<PAGE>
Supplement Dated April 15, 1995
to the Current Prospectuses
of the Following Delaware Group Funds
Delaware Group Delaware Fund, Inc., Delaware
Group Trend Fund, Inc., Delaware Group Value
Fund, Inc., Delaware Group Decatur Fund, Inc.,
Delaware Group DelCap Fund, Inc., Delaware
Group Delchester High-Yield Bond Fund, Inc.,
Delaware Group Government Fund, Inc.,
Delaware Group Tax-Free Fund, Inc., Delaware
Group Treasury Reserves, Inc., Delaware Group
Tax-Free Money, Inc., Delaware Group Cash
Reserve, Inc.
On March 29, 1995, shareholders of each of the above
referenced Funds or, as relevant, the series thereof, approved a new
Investment Management Agreement with Delaware Management
Company, Inc. ("DMC"), an indirect wholly-owned subsidiary of
Delaware Management Holdings, Inc. ("DMH"). The approval of
new Investment Management Agreements was subject to the
completion of the merger (the "Merger") between DMH and a wholly-
owned subsidiary of Lincoln National Corporation ("Lincoln
National") which occurred on April 3, 1995. Accordingly, the
previous Investment Management Agreements terminated and the new
Investment Management Agreements became effective on that date.
As a result of the Merger, DMC and its two affiliates,
Delaware Service Company, Inc., the Funds' shareholder servicing,
dividend disbursing and transfer agent and Delaware Distributors,
L.P., the Funds' national distributor became indirect wholly-owned
subsidiaries of Lincoln National. Lincoln National, with headquarters
in Fort Wayne, Indiana, is a diversified organization with operations
in many aspects of the financial services industry, including insurance
and investment management.
Under the new Investment Management Agreements, DMC
will be paid at the same annual fee rates and on the same terms as it
was under the previous Investment Management Agreements. In
addition, the investment approach and operation of each Fund and, as
relevant, each series of a Fund, will remain substantially unchanged.
PS-OTH-4/95
<PAGE> 1
DECATUR INCOME FUND PROSPECTUS
INSTITUTIONAL January 30, 1995
-----------------------------------------------------------------
1818 MARKET STREET, PHILADELPHIA, PA 19103
FOR MORE INFORMATION ABOUT THE DECATUR INCOME FUND INSTITUTIONAL CLASS CALL
THE DELAWARE GROUP AT 800-828-5052.
This Prospectus describes the Decatur Income Fund Institutional Class (the
"Class") of Decatur Income Fund series (the "Series") of Delaware Group Decatur
Fund, Inc. (the "Fund"). The Series' objective is to achieve the highest
possible current income by investing primarily in common stocks that provide
the potential for income and capital appreciation without undue risk to
principal.
Shares of this Class are available for purchase only by certain enumerated
institutions and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge and without a 12b-1 charge. See
Buying Shares.
This Prospectus relates only to the Class and sets forth information that
you should read and consider before you invest. Please retain it for future
reference. Part B of the Fund's registration statement, dated January 30,
1995, as it may be amended from time to time, contains additional information
about the Series and has been filed with the Securities and Exchange
Commission. Part B is incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors, L.P. at the
above address or by calling the above number. The Series' financial
statements appear in its Annual Report, which will accompany any response to
requests for Part B.
The Series also offers the Decatur Income Fund A Class and the Decatur
Income Fund B Class. Shares of the Decatur Income Fund A Class carry a
front-end sales charge and are subject to ongoing distribution expenses.
Shares of the Decatur Income Fund B Class are subject to ongoing distribution
expenses and a contingent deferred sales charge upon redemption.
TABLE OF CONTENTS
Cover Page................................ 1
Synopsis.................................. 2
Summary of Expenses....................... 3
Financial Highlights...................... 4
Investment Objective and Policies
Investment Strategy..................... 5
Suitability............................. 8
Buying Shares............................. 9
Redemption and Exchange................... 11
Dividends and Distributions............... 13
Taxes..................................... 13
Calculation of Net Asset Value Per Share.. 14
Management of the Fund.................... 15
Appendix A--Ratings....................... 18
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
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 SERIES
ARE NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY CREDIT UNION OR ANY
BANK, ARE NOT OBLIGATIONS OF ANY CREDIT UNION OR ANY BANK, AND INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE SERIES
ARE NOT CREDIT UNION OR BANK DEPOSITS.
- -------------------------------------------------------------------------------
1
<PAGE> 2
SYNOPSIS
Capitalization
The Series offers the Decatur Income Fund Institutional Class, the Decatur
Income Fund A Class and the Decatur Income Fund B Class. The Fund has a
present authorized capitalization of seven hundred fifty million shares of
capital stock with a $1.00 par value per share. Fifty million shares of that
stock have been allocated to the Decatur Income Fund Institutional Class,
four hundred fifty million shares have been allocated to the Decatur Income Fund
A Class and fifty million shares have been allocated to the Decatur Income Fund
B Class. See Shares under Management of the Fund.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment manager
for the Fund. The Manager or its affiliate, Delaware International Advisers
Ltd., manages the other funds in the Delaware Group. Delaware Distributors,
L.P. (the "Distributor") is the national distributor for the Fund and for all
of the other mutual funds in the Delaware Group. Delaware Service Company, Inc.
(the "Transfer Agent") is the shareholder servicing, dividend disbursing and
transfer agent for the Fund and for all of the other mutual funds in the
Delaware Group. See Management of the Fund.
Purchase Price
Shares of the Class offered by this Prospectus are available at net asset
value, without a front-end or contingent deferred sales charge and are not
subject to distribution fees under a Rule 12b-1 distribution plan. See Buying
Shares.
Investment Objective
The objective of the Series is to achieve the highest possible current income
by investing primarily in common stocks that provide the potential for income
and capital appreciation without undue risk to principal. See Investment
Objective and Policies.
Special Considerations
1. The Series may invest up to 15% of its net assets in high-yield securities
(junk bonds) and greater risks may be involved with an investment in the
Series. See High Yield, High Risk Securities under Investment Objective and
Policies.
