<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
PROSPECTUS
December 30, 1994
DELAWARE FUND
INSTITUTIONAL
DIVIDEND GROWTH FUND
INSTITUTIONAL
------------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about the Delaware Fund Institutional Class and
the Dividend Growth Fund Institutional Class call the Delaware Group at
800-828-5052.
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 Institutional Class and Dividend Growth
Fund offers the Dividend Growth Fund Institutional Class (individually, the
"Class" and collectively, the "Classes"). Shares of the Classes are available
for purchase only by certain enumerated institutions and are offered at net
asset value without the imposition of a front-end or contingent deferred sales
charge and without a 12b-1 charge. See Buying Shares.
This Prospectus relates only to the 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 the 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 number. 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 A Class and the Delaware Fund B
Class, and Dividend Growth Fund also offers the Dividend Growth Fund A Class and
the Dividend Growth Fund B Class. Shares of Delaware Fund A Class and Dividend
Growth Fund A Class carry a front-end sales charge and are subject to ongoing
distribution expenses. Shares of Delaware Fund B Class and Dividend Growth Fund
B Class are subject to ongoing distribution expenses and a contingent deferred
sales charge upon redemption.
TABLE OF CONTENTS
Cover Page................................ 1
Synopsis.................................. 2
Summary of Expenses....................... 3
Financial Highlights...................... 4
Investment Objectives and Policies
Investment Strategy..................... 6
Suitability............................. 10
Buying Shares............................. 11
Redemption and Exchange................... 13
Dividends and Distributions............... 15
Taxes..................................... 15
Calculation of Net Asset Value
Per Share............................... 16
Management of the Fund.................... 17
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> 2
SYNOPSIS
Capitalization
The Fund offers the Delaware Fund series, consisting of the Delaware Fund
Institutional Class, the Delaware Fund A Class and the Delaware Fund B Class,
and the Dividend Growth Fund series, consisting of the Dividend Growth Fund
Institutional Class, the Dividend Growth Fund A Class and the Dividend Growth
Fund B Class. The Fund has a present authorized capitalization of five hundred
million shares of capital stock with a $1.00 par value per share. Fifty million
shares of that stock have been allocated to the Delaware Fund Institutional
Class, one hundred million shares have been allocated to the Delaware Fund A
Class, fifty million shares have been allocated to the Delaware Fund B Class,
twenty-five million shares have been allocated to the Dividend Growth Fund
Institutional Class, fifty million shares have been allocated to the Dividend
Growth Fund A Class and fifty million shares have been allocated to the Dividend
Growth Fund B Class. See Shares under Management of the Fund.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment manager
for the Fund. The Manager or its affiliate, Delaware International Advisers
Ltd., manages the other funds in the Delaware Group. Delaware Distributors,
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.
Purchase Price
Shares of each Class offered by this Prospectus are available at net asset
value, without a front-end or contingent deferred sales charge and are not
subject to distribution fees under a Rule 12b-1 distribution plan. See Buying
Shares.
Investment Objective
The objective of the 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.
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 Objectives 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
Shares of the Fund are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
2
<PAGE> 3
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
Dividend
Delaware Growth
Fund Fund
Institutional Institutional
Shareholder Transaction Expenses Class Shareholder Transaction Expenses Class
- ---------------------------------------------------------------- ----------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)... None (as a percentage of offering price)... None
Maximum Sales Charge Imposed on Maximum Sales Charge Imposed on
Reinvested Dividends Reinvested Dividends
(as a percentage of offering price)... None (as a percentage of offering price)... None
Redemption Fees......................... None* Redemption Fees......................... None*
Exchange Fees........................... None** Exchange Fees........................... None**
</TABLE>
<TABLE>
<CAPTION>
Dividend
Delaware Growth
Fund Fund
Annual Operating Expenses Institutional Annual Operating Expenses Institutional
(as a percentage of average daily net assets) Class (as a percentage of average daily net assets) Class
- ---------------------------------------------------------------- ----------------------------------------------------------------
<S> <C> <C> <C>
Management Fees......................... 0.52% Management Fees (after voluntary waivers) 0.00%***
12b-1 Fees.............................. None 12b-1 Fees.............................. None
Other Operating Expenses................ 0.29% Other Operating Expenses (after voluntary waivers) 0.95%***
----- -----
Total Operating Expenses............. 0.81% Total Operating Expenses............. 0.95%***
===== =====
</TABLE>
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in each Class will bear directly or
indirectly. *CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire. ** Exchanges are subject to the requirements of
each fund and a front-end sales charge may apply. ***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 the Dividend Growth Fund
Institutional Class did not exceed .95% (exclusive of taxes, interest, brokerage
commissions and extraordinary expenses) during the commencement of the public
offering of the Class 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 2.96% for the Dividend Growth Fund Institutional
Class, reflecting Management Fees of 0.50%. See Delaware Fund A Class, Delaware
Fund B Class, Dividend Growth Fund A Class and Dividend Growth Fund B Class for
expense information about those classes.
