. Conversely, in a declining interest rate environment, such as the
present one, this strategy should help to abate the impact of RISING bond prices
on the portfolio.
In addition to our focus on intermediate-term bonds, we also emphasize
credit quality. Over the past six months, we have invested in government-related
mortgage debt and primarily single-A rated corporate debt. This exposure to
non-Treasury debt has helped maintain the Fund's relatively high yield.
/s/ GEORGE H. BURWELL /s/ GARY A. REED
- ------------------------ ------------------------
George H. Burwell Gary A. Reed
Senior Portfolio Manager Senior Portfolio Manager
3
<PAGE> 4
(PHOTO OF COLONIAL OBJECTS)
Long-Term Performance
DELAWARE FUND
CLASS A CLASS B
Average Annual Total Returns(1) Aggregate Total Returns(2)
10 Years +11.20% Lifetime +4.10%
Excluding Sales Charge
5 Years +9.02% Lifetime +0.10%
Including Sales Charge
1 Year +0.93%
Through April 30, 1995
RETURN AND SHARE VALUE FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THE ORIGINAL INVESTMENT. PAST PERFORMANCE IS NOT A
GUARANTEE OF FUTURE RESULTS.
(1)Class A returns reflect the 5.75% maximum sales charge and a 12b-1 fee on
performance after 6/1/92, and the reinvestment of all distributions.
(2)Class B returns including deferred sales charge reflect the reinvestment of
all distributions, the impact of the maximum 4% contingent deferred sales
charge and a 1% annual distribution and service fee, for the period from
introduction of Class B on September 6, 1994, through April 30, 1995. Class B
aggregate return for the six-month period ended April 30, 1995, was 5.30%
(excluding sales charge). Returns excluding the deferred sales charge assume
that the investment was not redeemed. Performance for this short time period
may not be representative of longer term performance of this Class.
The average annual total returns for Delaware Fund's Institutional Class, which
is available without sales or asset-based distribution charges only to certain
eligible institutional accounts, were +11.90%, +10.39% and +7.20%, respectively,
for the 10-, five- and one-year periods ended April 30, 1995. The six-month
aggregate return for the period ended April 30, 1995, was +5.71%. The
Institutional Class was initially made available on 11/9/92. Performance for the
Institutional Class for periods prior to this date are based on Class A
performance, adjusted to eliminate the sales charge, but not the asset-based
distribution charge.
4
<PAGE> 5
Financial Statements
DELAWARE GROUP DELAWARE FUND
STATEMENT OF NET ASSETS
April 30, 1995
(Unaudited)
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK - 62.76%
CAPITAL EQUIPMENT & SERVICES - 9.98%
Corning................... 89,000 $ 2,981,500
Diebold................... 141,825 5,885,738
Eaton..................... 129,000 7,401,375
Foster Wheeler............ 72,500 2,682,500
General Electric.......... 173,200 9,699,200
Hubbell Class B........... 41,370 2,223,638
Lockhart Martin........... 157,500 9,095,625
Rockwell International.... 108,000 4,711,500
RPM....................... 100,400 1,995,450
Teleflex.................. 44,300 1,832,913
WMX Technologies.......... 306,000 8,338,500
------------
56,847,939
------------
CHEMICALS - 3.04%
Air Products & Chemicals.. 54,000 2,720,250
duPont (EI) de Nemours.... 72,000 4,743,000
Loctite................... 80,000 3,980,000
Lubrizol.................. 67,500 2,354,063
Praxair................... 147,600 3,505,500
------------
17,302,813
------------
COMMUNICATIONS - 3.98%
ALLTEL.................... 195,500 4,838,625