2. The Series may enter into options and futures transactions for hedging
purposes to counterbalance portfolio volatility. While the Series does not
engage in options and futures for speculative purposes, there are risks which
result from use of these instruments by the Series, and the investor should
review the descriptions of such in this Prospectus. See Futures Contracts and
Options under Investment Objective and Policies.
Open-End Investment Company
The Fund, which was organized as a Maryland corporation in 1983 and was
previously organized as a Delaware corporation in 1956, is an open-end
management investment company and the Series' portfolio of assets is
diversified. See Shares under Management of the Fund.
Investment Management Fees
The Manager furnishes investment management services to the Fund, subject
to the supervision and direction of the Board of Directors. Under the
Investment Management Agreement, the annual compensation paid to the Manager
is equal to .60% on the first $100 million of the Series' average daily net
assets, .525% on the next $150 million, .50% on the next $250 million and
.475% on the average daily net assets in excess of $500 million, less all
directors' fees paid to the unaffiliated directors by the Series. See
Management of the Fund.
Redemption and Exchange
Shares of the Fund are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
2
<PAGE> 3
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
Annual Operating Expenses
Shareholder Transaction Expenses (as a percentage of average daily net assets)
- -------------------------------------------------------------- ---------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases Management Fees............................ 0.49%
(as a percentage of offering price)..... None 12b-1 Expenses............................. None
Maximum Sales Charge Imposed on Reinvested Other Operating Expenses................... 0.21%
Dividends (as a percentage of offering -----
price)................................ None Total Operating Expenses................. 0.70%
Redemption Fees........................... None* =====
Exchange Fees............................. None**
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Class will bear directly or
indirectly. The Annual Operating Expenses are based on the actual expenses
incurred by the Class during the period January 13, 1994 through November 30,
1994, and have been annualized. *CoreStates Bank, N.A. currently charges $7.50
per redemption for redemptions payable by wire. **Exchanges are subject to the
requirements of each fund and a front-end sales charge may apply. See Decatur
Income Fund A Class and Decatur Income Fund B Class for expense information
about those classes.
The following example illustrates the expenses that an investor would pay on
a $1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted in the table
above, the Fund charges no redemption fees.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$7 $23 $40 $88
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
3
<PAGE> 4
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements
of Delaware Group Decatur Fund, Inc.-Decatur Income Fund (formerly known as
Decatur Fund I) and have been audited by Ernst & Young LLP, independent
auditors. The data should be read in conjunction with the financial
statements, related notes, and the report of Ernst & Young LLP covering such
financial information and highlights, all of which are incorporated by
reference into Part B. Further information about the Series' performance is
contained in its Annual Report to shareholders. A copy of the Series' Annual
Report (including the report of Ernst & Young LLP) may be obtained from the
Fund upon request at no charge.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Period
1/13/94
through Year Ended
11/30/94(2) 11/30/94(1) 11/30/93(1) 11/30/92(1) 11/30/91(1) 11/30/90(1) 11/30/89(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,Beginning
of Period................. $16.72 $18.24 $17.20 $15.76 $14.53 $19.07 $16.89
Income From Investment
- ----------------------
Operations
----------
Net Investment Income....... 0.59 0.67 0.78 0.78 0.83 0.93 1.00
Net Gains or Losses on
Securities (both realized
and unrealized)......... (1.10) (0.73) 1.79 1.47 1.37 (2.93) 2.25
------ ------ ------ ------ ------ ------ ------
Total From Investment
Operations.............. ($0.51) ($0.06) $2.57 $2.25 $2.20 ($2.00) $3.25
------ ------ ------ ------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net
investment income)........ (0.62) (0.86) (0.68) (0.81) (0.97) (1.05) (0.81)
Distributions (from capital
gains).................... none (1.75) (0.85) none none (1.49) (0.26)
Returns of Capital.......... none none none none none none none
------ ------ ------ ------ ------ ------ ------
Total Distributions....... ($0.62) ($2.61) ($1.53) ($0.81) ($0.97) ($2.54) ($1.07)
------ ------ ------ ------ ------ ----- ------
Net Asset Value, End of
Period.................... $15.59 $15.57 $18.24 $17.20 $15.76 $14.53 $19.07
====== ====== ====== ====== ====== ====== ======
- -------------------------------------------------------------------------------------------------------------------------
Total Return................ (0.45%) (0.57%)(3) 15.85%(3) 14.55%(3) 15.46%(3) (12.04%)(3) 19.84%(3)
- ------------
- -------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000's omitted)........... $182,105 $1,153,890 $1,512,194 $1,508,206 $1,579,521 $1,560,641 $1,848,129
Ratio of Expenses to Average
Daily Net Assets.......... 0.70% 0.81% 0.71% .72% .70% .70% .67%
Ratio of Net Investment
Income to Average Daily
Net Assets.............. 4.03% 3.92% 4.34% 4.55% 5.18% 5.78% 5.48%
Portfolio Turnover Rate..... 92% 92% 80% 79% 78% 44% 38%
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Year Ended
11/30/88(1) 11/30/87(1) 11/30/86(1) 11/30/85(1)
<S> <C> <C> <C> <C>
Net Asset Value,Beginning
of Period................. $15.86 $19.32 $17.20 $15.41
Income From Investment
- ----------------------
Operations
----------
Net Investment Income....... 0.76 0.77 0.79 0.94
Net Gains or Losses on
Securities (both realized
and unrealized)......... 2.75 (1.43) 3.69 2.76
------ ------ ------ ------
Total From Investment
Operations.............. $3.51 ($0.66) $4.48 $3.70
------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net
investment income)........ (0.73) (0.80) (0.80) (0.91)
Distributions (from capital
gains).................... (1.75) (2.00) (1.56) (1.00)
Returns of Capital.......... none none none none
------ ------ ------ ------
Total Distributions....... ($2.48) ($2.80) ($2.36) ($1.91)
------ ------ ------ ------
Net Asset Value, End of
Period.................... $16.89 $15.86 $19.32 $17.20
====== ====== ====== ======
- -----------------------------------------------------------------------------------
Total Return................ 25.20%(3) (4.48%)(3) 29.27%(3) 26.20%(3)
- ------------
- -----------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000's omitted)........... $1,517,445 $1,346,411 $1,228,952 $850,393
Ratio of Expenses to Average
Daily Net Assets.......... .73% .69% .63% .65%
Ratio of Net Investment
Income to Average Daily
Net Assets.............. 4.80% 4.37% 4.84% 6.21%
Portfolio Turnover Rate..... 39% 56% 72% 75%
</TABLE>
- ------------
(1) Data for the Decatur Income Fund Institutional Class are derived from data
of the Decatur Income Fund A Class (formerly known as Decatur Fund I class),
which prior to May 2, 1994 was not subject to Rule 12b-1 distribution
expenses.
