<PAGE>
FEBRUARY 14, 1996
DEAR
- ------------------------------------------------------------------------------
SHAREHOLDER:
- ------------------------------------------------------------------------------
During the six months ended January 31, 1996, Delchester Fund benefited from
the sharp decline in U.S. interest rates and managed to avoid most of the
credit risk pitfalls of a slowing U.S. economy.
Delchester Fund has focused on higher-rated bonds within the
high-yield, non-investment grade sector. We attribute the Fund's strong
long-term performance, shown in the table to the right, to this defensive
philosophy. Given the potential risks associated with the high-yield market,
we consider our approach a prudent way to reach the Fund's objective of
paying high current income consistent with reasonable safety.
AVERAGE
TOTAL RETURN ANNUAL RETURN
Six Months Ended 10 Years Ended
January 31, 1996 January 31, 1996
Delchester Fund A Class +5.02% +10.21%
Lipper High Current
Yield Fund Average +6.57% +9.56%
All performance quoted above assumes reinvestment of distributions. Results
of Delchester and the Lipper Fund Average do not show the effect of sales
charges. Performance and yield for all Fund Classes can be found on page 5.
The Lipper Average consisted of 139 and 33 funds, respectively, for six
months and 10 years ended January 31, 1996.
Between July, 1995 and January, 1996, bonds rated BB, the highest
credit quality in the high-yield market, were the best performing high-yield
debt category. This reflected two developments -- the Federal Reserve Board's
efforts to lower short-term interest rates in the wake of a slowing economy
and investors' concerns about lower-rated bond issuers' ability to pay
interest and repay principal.
During the period, your Fund avoided industries that appeared
vulnerable to a weakening economy, namely retailers and highly cyclical
industrial companies. The Fund's portfolio was weighted toward bonds of
companies with relatively stable cash flows and those in growing industries
such as health care and cable television.
As we strive to protect principal, Delchester Fund seeks
opportunities to maximize current income. Your Fund's yield (for Class A
shares, as calculated by Securities and Exchange Commission guidelines) was
8.98% for the 30-day period ended January 31, 1996, slightly higher than six
months earlier. Your Fund provided a total return of +5.02% for Class A
shares (capital change plus reinvested dividends at net asset value) during
the six months ended January 31.
Delaware has managed Delchester since 1970 and included high-yield
bonds in several of our funds before such bonds were even recognized as a
separate asset category by most money managers. Inside, Paul A. Matlack and
Gerald T. Nichols, the Fund's portfolio managers, review the performance of
the past six months and offer their views on the high-yield market and
Delchester for the coming months.
As 1996 unfolds, we expect interest rates to be more stable than in
1994 or 1995. We believe the Federal Reserve Board is not likely to cut the
Federal Funds rate (the overnight bank lending rate) after having made three
cuts since last July. In our opinion, a stable monetary policy can promote
growth without rekindling inflation.
We appreciate the fact that you are among the more than 48,000
shareholders who have chosen to make Delchester Fund a part of their
portfolios. Delaware Group values your continued confidence in the Fund.
Sincerely,
WAYNE A. STORK
- -----------------------------------------------
Wayne A. Stork
Chairman, President and Chief Executive Officer
1
<PAGE>
PORTFOLIO
- ------------------------------------------------------------------------------
MANAGERS'
- ------------------------------------------------------------------------------
REVIEW
- ------------------------------------------------------------------------------
The past six months have been a rewarding period for Delchester Fund despite
the potential credit challenges posed by a slowing U.S. economy. Lower
interest rates and higher corporate earnings allowed many companies and high
yield bonds to both meet interest payments and appreciate in value.
For the six months ended January 31, the benchmark Salomon Brothers
High-Yield Bond Index rose +7.8%.
In addition to declining interest rates, strong demand for
relatively high quality, high-yield securities by mutual funds fueled the
market's advance, especially during the past six months. Nagging economic
worries benefited bonds rated BB at the expense of lower-rated issues.
PORTFOLIO HIGHLIGHTS
(AS OF JANUARY 31, 1996)
A Class Yield* 8.98%
Average Effective Duration 4.0 years
Average Effective Maturity 5.7 years
Number of Bond Issues 96
Top Sector - Media, Leisure & Entertainment
* Calculated according to Securities and Exhange Commission guidelines. See
page 5 for Class B and Class C Yields.
The yield advantage, and thus the income potential, of high-yield
bonds relative to comparable maturity U.S. Treasury securities has widened
since July 31. At the end of your Fund's first fiscal half, high-yield bonds
provided over four percentage points more in yield than U.S. Treasuries.
Obviously, this high interest rate compensates high-yield bond owners for the
lower credit quality of issuers and for the fact that their principal and
interest payments are not guaranteed by the U.S. government like Treasuries.
The Fund's Average Portfolio Quality Has Increased
(Percent of Net Assets as of July 31, 1994)
AAA 7%
CCC 5%
Not Rated 8%
BB 6%
B 72%
BBB 2%
(Percent of Net Assets as of January 31, 1996)
BB 32%
AAA 10%
Not Rated 1%
B 55%
DURING THE PAST 18 MONTHS, AS ECONOMIC GROWTH HAS SLOWED, DELCHESTER HAS
MOVED TO A HIGHER CONCENTRATION OF BONDS RATED BB.
2
<PAGE>
HIGH-YIELD MARKET PERFORMANCE
(JANUARY 1986 TO DECEMBER 1995)
BOND RATING AVERAGE ANNUAL RETURN
BB and B +12.60%
CCC +3.58%
Source: Salomon Brothers
This illustration is not intended to represent the performance of Delchester
Fund. Market performance in the future may differ from past performance.
THE FUND'S INVESTMENT STRATEGY
Since the Fund began investing in high-yield securities, we have
followed a single investment mission. Our goal has remained constant -- to
provide above-average income while maintaining a defensive approach to credit
risk management.