AT&T...................... 98,100 4,978,575
General Motors Class E.... 48,200 2,084,650
Tele Danmark ADR.......... 194,700 5,110,875
Tribune................... 95,400 5,640,525
------------
22,653,250
------------
CONSUMER GROUP - 19.08%
American Greetings Class A 124,600 3,379,775
American Stores........... 187,900 4,814,938
Armor All Products........ 96,000 1,920,000
ConAgra................... 164,000 5,453,000
Dayton Hudson............. 85,000 5,705,625
Dial...................... 153,800 3,710,425
May Department Stores..... 163,500 5,926,875
Philip Morris............. 120,000 8,130,000
Procter & Gamble.......... 185,000 12,926,875
Reynolds & Reynolds....... 291,600 7,727,400
Rite Aid.................. 260,400 6,054,300
RJR Nabisco Holdings...... 143,520 3,928,860
Sbarro.................... 178,500 4,596,375
Service International..... 393,000 11,102,250
Singer ................... 167,100 4,240,163
<PAGE> 6
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
CONSUMER GROUP (CONTINUED)
Sunbeam-Oster............. 209,200 $ 4,523,950
Wal-Mart Stores........... 413,500 9,820,625
Wallace Computer Service.. 141,700 4,729,238
------------
108,690,674
ENERGY - 7.44% ------------
Dresser Industries........ 77,500 1,695,313
Illinova.................. 139,000 3,231,750
Imperial Oil Limited...... 106,000 3,789,500
Kerr-McGee................ 115,000 5,965,625
Royal Dutch Petroleum..... 62,600 7,762,400
SCEcorp................... 190,000 3,182,500
Sonat..................... 164,100 4,984,538
Sun....................... 58,900 1,774,363
TOTAL S.A. ADR............ 147,223 4,619,122
Unocal.................... 188,200 5,410,750
------------
42,415,861
FINANCIAL & BANKING - 6.45% ------------
Bank of New York.......... 71,000 2,334,125
Federal Home Loan......... 128,300 8,371,575
Federal National Mortgage Association 49,050 4,328,663
First USA................. 208,300 8,852,750
Green Tree Financial...... 63,000 2,575,125
MBNA...................... 266,700 8,067,675
Mellon Bank............... 56,700 2,225,475
------------
36,755,388
INSURANCE & HEALTH CARE - 3.55% ------------
Abbott Laboratories....... 142,300 5,603,063
Bard (C.R.)............... 127,600 3,716,350
Equitable of Iowa......... 59,500 2,179,188
Pfizer.................... 22,000 1,905,750
SAFECO.................... 31,500 1,775,813
SmithKline Beecham ADR Unit 129,600 5,038,200
------------
20,218,364
MANUFACTURING - 4.05% ------------
AlliedSignal.............. 144,000 5,706,000
Danaher................... 63,400 1,886,150
Fleetwood Enterprises..... 170,000 3,910,000
Tyco International........ 221,200 11,613,000
------------
23,115,150
REAL ESTATE - 4.07% ------------
Associated Estates Realty. 122,400 2,417,400
Developers Diversified Realty 235,500 6,476,250
<PAGE> 7
NUMBER MARKET
OF SHARES VALUE
COMMON STOCK (CONTINUED)
REAL ESTATE (CONTINUED)
Health Care Property Investors 167,000 $ 5,051,750
Nationwide Health Properties 114,900 4,150,763
Storage Trust Realty...... 45,200 920,950
Storage USA............... 54,000 1,545,750
Sun Communities........... 121,700 2,601,338
-----------
23,164,201
TECHNOLOGY - 0.40% -----------
General Motors Class H.... 57,800 2,261,425
-----------
2,261,425
-----------
TRANSPORTATION - 0.72%
CSX....................... 51,800 4,124,575
-----------
4,124,575
-----------
TOTAL COMMON STOCK (COST $321,926,730) 357,549,640
-----------
CONVERTIBLE PREFERRED STOCK - 0.63%
Freeport-McMoRan Copper & Gold
5.00% pfd cv............. 167,400 3,599,100
TOTAL CONVERTIBLE PREFERRED STOCK -----------
(COST $3,876,568)........ 3,599,100
