May 7, 1996
Dear
- ----------------------
Shareholder:
- ----------------------
Devon Fund achieved an +11.99% total return (capital change plus income
based on net asset value for Class A shares) for the six months ended April 30,
1996, amid a volatile stock market.
Since the fall of calendar 1995, your Fund has benefited from a 50 basis
point (0.50%) reduction in interest rates and the fact that many companies in
the Fund's portfolio have had strong earnings.
However, in mid-February, the stock market and your Fund were affected by
several factors: inflation, the effect of currency fluctuations on multinational
companies and the effect of government regulatory and legal actions on several
large- and mid-size companies whose stocks we own.
Recent economic reports showing strong employment growth and higher prices
for commodities such as oil, gasoline and corn have led some investors to grow
concerned that the Federal Reserve Board will increase interest rates to curtail
inflation.
We approach such an environment with confidence in the validity of your
Fund's long-term oriented investment strategy. In our opinion, the Fund is
well-diversified among medium and large companies the portfolio manager believes
are likely to expand and increase their dividends regardless of the performance
of the overall economy.
- -----------------------------------------------------------------------------
TOTAL RETURN
6 MONTHS ENDED AVERAGE ANNUAL RETURN
APRIL 30, 1996 SINCE DEC. 29, 1993
-------------- ---------------------
Devon Fund A Class +11.99% +18.69%
- -----------------------------------------------------------------------------
Lipper Equity Income
Fund Average +13.03% (145 funds) +13.67% (86 funds)
- -----------------------------------------------------------------------------
Standard & Poor's 500
Index +13.76% +18.63%
- -----------------------------------------------------------------------------
Devon Fund performance and that of the Lipper Equity Income Average is based
on net asset value without effect of sales charge and assumes reinvestment of
dividends. Performance information for all Fund classes can be found on page
5.
- -----------------------------------------------------------------------------
Since 1993, the stock market has faced challenges from interest rates,
inflation expectations and in the perceived impact of government and legal
actions on consumer growth industries. Chances are price volatility will
continue as the Presidential election year unwinds.
In our report, George H. Burwell, Devon Fund's senior portfolio manager,
outlines why he has confidence in the long-term financial prospects of your
Fund's stock selections and why he believes they are suitable holdings for the
Fund's strategic focus. As you can see to the left, the Devon Fund approach has
generated a total return that, over its lifetime, has matched that of the
unmanaged S&P 500 Index and outpaced its average mutual fund peer in the
increasingly popular equity income category.
We believe that in a stock market that is often marked by sharp daily
price swings and emotional reactions to government reports, dividends and the
growth of dividends take on a much greater role in generating total return.
Devon Fund is well-suited to such an environment because it focuses on companies
with strong track records and good growth prospects. The Fund takes a
disciplined, value-oriented approach to stock selection that we believe helps
control overall exposure to market risks.
Sincerely,
/s/ Wayne A. Stork
- -----------------------------------------------
Wayne A. Stork
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
- -----------------------------------------------
1
<PAGE>
Portfolio
- ---------------------------
Manager's Review
- ---------------------------
The six months ended April 30, 1996, could be divided into two periods of stock
market performance. Between Halloween and Valentine's Day, the value of stocks
in the unmanaged Standard & Poor's 500 Index rose +14.58% as interest rates fell
and corporate earnings rose.
However, since reaching an all-time high on February 13, the S&P 500 has
remained in a volatile trading range. Investors have become wary of a possible
upward spike in inflation after several government reports showed stronger than
expected economic growth. Consequently, interest rates have risen sharply.
- ---------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
(BASED ON NET ASSETS AS OF APRIL 30)
Median Market Capitalization $4.8 billion
Number of Stocks 53
Stock Price-to-Earnings Ratio 15.4*
Top Sector - Consumer Growth 23.1%
Top 10 Holdings - Percent of
Net Assets 36.8%
* Based on median earnings estimates for fiscal 1996
as reported to First Call by industry analysts.
- ---------------------------------------------------------------------------
YOUR FUND'S INVESTMENT STRATEGY
Amid these developments, we have focused on companies with a track record
of consistent earnings. Our "value" orientation led us to sell stocks that had
reached our price targets and purchase stocks of growing companies with the
potential for dividend increases. We look at a stock price relative to its
earnings and do not pay more than 20% above what comparable stocks sell for as
measured by the S&P 500. The price-to-earnings ratio of stocks in the Fund's
portfolio was 15.4 as of April 30, compared to 19 for stocks in the S&P 500.
In the fall of calendar 1995, consumer growth stocks continued to make
a positive contribution to Devon Fund's results. Part of the price gain for
these companies was attributable to favorable prospects for sales and earnings
from overseas markets and from industry consolidation in the U.S.
