<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>
April 15, 1995
Delaware Group Delaware Fund, Inc.
Delaware Fund
Supplement To Prospectuses Dated December 30, 1994
The following revises the portfolio manager information under
Management of the Fund.
In April 1995, Gary A. Reed joined George H. Burwell as a
senior portfolio manager on the Delaware Fund management team.
Mr. Reed has primary responsibility for making day-to-day
investment decisions for the fixed income component of Delaware
Fund. Since 1989, Mr. Reed has served as a senior portfolio
manager for another fixed income portfolio in the Delaware Group
that is managed in a style which is similar to that of Delaware
Fund. Mr. Reed holds an AB in Economics from the University of
Chicago and an MA in Economics from Columbia University. He
began his career in 1978 with the Equitable Life Assurance
Company in New York City, where he specialized in credit
analysis. Prior to joining the Delaware Group in 1989, Mr. Reed
was Vice President and Manager of the fixed income department at
Irving Trust Company in New York.
PS-002-4/95
<PAGE> 1
DELAWARE FUND PROSPECTUS
DIVIDEND GROWTH FUND December 30, 1994
A CLASS SHARES
B CLASS SHARES
-------------------------------------------------
1818 MARKET STREET, PHILADELPHIA, PA 19103
FOR PROSPECTUS AND PERFORMANCE:NATIONWIDE 800-523-4640 PHILADELPHIA 988-1333
INFORMATION ON EXISTING ACCOUNTS:(SHAREHOLDERS ONLY)
NATIONWIDE 800-523-1918 PHILADELPHIA 988-1241
DEALER SERVICES: (BROKER/DEALERS ONLY)
NATIONWIDE 800-362-7500 PHILADELPHIA 988-1050
Delaware Group Delaware Fund, Inc. (the "Fund") is a professionally-managed
mutual fund of the series type. This Prospectus describes the shares of the
Common Stock series, which is known as and does business as the Delaware Fund
series ("Delaware Fund"), and the Dividend Growth Fund series ("Dividend
Growth Fund") (collectively, the "Series"). Delaware Fund's objective is to
seek a balance of capital appreciation, income and preservation of capital.
Dividend Growth Fund's objective is to seek current income and capital
appreciation.
Delaware Fund offers the Delaware Fund A Class ("Class A Shares") and the
Delaware Fund B Class ("Class B Shares") and Dividend Growth Fund offers the
Dividend Growth Fund A Class ("Class A Shares") and the Dividend Growth Fund
B Class ("Class B Shares") (collectively, the "Classes").
Class A Shares may be purchased at the public offering price, which is
equal to the next determined net asset value per share, plus a front-end
sales charge, and Class B Shares may be purchased at a price equal to the
next determined net asset value per share. The Class A Shares of each Series
are subject to a maximum front-end sales charge of 5.75% and annual 12b-1
Plan expenses. The Class B Shares of each Series are subject to a contingent
deferred sales charge ("CDSC") which may be imposed on redemptions made
within six years of purchase and 12b-1 Plan expenses which are higher than
those to which Class A Shares are subject and are assessed against the Class
B Shares for no longer than approximately eight years after purchase. See
Summary of Expenses, and Automatic Conversion of Class B Shares under Buying
Shares. These alternatives permit an investor to choose the method of
purchasing shares that is most beneficial given the amount of the purchase,
the length of time the investor expects to hold the shares and other
circumstances. See Buying Shares.
The minimum initial investment with respect to the Class A Shares is $250
and with respect to the Class B Shares is $1,000. Subsequent investments must
be at least $25 with respect to the Class A Shares and $100 with respect to
the Class B Shares. Class B Shares are also subject to a maximum purchase
limitation of $250,000. The Fund will therefore reject any order for purchase
of more than $250,000 for Class B Shares. See Buying Shares.
This Prospectus relates only to the Classes 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 December 30,
1994, as it may be amended from time to time, contains additional information
about the Fund and has been filed with Securities and Exchange Commission.
Part B is incorporated by reference into this Prospectus and is available,
without charge, by writing to Delaware Distributors, Inc. at the above
address or by calling the above numbers. Each Series' financial statements
appear in its respective Annual Report, which will accompany any response to
requests for Part B.
Delaware Fund also offers the Delaware Fund Institutional Class and
Dividend Growth Fund also offers the Dividend Growth Fund Institutional
Class. Those classes are available only to certain enumerated institutions,
have no front-end or contingent deferred sales charge and are not subject to
annual 12b-1 Plan expenses.
<PAGE> 2
TABLE OF CONTENTS
Cover Page................................ 1
Synopsis.................................. 2
Summary of Expenses....................... 4
Financial Highlights...................... 6
Investment Objectives and Policies
Investment Strategy..................... 10
Suitability............................. 14
The Delaware Difference
Plans and Services...................... 15
Retirement Planning....................... 16
Buying Shares............................. 17
Redemption and Exchange................... 24
Dividends and Distributions............... 28
Taxes..................................... 29
Calculation of Offering Price and
Net Asset Value Per Share............... 30
Management of the Fund.................... 30
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
FUND 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 FUND ARE NOT CREDIT UNION OR BANK DEPOSITS.
- -------------------------------------------------------------------------------
1
<PAGE> 3
SYNOPSIS
Capitalization
The Fund offers the Delaware Fund series, consisting of the Delaware Fund A
Class, the Delaware Fund B Class and the Delaware Fund Institutional Class,
and the Dividend Growth Fund series, consisting of the Dividend Growth Fund A
Class, the Dividend Growth Fund B Class and the Dividend Growth Fund
Institutional Class. The Fund has a present authorized capitalization of five
hundred million shares of capital stock with a $1.00 par value per share. One
hundred million shares of that stock have been allocated to the Delaware Fund
A Class, fifty million shares have been allocated to the Delaware Fund B
Class, fifty million shares have been allocated to the Delaware Fund
Institutional Class, fifty million shares have been allocated to the Dividend
Growth Fund A Class, fifty million shares have been allocated to the Dividend
Growth Fund B Class and twenty-five million shares have been allocated to the
Dividend Growth Fund Institutional 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, Inc.
(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.
Sales Charge
The price of each of the Class A Shares includes a maximum front-end sales
charge of 5.75% of the offering price, which is equivalent to 6.10% of the
amount invested for Delaware Fund A Class and 6.09% for Dividend Growth Fund
A Class, reduced on certain transactions of at least $100,000 but under
$1,000,000. For purchases of $1,000,000 or more, the front-end sales charge is
eliminated. Class A Shares are also subject to annual 12b-1 Plan expenses.
The price of each of the Class B Shares is equal to the net asset value per
share. Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed
within two years of purchase; (ii) 3% if shares are redeemed during the third or
fourth year following purchase; (iii) 2% if shares are redeemed during the fifth
year following purchase and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class B Shares are also subject to annual 12b-1 Plan
expenses for no longer than approximately eight years after purchase. See Buying
Shares and Automatic Conversion of Class B Shares thereunder; and Distribution
(12b-1) and Service under Management of the Fund.
Minimum Investment
The minimum initial investment for the Class A Shares is $250 and for the
Class B Shares is $1,000 (see Part B or contact your investment dealer for
each Retirement Plan minimum), and subsequent investments must be at least $25
for the Class A Shares and $100 for the Class B Shares. Class B Shares are also
subject to a maximum purchase limitation of $250,000. See Buying Shares.
Investment Objectives
The objective of the Delaware Fund is to seek a balance of capital
appreciation, income and preservation of capital. The objective of the Dividend
Growth Fund is to seek current income and capital appreciation. See Investment
Objectives and Policies.
2
<PAGE> 4
Special Considerations
The Dividend Growth Fund may enter into options and futures transactions for
hedging purposes to counterbalance portfolio volatility. While the Dividend
Growth Fund 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 on March 4, 1983 and
previously organized as a Delaware corporation in 1937, is an open-end
management investment company and each 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 Agreements, the annual compensation paid to the Manager is equal to:
for Delaware Fund, .60% on the first $100 million of 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 the Series'
proportionate share of all directors' fees paid to the unaffiliated directors
of the Fund; and, for Dividend Growth Fund, .60% on the first $500 million of
average daily net assets and .50% on the average daily net assets in excess of
$500 million. See Management of the Fund.
Redemption and Exchange
The Class A Shares of the Fund are redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Fund nor the Distributor assesses a charge for redemptions or exchanges of
Class A Shares, except for certain redemptions of shares purchased at net asset
value which may be subject to a contingent deferred sales charge if such
purchases triggered the payment of a dealer's commission. The Class B Shares
are redeemed or exchanged at the net asset value calculated after receipt of
the redemption or exchange request, less, in the case of redemptions, any
applicable CDSC. Neither the Fund nor the Distributor assesses any additional
charges for redemptions or exchanges of the Class B Shares. See Redemption and
Exchange.
3
<PAGE> 5
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses applicable
to the Class A and Class B Shares follows:
Delaware Fund
Class A Class B
Shareholder Transaction Expenses Shares Shares
- -------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................. 5.75% None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................. None None
Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, whichever is lower)............. None* 4.00%*
Redemption Fees........................................ None** None**
Delaware Fund
Annual Operating Expenses Class A Class B
(as a percentage of average daily net assets) Shares Shares
- -------------------------------------------------------------------------------
Management Fees........................................ 0.52% 0.52%
12b-1 Expenses (including service fees)................ 0.16%***/(+) 1.00%***
Other Operating Expenses............................... 0.29% 0.29%(++)
----- -----
Total Operating Expenses........................... 0.97% 1.81%
===== =====
Dividend
Growth Fund
Class A Class B
Shareholder Transaction Expenses Shares Shares
- -------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................. 5.75% None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................. None None
Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, whichever is lower)............. None* 4.00%*
Redemption Fees........................................ None** None**
<TABLE>
<CAPTION>
Dividend
Growth Fund
Annual Operating Expenses Class A Class B
(as a percentage of average daily net assets) Shares Shares
- -------------------------------------------------------------------------------
<S> <C> <C>
Management Fees (after voluntary waivers).............. 0.00%**** 0.00%****
12b-1 Expenses (including service fees)................ 0.30%*** 1.00%***
Other Operating Expenses (after voluntary waivers)..... 0.95%**** 0.95%****/++
----- -----
Total Operating Expenses........................... 1.25% 1.95%
===== =====
</TABLE>
<PAGE> 6
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in either of the Classes will bear
directly or indirectly. *With respect to the Class A Shares, purchases of $1
million or more may be made at net asset value; however, if in connection with
any such purchase, certain dealer commissions are paid to financial advisers
through whom such purchases are effected, a contingent deferred sales charge
of 1% will be imposed in the event of certain redemptions within 12 months of
purchase ("Limited CDSC"). The Class B Shares are subject to a CDSC of: (i)
4% if shares are redeemed within two years of purchase; (ii) 3% if shares are
redeemed during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; (iv) 1% if
shares are redeemed during the sixth year following purchase; and (v) 0%
thereafter. See Contingent Deferred Sales Charge for Certain Purchases of
Class A Shares Made at Net Asset Value under Redemption and Exchange, and
Deferred Sales Charge Alternative-Class B Shares under Buying Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire. ***Class A Shares and Class B Shares of each Series are
subject to separate 12b-1 Plans. Long-term shareholders may pay more than the
economic equivalent of the maximum front-end sales charges permitted by rules
of the National Association of Securities Dealers, Inc. (the "NASD"). (+)As the
portion of Fund assets attributable to the Delaware Fund A Class of shares
acquired after June 1, 1992 increases, this figure may increase or decrease
somewhat pursuant to the current 12b-1 fee calculation approved by the Board
of Directors. See Distribution (12b-1) and Service. (++)"Other Operating
Expenses" for Delaware Fund B Class are estimates derived from actual expenses
incurred by Delaware Fund A Class for its fiscal year ended October 31, 1994.