(2) Data are derived from data for the Decatur Income Fund Institutional Class
(formerly known as Decatur Fund I (Institutional) class), which commenced
operations on January 13, 1994. Ratios and total return have been
annualized.
(3) Does not reflect current maximum sales charges that are or were in effect
applicable to Decatur Income Fund A Class.
4
<PAGE> 6
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT STRATEGY
The objective of the Series is to earn the highest possible current income
by investing primarily in common stocks that provide the potential for income
and capital appreciation without undue risk to principal. This is a
fundamental policy and cannot be changed without shareholder approval. The
Series primarily aims to earn and pay its shareholders dependable current
income. It seeks to accomplish this objective while attempting to limit risk
to principal through prudent investing. Although it is not a fundamental
policy, the Series will invest at least 65% of its total assets in
income-producing securities.
The Manager carefully selects the Series' diversified group of securities
for their high yields relative to risk involved.
The Series generally invests in common stocks which it believes have better
potential for income and appreciation than fixed income securities. It may,
however, invest its assets in all classes of securities, bonds, preferred
stocks and common stocks in any proportions deemed prudent for defensive
purposes under existing market and economic conditions. All available types of
securities, including foreign securities (which may include American or
European Depository Receipts), are under continuous study, and the management
regularly transfers investments between securities or types of securities in
carrying out its investment policy. It is the Series' policy not to purchase
and sell securities with a view toward obtaining short-term profits. However,
the Series may hold securities for any period of time.
The Series may invest in repurchase agreements, but will not normally do so
except to invest excess cash balances.
Since common stocks tend to fluctuate more than fixed income securities, the
value of the Series' shares will accordingly vary. Consequently, appreciation
may be obtained in periods of generally rising markets; while in declining
markets, the value of its shares may, of course, decline.
The Series may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many
privately placed and legally restricted securities to be freely traded among
certain institutional buyers such as the Series. The Series may invest no more
than 10% of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day functions of determining whether or not individual Rule
144A Securities are liquid for purposes of the Series' 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to
consider the following factors in determining the liquidity of a Rule 144A
Security: (i) the frequency of trades and trading volume for the security;
(ii) whether at least three dealers are willing to purchase or sell the
security and the number of potential purchasers; (iii) whether at least two
dealers are making a market in the security; (iv) the nature of the security
and the nature of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Series'
holdings of illiquid securities exceed the Series' 10% limit on investment in
such securities, the Manager will determine what action shall be taken to
ensure that the Series continues to adhere to such limitation.
High Yield, High Risk Securities
The Series may invest up to 15% of its net assets in high risk, high yield
fixed income securities. These securities are rated lower than BBB by Standard
& Poor's Corporation ("S&P") and Baa by Moody's Investors Service, Inc.
("Moody's") or, if unrated, are considered by the Manager to be of equivalent
quality. The Series will not invest in securities which are rated lower than C
by S&P or Ca by Moody's or, if unrated, are considered by the Manager to be of
a quality that is lower than such ratings. See Appendix A to this Prospectus
for more rating information. Fixed income securities of this type are
considered to be of poor standing and predominantly speculative. Such
securities are subject to a substantial degree of credit risk.
In the past, in the opinion of the Manager, the high yields from these bonds
have more than compensated for their higher default rates. There can be no
assurance, however, that yields will continue to offset default rates on these
bonds in the future. The Manager intends to maintain an adequately diversified
portfolio of these bonds. While diversification can help to reduce the effect
of an individual default on the Series, there can be no assurance that
diversification will protect the Series from widespread bond defaults brought
about by a sustained economic downturn.
5
<PAGE> 7
Medium and low-grade bonds held by the Series may be issued as a consequence
of corporate restructurings, such as leveraged buy-outs, mergers,
acquisitions, debt recapitalizations or similar events. Also these bonds are
often issued by smaller, less creditworthy companies or by highly leveraged
(indebted) firms, which are generally less able than more financially stable
firms to make scheduled payments of interest and principal. The risks posed by
bonds issued under such circumstances are substantial.
The economy and interest rates may affect these high yield, high risk
securities differently from other securities. Prices have been found to be
less sensitive to interest rate changes than higher rated investments, but
more sensitive to adverse economic changes or individual corporate
developments. Also, during an economic downturn or substantial period of
rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service principal and
interest payment obligations, to meet projected business goals and to obtain
additional financing. Changes by recognized rating agencies in their rating of
any security and in the ability of an issuer to make payments of interest and
principal will also ordinarily have a more dramatic effect on the values of
these investments than on the values of higher-rated securities. Such changes
in value will not affect cash income derived from these securities, unless the
issuers fail to pay interest or dividends when due. Such changes will,
however, affect the Series' net asset value per share.
Portfolio Loan Transactions
The Series may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other
security transactions.
The major risk to which the Series would be exposed on a loan transaction is
the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Series will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to
be received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Futures Contracts
The Series may enter into futures contracts on stocks, stock indices,
interest rates and foreign currencies, and purchase or sell options on such
futures contracts. These activities will not be entered into for speculative
purposes, but rather for hedging purposes and to facilitate the ability to
quickly deploy into the stock market the Series' positions in cash, short-term
debt securities and other money market instruments, at times when the Series'
assets are not fully invested in equity securities. Such positions will
generally be eliminated when it becomes possible to invest in securities that
are appropriate for the Series.
A futures contract is a bilateral agreement providing for the purchase and
sale of a specified type and amount of a financial instrument, or for the
making and acceptance of a cash settlement, at a stated time in the future
for a fixed price. By its terms, a futures contract provides for a specified
settlement date on which the securities underlying the contract are delivered,
or in the case of securities index futures contracts, the difference between
the price at which the contract was entered into and the contract's closing
value is settled between the purchaser and seller in cash. Futures contracts
differ from options in that they are bilateral agreements, with both the
purchaser and the seller equally obligated to complete the transaction. In
addition, futures contracts call for settlement only on the expiration date,
and cannot be "exercised" at any other time during their term.
