<PAGE> 1
1995
Annual
Report
-----
DELAWARE
GROUP
DELCAP
FUND
-----
A Tradition of Sound Investing Since 1929
[DELAWARE GROUP LOGO]
- ---------------------
Philadelphia - London
<PAGE> 2
DELCAP FUND
- -----------------------
INVESTMENT
- -----------------------
OBJECTIVE
- -----------------------
TO SEEK LONG-TERM CAPITAL GROWTH BY INVESTING IN COMMON STOCKS AND SECURITIES
CONVERTIBLE INTO COMMON STOCKS OF COMPANIES THAT HAVE A DEMONSTRATED HISTORY OF
GROWTH AND HAVE THE POTENTIAL TO SUPPORT CONTINUED GROWTH.
ABOUT OUR COVER
- -----------------------
Headquartered in Philadelphia, Pennsylvania, Delaware Group shares in the
tradition of a city built on the vision of opportunity. Amidst the city's
historic sites, symbolic of our nation's freedom and prosperity, Delaware Group
provides both individual and institutional investors with a conservative,
disciplined approach to money management.
DELAWARE GROUP
- -----------------------
A TRADITION OF
- -----------------------
SOUND INVESTING
- -----------------------
Delaware Management Company's investment experience dates back to 1929. Our
first mutual fund was established in 1938. Headquartered in Philadelphia with
an affiliate in London, Delaware provides a full range of mutual fund
investments, annuities and retirement plan services. Delaware International
Advisers Ltd., our London-based international affiliate, was established in
1990.
Delaware Group manages mutual funds with the same time-tested,
disciplined strategies demanded by the large public and private pension plans,
foundations and endowments that are among our clients. With over 60 years of
investment management experience, we have demonstrated our commitment to
quality investment management and service.
Today, Delaware manages some $27 billion in mutual funds and
institutional investment advisory accounts. We measure our success by the
financial success and satisfaction of our nearly 500,000 shareholders.
<PAGE> 3
OCTOBER 20, 1995
DEAR
- -----------------------
SHAREHOLDER:
- -----------------------
Your Fund achieved very positive results during the fiscal year that ended on
September 30, 1995, marking a significant turnaround from a year earlier. As
you may recall, in 1994 the stock market was plagued by rising interest rates.
Low inflation, strong earnings expectations for small and mid-size
companies and a touch of speculation in the technology sector contributed to
the strong performance of DelCap Fund, whose portfolio consists of stocks
spanning a broad range of rapidly growing businesses.
It has generally been a banner year for U.S. stocks and a rewarding
year for your Fund. The Standard & Poor's 500 Index, an unmanaged market
barometer of large blue chip companies - which are not DelCap's "stock in
trade" - rose +29.7% during the Fund's fiscal year, one of the strongest
markets in recent memory. The NASDAQ Industrial Index, an unmanaged barometer
more representative of DelCap's focus, rose +26.26%. The rally began in the
spring, when the stock market anticipated that the Fed would lower the Federal
Funds rate, which it did on July 6.
Interest rate movements have a strong effect on corporate earnings as
well as the relative attractiveness of stocks as an investment class.
Consequently, stock prices were positively influenced by lower interest rates;
30-year U.S.Treasury Bond yields stood at 6.50% as of September 30, compared to
7.82% a year earlier.
Technology stocks rallied sharply in the spring and early summer as
the market expected that the use of personal computers and on-line services
would increase amid the introduction of new software. Health care stocks
advanced amid merger activity and cost-cutting efforts by hospitals and medical
service providers.
With a diversified mix of small and mid-
<TABLE>
<CAPTION>
- -----------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURN
-------------------------
One Year 3/27/86
Ended To
9/30/95 9/30/95
<S> <C> <C>
DelCap Fund A +22.04% +22.67%
NASDAQ Industrial Index +26.26% +10.69%
Lipper Mid-Cap Fund Average +28.63% +13.26%
Standard & Poors 500 Index +29.70% +13.40%
</TABLE>
Performance for DelCap Fund and the Lipper
Mid-Cap Average is based on net asset value without
impact of sales charges. DelCap was introduced on 3/27/86.
Performance information for both Classes is on page 7.
- -----------------------------------------------------
size companies, DelCap Fund A Class had a very attractive total return (capital
change plus income at net asset value) of +22.04% for the year ended September
30, 1995. Still, DelCap's performance was not as strong as the three broad
measures we normally use, as can be seen in the table above.
The Fund's weighting in technology stocks, was less than the three
measures in the chart above, particularly in the recently strong but volatile
and cyclical semiconductor industry. We should note that
1
<PAGE> 4
the exceptional appreciation enjoyed by the technology sector this year has
been unusual and that, as of this writing, the sector's speculative fever had
begun to subside.
We are pleased that this past fiscal year DelCap's performance tracked
DelCap's long-term annual average return at net asset value of +22.67% since
the Fund began operating on March 27, 1986. In contrast, the returns of the
NASDAQ Industrial Index and Lipper Mid-Cap Fund Average during your Fund's
lifetime are less than half their performance over the past fiscal year,
reflecting the volatile short-term behavior of the stock universe in which
DelCap invests.
During the past year, your Fund followed its "fundamental" approach to
investing - one that emphasizes long-term growth trends, consistent earnings
and strong management - in a market that favored "momentum" investing, a style
that focuses on short-term stock price behavior. A profile of our investment
approach appears on page 8.
We encourage you to read portfolio manager Edward Antoian's review of
the Fund's performance during the past year and his outlook for the coming
months. We are confident that the Fund's disciplined strategy will continue to
help investors benefit from the growth of dynamic, well-managed small and
mid-size companies as we commence your Fund's 10th year.
Sincerely,
/s/ Wayne A. Stork
Wayne A. Stork
Chairman
PORTFOLIO
- -----------------------
MANAGER'S
- -----------------------
REPORT
- -----------------------
The fiscal year ended September 30, 1995, has been a rewarding period for
DelCap Fund shareholders as lower interest rates resulted in higher stock
prices, particularly for small and mid-size growth stocks. Surprisingly,
despite lower interest rates, capital appreciation for many smaller
non-technology issues was no better than the gains made by shares of large
companies. A major reason was the weakness of the U.S. dollar relative to key
Asian and European currencies.
Generally, the value of the dollar has little effect on smaller
companies because, in most cases, these businesses derive only a small share of
revenues from exports - at least relative to large, multinational
conglomerates. Smaller stocks therefore tend to underperform relative to large,
export-driven stocks when the dollar's value is declining. That was the case
during much of our second fiscal half.
2
<PAGE> 5
- ---------------------------------------------------------
HOW DELCAP'S PORTFOLIO MIX
HAS CHANGED
<TABLE>
<CAPTION>
WEIGHTING AS OF:
SECTOR 9/94 9/95
<S> <C> <C>
Consumer* 29% 29%
Technology 18% 20%
Health Care 19% 15%
Business Services 12% 14%
Financial 8% 7%
Basic Industry 3% 4%
</TABLE>
*Includes manufacturing, retail and services
Percentages based on total net assets.