The following example illustrates the expenses that an investor would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted in the tables
above, the Fund charges no redemption fees.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years 1 year 3 year 5 years 10 years
------ ------- ------- -------- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Delaware Fund $8 $26 $45 $100 Dividend Growth Fund $10 $30 $53 $117
Institutional Class Institutional Class
</TABLE>
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
3
<PAGE> 4
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group 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 Institutional Class
--------------------------------------------------------------------------------------------
Period
Year 11/9/92(2)
Ended to Year Ended
10/31/94(2) 10/31/93 10/31/93(1) 10/31/92(1) 10/31/91(1) 10/31/90(1) 10/31/89(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $19.460 $18.820 $18.720 $18.810 $16.190 $17.480 $15.250
Income From Investment Operations
- ---------------------------------
Net Investment Income.................. 0.653 0.632 0.631 0.660 0.757 0.856 0.796
Net Gains (Losses) on Securities
(both realized and unrealized)....... (0.293) 1.438 1.509 1.490 3.033 (1.366) 2.384
------- ------- ------- ------- ------- ------- -------
Total From Investment Operations..... 0.360 2.070 2.140 2.150 3.790 (0.510) 3.180
------- ------- ------- ------- ------- ------- -------
Less Distributions
- ------------------
Dividends (from net investment income). (0.630) (0.660) (0.660) (0.700) (0.880) (0.780) (0.950)
Distributions (from capital gains)..... (1.160) (0.770) (0.770) (1.540) (0.290) none none
Returns of Capital..................... none none none none none none none
------- ------- ------- ------- ------- ------- -------
Total Distributions.................. (1.790) (1.430) (1.430) (2.240) (1.170) (0.780) (0.950)
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period......... $18.030 $19.460 $19.430 $18.720 $18.810 $16.190 $17.480
======= ======= ======= ======= ======= ======= =======
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return........................... 1.96% 11.76% 11.91%(3) 12.37%(3) 24.32%(3) (3.17%)(3) 21.66%(3)
- ------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000's omitted)...................... $93,990 $72,052 $507,528 $487,343 $453,449 $349,873 $361,625
Ratio of Expenses to Average
Daily Net Assets..................... .81% .77% .89% .79% .71% .75% .76%
Ratio of Net Investment Income to
Average Daily Net Assets............. 3.47% 3.39% 3.27% 3.64% 4.29% 4.99% 4.73%
Portfolio Turnover Rate................ 142% 160% 160% 144% 212% 147% 129%
</TABLE>
<TABLE>
<CAPTION>
<PAGE>5
- ------------------------------------------------------------------------------------------------
Delaware Fund Institutional Class
--------------------------------------------------------
10/31/88(1) 10/31/87(1) 10/31/86(1) 10/31/85(1)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period... $16.850 $23.200 $20.860 $19.070
Income From Investment Operations
- ---------------------------------
Net Investment Income.................. 0.551 0.331 0.554 0.717
Net Gains (Losses) on Securities
(both realized and unrealized)....... 2.259 (1.971) 4.486 2.883
------- ------- ------- -------
Total From Investment Operations..... 2.810 (1.640) 5.040 3.600
------- ------- ------- -------
Less Distributions
- ------------------
Dividends (from net investment income). (0.320) (0.400) (0.700) (0.800)
Distributions (from capital gains)..... (4.090) (4.310) (2.000) (1.010)
Returns of Capital..................... none none none none
------- ------- ------- -------
Total Distributions.................. (4.410) (4.710) (2.700) (1.810)
------- ------- ------- -------
Net Asset Value, End of Period......... $15.250 $16.850 $23.200 $20.860
======= ======= ======= =======
- ------------------------------------------------------------------------------------------------
Total Return........................... 22.03%(3) (9.14%)(3) 26.85%(3) 20.47%(3)
- ------------
- ------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period
(000's omitted)...................... $328,650 $320,854 $405,856 $341,269
Ratio of Expenses to Average
Daily Net Assets..................... .77% .73% .69% .75%
Ratio of Net Investment Income to
Average Daily Net Assets............. 4.01% 1.64% 2.53% 3.71%
Portfolio Turnover Rate................ 180% 205% 104% 132%
</TABLE>
- --------------
(1)Data are derived from data of the Delaware Fund A Class (formerly known as
Delaware Fund class) which was subject to 12b-1 distribution expenses
effective June 1, 1992.
