<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-37707
File No. 811-2071
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
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Post-Effective Amendment No. 59 X
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AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 59
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DELAWARE GROUP INCOME FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-2923
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George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: September 18, 1998
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It is proposed that this filing will become effective:
_________ immediately upon filing pursuant to paragraph (b)
_________ on September , 1998 pursuant to paragraph (b)
_________ 60 days after filing pursuant to paragraph (a)(1)
_________ on (date) pursuant to paragraph (a)(1)
____X____ 75 days after filing pursuant to paragraph (a)(2)
_________ on (date) pursuant to paragraph (a)(2) of Rule 485
Title of Securities Being Registered
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Corporate Bond Fund A Class, Corporate Bond Fund B Class, Corporate Bond
Fund C Class, Corporate Bond Fund Institutional Class, Extended Duration Bond
Fund A Class, Extended Duration Bond Fund B Class, Extended Duration Bond
Fund C Class, Extended Duration Bond Fund Institutional Class
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 59 to Registration File No. 2-37707 includes
the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectuses
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
CROSS-REFERENCE SHEET
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PART A
------
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
Corporate Bond Fund
Extended Duration Bond Fund
A Class/ Institutional
B Class/ Classes
C Class
<S> <C> <C> <C>
1 Cover Page...................................................... Cover Page Cover Page
2 Synopsis........................................................ Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses
3 Condensed Financial Information................................. N/A N/A
4 General Description of Registrant .............................. Investment Investment
Objective and Objective and
Policies; Shares; Policies; Shares;
Other Investment Other Investment
Policies and Risk Policies and Risk
Considerations Considerations
5 Management of the Fund ......................................... Management Management
of the Funds of the Funds
6 Capital Stock and Other Securities ............................. The Delaware Dividends and
Difference; Distributions;
Dividends and Taxes; Shares
Distributions;
Taxes; Shares
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
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PART A
------
(Continued)
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- -------------
Corporate Bond Fund
Extended Duration Bond Fund
A Class/ Institutional
B Class/ Classes
C Class
<S> <C> <C> <C>
7 Purchase of Securities Being Offered..................................... Cover; How Cover; How
to Buy Shares; to Buy Shares;
Calculation of Calculation of
Offering Price Net Asset
and Net Asset Value
Value Per Share; Per Share;
Management Management
of the Funds of the Funds
8 Redemption or Repurchase................................................. How to Buy How to Buy
Shares; Shares;
Redemption Redemption
and Exchange and Exchange
9 Legal Proceedings........................................................ None None
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
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PART B
------
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page...................................................... Cover Page
11 Table of Contents............................................... Table of Contents
12 General Information and History................................. General Information
13 Investment Objectives and Policies.............................. Investment Objectives
and Policies
14 Management of the Registrant.................................... Officers and Directors
15 Control Persons and Principal Holders
of Securities................................................... Officers and Directors
16 Investment Advisory and Other Services.......................... Plans Under Rule 12b-1
for the Fund Classes
(under Purchasing Shares);
Investment Management
Agreements
Officers and Directors;
General Information;
Financial Statements
17 Brokerage Allocation............................................ Trading Practices
and Brokerage
18 Capital Stock and Other Securities.............................. Capitalization and
Noncumulative Voting
(under General Information)
19 Purchase, Redemption and Pricing of
Securities Being Offered........................................ Purchasing Shares;
Determining Offering Price
and Net Asset Value;
Redemption and Repurchase;
Exchange Privilege
20 Tax Status...................................................... Taxes
21 Underwriters ................................................... Purchasing Shares
22 Calculation of Performance Data................................. Performance Information
23 Financial Statements............................................ Financial Statements
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
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PART C
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<TABLE>
<CAPTION>
Location
Item No. Description in Part C
- -------- ------------ ---------
<S> <C> <C>
24 Financial Statements and Exhibits.................................... Item 24
25 Persons Controlled by or under Common
Control with Registrant.............................................. Item 25
26 Number of Holders of Securities...................................... Item 26
27 Indemnification...................................................... Item 27
28 Business and Other Connections of
Investment Adviser................................................... Item 28
29 Principal Underwriters............................................... Item 29
30 Location of Accounts and Records..................................... Item 30
31 Management Services.................................................. Item 31
32 Undertakings......................................................... Item 32
</TABLE>
<PAGE>
SUBJECT TO CHANGE
CORPORATE BOND FUND PROSPECTUS
EXTENDED DURATION BOND [SEPTEMBER , 1998]
A CLASS SHARES
B CLASS SHARES
C CLASS SHARES
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1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance:
Nationwide 800-523-1918
Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Representatives of Financial Institutions:
Nationwide 800-659-2265
This Prospectus describes shares of the Corporate Bond Fund series and
the Extended Duration Bond Fund series (together, the "Funds") of Delaware Group
Income Funds, Inc. ("Income Funds, Inc."), a professionally-managed mutual fund
of the series type. The investment objective of each Fund is to seek to provide
investors with total return.
Each Fund offers three retail classes: "Class A Shares", "Class B
Shares and "Class C Shares" (individually, a "Class" and collectively, the
"Classes"). These alternatives permit an investor to choose the method of
purchasing shares that is most suitable for his or her needs.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
-1-
<PAGE>
This Prospectus relates only to the Classes listed above and sets forth
information that you should read and consider before you invest. Please retain
it for future reference. The Funds' Statement of Additional Information ("Part
B" of Income Funds, Inc.'s registration statement) dated [September __, 1998],
as it may be amended from time to time, contains additional information about
the Funds and has been filed with the Securities and Exchange Commission
("SEC"). Part B is incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors, L.P. at the
above address or by calling the above numbers. The SEC also maintains a Web site
(http://www.sec.gov) that contains Part B, material incorporated by reference
into Income Funds, Inc.'s registration statement, and other information
regarding registrants that electronically file with the SEC. The Funds'
financial statements, when available, will appear in their Annual Report, which
will accompany any requests for Part B.