++"Other Operating Expenses" for the Dividend Growth Fund B Class are derived
from actual expenses incurred by Dividend Growth Fund A Class during the fiscal
year ended October 31, 1994, after giving effect to the voluntary expense
waiver. ****The Manager had elected voluntarily to waive that portion, if
any, of the annual management fees payable by the Dividend Growth Fund and
to reimburse the Series to the extent necessary to ensure that the "Total
Operating Expenses" of this Series did not exceed .95% (exclusive of taxes,
interest, brokerage commissions, extraordinary expenses and 12b-1 expenses)
during the commencement of the public offering of the Series through December
31, 1994. This waiver has been extended through June 30, 1995. If the voluntary
expense waivers were not in effect, it is estimated that the "Total Operating
Expenses," as a percentage of average daily net assets, would be 3.26% and
3.96% for the Dividend Growth Fund A Class and Dividend Growth Fund B Class,
respectively, reflecting Management Fees of 0.50%. See Delaware Fund
Institutional Class and Dividend Growth Fund Institutional Class for expense
information about those classes.
4
<PAGE> 7
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 tables above, the Fund charges no redemption fees with respect to the
Class A Shares and, if shares are redeemed within six years after purchase,
the Fund charges a CDSC with respect to the Class B Shares.
<TABLE>
<CAPTION>
Delaware Fund Dividend Growth Fund
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $67(1) $87 $108 $170 Class A Shares $70(1) $95 $122 $200
Class B Shares $58 $87 $118 $191(2) Class B Shares $60 $91 $125 $209(2)
</TABLE>
An investor would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
<TABLE>
<CAPTION>
Delaware Fund Dividend Growth Fund
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $67 $87 $108 $170 Class A Shares $70 $95 $122 $200
Class B Shares $18 $57 $ 98 $191(2) Class B Shares $20 $61 $105 $209(2)
</TABLE>
(1) Under certain circumstances, a Limited CDSC, which has not been reflected
in this calculation, may be imposed in the event of certain redemptions
within 12 months of purchase. See Contingent Deferred Sales Charge for
Certain Purchases of Class A Shares Made at Net Asset Value under
Redemption and Exchange.
(2) At the end of no more than approximately eight years after purchase, Class
B Shares of a Series will be automatically converted into Class A Shares of
that Series. The example above assumes conversion of Class B Shares at the
end of year eight. However, the conversion may occur as late as three months
after the eighth anniversary of purchase, during which time the higher 12b-1
Plan fees payable by Class B Shares will continue to be assessed. See
Automatic Conversion of Class B Shares under Buying Shares for a description
of the automatic conversion feature. Years nine and ten reflect expenses of
the Class A Shares. The conversion will constitute a tax-free exchange for
federal income tax purposes. See Taxes.
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.
5
<PAGE> 8
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Delaware Fund, Inc.-Delaware Fund and Delaware Group Delaware
Fund, Inc.-Dividend Growth Fund 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 reports 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 their Annual Reports to shareholders. A copy of each Series'
Annual Report (including the report of Ernst & Young LLP) may be obtained
from the Fund upon request at no charge.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Delaware Fund A Class
-------------------------------------------------------------------------------------
Year Ended
10/31/94(1) 10/31/93(1) 10/31/92(1) 10/31/91 10/31/90 10/31/89 10/31/88 10/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........ $19.430 $18.720 $18.810 $16.190 $17.480 $15.250 $16.850 $23.200
Income From Investment Operations
- ---------------------------------
Net Investment Income....................... 0.615 0.631 0.660 0.757 0.856 0.796 0.551 0.331
Net Gains (Losses) on Securities
(both realized and unrealized)............ (0.285) 1.509 1.490 3.033 (1.366) 2.384 2.259 (1.971)
------- ------- ------- ------- ------- ------- ------- -------
Total From Investment Operations.......... 0.330 2.140 2.150 3.790 (0.510) 3.180 2.810 (1.640)
------- ------- ------- ------- ------- ------- ------- -------
Less Distributions
- ------------------
Dividends (from net investment income)...... (0.600) (0.660) (0.700) (0.880) (0.780) (0.950) (0.320) (0.400)
Distributions (from capital gains).......... (1.160) (0.770) (1.540) (0.290) none none (4.090) (4.310)
Returns of Capital.......................... none none none none none none none none
------- ------- ------- ------- ------- ------- ------- -------
Total Distributions....................... (1.760) (1.430) (2.240) (1.170) (0.780) (0.950) (4.410) (4.710)
------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period.............. $18.000 $19.430 $18.720 $18.810 $16.190 $17.480 $15.250 $16.850
======= ======= ======= ======= ======= ======= ======= =======
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(2)............................. 1.80% 11.91% 12.37% 24.32% (3.17%) 21.66% 22.03% (9.14%)
- ------------
- -----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)... $456,074 $507,528 $487,343 $453,449 $349,873 $361,625 $328,650 $320,854
Ratio of Expenses to Average
Daily Net Assets.......................... .97% .89% .79% .71% .75% .76% .77% .73%
Ratio of Net Investment Income to Average
Daily Net Assets.......................... 3.31% 3.27% 3.64% 4.29% 4.99% 4.73% 4.01% 1.64%
Portfolio Turnover Rate..................... 142% 160% 144% 212% 147% 129% 180% 205%
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Delaware Fund A Class
- -------------------------------------------------------------------------------
Year Ended
10/31/86 10/31/85
<S> <C> <C>
Net Asset Value, Beginning of Period..... $20.860 $19.070
Income From Investment Operations
- ---------------------------------
Net Investment Income....................... 0.554 0.717
Net Gains (Losses) on Securities
(both realized and unrealized)............ 4.486 2.883
------- -------
Total From Investment Operations.......... 5.040 3.600
------- -------
Less Distributions
- ------------------
Dividends (from net investment income)...... (0.700) (0.800)
Distributions (from capital gains).......... (2.000) (1.010)
Returns of Capital.......................... none none
------- -------
Total Distributions....................... (2.700) (1.810)
------- -------
Net Asset Value, End of Period.............. $23.200 $20.860
======= =======
- -------------------------------------------------------------------------------
Total Return(2)............................. 26.85% 20.47%
- ------------
- -------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)... $405,856 $341,269
Ratio of Expenses to Average
Daily Net Assets.......................... .69% .75%
Ratio of Net Investment Income to Average
Daily Net Assets.......................... 2.53% 3.71%
Portfolio Turnover Rate..................... 104% 132%
</TABLE>
- ------------
(1) Reflects 12b-1 distribution expenses beginning June 1, 1992.
(2) Does not reflect any maximum sales charges that are or were in effect nor
the 1% Limited CDSC that would apply in the event of certain redemptions
within 12 months of purchase. See Contingent Deferred Sales Charge for
Certain Purchases of Class A Shares Made at Net Asset Value.
6
<PAGE> 10
FINANCIAL HIGHLIGHTS
(Continued)
- -------------------------------------------------------------------------------
Delaware Fund
B Class
-------------
Period
9/6/94(1)
to
10/31/94
Net Asset Value, Beginning of Period. $18.340
Income From Investment Operations
- ---------------------------------
Net Investment Income........................... 0.070
Net Gains (Losses) on Securities
(both realized and unrealized) (0.280)
--------
Total From Investment Operations.............. (0.210)
--------
Less Distributions
- ------------------
Dividends (from net investment income) (0.150)
Distributions (from capital gains).............. none
Returns of Capital.............................. none
--------
Total Distributions........................... (0.150)
--------
Net Asset Value, End of Period.................. $17.980
========
- ------------------------------------------------------------------
Total Return.................................... (1.14%)(1)/(2)
- ------------
- ------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted) $568
Ratio of Expenses to Average Daily Net Assets 1.81%(1)
Ratio of Net Investment Income to Average
Daily Net Assets............................... 2.47%(1)
Portfolio Turnover Rate......................... 142%
- ------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Does not include any contingent deferred sales charge which varies from
1%-4% depending upon the holding period for Delaware Fund B Class.
7
<PAGE> 11
FINANCIAL HIGHLIGHTS
(Continued)
- -------------------------------------------------------------------------------
Dividend
Growth Fund
A Class
-----------
Period
12/29/93(1)
to
10/31/94
Net Asset Value, Beginning of Period... $10.000
Income From Investment Operations
- ---------------------------------------
Net Investment Income.................. 0.136
Net Gains (Losses) on Securities
(both realized and unrealized) 0.784
-----
Total From Investment Operations..... 0.920
-----
Less Distributions
- ------------------
Dividends (from net investment income) (0.090)
Distributions (from capital gains)..... none
Returns of Capital..................... none
----
Total Distributions.................. (0.090)
-------
Net Asset Value, End of Period......... $10.830
=======
- ------------------------------------------------------------
Total Return........................... 11.09%(1)/(2)
- ------------
- ------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's
omitted).............................. $4,600
Ratio of Expenses to Average Daily
Net Assets............................ 1.25%(1)/(3)
Ratio of Net Investment Income to
Average Daily Net Assets.............. 1.96%(1)/(4)
Portfolio Turnover Rate................ 180%
- ------------
(1) Date of initial sale; ratios and total return have been annualized.
(2) Total return does not include maximum sales charge of 5.75% nor the 1%
Limited CDSC that would apply in the event of certain redemptions within
12 months of purchase. See Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares Made at Net Asset Value. Total return reflects
expense limitation referenced in Notes 3 and 4.
(3) Ratio of expenses to average daily net assets prior to expense limitation
was 3.26% for the period ended October 31, 1994.
(4) Ratio of net investment loss to average daily net assets prior to expense
limitation was (0.05%) for the period ended October 31, 1994.
8
<PAGE> 12
FINANCIAL HIGHLIGHTS
(Continued)
- -------------------------------------------------------------------------------
Dividend
Growth Fund
B Class
-----------
Period
9/6/94(1)
to
10/31/94
Net Asset Value, Beginning of Period... $10.900
Income From Investment Operations
- ---------------------------------
Net Investment Income.................. 0.027
Net Gains (Losses) on Securities
(both realized and unrealized) (0.077)
-------
Total From Investment Operations..... (0.050)
-------
Less Distributions
- ------------------
Dividends (from net investment
income).............................. (0.030)
Distributions (from capital gains).... none
Returns of Capital.................... none
-------
Total Distributions................. (0.030)
-------
Net Asset Value, End of Period........ $10.820
=======
- --------------------------------------------------------------
Total Return.......................... (0.46%)(1)/(2)
- ------------
- --------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's
omitted).............................. $115
Ratio of Expenses to Average Daily
Net Assets............................ 1.95%(1)/(3)
Ratio of Net Investment Income to
Average Daily Net Assets.............. 1.26%(1)/(4)
Portfolio Turnover Rate............... 180%
- ----------
(1) Date of initial sale; ratios have been annualized and total return has not
been annualized.
(2) Total return does not include any contingent deferred sales charge which
varies from 1%-4% depending upon the holding period for Dividend Growth
Fund B Class. Total return reflects the expense limitation referenced in
Notes 3 and 4.
(3) Ratio of expenses to average daily net assets prior to expense limitation
was 3.96% for the period ended October 31, 1994.
(4) Ratio of net investment loss to average daily net assets prior to expense
limitation was (0.75%) for the period ended October 31, 1994.
9
<PAGE> 13
INVESTMENT OBJECTIVES AND POLICIES
The objective of the Delaware Fund is to seek a balance of capital
appreciation, income and preservation of capital.
The objective of the Dividend Growth Fund is to seek current income and
capital appreciation.
Although each Series will constantly strive to attain its objective, there
can be no assurance that it will be obtained. The objective of each Series
cannot be changed without shareholder approval.
