<PAGE>
JUNE 24, 1996
DEAR
- -----------------------
SHAREHOLDER:
- -----------------------
During the first half of Value Fund's 1996 fiscal year ended May 31, 1996,
stocks continued to post strong gains in spite of several short-lived periods of
market weakness. A brief interruption, rather than an impediment to stock
performance, these "mini" corrections were offset by subsequent upswings in the
market. By the end of May, the Standard & Poor's 500 Index, an unmanaged index
of large "blue chip" company stocks, had risen nearly 65 points, or 12%, since
November 1995.
An exciting development during this period was the renewed strength of small
company stocks, specifically growth stocks, as represented by the performance of
the Russell 2000 Index, an unmanaged index of small capitalization stocks. Since
small growth stocks were the primary beneficiaries of this trend, it was not a
major factor in the performance of Value Fund, which focuses on "value" stocks
(i.e., stocks whose market value is low relative to their underlying value or
future earnings and growth potential). Still, the Fund achieved an impressive
+11.97 total return at net asset value (capital change plus income based on net
asset value for A Class shares) for our fiscal half.
As you can see from the table, our results were competitive with the value
segment of the small-cap stock market. Because the Lipper Capital Appreciation
Fund Average (194 funds) is so broad, including both growth- and value-style
equity funds, we consider it a less-than-perfect benchmark for measure of Value
Fund's performance.
Understanding the fundamental differences between "growth" and "value" can be
helpful in understanding performance within the small-cap stock market. In this
report, David Dalrymple, the senior portfolio manager of Value Fund, explains
some basic characteristics of each style and how the Fund measures value in
selecting stocks for the portfolio. He also reviews the Fund's recent
positioning and shares his expectations for the second half of our fiscal year.
As I am writing this letter, Value Fund is beginning its 10th year of
operation. Five years into the current bull market, we believe more volatility
may be ahead. However, we also believe the U.S. is at an economic inflection
point that should allow for continued earnings growth through at least the
remainder of 1996, and our view is that eventually much of this earnings growth
may be realized by small company "value" stocks.
Sincerely,
WAYNE A. STORK
Wayne A. Stork
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
================================================================================
TOTAL RETURN
SIX MONTHS
ENDED
MAY 31, 1996
------------
Value Fund A Class +11.97%
Russell 2000 Index +17.26%
Russell 2000 Growth Index +22.35%
Russell 2000 Value Index +13.36%
Lipper Capital Appreciation
Fund Average +15.10%
Value Fund performance and the Lipper Capital Appreciation Fund Average are
based on net asset value without effect of sales charges. All performance
figures quoted above assume reinvestment of dividends and capital gains.
Performance information for all Value Fund Classes can be found on page 5.
================================================================================
1
<PAGE>
PORTFOLIO
- -------------------------
MANAGER'S REVIEW
- -------------------------
Over the past six months, small company stocks made a refreshing return to
leadership in the market as many investors looked past large company stocks
to the earnings growth of small stocks. Reversing a trend of 1995, the
small-cap market, as measured by the Russell 2000 Index, returned +17.26%
for the six months ended May 31, 1996, surpassing the +11.78% return (including
reinvested dividends) of the S&P 500 Index, a measure of large company stocks.
As shown in the performance table on the previous page, there was some
performance disparity within the small-cap market, which can be divided into two
distinct groups: "growth" and "value." Small growth stocks provided nearly twice
the return of small value stocks, typical of the often disparate performance of
the two investment styles.
Historically, these styles have moved in and out of favor and rarely have these
cycles been in "synch."
We believe that value investing makes sense for several reasons. Stocks with
low valuations and low expectations are better positioned for earnings surprises
and can involve less downside risk than growth stocks. Because value stocks have
low earnings expectations, there's a higher likelihood of them reaching their
targets, whereas growth stocks with high earnings expectations are at greater
risk of missing investors' growth predictions. In addition, undervalued
companies have a greater likelihood of expansion than contraction given that
their low valuations leave more room to rise if prospects improve. This tends
not to be the case with growth stocks and is not necessarily the way that stocks
in Value Fund's portfolio will perform.
