DELAWARE GROUP DELAWARE FUND INC, N-30D, 1996-01-03

DELAWARE GROUP DELAWARE FUND INC
N-30D, 1996-01-03

Previous: DEERE JOHN CAPITAL CORP, 424B3, 1996-01-03

Next: DELUXE CORP, 8-K, 1996-01-03

<PAGE>

1995
Annual
Report

--------
DELAWARE
GROUP
DELAWARE
FUND
--------

(PHOTO OF VARIOUS PHILADELPHIA HISTORICAL SITES.)

A Tradition of Sound Investing Since 1929

[LOGO]

<PAGE>

Delaware Fund
- ------------------------------------
Investment
- ------------------------------------
Objective
- ------------------------------------

To seek a balance of capital appreciation, income and preservation of capital.

(PHOTO OF VARIOUS PHILADELPHIA HISTORICAL SITES.)

About Our Cover
- ------------------------------------

Headquartered in Philadelphia, Pennsylvania, Delaware Group shares in the
tradition of a city built on the vision of opportunity. Amidst the city's
historic sites, symbolic of our nation's freedom and prosperity, Delaware Group
provides both individual and institutional investors with a conservative,
disciplined approach to money management.

Delaware Group
- ------------------------------------
A Tradition of
- ------------------------------------
Sound Investing
- ------------------------------------

Delaware Management Company's investment experience dates back to 1929. Our
first mutual fund was established in 1938. Headquartered in Philadelphia with an
affiliate in London, Delaware provides a full range of mutual fund investments,
annuities and retirement plan services. Delaware International Advisers Ltd.,
our London-based international affiliate, was established in 1990. Delaware
Group manages mutual funds with the same time-tested, disciplined strategies
demanded by the large public and private pension plans, foundations and
endowments that are among our clients. With over 60 years of investment
management experience, we have demonstrated our commitment to quality investment
management and service. Today, Delaware manages some $27 billion in mutual funds
and institutional investment advisory accounts. We measure our success by the
financial success and satisfaction of our nearly 500,000 shareholders.

<PAGE>

November 27, 1995

Dear Shareholder:

Delaware Fund's latest fiscal year, which ended October 31, 1995, was a
rewarding time in both the stock and bond markets, a welcome change from our
prior fiscal year. Your Fund, which includes a mix of equities and fixed-incom e
securities, provided a competitive total return of +16.26% (capital change plus
income based on Class A net asset value) for the period.
The sharp reduction in long-term interest rates this past year and
strong capital appreciation in the stock market helped Delaware Fund achieve its
best annual performance since 1991 and a total return that exceeds the Fund's
+11.85% average annual total return during the past 10 years.
Interest rates began declining in December 1994, when the bond and
stock markets anticipated the Federal Reserve Board would lower its target for
the Federal Funds rate - the rate banks charge each other on overnight loans.
The Federal Funds rate was lowered on July 6, 1995, as evidence mounted that the
U.S. economy's growth rate was slowing and that inflation remained subdued.
The stock component of your Fund's portfolio was helped by higher
corporate earnings, which have been fueled by both increased productivity and
the lower value of the dollar. A weak dollar helps U.S. exporters by making
products produced in the U.S. cheaper for foreigners to buy.
Delaware Fund aims to provide a balance of current income, capital
appreciation and principal preservation, and as such is more conservative than
funds that invest solely in equities or very long-term bonds. The Fund
participated in both the stock and bond market rallies, outperforming the
unmanaged Lehman Brothers Intermediate Government Corporate Index while
capturing nearly two-thirds of the gains provided by the equities market, as
measured by the unmanaged Standard & Poor's 500 Index. As part of the above
table, we included the performance of U.S. Treasury Bills to show the more
modest return available from what many people consider a "risk-free" investment.

===========================================================================
Total Return
--------------
12 Months
Ended 10/31/95
Delaware Fund A Class +16.26%
- ---------------------------------------------------------------------------
Lehman Bros. Intermediate
Government Corporate Index +12.54%
Standard & Poor's 500 Index +26.41%
Lipper Balanced Fund Average +17.98%
90-Day U.S. Treasury Bills +5.84%
- ---------------------------------------------------------------------------
Delaware Fund performance is based on net asset value without effect of the
front-end sales charge with all distributions reinvested.
Performance for all Fund Classes can be found on page 7. U.S. Treasury Bills
are guaranteed as to principal and interest, unlike shares in a mutual fund,
stocks and corporate bonds.
==============================================================================

<PAGE>

Although long-term economic trends remain favorable in our opinion, the
sharp and rapid price appreciation of both stocks and bonds during the past year
was unusual, and investors should not expect such stellar performance without
interruption year after year. Our 57 years of experience managing the Fund
through various market cycles has shown us that when stock appreciation is hard
to come by, stock dividends and the income generated by bonds take on a much
greater role in generating total return.
The equity portion of the portfolio, managed by George H. Burwell, is
invested in companies that have a history of increasing dividends and strong
profits. The Fund's bonds are managed by Gary A. Reed, who focuses on
intermediate bonds of high quality.
In the pages that follow, both managers discuss how the Fund is
positioned for the coming months as well as our outlook for the stock and bond
markets. We thank you for being among the more than 26,000 shareholders who have
chosen to invest in the Delaware Group's namesake Fund.

Sincerely,

/s/ Wayne A. Stork
- ------------------
Wayne A. Stork
Chairman

Portfolio
- ------------------------------------
Managers'
- ------------------------------------
Review
- ------------------------------------

Your Fund achieved its strongest results in four years as falling interest rates
and favorable earnings boosted bond and stock prices throughout 1995. As of
October 31, 1995, about 62% of your Fund's net assets were made up of
dividend-paying stocks, 31% was in bonds and the remainder in cash and other
assets about the same ratio as a year ago.
We believe this ratio has the potential to generate a total return
higher than inflation. Dividends on the stocks that comprise the S&P 500 Index
have risen an average of 4.7% annually since 1926 compared to an average
annual increase in consumer prices of just 3.1%, according to Ibbotson
Associates. The average annual total return for bonds since the late 1920s,
according to Ibbotson, has ranged from 4.8% for U.S. government bonds to 5.4%
for corporate bonds, with nearly all of the return derived from income.

Delaware Fund's Stock Focus
Many of your Fund's consumer growth and financial stocks rose significantly in
fiscal 1995, as did issues that were affected by mergers, restructurings and
internal efforts to improve productivity, such as those of Lockheed Martin Corp.

<PAGE>

============================================================================
Stock Portfolio Highlights
(As of October 31, 1995)

Percentage of Net Assets 61.9%
Average Price-To-Earnings
Ratio 13.8*
Median Market Capitalization $4.8 billion
Top Sector - Consumer Growth
Stock Portfolio Annual Return +22.35%**

* Based on a consensus of financial analysts estimates for 1996
reported to I/B/E/S.
** Based on equity only performance of Class A shares at net asset
value with dividends and capital gains reinvested. For complete Fund
performance, see page 7. Effect of 12b-1 fee not included.

==============================================================================

Companies that generated a substantial portion of their earnings from outside
the U.S. were helped by the relatively low valuation of the U.S.
dollar.
As of October 31, nearly three-quarters of your Fund's stock portfolio
was composed of large capitalization companies included in the S&P 500 Index.
Medium-size and smaller companies comprised the remainder of the stocks we held.
The table below details how and why we positioned the Fund's stock
portfolio in different industry groups relative to the composition of the S&P
500 Index.
As we research stocks, we look for businesses that can perform
reasonably well in most economic environments. We ask whether a company is
generating excess cash and reinvesting in the business in a low-risk manner such
as an acquisition that increases market share. We then examine the long-term
potential for dividend increases.
In the past year, this critical, objective analysis has led us to
several companies whose earnings and growth prospects we believe are bright. One
of our largest holdings as of October 31, for example, was Service
International, which outperformed the S&P 500 during the year.
Service International, the world's largest funeral home and cemetery
operator, has been reporting strong increases in revenue. Industry consolidation
and a generally aging population in Europe and America are creating a long-term
need that we believe the Houston-based company is well-positioned to fulfill.
Service International's strategy has been to acquire independent funeral homes
and consolidate them, increasing efficiency and profits.

==============================================================================
Stock Portfolio Composition
<TABLE>
<CAPTION>

Weighting
Industry Relative to
Group S&P 500 Index Comments
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Growth Greater Than Strong historic and potential dividend/earnings growth
Capital Goods Greater Than High dividends, potential for export sales growth
Basic Industry Greater Than High dividends and internal efforts to increase profits
Energy Less Than Slow dividend growth, dividend payout ratio too high
Utilities Less Than Limited earnings growth, competition, deregulation
Retailing Less Than Earnings hurt by weak consumer spending
Technology Less Than Low dividends, stock prices too high relative to earnings
</TABLE>
===============================================================================

<PAGE>

In fiscal 1995, the Fund's portfolio did not include many technology
stocks, an industry whose share prices generally advanced dramatically. These
companies' stocks did not meet a fundamental requirement of the Fund - the
payment of a regular dividend and the prospect of better-than-average dividend
increases.
The Fund's investment discipline requires us to avoid or sell a
company's shares when its stock price relative to earnings gets too high
compared to the average of companies in the S&P 500 Index. Since technology
stocks tended to trade at high prices relative to the overall market, this
strategy, coupled with the Fund's focus on dividends, steered us away from
technology stocks in fiscal 1995.

Delaware Fund's Bond Focus
During the past fiscal year, your Fund's bond portfolio was concentrated on the
intermediate segment of the bond market. We consider the Fund's bonds as
securities that can help stabilize a shareholder's principal. We are more
interested in providing a high level of income consistent with the preservation
of principal than in generating capital gains by predicting the direction of
interest rates.
Our holdings consisted primarily of mortgage-related securities issued
by government agencies such as the Federal National Mortgage Association and
high-quality bonds issued by corporations such as Ford Motor Co.
Corporate bonds did well during this year and your Fund's bond
portfolio benefited from having a larger percentage of corporate bonds than the
benchmark Lehman Brothers Intermediate Government Corporate Index (24% in the
portfolio vs. 19% in the Index).

============================================================================
Bond Portfolio Highlights
(As of October 31, 1995)

Percentage of Net Assets 31.4%
Average Duration 3.2 years
Average Maturity 4.9 years
Average Quality AAA
Bond portfolio annual return +12.03%**

** Based only on bond performance using Class A shares at net asset
value with distributions reinvested. For complete Fund performance, see
page 7. Effect of 12b-1 fee not included.
===============================================================================

However, mortgage securities, a leading component of the Fund's bond
portfolio, did not do as well as other parts of the bond market in 1995
primarily because of concerns that more homeowners would refinance mortgages as
interest rates fell. Also, the share of your Fund's portfolio devoted to U.S.
Treasuries, which rose sharply in value in the past year, was less than that of
the Lehman Brothers Index.
Hence the +12.03% total return of the fixed-income portion of your
Fund's portfolio was modestly less than the +12.54% total return of the
unmanaged Lehman Brothers Index for the 12 months ended October 31. The Fund's
average duration, 3.2 years, was comparable to that of the Lehman Brothers
Index.

<PAGE>

High-quality mortgage and corporate bonds, as opposed to U.S.
Treasuries, offer income advantages that we believe have the potential to
augment your Fund's performance in the coming months.

Outlook
We believe companies that have demonstrated a consistent and higher-than-average
level of earnings growth year after year will perform well in the months ahead.
In the past, when U.S. economic growth slowed, these companies - especially
consumer growth businesses - have tended to outperform companies such as steel,
paper and auto makers whose sales and profits are more dependent on the overall
fortunes of the U.S. economy.
We believe interest rates are more likely to fall further rather than
rise in the coming months, which could make the stocks of companies that
regularly increase cash dividends more attractive.
Our interest rate outlook also leads us to conclude that the high
quality bonds in your Fund's portfolio have the potential to perform relatively
well. Still, we will continue to position the bond component of your Fund in a
conservative way, focusing on both high income and long-term principal stability
rather than short-term price gains.

(Photo of Gary A. Reed, Senior Portfolio Manager, Fixed-Income and George H.
Burwell, Senior Portfolio Manager, Equities.)

Although income from bonds will fall if interest rates continue to
decline, this may be offset by dividend increases among companies in the S&P 500
Index. Corporate profits, measured in terms of earnings per share, have more
than doubled in the past five years. Yet, even as profits have risen, the
dividend payout ratio - the percentage of profits paid out as dividends has
declined sharply since 1991 and is less than 40% of earnings. Although there is
no way to know if corporate profits will continue to rise, current trends lead
us to believe that many companies have the potential to increase dividends in
the future.