INVESTMENT STRATEGY
Delaware Fund--As a "balanced" fund, the Delaware Fund will generally
invest at least 25% of its assets in fixed income securities, including U.S.
government securities and corporate bonds. The remainder of the Series will
be allocated to equity securities principally, including convertible
securities, and also to cash and cash equivalents. A portion of the Series'
investment in certain convertible securities may be deemed fixed income in
nature for purposes of this 25% fixed income allocation. The Series may also
invest in foreign securities.
The Series uses a dividend-oriented valuation strategy to select individual
securities in which it will invest. In seeking capital appreciation, the
Series invests primarily in common stocks of established companies believed to
have a potential for long-term capital growth. In seeking current income and
preservation of capital, in addition to capital appreciation, the Series
invests in various types of fixed income securities, including U.S. government
and government agency securities and corporate bonds. The Series generally
invests in bonds that are rated in the top four grades by a
nationally-recognized rating agency (e.g., Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's Corporation ("S&P")) at the time of purchase,
or, if unrated, are determined to be equivalent to the top four grades in the
judgment of the Manager. The fourth grade is considered medium grade and may
have some speculative characteristics. Typically, the maturity of the bonds
will range between five and 30 years. The Series may invest not more than 5%
of its assets in convertible debentures rated below investment grade.
The Series will analyze existing and expected economic and market conditions
and seek to identify those market sectors or individual securities that are
expected to benefit from those conditions. Its appraisal of these economic
conditions will determine the types of securities it will hold and the
degree of investment emphasis placed upon capital appreciation and income.
Dividend Growth Fund--The Dividend Growth Fund will seek to achieve its
objective by investing primarily in income-producing common stocks, with a
focus on common stocks that the Manager believes have the potential for
above average dividend increases over time. Under normal circumstances, the
Series will generally invest at least 65% of its total assets in dividend
paying common stocks.
In selecting stocks for the Series, the Manager will focus primarily on
dividend paying common stocks issued by companies with market capitalizations
in excess of $100 million, but is not precluded from purchasing shares of
companies with market capitalizations of less than $100 million. In seeking
stocks with potential for above average dividend increases, the Manager will
consider such factors as the historical growth rate of a dividend, the
frequency of prior dividend increases, the issuing company's potential to
generate cash flows and the price/earnings multiple of the stock relative to
the market. The Manager will generally avoid stocks that it believes are
overvalued and may select stocks with current dividend yields that are lower
than the current yield of the S&P 500 Stock Index in exchange for anticipated
dividend growth.
While management believes that the Series' objective may best be attained
by investing in common stocks, the Series may also invest in other securities
including, but not limited to, convertible and preferred securities, rights
and warrants to purchase common stock, and various types of fixed income
securities, such as U.S. government and government agency securities,
corporate debt securities, and bank obligations and may also engage in futures
transactions. The Series may invest in foreign securities.
Mortgage-Backed Securities--Each Series may invest in mortgage-backed
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities or government sponsored corporations. Each Series also may
invest in securities issued by certain private, non-government corporations,
such as financial institutions, if the securities are fully collateralized at
the time of issuance by securities or certificates issued or guaranteed by
the U.S. government, its agencies or instrumentalities. Two principal types
of mortgage-backed securities are collateralized mortgage obligations (CMOs)
and real estate mortgage investment conduits (REMICs).
CMOs are debt securities issued by U.S. government agencies or by financial
institutions and other mortgage lenders and collateralized by a pool of
mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in
sequence as the underlying mortgages are repaid. Prepayment may shorten the
stated maturity of the obligation and can result in a loss of premium, if any
10
<PAGE> 14
has been paid. Certain of these securities may have variable or floating
interest rates and others may be stripped (securities which provide only the
principal or interest feature of the underlying security).
REMICs, which were authorized under the Tax-Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured
by an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
CMOs and REMICs issued by private entities are not government securities and
are not directly guaranteed by any government agency. They are secured by the
underlying collateral of the private issuer. The Series will invest in such
private-backed securities only if they are 100% collateralized at the time of
issuance by securities issued or guaranteed by the U.S. government, its
agencies, or instrumentalities. The Series currently invest in
privately-issued CMOs and REMICs only if they are rated at the time of
purchase in the four highest grades by a nationally-recognized rating agency.
Asset-Backed Securities--Each Series may also invest in securities which
are backed by assets such as receivables on home equity and credit loans, and
receivables regarding automobile, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases. All such securities must be rated in
the highest rating category by a reputable credit rating agency (e.g., AAA by
S&P's or Aaa by Moody's). Such receivables are securitized in either a
pass-through or a pay-through structure. Pass-through securities provide
investors with an income stream consisting of both principal and interest
payments in respect of the receivables in the underlying pool. Pay-through
asset-backed securities are debt obligations issued usually by a special
purpose entity, which are collateralized by the various receivables and in
which the payments on the underlying receivables provide the funds to pay the
debt service on the debt obligations issued. The Series may invest in these
and other types of asset-backed securities that may be developed in the
future. It is each Series' current policy to limit asset-backed investments
to those represented by interests in credit card receivables, wholesale
dealer floor plans, home equity loans and automobile loans.
Due to the shorter maturity of the collateral backing such securities,
there is less of a risk of substantial prepayment than with mortgage-backed
securities. Such asset-backed securities do, however, involve certain risks
not associated with mortgage-backed securities, including the risk that
security interests cannot be adequately or in many cases, ever, established.
In addition, with respect to credit card receivables, a number of state and
federal consumer credit laws give debtors the right to set off certain
amounts owed on the credit cards, thereby reducing the outstanding balance.
In the case of automobile receivables, there is a risk that the holders may
not have either a proper or first security interest in all of the obligations
backing such receivables due to the large number of vehicles involved in a
typical issuance and technical requirements under state laws. Therefore,
recoveries on repossessed collateral may not always be available to support
payments on the securities. For further discussion concerning the risk of
investing in such asset-backed securities, see Part B.
Real Estate Investment Trusts--Each Series may invest in shares or
convertible bonds issued by real estate investment trusts ("REITS"). REITS
invest primarily in income producing real estate as well as real estate
related loans or interests. A REIT is not taxed on income distributed to
shareholders if it complies with several requirements relating to its
organization, ownership, assets and income, and a requirement that it
distribute to its shareholders at least 95% of its taxable income (other
than net capital gains) for each taxable year. Each Series anticipates
investing only in REITS that invest the majority of their assets directly in
real property and derive their income primarily from rents, which are known
as "equity REITS." Equity REITS can also realize capital gains by selling
properties that have appreciated in value.
Restricted and Illiquid Securities--Each Series may purchase privately
placed securities the resale of which is restricted under applicable
securities laws. Most of the privately placed securities acquired by the
Series will be eligible for resale by the Series 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. Each
Series may invest not more than 10% of its assets in illiquid securities.
While maintaining oversight, the Board of Directors of the Fund has delegated
to the Manager the day-to-day function of determining whether individual Rule
144A Securities are liquid for purposes of each Series' 10% limitation on
investments in illiquid securities. The Dividend Growth Fund currently
intends to limit its investments in restricted securities, excluding Rule
144A Securities, to not more than 5% of its assets.
11
<PAGE> 15
Convertible Securities--Each Series may invest in convertible securities,
including corporate debentures, bonds, notes and preferred stocks that may be
converted into or exchanged for common stock. These securities are generally
convertible either at a stated price or a stated rate (that is, for a
specific number of shares of common stock or other security). As with other
fixed income securities, the price of a convertible security to some extent
varies inversely with interest rates. While providing a fixed income stream,
a convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. Each Series may invest not more than 5% of
its assets in convertible debentures that are rated below investment grade or
are unrated but are determined by the Manager to be of comparable quality.
For a discussion concerning the risks of investing in such securities, see
Part B.
Foreign Securities and ADRs--Each Series may invest up to 5% of its assets
in foreign securities. Each Series may also invest without limitation in
sponsored and unsponsored American Depository Receipts ("ADRs") that are
actively traded in the United States. ADRs are receipts typically issued by a
U.S. bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. "Sponsored" ADRs are issued jointly by the
issuer of the underlying security and a depository, and "unsponsored" ADRs
are issued without the participation of the issuer of the deposited security.
Holders of unsponsored ADRs generally bear all the costs of such facilities
and the depository of an unsponsored ADR facility frequently is under no
obligation to distribute shareholder communications received from the issuer
of the deposited security or to pass through voting rights to the holders of
such receipts in respect of the deposited securities. Therefore, there may
not be a correlation between information concerning the issuer of the security
and the market value of an unsponsored ADR.
Foreign markets may be more volatile than U.S. markets, and investments in
foreign securities involve sovereign risks in addition to the normal risks
associated with U.S. securities. These risks include political risks, foreign
taxes and exchange controls and currency fluctuations. For example, foreign
portfolio investments may fluctuate in value due to changes in currency rates
(i.e., the value of foreign investments would increase with a fall in the
value of the dollar) and control regulations apart from market fluctuations.
Each Series may also experience delays in foreign securities settlement.
Each Series will, from time to time, conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through entering into contracts to
purchase or sell foreign currencies at a future date (i.e., a "forward
foreign currency" contract or "forward" contract). Investors should be aware
that there are costs and risks associated with such currency transactions.
The Fund's Custodian for its foreign securities is Morgan Guaranty Trust
Company of New York, located at 60 Wall Street, New York, New York 10260.
Futures Contracts--The Dividend Growth Fund may enter into futures
contracts on stocks and stock indices, and purchase or sell options on stock
index futures and stock indices. 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."
12
<PAGE> 16
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.
Options--The Dividend Growth Fund 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 Dividend Growth Fund 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. The Series will, at all
times during which it holds a put option, own the security covered by such
option.
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.
Repurchase Agreements--In order to invest its cash reserves or when in a
temporary defensive posture, each Series may enter into repurchase agreements
with banks or broker/dealers deemed to be creditworthy by the Manager, under
guidelines approved by the Board of Directors. A repurchase agreement is a
short-term investment in which the purchaser (i.e., the Series) acquires
ownership of a debt security and the seller agrees to repurchase the
13
<PAGE> 17
obligation at a future time and set price, thereby determining the yield
during the purchaser's holding period. Generally, repurchase agreements are
of short duration, often less than one week, but on occasion for longer
periods. Not more than 10% of a Series' assets may be invested in repurchase
agreements of over seven-days' maturity or other illiquid assets. Should an
issuer of a repurchase agreement fail to repurchase the underlying security,
the loss to the Series, if any, would be the difference between the
repurchase price and the market value of the security. Each Series will limit
its investments in repurchase agreements to those which the Manager under the
guidelines of the Board of Directors determines to present minimal credit
risks and which are of high quality. In addition, each Series must have
collateral of at least 100% of the repurchase price, including the portion
representing such Series' yield under such agreements which is monitored on a
daily basis. Such collateral is held by the Custodian in book entry form.
Such agreements may be considered loans under the Investment Company Act of
1940, but the Series consider repurchase agreements contracts for the
purchase and sale of securities, and each seeks to perfect a security
interest in the collateral securities so that it has the right to keep and
dispose of the underlying collateral in the event of default.
The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the Investment Company
Act to allow the Delaware Group funds jointly to invest cash balances.
Each Series of the Fund may invest cash balances in a joint repurchase
agreement in accordance with the terms of the Order and subject generally to
the conditions described above.
Portfolio Loan Transactions--Each 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 a 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, each 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.
Other Investment Policies--Neither Series may concentrate investments in
any industry, which means that a Series may generally not invest more than
25% of its assets in any one industry.
In pursuing its investment objective, each Series may hold securities for
any period of time. For temporary, defensive purposes, each Series may hold a
substantial portion of its assets in cash, cash equivalents or short-term
obligations, including repurchase agreements. Each Series may also enter
into repurchase agreements to invest excess cash balances.