The Corporate Bond Fund also offers Corporate Bond Fund Institutional
Class ("Institutional Shares") and the Extended Duration Bond Fund offers
Extended Duration Bond Fund Institutional Class ("Institutional Shares"), which
are available for purchase only by certain investors. A prospectus for the
Funds' Institutional Shares can be obtained by writing to Delaware Distributors,
L.P. at the above address or by calling the above number.
TABLE OF CONTENTS
Cover Page Classes of Shares
Synopsis How to Buy Shares
Summary of Expenses Redemption and Exchange
Financial Highlights Dividends and Distributions
Investment Objectives and Policies Taxes
Suitability Calculation of Offering Price and
Investment Strategy Net Asset Value Per Share
Risk Factors Management of the Funds
The Delaware Difference Other Investment Policies and
Plans and Services Risk Considerations
Appendix A--Ratings
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUNDS ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUNDS ARE NOT BANK OR CREDIT UNION DEPOSITS.
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<PAGE>
SYNOPSIS
Investment Objectives
The investment objective of each Fund is to seek to provide investors
with total return. Each Fund seeks to achieve its objective by investing
primarily in corporate bonds rated at least BBB by Standard & Poor's Ratings
Group ("S&P") or Baa by Moody's Investors Service, Inc. ("Moody's"), or
similarly rated by another nationally-recognized statistical rating
organization, or, if unrated (which may be more speculative in nature than rated
bonds), judged to be of comparable quality by the Manager (as defined below).
The average duration of the Corporate Bond Fund is expected to be between 4 and
7 years and that of the Extended Duration Bond Fund is expected to be between 8
and 11 years. Each Fund may also invest in U.S. and foreign government
securities and commercial paper. For further details, see Investment Objectives
and Policies, Risk Factors and Other Investment Policies and Risk
Considerations.
Risk Factors
Each Fund may invest in high-yield securities (junk bonds) and greater
risks may be involved with an investment in a Fund than an investment in a
mutual fund comprised exclusively of investment grade bonds. See Risk Factors
under Investment Objectives and Policies.
Investment Manager, Distributor and Transfer Agent
Delaware Management Company (the "Manager") furnishes investment
management services to each Fund, subject to the supervision and direction of
Income Funds, Inc.'s Board of Directors. The Manager also provides investment
management services to certain of the other funds available from Delaware
Investments. Delaware Distributors, L.P. (the "Distributor") is the national
distributor for the Funds and for all of the other mutual funds available from
Delaware Investments. Delaware Service Company, Inc. (the "Transfer Agent") is
the shareholder servicing, dividend disbursing, accounting services and transfer
agent for each Fund and for all of the other mutual funds available from
Delaware Investments. See Summary of Expenses and Management of the Funds for
further information regarding the Manager and the fees payable under each Fund's
Investment Management Agreement.
Sales Charges
The price of each of the Class A Shares includes a maximum front-end
sales charge of 4.75% of the offering price. The sales charge is reduced on
certain transactions of at least $100,000 but under $1,000,000. For purchases of
$1,000,000 or more, the front-end sales charge is eliminated; if a dealer's
commission is paid in connection with those sales, a contingent deferred sales
charge ("Limited CDSC") of 1% will be imposed if shares are redeemed during the
first year after purchase and 0.50% will be imposed if shares are redeemed
during the second year after the purchase. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange. Class A Shares are also subject to annual 12b-1 Plan
expenses for the life of the investment.
The price of each of the Class B Shares is equal to the net asset value
per share. Class B Shares are subject to a contingent deferred sales charge
("CDSC") of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3%
if shares are redeemed during the third or fourth year following purchase; (iii)
2% if shares are redeemed during the fifth year following purchase; and (iv) 1%
if shares are redeemed during the sixth year following purchase. Class B Shares
are subject to annual 12b-1 Plan expenses for approximately eight years after
purchase. See Deferred Sales Charge Alternative - Class B Shares and Automatic
Conversion of Class B Shares under Classes of Shares.
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<PAGE>
The price of Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses for
the life of the investment. See Classes of Shares and Distribution (12b-1) and
Service under Management of the Funds.
Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments generally must be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed these maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more in Class A
Shares, and that Class A Shares are subject to lower annual 12b-1 Plan expenses
than Class B and Class C Shares and generally are not subject to a CDSC. The
minimum and maximum purchase amounts for retirement plans may vary. See How to
Buy Shares.
Redemption and Exchange
Class A Shares of each Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request.
Neither the Funds nor the Distributor assesses a charge for redemptions or
exchanges of Class A Shares, except for certain redemptions of shares purchased
at net asset value, which may be subject to a CDSC if a dealer's commission was
paid in connection with such purchases. See Front-End Sales Charge Alternative -
Class A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the
net asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Funds
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares that
are offered. See Redemption and Exchange.
Open-End Investment Company
Income Funds, Inc. is an open-end management investment company. Each
Fund's portfolio of assets is diversified as defined by the Investment Company
Act of 1940 (the "1940 Act"). Income Funds, Inc. was first organized as a
Delaware corporation in 1970 and was subsequently organized as a Maryland
corporation on March 4, 1983. See Shares under Management of the Funds.
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<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to each Fund's Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
Corporate Bond Fund
Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ................ 4.75% None None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) ....... None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price
or redemption proceeds, as applicable) ............. None(1) 4.00%(2) 1.00%(3)
Redemption Fees............................................... None(4) None(4) None(4)
Extended Duration Bond Fund
Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ................ 4.75% None None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) ....... None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price
or redemption proceeds, as applicable) ............. None(1) 4.00%(2) 1.00%(3)
Redemption Fees............................................... None(4) None(4) None(4)
</TABLE>
(1) Class A purchases of $1 million or more may be made at net asset value.
However, if in connection with any such purchase a dealer commission is
paid to the financial adviser through whom such purchase is effected, a
Limited CDSC of 1% will be imposed on certain redemptions made during the
first year after purchase and 0.50% will be imposed on certain redemptions
made during the second year after purchase. Additional Class A purchase
options involving the imposition of a CDSC may be permitted as described in
the Prospectus from time to time. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange.
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<PAGE>
(2) Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed
within two years of purchase; (ii) 3% if shares are redeemed during the
third or fourth year following purchase; (iii) 2% if shares are redeemed
during the fifth year following purchase; (iv) 1% if shares are redeemed
during the sixth year following purchase; and (v) 0% thereafter. See
Deferred Sales Charge Alternative - Class B Shares.