The purchase or sale of a futures contract also differs from the purchase or
sale of a security or the purchase of an option in that no purchase price is
paid or received. Instead, an amount of cash or cash equivalents, which varies
but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin" as a good faith deposit. This
amount is generally maintained in a segregated account at the custodian bank.
Subsequent payments to and from the broker, referred to as "variation margin,"
are made on a daily basis as the value of the index or instrument underlying
the futures contract fluctuates, making positions in the futures contract more
or less valuable, a process known as "marking to the market."
Purchases or sales of stock or bond index futures contracts are used for
hedging purposes to attempt to protect the Series' current or intended
investments from broad fluctuations in stock or bond prices. For example, the
Series may sell stock or bond index futures contracts in anticipation of or
during a market decline to attempt to offset the decrease in market value of
the Series' securities portfolio that might otherwise result. If such decline
occurs, the loss in value of portfolio securities may be offset, in whole or
part, by gains on the futures position. When the Series is not fully invested
in the securities market and anticipates a significant market advance, it may
purchase stock or bond index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the cost of
securities that the Series intends to purchase. As such purchases are made,
the corresponding positions in stock or bond index futures contracts will be
closed out.
6
<PAGE> 8
Interest rate futures contracts are purchased or sold for hedging purposes to
attempt to protect against the effects of interest rate changes on the Series'
current or intended investments in fixed income securities. For example, if
the Series owned long-term bonds and interest rates were expected to increase,
the Series might sell interest rate futures contracts. Such a sale would have
much the same effect as selling some of the long-term bonds in the Series'
portfolio. However, since the futures market is more liquid than the cash
market, the use of interest rate futures contracts as a hedging technique
allows the Series to hedge its interest rate risk without having to sell its
portfolio securities. If interest rates did increase, the value of the debt
securities in the portfolio would decline, but the value of the Series'
interest rate futures contracts would be expected to increase at approximately
the same rate, thereby keeping the net asset value of the Series from
declining as much as it otherwise would have. On the other hand, if interest
rates were expected to decline, interest rate futures contracts could be
purchased to hedge in anticipation of subsequent purchases of long-term bonds
at higher prices. Because the fluctuations in the value of the interest rate
futures contracts should be similar to those of long-term bonds, the Series
could protect itself against the effects of the anticipated rise in the value
of long-term bonds without actually buying them until the necessary cash
became available or the market had stabilized. At that time, the interest rate
futures contracts could be liquidated and the Series' cash reserve could then
be used to buy long-term bonds on the cash market.
The Series may purchase and sell foreign currency futures contracts for
hedging purposes to attempt to protect its current or intended investments
denominated in foreign currencies from fluctuations in currency exchange
rates. Such fluctuations could reduce the dollar value of portfolio securities
denominated in foreign currencies, or increase the cost of foreign-denominated
securities to be acquired, even if the value of such securities in the
currencies in which they are denominated remains constant. The Series may sell
futures contracts on a foreign currency, for example, when it holds securities
denominated in such currency and it anticipates a decline in the value of such
currency relative to the dollar. In the event such decline occurs, the
resulting adverse effect on the value of foreign-denominated securities may be
offset, in whole or in part, by gains on the futures contracts. However, if
the value of the foreign currency increases relative to the dollar, the
Series' loss on the foreign currency futures contract may or may not be offset
by an increase in the value of the securities because a decline in the price
of the security stated in terms of the foreign currency may be greater than
the increase in value as a result of the change in exchange rates. Conversely,
the Series could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing futures contracts
on the relevant currency, which could offset, in whole or in part, the
increased cost of such securities resulting from a rise in the dollar value of
the underlying currencies. When the Series purchases futures contracts under
such circumstances, however, and the price of securities to be acquired
instead declines as a result of appreciation of the dollar, the Series will
sustain losses on its futures position which could reduce or eliminate the
benefits of the reduced cost of portfolio securities to be acquired.
The Series may also purchase and write options on the types of futures
contracts in which the Series may invest, and enter into related closing
transactions. Options on futures are similar to options on securities, as
described below, except that options on futures give the purchaser the right,
in return for the premium paid, to assume a position in a futures contract,
rather than to actually purchase or sell the futures contract, at a specified
exercise price at any time during the period of the option. In the event that
an option written by the Series is exercised, the Series will be subject to
all the risks associated with the trading of futures contracts, such as
payment of variation margin deposits. In addition, the writer of an option on
a futures contract, unlike the holder, is subject to initial and variation
margin requirements on the option position.
At any time prior to the expiration of a futures contract, a trader may
elect to close out its position by taking an opposite position on the contract
market on which the position was entered into, subject to the availability of
a secondary market, which will operate to terminate the initial position.
Likewise, a position in an option on a futures contract may be terminated by
the purchaser or seller prior to expiration by effecting a closing purchase or
sale transaction, subject to availability of a secondary market, which is the
purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
Series may realize a profit or a loss when closing out a futures contract or
an option on a futures contract.
To the extent that interest or exchange rates or securities prices move in
an unexpected direction, the Series may not achieve the anticipated benefits
of investing in futures contracts and options thereon, or may realize a loss.
To the extent that the Series purchases an option on a futures contract and
fails to exercise the option prior to the exercise date, it will suffer a loss
of the premium paid. Further, the possible lack of a secondary market could
prevent the Series from closing out its positions relating to futures. See
Part B for a further discussion of this investment technique.
7
<PAGE> 9
Options
The Series may write covered call options on individual issues as well as
write call options on stock indices. The Series may also purchase put options
on individual issues and on stock indices. The Manager will employ these
techniques in an attempt to protect appreciation attained, to offset capital
losses and to take advantage of the liquidity available in the option markets.
The ability to hedge effectively using options on stock indices will depend,
in part, on the correlation between the composition of the index and the
Series' portfolio as well as the price movement of individual securities. The
Series does not currently intend to write or purchase stock index options.
While there is no limit on the amount of the Series' assets which may be
invested in covered call options, the Series will not invest more than 2% of
its net assets in put options. The Series will only use Exchange-traded
options.