While each Series is permitted under certain circumstances to borrow money,
neither Series normally does so. A Series will not purchase investment
securities while it has any borrowings outstanding.
Each Series may purchase securities on a when-issued or delayed delivery
basis. It is the current intention of each Series not to enter into
when-issued commitments exceeding in the aggregate 5% of the market value of
the Series' total assets less liabilities other than obligations created by
these commitments.
* * *
Part B provides more information on the Fund's investment restrictions and
policies, and includes Appendix A which describes security ratings.
SUITABILITY
Each Series may be suitable for the patient investor interested in
long-term capital appreciation. Delaware Fund may be more suitable for
investors wishing to expose a portion of their assets to fixed income
securities, while Dividend Growth Fund may be more suitable for investors
seeking a greater emphasis on common stocks and securities convertible into
common stocks. Investors in each Series should be willing to accept the risks
associated with investments in equity securities. Investors in Delaware Fund
and, to a lesser extent, investors in Dividend Growth Fund should be willing
to accept the risks associated with investments in fixed income securities.
Net asset value may fluctuate in response to market conditions and, as a
result, neither Series is appropriate for a short-term investor.
Ownership of Series shares reduces the bookkeeping and administrative
inconveniences connected with direct purchases of these 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.
14
<PAGE> 18
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
(Philadelphia 988-1333)
Fund Information; Literature;
Price, Yield and Performance Figures
Shareholder Service Center
800-523-1918
(Philadelphia 988-1241)
Information on Existing Regular Investment
Accounts and Retirement Plan Accounts;
Wire Investments; Wire Liquidations;
Telephone Liquidations; Telephone Exchanges
Delaphone
800-362-FUND (800-362-3863)
Shareholder Services
During business hours, you can call the Fund's Shareholder Service Center.
The representatives can answer any of your questions about your account, the
Series, the various service features and other funds in the Delaware Group.
Performance Information
During business hours, you can call the Investor Information Center to get
current performance information.
Delaphone Service
Delaphone is an account inquiry service for investors with Touch-Tone(R)
phone service. It enables you to get information on your account faster than
the mailed statements and confirmations seven days a week, 24 hours a day.
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 the Shareholder Service Center.
Duplicate Confirmations
If your investment dealer is noted on your investment application, we
will send your dealer a duplicate confirmation. This makes it easier for your
investment dealer to help you manage your investments.
Tax Information
Each year, the Fund will mail you information on the tax status of your
dividends and distributions.
Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Also, you may be
permitted to invest your distributions in certain other funds in the Delaware
Group, subject to the exceptions noted below, as well as the eligibility and
minimum purchase requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of a Series or other
Delaware Group funds may be effected without a front-end sales charge. Class
B Shares of a Series or other Delaware Group funds acquired through
reinvestments of distributions will not be subject to a contingent deferred
sales charge if those shares are later redeemed. See Automatic Conversion of
Class B Shares under Buying Shares for information concerning the automatic
conversion of Class B Shares acquired by reinvesting dividends.
Holders of Class A Shares of a Series may not reinvest their distributions
in the Class B Shares of any fund in the Delaware Group, including the
Series. Holders of Class B Shares of a Series may reinvest their
distributions only in the Class B Shares of the funds in the Delaware Group
which offer that class of shares (the "Class B Funds"). See Class B Funds
under Buying Shares for a list of the funds offering Class B Shares. For more
information about reinvestments, please call the Shareholder Service Center.
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of the other funds in the Delaware Group, subject to
the exceptions noted below, as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus. Shareholders of Class B
Shares of a Series are permitted to exchange all or part of their Class B
Shares only into the corresponding class of shares of the Class B Funds,
subject to the minimum purchase and other requirements set forth in each
fund's prospectus. Exchanges are not permitted between Class A Shares and
Class B Shares of any of the funds of the Delaware Group. See Redemption and
Exchange.
15
<PAGE> 19
Except as noted below, permissible exchanges can be made without payment of
a front-end sales charge or the imposition of a contingent deferred sales
charge at the time of the exchange, as applicable. Persons exchanging into
the Class A Shares from a fund in the Delaware Group offered without a
front-end sales charge may be required to pay the applicable front-end sales
charge. See Investing by Exchange under How to Buy Shares and Redemption and
Exchange.
See Redemption and Exchange for additional information on exchanges.
Wealth Builder Option
You may be permitted to elect to have amounts in your account automatically
invested in shares of other funds in the Delaware Group. Investments under
this feature are exchanges and are therefore subject to the same conditions
and limitations as other exchanges of Class A and Class B Shares. See
Redemption and Exchange.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature allows
the combining of Class A Shares and Class B Shares of a Series that are
currently owned with the dollar amount of new purchases of Class A Shares
for a reduced front-end sales charge. Under the Combined Purchases Privilege,
this includes certain shares owned in other funds in the Delaware Group. See
Buying Shares.
Letter of Intention
With respect to Class A Shares, the Letter of Intention feature permits the
aggregation of purchases over a 13-month period to obtain a reduced front-end
sales charge. See Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits shareholders to reinvest
proceeds of Class A Shares redeemed, within one year from the redemption,
without a front-end sales charge. See Part B.
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 October 31.
RETIREMENT PLANNING
An investment in a Series may also be suitable for tax-deferred Retirement
Plans. Among the Retirement Plans noted below, Class B Shares are available
for investment only by Individual Retirement Accounts, Simplified Employee
Pension Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred
Compensation Plans.
Prototype Profit Sharing and Money Purchase Pension Plans are each subject
to a one-time fee of $200 per plan, or $300 for paired plans. No such fee is
charged for owner-only plans if the Delaware Group does not provide a Summary
Plan Description. In addition, these plans are subject to an annual
maintenance fee of $30 per participant account. Each of the other Retirement
Plans described below (other than 401(k) Defined Contribution Plans) is
subject to an annual maintenance fee of $15 for each participant's account,
regardless of the number of funds selected. Annual maintenance fees for
401(k) Defined Contribution Plans are based on the number of participants in
the Plan and the services selected by the employer. Fees are quoted upon
request. All of the fees noted above are subject to change. Additional
information about fees is contained in Part B. The minimum initial
investment in the Classes (as available) for each Plan is $250; subsequent
investments must be at least $25.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to Retirement Plan shareholders. Certain
Retirement Plans may qualify to purchase the Delaware Fund Institutional
Class or the Dividend Growth Fund Institutional Class. For additional
information on any of the Plans and Delaware's retirement services, call the
Shareholder Service Center or see Part B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored retirement
plan, may establish their own retirement program for investments in each of
the Classes. Contributions to an IRA may be tax-deductible and earnings are
tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted, and in some cases eliminated, for individuals
who participate in certain employer-sponsored retirement plans and whose
annual income exceeds certain limits. Existing IRAs and future contributions
up to the IRA maximums, whether deductible or not, still earn on a
tax-deferred basis.
16
<PAGE> 20
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established on a group basis by an employer who wishes to
sponsor a tax-sheltered retirement program by making IRA contributions on
behalf of all eligible employees. Each of the Classes is available for
investment by a SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Offers employers with 25 or fewer eligible employees the ability to
establish a SEP/IRA that permits salary deferral contributions. An employer
may also elect to make additional contributions to this Plan. Class B Shares
are not available for purchase by such Plans.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or certain types of non-profit
organizations to enter into a deferred compensation arrangement for the
purchase of shares of each of the Classes.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other entities
to enter into a deferred compensation arrangement for the purchase of shares
of each of the Classes.
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in
Class A Shares. Class B Shares are not available for purchase by such Plans.
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax-qualified plan based on salary
deferral contributions. An employer may elect to make profit sharing
contributions and/or matching contributions into the Plan. Class B Shares
are not available for purchase by such Plans.
BUYING SHARES
Purchase Amounts
The minimum initial purchase with respect to the Class A Shares is $250
and with respect to the Class B Shares is $1,000. Subsequent purchases must
be $25 or more with respect to the Class A Shares and $100 or more with
respect to the Class B Shares. Retirement Plans have other minimums. Refer to
Part B or call the Shareholder Service Center for more information on these
Plans. Class B Shares are also subject to a maximum purchase limitation of
$250,000.
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net asset
value per share, plus a sales charge which may be imposed, at the election of
the purchaser, at the time of the purchase with respect to Class A Shares
("front-end sales charge alternative") or on a contingent deferred basis with
respect to Class B Shares ("deferred sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares. Although Class A Shares incur a sales
charge when they are purchased, generally they are not subject to any sales
charge when they are redeemed, but are subject to annual 12b-1 Plan expenses
of up to a maximum of .30% of average daily net assets of such shares. See
Contingent Deferred Sales Charge for Certain Purchases of Class A Shares
Made at Net Asset Value and Distribution (12b-1) and Service. Certain
purchases of Class A Shares qualify for reduced front-end sales charges. See
Front-End Sales Charge Alternative--Class A Shares, below.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares. Class B Shares do not incur a front-end
sales charge when they are purchased, but they are subject to a sales charge
if they are redeemed within six years of purchase and are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (.25% of which are service fees
to be paid by the Series to the Distributor, dealers or others for providing
personal service and/or maintaining shareholder accounts) of average daily
net assets of such shares for no longer than approximately eight years after
purchase. Class B Shares permit all of the investor's dollars to work from
the time the investment is made. The higher 12b-1 Plan expenses paid by
Class B Shares will cause such shares to have a higher expense ratio and to
pay lower dividends than those related to the Class A Shares. At the end of
no more than approximately eight years after purchase, the Class B Shares are
automatically converted into Class A Shares. See Automatic Conversion of
Class B Shares. Such conversion will constitute a tax-free exchange for
federal income tax purposes. See Taxes.
The alternative purchase arrangements permit investors in a Series to
choose the method of purchasing shares that is most beneficial given the
amount of their purchase, the length of time they expect to hold their
shares and other relevant circumstances. Investors should determine whether
under their particular circumstances it is more advantageous to incur a
front-end sales charge by purchasing Class A Shares or to have the entire
initial purchase price invested in a Series with the investment thereafter
being subject to a CDSC, if shares are redeemed within six years of purchase,
by purchasing Class B Shares.
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<PAGE> 21
As an illustration, investors who qualify for significantly reduced
front-end sales charges on purchases of Class A Shares, as described below,
might elect the front-end sales charge alternative because similar sales
charge reductions are not available for purchases under the deferred sales
charge alternative. Moreover, shares acquired under the front-end sales
charge alternative are subject to annual 12b-1 Plan expenses of up to .30%,
whereas shares acquired under the deferred sales charge alternative are
subject to higher annual 12b-1 Plan expenses of 1% for no more than
approximately eight years after purchase. See Automatic Conversion of Class
B Shares. However, because front-end sales charges are deducted at the time
of purchase, such investors would not have all their funds invested initially.
Certain other investors might determine it to be more advantageous to have all
their funds invested initially, although they would be subject to a CDSC for
up to six years after purchase as well as annual 12b-1 Plan expenses of
1% until the shares are automatically converted into Class A Shares. The 12b-1
Plan distribution expenses with respect to the Class B Shares will be offset
to the extent any return is realized on the additional funds initially invested
under the deferred sales charge alternative. However, there can be no
assurance as to the return, if any, that will be realized on such additional
funds.