(3) Class C Shares are subject to a CDSC of 1% if the shares are redeemed
within 12 months of purchase. See Level Sales Charge Alternative - Class C
Shares under Classes of Shares.
(4) CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
<TABLE>
<CAPTION>
Corporate Bond Fund
Annual Operating Expenses Class A Class B Class C
(as a percentage of average daily net assets) Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees (after voluntary waivers) 0.00%(5) 0.00%(5) 0.00%(5)
12b-1 Plan Expenses (including service fees)
(after voluntary waivers)............................ 0.25%(6) 1.00%(6) 1.00%(6)
Other Operating Expenses
(after voluntary reimbursement)...................... 0.00%(5) 0.00%(5) 0.00%(5)
----- ----- -----
Total Operating Expenses
(after voluntary waivers)................... 0.80%(5) 1.55%(5) 1.55%(5)
===== ===== =====
Extended Duration Bond Fund
Annual Operating Expenses Class A Class B Class C
(as a percentage of average daily net assets) Shares Shares Shares
- -------------------------------------------------------------------------------------------------------------------
Management Fees .............................................. 0.00%(5) 0.00%(5) 0.00%(5)
12b-1 Plan Expenses (including service fees)
(after voluntary waivers)............................ 0.25%(6) 1.00%(6) 1.00%(6)
Other Operating Expenses
(after voluntary reimbursement)...................... 0.00%(5) 0.00%(5) 0.00%(5)
----- ----- -----
Total Operating Expenses
(after voluntary waivers)................... 0.80%(5) 1.55%(5) 1.55%(5)
===== ===== =====
</TABLE>
(5) Total Operating Expenses and Other Operating Expenses for Class A Shares,
Class B Shares and Class C Shares are based on estimated amounts for the
first full fiscal year of the Classes, after giving effect to the voluntary
expense waivers and payments. The Manager has elected voluntarily to waive
that portion, if any, of the annual management fees payable by each Fund
and to pay each Fund's expenses to the extent necessary to ensure that the
"Total Operating Expenses" of a Fund do not exceed 0.55%, excluding 12b-1
Plan expenses for
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<PAGE>
each Fund on an annualized basis from the commencement of operations
through March 31, 1999. If the voluntary fee waivers and expense payments
by the Manager through March 31, 1999 were not in effect, it is estimated
that for the first full year, the Total Operating Expenses, as a percentage
of average daily net assets, would be: (i) 0.00%, 0.00% and 0.00%,
respectively, for Class A Shares, Class B Shares and Class C Shares of the
Corporate Bond Fund, including other operating expenses of 0.00% and
management fees of 0.00%; and (ii) 0.00%, 0.00% and 0.00%, respectively;
for Class A Shares, Class B Shares and Class C Shares of the Extended
Duration Bond Fund, including other operating expenses of 0.00% and
management fees of 0.00%. See Management of the Funds.
(6) Class A Shares, Class B Shares and Class C Shares are subject to separate
12b-1 Plans. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by rules of the
National Association of Securities Dealers, Inc. (the "NASD"). The annual
12b-1 Plan expenses for Class A Shares have been set by the Board of
Directors at 0.25% of the average daily net assets of such Class. The
maximum annual 12b-1 Plan expenses permitted under the 12b-1 Plan for Class
A Shares are 0.30% of the average daily net assets of such Class. See
Distribution (12b-1) and Service under Management of the Fund.
Investors utilizing the Asset Planner asset allocation service also
typically incur an annual maintenance fee of $35 per Strategy. However, the
annual maintenance fee is waived until further notice. Investors who utilize the
Asset Planner for an Individual Retirement Account ("IRA") will pay an annual
IRA fee of $15 per Social Security number. See Part B.
For expense information about each Fund's Institutional Shares, see the
separate prospectus relating to that class.
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<PAGE>
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, (2) redemption and no redemption at the end of each time period
and (3) for Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable. The following example assumes the voluntary waivers
by the Manager as discussed in this Prospectus.
<TABLE>
<CAPTION>
Corporate Bond Fund
Assuming Redemption Assuming No Redemption
1 year 3 years 1 year 3 years
------ ------- ------ -------
<S> <C> <C> <C> <C>
Class A Shares $00(1) $00 $00 $00
Class B Shares(2) $00 $00 $00 $00
Class C Shares $00 $00 $00 $00
Extended Duration Bond Fund
Assuming Redemption Assuming No Redemption
1 year 3 years 1 year 3 years
------ ------- ------ -------
Class A Shares $00(1) $00 $00 $00
Class B Shares(2) $00 $00 $00 $00
Class C Shares $00 $00 $00 $00
</TABLE>
(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, or other
CDSC, which has not been reflected in this calculation, may be imposed on
certain redemptions made within 24 months after a purchase. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased
at Net Asset Value under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares
will be automatically converted into Class A Shares. The example above does
not assume conversion of Class B Shares since it reflects figures only for
one and three years. See Automatic Conversion of Class B Shares under
Classes of Shares for a description of the automatic conversion feature.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in each Class will
bear directly or indirectly.
-8-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Fund is to seek total return. Each
Fund seeks to achieve its objective by investing primarily in corporate bonds
rated BBB or higher by S&P or Baa or higher by Moody's, or similarly rated by
another nationally-recognized statistical rating organization or, if unrated
(which may be more speculative in nature than rated bonds), judged to be of
comparable quality by the Manager. See Appendix A - Ratings for more rating
information.
Each Fund's investment objective is non-fundamental and may be changed
by the Board of Directors without shareholder approval; however, it is the Board
of Directors' policy to notify shareholders prior to a material change in a
Fund's objective.
SUITABILITY
Each Fund may be suitable for the investor interested in total return
and the Manager's primary focus in selecting securities for each Fund will be
total return. Investors in each Fund should be willing to accept the risks
associated with investments in fixed income securities.