- ---------------------------------------------------------------------------
LONG-TERM DIVIDEND GROWTH AND STOCK PERFORMANCE
CONSUMER GROWTH STOCKS VS. CYCLICAL STOCKS 1970 TO 1995
<TABLE>
<CAPTION>
DIVIDEND INCREASES AVERAGE PERCENT OF
RELATIVE TO THE ANNUAL DEVON FUND
S&P 500 INDEX RETURN* NET ASSETS**
<S> <C> <C> <C>
CONSUMER GROWTH INDUSTRIES
Tobacco +940% +20.8% 6.1%
Health Care & Pharmaceuticals +353% +13.3% 11.6%
Food +228% +15.4% 3.2%
Household Products +217% +13.7% 2.2%
CYCLICAL INDUSTRIES
Building Materials -16% +11.4% 1.9%
Furnishings & Appliances -33% +11.1% 0%
Autos & Automotive Parts -54% +11.1% 2.1%
Steel -91% +6.7% 0%
STANDARD & POOR'S 500 INDEX +12.3%
Source: Smith Barney
Past performance does not guarantee future results. This illustration is not
intended to represent the performance of Devon Fund. *With dividends reinvested.
**As of April 30, 1996.
</TABLE>
- ----------------------------------------------------------------------------
CONSUMER GROWTH COMPANIES HAVE INCREASED CASH DIVIDENDS FASTER THAN THE S&P
500 AND FASTER THAN CYCLICAL COMPANIES SINCE 1970. THEY HAVE ALSO PROVIDED
HIGHER TOTAL RETURNS.
2
<PAGE>
Beginning in mid-February, however, amid signs that short-term U.S.
economic growth was stronger than anticipated, Wall Street began to prefer the
stocks of companies whose earnings are tied to the overall performance of the
U.S. economy, and stock prices of companies in businesses such as auto and oil
benefited from this shift in sentiment. While your Fund has found some
opportunities in this area, we believe many such "cyclical" companies have
unstable dividends and limited long-term growth potential.
Thus, during the latest six months, your Fund underperformed funds
purchased shares of cyclical companies with the expectation of benefiting from
very short-term price appreciation. Devon Fund takes a long-term approach, and
as you can see on page 2, consumer growth stocks have generally outperformed
cyclicals during the past quarter century.
Our stock selection method includes an evaluation of prior dividend
increases, the strength of a company's cash flow and stock price relative to the
market. This has led us to consumer growth companies such as PHILIP MORRIS COS.
and RITE AID CORP.
* After a year of providing above-average price returns, Philip Morris'
shares were negatively affected by new developments in the perennial legal
battle over smoking. We continue to believe the company's potential liabilities
are more than outweighed by business strengths and earnings growth. Since
February we've added to our position. Philip Morris was your Fund's largest
holding as of April 30.
* Rite Aid, a major drug store chain, was forced to abandon its effort to
merge with the Revco drug chain after the Federal Trade Commission raised
antitrust concerns. We bought the company's shares in early 1995 based on our
expectation that a store remodeling and expansion program would lead to higher
sales at older stores and greater productivity. Rite Aid's share price relative
to its earnings growth rate as of this writing remains attractive, in our
opinion. We believe the company remains well-positioned and may use its
resources to further increase its dividend.
<PAGE>
Profit Growth Among Major Companies Since 1979
S&P 500 Earnings Per Share Momentum
(Year over year change in earnings)
Mar-79 21.79%
Jun-79 24.49%
Sep-79 26.45%
Dec-79 20.52%
Mar-80 14.96%
Jun-80 6.87%
Sep-80 0.07%
Dec-80 -0.27%
Mar-81 -4.64%
Jun-81 0.47%
Sep-81 3.64%
Mar-82 1.58%
Jun-82 -5.60%
Sep-82 -11.20%
Dec-82 -17.71%
Mar-83 -16.14%
Jun-83 -11.15%
Sep-83 -1.92%
Dec-83 11.00%
Mar-84 22.87%
Jun-84 28.67%
Sep-84 24.51%
Dec-84 18.60%
Mar-85 7.40%
Jun-85 -3.64%
Sep-85 -8.03%
Dec-85 -12.20%
Mar-86 -11.41%
Jun-86 -5.77%
Sep-86 -2.50%
Dec-86 -0.89%
- ------------------------------------|
Mar-87 3.99% |
Jun-87 -1.97% |
Sep-87 6.80% |
Dec-87 20.86% |
Mar-88 23.11% HIGH |
Jun-88 50.28% EPS |
Sep-88 43.32% GROWTH |
Dec-88 35.77% |
Mar-89 34.32% |
Jun-89 16.43% |
Sep-89 4.27% |
- ------------------------------------|
- ------------------------------------|
Dec-89 -3.75% |
Mar-90 -13.22% |
Jun-90 -15.74% |
Sep-90 -8.27% |
Dec-90 -6.69% LOW |
Mar-91 -3.37% EPS |
Jun-91 -8.70% GROWTH |
Sep-91 -18.03% |
Dec-91 -25.16% |
Mar-92 -22.68% |
Jun-92 -12.16% |
- ------------------------------------|
Sep-92 1.23%
- ------------------------------------|
Dec-92 19.54% |
Mar-93 22.54% |
Jun-83 13.37% |
Sep-93 13.14% |
Dec-93 14.67% |
Mar-94 14.47% HIGH |
Jun-94 30.37% EPS |
Sep-94 33.90% GROWTH |
Dec-94 39.79% |
Mar-95 43.33% |
Jun-96 36.63% |
Sep-95 28.72% |
- ------------------------------------|
Dec-95 10.98%
- -------------------------------------------
EARNINGS PER SHARE (EPS) GROWTH IS CYCLICAL
Source: Merrill Lynch Quantitative Analysis
PROFITS AT MANY COMPANIES MAY SLOW DOWN OR EVEN DECLINE IN 1996 AFTER SEVERAL
YEARS OF STRONG PERFORMANCE. IN OUR OPINION, THIS SHOULD HELP COMPANIES THAT
CAN POST CONSISTENT EARNINGS.