================================================================================
Growth of a $10,000 Investment
Russell 2000 Value vs. Russell 2000 Growth (12/31/78 - 5/31/96)
(Growth) (Value) (Growth) (Value)
Dec-78 $10,000.00 $12,535.13 Jun-88 $ 38,672.30 $ 59,891.52
Dec-79 $15,083.46 $13,537.67 Dec-88 $ 37,280.50 $ 60,122.11
Jun-80 $15,910.80 $14,100.84 Jun-89 $ 42,639.42 $ 68,993.27
Dec-80 $22,966.52 $16,974.32 Dec-89 $ 44,799.00 $ 67,593.29
Jun-81 $24,014.47 $20,507.61 Jun-90 $ 46,360.70 $ 67,227.59
Dec-81 $20,845.51 $19,495.39 Dec-90 $ 36,999.37 $ 52,875.05
Jun-82 $17,589.26 $18,416.92 Jun-91 $ 46,627.77 $ 68,517.83
Dec-82 $25,219.52 $25,055.85 Dec-91 $ 55,938.16 $ 74,925.51
Jun-83 $36,370.47 $34,652.86 Jun-92 $ 50,566.92 $ 82,471.38
Dec-83 $30,297.19 $34,736.93 Dec-92 $ 60,284.62 $ 96,755.50
Jun-84 $26,062.28 $33,081.71 Jun-93 $ 60,762.42 $107,892.54
Dec-84 $25,501.69 $35,525.41 Dec-93 $ 68,338.57 $119,826.00
Jun-85 $30,302.10 $41,576.88 Jun-94 $ 61,444.40 $116,091.98
Dec-85 $33,399.25 $46,541.96 Dec-94 $ 66,676.67 $117,969.27
Jun-86 $40,857.33 $54,469.46 Jun-95 $ 77,309.96 $133,074.67
Dec-86 $34,595.54 $49,991.35 Dec-95 $ 87,373.37 $148,349.09
Jun-87 $43,390.60 $60,715.35 May-96 $104,586.91 $163,108.71
Source: Frank Russell & Company
OVER THE LONG-TERM PERIOD SHOWN, SMALL-CAP VALUE STOCKS HAVE OUTPERFORMED
SMALL-CAP GROWTH STOCKS BASED ON RELATIVE PRICE PERFORMANCE.
Understanding the fundamental differences between growth and value stocks may
help you understand why growth stocks and value stocks perform well at different
times. Past performance is not a guarantee of future results. Illustration
assumes all distributions were reinvested.
2
<PAGE>
HOW WE LOOK FOR VALUE
In researching stocks that we believe may be undervalued or selling at a
discount, we look at several measures of value. Comparing a company's stock
price to its underlying values based on profits, net assets, dividends, sales
and cash flow as well as its value in the private marketplace (that is, if it
was acquired by another company where it may be worth more) helps us
determine the fair value of a stock. Depending on the stock's industry, some
of these measures may be more appropriate than others. For example, it may be
more suitable to evaluate cyclical companies, such as paper and chemical
companies, based on the stock's price relative to net assets, sales and cash
flow rather than earnings. On the other hand, a more stable service company
may be better evaluated by looking at price relative to earnings.
We also look for catalysts that may stimulate a company's performance over
either the short or long term. This may be new management or products, a
possible sale of assets, or an outside development such as a change in
government policy. Without such a catalyst, we can't be confident that investors
will recognize the true value of a stock within a reasonable period of time.
An example of a catalyst currently affecting a stock in the portfolio is the
new management at Keystone International, a manufacturer of industrial valves.
Focused on more efficient production, more cost effective sales and
distribution, and better utilization of the company's assets, Keystone's new
management may maximize the company's potential in the months and years ahead.
Another catalyst that had a short-term effect on one of our health care
stocks was the federal government's late 1995 proposal to restrain Medicare
spending. Lincare Holdings, Inc., which we purchased last summer, was threatened
by the proposed cuts. But as the perception of risk from this regulatory change
subsided, the stock emerged in its previously regarded positive light.
Separating stocks that are real values from those that are just "cheap"
involves looking at a company's competitiveness, its growth prospects, and its
product development, just for starters. While a high yield or low
price-to-earnings ratio on a stock may signal a low price, they do not
necessarily point to value.
POSITIONING THE PORTFOLIO FOR A
SLOWING ECONOMY
In the first fiscal half of 1996, we had positioned Value Fund defensively
for what we believed was a slowing economy. We did this by focusing less on
economically sensitive stocks (such as paper, chemical, machinery and retail
stocks) and by focusing more on defensive and interest rate sensitive stocks
including consumer
================================================================================
STYLES OF EQUITY INVESTING: "GROWTH" VS. "VALUE"
GROWTH STOCK CHARACTERISTICS VALUE STOCK CHARACTERISTICS
* Growth rates of 10-20% or higher * Growth rates of less than 10%
* High earnings expectations * Low earnings expectations
* Typically more expensive * Typically inexpensive
(High price-to-earnings ratios (Low price-to-earnings
of 18-20x) ratios of 12-14x)
* Little or no dividend payments * Typically pays dividends
* High relative price risk * Low relative price risk
- --------------------------------------------------------------------------------
3
<PAGE>
growth and staples, utilities, energy and insurance companies.
ENERGY AND HEALTH CARE STRONG PERFORMERS
During the period, the Fund's energy holdings benefited from an improved
market for their products and services which led to rising prices. Now, however,
we have reduced our position because valuations are not as attractive as they
were last fall. We also are reducing our position in health care, an area where
we had broad exposure over the past six months and were quite successful.
INCREASED FOCUS ON CAPITAL GOODS PRODUCERS
We have recently increased our holdings of capital goods producers, which we
believe will benefit from the capital spending that typically comes late in the
economic cycle. As of May 31, these stocks represented 17.4% of net assets, up
from 12.7% last November.
CASH POSITION
We continue to remain fully invested. Over the winter months, cash
dropped to as low as 4.9%. At the end of May, we stood slightly higher at
8.1%, having sold some of our stocks and not yet found their replacements.
This was still under our November positioning. As a general rule,
we expect to maintain the cash position in the 3-15% range.