The Fund emphasizes income as the dominant component of return, and
stresses the importance of capital preservation over capital appreciation. We
strive to achieve this by investing primarily in older, seasoned securities
rated BB or B, the two highest quality tiers in the high yield market. In
general, the Fund emphasizes bonds rated B during periods of economic growth
and higher quality, lower yielding bonds rated BB during a slowdown.
The key to long-term outperformance, in our opinion, is the
preservation of as much principal as possible during periods when bond
issuers are less likely to meet payments. The economy, especially the
consumer credit area, appears to be entering such a period. Corporations are
meeting debt payments to a strong degree, but the default rate of high-yield
bonds has modestly increased.
To minimize default risk, we have focused on companies such as cable
television and health -- generally businesses with growing revenue and
earnings. Meanwhile, we reduced our holdings in highly cyclical industries
such as paper and chemicals.
To improve income potential, we slightly increased the average
effective duration of the Fund's portfolio from 3.9 years to 4.0 years.
Duration is the most common measure of a bond's sensitivity to interest
rates. It indicates the approximate percentage of change in a bond's price
given a 1% change in interest rates.
However, reflecting our conservative posture, the Fund's duration
remains more than 20% lower than the overall high-yield market as measured by
the Merrill Lynch High-Yield Master Index during the six months ended January
31. This positioning, part of our effort to preserve principal amid the
possibility of rising defaults, contributed to Delchester's underperformance
relative to more aggressive high-yield funds.
- ------------------------------------------------------------------------------
During the past two years, James R. Raith, Jr. had assisted Paul A. Matlack
and Gerald T. Nichols in co-managing Delchester Fund. On January 5, 1996,
Raith left the Fund's management team. Matlack and Nichols continue to manage
Delchester as they have for the past five years.
- ------------------------------------------------------------------------------
3
<PAGE>
OUTLOOK
We remain optimistic about the high-yield market in the coming
months because we believe the bond market has already "discounted" the
effects of a slowing economy on bond issuers' ability to meet interest
payments. What that means is that such concerns are already reflected in bond
prices.
Given moderate U.S. economic growth and relatively stable long-term
interest rates -- the scenario we see unfolding in the year ahead -- we
expect income will be the primary component of total return from high-yield
bonds for the remainder of 1996.
Accordingly, we believe the Fund will continue to provide an
attractive option for income-oriented investors who understand the risks of
high-yield investing and seek a time-tested alternative to the relatively low
yields of other fixed income securities.
We expect to remain relatively more conservative than our mutual
fund peers by avoiding high-yield securities of non-U.S. issuers and
maintaining a greater-than-average focus on bonds rated BB, an approach
consistent with the approach Delaware takes in managing high-yield
investments for many institutional investors such as employee pension funds.
This reflects the fact that, over the long-term, bonds rated BB have
historically been the best performing total return category of high-yield
debt.
/s/ PAUL A. MATLACK
- ----------------------------
Paul A. Matlack
Vice President
Senior Portfolio Manager
/s/ GERALD T. NICHOLS
- ----------------------------
Gerald T. Nichols
Vice President
Senior Portfolio Manager
A LOOK AT
- ------------------------------------------------------------------------------
LONG-TERM
- ------------------------------------------------------------------------------
PERFORMANCE
- ------------------------------------------------------------------------------
More than half of all Delchester shareholders choose to reinvest monthly
dividends, and thus benefit from compounding. A $10,000 investment in
Delchester A Class on January 31, 1986, would have provided $18,710 in
dividends through January 31, 1996, if dividends were continually reinvested,
as shown in the chart on the next page.
With the compounding provided by reinvestment, annual dividends
would have risen substantially since 1986 even though interest rates have
generally fallen during the past 10 years. The total annual amount paid by
Delchester Fund in dividends on a $10,000 investment would have risen from
$1,675 for the 12 months ended January 31, 1986 to $2,393 for the 12 months
ended January 31, 1996. That's a +42.9% increase that has outpaced the
cumulative increase in consumer prices since 1986, as measured by the
government's consumer price index.
4
<PAGE>
Annual Income Dividends 1986-1996
Delchester Fund A Class
$10,000 Initial Investment on January 31, 1986
Jan-87 $1308
Jan-88 $1392
Jan-89 $1513
Jan-90 $1648
Jan-91 $1788
Jan-92 $1915
Jan-93 $2124
Jan-94 $2322
Jan-95 $2484
Jan-96 $2393
Income for 12 months ended January 31
CHART ASSUMES $10,000 INVESTED ON JANUARY 31, 1986, A 4.75% FRONT-END SALES
CHARGE AND REINVESTMENT OF ALL DIVIDENDS. PERFORMANCE FOR OTHER DELCHESTER
CLASSES WILL VARY DUE TO DIFFERING CHARGES AND EXPENSES.
DELCHESTER FUND PERFORMANCE
AVERAGE ANNUAL RETURN THROUGH JANUARY 31, 1996
TEN YEARS FIVE YEARS ONE YEAR
Class A (Est.1970) +9.68% +14.96% +9.36%
LIFETIME
Class B (Est.1994)
Excluding sales charge +6.02% -- +13.95%
Including sales charge +3.97% -- +9.95%
Class C* (Est.1995) -- -- --
Excluding sales charge +2.58%
Including sales charge +1.58%
*aggregate return through January 31, 1996
DELCHESTER FUND INVESTS PRIMARILY IN HIGH-YIELD SECURITIES, WHICH INVOLVES
GREATER RISKS THAN INVESTING IN HIGHER QUALITY FIXED-INCOME SECURITIES.