3
<PAGE>
OUTLOOK
We believe that earnings growth among S&P 500 companies will slow
significantly in 1996, making non-cyclical companies which can continue to show
earnings and dividend growth more attractive to investors in the coming months.
Consistent growth is desirable because, on balance, long-term investors
tend to favor companies that deliver steady results. Since the fall of 1995, for
example, the share price of one major holding, SERVICE CORP. INTERNATIONAL, rose
from a 10% discount compared to the market to a 20% premium (based on stock
price divided by earnings per share). We believe investors grew more confident
about the company's expansion into the international funeral home business. We
do not expect such dramatic increases in value from all our holdings, but such
positive change provides us with confidence in our stock selection methodology.
The chart on the prior page shows that earnings per share of companies
that make up the S&P 500 have risen for almost four years. We believe that given
the sharp rise in interest rates in 1994 and again in 1996, economic growth will
not accelerate to the point where it generates high inflation. A number of
leading American business executives expressed this same opinion during a recent
trade conference in Washington.
From 1989 to 1991, before the Fund began operating, many of the stocks
currently in our portfolio fared well when the pace of overall corporate
earnings growth slowed. We believe this pattern could repeat itself in the
future.
/s/ George H. Burwell
- -------------------------------------------
George H. Burwell
VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER
MAY 7, 1996
A Look at
- -------------------------
Devon's
- -------------------------
Lifetime
- -------------------------
Performance
- -------------------------
An investor who bought $10,000 worth of Devon Fund A Class shares on December
29, 1993, and reinvested all dividends and capital gains would have had holdings
worth $14,214 as of April 30, 1996.
Our record since 1993 - admittedly a relatively short period - shows the
benefits of investing in a fund focusing on growth of dividends. The chart you
see on the next page illustrates the importance of reinvestment of capital gains
and dividends.
As you can see, such reinvestment would have made the total return of
Class A shares competitive with the returns provided by the unmanaged Standard
& Poor's 500 Index which includes large- and mid-size companies but does not
take into account the "real world" costs of buying and selling stocks and
operating a mutual fund.
4
<PAGE>
How Capital Gains Reinvestment Can Make A Difference
Devon Fund Class A Performance
December 29, 1993 to April 30, 1996
$10,000 Investment
S & P 500 Index
------------------
Period Market
End Value
12/29/93 $10,000
12/31/93 10,124
03/31/94 9,741
06/30/94 9,778
09/30/94 10,255
12/30/94 10,251
03/31/95 11,252
06/30/95 12,321
09/29/95 13,292
12/29/95 14,091
03/29/96 14,849
04/30/96 15,075
Without Reinvestment of Dividends With Reinvestment of Dividends
12/29/93 $9,524 $9,524
3/31/94 9,524 9,524
6/30/94 9,771 9,801
9/30/94 10,229 10,289
12/28/94 9,543 9,626
3/31/95 10,448 10,981
6/30/95 11,057 11,664
9/29/95 11,981 12,682
12/27/95 12,086 12,833
3/29/96 12,448 13,968
4/30/96 12,629 14,214
The Fund's performance is compared to that of the S&P 500 Index. Chart
assumes $10,000 invested on December 29, 1993, and includes the effect of a
4.75% front-end sales charge and the reinvestment of all dividends. Past
performance does not guarantee future results.
CAPITAL GAINS AND DIVIDEND REINVESTMENT HAVE PROVIDED MORE THAN HALF OF THE
TOTAL RETURN OF DEVON FUND SINCE YOUR FUND BEGAN OPERATING.
<PAGE>
DEVON FUND PERFORMANCE
AVERAGE ANNUAL RETURN THROUGH APRIL 30, 1996
<TABLE>
<CAPTION>
LIFETIME ONE YEAR
Class A (Est. 1993) +16.24% +21.03%
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Class B (Est. 1994)
Excluding Sales Charge +19.71% +26.22%
Including Sales Charge +17.54% +22.22%
- ----------------------------------------------------------------------------------------------
Class C* (Est. 1995)
Excluding Sales Charge +7.60% -
Including Sales Charge +6.60% -
*aggregate return through April 30, 1996
</TABLE>
DEVON FUND'S RETURN AND SHARE VALUE 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. RETURNS REFLECT REINVESTMENT OF ANY DISTRIBUTIONS
AND ANY APPLICABLE SALES CHARGES AS NOTED BELOW. B AND C CLASS RESULTS
"EXCLUDING SALES CHARGE" ASSUME INVESTMENT WAS NOT REDEEMED.
Class A returns reflect the effect of the 4.75% maximum front-end sales
charge and a 12b-1 fee. A voluntary fee limit equal to 1.25% of net assets
was in effect as of April 30, 1996. Returns would have been lower without the
cap. Sales charges have varied over the life of the Fund.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a contingent
deferred sales charge if redeemed before the end of the sixth year. Class B
was initially offered on September 6, 1994. Class B's six-month total return
was +11.61% with dividends and capital gains reinvested (based on net asset
value).