The net asset value per share of each Class may fluctuate in response
to the condition of individual companies and general market and economic
conditions and, as a result, the Funds are not appropriate for a short-term
investor. The Funds cannot assure a specific rate of return or yield, or that
principal will be protected. However, through the cautious selection and
supervision of its portfolio, the Manager will strive to achieve each Fund's
objective.
Naturally, the Funds cannot assure a specific rate of return or that
principal will be protected. The value of each Fund's shares can be expected to
move up and down depending upon market conditions. Consequently, appreciation
may be obtained in periods of generally rising markets, while in declining
markets, the value of its shares may, of course, decline. For this reason,
neither Fund is appropriate for short-term investors. However, through the
cautious selection and supervision of its portfolio, each Fund will strive to
achieve its objective set forth above.
Investors should not consider a purchase of Fund shares as equivalent
to a complete investment program. Delaware Investments offers a family of funds,
generally available through registered investment dealers, which may be used
together to create a more complete investment program.
Ownership of Fund shares can reduce the bookkeeping and administrative
inconveniences that would be connected with direct purchases of the types of
securities in which each Fund invests.
INVESTMENT STRATEGY
Each Fund will invest at least 65% of its assets at the time of
purchase in investment grade corporate bonds, that is corporate bonds rated BBB
or higher by S&P or Baa or higher by Moody's, or similarly rated by another
nationally-recognized statistical rating organization, or if unrated, judged to
be of comparable quality by the Manager.
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<PAGE>
The Corporate Bond Fund will seek to maintain an average duration of
between 4 and 7 years and the Extended Duration Bond Fund will seek to maintain
an average duration of between 8 and 11 years. Duration is a measure of the
expected life of a fixed income security on a present value basis that was
developed as a more precise alternative to the concept of term-to-maturity. See
Other Investment Policies and Risk Considerations for a discussion of duration.
Each Fund may also invest in securities of, or guaranteed by, the U.S.
and foreign governments, their agencies or instrumentalities and commercial
paper of companies having, at the time of purchase, an issue of outstanding debt
securities rated as described above or commercial paper rated A-1 or A-2 by S&P
or rated P-1 or P-2 by Moody's or, if unrated, judged to be of comparable
quality by the Manager.
Each Fund may acquire zero-coupon bonds and, to a lesser extent,
pay-in-kind (PIK) bonds. See Zero-Coupon Bonds and Pay-In-Kind Bonds under
Other Investment Policies and Risk Considerations. Each Fund may also invest in
other types of income-producing securities, including common stocks and
preferred stocks, some of which may have convertible features or attached
warrants and which may be speculative. See Convertible, Debt and Non-Traditional
Equity Securities under Other Investment Policies and Risk Considerations.
Each Fund may purchase privately-placed debt and other securities the
resale of which is restricted under applicable securities laws. Such securities
may be less liquid than securities that are not subject to resale restrictions.
Each Fund will not purchase illiquid assets, if more than 15% of its net assets
would consist of such illiquid securities. See Restricted/Illiquid Securities
under Other Investment Policies and Risk Considerations.
Each Fund may invest up to 15% of its total assets in securities of
issuers domiciled in foreign countries. See Foreign Investment Information under
Other Investment Policies and Risk Considerations.
Each Fund may invest up to 20% of its [total] assets in high yield,
higher risk fixed-income securities, which are commonly called "junk" bonds and
are considered to be speculative. See Other Investment Policies and Risk
Considerations for a description of the risks associated with investing in
lower-rated fixed-income securities.
Each Fund may hold cash or invest in short-term debt securities and
other money market instruments when, in the Manager's opinion, such holdings are
prudent given then prevailing market conditions or pending investment in other
types of securities. All these short-term investments will be of the highest
quality as determined by a nationally-recognized statistical rating organization
(e.g., AAA by S&P or Aaa by Moody's) or, if unrated, judged to be of comparable
quality as determined by the Manager. See Short-Term Investments under Other
Investment Policies and Risk Considerations.
The Manager does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the Manager may take advantage of short-term opportunities that are
consistent with its investment objective.
* * *
For a description of the Funds' other investment policies and for a
further description of some of the policies described above, see Other
Investment Policies and Risk Considerations.
-10-
<PAGE>
Although each Fund will constantly strive to attain its objective,
there can be no assurance that it will be attained.
Each Fund's designation as an open-end investment company and as a
diversified fund, may not be changed unless authorized by the vote of a majority
of that Fund's outstanding voting securities. A "majority vote of the
outstanding voting securities" of a Fund is the vote by the holders of the
lesser of a) 67% or more of the Fund's voting securities present in person or
represented by proxy if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy; or b) more than 50%
of the outstanding voting securities. Part B lists other more specific
investment restrictions of each Fund which may not be changed without a majority
shareholder vote.
The investment policies of a Fund that are not identified above or in
Part B as fundamental are not fundamental and may be changed by the Board of
Directors of Income Funds, Inc. without a shareholder vote.
RISK FACTORS
Generally
Each Fund invests principally in investment grade fixed-income
securities. The market values of fixed-income securities generally fall when
interest rates rise and, conversely, rise when interest rates fall. Each Fund
may also invest in lower-rated and unrated fixed-income securities tend to
reflect short-term corporate and market developments to a greater extent than
higher-rated fixed-income securities, which react primarily to fluctuations in
the general level of interest rates. These lower-rated or unrated securities
generally have a greater potential for price appreciation and can offer higher
yields, but, as a result of factors such as reduced creditworthiness of issuers,
increased risk of default and a more limited and less liquid secondary market,
are subject to greater volatility and risk of loss of income and principal than
are higher-rated securities. The Manager will attempt to reduce such risk
through portfolio diversification, credit analysis, and attention to trends in
the economy, industries and financial markets.
See High-Yield, High Risk Securities under Other Investment Policies
and Risk Considerations for further information about high-yield securities.
-11-
<PAGE>
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Investments
family of funds.
SHAREHOLDER PHONE DIRECTORY
Shareholder Service Center and Investor Information Center
800-523-1918
Information on Existing Regular Investment Accounts and Retirement
Plan Accounts; Wire Investments; Wire Liquidations; Telephone
Liquidations and Telephone Exchanges; Fund Information; Literature;
Price; Yield and Performance Figures
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
During business hours, you can call the Investor Information Center for
current yield information. Current yield and total return information may also
be included in advertisements and information given to shareholders. Yields are
computed on an annual basis over a 30-day period.