For the distribution and related services provided to, and the expenses
borne on behalf of, a Series, the Distributor and others will be paid, in
the case of the Class A Shares, from the proceeds of the front-end sales
charge and 12b-1 Plan fees and, in the case of the Class B Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption within six years of purchase. Sales personnel may receive
different compensation for selling Class A or Class B Shares. INVESTORS
SHOULD UNDERSTAND THAT THE PURPOSE AND FUNCTION OF THE 12B-1 PLAN AND THE
CDSC WITH RESPECT TO THE CLASS B SHARES ARE THE SAME AS THOSE OF THE 12B-1
PLAN AND THE FRONT-END SALES CHARGE WITH RESPECT TO THE CLASS A SHARES IN
THAT THE FEES AND CHARGES PROVIDE FOR THE FINANCING OF THE DISTRIBUTION OF
THE RESPECTIVE CLASSES. SEE 12B-1 DISTRIBUTION PLANS--CLASS A AND CLASS B
SHARES.
Dividends paid by a Series with respect to the Class A and Class B Shares,
to the extent any dividends are paid, will be calculated in the same manner
at the same time, on the same day and will be in the same amount, except that
the additional amount of 12b-1 Plan expenses relating to the Class B Shares
will be borne exclusively by such shares. See Calculation of Offering Price
and Net Asset Value Per Share. The shareholders of the Class A and Class B
Shares each have an exchange privilege by which they may exchange their
Class A Shares or Class B Shares for the Class A Shares or Class B Shares,
respectively, of certain other Delaware Group funds. See Exchange Privilege
under The Delaware Difference and Redemption and Exchange.
The NASD has adopted amendments to its Rules of Fair Practice relating to
investment company sales charges. The Fund and the Distributor intend to
operate in compliance with these rules with respect to both Class A and
Class B Shares.
<PAGE> 22
Front-End Sales Charge Alternative--Class A Shares
The Class A Shares may be purchased at the offering price which reflects a
maximum front-end sales charge of 5.75%. See Calculation of Offering Price
and Net Asset Value Per Share. Lower sales charges apply for larger purchases.
See the table below. The Class A Shares represent a proportionate interest in
a respective Series' assets and are subject to annual 12b-1 Plan expenses.
See Distribution (12b-1) and Service under Management of the Fund.
Reduced Front-End Sales Charges
Purchases of $100,000 or more at the offering price carry a reduced
front-end sales charge as shown in the following table.
Delaware Fund A Class and Dividend Growth Fund A Class
- ------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Concession**
Amount of Purchase Offering Amount as % of
Price Invested Offering Price
- ------------------------------------------------------------------------------
Delaware Dividend
Fund Growth Fund
-------- -----------
Less than $100,000 5.75% 6.10% 6.09% 5.00%
$100,000 but under $250,000 4.75 4.99 4.99 4.00
$250,000 but under $500,000 3.50 3.63 3.63 3.00
$500,000 but under $1,000,000* 3.00 3.09 3.09 2.60
*There is no front-end sales charge on purchases of $1 million or more but,
under certain limited circumstances, a 1% Limited CDSC may apply with
respect to Class A Shares.
- -----------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous purchases and current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Fund. Such reduced front-end
sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow dealers up to the full front-end sales charge shown above. In
addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Group products and services and who
increase sales of Delaware Group funds may receive an additional concession
of up to .15% of the offering price. Dealers who receive 90% or more of the
sales charge may be deemed to be underwriters under the Securities Act of
1933.
**Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- -----------------------------------------------------------------------------
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<PAGE> 23
For initial purchases of Class A Shares of $1,000,000 or more made on or
after June 1, 1993, a dealer's commission may be paid by the Distributor to
financial advisers through whom such purchases are effected in accordance
with the following schedule:
Dealer's Commission
-------------------
Amount of Purchase (as a percentage of amount purchased)
- ------------------
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as
to which a Limited CDSC applies may be aggregated with those of the Class A
Shares of a Series. Financial advisers should contact the Distributor
concerning the applicability and calculation of the dealer's commission in
the case of combined purchases. Financial advisers also may be eligible for
a dealer's commission in connection with certain purchases made under a
Letter of Intention or pursuant to an investor's Right of Accumulation.
The Distributor also should be consulted concerning the availability
of and program for these payments.
An exchange from other Delaware Group funds will not qualify for payment
of the dealer's commission, unless such exchange is from a Delaware Group
fund with assets as to which a dealer's commission or similar payment has
not been previously paid. The schedule and program for payment of the dealer's
commission are subject to change or termination at any time by the Distributor
in its discretion.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above
was paid in connection with the purchase of those shares. See Contingent
Deferred Sales Charge for Certain Purchases of Class A Shares Made at Net
Asset Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings in the Class A Shares of a Series with your
holdings in the Class B Shares of that Series and, except as noted below,
shares of the other funds in the Delaware Group, you can reduce the
front-end sales charges on any additional purchases of Class A Shares.
Except for shares of Delaware Group Premium Fund, Inc. beneficially owned
in connection with ownership of variable insurance products, shares of other
funds which do not carry a front-end sales charge or CDSC may not be included
unless they were acquired through an exchange from one of the other Delaware
Group funds which carried a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of Intention.
This allows you to make purchases over a 13-month period and qualify the
entire purchase for a reduction in front-end sales charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases made
pursuant to a Right of Accumulation or under a Letter of Intention, may
trigger the payment of a dealer's commission and the applicability of a
Limited CDSC. Investors should consult their financial advisers or the
Transfer Agent about the operation of these features. See Reduced Front-End
Sales Charges under Buying Shares.
Buying at Net Asset Value
Class A Shares of a Series may be purchased at net asset value under the
Delaware Group Dividend Reinvestment Plan and, under certain circumstances,
the 12-Month Reinvestment Privilege and the Exchange Privilege. (See The
Delaware Difference and Redemption and Exchange for additional information.)
Purchases of Class A Shares may be made at net asset value by officers,
directors and employees (including former officers and directors and former
employees who had been employed for at least ten years) and members of their
immediate families of the Manager, any affiliate, any of the funds in the
Delaware Group, certain of their agents and registered representatives and
employees of authorized investment dealers and by employee benefit plans for
such entities. Individual purchases include retirement accounts and must be
for accounts in the name of the individual or a qualifying family member.
Purchases of Class A Shares may be made by clients of registered
representatives of an authorized investment dealer at net asset value within
six months of a change of the registered representative's employment, if the
purchase is funded by proceeds from an investment where a front-end sales
charge has been assessed and the redemption of the investment did not result
in the imposition of a contingent deferred sales charge or other redemption
charge. Purchases of Class A Shares also may be made at net asset value by
bank employees that provide services in connection with agreements between
the bank and unaffiliated brokers or dealers concerning sales of Class A
Shares. Also, officers, directors and key employees of institutional clients
of the Manager or any of its affiliates may purchase Class A Shares at net
asset value. Moreover, purchases may be effected at net asset value for the
benefit of the clients of brokers, dealers and registered investment
advisers affiliated with a broker or dealer, if such broker, dealer or
investment adviser has entered into an agreement with the Distributor
19
<PAGE> 24
providing specifically for the purchase of Class A Shares in connection
with special investment products, such as wrap accounts or similar fee based
programs.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from
such accounts will be made at net asset value. Loan repayments made to a
Delaware Group account in connection with loans originated from accounts
previously maintained by another investment firm will also be invested at
net asset value.
The Fund must be notified in advance that an investment qualifies for
purchase of Class A Shares at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, Prototype Profit Sharing,
Pension and 401(k) Defined Contribution Plans) may also benefit from the
reduced front-end sales charges relating to the Class A Shares set forth in
the table on page 18, based on total plan assets. In addition, 403(b)(7)
and 457 Retirement Plan Accounts may also benefit from a reduced front-end
sales charge on Class A Shares based on the total amount invested by all
participants in the plan by satisfying the following criteria: (i) the
employer for which the plan was established has 250 or more eligible
employees and the plan lists only one broker of record, or (ii) the plan
includes employer contributions and the plan lists only one broker of record.
If a company has more than one plan investing in the Delaware Group of funds,
then the total amount invested in all plans would be used in determining the
applicable front-end sales charge reduction. Employees participating in such
Group Investment Plans may also combine the investments made in their plan
account when determining the front-end sales charge on purchases to
non-retirement Delaware Group investment accounts.
For additional information on these Plans, including Plan forms,
applications, minimum investments and any applicable account maintenance
fees, contact your investment dealer or the Distributor.
For other Retirement Plans and special services, see Retirement Planning.
Deferred Sales Charge Alternative--Class B Shares
Class B Shares may be purchased at net asset value without the imposition
of a front-end sales charge at the time of purchase. The Class B Shares are
being sold without a front-end sales charge so that a Series will invest the
full amount of the investor's purchase payment. The Distributor currently
anticipates compensating dealers or brokers for selling Class B Shares at
the time of purchase from its own funds in an amount equal to no more than 4%
of the dollar amount purchased. As discussed below, however, Class B Shares
are subject to annual 12b-1 Plan expenses and, if shares are redeemed within
six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for the distribution and related services provided to,
and the related expenses borne on behalf of, a Series for the benefit of the
Class B Shares in connection with the sale of the Class B Shares, including
the compensation paid to dealers or brokers for selling Class B Shares.
Payments to the Distributor and others under the 12b-1 Plan relating to the
Class B Shares may be, annually, in an amount equal to no more than 1%. The
combination of the CDSC and the proceeds of the 12b-1 Plan fees facilitates
the ability of a Series to sell the Class B Shares without a front-end sales
charge being deducted at the time of purchase.
Shareholders of the Class B Shares exercising the exchange privilege
described below will continue to be subject to the CDSC schedule of the Class
B Shares described in this Prospectus. Such schedule may be higher than the
CDSC schedule relating to the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Except for shares acquired through a reinvestment of dividends, Class B
Shares of a Series held for eight years after purchase are eligible for
automatic conversion into Class A Shares of that Series. The Fund will effect
conversions of Class B Shares into Class A Shares only four times in any
calendar year, on the last business day of the second full week of March,
June, September and December (each, a "Conversion Date"). If the eighth
anniversary after a purchase of Class B Shares falls on a Conversion Date, an
investor's Class B Shares will be converted on that date. If the eighth
anniversary occurs between Conversion Dates, an investor's Class B Shares
will be converted on the next Conversion Date after such anniversary.
Consequently, if a shareholder's eighth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B Shares for as
long as an additional three months after the eighth anniversary after
purchase before the shares will automatically convert into Class A Shares.
20
<PAGE> 25
Class B Shares of a fund acquired through reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through
dividend reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
Contingent Deferred Sales Charge
Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below, charged as a percentage of the dollar
amount subject thereto. The charge will be assessed on an amount equal to the
lesser of the net asset value at the time of purchase of the shares being
redeemed or the net asset value of the shares at the time of redemption. For
purposes of this formula, the "net asset value at the time of purchase" will
be the net asset value at purchase of the Class B Shares of the Series even
if those shares are later exchanged for Class B Shares of another Delaware
Group fund and, in the event of an exchange of the shares, the "net asset
value of such shares at the time of redemption" will be the net asset value
of the shares into which the shares have been exchanged. Accordingly, no CDSC
will be imposed on increases in net asset value above the initial purchase
price. In addition, no CDSC will be assessed on redemption of shares received
upon reinvestment of dividends or capital gains distributions.
The following table sets forth the rates of the CDSC for the Class B Shares
of a Series:
Contingent Deferred
Sales Charge
(as a Percentage of
Year After Dollar Amount
Purchase Made Subject to Charge)
------------- -------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares of a Series, the Class B Shares will
continue to be subject to annual 12b-1 Plan expenses of 1% of average daily
net assets representing those shares. See Automatic Conversion of Class B
Shares above. Investors are reminded that the Class A Shares into which the
Class B Shares will convert are subject to ongoing annual 12b-1 Plan expenses
of up to a maximum of .30% of average daily net assets representing such
shares.