INVESTMENT OUTLOOK
While we recognize that the economy has accelerated and is growing modestly,
we have concerns about how long that growth can continue. As we see neither
sustained growth nor an imminent recession ahead, we are positioning the Fund
defensively for this questionable period. We believe that the investment's share
of this year's upward movement in interest rates has been completed, rising from
5.9% in January to 7.1% now. Interest rates may climb modestly higher, perhaps
to 8%. However, we believe that basic low inflation forces are in effect.
We believe that small company stocks are attractively valued relative to
larger companies and offer more exciting prospects for growth over the long
term. We will continue to position Value Fund to take advantage of the potential
of small "value" stocks.
/s/ David C. Dalrymple
- ----------------------
DAVID C. DALRYMPLE
VICE PRESIDENT
SENIOR PORTFOLIO MANAGER
JUNE 24, 1996
================================================================================
Value Fund
A Long-Term performer
6/24/87 $ 9,525
12/31/87 $ 8,720
12/30/88 $11,023
12/29/89 $14,536
12/31/90 $12,625
12/31/91 $19,061
12/31/92 $21,878
12/31/93 $25,997
12/31/94 $24,183
12/29/95 $29,869
5/31/96 $34,271
- --------------------------------------------------------------------------------
4
<PAGE>
VALUE FUND'S
- ------------------------
LIFETIME
- ------------------------
PERFORMANCE
- ------------------------
Over its nine-year lifetime, Value Fund has outpaced the return of the
Russell 2000 Index, an unmanaged index of small company stocks. During the
same time period (June 24, 1987 through May 31, 1996), a $10,000 investment
in Value Fund would have grown to $34,271(based on A Class shares at 4.75%
sales charge with capital gains and dividends reinvested.)
VALUE FUND PERFORMANCE
AVERAGE ANNUAL RETURN THROUGH MAY 31, 1996
LIFETIME FIVE YEARS ONE YEAR
Class A (Est. 1987) 14.15% 14.76% 20.26%
Class B (Est. 1994)
Excluding Sales Charge 14.73% -- 25.31%
Including Sales Charge 12.64% -- 21.31%
Class C* (Est. 1995)
Excluding Sales Charge 12.81% -- --
Including Sales Charge 11.81% -- --
Russell 2000 Index 11.20% 17.10% 35.89%
*Aggregate return through May 31, 1996
VALUE FUND'S RETURN AND SHARE VALUE FLUCTUATE SO THAT SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE IS NOT A
GUARANTEE OF FUTURE RESULTS. RETURNS REFLECT REINVESTMENT OF ANY DISTRIBUTIONS
AND ANY APPLICABLE SALES CHARGES AS NOTED BELOW. B AND C CLASS RESULTS
"EXCLUDING SALES CHARGE" ASSUME THE INVESTMENT WAS NOT REDEEMED.
Class A returns reflect the effect of the current 4.75% maximum front-end
sales charge, reinvestment of all distributions, and a 12b-1 fee. Sales
charges have varied during the life of the Fund.
Class B performance reflects the reinvestment of 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 contingent deferred sales
charge of up to a maximum of 4% if redeemed before the end of the sixth year.
Class B was initially offered on September 6, 1994. Class B's six-month total
return was 11.55% with dividends and capital gains reinvested (based on
net asset value.)
Class C shares were initially offered on November 29, 1995. They have a 1%
annual distribution and service fee and a 1% contingent deferred sales charge
if redeemed within 12 months of purchase. Cumulative performance for the
six-month period may not be indicative of future performance.
The average annual returns for Value Fund's Institutional Class, which is
available without sales or asset-based distribution charges only to certain
eligible institutional accounts, were 14.92%, 16.13% and 26.63% for the
lifetime, five-year and one-year periods ended May 31, 1996, and aggregate
return for the six-month period ended May 31, 1996 was 12.12%. The
Institutional Class was initially made available on November 9, 1992. Prior
performance for this Class to this date is based on Class A performance,
adjusted to eliminate the sales charge, but not the asset-based distribution
charge.
5
<PAGE>
FINANCIAL
- -------------------
STATEMENTS
- -------------------
DELAWARE GROUP VALUE FUND, INC.