- ---------------------------------------------------------
A major exception to this rule of thumb is technology stocks. Unlike
most industries, U.S. computer hardware and software companies dominate the
world landscape, and even small high-tech firms export much of what they
produce. In our opinion, technology stocks temporarily enjoyed the best of all
worlds in fiscal 1995 as they benefited from declines in both interest rates
and the dollar.
THE FUND'S INVESTMENT STRATEGY
Overall, our portfolio was broadly diversified - with health care, consumer and
non-cyclical technology accounting for approximately 64% of the Fund's net
assets. Consequently, we did not rely on the shifting sands of currency values
and cyclical technology stocks to achieve short-term success. We take a
long-term view of the market and focus on classic growth industry sectors that
historically provide consistent returns.
[FIGURE 1]
FROM LEFT TO RIGHT THE DELCAP MANAGEMENT TEAM:
EDWARD ANTOIAN, JUDY FINGER, WILLIAM MILLER AND LORI P. WACHS
TECHNOLOGY
Approximately one-fifth of DelCap's net assets are in technology stocks, a
sector where some stocks have enjoyed capital appreciation of more than 100% in
calendar year 1995. In our opinion, the earnings growth that generated this
performance is not sustainable.
DelCap's focus has been on companies that we believe are not dependent
on overall economic growth such as local area networking (LAN) businesses.
Computer networking - the linking together of groups of computers for
business - has benefited from the rapidly increasing power of desktop computers
along with a growing desire and need for people to share data.
In keeping with our view of the overall technology sector, the Fund
has avoided cyclical companies in areas such as semiconductors. Despite
spectacular gains in the spring, many of these stocks withered by late summer
amid the heat of reduced earnings expectations. Cyclical technology companies
tend to have volatile product pricing and profit margins that begin to
deteriorate once the balance of supply and demand is upset.
3
<PAGE> 6
Below are two examples of how we positioned the Fund in technology
during the year.
- - We purchased shares of BAY NETWORKS, a Santa Clara, Ca. based maker of
high-speed routers, wide area network access devices and local area network
switches. It represented about 2.25% of the Fund's net assets as of
September 30.
- - We liquidated our position in COMPUWARE CORP., a Farmington Hills, Missouri
based developer of client server software products whose business has not
met our expectations. The company had represented 2.26% of Fund's net assets
as of March 31.
HEALTH CARE
Almost since the inception of DelCap Fund, health care companies have held a
place in the portfolio, and amounted to 15% of Fund net assets as of September
30. Our focus in the past year has been on health care providers who are adept
at controlling hospital costs.
We believe our selection of companies is well-positioned to handle
what we view as inevitable and necessary changes to Medicare and Medicaid, the
government's main health programs for the elderly and the poor. We expect
continued price controls will force the industry to be more efficient. Care
providers see a need to consolidate to increase service and shift the balance
of power from insurance companies and others who pay medical bills back to care
providers.
We have been taking profits in some of our long-term holdings in the
health care sector as prices have risen in the past year while retaining our
commitment to other companies, as illustrated by the examples below.
- - HEALTH MANAGEMENT ASSOCIATES, INC. is one of our large holdings in this
sector - about 1.97% of Fund net assets. It is a Florida based hospital
chain that specializes in buying and restructuring hospitals in small cities
throughout the Southeast. A national business periodical recently quoted
HMA's chairman as
- -------------------------------------------------------------------
DELCAP FUND'S 10 LARGEST EQUITY HOLDINGS
(as of September 30, 1995)
<TABLE>
<CAPTION>
COMPANY INDUSTRY
<S> <C>
SAP AG Computer software
Bay Networks Inc. Computer networking
HEALTHSOUTH Rehabilitation Corp. Health clinics
General Nutrition Companies Inc. Retailing
First Financial Management Corp. Databases
Xilinx Inc. Computer peripherals
Health Management Associates Inc. Hospital management
CUC International Consumer services
Bisys Group Inc. Financial databases/
management
Multimedia Inc. Television syndicator
</TABLE>
- -------------------------------------------------------------------
TOGETHER THESE STOCKS COMPRISED 21.3% OF NET ASSETS AS OF 9/30/95.
4
<PAGE> 7
saying the company strives to be "the Wal-Mart of the hospital business."
- - As the shares of COLUMBIA/HCA HEALTHCARE CORP. have appreciated and reached
our price target, we have been gradually reducing our commitment to this
operator of more than 300 hospitals nationwide. During the year, the company
completed one of the largest hospital mergers in U.S. history with
HealthTrust, Inc. It represented about 1.46% of the Fund's net assets as of
September 30, down from 2.43% in March.
THE CONSUMER SECTOR
We think the restructuring going on in the retail, restaurant and consumer
services industries offers investors some of the best opportunities that the
sector has exhibited in the past 15 years. Consequently - at 29% - the consumer
sector represents the largest share of the Fund's net assets. Our approach has
been to seek out those companies that we believe still have significant room
for geographic expansion or that have successfully adapted to the consumer's
focus on "value" - a trend that appears to be the product of relatively
stagnant wages and shifting social priorities.
In our opinion, the key to success in picking consumer companies is
identifying those businesses that have the products, the management and the
financial strength to capitalize on long-term market and social trends,
companies that can anticipate change in consumer tastes and consistently
deliver quality products and services.
- - GENERAL NUTRITION COMPANIES INC. is our largest holding in the consumer
sector and third largest as a percentage of Fund net assets (2.19%) as of
September 30. It is a Pittsburgh based chain of health food and vitamin
stores. We like the chain's leading market share in vitamin sales and its
recent effort to focus on core strengths. The company is well positioned, in
our opinion, to benefit from the long-term demographic trend toward an
older, more health-conscious population.
- - We sold our position in BRINKER INTERNATIONAL, a nationwide restaurant
company whose holdings include Chili's Bar & Grill, which focuses on the
highly competitive Mexican cuisine market. At the beginning of fiscal 1995,
Brinker shares amounted to less than 1% of the Fund's net assets, a position
we maintained until the second half. Brinker acknowledged in late September
that sales at its older restaurants have been flat this year after 10 years
of steady increases.
5
<PAGE> 8
MARKET OUTLOOK
Because of our long-term approach to managing your Fund, we do not try to
predict economic cycles and the direction of interest rates. Instead, our goal,
and our challenge, in managing DelCap's portfolio is to own stocks in companies
that we believe will experience above-average earnings growth in the future. We
attempt to achieve this goal by identifying those businesses that have produced
above-average, consistent earnings growth in the past.