Shareholder Services
During business hours, you can call Delaware Investments' Shareholder
Service Center. Our representatives can answer any questions about your account,
the Funds, various service features and other funds available from Delaware
Investments.
Delaphone Service
Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information on your account
faster than the mailed statements and confirmations. Delaphone also provides
current performance information on the Funds, as well as other funds in Delaware
Investments. Delaphone is available seven days a week, 24 hours a day.
Dividend Payments
Dividends, capital gains and other distributions, if any, are
automatically reinvested in your account, unless you elect to receive them in
cash. You may also elect to have the dividends earned in one fund automatically
invested in another Delaware Investments fund with a different investment
objective, subject to certain exceptions and limitations.
For more information, see Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares or call the
Shareholder Service Center.
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<PAGE>
MoneyLine(SM) Services
Delaware Investments offers the following services for fast and
convenient transfer of funds between your personal bank account and your Fund
account:
1. MoneyLine(SM) Direct Deposit Service
If you elect to have your dividends and distributions paid in
cash and such dividends and distributions are in an amount of $25 or
more, you may choose the MoneyLine(SM) Direct Deposit Service and have
such payments transferred from your Fund account to your predesignated
bank account. See Dividends and Distributions. In addition, you may
elect to have your Systematic Withdrawal Plan payments transferred from
your Fund account to your predesignated bank account through this
service. See Systematic Withdrawal Plans under Redemption and Exchange.
This service is not available for certain retirement plans.
2. MoneyLine(SM) On Demand
You or your investment dealer may request purchases and
redemptions of Fund shares by using MoneyLine(SM) On Demand. When you
authorize a Fund to accept such requests from you or your investment
dealer, funds will be withdrawn from (for share purchases) or deposited
to (for share redemptions) your predesignated bank account. Your
request will be processed the same day if you call prior to 4 p.m.,
Eastern time. There is a $25 minimum and a $50,000 maximum limit for
MoneyLine(SM) On Demand transactions. This service is not available for
retirement plans, except for purchases of shares by IRAs.
For each MoneyLine(SM) Service, it may take up to four business days
for the transactions to be completed. You can initiate either service by
completing an Account Services form. If the name and address on your designated
bank account are not identical to the name and address on your Fund account, you
must have your signature guaranteed. The Funds do not charge a fee for any
MoneyLine(SM) Service; however, your bank may charge a fee. Please call the
Shareholder Service Center for additional information about these services.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends and
those involving salary deferral purchases in connection with SIMPLE IRAs. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.
Tax Information
Each year, Income Funds, Inc. will mail to you information on the tax
status of your dividends and distributions.
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<PAGE>
Retirement Planning
An investment in the Funds may be a suitable investment option for
tax-deferred retirement plans. Delaware Investments offers a full spectrum of
qualified and non-qualified retirement plans, including the popular 401(k)
deferred compensation plan, IRA, and the new Roth IRA. Please call Delaware
Investments at 1-800-523-1918 for more information.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A Shares,
Class B Shares and Class C Shares of a Fund with the dollar amount of new
purchases of Class A Shares of a Fund to qualify for a reduced front-end sales
charge on such purchases of Class A Shares. Under the Combined Purchases
Privilege, you may also include certain shares that you own in other Delaware
Investments funds. See Classes of Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating certain of
your purchases of Delaware Investments fund shares over a 13-month period. See
Classes of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares, within one year of the date of the
redemption, without paying a front-end sales charge. See Part B.
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of other funds in Delaware Investments, subject to
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to invest in the Funds through regular liquidations of
shares in your accounts in other funds in Delaware Investments. Investments
under this feature are exchanges and are therefore subject to the same
conditions and limitations as other exchanges of Fund shares. See Additional
Methods of Adding to Your Investment - Wealth Builder Option and Investing by
Exchange under How to Buy Shares, and Redemption and Exchange.
Financial Information about the Funds
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
each Fund's investments and performance. Income Funds, Inc.'s fiscal year ends
on July 31.
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<PAGE>
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when they are
purchased, but generally are not subject to any sales charge when they are
redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 0.30% (currently no more than 0.25% pursuant to Board approval) of
average daily net assets of such shares. Certain purchases of Class A Shares
qualify for reduced front-end sales charges. See Front-End Sales Charge
Alternative - Class A Shares, below. See also Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange and Distribution (12b-1) and Service under Management of
the Funds.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within six years of purchase. Class B Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for approximately eight years after purchase. Class B Shares permit
all of the investor's dollars to work from the time the investment is made. The
higher 12b-1 Plan expenses paid by Class B Shares will cause such shares to have
a higher expense ratio and to pay lower dividends than Class A Shares. At the
end of approximately eight years after purchase, Class B Shares automatically
will be converted into Class A Shares and, thereafter, for the remainder of the
life of the investment, the annual 12b-1 Plan fee of up to 0.30% for the Class A
Shares will apply. See Automatic Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within 12 months of purchase. Class C Shares are subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
such shares for the life of the investment. The higher 12b-1 Plan expenses paid
by Class C Shares will cause such shares to have a higher expense ratio and to
pay lower dividends than Class A Shares. Unlike Class B Shares, Class C Shares
do not convert to another class.
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<PAGE>
The alternative purchase arrangements described above permit investors
to choose the method of purchasing shares that is most suitable given the amount
of their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in a Fund with their investment being subject
to a CDSC if they redeem shares within six years of purchase, or purchase Class
C Shares and have the entire initial purchase amount invested in a Fund with
their investment being subject to a CDSC if they redeem shares within 12 months
of purchase. In addition, investors should consider the level of annual 12b-1
Plan expenses applicable to each Class. The higher 12b-1 Plan expenses on Class
B Shares and Class C Shares will be offset to the extent a return is realized on
the additional money initially invested upon the purchase of such shares.