Class C shares have a 1% annual distribution and service fee and a 1%
contingent deferred sales charge if redeemed within 12 months. Cumulative
performance for the five months shown above may not be indicative of
long-term performance.
The average annual total returns for Devon Fund's Institutional Class, which
is available without sales or asset-based distribution charges only to
certain eligible institutional accounts, were +19.03% and +27.50%,
respectively, for the lifetime and one-year periods ended April 30, 1996. The
aggregate return for the six-month period ended April 30, 1996, was +12.17%.
5
<PAGE>
Financial
- ------------------------
Statements
- ------------------------
DELAWARE GROUP DEVON FUND+
STATEMENT OF NET ASSETS
APRIL 30, 1996
(UNAUDITED)
Number Market
Top 10 holdings are in boldface. of Shares Value
COMMON STOCK - 92.02%
Aerospace & Defense - 3.17%
GenCorp. . . . . . . . . . . . . . . . . . 11,800 $ 157,825
Lockheed Martin. . . . . . . . . . . . . . 4,800 387,000
--------
544,825
--------
Automobiles & Auto Parts - 2.11%
Danaher. . . . . . . . . . . . . . . . . . 9,200 362,250
--------
362,250
--------
Banking, Finance & Insurance - 15.14%
Bank of New York. . . . . . . . . . . . . . 3,200 155,200
CHUBB . . . . . . . . . . . . . . . . . . . 6,200 586,675
Cincinnati Financial. . . . . . . . . . . . 3,930 232,853
MBNA. . . . . . . . . . . . . . . . . . . . 4,500 127,688
Southern National . . . . . . . . . . . . . 14,300 398,613
STATE STREET BOSTON . . . . . . . . . . . . 8,800 438,900
United Healthcare . . . . . . . . . . . . . 6,900 403,650
U.S. Healthcare . . . . . . . . . . . . . . 5,000 260,938
----------
2,604,517
----------
Buildings & Materials - 1.91%
Foster Wheeler. . . . . . . . . . . . . . . 7,100 328,375
----------
328,375
----------
Cable, Media, & Publishing - 6.69%
American Greetings Class A. . . . . . . . . 10,600 293,488
Banta . . . . . . . . . . . . . . . . . . . 15,000 371,250
Hollinger International Class A . . . . . . 14,000 166,250
Reynolds & Reynolds Class A . . . . . . . . 6,900 319,125
----------
1,150,113
----------
Chemicals - 3.32%
Hanna (M.A.). . . . . . . . . . . . . . . . 5,300 182,850
Loctite . . . . . . . . . . . . . . . . . . 7,700 388,850
----------
571,700
----------
Consumer Products - 2.21%
Procter & Gamble. . . . . . . . . . . . . . 4,500 380,250
----------
380,250
----------
Electronics & Electrical - 3.53%
General Electric. . . . . . . . . . . . . . 3,400 263,500
Teleflex. . . . . . . . . . . . . . . . . . 7,400 343,175
----------
606,675
----------
- ----------------
+ Devon Fund is a Series of Delaware Group Delaware Fund, Inc.
<PAGE>
Number Market
of Shares Value
Energy - 5.60%
Imperial Oil Limited. . . . . . . . . . . . 3,400 $ 137,700
KERR-MCGEE. . . . . . . . . . . . . . . . . 7,100 453,513
Royal Dutch Petroleum . . . . . . . . . . . 1,400 200,550
TOTAL Class B ADR . . . . . . . . . . . . . 5,000 171,250
--------
963,013
--------
Farming & Agriculture - 3.70%
CONAGRA . . . . . . . . . . . . . . . . . . 16,500 637,313
--------
637,313
--------
Food, Beverage & Tobacco - 9.29%
Campbell Soup . . . . . . . . . . . . . . . 5,700 356,250
Flowers Industries. . . . . . . . . . . . . 14,300 191,263
PHILIP MORRIS . . . . . . . . . . . . . . . 9,800 883,225
RJR Nabisco Holdings. . . . . . . . . . . . 5,600 167,300
---------
1,598,038
---------
Healthcare & Pharmaceuticals - 11.56%
COLUMBIA/HCA HEALTHCARE . . . . . . . . . . 14,000 743,750
Pharmacia & Upjohn. . . . . . . . . . . . . 4,800 183,600
Schering-Plough . . . . . . . . . . . . . . 4,100 235,238
SMITHKLINE BEECHAM ADR. . . . . . . . . . . 12,200 658,800
Warner-Lambert. . . . . . . . . . . . . . . 1,500 167,625
---------
1,989,013
---------
Real Estate - 3.16%
Colonial Properties Trust . . . . . . . . . 3,100 74,400
Developers Diversified Realty . . . . . . . 3,000 87,375
Health Care Property Investors. . . . . . . 4,800 151,200
Nationwide Health Properties. . . . . . . . 4,000 79,500
Storage USA . . . . . . . . . . . . . . . . 2,200 72,875
Sun Communities . . . . . . . . . . . . . . 3,000 78,375
--------
543,725
Retail - 4.36% --------
May Department Stores . . . . . . . . . . . 3,200 163,200
RITE AID. . . . . . . . . . . . . . . . . . 19,800 586,575
--------
749,775
--------
Telecommunications - 1.61%
ALLTEL. . . . . . . . . . . . . . . . . . . 8,400 276,150
--------
276,150
--------
Utilities - 6.07%
CMS Energy. . . . . . . . . . . . . . . . . 11,000 320,375
DQE . . . . . . . . . . . . . . . . . . . . 5,300 140,450
DTE Energy. . . . . . . . . . . . . . . . . 4,000 124,000
Edison International. . . . . . . . . . . . 8,000 128,000