WE TAKE A LONG-TERM VIEW OF THE MARKET AND FOCUS ON CLASSIC GROWTH INDUSTRY
SECTORS THAT HAVE HISTORICALLY PROVIDED CONSISTENT RETURNS.
Our expectation for the balance of calendar 1995 is that networking
companies within the technology sector and health care information
systems/software companies have the potential to do well. We also favor
companies that provide products and services with superior intrinsic value for
consumers.
/s/ Edward Antoian
EDWARD ANTOIAN
SENIOR PORTFOLIO MANAGER
A LOOK AT
- -----------------------
DELCAP'S
- -----------------------
LONG-TERM
- -----------------------
PERFORMANCE
- -----------------------
As you can see from the chart to the right, an investor who bought $10,000
worth of DelCap Fund A Class shares on March 27, 1986, and reinvested all
capital gains and dividends would have had holdings worth $65,873 as of
September 30, 1995. The Fund's performance during the past fiscal year has been
one of the strongest in several years and mirrors the Fund's strong long-term
performance record.
As can be seen in the chart on the next page, over the long term,
DelCap A shares' performance has substantially exceeded that of the S&P 500 and
the NASDAQ Industrial Index, hypothetical portfolios of stocks that do not
include the "real world" costs of buying and selling stocks or operating a
mutual fund.
We believe DelCap's lifetime record illustrates the long-term
potential of small and mid-size companies, and the need to stick with an
investment strategy over good and weak market cycles. The sharp gains made
during the second half of 1995 after a sluggish first half are not uncommon
given the aggressive nature of the securities in which the Fund invests.
Our latest fiscal period illustrates the importance of staying the
course through short-term market fluctuations. As with any investment, past
performance is not a guarantee of future results.
6
<PAGE> 9
YOUR FUND'S PERFORMANCE IS COMPARED TO THAT OF THE S&P 500 INDEX AND THE NASDAQ
INDUSTRIAL INDEX.
Chart assumes $10,000 invested on March 27, 1986 and includes the impact of the
5.75% sales charge and the reinvestment of all dividends. Performance of other
classes of DelCap Fund will vary due to differing charges and expenses.
Your Fund's Long-Term Performance
<TABLE>
<CAPTION>
DelCap Fund S&P 500 NASDAQ Industrial Index
<S> <C> <C> <C>
Mar. '86 $ 9426 $ 10000 $ 10000
Dec. '86 $ 18905 $ 10487 $ 9293
Dec. '87 $ 22141 $ 11030 $ 9017
Dec. '88 $ 26081 $ 12850 $ 10081
Dec. '89 $ 34923 $ 16909 $ 11917
Dec. '90 $ 33693 $ 16383 $ 10802
Dec. '91 $ 47954 $ 21352 $ 17795
Dec. '92 $ 48854 $ 22977 $ 19285
Dec. '93 $ 54651 $ 25282 $ 21437
Dec. '94 $ 51745 $ 25626 $ 20053
Sept. '95 $ 65873* $ 33227 $ 26114
</TABLE>
* The upfront sales charge on A Class at the end of the Fund's fiscal year was
5.75%. It was lowered to 4.75% on November 29, 1995. A $10,000 investment at
inception would have grown to $66,531 as of September 30, 1995 assuming a 4.75%
sales charge and reinvestment of capital gains and dividends.
DELCAP FUND PERFORMANCE
Total Return through September 30, 1995
CLASS A (EST. 1986)
Average Annual Total Returns
<TABLE>
<CAPTION>
Sales Charge
----------------------
5.75% 4.75%
------- -------
<S> <C> <C>
Lifetime +21.91% +22.04%
Five Year +15.19% +15.42%
One Year +15.03% +16.23%
</TABLE>
CLASS B (EST. 1994)
Average Annual Total Returns
<TABLE>
<S> <C>
Lifetime
+21.53% Excluding Sales Charge
+17.84% Including Sales Charge
One Year
+21.34% Excluding Sales Charge
+17.34% Including Sales Charge
</TABLE>
DELCAP 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.
Class A returns reflect the impact of the 5.75% maximum sales charge,
reinvestment of all distributions, and a 12b-1 fee. The sales charge was
reduced to 4.75% on November 29, 1995 as described above.
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 also subject to a deferred sales charge
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 September 6, 1994.
Average annual total returns for the lifetime, five- and one-year periods for
DelCap Fund's Institutional Class, which is available without sales or
asset-based distribution charges only to certain eligible institutional
investors, were +22.78%, +16.76% and +22.45%, respectively, for the Fund's
fiscal period ended 9/30/95. The Institutional Class was initially made
available November 9, 1992. Performance illustrated for the Institutional Class
for periods prior to that date is based on A Class performance adjusted to
eliminate sales charges, but not the asset-based distribution charge.
7
<PAGE> 10
WHY WE AVOID
- -----------------------
MOMENTUM
- -----------------------
INVESTING
- -----------------------
DelCap Fund's investment management team looks for stocks of small and mid-size
companies that have a steady growth record, avoiding businesses whose prospects
we think might suddenly fall flat like a toy with a dead battery.
We pick one company at a time and look for a consistent track record
of growth in quarterly earnings and market share. We meet with companies'
management and visit their plants, analyze the product, talk to customers and
review the competition. While two companies may grow at the same rate, we
believe how a business grows is just as important as the rate of growth.
If a company grows rapidly but erratically, it could be a sign of
short-lived prosperity or insufficient planning on the part of management. In
our opinion, investors will be reluctant to pay a premium for companies whose
fortunes radically change from year to year, even if the industry is very
promising.
On the other hand, in our opinion, a consistent growth rate often
shows that a company has what it needs to continue growing at the same rate in
the future. DelCap Fund invests in companies that we believe have "quality
growth" characteristics.
DelCap Fund's portfolio management follows strict investment
guidelines in searching for companies that represent the best opportunities.
This disciplined approach targets companies:
- - that are leaders within an industry
- - with sound management teams
Steady Vs. Erratic Growth...
<TABLE>
<CAPTION>
Earnings Per Share
Company X Company Y
<S> <C> <C>
'91 $ 1.0 $ 1.0
'92 $ 1.3 $ 1.5
'93 $ 1.5 $ .8
'94 $ 2.0 $ 2.7
'95 $ 2.6 $ 2.3
</TABLE>
The information in this chart is fictional, is for illustrative purposes only
and is not intended to represent the earnings of any actual company.
COMPANY X HAS SEEN ITS PROFITS GROW RAPIDLY FROM $1 A SHARE TO $2.80 A SHARE
OVER FIVE YEARS. COMPANY Y HAS ALSO HAD STRONG GROWTH SINCE YEAR ONE. HOWEVER,
IT WOULD NOT BE AS ATTRACTIVE TO DELCAP AS COMPANY X BECAUSE GROWTH OVER THE
PAST FIVE YEARS HAS BEEN ERRATIC.