/s/ George H. Burwell
- -------------------------
George H. Burwell
Senior Portfolio Manager
Equities

/s/ Gary A. Reed
- -------------------------
Gary A. Reed
Senior Portfolio Manager
Fixed-Income

5
<PAGE>

Delaware Fund's
- -------------------------------------
Performance
- -------------------------------------
As you can see from the chart on page 7, an investor who bought $10,000 worth of
Delaware Fund A Class shares on October 31, 1985, and reinvested all dividends
would have had holdings worth $28,896 as of October 31, 1995.
The Fund has outperformed the Lehman Brothers Intermediate Government
Corporate Bond Index, a broad unmanaged hypothetical portfolio of long-term
bonds, over the past 10 years and achieved almost 75% of the total return of the
unmanaged Standard & Poor's 500 Index, a broad hypothetical portfolio composed
solely of stocks.
This performance is consistent with the balanced approach of the Fund -
investing in stocks as well as U.S. government bonds, mortgage-backed securities
and corporate bonds. Moreover, neither the Lehman Brothers nor the S&P 500 Index
includes the "real world" costs of buying and selling stocks or operating a
mutual fund, and people may not invest directly in an Index.
This year, we have added the Lehman Brothers Index to our performance
illustration. We are using the Lehman Brothers Index, which as of October 31,
1995, had the same average bond duration (3.2 years) as the fixed-income portion
of Delaware Fund, along with the S&P 500 Index. We did this so you can see the
long-term performance of a portfolio of equities relative to a portfolio that
relies solely on fixed-income securities.

Delaware Fund Performance
Average Annual Returns through October 31, 1995

6
<PAGE>

The Fund's performance is compared to that of the S&P 500 Index and the Lehman
Brothers Intermediate Government Corporate Index.

Chart assumes $10,000 invested on October 31, 1985, and includes the impact of a
5.75% sales charge and the reinvestment of all dividends and capital gains.
Performance of other Classes of Delaware Fund will vary due to differing charges
and expenses.

Delaware Fund Performance, 1985-1995

Lehman Brothers
Intermediate Standard &
Delaware Government Corporate Poor's 500
Fund A Class Index Stock Index
Oct. '85 $ 9426 $10000 $10000
Dec. '85 10535 10545 11236
Dec. '86 11698 12392 13328
Dec. '87 10976 12472 14019
Dec. '88 13283 13417 16331
Dec. '89 16677 15327 21490
Dec. '90 16597 16599 20821
Dec. '91 20056 19286 27137
Dec. '92 22598 20786 29201
Dec. '93 24720 23266 32132
Dec. '94 24386 22450 32568
Oct. '95 28896 26055 42018

*The upfront sales charge on A Class at the end of the Fund's fiscal year was
5.75%. It was lowered to 4.75% on November 29, 1995. A $10,000 investment on
October 31, 1985 would have grown to $29,197 as of October 31, 1995 assuming a
4.75% sales charge and reinvestment of dividends and capital gains.

Delaware Fund's return and share value fluctuate so that shares, when redeemed,
may be worth more or less than their original cost. Past performance is not a
guarantee of future results.

Class A returns reflect the effect of the maximum sales charge, reinvestment of
all distributions, and a 12b-1 fee of up to 0.30%. The upfront sales charge on A
Class shares at the end of the fiscal year was 5.75%. It was lowered to 4.75% on
November 29, 1995.

Class B performance reflects the reinvestment of all distributions. Class B
shares do not carry a front-end sales charge, but are subject to a 1% annual
distribution and service fee for eight years. They are subject to a contingent
deferred sales charge if redeemed before the end of the sixth year. Lifetime
performance "excluding sales charge" assumes the investment was not redeemed.
Class B was initially offered on September 6, 1994.

The average annual total returns for Delaware Fund's Institutional Class, which
is available without sales or asset-based distribution charges only to certain
eligible institutional accounts, were +11.91%, +13.21% and +16.50%,
respectively, for the 10-, five- and one-year periods ended October 31, 1995.
The Institutional Class was initially made available on November 9, 1992.
Performance for the Institutional Class for periods prior to this date are based
on Class A performance, adjusted to eliminate the sales charge, but not the
effect of the 12b-1 distribution fee.

As of November 29, 1995, the Fund also offers Class C shares which have a 1%
annual distribution and service fee. A 1% contingent deferred sales charge
applies if shares are redeemed within 12 months of purchase. Performance of
these shares will differ from the performance shown here.

7
<PAGE>

Delaware Fund's Lifetime Performance
<TABLE>
<CAPTION>

Sub-total/
Including Total Value/
From Investment/ Capital Gains Including Dividends
Initial Investment Only & Capital Gains
------------------ ------------- ------------------
<S> <C> <C> <C>
Dec. '38 ............................................... 10585 10855 10855
Dec. '39 ............................................... 10397 11121 11202
Dec. '40 ............................................... 10245 11303 11650
Dec. '41 ............................................... 9069 10090 10893
Dec. '42 ............................................... 9981 11129 12714
Dec. '43 ............................................... 11088 13417 16011
Dec. '44 ............................................... 11182 15433 18303
Dec. '45 ............................................... 14113 21965 25961
Dec. '46 ............................................... 10553 20536 23850
Dec. '47 ............................................... 9347 19208 22791
Dec. '48 ............................................... 8503 18382 22448
Dec. '49 ............................................... 8931 20470 25614
Dec. '50 ............................................... 10057 24371 31413
Dec. '51 ............................................... 10465 26983 35815
Dec. '52 ............................................... 10779 29409 39964
Dec. '53 ............................................... 9780 28009 39230
Dec. '54 ............................................... 13163 40374 57537
Dec. '55 ............................................... 13799 45979 65989
Dec. '56 ............................................... 13786 49808 72064
Dec. '57 ............................................... 10918 42465 62323
Dec. '58 ............................................... 14969 62043 92259
Dec. '59 ............................................... 15346 69944 103339
Dec. '60 ............................................... 13950 68218 101353
Dec. '61 ............................................... 16478 87703 129522
Dec. '62 ............................................... 13120 74367 110177
Dec. '63 ............................................... 14465 89211 131601
Dec. '64 ............................................... 15434 103988 151919
Dec. '65 ............................................... 19422 142733 206360
Dec. '66 ............................................... 18314 148602 211730
Dec. '67 ............................................... 20743 202388 277949
Dec. '68 ............................................... 20881 235473 318533
Dec. '69 ............................................... 15736 196878 266333
Dec. '70 ............................................... 14843 194388 271627
Dec. '71 ............................................... 15749 225794 316191
Dec. '72 ............................................... 15572 243093 340318
Dec. '73 ............................................... 11056 175836 254218
Dec. '74 ............................................... 8792 139829 212936
Dec. '75 ............................................... 11447 182038 290742
Dec. '76 ............................................... 14742 234448 389784
Dec. '77 ............................................... 13635 216845 377701
Dec. '78 ............................................... 13271 211044 386363
Dec. '79 ............................................... 15648 248852 478755
Dec. '80 ............................................... 18755 298262 602731
Dec. '81 ............................................... 19182 305063 659473
Dec. '82 ............................................... 25422 404284 939496
Dec. '83 ............................................... 24491 527343 1083898
Dec. '84 ............................................... 22730 546680 1110799
Dec. '85 ............................................... 26139 765326 1461216
Dec. '86 ............................................... 23069 973470 1622518
Dec. '87 ............................................... 16152 1045575 1522364
Dec. '88 ............................................... 18629 1205994 1842283
Dec. '89 ............................................... 22314 1444586 2313034
Dec. '90 ............................................... 20730 1381046 2301959
Dec. '91 ............................................... 22188 1698729 2781707
Dec. '92 ............................................... 23158 1897347 3134282
Dec. '93 ............................................... 23095 2094801 3428598
Dec. '94 ............................................... 21673 2013916 3382262
Oct. '95 ............................................... 25050 2330672 4014474
</TABLE>

An investment in Delaware Fund A Class made on April 25, 1938, would have grown
more than four hundred fold through October 31, 1995, if dividends and capital
gains were reinvested.

* The performance of Delaware Fund A shown in the chart above includes the
effect of a 5.75% up-front sales charge. The maximum up-front sales charge on
Delaware Fund A Class was reduced to 4.75% as of November 29, 1995. Based on
that 4.75% sales charge, a $10,000 investment would have grown to $4,060,423
during the lifetime period. This chart shows only the performance of Delaware
Fund's A Class; performance of the Fund's other Classes will differ from the
above performance due to varying sales charges and fees which are described on
page 7.

A $10,000 investment made in Delaware Fund on the first day it was
available in 1938, would have been worth more than $4 million as of October 31,
1995. Our point in showing you this powerful illustration is not to suggest that
Delaware Fund can make you a millionaire, but to illustrate the potential
rewards of patient, long-term investing regardless of the amount one has to
invest. Even a $100 investment in Delaware Fund during its lifetime period would
have grown to over $40,000, more than a year's pay for many Americans.
You can also see from the chart how much of an impact the continuous
reinvestment of dividends and capital gains can have on an investment. As a
result of the power of long-term compounding, annual dividends alone from the
$10,000 investment shown above would have been more than $100,000 in fiscal
1995.
Though past performance is not a guarantee of future results, Delaware
Fund's performance shows that people with the time and patience to ride out the
ups and downs of a portfolio that includes stocks, have the potential to build
substantial wealth over the long term.

8
<PAGE>

Financial
- --------------------------------------------------------------------
Statements
- --------------------------------------------------------------------

Delaware Group Delaware Fund
Statement of Net Assets
October 31, 1995

Number Market
of Shares Value
COMMON STOCK - 61.51%
Aerospace & Defense - 4.91%
AlliedSignal ............................. 134,000 $ 5,695,000
GenCorp .................................. 300,000 3,150,000
General Motors Class H ................... 130,800 5,493,600
Lockheed Martin .......................... 152,100 10,361,813
Rockwell International ................... 113,000 5,028,500
-----------
29,728,913
-----------
Automobiles & Automotive Parts - 1.05%
Armor All Products ....................... 96,000 1,608,000
Danaher .................................. 153,400 4,755,400
-----------
6,363,400
-----------
Banking, Finance & Insurance - 2.69%
Bank of New York ......................... 91,000 3,822,000
Equitable of Iowa ........................ 59,500 2,082,500
Federal Home Loan ........................ 60,300 4,175,775
Federal National Mortgage ................ 39,050 4,095,369
MBNA...................................... 56,700 2,090,813
-----------
16,266,457
-----------
Buildings & Materials - 0.73%
Foster Wheeler ........................... 117,500 4,406,250
-----------
4,406,250
-----------
Cable, Media, & Publishing - 1.33%
American Greetings Class A................ 254,600 8,035,813
-----------
8,035,813
-----------
Chemicals - 4.76%
Air Products & Chemicals ................. 94,000 4,852,750
duPont (EI) deNemours .................... 72,000 4,491,000
Loctite .................................. 210,000 9,922,500
Praxair .................................. 280,700 7,578,900
RPM ...................................... 100,400 1,951,525
-----------
28,796,675
-----------
Computers & Technology - 1.71%
Reynolds & Reynolds....................... 291,600 10,388,250
-----------
10,388,250
-----------
Consumer Products - 1.66%
Procter & Gamble.......................... 124,000 10,044,000
-----------
10,044,000
-----------
Electronics & Electrical - 3.35%
Diebold .................................. 112,425 5,958,525
General Electric ......................... 143,200 9,057,400
Teleflex ................................. 124,300 5,267,213
-----------
20,283,138
-----------
<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Energy - 5.30%
Imperial Oil Limited ....................... 106,000 $3,869,000
Kerr-McGee ................................. 115,000 6,339,375
Royal Dutch Petroleum ADR .................. 62,600 7,691,975
Sonat ...................................... 164,100 4,717,875
TOTAL S.A. ADR ............................. 147,223 4,545,510
Unocal ..................................... 188,200 4,940,250
-----------
32,103,985
-----------
Environmental Services - 1.84%
WMX Technologies ......................... 396,000 11,137,500
-----------
11,137,500
-----------
Farming & Agriculture - 2.58%
ConAgra .................................. 404,000 15,604,500
-----------
15,604,500
-----------
Food, Beverage & Tobacco - 4.61%
Philip Morris ............................. 235,000 19,857,500
RJR Nabisco Holdings ...................... 193,520 5,950,740
Sbarro .................................... 100,000 2,087,500
-----------
27,895,740
-----------
Healthcare & Pharmaceuticals - 6.66%
Abbott Laboratories ...................... 142,300 5,656,425
Rite Aid ................................. 300,400 8,110,800
Schering-Plough .......................... 164,600 8,826,675
SmithKline Beecham ADR Unit .............. 210,200 10,904,125
United Healthcare ........................ 128,400 6,821,250
-----------
40,319,275
-----------
Real Estate - 3.74%
Associated Estates Realty ................ 122,400 2,509,200
Developers Diversified Realty ............ 205,500 5,856,750
Health Care Property Investors ........... 167,000 5,657,125
Nationwide Health Properties ............. 114,900 4,725,263
Storage Trust Realty ..................... 45,200 887,050
Sun Communities .......................... 121,700 3,027,288
-----------
22,662,676
-----------
Retail - 3.35%
American Stores .......................... 187,900 5,613,513
Limited .................................. 179,900 3,305,663
May Department Stores .................... 163,500 6,417,375
Storage USA .............................. 54,000 1,579,500
Wal-Mart Stores .......................... 157,200 3,399,450
-----------
20,315,501
-----------
Utilities - 5.37%
ALLTEL .................................... 242,700 7,432,688
CMS Energy ................................ 305,000 8,425,625
Illinova .................................. 239,000 6,781,625
SCEcorp ................................... 280,000 4,760,000
Tele Danmark ADR .......................... 194,700 5,086,538
-----------
32,486,476
-----------
Miscellaneous - 5.87%
Service International .................... 308,000 12,358,500
Tomkins plc ADR .......................... 270,000 4,252,500