STATEMENT OF NET ASSETS
MAY 31, 1996
(UNAUDITED)
Number Market
of Shares Value
COMMON STOCK - 91.83%
Aerospace & Defense - 0.48%
Thiokol ......................................... 24,000 $ 987,000
-----------
987,000
-----------
Automobiles & Automotive Parts - 6.66%
Arvin Industries ................................ 117,400 2,876,300
*Clarcor ......................................... 46,700 963,188
*Custom Chrome ................................... 88,400 2,326,025
Exide ........................................... 35,000 822,500
*Monro Muffler Brake ............................. 121,900 2,361,813
Smith (A.O.) ................................... 85,200 2,279,100
Titan Wheel International ....................... 123,300 2,126,925
-----------
13,755,851
-----------
Banking, Finance & Insurance - 17.78%
*AMRESCO ......................................... 154,900 2,875,331
Allmerica Property & Casualty ................... 97,600 2,488,800
*Americredit ..................................... 201,300 3,044,663
*Cal Fed Bancorp ................................. 131,500 2,416,313
California Bancshares ........................... 60,700 2,048,625
Everest Reinsurance Holdings .................... 87,470 2,044,611
Enhance Financial Services Group ................ 70,100 2,032,900
*Financial Federal ............................... 46,800 766,350
Horace Mann Educators ........................... 68,600 2,186,625
Keystone Financial .............................. 61,100 2,031,575
Mid Ocean Ltd. .................................. 15,500 647,125
ONBANCorp ....................................... 90,600 2,865,225
PMI Group ....................................... 38,500 1,665,125
PartnerRe Limited ............................... 66,900 2,007,000
Penncorp Financial Group ........................ 70,200 2,141,100
Titan Holdings .................................. 39,690 625,118
*Transport Holdings Class A ...................... 25,200 1,096,200
USF&G ........................................... 106,300 1,700,800
Union Planters .................................. 66,500 2,036,563
-----------
36,720,049
-----------
Building, Housing & Materials - 2.53%
*Central Sprinkler ............................... 67,700 1,557,100
Continental Homes Holdings ...................... 100,100 2,464,963
*Southern Energy Homes ........................... 57,000 1,200,563
-----------
5,222,626
-----------
Top 10 holdings, representing 13.7% of net assets, are in boldface.
6
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Chemicals - 2.97%
*Carbide/Graphite Group .......................... 54,100 $ 1,034,663
Ferro ........................................... 75,800 2,065,550
*Scotts .......................................... 112,600 2,069,025
*Sterling Chemicals .............................. 83,900 964,850
-----------
6,134,088
-----------
Energy & Energy Services - 6.86%
*Belco Oil & Gas ................................. 46,700 1,278,413
*Belden & Blake .................................. 80,750 1,564,531
Cross Timbers Oil ............................... 106,700 2,387,413
*Global Marine ................................... 112,300 1,375,675
Public Service Company of New Mexico ............ 107,600 2,017,500
*Seacor Holdings ................................. 39,200 1,896,300
*TransTexas Gas .................................. 182,600 1,597,750
Valero Energy ................................... 74,000 2,035,000
-----------
14,152,582
-----------
Food, Beverage & Tobacco - 1.85%
*Bush Boake Allen ................................ 53,200 1,316,700
*Fresh America ................................... 46,700 630,450
International Multifoods ........................ 94,300 1,874,213
-----------
3,821,363
-----------
Healthcare & Pharmaceuticals - 9.19%
*Arbor Health Care ............................... 33,800 942,175
*Lincare Holdings ................................ 59,400 2,257,200
*Mariner Health Group ............................ 154,100 2,754,538
*Marquette Electronics Class A ................... 83,300 1,457,750
*Maxicare Health Plans ........................... 99,700 2,423,956
*Mid Atlantic Medical Services ................... 134,200 2,566,575
Owens & Minor ................................... 129,000 1,612,500
*Regency Health Services ......................... 247,200 2,502,900
Sullivan Dental ................................. 56,200 635,763
*Sunrise Medical ................................. 96,400 1,819,550
-----------
18,972,907
-----------
Industrial Machinery - 10.05%
Cascade ......................................... 61,800 930,863
Columbus McKinnon ............................... 117,100 1,932,150
*Global Industrial Technology .................... 116,400 2,153,400
Greenfield Industries ........................... 84,600 3,214,800
IDEX ............................................ 59,000 2,242,000
Keystone International .......................... 120,100 2,627,188
Kuhlman ......................................... 93,500 1,612,875
Regal-Beloit .................................... 96,400 2,000,300
*Rexel ........................................... 118,100 1,727,213
TriMas .......................................... 32,200 764,750
Varlen .......................................... 70,350 1,543,303
-----------
20,748,842
-----------
Media, Leisure & Entertainment - 5.05%
*Ascent Entertainment Group ...................... 106,700 1,907,263
*Carmike Cinemas-Class A ......................... 95,000 2,648,125
<PAGE>
Statement of Net Assets (Continued)
Number Market
of Shares Value
COMMON STOCK (Continued)
Media, Leisure & Entertainment (Continued)
*Devon Group ................................... 83,000 $ 2,448,500
*Valassis Communications ....................... 79,500 1,411,125
*Hollywood Park ................................ 191,100 2,006,550
-----------
10,421,563
-----------
Metals & Mining - 1.50%
AK Steel Holding .............................. 26,500 1,146,125
*Century Aluminum .............................. 102,800 1,535,575
*Universal Stainless & Alloy Products .......... 47,300 422,744
-----------
3,104,444
-----------
Paper & Forest Products - 3.38%