- - that have exhibited consistent, solid earnings growth over several years
- - that have the potential to sustain continued growth
Your Fund's view is that steadily growing small and mid-size companies
tend to offer greater long-term appreciation potential than companies with
volatile earnings growth. Think of "quality growth" investing the way a worker
searches for a job. Is it more attractive to work for a company that has a
record of relative job security and modest raises or one that offers big
bonuses one year and lays off a lot of staff the following year?
During DelCap's past fiscal year, the Fund's "fundamental" style of
investing was somewhat out-of-favor compared to what Wall Street calls
"momentum" style investing. A momentum investor would generally buy shares of a
company as industry analysts began to predict that the company's earnings would
rise. This strategy would also tend to require a momentum investor to sell the
stock at the first sign that a company's earnings would fall.
8
<PAGE> 11
FINANCIAL
-----------------------
STATEMENTS
-----------------------
DELAWARE GROUP DELCAP FUND, INC. -
CONCEPT I SERIES
STATEMENT OF NET ASSETS
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCK - 91.59%
BASIC INDUSTRY/CAPITAL GOODS - 4.02%
* Smith International . . . . . . . . . . . . . . . 229,200 $ 3,982,350
TriMas . . . . . . . . . . . . . . . . . . . . . 665,200 13,802,900
* UCAR International . . . . . . . . . . . . . . . 230,000 6,267,500
Wabash National . . . . . . . . . . . . . . . . . 151,550 5,361,081
* Wolverine Tube . . . . . . . . . . . . . . . . . 307,200 11,635,200
-----------
TOTAL BASIC INDUSTRY/CAPITAL GOODS . . . . . . . 41,049,031
-----------
BUSINESS SERVICES - 13.50%
DISTRIBUTORS - 0.71%
Intelligent Electronics . . . . . . . . . . . . . 746,000 6,294,375
* Peak Technologies Group . . . . . . . . . . . . . 35,000 914,375
-----------
7,208,750
-----------
ENVIRONMENTAL - 2.02%
Dames & Moore . . . . . . . . . . . . . . . . . . 728,900 11,662,400
* Sanifill . . . . . . . . . . . . . . . . . . . . 200,700 6,572,925
* United Waste Systems . . . . . . . . . . . . . . 56,900 2,396,913
-----------
20,632,238
-----------
MEDIA & PUBLISHING - 3.02%
* International Family Entertainment Class B . . . 445,900 8,472,100
* King World Productions . . . . . . . . . . . . . 30,800 1,128,050
* Multimedia . . . . . . . . . . . . . . . . . . . 421,700 18,396,663
Reynolds & Reynolds Class A . . . . . . . . . . . 82,700 2,842,813
-----------
30,839,626
-----------
OTHER - 7.75%
* BISYS Group . . . . . . . . . . . . . . . . . . . 752,400 18,998,100
* Corporate Express . . . . . . . . . . . . . . . . 160,500 3,892,125
* Cyrk . . . . . . . . . . . . . . . . . . . . . . 680,900 8,170,800
First Financial Management . . . . . . . . . . . 215,500 21,038,188
* Gartner Group Class A . . . . . . . . . . . . . . 278,400 9,152,400
* Interim Services . . . . . . . . . . . . . . . . 216,700 5,796,725
* Isomedix . . . . . . . . . . . . . . . . . . . . 535,500 7,831,688
Manpower . . . . . . . . . . . . . . . . . . . . 145,200 4,210,800
-----------
79,090,826
-----------
TOTAL BUSINESS SERVICES . . . . . . . . . . . . . 137,771,440
-----------
CONSUMER DURABLES/CYCLICAL - 0.76%
Harley-Davidson . . . . . . . . . . . . . . . . . 167,400 4,080,375
Polaris Industries . . . . . . . . . . . . . . . 83,900 3,702,088
-----------
TOTAL CONSUMER DURABLES/CYCLICAL . . . . . . . . 7,782,463
-----------
CONSUMER NON-DURABLES - 13.76%
RETAIL - 10.82%
* CompUSA . . . . . . . . . . . . . . . . . . . . . 38,300 1,646,900
* Fabri-Centers of America Class A . . . . . . . . 27,900 428,963
* Fabri-Centers of America Class B . . . . . . . . 27,900 341,775
Gap . . . . . . . . . . . . . . . . . . . . . . . 100,000 3,600,000
* General Nutrition . . . . . . . . . . . . . . . . 495,000 22,398,750
* Gymboree . . . . . . . . . . . . . . . . . . . . 459,200 13,776,000
Home Depot . . . . . . . . . . . . . . . . . . . 150,000 5,981,250
* Kohl's . . . . . . . . . . . . . . . . . . . . . 239,800 12,439,625
* Musicland Stores . . . . . . . . . . . . . . . . 861,700 7,324,450
* Neostar Retail Group . . . . . . . . . . . . . . 203,600 3,473,925
* Office Depot . . . . . . . . . . . . . . . . . . 76,800 2,313,600
* Price/Costco . . . . . . . . . . . . . . . . . . 314,500 5,405,469
* Staples . . . . . . . . . . . . . . . . . . . . . 645,925 18,287,752
Talbots . . . . . . . . . . . . . . . . . . . . . 230,100 9,117,713
* Value City Department Stores . . . . . . . . . . 532,200 3,924,975
------------
110,461,147
------------
TEXTILES AND APPAREL - 1.50%
* Tommy Hilfiger . . . . . . . . . . . . . . . . . 365,800 11,888,500
Warnaco Group Class A . . . . . . . . . . . . . . 144,100 3,458,400
------------
15,346,900
------------
OTHER - 1.44%
* Canandaigua Wine Class A . . . . . . . . . . . . 223,000 10,871,250
* Nature's Bounty . . . . . . . . . . . . . . . . . 537,400 3,022,875
* Oakley . . . . . . . . . . . . . . . . . . . . . 25,000 740,625
------------
14,634,750
------------
TOTAL CONSUMER NON-DURABLES . . . . . . . . . . . 140,442,797
------------
CONSUMER SERVICES - 14.30%
RESTAURANTS - 2.86%
* Bertucci's . . . . . . . . . . . . . . . . . . . 131,700 905,438
* DAKA International . . . . . . . . . . . . . . . 234,600 7,683,150
* Foodmaker . . . . . . . . . . . . . . . . . . . . 1,156,450 6,649,588
* Lone Star Steakhouse/Saloon . . . . . . . . . . . 225,500 9,245,500
Sbarro . . . . . . . . . . . . . . . . . . . . . 204,800 4,710,400
------------
29,194,076
------------
ENTERTAINMENT & LEISURE - 6.92%