(2)Data are derived from Delaware Fund Institutional Class shares (formerly
known as Delaware Fund (Institutional) class), which commenced operations on
November 9, 1992. Ratios and total return have been annualized.
(3)Does not reflect any maximum sales charges that are or were in effect for the
Delaware Fund A Class.
4
<PAGE> 6
FINANCIAL HIGHLIGHTS
(Continued)
- -----------------------------------------------------------------------------
Dividend
Growth Fund
Institutional
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.......................... 0.201
Net Gains (Losses) on Securities
(both realized and unrealized)................ 0.749
-------
Total From Investment Operations............. 0.950
-------
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................. $10.860
=======
- -------------------------------------------------------------------------------
Total Return .................................. 11.45%(1)/(2)
- ------------
- --------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...... $2,516
Ratio of Expenses to Average Daily Net Assets.. 0.95%(1)/(3)
Ratio of Net Investment Income to Average
Daily Net Assets............................. 2.26%(1)/(4)
Portfolio Turnover Rate........................ 180%
- ----------------
(1)Date of initial sale; ratios and total return have been annualized.
(2)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 2.96% for the period ended October 31, 1994.
(4)Ratio of net investment income to average daily net assets prior to expense
limitation was 0.25% for the period ended October 31, 1994.
5
<PAGE> 7
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 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).
6
<PAGE> 8
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.
7
<PAGE> 9
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, to a limited extent, 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."
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<PAGE> 10
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 Series the right to sell one
of its securities for an agreed price up to an agreed date. The advantage is
that the Series can be protected should the market value of the security
decline. However, the Series must pay a premium for this right which would be
lost if the option is not exercised.
Purchasing a Put Option on Stock Indices--Purchasing a protective put option
on stock indices is similar to the purchase of protective puts on an individual
stock. Indices used will include, but not be limited to, the S&P 500, the S&P
100 and the S&P OTC 250.
Closing Transactions--Closing transactions essentially let the Series offset a
put option or covered call option prior to its exercise or expiration. If the
Series cannot effect a closing transaction, it may have to hold a security it
would otherwise sell or deliver a security it might want to hold.
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<PAGE> 11
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 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.
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<PAGE> 12
BUYING SHARES
The Distributor serves as the national distributor for the Fund. Shares of
each Class may be purchased directly by contacting the Fund or its agent or
through authorized investment dealers. All purchases are at net asset value.
There is no sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of a Class as
part of their retirement program should contact their employer for details.
Shares of each Class are available for purchase only by: (a) retirement plans
introduced by persons not associated with brokers or dealers that are primarily
engaged in the retail securities business and rollover individual retirement
accounts from such plans; (b) tax-exempt employee benefit plans of the Manager,
or its affiliates and securities dealer firms with a selling agreement with the
Distributor; (c) institutional advisory accounts of the Manager, or its
affiliates and those having client relationships with Delaware Investment
Advisers, a division of the Manager, or its affiliates and their corporate
sponsors, as well as subsidiaries and related employee benefit plans and
rollover individual retirement accounts from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust 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.