Caraustar Industries .......................... 46,800 1,228,500
Chesapeake .................................... 66,200 1,762,575
Longview Fibre ................................ 125,300 2,114,438
Rayonier ...................................... 49,900 1,871,250
-----------
6,976,763
-----------
Real Estate - 6.51%
Developers Diversified Realty ................. 75,700 2,365,625
Duke Realty Investments ....................... 49,500 1,491,188
Public Storage ................................ 107,600 2,259,600
ROC Communities ............................... 85,900 2,050,863
Reckson Associates Realty ..................... 80,800 2,525,000
Starwood Lodging Trust ........................ 72,100 2,739,800
-----------
13,432,076
-----------
Retail & Apparel - 1.20%
Pier 1 Imports ................................ 157,700 2,483,775
-----------
2,483,775
-----------
Technology - 3.03%
*Burr-Brown .................................... 107,600 2,299,950
*Cherry Class A ................................ 52,100 612,175
*Cherry Class B ................................ 48,500 612,313
*LeCroy ........................................ 14,000 271,250
Methode Electronics Class A ................... 140,100 2,451,750
-----------
6,247,438
-----------
Textiles & Furniture - 1.27%
*Cone Mills .................................... 93,900 1,091,588
Juno Lighting ................................. 99,700 1,539,119
-----------
2,630,707
-----------
Transportation & Shipping - 5.95%
*ABC Rail Products ............................. 120,300 2,624,044
Airborne Freight .............................. 70,900 1,790,225
*Landstar Systems .............................. 66,300 1,939,275
*Mesaba Holdings ............................... 140,800 1,557,600
*Offshore Logistics ............................ 121,400 1,745,125
<PAGE>
Number Market
of Shares Value
COMMON STOCK (Continued)
Transportation & Shipping (Continued)
*Skywest ....................................... 40,500 $ 769,500
USFreightways ................................. 84,800 1,855,000
-----------
12,280,769
-----------
Utilities - 5.57%
Central Hudson Gas & Electric ................. 70,200 2,097,225
Central Maine Power ........................... 135,700 1,814,988
IES Industries ................................ 70,200 1,991,925
MidAmerican Energy ............................ 107,600 1,842,650
Sierra Pacific Resources ...................... 79,500 1,888,125
United Illuminating ........................... 50,500 1,862,188
-----------
11,497,101
-----------
Total Common Stock
(cost $159,993,989) .......................... 189,589,944
-----------
Principal
Amount
REPURCHASE AGREEMENTS - 6.48%
With Chase Manhattan 5.30% 6/3/96
(dated 5/31/96, collateralized by
$3,834,000 U.S. Treasury Notes
7.875% due 7/15/96 market value
$3,957,927 and $4,491,000 U.S.
Treasury Notes 7.125% due 9/30/99
market value $4,626,006) ..................... $ 8,411,000 $ 8,411,000
With J.P. Morgan Bank 5.30% 6/3/96
(dated 5/31/96, collateralized by
$493,000 U.S. Treasury Notes 4.75%
due 2/15/97 market value $496,806
and $3,834,000 U.S. Treasury Notes
5.50% due 2/28/99 market value
$3,806,567) .................................. 4,217,000 4,217,000
With PaineWebber 5.30% 6/3/96 (dated
5/31/96, collateralized by $332,000
U.S. Treasury Notes 6.75% due 2/28/97
market value $340,075 and $427,000
U.S. Treasury Notes 6.125% due 9/30/00
market value $423,720) ....................... 748,000 748,000
-----------
Total Repurchase Agreements
(cost $13,376,000) ........................... 13,376,000
-----------
7
<PAGE>
Statement of Net Assets (Continued)
Market
Value
TOTAL MARKET VALUE OF SECURITIES - 98.31%
(cost $173,369,989) ...................................... $202,965,944
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES - 1.69% ...................................... 3,489,711
------------
NET ASSETS APPLICABLE TO 8,517,833 SHARES
($.01 PAR VALUE OUTSTANDING) - 100.00% $206,455,655
============
NET ASSET VALUE - VALUE FUND A CLASS
($186,605,271 / 7,697,670 shares) ........................ $24.24
======
NET ASSET VALUE - VALUE FUND B CLASS
($9,517,126 / 394,513 shares) ............................ $24.12
======
NET ASSET VALUE - VALUE FUND C CLASS
($2,110,967 / 87,568 shares) ............................. $24.11
======
NET ASSET VALUE - VALUE FUND
INSTITUTIONAL CLASS
($8,222,291 / 338,082 shares) ............................ $24.32
======
Market
Value
COMPONENTS OF NET ASSETS AT MAY 31, 1996:
Common stock, $.01 par value, 500,000,000
shares authorized to the Fund with
150,000,000 shares allocated to Value
Fund A Class, 100,000,000 shares
allocated to Value Fund B Class,
50,000,000 shares allocated to Value
Fund C Class, and 50,000,000 shares
allocated to Value Fund Institutional
Class ..................................................... $152,962,336
Accumulated undistributed:
Net investment income ..................................... 320,928
Net realized gain on investments .......................... 23,577,684
Net unrealized appreciation of
investments and foreign currencies ........................ 29,594,707
------------
Total net assets ........................................... $206,455,655
============
- ----------
*Non-income producing security for the six months ended May 31, 1996
See accompanying notes
8
<PAGE>
DELAWARE GROUP VALUE FUND, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996
(UNAUDITED)
INVESTMENT INCOME:
Dividends ....................................... $ 1,357,776
Interest ........................................ 388,849 $ 1,746,625
----------
EXPENSES:
Management fees ($734,964)
and directors' fees ($4,744) ................... 739,708
Distribution expenses ........................... 313,007
Dividend disbursing and transfer
agent fees and expenses ........................ 252,183
Reports and statements to shareholders .......... 40,182
Registration fees ............................... 36,337
Salaries ........................................ 28,235
Professional fees ............................... 15,979
Custodian fees .................................. 7,093
Taxes, other than taxes on income ............... 5,269