Call Options
Writing Covered Call Options--A covered call option obligates the Series to
sell one of its securities for an agreed price up to an agreed date. When the
Series writes a call, it receives a premium and agrees to sell the callable
securities to a purchaser of a corresponding call during the call period
(usually not more than nine months) at a fixed exercise price regardless of
market price changes during the call period. The advantage is that the Series
receives premium income for the limited purpose of offsetting the costs of
purchasing put options or offsetting any capital loss or decline in market
value of the security. However, if the Manager's forecast is wrong, the Series
may not fully participate in the market appreciation if the security's price
rises.
Writing a Call Option on Stock Indices--Writing a call option on stock
indices is similar to the writing of a call option on an individual stock.
Stock indices used will include, but not be limited to, the S&P 500, the S&P
100 and the S&P Over-The-Counter ("OTC") 250.
Put Options
Purchasing a Put Option--A put option gives the Series the right to sell one
of its securities for an agreed price up to an agreed date. The advantage is
that the Series can be protected should the market value of the security
decline. However, the Series must pay a premium for this right which would be
lost if the option is not exercised.
Purchasing a Put Option on Stock Indices--Purchasing a protective put option
on stock indices is similar to the purchase of protective puts on an
individual stock. Indices used will include, but not be limited to, the S&P
500, the S&P 100 and the S&P OTC 250.
Closing Transactions--Closing transactions essentially let the Series offset
a put option or covered call option prior to its exercise or expiration. If
the Series cannot effect a closing transaction, it may have to hold a security
it would otherwise sell or deliver a security it might want to hold.
* * *
While the Series is permitted under certain circumstances to borrow money,
it does not normally do so. The Series will not purchase investment securities
while it has an outstanding borrowing.
Part B sets forth other more specific investment restrictions, some of which
limit the percentage of assets which may be invested in certain types of
securities.
SUITABILITY
The Series may be suitable for investors who want a current return with the
potential for capital appreciation. The investor should be willing to accept
the risks associated with investments in common stocks and other
income-producing securities, including high yield, high risk fixed income
securities.
Naturally, the Series cannot assure a specific rate of return or that
principal will be protected. The value of the Series' shares can be expected
to fluctuate depending upon market conditions. For this reason, the Series is
not appropriate for short-term investors. However, through the cautious
selection and supervision of its portfolio, the Series will strive to achieve
its objective of current income without undue risk to principal.
Ownership of the Series' shares reduces the bookkeeping and administrative
inconveniences connected with the direct purchase and management of a
portfolio of diversified securities.
An investor should not consider a purchase of Series shares as equivalent to
a complete investment program. The Delaware Group includes a family of funds,
generally available through registered investment dealers, which may be used
in concert to create a more complete investment program.
8
<PAGE> 10
BUYING SHARES
The Distributor serves as the national distributor for the Fund. Shares of the
Class may be purchased directly by contacting the Fund or its agent or through
authorized investment dealers. All purchases are at net asset value. There is no
sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by: (a) retirement plans
introduced by persons not associated with brokers or dealers that are primarily
engaged in the retail securities business and rollover individual retirement
accounts from such plans; (b) tax-exempt employee benefit plans of the Manager
or its affiliates and securities dealer firms with a selling agreement with the
Distributor; (c) institutional advisory accounts of the Manager or its
affiliates and those having client relationships with Delaware Investment
Advisers, a division of the Manager, or its affiliates and their corporate
sponsors, as well as subsidiaries and related employee benefit plans and
rollover individual retirement accounts from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customer for
whom such financial institution is exercising investment discretion in
purchasing shares of the Class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.
Decatur Income Fund A Class and
Decatur Income Fund B Class
In addition to offering the Decatur Income Fund Institutional Class of shares,
the Series also offers the Decatur Income Fund A Class and the Decatur Income
Fund B Class, which are described in a separate prospectus relating only to
those classes. Shares of Decatur Income Fund A Class and Decatur Income Fund B
Class may be purchased through authorized investment dealers or directly by
contacting the Fund or its agent. The Decatur Income Fund A Class carries a
front-end sales charge and has annual 12b-1 expenses equal to a maximum of .30%.
The maximum front-end sales charge as a percentage of the offering price is
5.75% (6.10% as a percentage of the amount invested) and is reduced on certain
transactions of $100,000 or more. The Decatur Income Fund B Class has no
front-end sales charge but is subject to annual 12b-1 expenses equal to a
maximum of 1%. Shares of Decatur Income Fund B Class and certain shares of the
Decatur Income Fund A Class may be subject to a contingent deferred sales charge
upon redemption. Sales or service compensation available in respect of such
classes, therefore, differs from that available in respect of the Decatur Income
Fund Institutional Class. All three classes of shares have a proportionate
interest in the underlying portfolio of securities of the Series. Total
Operating Expenses incurred by the Decatur Income Fund A Class, as a percentage
of average daily net assets, for the fiscal year ended November 30, 1994 were
0.81%. Such expenses reflect the 12b-1 Plan expenses for that class which apply
beginning May 2, 1994. Based on expenses incurred by the Decatur Income Fund A
Class during its fiscal year ended November 30, 1994, the expenses of the
Decatur Income Fund B Class are expected to be 1.70%, including 12b-1 expenses,
for the fiscal year ending November 30, 1995. See Part B for performance
information about the Decatur Income Fund A Class and the Decatur Income Fund B
Class. To obtain a prospectus relating to such classes, contact the Distributor.
9
<PAGE> 11
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application must be completed, signed
and sent with a check payable to Decatur Income Fund Institutional Class, to
1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to Decatur Income Fund Institutional Class. Your check
should be identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by wire to
CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include your
name(s) and your account number for the class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Fund's Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application to Decatur Income Fund Institutional Class, to
1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your
Client Services Representative by telephone at 800-828-5052 prior to sending
your wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group and you
qualify to purchase shares of the Class, you may write and authorize an exchange
of part or all of your investment into the Class. Shares of the Decatur Income
Fund B Class and the Class B Shares of the other funds in the Delaware Group
offering such a class of shares may not be exchanged into the Class. If you wish
to open an account by exchange, call your Client Services Representative at
800-828-5052 for more information.