RETURN AND SHARE VALUE WILL FLUCTUATE WITH RISING AND FALLING INTEREST RATES
SO THAT SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THE ORIGINAL
COST. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.
Class A returns reflect the reinvestment of all distributions, the effect of
a 4.75% front-end sales charge and a 12b-1 fee. The 30-day yield as of
January 31, 1996 was 8.98%, calculated according to SEC guidelines.
Class B performance reflects the reinvestment of all distributions. 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 deferred sales charge of
up to 4% if redeemed before the end of the sixth year. Lifetime performance
excluding sales charge assumes the investment was not redeemed. Class B was
initially offered on May 2, 1994. The 30-day yield as of January 31, 1996 was
8.65%, calculated according to SEC guidelines.
Class C performance is for only a two month period and may not be
representative of longer term results. C shares have a 1% annual distribution
and service fee. If redeemed within 12 months, a 1% contingent deferred sales
charge applies. Class C was initially offered on November 29, 1995. The
30-day yield as of January 31, 1996 was 8.65%, calculated according to SEC
guidelines.
The average annual total returns for the 10-year, five-year and one-year
periods ended January 31, 1996 for Delchester Fund's Institutional Class,
which is available without sales or asset-based distribution charges only to
certain eligible institutional accounts, were +10.42%, +16.37% and +15.08%.
The Institutional Class was initially made available June 1, 1992;
performance prior to that date is based on performance of Class A but was
adjusted to eliminate the effect of the sales charge.
5
<PAGE>
The Yield Advantage of High-Yield Bonds
Yield History - High-Yield Bonds vs. U.S. Treasuries
December 1984 through December 1995
Salomon Brothers
Hi-Yield U.S.
Index Treasuries
-------- ----------
Dec-84 15.97% 11.62%
Mar-85 15.43% 11.98%
Jun-85 14.23% 10.35%
Sep-85 13.97% 10.3 %
Dec-85 13.86% 9.66 %
Mar-86 12.54% 8.07 %
Jun-86 12.19% 7.92 %
Sep-86 12.49% 6.87 %
Dec-86 12.45% 7.11 %
Mar-87 11.52% 6.99 %
Jun-87 12.65% 8.38 %
Sep-87 12.59% 8.82 %
Dec-87 14.05% 8.95 %
Mar-88 12.86% 7.98 %
Jun-88 13.29% 9.01 %
Sep-88 13.34% 9.15 %
Dec-88 13.58% 9.03 %
Mar-89 13.72% 9.3 %
Jun-89 13.66% 8.6 %
Sep-89 13.73% 8.26 %
Dec-89 14.83% 7.83 %
Mar-90 15.81% 8.52 %
Jun-90 15.89% 8.6 %
Sep-90 16.18% 8.85 %
Dec-90 18.73% 8.25 %
Mar-91 16.57% 7.62 %
Jun-91 14.77% 7.69 %
Sep-91 13.51% 7.31 %
Dec-91 13.06% 6.58 %
Mar-92 11.39% 6.18 %
Jun-92 11.06% 6.4 %
Sep-92 10.47% 5.55 %
Dec-92 10.86% 6.09 %
Mar-93 9.77 % 5.21 %
Jun-93 9.29 % 5.48 %
Sep-93 9.08 % 4.89 %
Dec-93 9 % 5.31 %
Mar-94 9.96 % 6.44 %
Jun-94 10.6 % 7.07 %
Sep-94 10.8 % 7.4 %
Dec-94 11.3 % 7.8 %
Mar-95 10.75% 7.13 %
Jun-95 9.96 % 6.2 %
Sep-95 9.96 % 6.12 %
Dec-95 9.7 % 5.3 %
Payment of interest on high-yield bonds and repayment of principal depends on
the performance of individual companies and is not guaranteed by the U.S.
government like Treasuries. The yield shown above is the average yield of
bonds that make up the Salomon Brothers High-Yield Bond Index, an unmanaged
benchmark of non-investment grade bonds. It is not meant to represent the
yield of Delchester Fund. The Treasury yield shown matches the duration of
bonds in the high-yield index. Duration is a measure of a bond's sensitivity
to interest rates that indicates the likely percentage change in a bond's
price given a 1% movement in interest rates.
Source: Salomon Brothers
High-yield bonds have retained a substantial yield advantage over U.S.
Treasuries despite the fact that interest rates are much lower than in 1984.
This "spread" compensates investors for the lower credit quality and
resulting risk potential of high-yield bonds.
As you can see above, the yield advantage of high-yield bonds relative to
Treasuries widened from 3.5% to 4.2% in 1995, increasing the income potential
of the high-yield market. We believe this has made high-yield bonds
especially attractive to investors who desire a high level of current income.
Since inflation, as measured by the government's consumer price index,
rose only 2.5% in 1995, high-yield bond holders generally have been earning a
"real yield" of nearly 7.0%, an attractive level.
For the past two decades, high-yield bond investors have generally
demanded between 250 basis points (2.5%) and 600 basis points (6%) more yield
than comparable maturity U.S. government securities. This extra yield has
historically been much greater than the default rate of high-yield bonds,
which was less than 2% during 1995, according to Salomon Brothers.
6
<PAGE>
FINANCIAL
- -------------------------------------------------------------------------------
STATEMENTS
- -------------------------------------------------------------------------------
DELAWARE GROUP
DELCHESTER HIGH-YIELD BOND FUND, INC.