In determining whether a CDSC is applicable to a redemption, the
calculation will be determined in a manner that results in the lowest
applicable rate being charged. Therefore, with respect to the Class B Shares,
it will be assumed that the redemption is first for shares held over six
years or shares acquired pursuant to reinvestment of dividends or
distributions and then of shares held longest during the six-year period. The
charge will not be applied to dollar amounts representing an increase in the
net asset value since the time of purchase. All investments made during a
calendar month, regardless of when during the month the investment occurred,
will age one month on the last day of that month and each subsequent month.
The CDSC is waived on redemptions of Class B Shares in connection with the
following redemptions: (i) redemptions effected pursuant to the Fund's right
to liquidate a shareholder's account if the aggregate net asset value of the
shares held in the account is less than the then-effective minimum account
size; (ii) tax-free returns of excess contributions to an IRA or 403(b)(7)
Deferred Compensation Plan; (iii) required minimum distributions from an IRA,
403(b)(7) Deferred Compensation Plan, or 457 Deferred Compensation Plan; and
(iv) distributions from an IRA, 403(b)(7) Deferred Compensation Plan or 457
Deferred Compensation Plan due to death or disability.
12b-1 Distribution Plans--Class A and Class B Shares
Pursuant to the distribution plans adopted by the Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940, a Series is permitted to pay
the Distributor annual distribution fees payable monthly of .30% of the
average daily net assets of the Class A Shares and 1% of the average daily net
assets of the Class B Shares in order to compensate the Distributor for
providing distribution and related services and bearing certain expenses of
each Class. The Class B Shares' 12b-1 Plan is designed to permit an investor
to purchase Class B Shares through dealers or brokers without the assessment
of a front-end sales charge and at the same time permit the Distributor to
compensate dealers and brokers in connection with the sale of the Class B
Shares. In this regard, the purpose and function of the 12b-1 Plan and the
CDSC with respect to the Class B Shares are the same as those of the front-end
sales charge and 12b-1 Plan with respect to the Class A Shares in that the
fees and charges provide for the financing of the distribution of the
respective Classes. For more detailed discussion of the 12b-1 Plans relating
to the Class A and Class B Shares, see Distribution (12b-1) and Service.
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<PAGE> 26
Other Payments to Dealers--Class A and Class B Shares
In addition, from time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed certain
limits as set by the Distributor, may receive from the Distributor an
additional payment of up to .25% of the dollar amount of such sales. The
Distributor may also provide additional promotional incentives or payments to
dealers that sell shares of the Delaware Group of funds. In some instances,
these incentives or payments may be offered only to certain dealers who
maintain, have sold or may sell certain amounts of shares.
In connection with the promotion of Delaware Group fund shares, the
Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, reimburse dealers for expenses incurred in
connection with preapproved seminars, conferences and advertising and may,
from time to time, pay or allow additional promotional incentives to dealers,
which shall include non-cash concessions, such as certain luxury merchandise
or a trip to or attendance at a business or investment seminar at a luxury
resort, as part of preapproved sales contests. In addition, as noted above,
the Distributor may pay dealers a commission in connection with net asset
value purchases.
Class B Funds
The following funds currently offer Class B Shares: DMC Tax-Free Income
Trust-Pennsylvania, Delaware Group Delchester High-Yield Bond Fund, Inc.,
Delaware Group Government Fund, Inc., Treasury Reserves Intermediate Series of
Delaware Group Treasury Reserves, Inc., Delaware Group Cash Reserve, Inc.,
Tax-Free USA Fund, Tax-Free Insured Fund and Tax-Free USA Intermediate Fund of
Delaware Group Tax-Free Fund, Inc., Delaware Group DelCap Fund, Inc., Delaware
Group Value Fund, Inc., Decatur Income Fund and Decatur Total Return Fund of
Delaware Group Decatur Fund, Inc., Delaware Group Trend Fund, Inc.,
International Equity Series of Delaware Group Global & International Funds,
Inc. and each Series of the Fund.
Delaware Fund Institutional Class and
Dividend Growth Fund Institutional Class
In addition to offering the Delaware Fund A Class, the Delaware Fund B
Class, the Dividend Growth Fund A Class and the Dividend Growth Fund B Class,
the Fund also offers the Delaware Fund Institutional Class and the Dividend
Growth Fund Institutional Class of shares, which are described in a separate
prospectus relating to those classes of shares. Those classes may be purchased
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 customers 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. Such Delaware Fund Institutional Class and Dividend Growth
Fund Institutional Class shares generally are distributed directly by the
Distributor and do not have a front-end or contingent deferred sales charge or
a 12b-1 fee. Sales or service compensation available in respect of such
classes, therefore, differs from that available in respect of the Class A
Shares and the Class B Shares of a Series. All three classes of shares of a
Series have a proportionate interest in the underlying portfolio of securities
of that Series. Total Operating Expenses incurred by the Delaware Fund
Institutional Class as of October 31, 1994 were 0.81%. Total Operating
Expenses incurred by the Dividend Growth Fund Institutional Class for the
period December 29, 1993 (date of initial public offering) through October 31,
1994 were 0.95%, annualized, after voluntary fee waivers and expense
reimbursement by the Manager. See Part B for performance information about the
Delaware Fund Institutional Class and the Dividend Growth Fund Institutional
Class. To obtain a prospectus which describes the Delaware Fund Institutional
Class and the Dividend Growth Fund Institutional Class, contact the
Distributor.
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<PAGE> 27
Dividend Orders
Some shareholders want the dividends earned in one fund automatically
invested in another Delaware Group fund with a different investment objective.
For more information on the requirements of the other funds, see Dividend
Reinvestment Plan under The Delaware Difference or call the Shareholder
Service Center.
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer.
Investing through Your Investment Dealer
You can make a purchase of shares of the Classes through most investment
dealers who, as part of the service they provide, must transmit orders
promptly. They may charge for this service. If you want a dealer but do not
have one, we can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application must be completed, signed and
sent with a check, payable to the specific Class selected, to 1818 Market
Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to the specific Class selected. Your check should
be identified with your name(s) and account number. An investment slip
(similar to a deposit slip) is provided at the bottom of transaction
confirmations and dividend statements that you will receive from the Fund, and
should be used when you are making additional purchases. You can expedite
processing by including an investment slip with your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.
Investing 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 Shareholder
Service Center 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 the designated 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 should advise the
Fund's Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a Retirement Plan Account, call the
Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group, you
may write and authorize an exchange of part or all of your investment into
shares of the Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information.
Exchanges will not be permitted between Class A Shares and Class B Shares of
a Series or between the Class A Shares and Class B Shares of any other funds
in the Delaware Group. Class B Shares of any of the Class B Funds may be
exchanged for Class B Shares of a Series. Class B Shares of a Series acquired
by exchange will continue to carry the contingent deferred sales charge and
the automatic conversion schedules of the fund from which the exchange is
made. The holding period of the Class B Shares of a Series will be added to
that of the exchanged shares for purposes of determining the time of the
automatic conversion into Class A Shares of that Series.
Permissible exchanges into each Class of a Series will be made without a
front-end sales charge imposed by the Fund or, at the time of the exchange, a
contingent deferred sales charge imposed by the fund from which the exchange
is being made, except for exchanges into Class A Shares from funds not subject
to a front-end sales charge (unless such shares were acquired in an exchange
from a fund subject to such a charge or such shares were acquired through the
reinvestment of dividends).
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to use
the following services:
1. Direct Deposit
You may wish your employer or bank to make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and
private payments by Electronic Fund Transfer, which avoids mail time and check
clearing holds on payments such as social security, federal salaries, Railroad
Retirement benefits, etc.
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2. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly investments
without writing or mailing checks. You may authorize the Fund to transfer a
designated amount monthly from your checking account to your Class account.
Many shareholders use this as an automatic savings plan for IRAs and other
purposes. Shareholders should allow a reasonable amount of time for initial
purchases and changes to these plans to become effective.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
Should investments by these two methods be reclaimed or returned for some
reason, the Fund has the right to liquidate your shares to reimburse the
government or transmitting bank. If there are insufficient funds in your Class
account, you are obligated to reimburse the Series.
Purchase Price and Effective Date
The offering price and net asset value of the Class A and Class B Shares are
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 offering price or net asset value of
shares 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. An investor making the minimum
initial investment will be subject to involuntary redemption without the
imposition of a CDSC or Limited CDSC if he or she redeems any portion of his
or her account.
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways. The
exchange service is useful if your investment requirements change and you want
an easy way to invest in other equity funds, tax-advantaged funds, bond funds
or money market funds. This service is also useful if you are anticipating a
major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements
of each fund and all exchanges of shares from one fund or class to another
pursuant to this privilege constitute taxable events. See Taxes. You may want
to call us for more information or consult your financial adviser or
investment dealer to discuss which funds in the Delaware Group will best meet
your changing objectives, and the consequences of any exchange transaction.
Your shares will be redeemed or exchanged based on the net asset value next
determined after we receive your request in good order subject, in the case of
a redemption, to any applicable CDSC or Limited CDSC. Redemption or exchange
requests received in good order after the time the offering price and net
asset value of shares are 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. If a holder of
Class B Shares submits a redemption request for a specific dollar amount, the
Fund will redeem that number of shares necessary to deduct the applicable CDSC
and tender to the shareholder the requested amount to the extent enough shares
are then held in the shareholder account. 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 800-523-1918 (in Philadelphia, 988-1241). 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.
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
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<PAGE> 29
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 written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
Class A Shares may be exchanged for certain of the shares of the other funds
in the Delaware Group, including other Class A Shares, subject to the
eligibility and minimum purchase requirements set forth in each fund's
prospectus. All Delaware Group funds offer Class A Shares. Class A Shares may
not be exchanged for Class B Shares of the funds offering such shares. Class B
Shares of a Series may be exchanged only for the Class B Shares of any of the
Class B Funds. See Exchange Privilege under The Delaware Difference. In each
instance, permissible exchanges are subject to the minimum purchase and other
requirements set forth in each prospectus.
Permissible exchanges may be made at net asset value provided: (1) the
investment satisfies the eligibility and minimum purchase requirements set
forth in the prospectus of the fund being acquired; and (2) the shares of the
fund being acquired are in a state where that fund is registered.
There is no front-end sales charge or fee for exchanges made between shares
of funds which both carry a front-end sales charge. Any applicable front-end
sales charge will apply to exchanges from shares of funds not subject to a
front-end sales charge, except for transfers involving assets that were
previously invested in a fund with a front-end sales charge and/or transfers
involving the reinvestment of dividends.
Holders of the Class B Shares that exchange their shares ("outstanding Class
B Shares") for the Class B Shares of other Class B Funds ("new Class B
Shares") will not be subject to a CDSC that might otherwise be due upon
redemption of the outstanding Class B Shares. However, such shareholders will
continue to be subject to the CDSC and automatic conversion schedules of the
outstanding Class B Shares described in this Prospectus and any CDSC assessed
upon redemption will be charged by the Fund. A Series' CDSC schedule may be
higher than the CDSC schedule relating to the new Class B Shares acquired as a
result of the exchange. For purposes of computing the CDSC that may be payable
upon a disposition of the new Class B Shares, the holding period for the
outstanding Class B Shares is added to the holding period of the new Class B
Shares. The automatic conversion schedule of the outstanding Class B Shares
may be longer than that of the new Class B Shares. Consequently, an investment
in new Class B Shares by exchange may subject an investor to the higher 12b-1
fees applicable to Class B Shares for a longer time than if the investment in
new Class B Shares was made directly.
Different redemption and exchange methods are outlined below. Except for the
CDSC with respect to redemption of Class B Shares and the Limited CDSC with
respect to certain redemptions of Class A Shares purchased at net asset value,
there is no fee charged by the Fund or the Distributor for redeeming or
exchanging your shares, but such fees could be charged in the future. 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
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your Class A or Class B Shares. 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 a signature guarantee for each owner. 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. Class B Shares may be subject to a CDSC
and Class A Shares may be subject to a Limited CDSC with respect to certain
shares purchased at net asset value. Payment is normally mailed the next
business day, but no later than seven days, after receipt of your request. If
your Class A Shares are in certificate form, the certificate must accompany
your request and also be in good order. The Fund only issues certificates for
Class A Shares if a shareholder submits a specific request. The Fund does not
issue certificates for Class B Shares.