* Circus Circus Enterprises . . . . . . . . . . . . 135,900 3,805,200
* HFS . . . . . . . . . . . . . . . . . . . . . . . 221,800 11,616,775
La Quinta Inns . . . . . . . . . . . . . . . . . 115,200 3,225,600
* MGM Grand . . . . . . . . . . . . . . . . . . . . 76,500 1,950,750
* Mirage Resorts . . . . . . . . . . . . . . . . . 421,700 13,863,388
* Station Casinos . . . . . . . . . . . . . . . . . 453,100 6,938,094
TCA Cable TV . . . . . . . . . . . . . . . . . . 120,000 3,420,000
* Viacom Class A . . . . . . . . . . . . . . . . . 77,024 3,831,944
* Viacom Class B . . . . . . . . . . . . . . . . . 207,623 10,329,265
* WMS Industries . . . . . . . . . . . . . . . . . 549,900 11,616,638
------------
70,597,654
------------
OTHER - 4.52%
* ADT Limited . . . . . . . . . . . . . . . . . . . 924,700 12,714,625
Barefoot . . . . . . . . . . . . . . . . . . . . 609,800 8,079,850
Cash America International . . . . . . . . . . . 874,600 6,012,875
</TABLE>
9
<PAGE> 12
STATEMENT OF NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCK (CONTINUED)
CONSUMER SERVICES (CONTINUED)
OTHER (CONTINUED)
* CUC International . . . . . . . . . . . . . . . . 556,037 $ 19,391,790
------------
46,199,140
------------
TOTAL CONSUMER SERVICES . . . . . . . . . . . . . 145,990,870
------------
ENERGY - 1.35%
* AES . . . . . . . . . . . . . . . . . . . . . . . 478,697 9,155,080
Enron Oil & Gas . . . . . . . . . . . . . . . . . 211,000 4,589,250
------------
TOTAL ENERGY . . . . . . . . . . . . . . . . . . 13,744,330
------------
FINANCIAL - 7.29%
INSURANCE - 4.84%
AMBAC . . . . . . . . . . . . . . . . . . . . . . 305,000 13,420,000
Blanch (E.W.) Holdings . . . . . . . . . . . . . 628,800 11,947,200
CMAC Investment . . . . . . . . . . . . . . . . . 225,500 11,866,938
MBIA . . . . . . . . . . . . . . . . . . . . . . 172,400 12,154,200
------------
49,388,338
------------
OTHER - 2.45%
Aames Financial . . . . . . . . . . . . . . . . . 157,300 4,571,531
ADVANTA Class B . . . . . . . . . . . . . . . . . 99,900 4,220,775
* Olympic Financial Limited . . . . . . . . . . . . 238,700 6,534,413
SEI . . . . . . . . . . . . . . . . . . . . . . . 332,700 6,757,969
* WFS Financial . . . . . . . . . . . . . . . . . . 128,700 2,960,100
------------
25,044,788
------------
TOTAL FINANCIAL . . . . . . . . . . . . . . . . . 74,433,126
------------
HEALTHCARE - 15.19%
DEVICES - 0.03%
* Depotech . . . . . . . . . . . . . . . . . . . . 22,900 320,600
------------
320,600
------------
SERVICES - 12.60%
* Apria Healthcare Group . . . . . . . . . . . . . 555,000 13,597,500
Columbia/HCA Healthcare . . . . . . . . . . . . . 306,867 14,921,408
* Community Health Systems . . . . . . . . . . . . 83,300 3,363,238
* HCIA . . . . . . . . . . . . . . . . . . . . . . 172,300 4,307,500
* Health Management Associates Class A . . . . . . 626,487 20,125,895
* HEALTHSOUTH . . . . . . . . . . . . . . . . . . . 901,400 22,985,700
* Physician Reliance Network . . . . . . . . . . . 155,400 5,691,525
* Quantum Health Resources . . . . . . . . . . . . 693,800 7,371,625
* Quorum Health Group . . . . . . . . . . . . . . . 529,100 11,904,750
* Summit Care . . . . . . . . . . . . . . . . . . . 51,100 1,239,175
* Value Health . . . . . . . . . . . . . . . . . . 567,696 15,043,944
* Vivra . . . . . . . . . . . . . . . . . . . . . . 252,450 8,015,288
------------
128,567,548
------------
OTHER - 2.56%
* Oxford Health Plans . . . . . . . . . . . . . . . 131,500 9,550,188
United Healthcare . . . . . . . . . . . . . . . . 339,400 16,588,175
------------
26,138,363
------------
TOTAL HEALTHCARE . . . . . . . . . . . . . . . . 155,026,511
------------
TECHNOLOGY - 20.40%
COMMUNICATIONS - 2.56%
Allen Group . . . . . . . . . . . . . . . . . . . 121,300 4,397,125
* Cabletron Systems . . . . . . . . . . . . . . . . 234,050 15,418,044
* InterVoice . . . . . . . . . . . . . . . . . . . 277,800 6,319,950
------------
26,135,119
------------
HARDWARE - 11.07%
* Altera . . . . . . . . . . . . . . . . . . . . . 226,000 14,125,000
* Analog Devices . . . . . . . . . . . . . . . . . 147,400 5,103,725
* Bay Networks . . . . . . . . . . . . . . . . . . 430,500 23,004,844
* CliniCom . . . . . . . . . . . . . . . . . . . . 115,300 2,875,294
Dallas Semiconductor . . . . . . . . . . . . . . 287,800 5,899,900
* Diamond Multimedia Systems . . . . . . . . . . . 149,200 4,793,050
* In Focus Systems . . . . . . . . . . . . . . . . 126,600 3,117,525
* Microchip Technology . . . . . . . . . . . . . . 274,400 10,410,050
* StorMedia Class A . . . . . . . . . . . . . . . . 73,600 3,302,800
* Trimble Navigation Limited . . . . . . . . . . . 356,400 8,954,550
* Xilinx . . . . . . . . . . . . . . . . . . . . . 419,500 20,214,656
* Zilog . . . . . . . . . . . . . . . . . . . . . . 268,500 11,176,313
------------
112,977,707
------------
SOFTWARE - 6.77%
Adobe Systems . . . . . . . . . . . . . . . . . . 217,200 11,280,825
HBO & Co. . . . . . . . . . . . . . . . . . . . . 70,517 4,433,756
* Informix . . . . . . . . . . . . . . . . . . . . 518,400 16,912,800
* NetManage . . . . . . . . . . . . . . . . . . . . 383,600 9,086,525
* Novell . . . . . . . . . . . . . . . . . . . . . 592,300 10,846,494
Shared Medical Systems . . . . . . . . . . . . . 191,300 7,950,906
* Softkey International . . . . . . . . . . . . . . 72,400 3,212,750
* VMARK Software . . . . . . . . . . . . . . . . . 354,700 5,320,500
------------
69,044,556
------------
TOTAL TECHNOLOGY . . . . . . . . . . . . . . . . 208,157,382
------------
TRANSPORTATION - 1.02%
Illinois Central . . . . . . . . . . . . . . . . 266,700 10,434,638