STATEMENT OF NET ASSETS
JANUARY 31, 1996
(UNAUDITED)
Principal Market
Amount Value
CORPORATE BONDS - 87.95%
Aerospace & Defense - 1.98%
Alliant Techsystems 11 3/4%
sr sub nts 2003 ............................. $ 9,500,000 $10,545,000
**BE Aerospace 9 7/8% sr sub nts 2006 .......... 4,725,000 4,878,563
K&F Industries 13 3/4%
sr sub debs 2001 ............................ 8,571,000 9,010,264
-----------
24,433,827
-----------
Automotives & Automotive Parts - 5.26%
Aftermarket Technology 12%
sr sub nts 2004 ............................. 10,000,000 10,775,000
American General 12 7/8%
sr nts 2002 ................................. 7,200,000 7,416,000
Exide 0/12 1/4% sr sub def debs 2004 ......... 9,800,000 8,256,500
Exide 10% sr nts 2005 ........................ 9,600,000 10,308,000
Harvard Industries 11 1/8%
sr nts 2005 ................................. 11,700,000 12,138,750
SPX 11 3/4% sr sub nts 2002 .................. 14,935,000 16,055,125
-----------
64,949,375
-----------
Banking, Finance & Insurance - 1.50%
Bankers Life Holding 13%
sr sub nts 2002 ............................. 14,800,000 17,223,500
**First Nationwide Holdings 9 1/8%
sr sub nts 2003 ............................. 1,275,000 1,306,875
-----------
18,530,375
-----------
Buildings & Materials - 4.55%
**Acadia Partners 13% sub nts 1997 ............. 13,500,000 13,938,750
American Standard 10 7/8%
sr nts 1999 ................................. 8,385,000 9,244,463
Schuller International Group 10 7/8%
sr nts 2004 ................................. 14,850,000 16,743,375
Southdown 14% sr sub nts 2001 ................ 14,700,000 16,261,875
-----------
56,188,463
-----------
<PAGE>
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Cable, Media & Publishing - 12.67%
Century Communications
9 3/4% sr nts 2002 ........................ $ 14,600,000 $ 15,330,000
Century Communications
11 7/8% sr sub debs 2003 .................. 13,600,000 14,705,000
**Continental Cablevision 8.3%
sr nts 2006 ............................... 9,925,000 10,024,250
Continental Cablevision 9%
sr debs 2008 .............................. 14,250,000 15,033,750
Infinity Broadcasting 10 3/8%
sr sub nts 2002 ........................... 13,045,000 14,088,600
**K-III Communications 8.5%
sr nts 2006 ............................... 11,975,000 12,034,875
Marcus Cable 0/ 14/ 1/4%
sr dis nts 2005 ........................... 19,200,000 13,056,000
MFS Communications 0/ 8 7/8%
sr disc nts 2006 .......................... 14,250,000 9,387,188
Rogers Cablesystems 10%
sr sec nts 2005 ........................... 17,100,000 18,724,500
Rogers Cablesystems 10%
sr sec nts 2007 ........................... 8,260,000 9,044,700
Rogers Cablesystems 11%
sr sub nts 2015 ........................... 5,970,000 6,671,475
Sullivan Graphics 12 3/4%
sr sub nts 2005 ........................... 18,300,000 18,345,750
------------
$156,446,088
------------
Chemicals - 8.56%
Berry Plastics 12 1/4%
sr sub nts 2004 ........................... 11,600,000 12,528,000
Foamex L.P. 11 7/8%
sr sub nts 2004 ........................... 13,200,000 12,474,000
G-I Holdings 0% sr disc nts 1998 ........... 42,160,000 33,938,800
NL Industries 11 3/4% sr sec nts 2003 ...... 7,285,000 7,867,800
NL Industries 0/ 13%
sr sec disc nts 2005 ...................... 15,400,000 12,050,500
Polymer Group 12 3/4% sr nts 2002 .......... 14,650,000 15,126,125
UCC Investors Holding
0/ 12% sub disc nts 2005 .................. 15,000,000 11,737,500
------------
105,722,725
------------
Computers & Technology - 1.26%
Unisys 13 1/2% nts 1997 .................... 15,130,000 15,546,075
------------
15,546,075
------------
Consumer Products - 5.17%
American Safety Razor
9 7/8% sr nts 2005 ........................ 9,900,000 10,197,000
Calmar Spraying Systems
11.5% sr sub nts 2005 ..................... 14,500,000 14,790,000
7
<PAGE>
Statement of Net Assets (Continued)
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Consumer Products (Continued)
Dictaphone 11 3/4%
sr sub nts 2005 ............................ $ 9,600,000 $ 9,528,000
**Remington Arms 10% sr sub nts 2003 ........... 9,100,000 7,644,000
Revlon Worldwide 0%
sr sec disc nts 1998 ....................... 27,500,000 21,725,000
-----------
63,884,000
-----------
Energy - 1.97%
Ferrellgas 10% sr sub nts 2001 ............... 13,100,000 14,017,000
Global Marine 12 3/4%
sr sec nts 1999 ............................ 9,245,000 10,285,063
-----------
24,302,063
-----------
Food, Beverage & Tobacco - 1.10%
Specialty Foods 11 1/8% sr nts 2002 .......... 7,760,000 7,410,800
Specialty Foods 11 1/4% sr nts 2003 .......... 7,250,000 6,235,000
-----------
13,645,800
-----------
Healthcare & Pharmaceuticals - 2.35%
HEALTHSOUTH Rehabilitation 9 1/2%
sr sub nts 2001 ............................ 8,600,000 9,374,000
Tenet Healthcare 10 1/8%
sr sub nts 2005 ............................ 17,500,000 19,687,500
-----------
29,061,500
-----------
Industrial Machinery - 3.45%
**Alvey Systems 11 3/8%
sr sub nts 2003 ............................ 4,750,000 4,922,188
**Coinmach 11 3/4% sr nts 2005 ................. 14,500,000 14,971,250
IMO Industries 12% sr sub debs 2001 .......... 10,650,000 10,889,625
**Norcal Waste Systems 12 1/2%
sr sub notes 2005 .......................... 11,500,000 11,873,750
-----------
42,656,813
-----------
Leisure, Lodging & Entertainment - 5.85%
Aztar 13 3/4% sr sub nts 2004 ................ 13,510,000 15,198,750
Cinemark USA 12% sr nts 2002 ................. 10,000,000 11,000,000
Coleman Holdings 0%
sr sec disc nts 1998 ....................... 19,600,000 16,170,000
MGM Grand Hotel 12%
1st mtg nts 2002 ........................... 9,400,000 10,340,000
NWCG Holdings 0%
sr sec disc nts 1999 ....................... 4,700,000 3,301,750
Six Flags Theme Parks 0%/12 1/4%