-----------
PRINCIPAL
AMOUNT
CORPORATE BONDS - 10.79%
Advanta 5.125% 11/15/96... $ 2,950,000 2,857,456
Allstate 5.875% 6/15/98... 4,100,000 3,933,999
Aristar 8.125% 12/1/97.... 1,135,000 1,155,956
Bankers Trust-New York
7.25% 11/1/96............ 2,375,000 2,381,313
8.00% 3/15/97............ 3,250,000 3,292,010
Bell Atlantic 5.70% 5/30/96 2,800,000 2,771,138
Capital One Bank 8.125% 2/27/98 3,000,000 3,041,250
Celulosa Arauco 7.25% 6/11/98 1,750,000 1,701,875
+CEZ Finance BV 8.875% 12/20/99 1,735,000 1,793,990
City of Prague 7.75% 5/10/99 2,355,000 2,344,697
Columbia/HCA Healthcare 8.70% 2/10/10 1,800,000 1,877,917
Dean Witter Discover 6.625% 3/1/00 2,000,000 1,995,000
Equitable Companies 9.00% 12/15/04 1,190,000 1,255,563
+Financira Energetic Nacional 9.00% 11/8/99 2,000,000 1,950,000
First USA Bank 5.75% 1/15/99 2,650,000 2,490,133
General Motors Acceptance Corporation
Medium-Term Note 6.71% 3/3/99 950,000 934,040
General Motors Acceptance Corporation
8.375% 5/1/97............ 915,000 934,582
<PAGE> 8
PRINCIPAL MARKET
AMOUNT VALUE
CORPORATE BONDS (CONTINUED)
K-Mart 7.55% 7/27/04...... $ 1,970,000 $ 1,884,281
MBNA 6.875% 10/1/99....... 1,240,000 1,213,047
Nationwide Mutual Insurance
9.875% 2/15/25........... 2,000,000 2,125,000
Ontario Province 17.00% 11/5/11 565,000 678,548
Quebec Province 8.625% 1/19/05 2,420,000 2,553,100
RJR Nabisco
6.80% 9/1/01............. 1,000,000 989,773
8.30% 4/15/99............ 1,000,000 1,019,657
Southwest Air 7.875% 9/1/07 2,750,000 2,738,112
Tektronix 7.50% 8/1/03.... 2,300,000 2,185,000
Thailand Kingdom
4.73% 9/30/96............ 795,000 771,648
7.07% 9/30/13............ 2,655,000 2,342,451
Transamerica 8.08% 11/4/99 3,785,000 3,873,429
VF Corp. 9.50% 5/1/01..... 2,175,000 2,389,825
-----------
TOTAL CORPORATE BONDS (COST $60,854,923) 61,474,790
-----------
U.S. TREASURY OBLIGATIONS - 3.11%
U.S. Treasury Notes 4.375% 8/15/96 5,305,000 5,170,715
U.S. Treasury Notes 7.125% 9/30/99 695,000 702,167
U.S. Treasury Notes 7.25% 5/15/04 1,000,000 1,012,656
U.S. Treasury Notes 7.75% 11/30/99 4,750,000 4,913,281
U.S. Treasury Notes 8.00% 8/15/99 800,000 834,750
U.S. Treasury Note/Bond 6.875% 4/30/97 5,065,000 5,091,905
TOTAL U.S. TREASURY OBLIGATIONS -----------
(COST $17,614,206)........ 17,725,474
-----------
MORTGAGE-BACKED SECURITIES -10.39%
Federal Home Loan Mortgage Corporation
8.50% 4/1/09............. 580,227 588,611
Federal Home Loan Mortgage Corporation
8.50% 6/1/14............. 917,398 941,342
Federal National Mortgage Association
5.22% 7/10/98............ 5,370,000 5,095,808
Federal National Mortgage Association
6.00% 2/1/01............. 1,437,065 1,379,134
Federal National Mortgage Association
7.00% 6/1/09............. 2,983,686 2,918,418
Federal National Mortgage Association
7.00% 7/1/17............. 2,874,900 2,759,617
Federal National Mortgage Association
7.50% 5/1/07............. 3,607,618 3,605,633
6
<PAGE> 9
PRINCIPAL MARKET
AMOUNT VALUE
MORTGAGE-BACKED SECURITIES (CONTINUED)
Federal National Mortgage Association
8.00% 9/1/96............. $ 3,037,895 $ 3,069,306
Federal National Mortgage Association
8.00% 12/1/09 to 1/1/10.. 5,058,104 5,121,331
Federal National Mortgage Association
8.50% 9/1/07............. 3,457,962 3,551,119
Federal National Mortgage Association
8.50% 11/1/09............ 5,430,888 5,578,543
Federal National Mortgage Association
9.50% 3/1/16 to 2/1/25... 7,585,707 7,922,323
Government National Mortgage Association
7.50% 3/15/08 to 5/15/09. 4,892,255 4,875,441
Government National Mortgage Association
8.50% 9/15/24............ 5,026,903 5,127,441