9
<PAGE>
Statement of Net Assets (Continued)

Number Market
of Shares Value
COMMON STOCK (Continued)
Miscellaneous (Continued)
Tyco International........................ 311,200 $18,905,400
-----------
35,516,400
-----------
Total Common Stock
(cost $317,850,475)...................... 372,354,949
-----------

CONVERTIBLE PREFERRED STOCK - 0.41%
Freeport-McMoRan Copper & Gold
5.00% pfd cv............................. 103,400 2,468,675
-----------
Total Convertible Preferred Stock
(cost $2,299,511)........................ 2,468,675
-----------

Principal
Amount
CORPORATE BONDS - 9.61%
Allstate 5.875% 06/15/98 ................. $4,120,000 4,078,800
Aristar 8.125% 12/01/97 ................. 1,145,000 1,192,231
Capital One Bank 6.66% 08/17/98 .......... 3,060,000 3,094,425
Celulosa Arauco 7.25% 06/11/98 .......... 1,750,000 1,758,750
Columbia/HCA Healthcare
8.70% 02/10/2010 ........................ 3,050,000 3,534,188
Dean Witter Discover
6.25% 03/01/2000 ........................ 2,000,000 1,997,740
*Financira Energetic Nacional
9.00% 11/08/99 .......................... 2,000,000 2,050,000
Ford Motor Credit Global
6.25% 11/08/2000 ........................ 4,015,000 4,004,963
General Motors Acceptance Corporation
Medium-Term Note
5.75% 03/03/99 .......................... 990,000 972,675
General Motors Acceptance Corporation
8.375% 05/01/97 ......................... 965,000 996,363
HF Ahmanson & Company
6.35% 09/01/98 .......................... 3,735,000 3,753,675
MBNA 6.875% 10/01/99 ..................... 1,240,000 1,267,900
*Nationwide Mutual Insurance
9.875% 02/15/2025 ....................... 2,000,000 2,280,000
Noranda 8.125% 06/15/2004 ................ 3,635,000 3,943,975
Pep Boys 7.00% 06/01/2005 ................ 3,940,000 4,004,025
RJR Nabisco 8.30% 04/15/99 ............... 1,000,000 1,061,250
RJR Nabisco 6.80% 09/01/2001 ............. 1,000,000 1,011,250
Southwest Airlines
7.875% 09/01/2007 ....................... 2,750,000 2,935,625
Standard Credit Card
7.25% 04/07/2008 ........................ 2,740,000 2,876,178
Tektronix 7.50% 08/01/2003 ............... 2,300,000 2,346,000
Thailand Kingdom Medium-Term Note
7.07% 09/30/2013 ........................ 2,655,000 2,542,163
Transamerica Financial Medium-Term Note
8.08% 11/04/99 .......................... 3,785,000 4,012,100
VF Corp. 9.50% 05/01/2001 ................ 2,175,000 2,490,375
-----------
Total Corporate Bonds
(cost $55,913,095) ...................... 58,204,651
-----------
<PAGE>

Principal Market
Amount Value
ASSET-BACKED SECURITIES - 4.59%
ADVANTA 5.95% 05/25/2009 ................. $ 1,410,422 $ 1,367,420
American Finance Home Equity
Series 94-2 A1 6.95% 06/25/2024 ......... 2,698,305 2,712,066
Series 94-5 A 7.20% 02/15/2008 .......... 709,873 718,533
Series 94-1 A 7.50% 03/15/2007 .......... 854,748 872,612
Series 91-1 A 8.00% 07/25/2006 .......... 674,112 691,369
Case Equipment Loan Trust
Series 95-B A3 6.15% 09/15/2002 ......... 4,440,000 4,449,324
Dayton Hudson Credit Card Master Trust
Series 95-1A 6.10% 02/25/2002 ........... 3,525,000 3,536,985
Olympic Automobile Receivables Trust
Series 95-B A2 7.35% 10/15/2001 ......... 4,146,921 4,220,736
OSCC Home Equity Loan Trust
6.025% 06/15/2008 ....................... 1,498,486 1,467,557
Premier Auto Trust
Series 93-3 A3 4.90% 12/15/98 ........... 3,233,452 3,201,118
World Omni Automobile Lease
Securitization Trust
Series 95-A 6.05% 11/25/2001 ............ 2,200,000 2,202,063
Series 94-BA 7.95% 01/25/2001 ........... 2,310,000 2,369,367
-----------
Total Asset-Backed Securities
(cost $27,556,695) ...................... 27,809,150
-----------

COLLATERALIZED MORTGAGE
OBLIGATIONS - 2.20%
Federal Deposit Insurance Corporation
REMIC Trust
Series 94-C1 2A2 7.85%
09/25/2025 .............................. 3,725,000 3,800,664
Federal Home Loan Mortgage Corporation
Series 1666-E 6.00% 12/15/2019 .......... 3,380,000 3,310,992
Paine Webber CMO Trust
9.00% 03/20/97 .......................... 539,789 541,294
Resolution Trust Corporation
Series 95-C1 A2B 6.55%
02/25/2027 .............................. 3,900,000 3,890,250
Travelers Mortgage Securities Corporation
12.00% 03/01/2014 ....................... 1,583,229 1,777,175
-----------
Total Collateralized Mortgage Obligations
(cost $13,230,340) ...................... 13,320,375
-----------

GOVERNMENT AGENCY NOTES - 0.95%
Federal Home Loan Bank Global Note
6.125% 08/05/96 ......................... 5,740,000 5,767,035
-----------
Total Government Agency Notes
(cost $5,712,197) ....................... 5,767,035
-----------

MORTGAGE-BACKED SECURITIES - 10.74%
Federal Home Loan Mortgage Corporation
6.00% 02/01/2001 ........................ 1,372,641 1,355,912
Federal Home Loan Mortgage Corporation
8.50% 9/1/08 to 6/1/14 .................. 2,805,563 2,921,403
Federal National Mortgage Association
6.50% 2/1/10 to 2/1/24 .................. 7,649,540 7,473,864

10
<PAGE>

Statement of Net Assets (Continued)
Principal Market
Amount Value
MORTGAGE-BACKED SECURITIES
(Continued)
Federal National Mortgage Association
7.00% 6/1/09 to 7/1/17 .................. $11,132,647 $11,205,979
Federal National Mortgage Association
7.50% 05/01/2007 ........................ 3,349,805 3,418,895
Federal National Mortgage Association
8.00% 12/1/09 to 9/1/16 ................. 7,401,033 7,631,120
Federal National Mortgage Association
8.50% 11/01/2009 ........................ 2,590,151 2,692,947
Federal National Mortgage Association
9.50% 2/1/17 to 2/1/25 .................. 7,024,443 7,420,669
Government National Mortgage Association
6.50% 02/15/2024 ........................ 3,436,482 3,343,053
Government National Mortgage Association
7.50% 2/15/23 to 5/15/23 ................ 4,811,472 4,882,141
Government National Mortgage Association
9.00% 11/15/17 to 6/15/21 ............... 11,527,270 12,187,132
Government National Mortgage Association
10.00% 11/15/16 to 5/15/19 .............. 390,023 428,595
Government National Mortgage Association
12.50% 12/15/2010 ....................... 47,964 55,324
-----------
Total Mortgage-Backed Securities
(cost $64,107,545) ...................... 65,017,034
-----------

U.S. TREASURY OBLIGATIONS - 3.27%
U.S. Treasury Notes 4.375% 08/15/96 ...... 5,305,000 5,257,520
U.S. Treasury Notes
6.375% 01/15/2000 ....................... 1,100,000 1,124,002
U.S. Treasury Notes
6.375% 08/15/2002 ....................... 2,660,000 2,731,022
U.S Treasury Notes 6.50% 05/15/2005 3,700,000 3,830,055
U.S.Treasury Notes
6.875% 04/30/97 ......................... 3,665,000 3,731,740
U.S Treasury Notes 7.75% 11/30/99 ........ 2,250,000 2,408,062
U.S Treasury Notes 8.75% 10/15/97 ........ 650,000 687,271
-----------
Total U.S. Treasury Obligations
(cost $19,475,622) ...................... 19,769,672
-----------

REPURCHASE AGREEMENTS - 6.01%
With Chase Manhattan Bank
5.83% 11/1/95 (dated 10/31/95,
collateralized by $12,291,000 U.S.
Treasury Notes 5.625% due 6/30/97,
market value $12,517,866) ............... 12,201,000 12,201,000
With J.P. Morgan Securities
5.85% 11/1/95 (dated 10/31/95,
collateralized by $11,634,000 U.S.
Treasury Notes 6.875% due 7/31/99,
market value $12,248,079) ............... 12,004,000 12,004,000
With PaineWebber 5.83% 11/1/95
(dated 10/31/95, collateralized by
$12,254,000 U.S. Treasury Notes
6.00% due 8/31/97, market value
$12,448,316) ............................ 12,186,000 12,186,000
-----------
Total Repurchase Agreements
(cost $36,391,000) ...................... 36,391,000
-----------
<PAGE>

Statement of Net Assets (Continued)
Market
Value
TOTAL MARKET VALUE OF SECURITIES
OWNED - 99.29% (cost $542,536,480) ....................... $601,102,541
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 0.71% ............................... 4,270,274
------------
NET ASSETS APPLICABLE TO 30,344,833 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% ..................... $605,372,815
============

NET ASSET VALUE - DELAWARE FUND A CLASS
($493,242,561 / 24,730,846 SHARES) ............................. $19.94
======
NET ASSET VALUE - DELAWARE FUND B CLASS
($3,382,975 / 170,037 SHARES) .................................. $19.90
======
NET ASSET VALUE - DELAWARE FUND INSTITUTIONAL CLASS
($108,747,279 / 5,443,950) ..................................... $19.98
======
- ------------------
*Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.

Components of Net Assets at October 31, 1995:
Common stock, $1 par value, 200,000,000 shares authorized
to the Delaware Fund ..................................... $510,786,787
Accumulated undistributed income:
Net investment income .................................... 3,693,045
Net realized gain on investments ......................... 32,326,922
Net unrealized appreciation of investments ............... 58,566,061
------------
Total net assets .......................................... $605,372,815
============
See accompanying notes

11
<PAGE>

Delaware Group Delaware Fund
Statement of Operations
Year Ended October 31, 1995

INVESTMENT INCOME:
Interest ................................. $15,717,149
Dividends ................................ 10,036,736 $25,753,885
-----------

EXPENSES:
Management fees ($2,953,762) and
directors' fees ($16,336) ............... 2,970,098
Dividend disbursing and transfer agent
fees and expenses ....................... 996,616
Distribution expenses .................... 859,369
Salaries ................................. 144,466
Reports to shareholders .................. 111,651
Custodian fees ........................... 63,129
Federal and state registration fees ...... 46,566
Taxes, other than taxes on income ........ 33,831
Professional fees ........................ 31,649
Other .................................... 125,676 5,383,051
---------- -----------
NET INVESTMENT INCOME .................... 20,370,834
-----------

NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain from
security transactions ................... 33,206,692
Net unrealized appreciation of
investments during the period ........... 33,674,467
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS: .................... 66,881,159
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............... $87,251,993
===========

COMPUTATION OF NET ASSET VALUE AND OFFERING
PRICE - DELAWARE FUND A CLASS:
Net asset value per share (A) ............................. $19.94
Sales charges (5.75% of offering price, or 6.12% of amount
invested per share) (B) .................................. 1.22
------
Offering price ............................................ $21.16
======
- -----------------
(A) Net asset value per share, as illustrated, is the estimated amount
which would be paid upon the redemption or repurchase of shares.
(B) See Purchasing Shares in the current Prospectus for purchases of $100,000
or more and purchase options not including the payment of a front-end sales
charge. Effective November 29, 1995, the maximum sales charge was reduced
from 5.75% to 4.75%. At 4.75%, the sales charge would have been $0.99
resulting in an offering price of $20.93.