Other ........................................... 17,244 1,455,237
---------- ---------
NET INVESTMENT INCOME ........................... 291,388
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain from
security transactions .......................... 23,732,978
Net unrealized depreciation of
investments and foreign currency
during the period .............................. (1,663,748)
----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ................................. 22,069,230
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $ 22,360,618
============
See accompanying notes
<PAGE>
DELAWARE GROUP VALUE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Year
Ended Ended
5/31/96 11/30/95
(Unaudited)
OPERATIONS:
Net investment income ........................ $ 291,388 $ 2,250,870
Net realized gain from security
transactions ................................ 23,732,978 7,254,850
Net unrealized appreciation (depreciation)
of investments during the period ............ (1,663,748) 24,932,006
---------- ----------
Net increase in net assets resulting
from operations ............................. 22,360,618 34,437,726
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Value Fund A Class .......................... (1,863,274) (1,473,989)
Value Fund B Class .......................... (25,335) (13,005)
Value Fund C Class .......................... (67) --
Value Fund Institutional Class .............. (98,850) (74,067)
Net realized gain from security transactions:
Value Fund A Class .......................... (6,909,642) (2,306,541)
Value Fund B Class .......................... (237,353) (21,675)
Value Fund C Class .......................... (214) --
Value Fund Institutional Class .............. (293,254) (86,125)
---------- ----------
(9,427,989) (3,975,402)
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Value Fund A Class .......................... 16,855,076 53,057,497
Value Fund B Class .......................... 3,680,351 4,607,799
Value Fund C Class .......................... 2,039,350 5,030
Value Fund Institutional Class .............. 3,847,905 4,893,677
Net asset value of shares issued upon
reinvestment of dividends from net
investment income and net realized
gain from security transactions:
Value Fund A Class .......................... 8,292,053 3,572,237
Value Fund B Class .......................... 252,413 32,715
Value Fund C Class .......................... 281 --
Value Fund Institutional Class .............. 392,342 160,192
---------- ----------
35,359,771 66,329,147
---------- ----------
Cost of shares repurchased:
Value Fund A Class .......................... (27,323,393) (87,750,505)
Value Fund B Class .......................... (792,161) (998,195)
Value Fund C Class .......................... (10,691) --
Value Fund Institutional Class .............. (3,808,075) (5,283,529)
---------- ----------
(31,934,320) (94,032,229)
---------- ----------
Increase (Decrease) in net assets derived
from capital share transactions ............. 3,425,451 (27,703,082)
---------- ----------
NET INCREASE IN NET ASSETS ................... 16,358,080 2,759,242
---------- ----------
NET ASSETS:
Beginning of period .......................... 190,097,575 187,338,333
------------ ------------
End of period (including undistributed net
investment income of $320,928 and
$2,017,066, respectively) ................... $206,455,655 $190,097,575
============ ============
See accompanying notes
9
<PAGE>
Delaware Group Value Fund, Inc.
Notes to Financial Statements
May 31, 1996
(Unaudited)
Delaware Group Value Fund, Inc. ("the Fund") is registered as a diversified
open-end investment company under the Investment Company Act of 1940. The
Fund is organized as a Maryland corporation and offers four classes of
shares.
The investment objective of the Value Fund is to seek capital appreciation.
The Fund's strategy is to invest primarily in equities with market values
that, in the manager's opinion, appear low relative to their underlying value
or future earnings and growth potential.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund:
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 pm EST on the valuation date. Securities not
traded or securities not listed on an exchange are valued at the mean of the
last quoted bid and asked prices. Long-term debt securities are valued by an
independent pricing service when such prices are believed to reflect the fair
value of such securities. Money market instruments having less than 60 days
to maturity are valued at amortized cost which approximates market value.
Federal Income Taxes - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes is required in the
financial statements.
Repurchase Agreements - The Fund may invest in a pooled cash account along
with other members of the Delaware Group of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements
secured by obligations of the U.S. government. The respective collateral
is held by the Fund's custodian bank until the maturity of the respective
repurchase agreements. Each repurchase agreement is 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) 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.
Foreign Currencies - The value of all assets and liabilities denominated in
foreign currencies are translated into U.S. dollars at the exchange rate of
such currencies against the U.S. dollar as of 3:00 pm EST. Forward foreign
currency contracts are valued at the mean between the bid and asked prices of
the contracts. Interpolated values are derived when the settlement date of
the contract is an interim date for which quotations are not available.
10
<PAGE>
Other - Expenses common to all Funds within the Delaware Group of Funds
are allocated amongst the funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale
of investment securities are those of the specific securities sold. Dividend
income is recorded on the ex-dividend date and interest income is recorded
on the accrual basis. Original issue discounts are accreted to interest
income over the lives of the respective securities.
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.