Government National Mortgage Association
9.00% 9/30/17 to 4/15/20. 5,861,107 6,097,506
Government National Mortgage Association
10.00% 11/15/16 to 5/15/19 434,679 471,126
Government National Mortgage Association
12.50% 12/15/10.......... 48,479 55,190
TOTAL MORTGAGE-BACKED SECURITIES -----------
(COST $58,721,756)....... 59,157,889
-----------
COLLATERALIZED MORTGAGE
OBLIGATIONS -1.36%
Federal Deposit Insurance Corporation REMIC
Trust Series 94-C1 2A2 7.85% 9/25/25 2,050,000 2,068,578
Federal Home Loan Mortgage Corporation
Series 1666-E 6.00% 12/15/19 3,320,000 3,036,485
Paine Webber CMO Trust 9.00% 3/20/97 722,438 730,947
Travelers Mortgage Securities Corporation
Series I-Z2 12.00% 3/1/14. 1,715,799 1,928,129
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS -----------
(COST $7,934,613)......... 7,764,139
-----------
<PAGE> 10
PRINCIPAL MARKET
AMOUNT VALUE
ASSET BACKED SECURITIES - 4.53%
Advanta Corporation 93-1 A2
5.95% 5/25/09............. $ 1,508,563 $ 1,397,835
American Finance Home Equity
Series 94-2 A1 6.95% 6/25/24 3,059,272 3,007,570
Series 92-5 A 7.20% 2/15/08 823,958 805,666
Series 92-1 A 7.50% 3/15/07 1,034,251 1,018,738
Series 91-1A 8.00% 7/25/06 749,403 750,976
Carco Auto Loan Trust
Series 91-3 7.875% 3/15/98 3,820,000 3,884,176
Olympic Automobile Receivables Trust
Series 95-B A2 7.35% 10/15/01 4,085,000 4,109,102
OSCC Home Equity Loan Trust
6.025% 6/15/08............ 1,701,677 1,608,085
Premier Auto Trust
Series 93-3A 4.22% 3/2/99. 2,786,699 2,701,426
Series 93-3 A3 4.90% 12/15/98 4,279,972 4,189,237
World Omni Automobile Lease Securitization
Trust 94-BA 7.95% 1/25/01. 2,300,000 2,338,453
TOTAL ASSET BACKED SECURITIES -----------
(COST $26,032,943)........ 25,811,264
-----------
GOVERNMENT AGENCY NOTES - 2.27%
Federal Home Loan Bank Global Note
6.125% 8/5/96............. 10,740,000 10,697,695
Tennessee Valley Authority 8.25% 11/15/96 2,165,000 2,213,838
TOTAL GOVERNMENT AGENCY NOTES -----------
(COST $12,919,310)........ 12,911,533
-----------
REPURCHASE AGREEMENTS - 6.95%
With Deutsche Bank 5.875% 5/1/95
(dated 4/28/95, collateralized by
$8,562,000 U.S. Treasury Notes
5.875% due 5/31/96, market value
$8,720,752 and $4,668,000 U.S. Treasury
Notes 7.125% due 9/30/99, market
value $4,734,843)......... 13,185,000 13,185,000
With J.P. Morgan Securities 5.875% 5/1/95
(dated 4/28/95, collateralized by
$8,562,000 U.S. Treasury Notes
6.875% due 2/28/97, market value
$8,705,544 and $4,730,000 U.S. Treasury
Notes 7.125% due 10/15/98, market
value $4,803,470)......... 13,237,000 13,237,000
7
<PAGE> 11
PRINCIPAL MARKET
AMOUNT VALUE
REPURCHASE AGREEMENTS (CONTINUED)
With PaineWebber 5.875% 5/1/95
(dated 4/28/95, collateralized by
$13,079,000 U.S. Treasury Notes 7.25%
due 2/15/98, market value $13,457,464) $ 13,185,000 $ 13,185,000
TOTAL REPURCHASE AGREEMENTS ------------
(COST $39,607,000)........ 39,607,000
------------
TOTAL MARKET VALUE OF
SECURITIES OWNED - 102.79%
(COST $549,488,049)....... 585,600,829
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS - (2.79%) (15,906,146)
NET ASSETS APPLICABLE TO ------------
30,950,825 SHARES ($1 PAR VALUE)
OUTSTANDING - 100.00%..... $569,694,683
NET ASSET VALUE - DELAWARE ============
FUND A CLASS
($469,897,222 / 25,531,291 SHARES). $18.40
NET ASSET VALUE - DELAWARE ======
FUND B CLASS
($1,655,628 / 90,053 SHARES)... $18.39
NET ASSET VALUE - DELAWARE ======
FUND INSTITUTIONAL CLASS
($98,141,833 / 5,329,481 SHARES)... $18.41
======
- ----------------
+Security 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.