sr sub disc nts 2005 ....................... 19,200,000 16,224,000
-----------
72,234,500
-----------
Metals & Mining - 7.95%
Acme Metals 12 1/2% sr sec nts 2002 .......... 15,500,000 15,965,000
Algoma Steel 12 3/8%
1st mtg nts 2005 ........................... 14,600,000 13,578,000
8
<PAGE>
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Metals & Mining (Continued)
GS Technologies 12% sr nts 2004 ............ $ 11,500,000 $ 11,528,750
GS Technologies 12 1/4% sr nts 2005 ........ 9,450,000 9,544,500
Inland Steel 12 3/4% unsec nts 2002 ........ 3,100,000 3,456,500
Interlake 12% sr sub nts 2001 .............. 10,600,000 10,759,000
Kaiser Aluminum 12 3/4%
sr sub nts 2003 .......................... 9,600,000 10,704,000
Maxxam Group 11 1/4%
sr sec nts 2003 .......................... 12,250,000 12,219,375
Maxxam Group 14% sr sub nts 2000 ........... 1,576,000 1,652,830
NS Group 13 1/2% unit 2003 ................. 9,600,000 8,736,000
------------
98,143,955
------------
Packaging & Containers - 6.20%
Ivex Packaging 12 1/2%
sr sub nts 2002 .......................... 15,750,000 16,695,000
Owens-Illinois 11% debs 2003 ............... 23,800,000 27,013,000
Silgan Holdings 0%/13 1/4%
sr disc debs 2002 ........................ 23,777,000 22,825,920
U.S. Can 13 1/2% sr sub nts 2002 ........... 9,200,000 10,097,000
------------
76,630,920
------------
Paper & Forest Products - 8.27%
Crown Paper 11% sr sub nts 2005 ............ 14,600,000 13,194,750
Doman Industries 8 3/4% sr nts 2004 ........ 12,800,000 12,224,000
Domtar 11 3/4% sr nts 1999 ................. 12,000,000 13,350,000
Pacific Lumber 10 1/2% sr nts 2003 ......... 15,000,000 14,475,000
SD Warren 12% sr sub nts 2004 .............. 19,600,000 21,560,000
Stone Consolidated 10 1/4%
sr sec nts 2000 .......................... 11,750,000 12,645,938
Stone Container 11 7/8% sr nts 1998 ........ 4,750,000 4,993,438
Stone Container 11 1/2% sr nts 2004 ........ 9,750,000 9,676,875
------------
102,120,001
------------
Retail - 2.57%
Fleming Companies 10 5/8% sr nts 2001 ...... 6,380,000 6,427,850
Pathmark Stores 0/ 10 3/4%
jr sub nts 2003 .......................... 11,600,000 6,931,000
Penn Traffic 10.65% sr nts 2004 ............ 9,000,000 8,921,250
Ralph's Grocery 13 3/4%
sr sub nts 2005 .......................... 8,982,000 9,509,693
------------
31,789,793
------------
Telecommunications - 4.42%
CAI Wireless Systems 12 1/4%
sr nts 2002 .............................. 10,663,000 11,662,656
Galaxy Telecom 12 3/8%
sr sub nts 2005 .......................... 7,500,000 8,006,250
**IXC Communications 13%
sr sub nts 2005 .......................... 13,000,000 13,780,000
<PAGE>
Statement of Net Assets (Continued)
Principal Market
Amount Value
CORPORATE BONDS (Continued)
Telecommunications (Continued)
Pronet 11 7/8% sr sub nts 2005 ........... $ 9,500,000 $ 10,592,500
Rogers Cantel Mobile 10 3/4%
sr sec nts 2001 ........................ 10,000,000 10,575,000
--------------
54,616,406
--------------
Transportation & Shipping - 1.76%
Eletson Holdings 9 1/4%
1st pfd mtg nts 2003 ................... 10,040,000 $ 10,140,400
Teekay Shipping 8.32%
1st pfd mgt nts 2008 ................... 2,295,000 2,317,950
Transport Ocean Container 12 1/4%
sr sub nts 2004 ........................ 8,900,000 9,211,500
Viking Star Shipping 9 5/8%
1st pfd mtg nts 2003 ................... 75,000 79,125
--------------
21,748,975
--------------
Utilities - 1.11%
Midland II Funding 13 1/4% debs 2006 ..... 12,250,000 13,658,750
--------------
13,658,750
--------------
Total Corporate Bonds
(Cost $1,044,708,748) .................. 1,086,310,404
--------------
U.S. TREASURY OBLIGATIONS - 6.06%
U.S. Treasury Notes 9 3/8% 1996 .......... 74,160,000 74,789,614
--------------
Total U.S. Treasury Obligations
(Cost $74,936,439) ..................... 74,789,614
--------------
Number
of Shares
PREFERRED STOCK - 0.44%
*Supermarkets General $3.50 pfd .............. 200,000 5,400,000
-------------
Total Preferred Stock
(Cost $5,107,800) ......................... 5,400,000
-------------
CONVERTIBLE PREFERRED STOCK - 0.79%
Pantry Pride cv $14.875 pfd ................. 97,500 9,750,000
-------------
Total Convertible Preferred Stock
(Cost $10,237,500) ........................ 9,750,000
-------------
STOCK WARRANTS - 0.01%
*Berry Plastics .............................. 11,600 174,000
-------------
Total Stock Warrants (Cost $104,400) ........ 174,000
-------------
TOTAL MARKET VALUE OF SECURITIES - 95.25%
(Cost $1,135,094,887) ..................... 1,176,424,018
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 4.75% .................. 58,746,471
-------------
<PAGE>
Market
Value
NET ASSETS APPLICABLE TO 163,114,767
DELCHESTER FUND A CLASS, 23,690,187
DELCHESTER FUND B CLASS, 159,792
DELCHESTER FUND C CLASS SHARES AND 10,016,227
DELCHESTER FUND INSTITUTIONAL CLASS
($1 PAR VALUE) OUTSTANDING; EQUIVALENT
TO $6.27 PER SHARE - 100.00% ............................ $ 1,235,170,489
===============
COMPONENTS OF NET ASSETS AT JANUARY 31, 1996:
Capital Stock, $1 par value, 500,000,000 shares
authorized to the Fund with 350,000,000
shares allocated to Delchester Fund A Class,
50,000,000 shares allocated to Delchester
Fund B Class, 50,000,000 shares allocated to
Delchester Fund C Class and 50,000,000
shares allocated to Delchester Fund
Institutional Class ..................................... $ 1,441,422,468
Accumulated undistributed:
Net realized loss on investments ........................ (248,497,998)
Net unrealized appreciation of investments .............. 41,329,131
Net investment income ................................... 916,888
---------------
Total net assets ......................................... $ 1,235,170,489
===============
- ------------
*Non-Income producing security for the six months ended January 31, 1996.