However, there can be no assurance as to the return, if any, that will be
realized on such additional money. In addition, the effect of any return earned
on such additional money will diminish over time. In comparing Class B Shares to
Class C Shares, investors should also consider the duration of the annual 12b-1
Plan expenses to which each of the Classes is subject and the desirability of an
automatic conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, each Fund, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b- 1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A Shares, Class B Shares and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the CDSCs
applicable to Class B Shares and Class C Shares are the same as those of the
12b-1 Plan and the front-end sales charge applicable to Class A Shares in that
such fees and charges are used to finance the distribution of the respective
Classes. See Distribution (12b-1) and Service under Management of the Funds.
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time, on the same day
and will be in the same amount, except that the additional amount of 12b-1 Plan
expenses relating to Class B Shares and Class C Shares will be borne exclusively
by such shares. See Calculation of Offering Price and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Income Funds, Inc. and the Distributor intend to operate in compliance
with these rules.
Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
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<PAGE>
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
<TABLE>
<CAPTION>
Corporate Bond Fund Class A Shares and
Extended Duration Bond Fund Class A Shares
- ------------------------------------------------------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
Offering Amount as % of
Amount of Purchase Price Invested** Offering Price
- ------------------------------------------------------------------------------------------------------------------------------
Corporate Extended
Bond Duration Bond
Fund Fund
<S> <C> <C> <C> <C>
Less than $100,000 4.75% 0.00% 0.00% 4.00%
$100,000 but under $250,000 3.75 0.00 0.00 3.00
$250,000 but under $500,000 2.50 0.00 0.00 2.00
$500,000 but under $1,000,000* 2.00 0.00 0.00 1.60
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of
$1,000,000 or more but, under certain limited circumstances, a Limited CDSC
of 1% may apply upon redemption of such shares made during the first year
after purchase and 0.50% may apply upon redemption of such shares made
during the second year after purchase.
** Based upon an initial net asset value of $5.50 per share of Class A Shares.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
A Fund must be notified when a sale takes place which would qualify
for the reduced front-end sales charge on the basis of previous or
current purchases. The reduced front-end sales charge will be granted
upon confirmation of the shareholder's holdings by that Fund. Such
reduced front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow to dealers up to the full amount of
the front-end sales charge shown above. In addition, certain dealers
who enter into an agreement to provide extra training and information
on Delaware Investments products and services and who increase sales
of Delaware Investments funds may receive an additional commission of
up to 0.15% of the offering price. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the Securities
Act of 1933.
- --------------------------------------------------------------------------------
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<PAGE>
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are made in accordance with the following schedule:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
------------------ -----------------
Up to $5 million 1.00%
Next $20 million up to $25 million 0.50
Amount over $25 million 0.25
Such Class A Shares are subject to a Limited CDSC of 1% if shares are
redeemed during the first year after purchase and 0.50% if shares are redeemed
during the second year after purchase.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other funds from Delaware
Investments as to which a Limited CDSC applies may be aggregated with those of
Class A Shares of a Fund. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter of Intention
or pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC if the dealer's commission described above
was paid in connection with the purchase of those shares. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of
Class B Shares and/or Class C Shares of a Fund and shares of other funds in
Delaware Investments, except those noted below, you can reduce the front-end
sales charges on any additional purchases of Class A Shares. Shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with ownership of
variable insurance products may be combined with other Delaware Investments fund
holdings. In addition, assets held by investment advisory clients of the Manager
or its affiliates in a stable value account may be combined with other Delaware
Investments fund holdings. Shares of other funds that do not carry a front-end
sales charge or CDSC may not be included unless they were acquired through an
exchange from a Delaware Investments fund that does carry a front-end sales
charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
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<PAGE>
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a 13-month
period and qualify the entire purchase for a reduction in front-end sales
charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative Class A Shares, above.
Allied Plans
Class A Shares are available for purchase by participants in certain
defined contribution plans ("Allied Plans") which are made available under a
joint venture agreement between the Distributor and another institution through
which mutual funds are marketed and which allow investments in Class A Shares of
designated Delaware Investments funds ("eligible Delaware Investments fund
shares"), as well as shares of designated classes of non-Delaware Investments
funds ("eligible non-Delaware Investments fund shares"). Class B Shares and
Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front-end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments fund shares to which a
sales charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on which a
sales charge was already paid or through the reinvestment of dividends.
See Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
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<PAGE>
Buying Class A Shares at Net Asset Value
Class A Shares of a Fund may be purchased at net asset value under the
Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
See The Delaware Difference and Redemption and Exchange for additional
information.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Manager, any affiliate, any of the funds in Delaware Investments, certain of
their agents and registered representatives and employees of authorized
investment dealers and by employee benefit plans for such entities. Individual
purchases, including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware
Investments funds. Officers, directors and key employees of institutional
clients of the Manager or any of its affiliates may purchase Class A Shares at
net asset value. Moreover, purchases may be effected at net asset value for the
benefit of the clients of brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or investment adviser
has entered into an agreement with the Distributor providing specifically for
the purchase of Class A Shares in connection with special investment products,
such as wrap accounts or similar fee based programs. Investors may be charged a
fee when effecting transactions in Class A Shares through a broker or agent that
offers these special products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase Institutional Shares of a Fund;
any group retirement plan (excluding defined benefit pension plans), or such
plans of the same employer, for which plan participant records are maintained on
the Delaware Investment & Retirement Services, Inc. ("DIRSI") proprietary record
keeping system that (i) has in excess of $500,000 of plan assets invested in
Class A Shares of Delaware Investments funds and any stable value account
available to investment advisory clients of the Manager or its affiliate, or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a Delaware
Investments fund and such employer has properly represented to DIRSI in writing
that it has the requisite number of employees and has received written
confirmation back from DIRSI.