COMPONENTS OF NET ASSETS AT APRIL 30, 1995:
Common stock, $1 par value, 200,000,000
shares authorized to the Delaware Fund $522,336,426
Accumulated undistributed income:
Net investment income..... 2,602,082
Net realized gain on investments... 8,643,395
Net unrealized appreciation of investments 36,112,780
------------
Total net assets.......... $569,694,683
============
See accompanying notes
8
<PAGE> 12
DELAWARE GROUP DELAWARE FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1995
(Unaudited)
INVESTMENT INCOME:
Interest.................. $7,862,577
Dividends................. 4,940,878 $12,803,455
EXPENSES:
Management fees ($1,425,167) and
directors' fees ($8,491).. 1,433,658
Dividend disbursing and transfer
agent fees and expenses. 505,930
Distribution expenses..... 400,798
Salaries.................. 67,727
Custodian fees............ 51,756
Reports to shareholders... 64,551
Taxes, other than taxes on income 28,275
Federal and state registration fees 22,018
Professional fees......... 14,400
Other..................... 59,486 2,648,599
-------- -----------
NET INVESTMENT INCOME..... 10,154,856
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain from security transactions 9,523,165
Net unrealized appreciation
of investments during the period... 11,221,186
NET REALIZED AND UNREALIZED -----------
GAIN ON INVESTMENTS....... 20,744,351
NET INCREASE IN NET ASSETS -----------
RESULTING FROM OPERATIONS. $30,899,207
===========
See accompanying notes
<PAGE> 13
Delaware Fund - 103632
DELAWARE GROUP DELAWARE FUND
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR
ENDED ENDED
4/30/95 10/31/94
(UNAUDITED)
OPERATIONS:
Net investment income .... $ 10,154,856 $ 18,679,911
Net realized gain from
security transactions 9,523,165 7,247,608
Net appreciation (depreciation)
during the period......... 11,221,186 (16,013,608)
Net increase in net assets ------------- -------------
resulting from operations. 30,899,207 9,913,911
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Delaware Fund A Class..... (8,364,821) (15,343,261)
Delaware Fund B Class..... (15,712) (3,727)
Delaware Fund Institutional Class (1,914,873) (2,958,346)
Net realized gain from security transactions:
Delaware Fund A Class..... (6,294,837) (29,288,645)
Delaware Fund B Class..... (11,657) --
Delaware Fund Institutional Class (1,332,622) (4,503,721)
----------- -----------
(17,934,522) (52,097,700)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Delaware Fund A Class..... 20,114,561 28,724,526
Delaware Fund B Class..... 1,031,614 567,201
Delaware Fund Institutional Class 12,094,654 34,025,403
Net asset value of shares issued upon reinvestment
of dividends from net investment income and
realized securities profits:
Delaware Fund A Class..... 11,211,151 34,242,339
Delaware Fund B Class..... 26,394 3,714
Delaware Fund Institutional Class 3,238,513 7,450,202
----------- -----------
47,716,887 105,013,385
----------- -----------
Cost of shares repurchased:
Delaware Fund A Class..... (28,226,776) (78,055,142)
Delaware Fund B Class..... (17,172) --
Delaware Fund Institutional Class (13,374,731) (13,722,666)
----------- -----------
(41,618,679) (91,777,808)
----------- -----------
Increase in net assets derived from capital
share transactions........ 6,098,208 13,235,577
NET INCREASE (DECREASE) ----------- -----------
IN NET ASSETS............. 19,062,893 (28,948,212)
----------- -----------
NET ASSETS:
Beginning of period....... 550,631,790 579,580,002
------------ ------------
End of period (including undistributed net
investment income of $2,602,082 and
$2,742,632, respectively). $569,694,683 $550,631,790
============ ============
See accompanying notes
9
<PAGE> 14
DELAWARE GROUP DELAWARE FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1995
(Unaudited)
Delaware Group Delaware Fund, Inc. ("the Fund") is registered as a
diversified open-end investment company under the Investment Company Act of
1940. The Fund is organized as a Maryland corporation and offers three
classes of shares.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund for financial
statement preparation:
SECURITY VALUATION - Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 pm on the valuation date. Securities not traded
are valued at the last quoted bid price. 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.