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Written Exchange
You can also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your Class A or Class B Shares
into another mutual fund in the Delaware Group, subject to the same conditions
and limitations as other exchanges noted above.
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 Class A Shares in certificate form, you
can only redeem or exchange by written request and you must return your
certificates.
The Telephone Redemption service enabling you to have redemption proceeds
mailed to your 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 Series 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. Instructions received by telephone
are generally tape recorded, and 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
The Telephone Redemption feature is a quick and easy method to redeem
shares. 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. This
service is only available to individual, joint and individual fiduciary-type
accounts.
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 an Authorization Form with 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. Except for any
CDSC which may be applicable to the Class B Shares and the Limited CDSC which
may be applicable to purchases made at net asset value with respect to the Class
A Shares, there are no fees for this method, but the mail time may delay getting
funds into your bank account. Simply call the Fund's Shareholder Service Center
prior to the time the offering price and net asset value are determined, as
noted above.
If expedited payment by check or wire could adversely affect a Series, the
Fund may take up to seven days to pay.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to adjust
your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange Class
A or Class B Shares into any fund in the Delaware Group under the same
registration, subject to the same conditions and limitations as other
exchanges noted above. As with the written exchange service, telephone
exchanges are subject to the requirements of each fund, as described above.
Telephone exchanges may be subject to limitations as to amounts or frequency.
Systematic Withdrawal Plan for Class A Shares
1. Regular Plans
This plan provides holders of the Class A Shares with a consistent monthly
(or quarterly) payment. This is particularly useful to shareholders living on
fixed incomes, since it can provide them with a stable supplemental amount.
With accounts of at least $5,000, you may elect monthly withdrawals of $25
(quarterly $75) or more. The Fund does not recommend any particular monthly
amount, as each shareholder's situation and needs vary. Payments are normally
made by check. In the alternative, you may elect to have your payments
transferred from your Series account to your predesignated bank account
through the Delaware Group's MoneyLine service. Your funds will normally be
credited to your bank account after two business days. Except with respect to
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<PAGE> 31
the Limited CDSC which may be applicable to Class A Shares as noted below,
there are no fees for this method. You can initiate this service by completing
an Authorization Agreement. If the name and address on your bank account are
not identical to the name and address on your Series account, you must have
your signature guaranteed. Please call the Shareholder Service Center for
additional information.
2. Retirement Plans
For shareholders eligible under the applicable Retirement Plan to receive
benefits in periodic payments, the Fund's Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for
calculating your withdrawals depending upon whether the distributions are
required or optional. Withdrawals must be for $25 or more; however, no minimum
account balance is required.
* * *
Shareholders should not purchase Class A Shares while participating in a
Systematic Withdrawal Plan. Also, redemptions of Class A Shares pursuant to a
Systematic Withdrawal Plan may be subject to a Limited CDSC if the original
purchase was made within the 12 months prior to the withdrawal at net asset
value and a dealer's commission was paid on that purchase. See Contingent
Deferred Sales Charge for Certain Purchases of Class A Shares Made at Net
Asset Value. For more information on both of these plans, please call the
Shareholder Service Center.
The Systematic Withdrawal Plan is not available with respect to the Class B
Shares.
Wealth Builder Option
Shareholders may elect to invest in other mutual funds in the Delaware Group
through our Wealth Builder Option. Under this automatic exchange program,
shareholders can authorize regular monthly amounts (minimum of $100 per fund)
to be liquidated from their Class account and invested automatically into one
or more funds in the Delaware Group. Investments under this option are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges of Class A and Class B Shares noted above.
Shareholders can also use the Wealth Builder Option to invest in the Fund
through regular liquidations of shares in their accounts in other funds in the
Delaware Group, subject to the same conditions and limitations as other
exchanges noted above. Shareholders can terminate their participation at any
time by written notice to the Fund. See Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares Made at Net Asset Value
For purchases of Class A Shares, a Limited CDSC will be imposed by the Fund
upon certain redemptions of Class A Shares (or shares into which such Class A
Shares are exchanged) made within 12 months of purchase, if such purchases
were made at net asset value and triggered the payment by the Distributor of
the dealer's commission described above. See Buying Shares.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of (1) the net asset value at the time of purchase of the Class A
Shares being redeemed or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A
Shares even if those shares are later exchanged for shares of another Delaware
Group fund and, in the event of an exchange of Class A Shares, the "net asset
value of such shares at the time of redemption" will be the net asset value of
the shares into which the Class A Shares have been exchanged.
Redemptions of such Class A Shares held for more than 12 months will not be
subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the 12-month
holding period. The Fund assesses the Limited CDSC if such 12-month period is
not satisfied irrespective of whether the redemption triggering its payment is
of the Class A Shares of a Series or the Class A Shares into which the Class A
Shares of that Series have been exchanged.
In determining whether a Limited CDSC is payable, it will be assumed that
shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains dist
ributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of when during the month the
investment occurred, will age one month on the last day of that month and each
subsequent month.
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The Limited CDSC will be waived in the following instances: (i) redemptions
effected pursuant to the Fund's right to liquidate a shareholder's account if
the aggregate net asset value of the shares held in the account is less than
the then-effective minimum account size; (ii) distributions to participants
from a retirement plan qualified under section 401(a) or 401(k) of the
Internal Revenue Code of 1986, as amended ("the Code"), or due to death of a
participant in such a plan; (iii) redemptions pursuant to the direction of a
participant or beneficiary of a retirement plan qualified under section 401(a)
or 401(k) of the Code with respect to that retirement plan; (iv) distributions
from a section 403(b)(7) Plan or an IRA due to death, disability, or
attainment of age 59 1/2; (v) tax-free returns of excess contributions to an
IRA; (vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; and (viii) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying at Net Asset Value).
DIVIDENDS AND DISTRIBUTIONS
Each Series will normally make payments from net investment income on a
quarterly basis. During the fiscal year ended October 31, 1994, dividends
totaling $0.600 and $0.150 per share of the Delaware Fund A Class and the
Delaware Fund B Class, respectively, were paid from net investment income.
During the same period, dividends totaling $0.090 and $0.030 per share of the
Dividend Growth Fund A Class and the Dividend Growth Fund B Class,
respectively, were paid from net investment income. This amount included
undistributed net investment income earned by the Delaware Fund A Class during
the previous fiscal year.
Payments from net realized securities profits of each Series, if any, will
be distributed annually in the quarter following the close of the fiscal year.
During the fiscal year ended October 31, 1994, distributions totaling $1.160
per share of the Delaware Fund A Class were paid from realized securities
profits. The Dividend Growth Fund A Class commenced operations on December 29,
1993 and the Class B Shares of each Series commenced operations on September
6, 1994.
Each of the Classes of a Series will share proportionately in the investment
income and expenses of that Series, except that: (i) the per share dividends and
distributions on the Class B Shares of a Series will be lower than the per share
dividends and distributions on the Class A Shares of that Series as a result of
the higher expenses under the 12b-1 Plan relating to the Class B Shares; and
(ii) the per share dividends and distributions on both the Class A Shares of a
Series and the Class B Shares of that Series will be lower than the per share
dividends and distributions on, respectively, the Delaware Fund Institutional
Class and Dividend Growth Fund Institutional Class as such classes will not
incur any expenses under the Rule 12b-1 Plans. See Distribution (12b-1) and
Service under Management of the Fund.
Both dividends and distributions, if any, are automatically reinvested in
your account at net asset value, unless you elect otherwise. Any check in
payment of dividends or other distributions which cannot be delivered by the
Post Office or which remains uncashed for a period of more than one year may
be reinvested in the shareholder's account at the then-current net asset value
and the dividend option may be changed from cash to reinvest. If you elect to
take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may elect the Delaware
Group's MoneyLine service to enable such payments to be transferred from your
Series account to your predesignated bank account. Your funds will normally be
credited to your bank account two business days after the payment date. There
are no fees for this method. See Systematic Withdrawal Plan for Class A Shares
under Redemption and Exchange for information regarding authorization of this
service. (See The Delaware Difference for more information on reinvestment
options.)
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<PAGE> 33
TAXES
Each 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, a 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.
Each 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,
whether received in cash or 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 a
Series that so qualifies will be designated each year in a notice from the
Fund to the Series' shareholders. For the fiscal year ended October 31, 1994,
52% and 45% of, respectively, the Delaware Fund's and the Dividend Growth
Fund's dividends from net investment income qualified for the corporate
dividends-received deduction.
Distributions paid by a Series from long-term capital gains, whether
received in cash or 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 do not
seek to realize any particular amount of capital gains during a year; rather,
realized gains are a byproduct of a 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 a 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.
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 a 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 a 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. All or a
portion of the sales charge incurred in purchasing a Series' shares will be
excluded from the federal tax basis of any of such shares sold or exchanged
within ninety (90) days of their purchase (for purposes of determining gain or
loss upon sale of such shares) if the sale proceeds are reinvested in the
Series or in another fund in the Delaware Group of funds and a sales charge
that would otherwise apply to the reinvestment is reduced or eliminated. Any
portion of such sales charge excluded from the tax basis of the shares sold
will be added to the tax basis of the shares acquired in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the end of
no longer than approximately eight years after purchase will constitute a
tax-free exchange for federal tax purposes. Shareholders should consult their
own tax advisers regarding specific questions as to federal, state, local or
foreign taxes. See Automatic Conversion of Class B Shares under Buying 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 consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in a
Series.
See Taxes in Part B for additional information on tax matters relating to
each Series and its shareholders.
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CALCULATION OF OFFERING
PRICE AND NET ASSET VALUE
PER SHARE
Class A Shares are purchased at the offering price and Class B Shares are
purchased at the net asset value ("NAV") per share. The offering price of the
Class A Shares consists of the NAV per share next determined after the order
is received, plus any applicable front-end sales charges. The offering price
and NAV are 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. Debt securities are priced at fair value by an independent pricing
service using methods approved by the Fund's Board of Directors. 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 a Series' three classes will bear, pro-rata, all of the common
expenses of that Series. The net asset values of all outstanding shares of
each class of a Series will be computed on a pro-rata basis for each
outstanding share based on the proportionate participation in that Series
represented by the value of shares of that class. All income earned and
expenses incurred by a Series will be borne on a pro-rata basis by each
outstanding share of a class, based on each class' percentage in that Series
represented by the value of shares of such classes, except that the Delaware
Fund Institutional Class and the Dividend Growth Fund Institutional Class will
not incur any distribution fees under the 12b-1 Plans and the Class A and
Class B Shares of each Series alone will bear the 12b-1 Plan expenses 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 a Series will vary.
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 October 31, 1994, the Manager and its affiliate,
Delaware International Advisers Ltd., were supervising in the aggregate more
than $25 billion in assets in the various institutional (approximately
$16,074,376,000) and investment company (approximately $9,525,500,000)
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.
The Manager manages each 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 equal to: for the Delaware Fund, .60% on the first $100 million of average
daily net assets of the Fund, .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 the Series' proportionate share of all directors' fees paid to
the unaffiliated directors of the Fund; and, for the Dividend Growth Fund,
.60% on the first $500 million of average daily net assets and .50% on the
average daily net assets in excess of $500 million. Investment management
fees paid by the Delaware Fund for the fiscal year ended October 31, 1994 were
0.52% of average daily net assets. Investment management fees earned by the
Dividend Growth Fund from December 29, 1993 (date of initial public offering)
through October 31, 1994 were 0.50%, annualized, of average daily net assets
and no fees were paid by this Series as a result of the voluntary waiver of
fees by the Manager described on page 4.