Illinova. . . . . . . . . . . . . . . . . . 13,000 331,500
---------
1,044,325
---------
Miscellaneous - 8.59%
SERVICE INTERNATIONAL . . . . . . . . . . . 8,900 472,813
Tompkins plc-ADR. . . . . . . . . . . . . . 8,000 136,000
TYCO INTERNATIONAL. . . . . . . . . . . . . 22,500 869,063
----------
1,477,876
Total Common Stock ----------
(cost $13,853,186). . . . . . . . . . . . . 15,827,933
----------
6
<PAGE>
Statement of Net Assets (Continued)
Number Market
of Shares Value
CONVERTIBLE PREFERRED STOCK - 0.33%
Freeport-McMoRan Copper & Gold
5% pfd cv . . . . . . . . . . . . . . . . . 2,000 $ 56,750
-------
Total Convertible Preferred Stock
(cost $50,935). . . . . . . . . . . . . . . 56,750
-------
Principal
Amount
REPURCHASE AGREEMENTS - 8.68%
With Chase Manhattan 5.30% 5/1/96
(dated 4/30/96, collateralized by $492,000
U.S. Treasury Notes 6.125% due 5/31/97,
market value $505,925). . . . . . . . . . . $496,000 496,000
With J.P. Morgan Securities 5.30% 5/1/96
(dated 4/30/96, collateralized by $477,000
U.S. Treasury Notes 6.125% due 9/30/00,
market value $475,080 and $34,000 U.S.
Treasury Notes 5.75% due 10/31/00, market
value $33,177) . . . . . . . . . . . . . . 498,000 498,000
With PaineWebber 5.32% 5/1/96
(dated 4/30/96, collateralized by
$510,000 U.S. Treasury Notes 6.25% due
4/30/01, market value $508,245) . . . . . . 498,000 498,000
-------
Total Repurchase Agreements
(cost $1,492,000) . . . . . . . . . . . . . 1,492,000
-------
TOTAL MARKET VALUE OF SECURITIES
OWNED - 101.03% (cost $15,396,121). . . . . 17,376,683
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS - (1.03%). . . . . . . . . (176,426)
--------
NET ASSETS APPLICABLE TO 1,297,251
SHARES ($1 PAR VALUE) OUTSTANDING - 100.00% $17,200,257
===========
NET ASSET VALUE - DEVON FUND A CLASS
($12,002,354/905,330 SHARES) . . . . . . $13.26
======
NET ASSET VALUE - DEVON FUND B CLASS
($1,782,125/134,836 SHARES) . . . . . . . $13.22
======
NET ASSET VALUE - DEVON FUND C CLASS
($246,995/18,706 SHARES). . . . . . . . . $13.20
======
NET ASSET VALUE - DEVON FUND INSTITUTIONAL CLASS
($3,168,783/238,379 SHARES . . . . . . . $13.29
======
COMPONENTS OF NET ASSETS AT APRIL 30, 1996
Common stock, $1 par value, 125,000,000 shares
authorized to the Devon Fund. . . . . . . . $14,303,646
Accumulated undistributed income:
Net investment income . . . . . . . . . . . 39,841
Net realized gain on investments. . . . . . 876,208
Net unrealized appreciation of investments 1,980,562
---------
Total net assets . . . . . . . . . . . . . . $17,200,257
===========
See accompanying notes
<PAGE>
Delaware Group Devon Fund
Statement of Operations
Six Months Ended April 30, 1996
(Unaudited)
INVESTMENT INCOME:
Dividends . . . . . . . . . . . . . . . . . . . $169,733
Interest. . . . . . . . . . . . . . . . . . . . 49,269 $ 219,002
-------- ---------
EXPENSES:
Management fees ($44,081) and
directors' fees ($5,606) . . . . . . . . . . . 49,687
Distribution expenses . . . . . . . . . . . . . 21,783
Dividend disbursing and transfer agent
fees and expenses. . . . . . . . . . . . . . . 21,580
Federal and state registration fees . . . . . . 19,062
Professional fees . . . . . . . . . . . . . . . 9,995
Reports to shareholders . . . . . . . . . . . . 3,758
Amortization of organization expenses . . . . . 2,254
Taxes, other than taxes on income . . . . . . . 2,121
Salaries. . . . . . . . . . . . . . . . . . . . 2,079
Custodian fees. . . . . . . . . . . . . . . . . 1,580
Other . . . . . . . . . . . . . . . . . . . . . 4,224
--------
Total expenses. . . . . . . . . . . . . . . . . 138,123
Less expenses absorbed by
Delaware Management Company, Inc . . . . . . . (47,161) 90,962
-------- --------
NET INVESTMENT INCOME 128,040
--------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain from
security transactions. . . . . . . . . . . . . 872,923
Net unrealized appreciation of investments
during the period. . . . . . . . . . . . . . . 584,044
--------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS. . . . . . . . . . . . . . 1,456,967
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS. . . . . . . . . . . $1,585,007
==========
See accompanying notes
7
<PAGE>
Delaware Group Devon Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended Year Ended
4/30/96 10/31/95
(Unaudited)
<S> <C> <C>
OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . . . $ 128,040 $ 177,618
Net realized gain from security transactions . . . . . . 872,923 671,745
Unrealized appreciation during the period. . . . . . . . 584,044 1,214,843
----------- -----------
Net increase in net assets resulting