------------
TOTAL TRANSPORTATION . . . . . . . . . . . . . . 10,434,638
------------
TOTAL COMMON STOCK
(cost $680,574,954) . . . . . . . . . . . . . 934,832,588
------------
PREFERRED STOCK - 3.05%
* SAP AG-VORZUG . . . . . . . . . . . . . . . . . . 188,500 31,102,500
------------
TOTAL PREFERRED STOCK
(cost $9,953,794) . . . . . . . . . . . . . . 31,102,500
------------
</TABLE>
10
<PAGE> 13
STATEMENT OF NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS - 4.60%
With Chase Manhattan Bank 6.20% 10/2/95
(dated 9/29/95, collateralized by
$5,660,000 U.S. Treasury Notes 7.50%
due 1/31/97, market value $5,846,792,
$5,401,000 U.S. Treasury Notes 6.00%
due 12/31/97, market value $5,490,146
and $4,412,000 U.S. Treasury Notes
7.75% due 12/31/99, market value
$4,773,386) . . . . . . . . . . . . . . . . . $15,680,000 $15,680,000
With J.P. Morgan Securities 6.30% 10/2/95
(dated 9/29/95, collateralized by
$11,031,000 U.S. Treasury Notes 6.50%
due 9/30/96, market value $11,465,015
and $4,324,000 U.S. Treasury Notes
7.00% due 9/30/96, market value
$4,526,214) . . . . . . . . . . . . . . . . . 15,664,000 15,664,000
With Paine Webber Securities 6.35% 10/2/95
(dated 9/29/95, collateralized by
$11,031,000 U.S. Treasury Notes 6.875%
due 2/28/97, market value $11,241,281
and $4,635,000 U.S. Treasury Notes
6.125% due 5/31/97, market value
$4,744,981) . . . . . . . . . . . . . . . . . 15,664,000 15,664,000
-----------
TOTAL REPURCHASE AGREEMENTS
(COST $47,008,000) . . . . . . . . . . . . . . 47,008,000
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
<S> <C>
TOTAL MARKET VALUE OF SECURITIES OWNED - 99.24%
(COST $737,536,748) . . . . . . . . . . . . . . . . . . . 1,012,943,088
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.76% . . . . . . . . . . . . . . . . 7,716,377
--------------
NET ASSETS APPLICABLE TO 35,317,904 SHARES
($.01 PAR VALUE) OUTSTANDING - 100.00% . . . . . . . . . . $1,020,659,465
==============
NET ASSET VALUE - DELCAP FUND A CLASS
($888,571,491 / 30,782,239 SHARES) . . . . . . . . . . . . . . . $28.87
======
NET ASSET VALUE - DELCAP FUND B CLASS
($2,709,556 / 94,459 SHARES) . . . . . . . . . . . . . . . . . . $28.68
======
NET ASSET VALUE - DELCAP FUND INSTITUTIONAL CLASS
($129,378,418 / 4,441,206 SHARES) . . . . . . . . . . . . . . . $29.13
======
</TABLE>
------------------
*Non-income producing security for the year ended September 30, 1995.
<TABLE>
<S> <C>
COMPONENTS OF NET ASSETS AT SEPTEMBER 30,1995:
Common stock $.01 par value, 500,000,000 shares . . . . . . .
authorized to the Fund+ . . . . . . . . . . . . . . . . . $ 633,649,860
Accumulated undistributed income:
Net investment loss . . . . . . . . . . . . . . . . . . . (6,001,322)
Net realized gain on investments+ . . . . . . . . . . . . 117,604,587
Net unrealized appreciation of investments . . . . . . . . 275,406,340
--------------
Total net assets . . . . . . . . . . . . . . . . . . . . . . $1,020,659,465
==============
</TABLE>
+ During the current fiscal year, the Fund adopted Statement of Position 93-2,
"Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Gain Distributions by Investment
Companies." Accordingly, the Fund reclassified $9,241,699 of permanent book
and tax basis differences from accumulated net investment loss to common
stock and $4,815,478 of permanent book and tax basis differences from
accumulated net investment loss to accumulated net realized gain on
investments.
See accompanying notes
11
<PAGE> 14
DELAWARE GROUP DELCAP FUND, INC. -
CONCEPT I SERIES
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . $ 3,494,918
Dividends . . . . . . . . . . . . . . . . . . . . 3,197,905 $ 6,692,823
-----------
EXPENSES:
Management fees
($7,128,192) and directors' fees
($17,294) . . . . . . . . . . . . . . . . . . 7,145,486
Distribution expenses . . . . . . . . . . . . . . 2,539,745
Dividend disbursing and transfer agent
fees and expenses . . . . . . . . . . . . . . 2,212,700
Salaries . . . . . . . . . . . . . . . . . . . . 243,048
Reports and statements to shareholders . . . . . 172,550
Taxes (other than income) . . . . . . . . . . . . 81,150
Federal and state registration fees . . . . . . . 52,125
Professional fees . . . . . . . . . . . . . . . . 51,836
Custodian fees . . . . . . . . . . . . . . . . . 35,688
Other . . . . . . . . . . . . . . . . . . . . . . 159,817 12,694,145
----------- ------------
NET INVESTMENT LOSS . . . . . . . . . . . . . . . (6,001,322)
------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain from
security transactions . . . . . . . . . . . . 135,186,480
Net unrealized appreciation of investments
during the period . . . . . . . . . . . . . . 61,062,660
------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS . . . . . . . . . . . . . 196,249,140
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS . . . . . . . . . . $190,247,818
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELCAP FUND A CLASS:
Net asset value per share (A) . . . . . . . . . . . . . . . . . . $28.87
Sales charges (5.75% of offering price, or 6.10% of
amount invested per share) (B) . . . . . . . . . . . . . . . . 1.76
------
Offering price . . . . . . . . . . . . . . . . . . . . . . . . . $30.63
======
</TABLE>
-----------------
(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 and purchase options not including the payment of a
front end sales charge. Effective November 29, 1995, the maximum sales
charge was reduced from 5.75% to 4.75%. At 4.75%, the sales charge
would have been $1.44 resulting in an offering price of $30.31.