**This security is exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At January 31,
1996, these securities amount to $95,374,501 or 7.72% of net assets.
Summary of Abbreviations:
cv - convertible
debs - debentures
def - deferred
disc - discount
fm - floating rate notes
jr - junior
mtg - mortgage
nts - notes
pfd - preferred
sec - secured
sr - senior
sub - subordinated
unsec - unsecured
See accompanying notes
9
<PAGE>
DELAWARE GROUP
DELCHESTER HIGH-YIELD BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1996
(UNAUDITED)
ASSETS:
Investments at market ..................................... $1,176,424,018
Cash ...................................................... 21,693,401
Interest receivable ....................................... 29,892,803
Receivable for investment securities sold ................. 17,495,035
Receivable for Fund shares sold ........................... 3,606,130
Other assets .............................................. 29,215
--------------
Total assets .............................................. 1,249,140,602
--------------
LIABILITIES:
Payable for Fund shares repurchased ....................... 1,524,550
Payable for investment securities purchased ............... 6,573,160
Distributions payable ..................................... 5,163,767
Other accounts payable and accrued expenses ............... 708,636
--------------
Total liabilities ......................................... 13,970,113
--------------
Total Net Assets .......................................... $1,235,170,489
==============
See accompanying notes
DELAWARE GROUP
DELCHESTER HIGH-YIELD BOND FUND, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 1996
(UNAUDITED)
INVESTMENT INCOME:
Interest ......................................... $ 67,552,804
Dividends ........................................ 725,156 $68,277,960
------------
EXPENSES:
Management fees ($3,458,304) and directors'
fees ($10,966) .................................. 3,469,270
Distribution expenses ............................ 1,919,072
Dividend disbursing and transfer
agent fees and expenses .......................... 793,156
Salaries ......................................... 136,301
Taxes (other than taxes on income) ............... 79,870
Reports and statements to shareholders ........... 77,570
Registration fees ................................ 62,300
Professional fees ................................ 24,588
Custodian fees ................................... 4,200
Other ............................................ 123,676 6,690,003
------------
NET INVESTMENT INCOME ............................ 61,587,957
------------
NET REALIZED LOSS AND
UNREALIZED GAIN ON INVESTMENTS:
Net realized loss from investment transactions ... (5,565,173)
Net unrealized appreciation of
investments during the period ................... 2,651,814
NET REALIZED AND UNREALIZED ....................... ------------
LOSS ON INVESTMENTS .............................. (2,913,359)
NET INCREASE IN NET ASSETS ........................ ------------
RESULTING FROM OPERATIONS ........................ $58,674,598
============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
FOR THE DELCHESTER FUND A CLASS -January 31, 1996:
Net asset value per share (A) .................... $6.27
Sales charge (4.75% of offering price or 4.94% of
amount invested per share)(B) .................... .31
------
Offering price ................................... $6.58
======
- ------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See PURCHASING SHARES in the current PROSPECTUS for purchases of $100,000
or more for Delchester Fund A Class.