See accompanying notes
<PAGE>

Delaware Group Delaware Fund
Statements of Changes in Net Assets

Year Ended Year Ended
10/31/95 10/31/94
OPERATIONS:
Net investment income ...................... $ 20,370,834 $ 18,679,911
Net realized gain from
security transactions ..................... 33,206,692 7,247,608
Net appreciation (depreciation)
during the period ......................... 33,674,467 (16,013,608)
------------ ------------
Net increase in net assets
resulting from operations ................. 87,251,993 9,913,911
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Delaware Fund A Class ..................... (15,844,023) (15,343,261)
Delaware Fund B Class ..................... (47,613) (3,727)
Delaware Fund Institutional Class ......... (3,528,785) (2,958,346)
Net realized gain from security transactions:
Delaware Fund A Class ..................... (6,294,837) (29,288,645)
Delaware Fund B Class ..................... (11,657) --
Delaware Fund Institutional Class ......... (1,332,622) (4,503,721)
------------ ------------
(27,059,537) (52,097,700)
------------ ------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Delaware Fund A Class ..................... 28,758,712 28,724,526
Delaware Fund B Class ..................... 2,646,689 567,201
Delaware Fund Institutional Class ......... 24,654,943 34,025,403
Net asset value of shares issued upon
reinvestment of dividends from net
investment income and net realized
gain on security transactions
Delaware Fund A Class ..................... 16,717,134 34,242,339
Delaware Fund B Class ..................... 57,857 3,714
Delaware Fund Institutional Class ......... 4,844,558 7,450,202
------------ ------------
77,679,893 105,013,385
------------ ------------
Cost of shares repurchased:
Delaware Fund A Class ..................... (57,791,089) (78,055,142)
Delaware Fund B Class ..................... (115,464) --
Delaware Fund Institutional Class (25,224,771) (13,722,666)
------------ ------------
(83,131,324) (91,777,808)
------------ ------------
Increase (decrease) in net assets
derived from capital share
transactions .............................. (5,451,431) 13,235,577
------------ ------------
NET INCREASE (DECREASE) IN
NET ASSETS ................................ 54,741,025 (28,948,212)

NET ASSETS:
Beginning of period ........................ 550,631,790 579,580,002
------------ ------------
End of period (including undistributed
net investment income of $3,693,045
and $2,742,632, respectively) ............. $605,372,815 $550,631,790
============ ============

See accompanying notes

12
<PAGE>

Delaware Group Delaware Fund
Notes to Financial Statements
October 31, 1995

Delaware Group Delaware Fund, Inc. (the "Company") is registered as a
diversified open-end investment company under the Investment Company Act of
1940. The Company currently offers two Series, Delaware Fund (the "Fund") and
Devon Fund (formerly known as Dividend Growth Fund). The Company is organized as
a Maryland corporation. As of October 31, 1995, the Fund offered three classes
of shares. Effective November 29, 1995, the Fund began offering a fourth class
of shares. This class is known as Delaware Fund C Class.

1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund for financial
statement preparation:

Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 pm on the valuation date. Securities not traded or
securities not listed on an exchange are valued at the mean of the last quoted
bid and asked prices. Long-term debt securities are valued by an independent
pricing service when such prices are believed to reflect the fair value of such
securities. Money market instruments having less than 60 days to maturity are
valued at amortized cost.

Federal Income Taxes - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes is required in the financial
statements.

Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Group of Funds. The aggregate daily balance of the
pooled cash account is invested in repurchase agreements secured by obligations
of the U.S. government. The respective collateral is held by the Fund's
custodian bank until the maturity of the respective repurchase agreements. Each
repurchase agreement is at least 100% collateralized. However, in the event of
default or bankruptcy by the counterparty to the agreement, realization of the
collateral may be subject to legal proceedings.

Class Accounting - Investment income, common expenses and gain (loss) on
investments are allocated to the various classes of the Fund on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.

Other - Expenses common to all funds within the Delaware Group of Funds are
allocated amongst the funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale of
investment securities are those of the specific securities sold. Dividend income
is recorded on the ex-dividend date and interest income is recorded on an
accrual basis. Original issue discounts are accreted to interest income over the
lives of the respective securities.

Certain fund expenses are paid directly by brokers. The amount of these expenses
is less than 0.01% of the Fund's average net assets.
<PAGE>

2. Investment Management and Distribution Agreements
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. (DMC), the Investment Manager of the
Fund, a fee which is calculated daily at the annual rate of 0.60% on the first
$100 million of average daily net assets of the Fund, 0.525% on the next $150
million, 0.50% on the next $250 million and 0.475% on the average daily net
assets over $500 million, less fees paid to the independent directors. At
October 31, 1995, the Fund had a liability for Investment Management fees and
other expenses payable to DMC for $258,744.

Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of A Class and 1.00% of the average
daily net assets of B Class. No distribution expenses are paid by the
Institutional Class. At October 31, 1995, the Fund had a liability for
distribution fees and other expenses payable to DDLP of $15,481. For the year
ended October 31, 1995, the Fund paid DDLP $73,817 for commissions earned on
sales of Delaware Fund A Class shares.

The Fund has engaged Delaware Service Company Inc. (DSC), an affiliate of DMC,
to serve as dividend disbursing and transfer agent for the Fund. For the year
ended October 31, 1995, the Fund has expensed $996,616 for these services. At
October 31, 1995, the Fund had a liability for such fees and other expenses
payable to DSC for $12,038.

Certain officers of the Investment Manager are officers, directors, and/or
employees of the Fund. These officers, directors, and employees are paid no
compensation by the Fund.

On April 3, 1995, Delaware Management Holdings, Inc., the indirect parent of
DMC, DDLP and DSC, through a merger transaction (the "Merger") became a
wholly-owned subsidiary of Lincoln National Corporation. Other than the
resulting change in ownership, the Merger will not materially change the manner
in which DMC, DDLP or DSC have heretofore conducted their relationship with the
Fund.

3. Investments
During the year ended October 31, 1995, the Fund made purchases of $452,047,553
and sales of $493,867,650 of investment securities other than U.S. government
securities and temporary cash investments.

At October 31, 1995, unrealized appreciation for federal income tax purposes
aggregated $58,520,542 of which $60,626,657 related to unrealized appreciation
of securities and $2,106,115 related to unrealized depreciation of securities.

The realized gain for federal income tax purposes was $32,806,568 for the year
ended October 31, 1995.

On October 31, 1995, the Fund had a receivable for investment securities sold of
$6,731,183 and a payable for investment securities purchased of $4,001,751.

13
<PAGE>

Notes to Financial Statements (Continued)

4. Capital Stock
Transactions in capital stock shares were as follows:

Year Ended Year Ended
10/31/95 10/31/94
Shares sold:
Delaware Fund A Class ...................... 1,589,185 1,561,930
Delaware Fund B Class ...................... 141,318 31,368
Delaware Fund Institutional Class .......... 1,324,391 1,850,567

Shares issued upon reinvestment of
dividends from net investment income
and net realized gain on security
transactions:
Delaware Fund A Class ..................... 925,046 1,883,180
Delaware Fund B Class ..................... 3,127 207
Delaware Fund Institutional Class ......... 268,511 410,140
---------- ----------
4,251,578 5,737,392
---------- ----------
Shares repurchased:
Delaware Fund A Class ..................... (3,123,004) (4,229,098)
Delaware Fund B Class ..................... (5,983) --
Delaware Fund Institutional Class ......... (1,363,009) (750,002)
---------- ----------
(4,491,996) (4,979,100)
---------- ----------
Net increase (decrease) ................... (240,418) 758,292
========== ==========
<PAGE>

5. Securities Lending
The market value of securities on loan to broker/dealers at October 31, 1995,
was $70,309,108 for which the Fund received cash collateral of $72,660,759.

6. Lines of Credit
The Fund has a committed line of credit for $10,000,000. No amount was
outstanding at October 31,1995, or at any time during the last fiscal year.

7. Concentration of Credit Risk
The Fund invests in securities whose value is derived from an underlying pool of
mortgages or consumer loans. Prepayment of these loans may shorten the stated
maturity of the respective obligation and may result in a loss of premium, if
any has been paid.

The Fund may invest up to 10% of its total assets in illiquid securities which
includes securities with contractual restrictions on resale, securities exempt
from registration under Rule 144A of the Securities Act of 1933, as amended, and
other securities which may not be readily marketable. The relative illiquidity
of some of these securities may adversely affect the Fund's ability to dispose
of such securities in a timely manner and at a fair price when it is necessary
to liquidate such securities. These securities have been denoted in the
Statement of Net Assets.

14
<PAGE>

Notes to Financial Statements (Continued)

8. Financial Highlights
Selected data for each share of the Fund outstanding throughout each period
were as follows:

<TABLE>
<CAPTION>
Delaware Fund A Class
-------------------------------------------------------------
Year Ended October 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............................... $18.000 $19.430 $18.720 $18.810 $16.190

Income from investment operations:
Net investment income ............................................ 0.664 0.615 0.631 0.660 0.757
Net realized and unrealized gain (loss) from security transactions 2.156 (0.285) 1.509 1.490 3.033
------- ------- ------- ------- -------
Total from investment operations ................................. 2.820 0.330 2.140 2.150 3.790

Less distributions:
Dividends from net investment income ............................. (0.630) (0.600) (0.660) (0.700) (0.880)
Distributions from net realized gain on security transactions .... (0.250) (1.160) (0.770) (1.540) (0.290)
------- ------- ------- ------- -------
Total distributions .............................................. (0.880) (1.760) (1.430) (2.240) (1.170)
------- ------- ------- ------- -------
Net asset value, end of period ..................................... $19.940 $18.000 $19.430 $18.720 $18.810
======= ======= ======= ======= =======

Total return (1).................................................... 16.26% 1.80% 11.91% 12.37% 24.32%

Ratios/supplemental data:
Net assets, end of period (000 omitted) .......................... $493,243 $456,074 $507,528 $487,343 $453,449
Ratio of expenses to average net assets .......................... 0.97% 0.97% 0.89% 0.79%(5) 0.71%
Ratio of net investment income to average net assets ............. 3.55% 3.31% 3.27% 3.64% 4.29%
Portfolio turnover ............................................... 94% 142% 160% 144% 212%
</TABLE>

<TABLE>
<CAPTION>
Delaware Fund Delaware Fund
B Class Institutional Class
------------------- --------------------------------
Year 9/6/94(2) | Year Year 11/09/92(3)
Ended to | Ended Ended to
10/31/95 10/31/94 | 10/31/95 10/31/94 10/31/93
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period. . . . . . . . . . . . . . . . $17.980 $18.340 | $18.030 $19.460 $18.820
|
Income (loss) from investment operations: |
Net investment income. . . . . . . . . . . . . . . . . . . . . . . 0.567 0.070 | 0.694 0.653 0.632
Net realized and unrealized gain (loss) from security transactions 2.113 (0.280 | 2.166 (0.293) 1.438
------- ------- | ------- ------- -------
Total from investment operations . . . . . . . . . . . . . . . . . 2.680 (0.210) | 2.860 0.360 2.070
------- ------- | ------- ------- -------
|
Less distributions: |
Dividends from net investment income . . . . . . . . . . . . . . . (0.510) (0.150) | (0.660) (0.630) (0.660)
Distributions from net realized gain on security transactions. . . (0.250) none | (0.250) (1.160) (0.770)
------- ------- | ------- ------- -------
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . (0.760) (0.150) | (0.910) (1.790) (1.430)
------- ------- | ------- ------- -------
Net asset value, end of period . . . . . . . . . . . . . . . . . . . $19.900 $17.980 | $19.980 $18.030 $19.460
======= ======= | ======= ======= =======
|
Total return(4). . . . . . . . . . . . . . . . . . . . . . . . . . . 15.36% (1.14%) | 16.50% 1.96% 11.76%
|
Ratios/supplemental data: |
Net assets, end of period (000 omitted). . . . . . . . . . . . . . $3,383 $568 | $108,747 $93,990 $72,052
Ratio of expenses to average net assets. . . . . . . . . . . . . . 1.79% 1.81% | 0.79% 0.81% 0.77%
Ratio of net investment income to average net assets . . . . . . . 2.73% 2.47% | 3.73% 3.47% 3.39%
Portfolio turnover . . . . . . . . . . . . . . . . . . . . . . . . 94% 142% | 94% 142% 160%
</TABLE>
- ------------------
1 Does not include maximum sales charge that is or was in effect nor the 1%
limited contingent deferred sales charge that would apply in the event of
certain redemptions within 12 months of purchase.
2 Date of initial public offering; ratios have been annualized and total return
has not been annualized.
3 Date of initial public offering; ratios and total return have been annualized.
4 Does not include contingent deferred sales charge which varies from 1%-4%
depending upon the holding period for Delaware Fund B Class.
5 Includes 12b-1 distribution expenses effective June 1, 1992.