2. Investment Management and Distribution Agreements
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. (DMC), the Investment Manager of the
Fund, an annual fee which is calculated daily at the annual rate of 0.75% of
the average daily net assets of the Fund less fees paid to the independent
directors. At May 31, 1996, the Fund had a liability for Investment
Management fees and other expenses payable to DMC for $34,369.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and 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 distribution expenses are
paid by the Institutional Class. At May 31, 1996, the Fund had a liability
for distributions fees and other expenses payable to DDLP of $5,891. For the
six months ended May 31, 1996, the Fund paid DDLP $36,800 for commissions
earned on sales of Value 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 May 31, 1996, the Fund expensed $252,183 for these services.
At May 31, 1996, the Fund had a liability for such fees and other expenses
payable to DSC of $6,362.
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.
3. Investments
During the six months ended May 31, 1996, the Fund made purchases of
$87,925,289 and sales of $94,036,258 of investment securities other than U.S.
government securities and temporary cash investments.
<PAGE>
Notes to Financial Statements (Continued)
At May 31, 1996, unrealized appreciation for federal income tax purposes
aggregated $29,594,707 of which $32,892,429 related to unrealized
appreciation of securities and $3,297,722 related to unrealized depreciation
of securities.
The realized gain for federal income tax purposes was $23,733,290 for the six
months ended May 31, 1996.
4. Capital Stock
Six Months Year
Ended Ended
5/31/96 11/30/95
---------- --------
Shares sold:
Value Fund A Class ............................ 738,941 2,698,238
Value Fund B Class ............................ 161,363 227,700
Value Fund C Class ............................ 87,788 221
Value Fund Institutional Class ................ 168,114 232,840
Shares issued upon reinvestment
of dividends from net investment
income and distributions of net realized
gain from security transactions:
Value Fund A Class ............................ 376,067 190,919
Value Fund B Class ............................ 11,473 1,750
Value Fund C Class ............................ 13 --
Value Fund Institutional Class ................ 17,761 8,548
----------- -----------
1,561,520 3,360,216
----------- -----------
Share repurchased:
Value Fund A Class ............................ (1,194,067) (4,401,949)
Value Fund B Class ............................ (34,466) (48,686)
Value Fund C Class ............................ (454) --
Value Fund Institutional Class ................ (166,873) (251,372)
----------- -----------
(1,395,860) (4,702,007)
----------- -----------
Net increase (decrease) ....................... 165,660 (1,341,791)
========== ==========
5. Lines of Credit
The Fund has a committed line of credit for $2.5 million. No amount was
outstanding at May 31, 1996 or at any time during the last fiscal period.
11
<PAGE>
Notes to Financial Statements (Continued)
6. Financial Highlights
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Value Fund A Class
-------------------------------------------------------------------
Six Months
Ended Year Ended November 30,
5/31/96(1) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $22.760 $19.320 $20.070 $17.750 $15.320 $11.050
Income from investment operations:
Net investment income (loss)(2).......... 0.036 0.253 0.142 0.033 0.060 (0.006)
Net realized and unrealized gain
(loss) from security transactions....... 2.574 3.597 (0.687) 3.147 3.360 4.681
------- ------- ------- ------- ------- -------
Total from investment operations......... 2.610 3.850 (0.545) 3.180 3.420 4.675
------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income..... (0.240) (0.160) (0.035) (0.040) none (0.155)
Distributions from net realized gain
on security transactions................ (0.890) (0.250) (0.170) (0.820) (0.990) (0.250)
------- ------- ------- ------- ------- -------
Total distributions...................... (1.130) (0.410) (0.205) (0.860) (0.990) (0.405)
Net asset value, end of period............ $24.240 $22.760 $19.320 $20.070 $17.750 $15.320
======= ======= ======= ======= ======= =======
Total return(3)........................... 11.97% 20.39% (2.78%) 18.59% 22.99% 43.61%
Ratios/supplemental data:
Net assets, end of period (000 omitted).. $186,605 $177,011 $179,498 $151,384 $38,792 $12,041
Ratio of expenses to average net assets.. 1.46% 1.48% 1.46% 1.64% 1.93% 2.26%
Ratio of net investment income (loss) to
net assets .............................. 0.31% 1.18% 0.75% 0.25% 0.39% (0.07%)
Portfolio turnover....................... 95% 65% 14% 32% 68% 99%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.
(2) The six months ended 5/31/96 per share information was based on the average
shares outstanding method.
(3) Does not include current 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.