Investors in Delaware-Voyageur Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds in Delaware Investments at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Investments account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
A Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
-20-
<PAGE>
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, SIMPLE IRA, SIMPLE
401(k), Profit Sharing, Money Purchase Pension, 401(k) Defined Contribution
Plans and 403(b)(7) and 457 Deferred Compensation Plans) may benefit from the
reduced front-end sales charges available on the Class A Shares, based on total
plan assets. If a company has more than one plan investing in Delaware
Investments funds, then the total amount invested in all plans will be
aggregated to determine the applicable front-end sales charge reduction on each
purchase, both initial and subsequent, if, at the time of each such purchase,
the company notifies the Fund in which it is investing that it qualifies for the
reduction. Employees participating in such Group Investment Plans may also
combine the investments held in their plan account to determine the front-end
sales charge applicable to purchases in non-retirement investment accounts
available from Delaware Investments if, at the time of each such purchase, they
notify the Fund in which they are investing that they are eligible to combine
purchase amounts held in their plan account.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from Delaware Investments funds. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount purchased. In addition, from time to time, upon written notice to all of
its dealers, the Distributor may hold special promotions for specified periods
during which the Distributor may pay additional compensation to dealers or
brokers for selling Class B Shares at the time of purchase. As discussed below,
however, Class B Shares are subject to annual 12b-1 Plan expenses and, if
redeemed within six years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, are paid
to the Distributor and others for providing distribution and related services,
and bearing related expenses, in connection with the sale of Class B Shares.
These payments support the compensation paid to dealers or brokers for selling
Class B Shares. Payments to the Distributor and others under the Class B 12b-1
Plan may be in an amount equal to no more than 1% annually. The combination of
the CDSC and the proceeds of the 12b-1 Plan fees makes it possible for the Funds
to sell Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of
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<PAGE>
March, June, September and December (each, a "Conversion Date"). If the eighth
anniversary after a purchase of Class B Shares falls on a Conversion Date, an
investor's Class B Shares will be converted on that date. If the eighth
anniversary occurs between Conversion Dates, an investor's Class B Shares will
be converted on the next Conversion Date after such anniversary. Consequently,
if a shareholder's eighth anniversary falls on the day after a Conversion Date,
that shareholder will have to hold Class B Shares for as long as three
additional months after the eighth anniversary of purchase before the shares
will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class C Shares at the time of
purchase from its own assets in an amount equal to no more than 1% of the dollar
amount purchased. As discussed below, however, Class C Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within 12 months of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, are paid
to the Distributor and others for providing distribution and related services,
and bearing related expenses, in connection with the sale of Class C Shares.
These payments support the compensation paid to dealers or brokers for selling
Class C Shares. Payments to the Distributor and others under the Class C 12b-1
Plan may be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Prospectus. See Redemption and Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to
a CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestments of dividends or capital gains distributions. For purposes
of this formula, the "net asset value at the time of purchase" will be the net
asset value at purchase of Class B Shares or Class C Shares of a Fund, even if
those shares are later exchanged for shares of another Delaware Investments
fund. In the event of an exchange of the shares, the "net asset value of such
shares at the time of redemption" will be the net asset value of the shares that
were acquired in the exchange.
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The following table sets forth the rates of the CDSC for Class B Shares
of the Funds:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
------------------------ ------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. Investors are
reminded that the Class A Shares into which Class B Shares will convert are
subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30%
(currently, no more than 0.25% pursuant to Board action) of average daily net
assets of such shares.
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge - Class B and Class C
Shares under Redemption and Exchange.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the funds in Delaware Investments. In some instances, these incentives
or payments may be offered only to certain dealers who maintain, have sold or
may sell certain amounts of shares.
Subject to pending amendments to the NASD's Conduct Rules, in
connection with the promotion of Delaware Investments fund shares, the
Distributor may, from time to time, pay to participate in dealer- sponsored
seminars and conferences, reimburse dealers for expenses incurred in connection
with preapproved seminars, conferences and advertising and may, from time to
time, pay or allow additional promotional incentives to dealers, which shall
include non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and
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Exchange Commission. It is likely that the NASD's Conduct Rules will be amended
such that the ability of the Distributor to pay non-cash compensation as
described above will be restricted in some fashion. The Distributor intends to
comply with the NASD's Conduct Rules as they may be amended.
Institutional Shares
In addition to offering Class A, Class B and Class C Shares, each Fund
also offers Institutional Shares, which are described in a separate prospectus
and are available for purchase only by certain investors. Institutional Shares
generally are distributed directly by the Distributor and do not have a
front-end sales charge, a CDSC or a Limited CDSC, and are not subject to 12b-1
Plan distribution expenses. To obtain the prospectus that describes the Funds'
Institutional Shares, contact the Distributor by writing to the address or by
calling the telephone number listed on the back of this Prospectus.
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HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of shares of any Class
generally must be $100 or more. For purchases under the Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act or through an Automatic Investing Plan,
there is a minimum initial purchase of $250 and a minimum subsequent purchase of
$25. Minimum purchase requirements do not apply to retirement plans other than
IRAs, for which there is a minimum initial purchase of $250, and a minimum
subsequent purchase of $25, regardless of which Class is selected.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares or Class C Shares by the plan.
Investing through Your Investment Dealer
You can make a purchase of shares of a Fund through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one,
Delaware Investments can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to the specific Fund and Class selected, to
Delaware Investments at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Fund and Class selected. Your check should be
identified with your name(s) and account number. An investment slip (similar to
a deposit slip) is provided at the bottom of transaction confirmations and
dividend statements that you will receive from Income Funds, Inc. Use of this
investment slip can help expedite processing of your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number for the Fund and Class in which
you are investing).
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement account, an appropriate retirement
plan application, for the specific Fund and Class selected, to Delaware
Investments at 1818 Market Street, Philadelphia, PA 19103.
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2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund from Delaware
Investments, you may write and authorize an exchange of part or all of your
investment into shares of a Fund. If you wish to open an account by exchange,
call the Shareholder Service Center for more information. All exchanges are
subject to the eligibility and minimum purchase requirements set forth in each
fund's prospectus. See Redemption and Exchange for more complete information
concerning your exchange privileges.
Holders of Class A Shares of a Fund may exchange all or part of their
shares for certain of the shares of other funds available from Delaware
Investments, including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of a Fund or of any other fund
available from Delaware Investments. Holders of Class B Shares of a Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C Shares
of a Fund are permitted to exchange all or part of their Class C Shares only
into Class C Shares of other Delaware Investments funds. Class B Shares of a
Fund and Class C Shares of a Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of a Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of the Fund.