15
<PAGE>

Delaware Group Delaware Fund, Inc.
Report of Independent Auditors

To the Shareholders and Board of Directors
Delaware Group Delaware Fund, Inc. - Delaware Fund

We have audited the accompanying statement of net assets of Delaware Group
Delaware Fund, Inc. - Delaware Fund as of October 31, 1995, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Delaware Fund, Inc. - Delaware Fund at October 31, 1995, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.

Ernst & Young LLP

Philadelphia, Pennsylvania
December 1, 1995

- -------------------------------------------------------------------------------

A Report on Delaware Fund's Annual Meeting

At an annual meeting of shareholders held on March 29, 1995, the following
matters were submitted for shareholder vote: the election of directors, the
ratification of the selection of Ernst & Young LLP as independent auditors of
the Fund and the approval of a new investment management agreement. The new
investment management agreement was proposed in connection with the April 3,
1995, merger of Delaware Management Holdings, Inc. (the parent of Delaware
Management Company, Inc.) and a subsidiary of Lincoln National Corporation.
Whenever there is a change in control of an investment manager, the Investment
Company Act of 1940 requires shareholders to vote on a new investment management
agreement.

Below are the names of each director elected at the meeting as well as the
results of the other matters voted on by shareholders.

Number of Votes*
-------------------------------------------
For Against/Withheld Abstentions
Election of Directors:**
Wayne A. Stork 21,303,756 475,115 --
Walter P. Babich 21,306,432 472,439 --
Anthony D. Knerr 21,293,293 485,578 --
Ann R. Leven 21,305,253 473,618 --
W. Thacher Longstreth 21,301,501 477,370 --
Charles E. Peck 21,306,356 472,515 --

Approval of the New
Investment Management
Agreement 19,910,466 536,627 793,448
Selection of Ernst & Young LLP
as Independent Auditors** 17,668,238 117,575 3,993,057

* Please note that the results of this meeting were not audited by Ernst &
Young LLP.
** Voted upon by all shareholders of Delaware Group Delaware Fund, Inc.

16
<PAGE>

This annual report is for the information of Delaware Fund shareholders, but
it may be used with prospective investors when preceded or accompanied by a
current Prospectus, which sets forth details about charges, expenses,
investment objectives and operating policies of the Fund. Summary investment
results are documented in the Fund's current Statement of Additional
Information.

When used with prospective investors after December 31, 1995, this report
must be accompanied by a Delaware Fund Performance Update for the most
recently completed calendar quarter. The figures in this report represent
past results which are not a guarantee of future results. The return and
principal value of an investment in the Fund will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.

Board
- ------------------------------------------
Members
- ------------------------------------------
Wayne A. Stork
Chairman, Delaware Group of Funds
Philadelphia, PA

Walter P. Babich
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA

Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY

Ann R. Leven
Treasurer, National Gallery of Art
Washington, DC

W. Thacher Longstreth
Vice Chairman, Packquisition Corp.
Philadelphia, PA

Charles E. Peck
Secretary of Enterprise Homes, Inc.
Fredericksburg, VA
former Chairman and CEO
The Ryland Group, Inc.
Columbia, MD

Affiliated
- ------------------------------------------
Officers
- ------------------------------------------
George M. Chamberlain, Jr.
Senior Vice President and Secretary,
Delaware Group of Funds
Philadelphia, PA

Keith E. Mitchell
President and CEO,
Delaware Distributors, L.P.
Philadelphia, PA

David K. Downes
Senior Vice President, Chief Financial Officer and
Chief Administrative Officer
Delaware Group of Funds
Philadelphia, PA

<PAGE>

Delaware Group
- ------------------------------------------
of Funds
- ------------------------------------------

For Growth of Capital
Trend Fund
DelCap Fund
Value Fund

For Total Return
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
Delaware Fund

For Global Diversification
International Equity Fund
Global Assets Fund
Global Bond Fund

For Current Income
Delchester Fund
U.S. Government Fund
Limited-Term Government Fund

For Tax-Free Current Income
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Tax-Free Pennsylvania Fund

Money Market Funds
Delaware Cash Reserve
U.S. Government Money Fund
Tax-Free Money Fund

Closed-End Equity/Income*
Dividend and Income Fund
Global Dividend and Income Fund

This report must be preceded or accompanied by a current Delaware Fund
prospectus. For a prospectus of any other Delaware Group fund, contact your
financial adviser or Delaware Group.

* Delaware Group Dividend and Income Fund and Delaware Group Global Dividend and
Income Fund purchases can be made through any registered broker.

Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
are not obligations of or deposits of any bank or any credit union, and involve
investment risk, including the possible loss of principal. Shares of the Fund
are not bank or credit union deposits.

Investment Manager
Delaware Management Company, Inc.
Philadelphia

International Affiliate
Delaware International Advisers Ltd.
London

National Distributor
Delaware Distributors, L.P.
Philadelphia

Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
Philadelphia

1818 Market Street
Philadelphia, PA 19103-3682
Nationwide (800) 523-4640

Securities Dealers Only
Nationwide (800) 362-7500

Copy Rights Delaware Distributors, L.P.

Printed in the U.S.A. on recycled paper.

AR-002[10/95]TKO12/95

(LOGO)

<PAGE>

1995
Annual ----------------------------
Report DELAWARE
GROUP
DEVON
FUND
----------------------------

[PHOTO OF VARIOUS PHILADELPHIA HISTORICAL SITES.]

A Tradition of Sound Investing Since 1929

DELAWARE
GROUP
--------
Philadelphia * London

<PAGE>

Devon Fund
- -----------------
Investment
- -----------------
Objective
- -----------------

To seek current income and capital appreciation.

[PHOTO OF VARIOUS PHILADELPHIA HISTORICAL SITES.]

About Our Cover
- ---------------

Headquartered in Philadelphia, Pennsylvania, Delaware Group shares in
the tradition of a city built on the vision of opportunity. Amidst the city's
historic sites, symbolic of our nation's freedom and prosperity, Delaware Group
provides both individual and institutional investors with a conservative,
disciplined approach to money management.

Delaware Group
- -----------------
A Tradition of
- -----------------
Sound Investing
- -----------------

Delaware Group manages mutual funds with the same time-tested,
disciplined strategies demanded by the large public and private pension plans,
foundations and endowments that are among our clients. With over 60 years of
investment management experience, we have demonstrated our commitment to quality
investment management and service.

Today, Delaware manages some $27 billion in mutual funds and
institutional investment advisory accounts. We measure our success by the
financial success and satisfaction of our nearly 500,000 shareholders.

<PAGE>

November 29, 1995

Dear
- -----------------
Shareholder:
- -----------------

Your Fund achieved a very positive +21.98% total return (capital change plus
income based on net asset value) for the 12 months ended October 31, 1995, a
period of exception-ally strong capital appreciation for the stock market.

Devon Fund - known as Dividend Growth Fund until we renamed it this
past August - has outperformed the average of its 409 growth and income-oriented
peers for both the latest fiscal year and for the 22-month period the Fund has
been operating, as you can see to the right.

During the past fiscal year, Devon Fund has benefited from favorable
economic and financial market conditions, namely a sharp reduction in interest
rates in calendar 1995, and the fact that many companies in the Fund's portfolio
have had strong earnings. The performance of consumer growth stocks helped us do
better than the average of our peers in the past year.

Interest rates began to fall in the spring, amid a slowdown in the U.S.
economy's growth rate, reduced expectations for inflation and an anticipated
shift in Federal Reserve Board policy. The Fed lowered the Federal Funds rate -
the rate banks charge each other for overnight loans - on July 6.

In 1995, higher corporate earnings have been fueled by productivity
growth, lower long-term financing costs for businesses and a decline in the
value of the U.S. dollar, which can help U.S. exporters by making products
cheaper for foreigners to buy.

In the five years ended October 31, 1995, the unmanaged Standard &
Poor's 500 Index has more than doubled as several trends have unfolded: our
country's banks have returned to health, long-term interest rates reached
generational lows as inflation ebbed, and U.S. industry revitalized itself by
scaling back debt and boosting productivity through technology and changes in
the work place.

- -----------------------------------------------------------------------
Total Return
12 months Since
Ended Inception
10/31/95 on 12/29/93

Devon Fund A Class +21.98% +33.26%
- -----------------------------------------------------------------------
Lipper Growth &
Income Fund Average +20.23% +22.44%
Standard & Poor's 500 Index +26.41% +30.58%
- -----------------------------------------------------------------------
Devon Fund (formerly Dividend Growth Fund) performance and performance
of the Lipper Growth and Income Fund Average is based on net asset
value without the effect of sales charge and assumes reinvestment of
dividends and capital gains. Performance information for all Fund
Classes can be found on page 7.
- -----------------------------------------------------------------------

A continuing positive sign is that more investors appear to be
taking a longer term approach to investing than had been the case in the
1980s. Still, we urge caution in thinking that the recent robust stock price
performance and buoyant optimism of the past few years can continue without
pause for the remaining years of the 20th Century.

<PAGE>

If stock price appreciation becomes harder to come by than in 1995,
we believe that dividends should take on a much greater role in generating
total return for stock investments. Devon Fund is well positioned for such an
environment because it focuses on dynamic companies that George H. Burwell,
the Fund's portfolio manager, anticipates will be able and willing to
increase dividends faster than the rest of the equities market. Moreover, the
Fund's disciplined approach to stock selection is designed to help reduce
exposure to market risks.

I wish to thank you for your confidence in Devon Fund, and I
encourage you to review the remainder of our report, which discusses the
Fund's positioning during the past year as well as our outlook for the Fund
for the coming months.

Sincerely,

/s/ WAYNE A. STORK
- --------------------------------
Wayne A. Stork
Chairman

Portfolio
- -----------------
Manager's
- -----------------
Review
- -----------------

It's been a banner year for stocks and for the Devon Fund as well. Your Fund
had the advantage of building its portfolio in 1994, our first year of
operation, when stock prices were generally stagnant. In 1995, as the stock
market's broad rally tended to favor the stocks of multinational companies,
our 1994 buying decisions began to bear fruit.

We had an opportunity to acquire stocks of large and mid-size
companies that offered historic dividend consistency and potential for
dividend growth. These same companies were generally able to post higher
earnings in 1995 despite a slowdown in the U.S. economy's growth rate.

- ------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
(As of October 31, 1995)
Average Market Value
of Companies $4.6 billion

Number of Stocks 56

Average Stock
Price-to-Earnings Ratio 13.8*

Top Sector - Consumer Growth 17.2%**

The above table details key elements of your
Fund's portfolio.

* Based on a consensus of earnings estimates for 1996 by analysts as
reported to I/B/E/S.
** Percent of net assets as of October 31.
- -----------------------------------------------------------------------
<PAGE>

Your Fund's Investment Strategy

Your Fund benefited from the strong performance over the past year of our in
financial and consumer growth stocks, as well as corporate restructurings
such as the merger of Lockheed Corp. and Martin Marietta Corp. to form
Lockheed Martin Corp., now the nation's biggest defense contractor.

Two years ago, prices of many consumer growth stocks were low relative
to earnings when compared to growth sector prices in the 1980s. This was due to
concern about negative trends in U.S. consumer spending and slower domestic
population growth. Some companies were challenged by increased competition
and/or growing expenses related to civil litigation. Also, greater government
price and product regulation appeared to threaten profitable industries such as
health care providers, tobacco and pharmaceuticals.

In fiscal 1995, however, consumer growth stocks rebounded and made a
significant positive contribution to Devon Fund's results. Part of the price
gain for these companies is attributable to bright prospects for higher sales
and earnings from markets such as Asia and Europe and to a U.S. dollar that
declined in value.

As the U.S. economy slows, companies with predictable earnings growth
tend to become more popular, and their stock prices relative to their earnings
tend to rise. We believe that earnings growth among S&P 500 Index companies will
slow significantly, making those companies which can continue to show solid
dividend growth even more attractive.

What We Bought and Sold

Our stock selection method includes:

* an evaluation of prior dividend increases
* the strength of a company's cash flow
* stock price relative to the market

These criteria have led us to consumer growth companies such as ConAgra Inc.-
a food processor whose supermarket brands include Healthy Choice and
Butterball turkeys. ConAgra has raised its dividend at least 14% a year for
each of the past 21 years.

PHOTO OF GEORGE H. BURWELL In fiscal 1995, consumer growth stocks
SENIOR PORTFOLIO MANAGER rebounded and made a positive
contribution to Devon Fund's results.