Investing through Your Investment Dealer
You can make a purchase of Class shares through most investment dealers who,
as part of the service they provide, must transmit orders promptly. They may
charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when such exchange is open.
The effective date of a purchase made through an investment dealer is the
date the order is received by the Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received,
unless it is received after the time the share price is determined, as noted
above. Those received after such time will be effective the next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase or exchange. If a purchase
is cancelled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right, upon 60
days' written notice, to redeem accounts that remain under $250 as a result of
redemptions.
10
<PAGE> 12
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer
for details.
Your shares will be redeemed or exchanged based on the net asset value next
determined after we receive your request in good order. Redemption and exchange
requests received in good order after the time the net asset value of shares is
determined, as noted above, will be processed on the next business day. See
Purchase Price and Effective Date under Buying Shares. Except as otherwise noted
below, for a redemption request to be in "good order," you must provide your
Class account number, account registration, and the total number of shares or
dollar amount of the transaction. With regard to exchanges, you must also
provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Fund at 800-828-5052.
The Fund will honor written redemption requests of shareholders who recently
purchased shares by check, but will not mail the proceeds until it is reasonably
satisfied the purchase check has cleared, which may take up to 15 days from the
purchase date. The Fund will not honor telephone redemptions for Class shares
recently purchased by check unless it is reasonably satisfied that the purchase
check has cleared. You can avoid this potential delay if you purchase shares by
wiring Federal Funds. The Fund reserves the right to reject a telephone
redemption request or delay payment of telephone redemption proceeds if there
has been a recent change to the shareholder's address of record.
Shares of the Class may be exchanged into any other Delaware Group mutual
fund provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Class, such exchange will be exchanged at
net asset value. Shares of the Class may not be exchanged into the Class B
Shares of the funds in the Delaware Group. The Fund reserves the right to reject
exchange requests at any time. The Fund may suspend or terminate, or amend the
terms of, the exchange privilege upon 60 days' written notice to shareholders.
Different redemption and exchange methods are outlined below. There is no fee
charged by the Fund or the Distributor for redeeming or exchanging your
shares. You may also have your investment dealer arrange to have your shares
redeemed or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders with respect to an account,
including selection of any of the features described below, shall continue in
effect until revoked or modified in writing and until such time as such written
revocation or modification has been received by the Fund or its agent.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your Class shares or to request an exchange of any or
all your Class shares into another mutual fund in the Delaware Group, subject
to the same conditions and limitations as other exchanges noted above. The
request must be signed by all owners of the account or your investment dealer
of record.
For redemptions of more than $50,000, or when the proceeds are not sent to the
shareholder(s) at the address of record, the Fund requires a signature by all
owners of the account and may require a signature guarantee. Each signature
guarantee must be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
The redemption request is effective at the net asset value next determined
after it is received in good order. Payment is normally mailed the next business
day, but no later than seven days, after receipt of your request. The Fund does
not issue certificates for shares unless you submit a specific request. If your
shares are in certificate form, the certificate must accompany your request and
also be in good order.
Shareholders also may submit their written request for redemption or exchange
by facsimile transmission at the following number: 215-972-8864.
11
<PAGE> 13
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge)
for you. If you choose to have your shares in certificate form, you can only
redeem or exchange by written request and you must return your certificates.
The Telephone Redemption service enabling redemption proceeds to be mailed to
the account address of record and the Telephone Exchange service, both of
which are described below, are automatically provided unless the Fund receives
written notice from the shareholder to the contrary. The Fund reserves the
right to modify, terminate or suspend these procedures upon 60 days' written
notice to shareholders. It may be difficult to reach the Fund by telephone
during periods when market or economic conditions lead to an unusually large
volume of telephone requests.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Class shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, the shareholder is acknowledging prior
receipt of a prospectus for the fund into which shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record. Payment is normally mailed the next business day,
but no more than seven days, after receipt of the request.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, the Fund requires a written authorization and may require that you
have your signature guaranteed. For your protection, your authorization must be
on file. If you request a wire, your funds will normally be sent the next
business day. CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted
from your redemption. If you ask for a check, it will normally be mailed the
next business day, but no later than seven days, after receipt of your request
to your predesignated bank account. There are no fees for this method, but the
mail time may delay getting funds into your bank account. Simply call your
Client Services Representative prior to the time the net asset value is
determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any fund in
the Delaware Group under the same registration. As with the written exchange
service, telephone exchanges are subject to the same conditions and limitations
as other exchanges noted above. Telephone exchanges may be subject to
limitations as to amounts or frequency.
12
<PAGE> 14
DIVIDENDS AND DISTRIBUTIONS
The Fund currently intends to make payments from the Series' net investment
income monthly. Payments from the Series' net realized securities profits, if
any, will be made during the first quarter of the next fiscal year.
During the fiscal year ended November 30, 1994, dividends totaling $0.62 per
share of the Class were paid from net investment income. In addition to a
dividend payment from net investment income, a capital gain of $0.42 per share
was paid from realized securities profits of the Class on January 5, 1995 to
shareholders of record December 27, 1994.
Each class of the Series will share proportionately in the investment income
and expenses of the Series, except that the Class will not incur any
distribution fee under the Series' 12b-1 Plans which apply to the Decatur Income
Fund A Class and the Decatur Income Fund B Class.
Both dividends and distributions,if any, are automatically reinvested in your
account at net asset value.
TAXES
The Series has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue Code (the
"Code"). As such, the Series will not be subject to federal income tax, or to
any excise tax, to the extent its earnings are distributed as provided in the
Code.
The Series intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to you as ordinary income, even
though received in additional shares. For corporate investors, dividends from
net investment income will generally qualify in part for the corporate
dividends-received deduction. The portion of dividends paid by the Series that
so qualifies will be designated each year in a notice from the Fund to the
Series' shareholders. For the fiscal year ended November 30, 1994, 100% of the
Series' dividends from net investment income qualified for the corporate
dividends-received deduction.
Distributions paid by the Series from long-term capital gains, received in
additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Series. The Series does not seek to realize any
particular amount of capital gains during a year; rather, realized gains are a
byproduct of Series management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Series are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
13
<PAGE> 15
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders
of record on a specified date in one of those months, but which, for
operational reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by the Series and
received by the shareholder on December 31 of the year declared.