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George H. Burwell and Dorothea M. Dutton have primary responsibility for
making day-to-day investment decisions for the Delaware Fund and Mr. Burwell
has such responsibility for the Dividend Growth Fund. Mr. Burwell, who has
been the Fund's Senior Portfolio Manager for equities since 1992, holds a BA
from the University of Virginia. Prior to joining the Delaware Group in 1992,
Mr. Burwell was a portfolio manager for Midlantic Bank in Edison, New Jersey,
where he managed an equity mutual fund and three commingled funds. Mr. Burwell
is a Chartered Financial Analyst.
Ms. Dutton has been the Delaware Fund's Senior Portfolio Manager for fixed
income since 1988. She is a graduate of the University of Washington. Prior to
joining the Delaware Group in 1986, she was the Senior Investment Officer for
fixed income for the California State Teachers' Retirement System. A Chartered
Financial Analyst, Ms. Dutton is a member of the Financial Analysts of
Philadelphia and the Fixed Income Analysts' Society.
In making investment decisions for the Fund, Mr. Burwell and Ms. Dutton
regularly consult with Wayne A. Stork, Richard G. Unruh, Jr. and Paul E.
Suckow. Mr. Stork, Chairman 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. A graduate of Brown University, Mr. Unruh received his
MBA from the University of Pennsylvania's Wharton School and 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 the Manager and was
named Senior Vice President of the Manager in 1988. 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. Mr. Suckow is Delaware's Chief Investment Officer for fixed
income. A Chartered Financial Analyst, he is a graduate of Bradley University
with an MBA from Western Illinois University. Mr. Suckow was a fixed income
portfolio manager at the Delaware Group from 1981 to 1985. He returned to the
Delaware Group in 1993 after eight years with Oppenheimer Management
Corporation.
Portfolio Trading Practices
The Series normally will not invest for short-term trading purposes.
However, each 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. A turnover rate of 100% would
occur, for example, if all the investments in a Series' portfolio at the
beginning of the year were replaced by the end of the year. During the past
two fiscal years, Delaware Fund's portfolio turnover rates were 160% for 1993
and 142% for 1994. For the period December 29, 1993 (date of initial public
offering) through October 31, 1994, Dividend Growth Fund's portfolio turnover
rate was 180%, annualized.
The Fund 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 Fund
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, Delaware Fund and Dividend Growth Fund may quote total
return performance of their respective classes, 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 and (i) in
the case of Class A Shares, the impact of the maximum front-end sales charge
at the beginning of each specified period and (ii) in the case of Class B
Shares, the deduction of any applicable CDSC at the end of the relevant
period. Each presentation will include the average annual total return for
one-, five- and ten-year or life-of-Series periods, as relevant. The Series
may also advertise aggregate and average total return information concerning a
Class over additional periods of time. In addition, each Series may present
total return information that does not reflect the deduction of the maximum
front-end sales charge or any applicable CDSC. In this case, such total return
information would be more favorable than total return information which
includes deductions of the maximum front-end sales charge or any applicable
CDSC.
Because securities prices fluctuate, investment results of the Classes will
fluctuate over time and past performance should not be considered as a
representation of future results.
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Distribution (12b-1) and Service
The Distributor, Delaware Distributors, Inc. serves as the national
distributor for each Series under separate Amended and Restated Distribution
Agreements dated as of September 6, 1994.
The Fund has adopted a separate distribution plan under Rule 12b-1 (the
"Plan") for each of the Classes which permits the Fund to pay the Distributor
from the assets of the respective Class a monthly fee for its services and
expenses in distributing and promoting sales of shares. These expenses
include, among other things, preparing and distributing advertisements, sales
literature, and prospectuses and reports used for sales purposes, compensating
sales and marketing personnel, holding special promotions for specified
periods of time, and paying distribution and maintenance fees to brokers,
dealers and others. In connection with the promotion of Class A and Class B
Shares, the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for expenses
incurred in connection with preapproved seminars, conferences and advertising.
The Distributor may pay or allow additional promotional incentives to dealers
as part of preapproved sales contests and/or to dealers who provide extra
training and information concerning a Class and increase sales of shares of a
Class. In addition, the Fund may make payments from the assets of the
respective Class directly to others, such as banks, who aid in the
distribution of Class shares or provide services in respect of a Class,
pursuant to service agreements with the Fund.
The 12b-1 Plan expenses relating to the Class B Shares are also used to pay
the Distributor for advancing the commission costs to dealers with respect to
the initial sale of such shares.
The aggregate fees paid by the Fund on behalf of each Series from the assets
of the respective Class to the Distributor and others under the Plan may not
exceed .30% of a Class A Shares' average daily net assets in any year, and 1%
(.25% of which are service fees to be paid by the Series to the Distributor,
dealers and others, for providing personal service and/or maintaining
shareholder accounts) of a Class B Shares' average daily net assets in any
year. Each Series' Class A and Class B Shares will not incur any distribution
expenses beyond these limits, which may not be increased without shareholder
approval. The Distributor may, however, incur additional expenses and make
additional payments to dealers from its own resources to promote the
distribution of shares of the Classes.
Effective June 1, 1992, the Board of Directors has determined that the
annual fee payable from Delaware Fund A Class on a monthly basis, under its
Plan, will be equal to the sum of: (i) the amount obtained by multiplying .30%
by the average daily net assets represented by shares of that Class that are
acquired by shareholders on or after June 1, 1992; and (ii) the amount
obtained by multiplying .10% by the average daily net assets represented by
shares of that Class that were acquired before June 1, 1992. While this is the
method for calculating the Delaware Fund A Class' 12b-1 fee, the fee is a
Class expense so that all shareholders, regardless of when they purchase their
shares, will bear 12b-1 expenses at the same per share rate. As Delaware Fund
A Class shares are sold on or after June 1, 1992, the initial rate of at least
.10% will increase over time. Thus, as the proportion of Delaware Fund A Class
shares purchased on or after June 1, 1992, to Class shares outstanding prior
to June 1, 1992, increases, the expenses attributable to payments under the
Plan will also increase (but will not exceed .30% of average daily net
assets). While this describes the current formula for calculating the fees
which will be payable under the Plan, the Plan permits the Fund, on behalf of
the Delaware Fund series, to pay a full .30% on all assets of the Delaware
Fund A Class at any time following Board approval. The Class will not incur
any distribution expenses beyond the .30% limit, which may not be increased
without shareholder approval.
On September 23, 1993, the Board of Directors set the fee for the Dividend
Growth Fund A Class at .30% of average daily net assets.
The Plans do not apply to the Delaware Fund Institutional Class or the
Dividend Growth Fund Institutional Class of shares. Those shares are not
included in calculating the Plans' fees, and the Plans are not used to assist
in the distribution and marketing of the Delaware Fund Institutional Class or
the Dividend Growth Fund Institutional Class.
While payments pursuant to the Plans may not exceed .30% annually with
respect to each Series' Class A Shares and 1% annually with respect to each
Series' Class B Shares, the Plans do not limit fees to amounts actually
expended by the Distributor. It is therefore possible that the Distributor may
realize a profit in any particular year. However, the Distributor currently
expects that its distribution expenses will likely equal or exceed payments to
it under the Plans. The monthly fees paid to the Distributor under the Plans
are subject to the review and approval of the Fund's unaffiliated directors
who may reduce the fees or terminate the Plans at any time.
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The staff of the Securities and Exchange Commission ("SEC") has proposed
amendments to Rule 12b-1 and other related regulations that could impact Rule
12b-1 Distribution Plans. The Fund intends to amend the Plans, if necessary,
to comply with any new rules or regulations the SEC may adopt with respect to
Rule 12b-1.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Delaware
Fund under an Agreement dated June 29, 1988 and for the Dividend Growth Fund
under an Agreement dated December 29, 1993. The unaffiliated directors review
service fees paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those borne
by the Manager under the Investment Management Agreements and those borne by
the Distributor under the Distribution Agreements. The ratio of expenses to
average daily net assets for the Delaware Fund A Class for the fiscal year
ended October 31, 1994 was 0.97%, inclusive of 12b-1 fees. The ratio of
operating expenses to average daily net assets for the Dividend Growth Fund A
Class from December 29, 1993 (date of initial public offering) through October
31, 1994 was 1.25% (annualized), inclusive of 12b-1 fees, after voluntary fee
waivers and expense reimbursements by the Manager. The Class B Shares of each
Series commenced operations on September 6, 1994. Based on expenses incurred
by the Delaware Fund A Class during its fiscal year ended October 31, 1994,
the expenses of the Delaware Fund B Class are expected to be 1.81%, inclusive
of 12b-1 fees, for the fiscal year ending October 31, 1995. Based on the
expenses incurred by the Dividend Growth Fund A Class during the period ended
October 31, 1994, the expenses of the Dividend Growth Fund B Class are
expected to be 1.95%, inclusive of 12b-1 fees, after voluntary fee waivers and
expense reimbursements by the Manager through June 30, 1995.
Shares
The Fund is an open-end management investment company, commonly known as a
mutual fund, and each Series' portfolio of assets is diversified. The Fund,
which was organized as a Maryland corporation on March 4, 1983, was previously
organized as a Delaware corporation in 1937.
The Fund currently offers two Series of shares--the Delaware Fund series and
the Dividend Growth Fund series. Series shares have a par value of $1.00,
equal voting rights, except as noted below, and are equal in all other
respects. Each Series will vote separately on any matter which affects only
that Series. Shares of each Series have a priority over shares of any other
series of the Fund in the assets and income of that Series. 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.
The Delaware Fund and the Dividend Growth Fund also offer the Delaware Fund
Institutional Class and the Dividend Growth Fund Institutional Class of
shares, respectively, which represent proportionate interests in the assets of
the respective Series and have the same voting and other rights and
preferences as the other classes of that Series, except that shares of the
Delaware Fund Institutional Class and the Dividend Growth Fund Institutional
Class are not subject to, and may not vote on matters affecting, the
Distribution Plans under Rule 12b-1 relating to the Classes. Similarly, the
shareholders of the Class A Shares may not vote on matters affecting a Series'
Plan under Rule 12b-1 relating to the Class B Shares, and the shareholders of
the Class B Shares may not vote on matters affecting a Series' Plan under Rule
12b-1 relating to the Class A Shares.
Prior to September 6, 1994, the Delaware Fund A Class was known as the
Delaware Fund class and the Delaware Fund Institutional Class was known as the
Delaware Fund (Institutional) class. Prior to the same date, the Dividend
Growth Fund A Class was known as the Dividend Growth Fund class and the
Dividend Growth Fund Institutional Class was known as the Dividend Growth Fund
(Institutional) class.
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Delaware
Fund
Dividend
The Delaware Group includes 22 different Growth Fund
funds with a wide range of investment -----------
objectives. Stock funds, income funds, A Class
tax-free funds, money market funds and B Class
closed-end equity funds give investors the
ability to create a portfolio that fits their
personal financial goals. For more information
contact your financial adviser or call the
Delaware Group at 800-523-4640, in
Philadelphia 215-988-1333.
Investment Manager PROSPECTUS
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103 DECEMBER 30, 1994
National Distributor
Delaware Distributors, Inc.
1818 Market Street
Philadelphia, PA 19103
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
Legal Counsel (PHOTO OF GEORGE WASHINGTON
Stradley, Ronon, Stevens & Young CROSSING THE DELAWARE RIVER)
One Commerce Square
Philadelphia, PA 19103
Independent Auditors
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
Custodian
Chemical Bank
450 West 33rd Street
New York, NY 10001
P-002/P-063/P-039/P-069-12/94-RRD DELAWARE
Printed in the U.S.A. GROUP
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