12
<PAGE>
Notes to Financial Statements (Continued)
6. Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Value Fund
Value Fund B Class C Class
-----------------------------------------------------------
Six Months Year 9/6/94(2) Six Months 11/29/95(3)
Ended Ended to Ended to
5/31/96(1) 11/30/95 11/30/94 5/31/96(1) 11/30/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ....................... $22.5900 $19.300 $20.280 $22.760 $22.510
Income from investment
operations:
Net investment income
(loss)(4)........................ (0.044) 0.141 0.011 (0.043) none
Net realized and
unrealized gain
(loss) from security
transactions .................... 2.559 3.549 (0.991) 2.563 0.250
-------- ------- ------- ------- -------
Total from investment
operations ....................... 2.515 3.690 (0.980) 2.520 0.250
-------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income .............. (0.0950) (0.150) none (0.280) none
Distributions from net
realized
gain on security
transactions ................... (0.8900) (0.250) none (0.890) none
-------- ------- ------- ------- -------
Total distributions............... (0.9850) (0.400) none (1.170) none
Net asset value,
end of period ................... $24.1200 $22.590 $19.300 $24.110 $22.760
======== ======= ======= ======= =======
Total return(5)................... 11.55% 19.55% (4.83%) 11.57% (6)
Ratios/supplemental data:
Net assets, end of
period (000 omitted) ............. $9,517 $5,788 $1,455 $2,111 $5
Ratio of expenses to
average net assets ............... 2.16% 2.18% 2.16% 2.16% (6)
Ratio of net investment
income to average net assets..... (0.39%) 0.48% 0.05% (0.39%) (6)
Portfolio turnover................ 95% 65% 14% 95% (6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Value Fund Institutional Class
-------------------------------------------------------------
Six Months Year Year Year 11/9/92(2)
Ended Ended Ended Ended to
5/31/96(1) 11/30/95 11/30/94 11/30/93 11/30/9(2)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period ....................... $22.860 $19.400 $20.140 $17.750 $17.090
Income from investment
operations:
Net investment income
(loss)4 ........................ 0.070 0.297 0.195 0.092 0.004
Net realized and
unrealized gain
(loss) from security
transactions ................... 2.580 3.628 (0.685) 3.158 0.656
------- ------- ------- ------- -------
Total from investment
operations ..................... 2.650 3.925 (0.490) 3.250 0.660
------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income .............. (0.300) (0.215) (0.080) (0.040) none
Distributions from net
realized
gain on security
transactions ................... (0.890) (0.250) (0.170) (0.820) none
------- ------- ------- ------- -------
Total distributions.............. (1.190) (0.465) (0.250) (0.860) none
Net asset value,
end of period .................. $24.320 $22.860 $19.400 $20.140 $17.750
======= ======= ======= ======= =======
Total return5..................... 12.12% 20.76% (2.51%) 19.00% 3.86%
Ratios/supplemental data:
Net assets, end of
period (000 omitted) ........... $8,223 $7,294 $6,385 $5,476 $1,558
Ratio of expenses to
average net assets ............. 1.16% 1.18% 1.16% 1.34% 1.63%
Ratio of net investment
income
to average net assets........... 0.61% 1.48% 1.05% 0.55% 0.69%
Portfolio turnover............... 95% 65% 14% 32% 68%
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(3) Date of initial public offering.
(4) The six months ended 5/31/96 per share information was based on the average
shares outstanding method.
(5) Does not include contingent deferred sales charge for Value Fund B Class
(1%-4% depending upon the holding period) and for Value Fund C Class (1%).
(6) The ratios of expenses and net income to average net assets, portfolio
turnover and total return have been omitted as management believes such
ratios and returns for this relatively short period are not meaningful.
13
<PAGE>
This semi-annual report is for the information of Value Fund shareholders,
but it may be used with prospective investors when preceded or accompanied by
a current PROSPECTUS for Value 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
Enterprise Fund
DelCap Fund
Value Fund
U.S. Growth Fund
FOR TOTAL RETURN
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
Delaware Fund
FOR GLOBAL DIVERSIFICATION
Emerging Markets Fund
New Pacific Fund
International Equity Fund
World Growth Fund
Global Assets Fund
Global Bond Fund
FOR CURRENT INCOME
Delchester Fund
Corporate Income Fund
Federal Bond Fund
U.S. Government Fund
Limited-Term Government Fund
FOR TAX-FREE CURRENT INCOME
Tax-Free Pennsylvania Fund
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
MONEY MARKET FUNDS
Delaware Cash Reserve
U.S. Government Money Fund
Tax-Free Money Fund
CLOSED-END EQUITY/INCOME
Dividend and Income Fund
Global Dividend and Income Fund
For a prospectus of any other Delaware Group fund, contact your financial
adviser or Delaware Group.
* Delaware Group Dividend and Income Fund and Delaware Group Global Dividend
and Income Fund purchases can be made through any registered broker.
<PAGE>
Be sure to consult your financial adviser when making investment decisions.
Mutual funds can be a valuable part of your financial plan; however, shares
of the Funds are not FDIC or NCUSIF insured, are not guaranteed by any bank
or any credit union, are not obligations of or deposits of any bank or any
credit union, and involve investment risk, including the possible loss of
principal. Shares of the Fund are not bank or credit union deposits.
This report must be preceded or accompanied by a current Value Fund
PROSPECTUS and the Delaware Group Fund Performance Update for the most recently
completed calendar quarter.
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia
1818 Market Street
Philadelphia, PA 19103-3682
Nationwide (800) 523-4640
SECURITIES DEALERS ONLY
Nationwide (800) 362-7500
FINANCIAL INSTITUTIONS REPRESENTATIVES ONLY
Nationwide (800) 659-BANK (2265)
Copy Rights Delaware Distributors, L.P.
Printed in the U.S.A. on recycled paper.
SA - 021 [5/96] PP7/96
- ------------------
DELAWARE
GROUP
VALUE FUND
- ------------------
1996
SEMI-ANNUAL
REPORT
A Tradition of Sound Investing Since 1929
DELAWARE
GROUP
===============
Philadelphia * London