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 is required in the financial
statements.
REPURCHASE AGREEMENTS - The Fund may invest in a pooled cash account along with
other members of the Delaware Group Family of Funds. The aggregate daily balance
of the pooled cash account is invested in repurchase agreements secured by
obligations of the U.S. Government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is 102% collateralized. However, in the
event of default or bankruptcy by the counterparty to the agreement, realization
of the collateral may be subject to legal proceedings.
CLASS ACCOUNTING - Investment income, common expenses and gain (loss) are
allocated to the various classes of the Fund on the basis of daily net assets.
Distribution expenses relating to a specific class are charged directly to that
class.
OTHER - Expenses common to all Funds within the Delaware Group 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 an
accrual basis. Original issue discounts are accreted to interest income over the
lives of the respective securities.
2. INVESTMENT MANAGEMENT AND DISTRIBUTION AGREEMENTS
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. (DMC), the investment manager of the
Fund, an annual fee which is calculated daily at the rate of 0.60% on the first
$100 million of average daily net assets of the Fund, 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, less fees paid to the independent directors. At April
30, 1995, the Fund had a liability for Investment Management fees and other
expenses payable to DMC for $256,428.
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 A Class and 1.00% of the average
daily net assets of B Class. No distribution expenses are paid by the
Institutional Class. At April 30, 1995, the Fund had a liability for
distribution fees and other expenses payable to DDLP for $14,220. For the six
months ended April 30, 1995, the Fund paid DDLP $38,821 for commissions earned
on sales of Delaware Fund A Class shares.
The Fund has engaged Delaware Service Company Inc. (DSC), an affiliate of DMC,
to serve as dividend disbursing and transfer agent for the Fund. For the six
months ended April 30, 1995, the Fund expensed $467,163 for these services. At
April 30, 1995, the Fund had a liability for such fees and other expenses
payable to DSC for $34,467.
Certain officers of the Investment Manager are officers, directors and/or
employees of the Fund. These officers, directors and employees are paid no
compensation by the Fund.
On April 3, 1995, Delaware Management Holdings, Inc., the indirect parent of
DMC, DDLP and DSC, through a merger transaction (the "Merger") became a
wholly-owned subsidiary of Lincoln National Corporation. Other than the
resulting change in ownership, the Merger will not materially change the manner
in which DMC has heretofore conducted its relationship with the Fund. The same
personnel who managed the operation and affairs of the Fund before the Merger
have continued to manage its operations and affairs since the Merger.
10
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
During the six months ended April 30, 1995, the Fund made purchases of
$260,373,590 and sales of $277,405,995 of investment securities other than U.S.
Government securities and temporary cash investments.
At April 30, 1995, unrealized appreciation for financial reporting and federal
income tax purposes aggregated $36,064,797 of which $40,672,832 related to
unrealized appreciation of securities and $4,608,035 related to unrealized
depreciation of securities.
The realized gain for federal income tax purposes was $9,125,506 for the six
months ended April 30, 1995.
4. CAPITAL STOCK
SIX MONTHS YEAR
ENDED ENDED
4/30/95 10/31/94
Shares sold:
Delaware Fund A Class..... 1,141,776 1,561,930
Delaware Fund B Class..... 57,939 31,368
Delaware Fund Institutional Class 681,166 1,850,567
Shares issued upon reinvestment of dividends
from net investment income and realized
securities profits:
Delaware Fund A Class .... 641,965 1,883,180
Delaware Fund B Class .... 1,512 207
Delaware Fund Institutional Class 186,077 410,140
---------- ----------
2,710,435 5,737,392
---------- ----------
Shares repurchased:
Delaware Fund A Class .... (1,592,069) (4,229,098)
Delaware Fund B Class .... (973) --
Delaware Fund Institutional Class (751,819) (750,002)
---------- ----------
(2,344,861) (4,979,100)
---------- ----------
Net increase.............. 365,574 758,292
========== ==========
5. SECURITIES LENDING
The market value of securities on loan to broker/dealers at April 30, 1995, was
$46,941,122 for which the Fund received cash collateral of $48,442,179.