See accompanying notes
10
<PAGE>
DELAWARE GROUP
DELCHESTER HIGH-YIELD BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED) Six Months Year
Ended Ended
1/31/96 7/31/95
OPERATIONS:
Net investment income ................ $ 61,587,957 $ 120,365,795
Net realized loss from investment
transactions ........................ (5,565,173) (87,627,487)
Net unrealized appreciation during
the period .......................... 2,651,814 62,149,528
Net increase in net assets ........... --------------- ---------------
resulting from operations ........... 58,674,598 94,887,836
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
A Class ............................. (51,521,360) (106,358,471)
B Class ............................. (5,953,670) (6,897,786)
C Class ............................. (4,943) --
Institutional Class ................. (3,191,096) (7,492,250)
--------------- ---------------
(60,671,069) (120,748,507)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ............................. 87,749,640 244,651,020
B Class ............................. 41,902,348 97,174,674
C Class ............................. 1,027,900 --
Institutional Class ................. 20,143,211 93,277,438
Net asset value of shares issued upon
reinvestment of dividends from net
investment income:
A Class ............................. 25,319,986 51,650,920
B Class ............................. 2,377,700 2,782,355
C Class ............................. 3,950 --
Institutional Class ................. 2,688,635 5,760,633
--------------- ---------------
181,213,370 495,297,040
--------------- ---------------
Cost of shares repurchased:
A Class ............................. (109,231,610) (234,810,778)
B Class ............................. (7,543,550) (10,542,001)
C Class ............................. (33,868) --
Institutional Class ................. (21,602,644) (106,185,449)
--------------- ---------------
(138,411,672) (351,538,228)
--------------- ---------------
Increase in net assets derived from
capital share transactions .......... 42,801,698 143,758,812
--------------- ---------------
NET INCREASE IN NET ASSETS ........... 40,805,227 117,898,141
NET ASSETS:
Beginning of period .................. 1,194,365,262 1,076,467,121
------------- -------------
End of period (including undistributed
net investment income of $916,888
and $-0-, respectively) ............. $1,235,170,489 $1,194,365,262
=============== ===============
See accompanying notes
<PAGE>
DELAWARE GROUP
DELCHESTER HIGH-YIELD BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996
(UNAUDITED)
Delaware Group Delchester High-Yield Bond 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. The
Fund offers four classes of shares. The Fund's objective is to seek as high a
current income as is consistent with providing reasonable safety.
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 p.m. on the valuation date. Securities not
traded or 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 and 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 - 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 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 - Expenses directly attributable to a class are charged to
that class. Other common expenses are prorated between all classes of the
Fund.
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. Interest
income is recorded on the accrual basis. Original issue discounts are
accreted to interest income over the lives of the respective securities. The
Fund declares dividends daily from net investment income and pays such
dividends monthly.
Certain fund expenses are paid directly by brokers. The amount of these
expenses is less than 0.01% of the Fund's average net assets.
11
<PAGE>
Notes to Financial Statements (Continued)
2. Investment Management Fees and Other Transactions with Affiliates
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% of 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, less fees paid to the unaffiliated independent directors. At January
31, 1996, the Fund had a liability for Investment Management fees and other
expenses payable to DMC for $70,492.
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 the C Class. No distributions
expenses are paid by the Institutional Class. At January 31, 1996, the Fund
had a liability for distribution fees and other expenses payable to DDLP for
$33,014. For the six months ended January 31, 1996, the Fund paid DDLP
$275,484 for commissions earned on sales of Delchester 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 January 31, 1996, the Fund expensed $793,156 for these
services. At January 31, 1996, the Fund had a liability for such fees and
other expenses payable to DSC for $33,668.
Certain officers of the 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 January 31, 1996, the Fund made purchases of
$477,384,133 and sales of $503,625,845 of investment securities other than
direct U.S. Government securities and temporary cash investments.
At January 31, 1996, the aggregate cost of securities for federal income tax
purposes was $1,135,147,387.
At January 31, 1996, net unrealized appreciation for federal income tax
purposes aggregated $41,276,631 of which $49,415,605 related to unrealized
appreciation of securities and $8,138,974 related to unrealized depreciation
of securities.
The realized loss for federal income tax purposes was $5,565,173 for the
six months ended January 31, 1996. For federal income tax purposes, the Fund
had accumulated capital losses at July 31, 1995 of $240,229,579 which may be
carried forward and applied against future capital gains. The capital loss
carryforward expires as follows: 1998-$59,747,000, 1999-$89,261,000,
2002-$3,628,000 and 2003-$87,593,579.
12
<PAGE>
4. Capital Stock
Transactions in capital stock shares were as follows:
Six Month Year
Ended Ended
1/31/96 7/31/95
Shares sold:
A Class ....................................... 14,058,826 39,583,037
B Class ....................................... 6,709,806 15,685,814
C Class ....................................... 164,571 --
Institutional Class ........................... 3,226,605 15,030,853
Shares issued upon reinvestment of dividends
from net investment income:
A Class ....................................... 4,056,690 8,345,378
B Class ....................................... 380,946 449,795
C Class ....................................... 631 --
Institutional Class ........................... 430,775 931,569
----------- -----------
29,028,850 80,026,446
----------- -----------
Shares repurchased:
A Class ....................................... (17,495,798) (37,892,161)
B Class ....................................... (1,207,608) (1,704,030)
C Class ....................................... (5,410) --
Institutional Class ........................... (3,469,824) (17,158,023)
----------- -----------
(22,178,640) (56,754,214)
----------- -----------
Net increase ................................... 6,850,210 23,272,232
=========== ===========
5. Lines of Credit
The Fund has a committed line of credit for $20,000,000. No amount was
outstanding at January 31, 1996 or at any time during the last six months.
6. Concentration of Credit Risk
The Fund invests in high-yield fixed income securities which carry ratings of
CCC or lower by Standard & Poors and/or Caa 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 more susceptible to adverse economic and competitive
industry conditions than investment grade securities.
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.