Delaware Fund A Class, Delaware Fund B Class, Dividend Growth Fund A Class
and Dividend Growth Fund B Class
In addition to offering the Delaware Fund Institutional Class and the Dividend
Growth Fund Institutional Class of shares, the Fund also offers the Delaware
Fund A Class, the Delaware Fund B Class, the Dividend Growth Fund A Class and
the Dividend Growth Fund B Class which are described in a separate prospectus
relating only to those classes. Those classes may be purchased through
authorized investment dealers or directly by contacting the Fund or its agent.
The Delaware Fund A Class and Dividend Growth Fund A Class carry a front-end
sales charge and have annual 12b-1 expenses equal to a maximum of .30%. The
maximum front-end sales charge as a percentage of the offering price is 5.75%
(6.10% with respect to the Delaware Fund A Class and 6.09% with respect to the
Dividend Growth Fund A Class, as a percentage of the amount invested) and is
reduced on certain transactions of $100,000 or more. The Delaware Fund B Class
and the Dividend Growth Fund B Class have no front-end sales charge and are
subject to annual 12b-1 expenses equal to a maximum of 1%. Shares of the
Delaware Fund B Class and Dividend Growth Fund B Class and certain shares of the
Delaware Fund A Class and Dividend Growth Fund A Class may be subject to a
contingent deferred sales charge upon redemption. Sales or service compensation
available in respect of such classes, therefore, differs from that available in
respect of the Delaware Fund Institutional Class and Dividend Growth Fund
Institutional Class. 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 A Class as a percentage
of average daily net assets for the fiscal year ended October 31, 1994 were
0.97%. From December 29, 1993 (date of initial public offering) through October
31, 1994, Total Operating Expenses incurred by the Dividend Growth Fund A Class
were 1.25%, annualized, after voluntary fee waivers and expense reimbursement by
the Manager. Based on expenses incurred by the Delaware Fund A Class during the
fiscal year ended October 31, 1994, the expenses of the Delaware Fund B Class
are expected to be 1.81% for the fiscal year ending October 31, 1995, and, based
on 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%, after voluntary fee waivers and expense reimbursements by the
Manager through June 30, 1995. See Part B for performance information about
such Class A Shares and Class B Shares. To obtain a prospectus relating to the
Delaware Fund A Class, the Delaware Fund B Class, the Dividend Growth Fund A
Class and the Dividend Growth Fund B Class, contact the Distributor.
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<PAGE> 13
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase the shares of the Classes.
Investing Directly 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.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by wire to
CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include your
name(s) and your account number for the Class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Fund's Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application to 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 must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group and you
qualify to purchase shares of the Classes, you may write and authorize an
exchange of part or all of your investment into the Classes. Shares of the
Delaware Fund B Class and the Dividend Growth Fund B Class and the Class B
Shares of the other funds in the Delaware Group offering such a class of shares
may not be exchanged into the Classes. If you wish to open an account by
exchange, call your Client Services Representative at 800-828-5052 for more
information.
Investing through Your Investment Dealer
You can make a purchase of Class shares through most investment dealers
who, as part of the service they provide, must transmit orders promptly. They
may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) of each Class is determined as of the
close of regular trading on the New York Stock Exchange (ordinarily, 4 p.m.,
Eastern time) on days when such exchange is open.
The effective date of a purchase made through an investment dealer is the date
the order is received by the Fund. The effective date of a direct purchase is
the day your wire, electronic transfer or check is received, unless it is
received after the time the share price is determined, as noted above. Those
received after such time will be effective the next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase or exchange. If a purchase
is cancelled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right, upon 60
days' written notice, to redeem accounts that remain under $250 as a result of
redemptions.
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<PAGE> 14
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged based on the net asset value next
determined after we receive your request in good order. Redemption and exchange
requests received in good order after the time the net asset value of shares is
determined, as noted above, will be processed the next business day. See
Purchase Price and Effective Date under Buying Shares. Except as otherwise noted
below, for a redemption request to be in "good order," you must provide your
Class account number, account registration and the total number of shares or
dollar amount of the transaction. With regard to exchanges , you must also
provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Fund at 800-828-5052.
The Fund will honor written redemption requests of shareholders who recently
purchased shares by check, but will not mail the proceeds until it is reasonably
satisfied the purchase check has cleared, which may take up to 15 days from the
purchase date. The Fund will not honor telephone redemptions for Class shares
recently purchased by check unless it is reasonably satisfied that the purchase
check has cleared. You can avoid this potential delay if you purchase shares by
wiring Federal Funds. The Fund reserves the right to reject a 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.