George H. Burwell
Senior Portfolio Manager

Earnings and dividend growth has also attracted us to Philip Morris
Cos. The tobacco, food and beer company's market share has continued to grow
around the world despite regulatory and competitive challenges. Philip Morris
has raised its dividend more than 50% in the past two years, and has, in our
opinion, a very healthy cash flow.

<PAGE>

Lower interest rates helped the Fund's financial stock holdings such as
credit card issuer MBNA Corp. and First USA Inc. for most of calendar 1995.
However, we have reduced our holdings since the summer as such financial stocks
met our price targets. By the end of the fiscal year, weakness in this sector
began to emerge as the stock market grew concerned about the health of the
consumer credit industry and the credit quality of borrowers.

In fiscal 1995, the Fund's portfolio did not have many technology
stocks, an industry whose share prices advanced dramatically. These companies'
stocks did not meet a fundamental requirement of the Fund - the payment of a
regular dividend and the prospect of better-than-average dividend increases.

The Fund's investment discipline generally requires us to avoid and/or
sell a company's shares when its price-to-earnings ratio becomes more than 20%
higher than that of companies in the S&P 500 Index. Since technology stocks
tended to trade at a large premium relative to the overall market, this
strategy, coupled with the Fund's focus on dividends, steered us away from
technology stocks.

One sector where we felt there was long-term value but where stock
price gains were negligible was retail stores. Consumer spending, especially for
items such as clothing, remained weak. Our holdings, such as Wal-Mart Stores and
May Department Stores, underperformed the market and by mid-1995, we had
significantly reduced our exposure to the industry.

A Focus On Rising Dividends

As the table below shows, the Fund's five largest holdings (as a percent of
net assets) are stocks of companies that, taken together, have raised
dividends more than twice the rate of companies that make up the S&P 500
Index.

- -------------------------------------------------------------------------------
DIVIDEND AND STOCK PRICE PERFORMANCE
Top Five Devon Holdings
(as a percentage of net assets as of October 31, 1995)

Quarterly Stock
Dividend Price
Increase Increase
December 31, 1993 to October 31, 1995
- ------------------------------------------------------------------------------
Tyco International (4.9%) 0 +20%
Philip Morris Companies Inc. (4.7%) +45% +66%
ConAgra Inc. (4.2%) +32% +55%
Loctite Corp. (3.4%) +25% +29%
Reynolds & Reynolds (3.2%) +18% +58%
- ------------------------------------------------------------------------------
Top Five Average +24% +46%
Standard & Poor's 500 Index +9% +31%

This illustration is not intended to represent Devon Fund's performance.
Complete performance information can be found on page 7. Past performance is
not a guarantee of future results.
Source: Bloomberg Business News

- ------------------------------------------------------------------------------

<PAGE>
Companies in the S&P 500 Index
have seen profits rise
substantially in the past
several years, but the
percentage of profits paid to
shareholders as dividends -
the dividend payout ratio -
has fallen. We believe many
S&P 500 Index companies have
the potential to raise
dividends.
Room for Improvement
A Growing Gap Between Earnings and Dividends

S&P 500 Index Dividend Payout Ratio

Sept. '85 52%
Dec. '85 60
Mar. '86 54
June '86 54
Sept. '86 54
Dec. '86 70
Mar. '87 48
June '87 72
Sept. '87 42
Dec. '87 48
Mar. '88 41
June '88 41
Sept. '88 39
Dec. '88 44
Mar. '89 37
June '89 44
Sept. '89 58
Dec. '89 60
Mar. '90 50
June '90 53
Sept. '90 56
Dec. '90 71
Mar. '91 54
June '91 71
Sept. '91 84
Dec. '91 119
Mar. '92 54
June '92 60
Sept. '92 68
Dec. '92 84
Mar. '93 49
June '93 67
Sept. '93 55
Dec. '93 61
Mar. '94 45
June '94 46
Sept. '94 41
Dec. '94 40
Mar. '95 35
June '95 39

Quarterly Dividends
Payout Ratio = ----------------------------------------
Quarterly Earnings Per Share

Source: Bloomberg Business News

What's more, the rate of capital appreciation of these five stocks
taken as a group (22.31% of net assets at year's end) has exceeded the average
price appreciation of stocks in the S&P 500 Index since the end of 1993.

Outlook
As the stock market has reached new heights, we have allowed the Fund's cash
reserves to build up modestly as new money was added to the Fund. At October 31,
about 9.1% of net assets was in cash and other assets, compared to 5.8% at the
end of fiscal year 1994.
In our opinion, a significant number of companies in the S&P 500
Index have an opportunity to increase dividends, especially mid-size and
large consumer growth companies. As the chart above shows, the percentage of
profits paid out in dividends by companies that make up the Index has dropped
steadily for the past five years to less than 40% of earnings as of this
writing. Profits measured in terms of earnings per share, meanwhile, have
risen dramatically during the same five-year period.
Banks and other financial stocks still generally offer yields that are
superior to many companies in the S&P 500. However, we believe this industry's
attractiveness has become limited. Although interest rates may move lower, and
bank merger activity will undoubtedly continue, three things, in our opinion,
may limit financial stock performance in the coming months:

* their prices relative to earnings are much higher than in 1994
* loan growth could slow and bad debts could rise
* the difference between short and long-term interest rates is very small
Banks tend to have higher profits when the spread is larger
<PAGE>

We do believe that many non-financial stocks remain attractively
priced, especially stocks that pay dividends. Stock dividends contribute
directly to total return via the income they provide and indirectly by
increasing the perceived value of the stock, which can help contribute to
price appreciation. Where a relatively steady dividend is attractive, we
believe a growing dividend should be even more valuable.

/s/ George H. Burwell
- -------------------------
George H. Burwell
Senior Portfolio Manager

A Look at
- -----------------
Devon's Lifetime
- -----------------
Performance
- -----------------

As you can see from the chart on the next page, an investor who bought
$10,000 worth of Devon Fund A Class shares on December 29, 1993, and
reinvested all dividends and capital gains would have had holdings worth
$12,560 as of October 31, 1995.

Although the Devon Fund A Class has been in existence only two
years, it has so far kept pace with the performance of the Standard & Poor's
500 Index after accounting for the Class' front-end sales charge. The Index
is a hypothetical portfolio of large and mid-size stocks that does not
include the "real world" costs of buying and selling stocks and operating a
mutual fund.

Our record since 1993 - while admittedly a relatively short period -
shows the benefits of investing in a fund that has outperformed the market
during a period of relative weakness and provided competitive results during
a market rally. Such results, albeit brief, reinforce our confidence in the
soundness of the Fund's strategy.

<PAGE>
Your Fund's performance is
compared to that of the
S&P 500 Index.

Chart assumes $10,000 invested
on December 29, 1993 and
includes the effect of the
5.75% front-end sales charge
and the reinvestment of all
dividends and capital gains.
Performance of other classes
of Devon Fund will vary due to
differing charges and expenses.

Devon Fund's Lifetime Performance

Growth of a $10,000 Investment
Total Return through October 31, 1995

Devon Fund Standard & Poor's
---------- -----------------
12/31/93 9,427 9,978
12/31/94 9,955 10,113
10/31/95 12,560 13,048
------ ------
Totals 12,560 13,048

* The front-end sales charge on A Class at the end of the Fund's fiscal year was
5.75%. It was lowered to 4.75% on November 29, 1995. A $10,000 investment at
inception would have grown to $12,692 as of October 31, 1995, assuming a 4.75%
sales charge and reinvestment of dividends and capital gains.

DEVON FUND PERFORMANCE
Average Annual Returns through October 31, 1995

Class A (Est. 1993)
Average Annual Total Returns

Sales Charge
------------------
5.75% 4.75%
------- -------
Lifetime +13.18% +13.82%
One Year +14.98% +16.19%

Class B (Est. 1994)
Average Annual Total Returns

Lifetime
+17.58% Excluding Sales Charge
+14.19% Including Sales Charge

One Year
+21.09% Excluding Sales Charge
+17.09% Including Sales Charge

Devon Fund's return and share value fluctuate so that shares, when redeemed, may
be worth more or less than their original cost. Past performance is not a
guarantee of future results. An expense limitation has been in effect since the
Fund began operating. The Fund's performance would have been materially lower
had the limitation not been in effect.

Class A returns reflect the effect of the 5.75% maximum front-end sales charge,
reinvestment of all distributions and a 12b-1 fee. The front-end sales charge
was lowered to 4.75% on November 29, 1995, as described above.

Class B performance reflects the reinvestment of all distributions. Class B
shares do not carry a front-end sales charge, but are subject to a 1% annual
distribution and service fee. They are subject to a deferred sales charge if
redeemed before the end of the sixth year. Lifetime performance "excluding sales
charge" assumes the investment was not redeemed. Class B was initially offered
on September 6, 1994.

The average annual total returns for Devon Fund's Institutional Class, which is
available without sales or asset-based distribution charges only to certain
eligible institutional accounts, were +17.20% and +22.26%, respectively, for the
lifetime and one-year periods ended October 31, 1995.

As of November 29, 1995, the Fund also offers Class C shares, which have a 1%
annual distribution and service fee and, if redeemed within 12 months, a 1%
contingent deferred sales charge. Performance of these shares will differ from
the performance shown above.

<PAGE>

Asset Allocation:
- -------------------
Why Diversification
- -------------------
Makes Sense
- -------------------

An inheritance, an early retirement or a change in jobs - these are among the
circumstances that could result in you receiving money that you may choose to
invest.

Deciding how to allocate these dollars at first may seem a challenging
task. Lots of people undoubtedly have words of advice. Lots of options beckon,
among them mutual funds.

As you and your financial adviser explore various options, one fact to
keep in mind is that no one can consistently predict which single type of
investment will perform the best in the future. History has shown that markets
move in cycles, depending on factors such as the economy, interest rates,
inflation and changing political and social conditions.

Performance Leadership Changes

Five different types of assets - from small company stocks, whose prices can
change a lot from day to day, to U.S. Treasury bills, the most conservative
of asset classes - have been the top performing asset class in any one year
since 1980, according to research compiled by Ibbotson Associates of Chicago.

Equity investments have been the top performers during nine of the past
16 years, but some years small stocks have led and in other years large company
stocks have led. Long- and intermediate-term bonds have had the best performance
four times since 1980 - but again, sometimes corporate bonds led the way and
other years government bonds ranked the highest.

Such constant change is why asset allocation makes sense for long-term
investors. By maintaining a diversified portfolio that includes different asset
classes, you can help reduce your portfolio's risk when one or more investments
perform poorly, and share in the benefits when one or more investments do well.

=============================================================================================================
Compound Annual Rates of Return By Decade

1930s 1940s 1950s 1960s 1970s 1980s 1990s** 1985-94
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Large Company Stocks -0.1% 9.2% 19.4% 7.8% 5.9% 17.5% 8.7% 14.4%
Small Company Stocks 1.4 20.7 16.9 15.5 11.5 15.8 11.8 11.1
Long-Term Corporate Bonds 6.9 2.7 1.0 1.7 6.2 13.0 8.4 11.6
Long-Term U.S. Treasury Bonds 4.9 3.2 -0.1 1.4 5.5 12.6 8.3 11.9
Intermediate-Term U.S. Treasury Bonds 4.6 1.8 1.3 3.5 7.0 11.9 7.5 9.4
U.S. Treasury Bills 0.6 0.4 1.9 3.9 6.3 8.9 4.7 5.8
- -------------------------------------------------------------------------------------------------------------
Inflation (Based on the
Consumer Price Index) -2.0 5.4 2.2 2.5 7.4 5.1 3.5 3.6

** Based on the period 1990-1994.
Source: Ibbotson Associates. Used with permission.
=============================================================================================================
</TABLE>
Asset class performance leadership has varied from decade to decade. Inflation
figures are added for comparison only.

Return potential and risk vary with different types of securities. While
stocks historically have offered the highest long-term return potential of
any asset class, their value may fluctuate significantly in the short term,
and volatility is even greater for securities of small-cap companies.
Corporate and U.S. Treasury bonds and bills, which offer the potential for
current income, tend to be less price volatile than stocks, but are
nonetheless sensitive to changes in interest rates. U.S. Treasury bonds and
bills, unlike corporate bonds, are guaranteed as to principal and interest.
In general, the longer a bond's maturity, the greater the potential for price
fluctuation. Past performance of these unmanaged asset classes is not a
guarantee of future results and does not reflect any fees or expenses.

<PAGE>

Research has shown that how you mix several investments - that is,
asset allocation --determines more than 92% of your long-term investment
results.* In fact, by dividing your investments among various asset classes,
such as stocks, bonds and short-term cash reserves, you can reduce the amount
that your portfolio value shifts in the short-term and enhance total return
potential over time.

Devon Fund strives to provide both capital appreciation and current
income by investing in stocks with potential for dividend growth. Such
objectives can make the Fund an appropriate component for many investment
strategies.