from operations. . . . . . . . . . . . . . . . . . . . 1,585,007 2,064,206
---------- -----------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
Devon Fund A Class. . . . . . . . . . . . . . . . . . . (91,678) (124,083)
Devon Fund B Class. . . . . . . . . . . . . . . . . . . (5,884) (6,520)
Devon Fund C Class. . . . . . . . . . . . . . . . . . . (277) -
Devon Fund Institutional Class. . . . . . . . . . . . . (37,091) (45,722)
Net realized gain from security transactions:
Devon Fund A Class. . . . . . . . . . . . . . . . . . . (463,434) (144,950)
Devon Fund B Class. . . . . . . . . . . . . . . . . . . (50,076) (7,068)
Devon Fund C Class. . . . . . . . . . . . . . . . . . . (367) -
Devon Fund Institutional Class. . . . . . . . . . . . . (151,603) (47,947)
--------- ----------
(800,410) (376,290)
--------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Devon Fund A Class. . . . . . . . . . . . . . . . . . . 3,717,284 4,890,613
Devon Fund B Class. . . . . . . . . . . . . . . . . . . 836,625 668,823
Devon Fund C Class. . . . . . . . . . . . . . . . . . . 243,935 -
Devon Fund Institutional Class. . . . . . . . . . . . . 669,989 1,400,865
Net asset value of shares issued upon reinvestment
of dividends from net investment income and
net realized gain from security transactions:
Devon Fund A Class. . . . . . . . . . . . . . . . . . . 542,086 266,511
Devon Fund B Class. . . . . . . . . . . . . . . . . . . 53,759 12,607
Devon Fund C Class. . . . . . . . . . . . . . . . . . . 645 -
Devon Fund Institutional Class. . . . . . . . . . . . . 188,694 93,669
---------- ----------
6,253,017 7,333,088
---------- ----------
Cost of shares repurchased:
Devon Fund A Class. . . . . . . . . . . . . . . . . . . (1,664,205) (2,110,412)
Devon Fund B Class. . . . . . . . . . . . . . . . . . . (36,655) (30,450)
Devon Fund C Class. . . . . . . . . . . . . . . . . . . (995) -
Devon Fund Institutional Class. . . . . . . . . . . . . (714,691) (1,532,095)
----------- -----------
(2,416,546) (3,672,957)
----------- -----------
Increase in net assets derived from
capital share transactions. . . . . . . . . . . . . . . 3,836,471 3,660,131
----------- -----------
NET INCREASE IN NET ASSETS . . . . . . . . . . . . . . . 4,621,068 5,348,047
----------- -----------
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . . . . . 12,579,189 7,231,142
----------- -----------
End of period (including undistributed net
investment income of $39,841 and
$46,731, respectively). . . . . . . . . . . . . . . . . $17,200,257 $12,579,189
=========== ===========
</TABLE>
See accompanying notes
<PAGE>
Delaware Group Devon Fund
Notes to Financial Statements
April 30, 1996
(Unaudited)
Delaware Group Delaware Fund, Inc. (the "Company") is registered as a
diversified open-end investment company under the Investment Company Act of
1940, as amended. The Company currently offers two series, Devon Fund (the
"Fund") and Delaware Fund. The Company is organized as a Maryland corporation.
The Fund offers four classes of shares.
The investment objective of the Fund is to seek current income and capital
appreciation.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund:
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 pm on the valuation date. Securities not traded
or securities not listed on an exchange are valued at the mean of the last
quoted bid and asked prices. Money market instruments having less than 60
days to maturity are valued at amortized cost.
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 of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements
secured by obligations of the U.S. government. The respective collateral is
held by the Fund's custodian bank until the maturity of the respective
repurchase agreements. Each repurchase agreement is at least 100%
collateralized. However, in the event of default or bankruptcy by the
counterparty to the agreement, realization of the collateral may be subject
to legal proceedings.
Class Accounting - Investment income, common expenses, and gain (loss) on
investments are allocated to the various classes of the Fund on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
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.
Certain fund expenses are paid directly by brokers. The amount of these
expenses was less than 0.01% of the Fund's average net assets.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
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, a fee which is calculated daily at the annual rate of 0.60% on the
first $500 million of average daily net assets of the Fund and 0.50% on the
average daily net assets over $500 million.