The sale of shares of the Series is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two series or portfolios of a mutual fund). Any loss
incurred on sale or exchange of the Series' shares which had been held for six
months or less will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state and local
taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of the Series are exempt from Pennsylvania
county personal property taxes.
Each year, the Fund will mail you information on the tax status of the Series'
dividends and distributions. Shareholders will also receive each year
information as to the portion of dividend income, if any, that is derived from
U.S. government securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Series.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Account Registration Form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information only.
Prospective investors should contact their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in the
Series.
See Accounting and Tax Issues and Distributions and Taxes in Part B for
additional information on tax matters relating to the Series and its
shareholders.
CALCULATION OF NET ASSET
VALUE PER SHARE
The purchase and redemption price of the Class is the net asset value
("NAV") per share next determined after the order is received. The NAV is
computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when such exchange is open.
The NAV per share is computed by adding the value of all securities and other
assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are valued
at their fair value as determined in good faith and in a method approved by the
Fund's Board of Directors.
Each of the Series' three classes will bear, pro-rata, all of the common
expenses of the Series. The net asset values of all outstanding shares of each
class of the Series will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Series represented by the
value of shares of that class. All income earned and expenses incurred by the
Series will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Series represented by the value of shares
of such classes, except that the Class will not incur any of the expenses under
the Series' 12b-1 Plans and the Decatur Income Fund A and B Classes alone will
bear the 12b-1 Plan fees payable under their respective Plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the net asset value of and dividends paid to each class of the Series
will vary.
14
<PAGE> 16
MANAGEMENT OF THE FUND
Directors
The business and affairs of the Fund are managed under the direction of its
Board of Directors. Part B contains additional information regarding the
directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the Delaware
Group since 1938. On November 30, 1994, the Manager and its affiliate, Delaware
International Advisers Ltd., were supervising in the aggregate more than $24
billion in assets in the various institutional (approximately $15,544,258,000)
and investment company (approximately $9,237,192,000) accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). By reason of its percentage ownership of DMH common
stock and through a Voting Trust Agreement with certain other DMH shareholders,
Legend Capital Group, L.P. ("Legend") controls DMH and the Manager. As General
Partners of Legend, Leonard M. Harlan and John K. Castle have the ability to
direct the voting of more than a majority of the shares of DMH common stock and
thereby control the Manager.
On December 12, 1994, DMH entered into a merger agreement with Lincoln
National Corporation ("Lincoln National") and a newly-formed subsidiary of
Lincoln National. Pursuant to that agreement, the new subsidiary will be merged
with and into DMH. This merger will result in DMH becoming a wholly-owned
subsidiary of Lincoln National. The transaction is expected to close in the
early spring of 1995, subject to the receipt of all regulatory approvals and
satisfaction of conditions precedent to closing, including the approval
described below. Lincoln National, with headquarters in Fort Wayne, Indiana, is
a diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management.
The Manager manages the Series' portfolio and makes investment decisions which
are implemented by the Fund's Trading Department. The Manager also pays the
salaries of all the directors, officers and employees of the Fund who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee of .60% on the first $100 million of average daily net assets of the Series,
.525% on the next $150 million, .50% on the next $250 million and .475% on the
average daily net assets in excess of $500 million, less all directors' fees
paid to the unaffiliated directors by the Series. Investment management fees
paid by the Series for the fiscal year ended November 30, 1994 were 0.49% of
average daily net assets.
Completion of the above-described merger transaction will result in an
assignment, and consequently a termination, of the existing investment
management agreement between the Manager and the Fund. Subject to approval by
the Fund's Board, Series shareholders will be asked to vote on a new investment
management agreement with the Manager, to become effective at or about the
time the transaction is to be completed. It is not anticipated that there will
be any changes in the compensation or other material terms of the existing
investment management agreement as a result of the transaction. Details of the
transaction will be included in the proxy materials to be furnished to
shareholders in connection with a shareholder meeting expected to be held some
time in early 1995.
John B. Fields has primary responsibility for making day-to-day investment
decisions for the Series. He has been the Senior Portfolio Manager of this
Series since 1993. Mr. Fields, who has 24 years experience in investment
management, earned a bachelor's degree and an MBA from Ohio State University.
Before joining the Delaware Group in 1992, he was Director of Domestic Equity
Risk Management at DuPont. Prior to that, he was Director of Equity Research at
Comerica Bank. Mr. Fields is a member of the Financial Analysts Society of
Wilmington, Delaware.
In making investment decisions for the Series, Mr. Fields works with a team of
12 portfolio managers and analysts, each of whom specializes in a different
industry sector and makes recommendations accordingly. Mr. Fields also regularly
consults with Wayne A. Stork and Richard G. Unruh, Jr. Mr. Stork, Chairman of
the Board of the Manager and the Fund's Board of Directors, is a graduate of
Brown University and attended New York University's Graduate School of Business
Administration. Mr. Stork joined the Delaware Group in 1962 and has served in
various executive capacities at different times within the Delaware
organization. Mr. Unruh is a graduate of Brown University and received his MBA
from the University of Pennsylvania's Wharton School. He joined the Delaware
Group in 1982 after 19 years of investment management experience with Kidder,
Peabody & Co. Inc. Mr. Unruh was named an executive vice president of the Fund
in 1994. He is also a member of the Board of Directors of the Manager and was
named an executive vice president of the Manager in 1994. He is on the Board of
Directors of Keystone Insurance Company and AAA Mid-Atlantic and is a former
president and current member of the Advisory Council of the Bond Club of
Philadelphia. It is not anticipated that there will be any changes in the
personnel responsible for managing the Series as a result of the above-described
merger transaction.
15
<PAGE> 17
Portfolio Trading Practices
The Series normally will not invest for short-term trading purposes. However,
the Series may sell securities without regard to the length of time they have
been held. The degree of portfolio activity will affect brokerage costs of the
Series and may affect taxes payable by the Series' shareholders to the extent
of any net realized capital gains. Given the Series' investment objective, its
annual portfolio turnover rate is not expected to exceed 100%.
During the past two fiscal years, the Series' portfolio turnover rates were
80% for 1993 and 92% for 1994.