Shares of a Class may be exchanged into any other Delaware Group mutual fund
provided: (1) the investment satisfies the eligibility and other requirements
set forth in the prospectus of the fund being acquired, including the payment of
any applicable front-end sales charge; and (2) the shares of the fund being
acquired are in a state where that fund is registered. If exchanges are made
into other shares that are eligible for purchase only by those permitted to
purchase shares of the Classes, such exchange will be exchanged at net asset
value. Shares of the Classes may not be exchanged into the Class B Shares of the
funds in the Delaware Group. The Fund reserves the right to reject exchange
requests at any time. The Fund may suspend or terminate, or amend the terms of,
the exchange privilege upon 60 days' written notice to shareholders.
Different redemption and exchange methods are outlined below. There is no fee
charged by the Fund or the Distributor for redeeming or exchanging your shares.
You may also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders with respect to an account, including
selection of any of the features described below, shall continue in effect until
revoked or modified in writing and until such time as such written revocation or
modification has been received by the Fund or its agent.
All exchanges involve a purchase of shares of the fund into which the exchange
is made. As with any purchase, an investor should obtain and carefully read that
fund's prospectus before buying shares in an exchange. The prospectus contains
more complete information about the fund, including charges and expenses.
Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your Class shares or to request an exchange of any or all
your Class shares into another mutual fund in the Delaware Group, subject to the
same conditions and limitations as other exchanges noted above. The request must
be signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent to the
shareholder(s) at the address of record, the Fund requires a signature by all
owners of the account and may require a signature guarantee. Each signature
guarantee must be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
The redemption request is effective at the net asset value next determined
after it is received in good order. Payment is normally mailed the next business
day, but no later than seven days, after receipt of your request. The Fund does
not issue certificates for shares unless you submit a specific request. If your
shares are in certificate form, the certificate must accompany your request and
also be in good order.
Shareholders also may submit their written request for redemption or
exchange by facsimile transmission at the following number: 215-972-8864.
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<PAGE> 15
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange methods,
you must have the Transfer Agent hold your shares (without charge) for you. If
you choose to have your shares in certificate form, you can only redeem or
exchange by written request and you must return your certificates.
The Telephone Redemption service enabling redemption proceeds to be mailed to
the account address of record and the Telephone Exchange service, both of which
are described below, are automatically provided unless the Fund receives written
notice from the shareholder to the contrary. The Fund reserves the right to
modify, terminate or suspend these procedures upon 60 days' written notice to
shareholders. It may be difficult to reach the Fund by telephone during periods
when market or economic conditions lead to an unusually large volume of
telephone requests.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Class shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, the shareholder is acknowledging prior
receipt of a prospectus for the fund into which shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record. Payment is normally mailed the next business day,
but no more than seven days, after receipt of the request.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your predesignated
bank account by wire or by check. You should authorize this service when you
open your account. If you change your predesignated bank account, the Fund
requires a written authorization and may require that you have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day, but no later than seven days, after receipt of your request to your
predesignated bank account. There are no fees for this method, but the mail time
may delay getting funds into your bank account. Simply call your Client Services
Representative prior to the time the net asset value is determined, as noted
above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any fund in
the Delaware Group under the same registration. As with the written exchange
service, telephone exchanges are subject to the same conditions and limitations
as other exchanges noted above. Telephone exchanges may be subject to
limitations as to amounts or frequency.
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<PAGE> 16
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 $0.630 and $0.090 per share of the Delaware Fund Institutional Class
and the Dividend Growth Fund Institutional Class, respectively, were paid from
net investment income. This amount included undistributed net investment income
earned by the Delaware Fund 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 Institutional Class were paid from realized
securities profits. The Dividend Growth Fund Institutional Class commenced
operations on December 29, 1993.
Each class of a Series will share proportionately in the investment income and
expenses of that Series, except that the Classes will not incur any distribution
fees under the 12b-1 Plans which apply only to the Delaware Fund A Class, the
Delaware Fund B Class, the Dividend Growth Fund A Class and the Dividend Growth
Fund B Class.
Both dividends and distributions, if any, are automatically reinvested in your
account at net asset value.