DMC has elected voluntarily to waive its fee and reimburse the Fund to the
extent that annual operating expenses, exclusive of taxes, interest, brokerage
commissions, extraordinary expenses and 12b-1 expenses exceed 0.95% of average
net assets for each class through December 31, 1996. Total expenses absorbed by
DMC for the six months ended April 30, 1996 were $47,161.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B Class and C Class. No distribution expenses
are paid by the Institutional Class. For the six months ended April 30, 1996,
the Fund paid DDLP $9,212 for commissions earned on sales of Devon 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, 1996, the Fund has expensed $21,580 for these
services.
On April 30, 1996, the Fund had expenses payable relating to operations to
DMC and its affiliates of $183,429.
Certain officers of DMC are officers, directors, and/or employees of the
Fund. These officers, directors, and employees are paid no compensation by
the Fund.
3. Investments
During the six months ended April 30, 1996, the Fund made purchases of
$8,666,093 and sales of $5,673,671 of investment securities other than U.S.
government securities and temporary cash investments.
At April 30, 1996, unrealized appreciation for federal income tax purposes
aggregated $1,980,562 of which $2,126,919 related to unrealized appreciation
of securities and $146,357 related to unrealized depreciation of securities.
The realized gain for federal income tax purposes was $872,923 for the six
months ended April 30, 1996.
On April 30, 1996, the Fund had a payable for investment securities purchased
of $87,665.
<PAGE>
4. Capital Stock
Transactions in capital stock shares were as follows:
Six Months Year
Ended Ended
4/30/96 10/31/95
Shares sold:
Devon Fund A Class. . . . . . . . . . . . 284,475 437,494
Devon Fund B Class. . . . . . . . . . . . 64,256 59,748
Devon Fund C Class. . . . . . . . . . . . 18,732 -
Devon Fund Institutional Class 50,556 125,933
Shares issued upon reinvestment of dividends
from net investment income and net
realized gain from security transactions:
Devon Fund A Class. . . . . . . . . . . 42,643 25,450
Devon Fund B Class. . . . . . . . . . . 4,236 1,195
Devon Fund C Class. . . . . . . . . . . 50 -
Devon Fund Institutional Class 14,823 8,931
------- --------
479,771 658,751
------- --------
Shares repurchased:
Devon Fund A Class. . . . . . . . . . . (126,791) (182,731)
Devon Fund B Class. . . . . . . . . . . (2,740) (2,452)
Devon Fund C Class. . . . . . . . . . . (76) -
Devon Fund Institutional Class (54,910) (138,734)
-------- --------
(184,517) (323,917)
-------- --------
Net increase. . . . . . . . . . . . . . . . 295,254 334,834
======== ========
5. Lines of Credit
The Fund has a committed line of credit for $500,000. No amount was
outstanding at April 30, 1996, or at any time during the last fiscal period.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
6. Financial Highlights
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Devon Fund Devon Fund Devon Fund
A Class B Class C Class
-------------------------------------- ------------------------------ -----------
Six Months Year 12/29/93(2) Six Months Year 9/06/94(3) 11/29/95(3)
Ended Ended to Ended Ended to to
4/30/96(1) 10/31/95 10/31/94 4/30/96(1) 10/31/95 10/31/94 4/30/96
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period. . . . . . . . . . . . . $12.550 $10.830 $10.000 $12.500 $10.820 $10.900 $13.020
Income (loss) from investment
operations:
Net investment income(4). . . . . . 0.114 0.207 0.136 0.068 0.127 0.027 0.070
Net realized and unrealized gain
(loss) from security transactions 1.356 2.053 0.784 1.352 2.053 (0.077) 0.885
------ ------ ------ ------- ------ ------ ------
Total from investment operations . . 1.470 2.260 0.920 1.420 2.180 (0.050) 0.955
------ ------ ------ ------- ------ ------ ------
Less distributions:
Dividends from net investment income (0.120) (0.220) (0.090) (0.060) (0.180) (0.030) (0.135)
Distributions from net realized gain
on security transactions.. . . . . (0.640) (0.320) none (0.640) (0.320) none (0.640)
------ ------- ------ ------- ------- ----- ------
Total distributions . . . . . . . . (0.760) (0.540) (0.090) (0.700) (0.500) (0.030) (0.775)
------ ------- ------ ------- -------- ------ ------
Net asset value, end of period $13.260 $12.550 $10.830 $13.220 $12.500 $10.820 $13.200
======= ======= ======= ======= ======= ======= =======
Total return(5). . . . . . . . . . . 11.99% 21.98% 11.09% 11.61% 21.09% (0.46%) 7.60%
Ratios/supplemental data:
Net assets, end of period (000
omitted) . . . . . . . . . . . . . $12,002 $8,846 $4,600 $1,782 $863 $115 $247
Ratio of expenses to average
net assets. . . . . . . . . . . . . 1.25%(6) 1.25%(6) 1.25%(6) 1.95%(8) 1.95%(8) 1.95%(8) 1.95%(10)
Ratio of net investment income
to average net assets . . . . . . . 1.76%(7) 1.82%(7) 1.96%(7) 1.06%(9) 1.12%(9) 1.26%(9) 1.06%(11)
Portfolio turnover. . . . . . . . . 87% 99% 180% 87% 99% 180% 87%
Devon Fund
Institutional Class
-----------------------------------
Six Months Year 12/29/93(2)
Ended Ended to
4/30/96(1) 10/31/95 10/31/94
Net asset value, beginning
of period. . . . . . . . . . . . . $12.590 $10.860 $10.000
Income (loss) from investment
operations:
Net investment income(4). . . . . . 0.134 0.241 0.201
Net realized and unrealized gain
(loss) from security transactions 1.361 2.049 0.749
------ ------ ------
Total from investment operations . . 1.495 2.290 0.950
------ ------ ------
Less distributions:
Dividends from net investment income (0.155) (0.240) (0.090)
Distributions from net realized gain
on security transactions.. . . . . (0.640) (0.320) none
------- ------- -------
Total distributions . . . . . . . . (0.795) (0.560) (0.090)
------- ------- -------
Net asset value, end of period $13.290 $12.590 $10.860
======= ======= =======
Total return(5). . . . . . . . . . . 12.17% 22.26% 11.45%
Ratios/supplemental data:
Net assets, end of period (000
omitted) . . . . . . . . . . . . . $3,169 $2,870 $2,516
Ratio of expenses to average
net assets. . . . . . . . . . . . . 0.95%(12) 0.95%(12) 0.95%(12)
Ratio of net investment income
to average net assets . . . . . . . 2.06%(13) 2.12%(13) 2.26%(13)