See accompanying notes
DELAWARE GROUP DELCAP FUND, INC. -
CONCEPT I SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
9/30/95 9/30/94
<S> <C> <C>
OPERATIONS:
Net investment loss . . . . . . . . . . . . . . . $ (6,001,322) $ (6,993,212)
Net realized gain from
security transactions . . . . . . . . . . . . 135,186,480 66,202,686
Net unrealized appreciation
(depreciation) during the period . . . . . . . 61,062,660 (46,415,425)
-------------- --------------
Net increase in net assets resulting
from operations . . . . . . . . . . . . . . . 190,247,818 12,794,049
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET REALIZED GAIN ON
SECURITY TRANSACTIONS:
DelCap Fund A Class . . . . . . . . . . . . . . . (61,939,346) (31,409,900)
DelCap Fund B Class . . . . . . . . . . . . . . . (46,008) --
DelCap Fund Institutional Class . . . . . . . . . (8,026,850) (2,880,741)
-------------- --------------
(70,012,204) (34,290,641)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
DelCap Fund A Class . . . . . . . . . . . . . 172,133,494 191,838,977
DelCap Fund B Class . . . . . . . . . . . . . 2,481,501 284,647
DelCap Fund Institutional Class . . . . . . . 41,376,161 49,327,046
Net asset value of shares issued upon
reinvestment of dividends from net
realized gain on security transactions:
DelCap Fund A Class . . . . . . . . . . . . . 54,475,614 28,187,308
DelCap Fund B Class . . . . . . . . . . . . . 45,490 --
DelCap Fund Institutional Class . . . . . . . 8,023,944 2,880,741
-------------- --------------
278,536,204 272,518,719
-------------- --------------
Cost of shares repurchased:
DelCap Fund A Class . . . . . . . . . . . . . (333,842,781) (366,368,314)
DelCap Fund B Class . . . . . . . . . . . . . (437,022) --
DelCap Fund Institutional Class . . . . . . . (45,032,949) (26,399,149)
-------------- --------------
(379,312,752) (392,767,463)
-------------- --------------
Decrease in net assets derived
from capital share transactions . . . . . . . (100,776,548) (120,248,744)
-------------- --------------
NET INCREASE (DECREASE) IN
NET ASSETS . . . . . . . . . . . . . . . . . . 19,459,066 (141,745,336)
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . 1,001,200,399 1,142,945,735
-------------- --------------
End of period . . . . . . . . . . . . . . . . . . $1,020,659,465 $1,001,200,399
============== ==============
</TABLE>
See accompanying notes
12
<PAGE> 15
DELAWARE GROUP DELCAP FUND, INC. -
CONCEPT I SERIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
Delaware Group DelCap Fund, Inc. - Concept I Series (the "Fund") is
registered as a diversified open-end investment company under the Investment
Company Act of 1940. The Fund is organized as a Maryland corporation and
offers three classes of shares.
1. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund for
financial statement preparation:
SECURITY VALUATION - Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 pm on the valuation date. Securities not
traded or securities not listed on a 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 aggregated daily
balance of the pooled cash account is invested in repurchase agreements
secured by obligations of the U.S. Government. The respective collateral is
held by the Fund's custodian bank until the maturity of the respective
repurchase agreements. Each repurchase agreement is 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 an accrual basis.
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 0.75% of the
net assets of the Fund less fees paid to the independent directors. At
September 30, 1995, the Fund had a liability for Investment Management fees
and other expenses payable to DMC for $112,371.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee of 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. No distribution expenses are paid by the
Institutional Class. At September 30, 1995, the Fund had a liability for
distribution fees and other expenses payable to DDLP for $37,250. For the
year ended September 30, 1995, the Fund paid DDLP $179,889 for commissions
earned on sales of DelCap 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 year ended September 30, 1995, the Fund has expensed $2,212,700 for
these services. At September 30, 1995, the Fund had a liability for such
fees and other expenses payable to DSC for $35,537.
Certain officers of the Investment Manager are officers, directors, and/or
employees of the Fund. These officers, directors and employees are paid no
compensation by the Fund.
On April 3, 1995, Delaware Management Holdings, Inc., the indirect parent of
DMC, DDLP and DSC, through a merger transaction (the "Merger") became a
wholly-owned subsidiary of Lincoln National Corporation. Other than the
resulting change in ownership, the Merger will not materially change the
manner in which DMC, DDLP and DSC have heretofore conducted their
relationship with the Fund.
3. INVESTMENTS
During the year ended September 30, 1995, the Fund made purchases of
$459,089,975 and sales of $605,513,422 of investment securities other than
U.S. Government securities and temporary cash investments.
At September 30, 1995 unrealized appreciation for federal income tax
purposes aggregated $273,824,378 of which $325,198,948 related to unrealized
appreciation of securities and $51,374,570 related to unrealized
depreciation of securities.
The realized gain for federal income tax purposes was $135,100,883 for the
year ended September 30, 1995.
4. CAPITAL STOCK
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
9/30/95 9/30/94
<S> <C> <C>
Shares Sold:
DelCap Fund A Class . . . . . . . . . . . . . 6,866,401 7,533,859
DelCap Fund B Class . . . . . . . . . . . . . 99,480 11,224
DelCap Fund Institutional Class . . . . . . . 1,642,627 1,922,292
Shares issued upon reinvestment of
dividends from net realized gain
from security transactions:
DelCap Fund A Class . . . . . . . . . . . . . 2,420,065 1,093,510
DelCap Fund Fund B Class . . . . . . . . . . . 2,023 --
DelCap Fund Institutional Class . . . . . . . 354,102 111,355
----------- -----------
11,384,698 10,672,240
----------- -----------
Shares repurchased:
DelCap Fund A Class . . . . . . . . . . . . . (13,342,366) (14,339,288)
DelCap Fund B Class . . . . . . . . . . . . . (18,268) --
DelCap Fund Institutional Class . . . . . . . (1,838,303) (1,024,685)
----------- -----------
(15,198,937) (15,363,973)
----------- -----------
Net decrease . . . . . . . . . . . . . . . . . (3,814,239) (4,691,733)
=========== ===========
</TABLE>
5. LINES OF CREDIT
The Fund has a committed line of credit for $15 million. No amount was
outstanding at September 30, 1995 or at any time during the last fiscal
year.
13
<PAGE> 16
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>
DELCAP FUND A CLASS
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . . . . . $25.570 $26.080 $20.730 $21.470 $15.810
Income (loss) from investment operations:
Net investment income (loss)* . . . . . . . . . . . . . . . . . . . (0.166) (0.218) (0.125) (0.059) 0.064
Net realized and unrealized gain (loss) from security transactions . 5.296 0.528 5.475 (0.651) 6.496
------- ------- ------- ------- -------
Total from investment operations . . . . . . . . . . . . . . . . . . 5.130 0.310 5.350 (0.710) 6.560
Less distributions:
Dividends from net investment income . . . . . . . . . . . . . . . . none none none (0.030) (0.410)
Distributions from net realized gain on security transactions . . . (1.830) (0.820) none none (0.490)
------- ------- ------- ------- -------
Total distributions . . . . . . . . . . . . . . . . . . . . . . . . (1.830) (0.820) none (0.030) (0.900)
------- ------- ------- ------- -------
Net asset value, end of period . . . . . . . . . . . . . . . . . . . . $28.870 $25.570 $26.080 $20.730 $21.470
======= ======= ======= ======= =======
Total return** . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.04% 1.17% 25.81% (3.32%) 43.25%
Ratios/supplemental data:
Net assets, end of period (000 omitted) . . . . . . . . . . . . . . $888,571 $890,787 $1,057,358 $993,125 $512,356
Ratio of expenses to average net assets . . . . . . . . . . . . . . 1.37% 1.35% 1.30% 1.39% 1.43%
Ratio of net investment loss to average net assets . . . . . . . . . (0.67%) (0.68%) (0.43%) (0.26%) 0.63%
Portfolio turnover . . . . . . . . . . . . . . . . . . . . . . . . . 51% 34% 51% 24% 33%
</TABLE>
-----------------
* 1995 per share information was based on the average shares outstanding
method.