6. LINES OF CREDIT
The Fund has a committed line of credit for $10,000,000. No amount was
outstanding at April 30, 1995, or at any time during the last fiscal period.
7. CONCENTRATION OF CREDIT RISK
The Fund invests in securities whose value is derived from an underlying pool of
mortgages or consumer loans. Prepayment of these loans may shorten the stated
maturity of the respective obligation and may result in a loss of premium, if
any has been paid.
The Fund may invest up to 10% of its total 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.
11
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
DELAWARE FUND A CLASS
--------------------------------------------------------------------------
SIX MONTHS(1)
ENDED YEAR ENDED OCTOBER 31,
4/30/95 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period............. $18.000 $19.430 $18.720 $18.810 $16.190 $17.480
Income (loss) from investment operations:
Net investment income............................ 0.327 0.615 0.631 0.660 0.757 0.856
Net realized and unrealized gain
(loss) from security transactions .............. 0.653 (0.285) 1.509 1.490 3.033 (1.366)
------- ------- ------- ------- ------- -------
Total from investment operations................. 0.980 0.330 2.140 2.150 3.790 (0.510)
Less distributions:
Dividends from net investment income............. (0.330) (0.600) (0.660) (0.700) (0.880) (0.780)
Distributions from net realized gain
on security transactions........................ (0.250) (1.160) (0.770) (1.540) (0.290) none
------- ------- ------- ------- ------- -------
Total distributions.............................. (0.580) (1.760) (1.430) (2.240) (1.170) (0.780)
Net asset value, end of period................... $18.400 $18.000 $19.430 $18.720 $18.810 $16.190
======= ======= ======= ======= ======= =======
Total return(2).................................. 5.65% 1.80% 11.91% 12.37% 24.32% (3.17%)
Ratios/supplemental data:
Net assets, end of period (000 omitted).......... $469,897 $456,074 $507,528 $487,343 $453,449 $349,873
Ratio of expenses to average net assets.......... 1.00% 0.97% 0.89% 0.79% 0.71% 0.75%
Ratio of net investment income to average net assets 3.73% 3.31% 3.27% 3.64% 4.29% 4.99%
Portfolio turnover............................... 110% 142% 160% 144% 212% 147%
</TABLE>
- --------------------
(1)Ratios have been annualized and total return has not been annualized.
(2)Does not include maximum sales charge of 5.75% nor the 1% limited contingent
deferred sales charge that would apply in the event of certain redemptions
within 12 months of purchase.
12
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
DELAWARE FUND DELAWARE FUND
B CLASS INSTITUTIONAL CLASS
-------------------------- --------------------------------------
SIX MONTHS(1) 9/6/94(2) SIX MONTHS(1) YEAR 11/09/92(3)
ENDED TO ENDED ENDED TO
4/30/95 10/31/94 4/30/95 10/31/94 10/31/93
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $17.980 $18.340 $18.030 $19.460 $18.820
Investment gain (loss) from investment operations:
Net investment income........................ 0.306 0.070 0.344 0.653 0.632
Net realized and unrealized gain
(loss) from security transactions........... 0.624 (0.280) 0.646 (0.293) 1.438
------- ------- ------- ------- -------
Total from investment operations............. 0.930 (0.210) 0.990 0.360 2.070
Less distributions:
Dividends from net investment income......... (0.270) (0.150) (0.360) (0.630) (0.660)
Distributions from net realized
gain on security transactions............... (0.250) none (0.250) (1.160) (0.770)
------- ------- ------- ------- -------
Total distributions.......................... (0.520) (0.150) (0.610) (1.790) (1.430)
------- ------- ------- ------- -------
Net asset value, end of period............... $18.390 $17.980 $18.410 $18.030 $19.460
======= ======= ======= ======= =======
Total return(4).............................. 5.30% (1.14%) 5.71% 1.96% 11.76%
Ratios/supplemental data:
Net assets, end of period (000 omitted)...... $1,656 $568 $98,142 $93,990 $75,052
Ratio of expenses to average net assets...... 1.83% 1.81% 0.83% 0.81% 0.77%
Ratio of net investment income
to average net assets....................... 2.90% 2.47% 3.90% 3.47% 3.39%
Portfolio turnover........................... 110% 142% 110% 142% 160%
</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; ratios and total return have been
annualized.