Portfolio turnover. . . . . . . . . 87% 99% 180%
</TABLE>
<PAGE>
- ----------------------------
1. Ratios have been annualized and total return has not been annualized.
2. Date of initial public offering; ratios and total return have been
annualized.
3. Date of initial public offering, ratios have been annualized and total
return has not been annualized
4. Per share information for the six months ended April 30, 1996, and for the
year ended October 31, 1996, was based on the average shares outstanding
method.
5. Total return does not include maximum sale charge that is or was in effect
nor the 1% limited contingent deferred sales charge that would apply in the
event of certain redemptions within 12 months of purchase for Devon Fund A
Class or the contingent deferred sales charge which varies from 1% - 4% for
Devon Fund B Class and 1% for Devon Fund C Class depending upon the holding
period.
6. Ratio of expenses to average net assets prior to expense limitation was
1.90% for the six months ended April 30, 1996, 2.29% for the year ended
October 31, 1995, and 3.26% for the period ended October 31, 1994.
7. Ratio of net investment income (loss) to average net assets prior to expense
limitation was 1.11% for the six months ended April 30, 1996, 0.78% for the
year ended October 31, 1995, and (0.05%) for the period ended October 31,
1994.
8. Ratio of expenses to average net assets prior to expense limitation was
2.60% for the six months ended April 30, 1996, 2.99% for the year ended
October 31, 1995, and 3.96% for the period ended October 31, 1994.
9. Ratio of net investment income (loss) to average net assets prior to expense
limitation was 0.41% for the six months ended April 30, 1996, 0.08% for the
year ended October 31, 1995, and (0.75%) for the period ended October 31,
1994.
10. Ratio of expenses to average net assets prior to expense limitation was
2.60% for the period ended April 30, 1996.
11. Ratio of net investment income to average net assets prior to expense
limitation was 0.41% for the period ended April 30, 1996.
12. Ratio of expenses to average net assets prior to expense limitation was
1.60% for the six months ended April 30, 1996, 1.99% for the year ended
October 31, 1995, and 2.96% for the period ended October 31, 1994.
13. Ratio of net investment income to average net assets prior to expense
limitation was 1.41% for the six months ended April 30, 1996, 1.08% for the
year ended October 31, 1995, and 0.25% for the period ended October 31,
1994.
10
<PAGE>
This semi-annual report is for the information of Devon 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 the Fund. Summary investment
results are documented in the Fund's current STATEMENT OF ADDITIONAL
INFORMATION. The figures in this report represent past results which are not
a guarantee of future results. The return and principal value of an
investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
Delaware Group
- ----------------------------
of Funds
- ----------------------------
FOR GROWTH OF CAPITAL
Trend Fund
Enterprise Fund
DelCap Fund
Value Fund
U.S. Growth Fund
FOR TOTAL RETURN
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
Delaware Fund
FOR GLOBAL DIVERSIFICATION
Emerging Markets Fund
New Pacific Fund
International Equity Fund
World Growth Fund
Global Assets Fund
Global Bond Fund
FOR CURRENT INCOME
Delchester Fund
Corporate Income Fund
Federal Bond Fund
U.S. Government Fund
Limited-Term Government Fund
FOR TAX-FREE CURRENT INCOME
Tax-Free Pennsylvania Fund
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate 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
For a prospectus of any other Delaware Group fund, contact your financial
adviser or Delaware Group.
* Delaware Group Dividend and Income Fund and Delaware Group Global Dividend
and Income Fund purchases can be made through any registered broker.
<PAGE>
Be sure to consult your financial adviser when making investments. Mutual
funds can be a valuable part of your financial plan; however, shares of the
Fund are not FDIC or NCUSIF insured, are not guaranteed by any bank or any
credit union, 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 Devon 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)
(c)Copy Rights Delaware Distributors, L.P.
Printed in the U.S.A. on recycled paper.
SA - 039 [4/96] PP6/96
========
DELAWARE
GROUP
DEVON
FUND
========
1996
SEMI-ANNUAL
REPORT
A Tradition of Sound Investing Since 1929
DELAWARE
GROUP
- ------------
Philadelphia . London