The Series uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, the Series may consider a
broker/dealer's sales of Series shares in placing portfolio orders and may place
orders with broker/dealers that have agreed to defray certain Series expenses
such as custodian fees.
Performance Information
From time to time, the Series may quote total return performance of the Class
in advertising and other types of literature. Total return will be based on a
hypothetical $1,000 investment, reflecting the reinvestment of all
distributions at net asset value. Each presentation will include the average
annual total return for one-, five- and ten-year periods. The Series may also
advertise aggregate and average total return information concerning the Class
over additional periods of time.
Because securities prices fluctuate, investment results of the Class will
fluctuate over time and past performance should not be considered as a
representation of future results.
Statements and Confirmations
You will receive quarterly statements of your account as well as
confirmations of all investments and redemptions. You should examine statements
and confirmations immediately and promptly report any discrepancy by calling
your Client Services Representative.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an unaudited
semi-annual report. These reports provide detailed information about the Fund's
investments and performance. The Fund's fiscal year ends on November 30.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor
for the Series under an Amended and Restated Distribution Agreement dated as of
September 6, 1994. It bears all of the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the shareholder
servicing, dividend disbursing and transfer agent for the Series under an
Agreement dated June 29, 1988. The unaffiliated directors review service fees
paid to the Transfer Agent. Certain recordkeeping and other shareholder services
that otherwise would be performed by the Transfer Agent may be performed by
certain other entities and the Transfer Agent may elect to enter into an
agreement to pay such other entities for those services. In addition,
participant account maintenance fees may be assessed for certain recordkeeping
provided as part of retirement plan and administration service packages. These
fees are based on the number of participants in the plan and the various
services selected by the employer. Fees will be quoted upon request and are
subject to change.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
16
<PAGE> 18
Expenses
The Series is responsible for all of its own expenses other than those borne
by the Manager under the Investment Management Agreement and those borne by the
Distributor under the Amended and Restated Distribution Agreement. For the
period January 13, 1994 (date of initial public offering) through November 30,
1994, the ratio of operating expenses to average daily net assets for the Class
was 0.70%, annualized.
Shares
The Decatur Income Fund is the original series of Delaware Group Decatur
Fund, Inc., which is an open-end management investment company, commonly known
as a mutual fund. The Series' portfolio of assets is diversified. The Fund was
organized as a Maryland corporation on March 4, 1983. The Fund was previously
organized as a Delaware corporation in 1956. Prior to May 2, 1994, the Decatur
Income Fund series was named the Decatur I Series (which was known and did
business as Decatur Fund I).
Series shares have a par value of $1.00, equal voting rights, except as noted
below, and are equal in all other respects. All Fund shares have noncumulative
voting rights which means that the holders of more than 50% of the Fund's shares
voting for the election of directors can elect 100% of the directors if they
choose to do so. Under Maryland law, the Fund is not required, and does not
intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the Investment Company Act of 1940.
Shareholders of 10% or more of the Fund's shares may request that a special
meeting be called to consider the removal of a director. Shares of each series
of the Fund will vote separately on any matter which affects only that series.
Shares of the Series will have a priority over shares of the Fund's other series
in the assets and income of the Series and will vote separately on any matter
that affects only the Series.
The Series also offers the Decatur Income Fund A Class and the Decatur Income
Fund B Class of shares which represent proportionate interests in the assets
of the Series and have the same voting and other rights and preferences as the
Class, except that shares of the Class are not subject to, and may not vote on
matters affecting the Distribution Plans under Rule 12b-1 relating to the
Decatur Income Fund A Class and the Decatur Income Fund B Class.
From May 2, 1994 to September 5, 1994, the Decatur Income Fund Institutional
Class was known as the Decatur Income Fund (Institutional) class and prior to
May 2, 1994, it was known as the Decatur Fund I (Institutional) class. From May
2, 1994 to September 5, 1994, the Decatur Income Fund A Class was known as the
Decatur Income Fund class and prior to May 2, 1994, it was known as the Decatur
Fund I class.
17
<PAGE> 19
APPENDIX A--RATINGS
The Series has the ability to invest up to 15% of its net assets in high
risk, high yield fixed income securities. The table set forth below shows the
asset composition, based on rating categories, of such securities held by the
Series. Certain securities may not be rated because the rating agencies were
either not asked to provide ratings (e.g., many issuers of privately placed
bonds do not seek ratings) or because the rating agencies declined to provide
a rating for some reason, such as insufficient data. The table below shows the
percentage of the Series' high risk, high yield securities which are not rated.
The information contained in the table was prepared based on a dollar weighted
average of the Series' portfolio composition based on month end data for the
fiscal year ended November 30, 1994. The paragraphs following the table contain
excerpts from Moody's and S&P's rating descriptions. These credit ratings
evaluate only the safety of principal and interest and do not consider the
market value risk associated with high yield securities.
Rating Moody's Average Weighted
and/or Percentage of
S&P Portfolio
-------------- ----------------
Ba/BB 1.05%
B/B 8.74%
Caa/CCC 0.34%
Not Rated/Other 0.23%
General Rating Information
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to be
the best quality. They carry the smallest degree of investment risk;
Aa--judged to be of high quality by all standards; A--possess favorable
attributes and are considered "upper medium" grade obligations;
Baa--considered as medium grade obligations. Interest payments and principal
security appear adequate for the present but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time; Ba--judged to have speculative elements; their future cannot be
considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position characterizes
bonds in this class; B--generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small;
Caa--are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest;
Ca--represent obligations which are speculative in a high degree. Such issues
are often in default or have other marked shortcomings; C--the lowest rated
class of bonds and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.
18
<PAGE> 20
Decatur
Income
Fund
-------------
Institutional
For more information contact the Delaware
Group at 800-828-5052.
PROSPECTUS
Investment Manager
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103 JANUARY 30, 1995
National Distributor
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent (PHOTO OF GEORGE WASHINGTON
Delaware Service Company, Inc. CROSSING THE DELAWARE RIVER)
1818 Market Street
Philadelphia, PA 19103
Legal Counsel
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
Independent Auditors
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
Custodian
Chemical Bank
450 West 33rd Street DELAWARE
New York, NY 10001 GROUP
========
P-051-1/95-RRD
Printed in the U.S.A.