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, even
though received in additional shares. For corporate investors, dividends from
net investment income will generally qualify in part for the corporate
dividends-received deduction. The portion of dividends paid by 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, received in
additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Series. The Series 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.
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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.
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.
CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of a Class is the net asset value ("NAV")
per share next determined after the order is received. The NAV is computed as of
the close of regular trading on the New York Stock Exchange (ordinarily, 4 p.m.,
Eastern time) on days when such exchange is open.
The NAV per share is computed by adding the value of all securities and other
assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
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 the 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 the Series represented by the value of shares
of such classes, except that the Classes will not incur any of the expenses
under the Fund's 12b-1 Plans and the Delaware Fund A and B Classes and the
Dividend Growth Fund A and B Classes alone will bear the 12b-1 Plan fees payable
under their respective Plans. Due to the specific distribution expenses and
other costs that will be allocable to each class, the net asset value of and
dividends paid to each class of a Series will vary.
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<PAGE> 18
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
for the period 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 3.
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 Delaware Management Company, Inc. 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.
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<PAGE> 19
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.
The portfolio turnover rate for Dividend Growth Fund for the period December 29,
1993 (date of initial public offering) through October 31, 1994 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 for their respective Class, in advertising and other types of
literature. Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value. Each
presentation will include the average annual total return for one-, five- and
ten-year 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.
Because securities prices fluctuate, investment results of a Class will
fluctuate over time and past performance should not be considered as a
representation of future results.
Statements and Confirmations
You will receive quarterly statements of your account as well as confirmations
of all investments and redemptions. You should examine statements and
confirmations immediately and promptly report any discrepancy by calling your
Client Services Representative.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an unaudited
semi-annual report. These reports provide detailed information about the Fund's
investments and performance. The Fund's fiscal year ends on October 31.
Distribution 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. It bears all of the costs of promotion
and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the shareholder
servicing, dividend disbursing and transfer agent for the 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. Certain recordkeeping and other shareholder
services that otherwise would be performed by the Transfer Agent may be
performed by certain other entities and the Transfer Agent may elect to enter
into an agreement to pay such other entities for those services. In addition,
participant account maintenance fees may be assessed for certain recordkeeping
provided as part of retirement plan and administration service packages. These
fees are based on the number of participants in the plan and the various
services selected by the employer. Fees will be quoted upon request and are
subject to change.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
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<PAGE> 20
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 Amended and Restated Distribution Agreements. For the
fiscal year ended October 31, 1994, the ratio of operating expenses to average
daily net assets for the Delaware Fund Institutional Class was 0.81%. From
December 29, 1993 (date of initial public offering) through October 31, 1994,
the ratio of operating expenses to average daily net assets for the Dividend
Growth Fund Institutional Class was 0.95%, annualized, after voluntary fee
waivers and expense reimbursements by the Manager.
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,
incorporated in Maryland 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 A
Class and the Delaware Fund B Class, and the Dividend Growth Fund A Class and
the Dividend Growth Fund B Class, respectively, which represent proportionate
interests in the assets of the respective Series and have the same voting and
other rights and preferences as the Delaware Fund Institutional Class and the
Dividend Growth Fund Institutional Class, respectively, except that shares of
the Classes are not subject to, and may not vote on matters affecting, the
Distribution Plans under Rule 12b-1 relating to the Delaware Fund A Class, the
Delaware Fund B Class, the Dividend Growth Fund A Class and the Dividend Growth
Fund B Class.
Prior to September 6, 1994, the Delaware Fund Institutional Class was known as
the Delaware Fund (Institutional) class, the Dividend Growth Fund Institutional
Class was known as the Dividend Growth Fund (Institutional) class, the Delaware
Fund A Class was known as the Delaware Fund class and the Dividend Growth Fund A
Class was known as the Dividend Growth Fund class.
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<PAGE> 21
Delaware
Fund
-------------
For more information contact the Delaware Institutional
Group at 800-828-5052.
Dividend
Growth Fund
-------------
INSTITUTIONAL
PROSPECTUS
Investment Manager DECEMBER 30, 1994
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
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
DELAWARE
GROUP
=============
P-042/P-040-12/94-RRD
Printed in the U.S.A.