<PAGE>
Notes to Financial Statements (Continued)
7. Financial Highlights
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Delchester Fund A Class
-------------------------------------------------------------
Six Months
Ended Year Ended July 31,
1/31/96(1) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .............................. $6.280 $6.450 $7.070 $6.9000 $6.260 $6.300
Income from investment operations:
Net investment income ............................................ 0.322 0.668 0.744 0.774 0.781 0.805
Net realized and unrealized gain (loss) from security transactions (0.015) (0.167) (0.618) 0.165 0.640 (0.040)
------ ------ ------ ------ ------ ------
Total from investment operations ................................. 0.307 0.501 0.126 0.939 1.421 0.765
------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income.............................. (0.317) (0.671) (0.746) (0.769) (0.781) (0.805)
Distributions from net realized gain on security transactions .... none none none none none none
------ ------ ------ ------ ------ ------
Total distributions .............................................. (0.317) (0.671) (0.746) (0.769) (0.781) (0.805)
------ ------ ------ ------ ------ ------
Net asset value, end of period..................................... $6.270 $6.280 $6.450 $7.070 $6.900 $6.260
====== ====== ====== ====== ====== ======
Total return(2).................................................... 5.02% 8.46% 1.60% 14.46% 23.94% 14.51%
Ratios/supplemental data:
Net assets, end of period (000 omitted)........................... 1,022,812 $1,020,763 $983,569 $955,113 $760,290 $505,530
Ratio of expenses to average net assets .......................... 1.04% 1.09% 1.05% 1.04% 1.08% 1.20%
Ratio of net investment income to average net assets ............. 10.24% 10.77% 10.48% 11.17% 11.58% 14.15%
Portfolio turnover ............................................... 85% 92% 92% 72% 101% 38%
</TABLE>
- -------------------
1 Ratios have been annualized but total return has not been annualized.
2 Does not include maximum sales charge of 4.75% nor the 1% limited
contingent deferred sales charge that would apply in the event of certain
redemptions within 12 months of purchase.
13
<PAGE>
Notes to Financial Statements (Continued)
7. Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Delchester
Fund
Delchester Fund B Class C Class Delchester Fund Institutional Class
--------------------------- ---------- -----------------------------------------------------
Six Period Period Six
Months Year 5/2/94(2) 11/29/95(2) Months
Ended Ended to to Ended Year Ended July 31,
1/31/96(5) 7/31/95 7/31/94 1/31/96 1/31/96(5) 1995 1994 1993 1992(1) 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $6.280 $6.450 $6.730 $6.210 $6.280 $6.450 $7.070 $6.900 $6.260 $6.300
Income from investment operations:
Net investment income............... 0.298 0.624 0.120 0.108 0.329 0.685 0.758 0.787 0.798 0.822
Net realized and unrealized gain
(loss) from security transactions.. (0.015) (0.170) (0.280) 0.051 (0.014) (0.169) (0.617) 0.165 0.640 (0.040)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations..... 0.283 0.454 (0.160) 0.159 0.315 0.516 0.141 0.952 1.438 0.782
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income (0.293) (0.624) (0.120) (0.099) (0.325) (0.686) (0.761) (0.782) (0.798) (0.822)
Distributions from net realized
gain on security transactions ..... none none none none none none none none none none
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions................. (0.293) (0.624) (0.120) (0.099) (0.325) (0.686) (0.761) (0.782) (0.798) (0.822)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period....... $6.270 $6.280 $6.450 $6.270 $6.270 $6.280 $6.450 $7.070 $6.900 $6.260
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return......................... 4.63%(3) 7.64%(3) (4) (4) 5.15% 8.72% 1.82% 14.67% 24.28% 14.85%
Ratios/supplemental data:
Net assets, end of period
(000 omitted)......................$148,549 $111,860 $21,776 $1,002 $62,807 $61,742 $71,122 $35,909 $18,746 $113,414
Ratio of expenses to
average net assets................. 1.79% 1.82% 1.83% 1.79% 0.79% 0.82% 0.83% 0.86% 0.86% 0.90%
Ratio of net investment income
to average net assets.............. 9.50% 10.14% 9.70% 9.50% 10.50% 11.14% 10.70% 11.35% 12.17% 14.45%
Portfolio turnover.................. 85% 92% 92% 85% 85% 92% 92% 72% 101% 38%
</TABLE>
- ------------
The per share data prior to 1992 was derived from the data of the Delchester I
class which, like the Delchester Fund Institutional Class, a new class of
shares, was not subject to Rule 12b-1 distribution expenses. Delchester I
class was converted into Delchester Fund Class on June 1, 1992, pursuant to a
Plan of Recapitalization approved by shareholders of Delchester I class.
1 The per share data of Delchester I class and Delchester Fund Institutional
Class has been combined for 1992. For the ten months ended May 31, 1992, the
Delchester I class operating expenses and net investment income per share
were $0.47 and $.666, respectively. For the two months ended July 31, 1992,
the Delchester Fund Institutional Class operating expenses and net investment
income per share were $.009 and $.132, respectively. All net investment
income was distributed to shareholders.
2 Date of initial public offering. Ratios have been annualized.
3 Does not include the contingent deferred sales charge which varies from
1%-4% depending upon the holding period.
4 Total return has been omitted as management believes that such information
for this relatively short period is not meaningful.
5 Ratios have been annualized but total return has not been annualized.
14
<PAGE>
This semi-annual report is for the information of Delchester Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current PROSPECTUS for Delchester Fund, which sets forth
details about charges, expenses, investment objectives and operating policies
of the Fund. You should read the prospectus carefully before you invest.
Summary investment results are documented in the Fund's current STATEMENT OF
ADDITIONAL INFORMATION. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value
of an investment in the Fund will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
DELAWARE GROUP
- ------------------------------------------------------------------------------
OF FUNDS
- ------------------------------------------------------------------------------
FOR GROWTH OF CAPITAL
Trend Fund
DelCap Fund
Value Fund
FOR TOTAL RETURN
Devon 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
Limited-Term Government 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
For a prospectus of any 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.
15
<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 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 Delchester Fund
PROSPECTUS and the Delaware Group Fund Performance Update for the most
recently completed calendar quarter.For a prospectus of any other Delaware
Group fund, contact your financial adviser or Delaware Group.
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) 659-2265
/c/ Copy Rights Delaware Distributors, L.P.
Printed in the U.S.A. on recycled paper.
SA - 024 [1/96] PP3/96
==========
Delaware
Delchester
Fund
==========
1996
SEMI-ANNUAL
REPORT
A Tradition of Sound Investing Since 1929
DELAWARE
GROUP
========
Philadelphia * London