The Basic Four
Below are four general ways that investment professionals have allocated
assets. They are by no means the only way to divide your investment dollars,
but they are presented here to give you a general idea of the variety of
long-term strategies that are available.

* Capital Growth
A strategy with an objective of capital growth may focus on several different
sectors of the equity market - such as mutual funds that invest in small
growing companies and those that focus on large established companies. It may
include both U.S. and international investments. Such a strategy would be
suitable for investors who wish to maximize capital appreciation and are
willing to accept a relatively high degree of short-term risk to principal.

* Total Return
Investors who follow this strategy typically want capital growth but also
want to cushion an investment against short-term price changes. This strategy
can involve allocation of the largest share of assets to mutual funds that
invest in the common stocks of mid-size and established companies for growth.
Funds that invest in corporate bonds and preferred stocks may be added to the
portfolio to generate income.

* The Balanced Approach
A strategy that seeks a balanced approach is generally geared to conservative
investors who are as equally concerned with preserving principal as they are
with future growth. It can involve using a mix of mutual funds that may
invest in dividend-paying stocks, U.S. government securities, and very
high-quality corporate bonds. A major goal is generally to keep ahead of
inflation while trying to minimize risk.

* Current Income
A strategy that focuses on current income can employ mutual funds that strive
to maximize current income through various types of bond funds and possibly
stock funds. Long-term growth is generally a secondary goal. Asset classes
that involve risk to principal may be used in order to achieve higher income.
One variation of such a strategy can rely on municipal bond funds to maximize
income exempt from taxation.

Exactly how you should divide your investment dollars is something
that depends on your circumstances and should be carefully planned with the
help of a professional financial adviser.

It's helpful to keep in mind that your needs change over time and
that market conditions can change, affecting the strategy you plan. Talk with
your financial adviser and discuss your investment goals.

* Financial Analysts Journal, B.G.R.Brinson, B.D.Singer and G.L.Beebower,
May-June 1991.

<PAGE>

Financial
- ----------------------------------
Statements
- ----------------------------------
Delaware Group Devon Fund+
Statement of Net Assets
October 31, 1995

Number Market
of Shares Value
COMMON STOCK - 90.53%
Aerospace & Defense - 7.41%
AlliedSignal ..................................... 3,200 $136,000
GenCorp .......................................... 10,600 111,300
General Motors Class H ........................... 4,500 189,000
Lockheed Martin .................................. 4,800 327,000
Rockwell International ........................... 3,800 169,100
--------
932,400
--------
Automobiles & Auto Parts - 1.23%
Danaher .......................................... 5,000 155,000
--------
155,000
--------
Banking, Finance & Insurance - 4.41%
Bank of New York ................................. 3,100 130,200
Equitable of Iowa ................................ 2,000 70,000
Federal Home Loan ................................ 1,800 124,650
Federal National Mortgage ........................ 1,100 115,363
MBNA.............................................. 1,500 55,313
Wilmington Trust ................................. 2,000 59,500
--------
555,026
--------
Buildings & Materials - 1.22%
Foster Wheeler ................................... 4,100 153,750
--------
153,750
--------
Cable, Media, & Publishing - 4.14%
American Greetings Class A ....................... 9,600 303,000
Banta ............................................ 5,000 217,500
--------
520,500
--------
Chemicals - 6.59%
Air Products & Chemicals ......................... 3,100 160,038
Loctite .......................................... 9,000 425,250
Praxair .......................................... 9,000 243,000
--------
828,288
--------
Computers & Technology - 3.14%
Reynolds & Reynolds .............................. 11,100 395,438
--------
395,438
--------
Consumer Products - 2.32%
Procter & Gamble ................................. 3,600 291,600
--------
291,600
--------
Electronics & Electrical - 4.09%
Diebold .......................................... 2,700 143,100
General Electric ................................. 3,400 215,050
Teleflex ......................................... 3,700 156,788
--------
514,938
--------

+ Devon Fund is a Series of Delaware Group Delaware Fund, Inc.
<PAGE>

Number Market
of Shares Value
COMMON STOCK (Continued)
Energy - 6.82%
Imperial Oil Limited ............................. 3,400 $124,100
Kerr-McGee ....................................... 3,500 192,938
Royal Dutch Petroleum ADR ........................ 1,400 172,025
Sonat ............................................ 4,000 115,000
TOTAL S.A. ADR ................................... 5,000 154,375
Unocal ........................................... 3,800 99,750
----------
858,188
----------
Environmental Services - 3.02%
WMX Technologies ................................. 13,500 379,688
----------
379,688
----------
Farming & Agriculture - 4.15%
ConAgra .......................................... 13,500 521,438
----------
521,438
----------
Food, Beverage & Tobacco - 6.39%
Philip Morris .................................... 7,000 591,500
RJR Nabisco Holdings ............................. 6,900 212,175
----------
803,675
----------
Healthcare & Pharmaceuticals - 10.77%
Abbott Laboratories .............................. 4,700 186,825
Rite Aid ......................................... 9,000 243,000
Schering-Plough .................................. 5,500 294,938
SmithKline Beecham ADR Unit ...................... 6,600 342,375
United Healthcare ................................ 5,400 286,875
----------
1,354,013
----------
Real Estate - 2.34%
Colonial Properties Trust ........................ 2,600 65,000
Developers Diversified Realty..................... 2,000 57,000
Health Care Property Investors ................... 1,700 57,588
Nationwide Health Properties ..................... 1,400 57,575
Sun Communities .................................. 2,300 57,213
----------
294,376
----------
Retail - 4.65%
American Stores .................................. 4,700 140,413
Limited .......................................... 5,000 91,875
May Department Stores ............................ 4,600 180,550
Storage USA ...................................... 2,200 64,350
Wal-Mart Stores .................................. 5,000 108,125
----------
585,313
----------
Utilities - 9.17%
ALLTEL ........................................... 8,400 257,250
CMS Energy ....................................... 11,000 303,875
Illinova ......................................... 10,000 283,750
SCEcorp .......................................... 8,000 136,000
Tele Danmark ADR ................................. 6,600 172,425
----------
1,153,300
----------
Miscellaneous - 8.67%
Service International ............................ 8,900 357,113
Tomkins plc ADR .................................. 8,000 126,000
Tyco International ............................... 10,000 607,500
----------
1,090,613
----------
Total Common Stock (cost $9,987,841) ............. 11,387,544
----------

<PAGE>

Number Market
Statement of Net Assets (Continued) of Shares Value
CONVERTIBLE PREFERRED STOCK - 0.38%
Freeport-McMoRan Copper & Gold
5% pfd cv ...................................... 2,000 $ 47,750
-----------
Total Convertible Preferred Stock
(cost $50,935) ................................. 47,750
-----------

Principal
Amount
REPURCHASE AGREEMENTS - 7.35%
With Chase Manhattan Bank 5.83%
11/1/95 (dated 10/31/95,
collateralized by $312,000 U.S. ................
Treasury Notes 5.625% due 6/30/97,
market value $318,184) ........................ $310,000 310,000
With J.P. Morgan Securities 5.85%
11/1/95 (dated 10/31/95,
collateralized by $296,000 U.S. ................
Treasury Notes 6.875% due 7/31/99,
market value $311,326) ........................ 305,000 305,000
With PaineWebber 5.83% 11/1/95
(dated 10/31/95, collateralized by
$311,000 U.S. Treasury Notes
6.00% due 8/31/97,
market value $316,416) ........................ 310,000 310,000
-----------
Total Repurchase Agreements
(cost $925,000) ................................ 925,000
-----------

TOTAL MARKET VALUE OF SECURITIES OWNED - 98.26%
(cost $10,963,776) ....................................... 12,360,294
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 1.74% ............................... 218,895
-----------
NET ASSETS APPLICABLE TO 1,001,997 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% ...................... $12,579,189
===========

NET ASSET VALUE - DEVON FUND A CLASS
($8,845,587 / 705,003 SHARES) ............................ $12.55
===========

NET ASSET VALUE - DEVON FUND B CLASS
($863,217 / 69,084 SHARES) ............................... $12.50
===========
NET ASSET VALUE - DEVON FUND INSTITUTIONAL CLASS
($2,870,385 / 227,910 SHARES) ............................ $12.59
===========

COMPONENTS OF NET ASSETS AT OCTOBER 31, 1995
Common stock, $1 par value, 125,000,000 shares
authorized to the Devon Fund ............................... $10,467,175
Accumulated undistributed income
Net investment income ...................................... 46,731
Net realized gain on investments ........................... 668,765
Net unrealized appreciation of investments ................. 1,396,518
-----------
Total net assets ............................................. $12,579,189
===========

See accompanying notes

<PAGE>

Delaware Group Devon Fund
Statement of Operations
Year Ended October 31, 1995

INVESTMENT INCOME:
Dividends .......................................... $233,638
Interest ........................................... 59,771 $293,409
--------

EXPENSES:
Management fees ($57,382) and
directors' fees ($17,909) ......................... 75,291
Federal and state registration fees ................. 34,205
Dividend disbursing and transfer agent
fees and expenses ................................. 26,798
Distribution expenses ............................... 25,029
Reports to shareholders ............................. 16,345
Amortization of organization expenses ............... 13,925
Professional fees ................................... 6,827
Custodian fees ...................................... 5,873
Salaries ............................................ 2,378
Taxes, other than taxes on income ................... 1,183
Other ............................................... 7,316
--------
215,170
--------
Less expenses absorbed by
Delaware Management Company, Inc. ................. (99,379) 115,791
-------- ----------
NET INVESTMENT INCOME ............................... 177,618
----------

NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain from
security transactions ............................ 671,745
Net unrealized appreciation of investments
during the period ................................ 1,214,843
----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS .............................. 1,886,588
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................. $2,064,206
==========

COMPUTATION OF NET ASSET VALUE AND OFFERING
PRICE - DEVON FUND A CLASS:
Net asset value per share (A) ................................... $12.55
Sales charges (5.75% of offering price, or 6.14% of amount
invested per share) (B) ....................................... 0.77
----------
Offering price ................................................... $13.32
==========

(A) Net asset value per share, as illustrated, is the estimated amount
which would be paid upon the redemption or repurchase of shares.
(B) See Purchasing Shares in the current Prospectus for purchases of $100,000
or more and purchase options not including the payment of a front-end sales
charge. Effective November 29, 1995, the maximum sales charge was reduced
from 5.75% to 4.75%. At 4.75%, the sales charge would have been $0.63
resulting in an offering price of $13.18.

See accompanying notes

<PAGE>

Delaware Group Devon Fund
Statement of Changes in Net Assets

Period
Year 12/29/93*
Ended to
10/31/95 10/31/94
OPERATIONS:
Net investment income ...................... $ 177,618 $ 101,183
Net realized gain from
security transactions .................... 671,745 196,985
Unrealized appreciation
during the period ........................ 1,214,843 181,675
---------- ----------
Net increase in net assets
resulting from operations ................ 2,064,206 479,843
---------- ----------

DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
Devon Fund A Class ....................... (124,083) (32,915)
Devon Fund B Class ....................... (6,520) (85)
Devon Fund Institutional Class ........... (45,722) (22,745)
Net realized gain from
security transactions:
Devon Fund A Class ....................... (144,950) --
Devon Fund B Class ....................... (7,068) --
Devon Fund Institutional Class ........... (47,947) --
---------- ----------
(376,290) (55,745)
---------- ----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Devon Fund A Class ........................... 4,890,613 5,237,687
Devon Fund B Class ........................... 668,823 114,216
Devon Fund Institutional Class ............... 1,400,865 3,193,830
Net asset value of shares issued upon
reinvestment of dividends from net
investment income and net realized
gain from security transactions:
Devon Fund A Class ........................... 266,511 32,824
Devon Fund B Class ........................... 12,607 85
Devon Fund Institutional Class ............... 93,669 22,745
---------- ----------
7,333,088 8,601,387
---------- ----------
Cost of shares repurchased:
Devon Fund A Class ........................... (2,110,412) (906,247)
Devon Fund B Class ........................... (30,450) --
Devon Fund Institutional Class ............... (1,532,095) (888,096)
---------- ----------
(3,672,957) (1,794,343)
---------- ----------
Increase in net assets derived from
capital share transactions ................... 3,660,131 6,807,044
---------- ----------
NET INCREASE IN NET ASSETS ..................... 5,348,047 7,231,142
---------- ----------

NET ASSETS:
Beginning of period ............................ 7,231,142 --
---------- ----------
End of period (including undistributed net
investment income of $46,731 and
$45,438, respectively) ...................... $12,579,189 $7,231,142
=========== ==========

* Date of initial public offering.