** Does not include maximum sales 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.
14
<PAGE> 17
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>
DELCAP FUND B CLASS DELCAP FUND INSTITUTIONAL CLASS
---------------------- -------------------------------
YEAR 9/6/94* YEAR YEAR 11/9/92*
ENDED TO ENDED ENDED TO
9/30/95 9/30/94 9/30/95 9/30/94 9/30/93
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . . . $25.560 $25.180 $25.710 $26.140 $22.000
Income (loss) from investment operations:
Net investment loss** . . . . . . . . . . . . . . . . . . . (0.340) (0.008) (0.091) (0.080) (0.027)
Net realized and unrealized gain from security transactions 5.290 0.388 5.341 0.470 4.167
------- ------- ------- ------- -------
Total from investment operations . . . . . . . . . . . . . . 4.950 0.380 5.250 0.390 4.140
Less distributions:
Dividends from net investment income . . . . . . . . . . . . none none none none none
Distributions from net realized gain on security transactions (1.830) none (1.830) (0.820) none
------- ------- ------- ------- -------
Total distributions . . . . . . . . . . . . . . . . . . . . (1.830) none (1.830) (0.820) none
------- ------- ------- ------- -------
Net asset value, end of period . . . . . . . . . . . . . . . . $28.680 $25.560 $29.130 $25.710 $26.140
======= ======= ======= ======= =======
Total return+ . . . . . . . . . . . . . . . . . . . . . . . . . 21.34% 1.51% 22.45% 1.48% 21.31%
Ratios/supplemental data:
Net assets, end of period (000 omitted) . . . . . . . . . . $2,710 $287 $129,378 $110,126 $85,588
Ratio of expenses to average net assets . . . . . . . . . . 2.07% 2.05% 1.07% 1.05% 1.02%
Ratio of net investment loss to average net assets . . . . . (1.37%) (1.38%) (0.37%) (0.38%) (0.15%)
Portfolio turnover . . . . . . . . . . . . . . . . . . . . . 51% 34% 51% 34% 51%
</TABLE>
-----------------
* Date of initial public offering; ratios and total return have been
annualized for DelCap Fund Institutional Class. Ratios have been
annualized and total return has not been annualized for DelCap Fund B
Class.
** 1995 per share information was based on the average shares outstanding
method.
+ Does not include contingent deferred sales charge which varies from 1%-4%
depending upon the holding period for DelCap Fund B Class.
15
<PAGE> 18
DELAWARE GROUP DELCAP FUND, INC. - CONCEPT I SERIES
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
DELAWARE GROUP DELCAP FUND, INC. - CONCEPT I SERIES
We have audited the accompanying statement of net assets of Delaware Group
DelCap Fund, Inc. - Concept I Series as of September 30, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period ended
September 30, 1995. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 1995, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Delaware Group DelCap Fund, Inc. - Concept I Series at September 30, 1995,
the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period ended
September 30, 1995, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
November 3, 1995
A REPORT ON DELCAP FUND'S ANNUAL MEETING
At an annual meeting of shareholders held on March 29, 1995, the following
matters were submitted for shareholder vote: the election of directors, the
ratification of the selection of Ernst & Young LLP as independent auditors
of the Fund and the approval of a new investment management agreement. The
new investment management agreement was proposed in connection with the
April 3, 1995, merger of Delaware Management Holdings, Inc. (the parent of
Delaware Management Company, Inc.) and a subsidiary of Lincoln National
Corporation. Whenever there is a change in control of an investment manager,
the Investment Company Act of 1940 requires shareholders to vote on a new
investment management agreement.
Below are the names of each director elected at the meeting as well as the
results of the other matters voted on by shareholders.
<TABLE>
<CAPTION>
Number of Votes*
--------------------------------------------------
For Against/Withheld Abstentions
<S> <C> <C> <C>
Election of Directors:
Wayne A. Stork . . . . . . . . 21,217,252 626,859 --
Walter P. Babich . . . . . . . 21,217,543 626,568 --
Anthony D. Knerr . . . . . . . 21,217,204 626,908 --
Ann R. Leven . . . . . . . . . 21,217,709 626,403 --
W. Thacher Longstreth . . . . . 21,216,170 627,941 --
Charles E. Peck . . . . . . . . 21,217,584 626,527 --
Approval of the New
Investment Management
Agreement . . . . . . . . . . 20,448,593 420,073 975,445
Selection of Ernst & Young LLP
as Independent Auditors . . . . 19,970,324 194,527 1,679,260
</TABLE>
* Please note that the results of this meeting were not audited by Ernst &
Young LLP.
16
<PAGE> 19
This annual report is for the information of DelCap 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.
If used with prospective investors after December 31, 1995, this report must be
accompanied by a DelCap Fund perform-ance update for the most recently
completed calendar quarter. The figures in this report represent past results
which is 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.
BOARD
- -----------------------
MEMBERS
- -----------------------
WAYNE A. STORK
Chairman, Delaware Group of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC
W. THACHER LONGSTRETH
Vice Chairman, Packquisition Corp.
Philadelphia, PA
CHARLES E. PECK
Secretary of Enterprise Homes, Inc.
Fredericksburg, VA
former Chairman and CEO
The Ryland Group, Inc.
Columbia, MD
AFFILIATED
- -----------------------
OFFICERS
- -----------------------
GEORGE M. CHAMBERLAIN, JR.
Senior Vice President and Secretary,
Delaware Group of Funds
Philadelphia, PA
KEITH E. MITCHELL
President and CEO,
Delaware Distributors, L.P.
Philadelphia, PA
DAVID K. DOWNES
Senior Vice President, Chief Financial Officer and
Chief Administrative Officer
Delaware Group of Funds
Philadelphia, PA
<PAGE> 20
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
This report must be preceded or accompanied by a current DelCap Fund
prospectus. 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.
[DELAWARE GROUP LOGO]
- ----------------------
Philadelphia - London
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.
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
(C) Delaware Distributors, L.P.
[RECYCLE LOGO] Printed in the U.S.A. on recycled paper.
AR-016[9/95]TKO11/95