(4)Does not include contingent deferred sales charge which varies from 1%-4%
depending upon the holding period for Delaware Fund B Class.
13
<PAGE> 18
Board Members Other Affiliated Officers
MR. WAYNE A. STORK MR. KEITH E. MITCHELL
Chairman President and CEO Delaware
Delaware Group of Funds Distributors, L.P.
Philadelphia, PA
MR. DAVID K. DOWNES
MR. WALTER P. BABICH President
Board Chairman Delaware Management Trust Company
Citadel Constructors, Inc.
King of Prussia, PA MR. GEORGE M. CHAMBERLAIN, JR.
Secretary
MR. ANTHONY D. KNERR Delaware Group of Funds
Consultant
Anthony Knerr & Associates MR. BRIAN F. WRUBLE
New York, NY President and CEO
Delaware Group of Funds
MS. ANN R. LEVEN Philadelphia, PA
Treasurer
National Gallery of Art
Washington, DC
MR. W. THACHER LONGSTRETH
Vice Chairman
Packquisition Corp.
Philadelphia, PA
MR. CHARLES E. PECK
Secretary of Enterprise Homes, Inc.
Fredericksburg, VA
former Chairman and CEO
The Ryland Group, Inc.
Columbia, MD
This semi-annual report is for the information of Delaware Fund shareholders,
but it may be used with prospective investors when preceded or accompanied by a
current PROSPECTUS, which gives details about charges, expenses, investment
objectives and operating policies of the Fund. Summary investment results are
documented in the current STATEMENT OF ADDITIONAL INFORMATION. If used with
prospective investors after June 30, 1994, this report must also be accompanied
by a Delaware Fund Performance Update for the most recently completed calendar
quarter. The figures in this report represent past 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.
<PAGE> 19
Delaware Group of Funds
FOR GROWTH OF CAPITAL
Trend Fund
DelCap Fund
Value Fund
FOR TOTAL RETURN
Dividend Growth Fund
Decatur Total Return Fund
Decatur Income Fund
Delaware Fund
FOR GLOBAL
DIVERSIFICATION
International Equity Fund
Global Assets Fund
Global Bond Fund
FOR CURRENT INCOME
Delchester Fund
U.S. Government Fund
Treasury Reserves
Intermediate Fund
FOR TAX-FREE
CURRENT INCOME
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA
Intermediate Fund
Tax-Free Pennsylvania Fund
MONEY MARKET FUNDS
Delaware Cash Reserve
U.S. Government Money Fund
Tax-Free Money Fund
CLOSED-END EQUITY/INCOME
Dividend and Income Fund
Global Dividend and
Income Fund
<PAGE> 20
The Delaware Group includes funds with a wide range of investment objectives.
Stock funds, income funds, tax-free funds, money market funds, closed-end
equity/income funds and global funds give investors the ability to create a
portfolio that fits their personal financial goals. For more information,
including a prospectus of any Delaware Group fund, contact your financial
adviser or call Delaware Group at 800-523-4640 or 215-988-1333 in
Philadelphia. Read the prospectus carefully before investing. BE SURE TO
CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS CAN BE A
VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE NOT
FDIC OR NCUSIFINSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS 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.
INVESTMENT MANAGER
Delaware Management Company, Inc.
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
SA 002 [4/30] PP695 Printed in the U.S.A.
DELAWARE GROUP
A TRADITION OF SOUND INVESTING SINCE 1929
(PHOTO OF COLONIAL OBJECTS)
1995
SEMI- DELAWARE
GROUP
ANNUAL =========
Delaware Fund
REPORT
BULK RATE
U.S. POSTAGE
PAID
Permit No.145
Conshohocken, PA