See accompanying notes

<PAGE>

Delaware Group Devon Fund
Notes to Financial Statements
October 31, 1995

Delaware Group Delaware Fund, Inc. (the "Company") is registered as a
diversified open-end investment company under the Investment Company Act of
1940. The Company currently offers two series, Devon Fund (formerly known as
Dividend Growth Fund) (the "Fund") and Delaware Fund. The Company is organized
as a Maryland corporation. As of October 31, 1995, the Fund offered three
classes of shares. Effective November 29, 1995, the Fund began offering a fourth
class of shares. This class is known as Devon Fund C Class.

1. Significant Accounting Policies

The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund for financial
statement preparation:

Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 pm on the valuation date. Securities not traded or
securities not listed on an exchange are valued at the mean of the last quoted
bid and asked prices. Money market instruments having less than 60 days to
maturity are valued at amortized cost.

Class Accounting - Investment income, common expenses, and gain (loss) on
investments are allocated to the various classes of the Fund on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.

Certain fund expenses are paid directly by brokers. The amount of these expenses
is less than 0.01% of the Fund's average net assets.

<PAGE>

Notes to Financial Statements (Continued)

2. Investment Management and Distribution Agreements

In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. (DMC), the Investment Manager of the
Fund, a fee which is calculated daily at the annual rate of 0.60% on the first
$500 million of average daily net assets of the Fund and 0.50% on the average
daily net assets over $500 million.

DMC has elected voluntarily to waive its fee and reimburse the Fund to the
extent that annual operating expenses, exclusive of taxes, interest, brokerage
commissions, extraordinary expenses and 12b-1 expenses exceed 0.95% of average
net assets for each class through June 30, 1996. Total expenses absorbed by DMC
for the year ended October 31, 1995 were $99,379.

Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B Class. No distribution expenses are paid by
the Institutional Class. For the year ended October 31, 1995, the Fund paid DDLP
$11,165 for commissions earned on sales of Devon Fund A Class shares.

The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to serve as dividend disbursing and transfer agent for the Fund. For the year
ended October 31, 1995, the Fund has expensed $26,798 for these services.

On October 31, 1995, the Fund has expenses payable relating to operations to DMC
and its affiliates of $87,782.

Certain officers of the Investment Manager are officers, directors, and/or
employees of the Fund. These officers, directors, and employees are paid no
compensation by the Fund.

On April 3, 1995, Delaware Management Holdings, Inc., the indirect parent of
DMC, DDLP and DSC, through a merger transaction (the "Merger") became a
wholly-owned subsidiary of Lincoln National Corporation. Other than the
resulting change in ownership, the Merger will not materially change the manner
in which DMC, DDLP and DSC have heretofore conducted their relationships with
the Fund.

3. Investments

During the year ended October 31, 1995, the Fund made purchases of $11,369,617
and sales of $8,634,241 of investment securities other than U.S. Government
securities and temporary cash investments.

At October 31, 1995, unrealized appreciation for financial reporting and federal
income tax purposes aggregated $1,396,518 of which $1,463,347 related to
unrealized appreciation of securities and $66,829 related to unrealized
depreciation of securities.

The realized gain for federal income tax purposes was $670,225 for the year
ended October 31, 1995.

<PAGE>

4. Capital Stock

Transactions in capital stock shares were as follows:

Period
12/29/93*
Year Ended to
10/31/95 10/31/94
Shares sold:
Devon Fund A Class ........................... 437,494 509,283
Devon Fund B Class ........................... 59,748 10,585
Devon Fund Institutional Class ............... 125,933 314,972
Shares issued upon reinvestment of
dividends from net investment
income and net realized gain
from security transactions:
Devon Fund A Class ........................... 25,450 3,171
Devon Fund B Class ........................... 1,195 8
Devon Fund Institutional Class ............... 8,931 2,201
-------- --------
658,751 840,220
-------- --------
Shares repurchased:
Devon Fund A Class ........................... (182,731) (87,664)
Devon Fund B Class ........................... (2,452) --
Devon Fund Institutional Class ............... (138,734) (85,393)
-------- --------
(323,917) (173,057)
-------- --------
Net increase ................................. 334,834 667,163
======== ========
- ------------
* Date of initial public offering of Devon Fund A Class and Devon Fund
Institutional Class; the date of initial public offering of Devon Fund B
Class was September 6, 1994.

5. Lines of Credit

The Fund has a committed line of credit for $500,000. No amount was outstanding
at October 31, 1995, or at any time during the last fiscal year.

<PAGE>

Notes to Financial Statements (Continued)

6. Financial Highlights

Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>

Devon Fund Devon Fund Devon Fund
A Class B Class Institutional Class
-------------------- ------------------- ----------------------
Year 12/29/93(1) Year 9/06/94(7) Year 12/29/93(1)
Ended to Ended to Ended to
10/31/95 10/31/94 10/31/95 10/31/94 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>

Net asset value, beginning of period...... $10.830 $10.000 $10.820 $10.900 $10.860 $10.000
Income (loss) from investment operations:
Net investment income(10)............... 0.207 0.136 0.127 0.027 0.241 0.201
Net realized and unrealized gain (loss)
from security transactions............. 2.053 0.784 2.053 (0.077) 2.049 0.749
------- ------- ------- ------- ------- -------
Total from investment operations........ 2.260 0.920 2.180 (0.050) 2.290 0.950

Less distributions:
Dividends from net investment income.... (0.220) (0.090) (0.180) (0.030) (0.240) (0.090)
Distributions from net realized gain
on security transactions............... (0.320) -- (0.320) -- (0.320) --
------- ------- ------- ------- ------- -------
Total distributions..................... (0.540) (0.090) (0.500) (0.030) (0.560) (0.090)
------- ------- ------- ------- ------- -------
Net asset value, end of period............ $12.550 $10.830 $12.500 $10.820 $12.590 $10.860
======= ======= ======= ======= ======= =======

Total return(2)........................... 21.98% 11.09% 21.09% (0.46%) 22.26% 11.45%

Ratios/supplemental data:
Net assets, end of period (000 omitted). $8,846 $4,600 $863 $115 $2,870 $2,516
Ratio of expenses to average net assets 1.25%(3) 1.25%(3) 1.95%(5) 1.95%(5) 0.95%(8) 0.95%(8)
Ratio of net investment income to
average net assets.................... 1.82%(4) 1.96%(4) 1.12%(6) 1.26%(6) 2.12%(9) 2.26%(9)
Portfolio turnover...................... 99% 180% 99% 180% 99% 180%

</TABLE>
__________________

1 Date of initial public offering; ratios and totals return have been
annualized.
2 Total return does not include maximum sales charge that is or was in effect
nor the 1% limited contingent deferred sales charge that would apply in the
event of certain redemptions within 12 months of purchase for Devon Fund A
Class (formerly known as Dividend Growth Fund A Class) or the contingent
deferred sales charge which varies from 1%-4% depending upon the holding
period for Devon Fund B Class (formerly known as Dividend Growth Fund B
Class).
3 Ratio of expenses to average net assets prior to expense limitation was 2.29%
for the year ended October 31, 1995, and 3.26% for the period ended October
31, 1994.
4 Ratio of net investment income (loss) to average net assets prior to expense
limitation was 0.78% for the year ended October 31, 1995 and (0.05%) for the
period ended October 31, 1994.
5 Ratio of expenses to average net assets prior to expense limitation was 2.99%
for the year ended October 31, 1995, and 3.96% for the period ended October
31, 1994.
6 Ratio of net investment income (loss) to average net assets prior to expense
limitation was 0.08% for the year ended October 31, 1995 and (0.75%) for the
period ended October 31, 1994.
7 Date of initial public offering, ratios have been annualized and total return
has not been annualized.
8 Ratio of expenses to average net assets prior to expense limitation was 1.99%
for the year ended October 31, 1995, and 2.96% for the period ended October
31, 1994.
9 Ratio of net investment income to average net assets prior to expense
limitation was 1.08% for the year ended October 31, 1995, and 0.25% for the
period ended October 31, 1994.
10 1995 per share information was based on the average shares outstanding
method.
<PAGE>

Delaware Group Delaware Fund, Inc.
Devon Fund
Report of Independent Auditors

To the Shareholders and Board of Directors
Delaware Group Delaware Fund, Inc. - Devon Fund

We have audited the accompanying statement of net assets of Delaware Group
Delaware Fund, Inc. - Devon Fund (formerly Delaware Group Delaware Fund -
Dividend Growth Fund) as of October 31, 1995, and the related statement of
operations for the year then ended and the statement of changes in net assets
and the financial highlights for the year then ended and for the period from
December 29, 1993, (date of initial public offering) to October 31, 1994. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Delaware Fund, Inc. - Devon Fund (formerly Delaware Group
Delaware Fund - Dividend Growth Fund) at October 31, 1995, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for the year then ended and for the period from December
29, 1993, (date of initial public offering) to October 31, 1994, in conformity
with generally accepted accounting principles.

Ernst & Young LLP
Philadelphia, Pennsylvania
December 1, 1995

<PAGE>

A Report on Devon Fund's Annual Meeting

Below are the names of each director elected at the meeting as well as the
results of the other matters voted on by shareholders.

Number of Votes*
----------------------------------------
For Against/Withheld Abstentions
Election of Directors:**
Wayne A. Stork ............... 21,303,756 475,115 --
Walter P. Babich ............. 21,306,432 472,439 --
Anthony D. Knerr ............. 21,293,293 485,578 --
Ann R. Leven ................. 21,305,253 473,618 --
W. Thacher Longstreth ........ 21,301,501 477,370 --
Charles E. Peck .............. 21,306,356 472,515 --

Approval of the New
Investment Management
Agreement .................... 520,622 9,906 7,799
Selection of Ernst & Young LLP
as Independent Auditors** .... 17,668,238 117,575 3,993,057

* Please note that the results of this meeting were not audited by
Ernst & Young LLP.

** Voted upon by all shareholders of Delaware Group Delaware Fund, Inc

<PAGE>

This annual report is for the information of Devon Fund shareholders, but it
may be used with prospective investors when preceded or accompanied by a
current Prospectus, which sets forth details about charges, expenses,
investment objectives and operating policies of the Fund. Summary investment
results are documented in the Fund's current Statement of Additional
Information.

When used with prospective investors after December 31, 1995, this report
must be accompanied by a Devon Fund Performance Update for the most recently
completed calendar quarter. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value
of an investment in the Fund will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.

- ------------------------------------------------------------------------------

Board
- -------------------------------
Members
- -------------------------------

Wayne A. Stork
Chairman, Delaware Group of Funds
Philadelphia, PA

Walter P. Babich
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA

Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY

Ann R. Leven
Treasurer, National Gallery of Art
Washington, DC

W. Thacher Longstreth
Vice Chairman, Packquisition Corp.
Philadelphia, PA

Charles E. Peck
Secretary of Enterprise Homes, Inc.
Fredericksburg, VA
former Chairman and CEO
The Ryland Group, Inc.
Columbia, MD

Affiliated
- -------------------------------
Officers
- -------------------------------
George M. Chamberlain, Jr.
Senior Vice President and Secretary,
Delaware Group of Funds
Philadelphia, PA

Keith E. Mitchell
President and CEO,
Delaware Distributors, L.P.
Philadelphia, PA

David K. Downes
Senior Vice President, Chief Financial Officer and
Chief Administrative Officer
Delaware Group of Funds
Philadelphia, PA

<PAGE>

Delaware Group
- -------------------------------
of Funds
- -------------------------------

For Growth of Capital
Trend Fund
DelCap Fund
Value Fund

For Total Return
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
Delaware Fund

For Global Diversification
International Equity Fund
Global Assets Fund
Global Bond Fund

For Current Income
Delchester Fund
U.S. Government Fund
Limited-Term Government Fund

For Tax-Free Current Income
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Tax-Free Pennsylvania Fund

Money Market Funds
Delaware Cash Reserve
U.S. Government Money Fund
Tax-Free Money Fund

Closed-End Equity/Income*
Dividend and Income Fund
Global Dividend and Income Fund

This report must be preceded or accompanied by a current Devon Fund prospectus.
For a prospectus of any other Delaware Group fund, contact your financial
adviser or Delaware Group.

* Delaware Group Dividend and Income Fund and Delaware Group Global
Dividend and Income Fund purchases can be made through any registered
broker.

<PAGE>

DELAWARE
GROUP
- --------
Philadelphia * London

Investment Manager
Delaware Management Company, Inc.
Philadelphia

International Affiliate
Delaware International Advisers Ltd.
London

National Distributor
Delaware Distributors, L.P.
Philadelphia

Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
Philadelphia

1818 Market Street
Philadelphia, PA 19103-3682
Nationwide (800) 523-4640

Securities Dealers Only
Nationwide (800) 362-7500

Copy Rights Delaware Distributors, L.P.

RECYCLE LOG0
L.P.Printed in the U.S.A. on recycled paper.

AR-039[10/95]TKO12/951995