Permissible exchanges into Class A Shares of a Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of a Fund will be made without the imposition of a CDSC
by the fund from which the exchange is being made at the time of the exchange.
See Allied Plans under Classes of Shares for information on exchanges
by participants in an Allied Plan.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Income Funds,
Inc. to transfer a designated amount monthly from your checking account to your
Fund account. Many shareholders use this as an automatic savings plan.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
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This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans or, 403(b)(7) or 457 Deferred
Compensation Plans.
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your Fund account for you (for example: payroll deduction, pay by phone, annuity
payments). Each Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
* * *
Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Income Funds, Inc. has the
right to liquidate your shares to reimburse the government or transmitting bank.
If there are insufficient funds in your account, you are obligated to reimburse
the appropriate Fund.
3. MoneyLine(SM) On Demand
Through the MoneyLine(SM) On Demand service, you or your investment
dealer may call your Fund to request a transfer of funds from your predesignated
bank account to your Fund account. See MoneyLine(SM) Services under The Delaware
Difference for additional information about this service.
4. Wealth Builder Option
You can use our Wealth Builder Option to invest in a Fund through
regular liquidations of shares in your accounts in other funds available from
Delaware Investments. You may also elect to invest in other mutual funds in
Delaware Investments through the Wealth Builder Option through regular
liquidations of shares in your Fund account.
Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your account in
one or more funds in Delaware Investments and invested automatically into any
other Delaware Investments account that you may specify. If in connection with
the election of the Wealth Builder Option, you wish to open a new account to
receive the automatic investment, such new account must meet the minimum initial
purchase requirements described in the prospectus of the fund that you select.
All investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above. You can
terminate your participation at any time by written notice to the fund from
which the exchanges are made. See Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) and 457 Deferred
Compensation Plans.
5. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your Fund account. Or, you may
invest your distributions in certain other funds in the Delaware Investments,
subject to the exceptions noted below as well as the eligibility and minimum
purchase requirements set forth in each fund's prospectus.
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Reinvestments of distributions into Class A Shares of a Fund or of
other Delaware Investments funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of a Fund or of other
Delaware Investments funds or into Class C Shares of a Fund or of other Delaware
Investments funds are also made without any sales charge and will not be subject
to a CDSC if later redeemed. See Automatic Conversion of Class B Shares under
Classes of Shares for information concerning the automatic conversion of Class B
Shares acquired by reinvesting dividends.
Holders of Class A Shares of a Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in Delaware
Investments, including the Funds. Holders of Class B Shares of a Fund may
reinvest their distributions only into Class B Shares of funds that offer that
class of shares. Similarly, holders of Class C Shares of a Fund may reinvest
their distributions only into Class C Shares of Delaware Investments funds that
offer that class of shares. For more information about reinvestments, call the
Shareholder Service Center.
Capital gains and/or dividends for participants in the following
retirement plans are automatically reinvested into the same Delaware Investments
fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE
401(k), Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plan, or 403(b)(7) or 457 Deferred Compensation Plans.
Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and
Class C Shares are determined as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
The effective date of a purchase is the date the order is received by a
Fund, its agent or designee. The effective date of a direct purchase is the day
your wire, electronic transfer or check is received unless it is received after
the time the offering price or net asset value of shares is determined, as noted
above. Purchase orders received after such time will be effective the next
business day.
The Conditions of Your Purchase
Each Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are responsible
for any loss incurred. A Fund can redeem shares from your account(s) to
reimburse itself for any loss, and you may be restricted from making future
purchases in any of the funds in the Delaware Investments. Each Fund reserves
the right to reject purchase orders paid by third-party checks or checks that
are not drawn on a domestic branch of a United States financial institution. If
a check drawn on a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency conversion.
Each Fund also reserves the right, following shareholder notification,
to charge a service fee on non- retirement accounts that, as a result of a
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
appropriate Fund will charge a $9 fee for that quarter and each subsequent
calendar quarter until the account is brought up to the minimum balance. The
service fee will be deducted from the account during the first week of each
calendar quarter for the previous quarter, and will be used to help defray the
cost of maintaining low- balance accounts. No fees will be charged without
proper notice, and no CDSC will apply to such assessments.
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Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other bond funds, equity funds, tax-advantaged
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. See Taxes.
Further, in order for an exchange to be processed, shares of the fund being
acquired must be registered in the state where the acquiring shareholder
resides. You may want to consult your financial adviser or investment dealer to
discuss which funds in Delaware Investments will best meet your changing
objectives, and the consequences of any exchange transaction. You may also call
Delaware Investments directly for fund information.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after a Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See Purchase Price and Effective Date under
How to Buy Shares. A shareholder submitting a redemption request may indicate
that he or she wishes to receive redemption proceeds of a specific dollar
amount. In the case of such a request, and in the case of certain redemptions
from retirement plan accounts, a Fund will redeem the number of shares necessary
to deduct the applicable CDSC in the case of Class B and Class C Shares, and, if
applicable, the Limited CDSC in the case of Class A Shares and tender to the
shareholder the requested amount, assuming the shareholder holds enough shares
in his or her account for the redemption to be processed in this manner.
Otherwise, the amount tendered to the shareholder upon redemption will be
reduced by the amount of the applicable CDSC or Limited CDSC. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. Each Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. Each Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the check has cleared, which may take up to 15 days
from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. Each Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
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There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds available from Delaware
Investments (in each case, "New Shares") in a permitted exchange, will not be
subject to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC and,
in the case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this Prospectus and any CDSC assessed upon redemption
will be charged by the fund from which the Original Shares were exchanged. In an
exchange of Class B Shares from a Fund, the Fund's CDSC schedule may be higher
than the CDSC schedule relating to the New Shares acquired as a result of the
exchange. For purposes of computing the CDSC that may be payable upon a
disposition of the New Shares, the period of time that an investor held the
Original Shares is added to the period of time that an investor held the New
Shares. With respect to Class B Shares, the automatic conversion schedule of the
Original Shares may be longer than that of the New Shares. Consequently, an
investment in New Shares by exchange may subject an investor to the higher 12b-1
fees applicable to Class B Shares of a Fund for a longer period of time than if
the investment in New Shares were made directly.
Various redemption and exchange methods are outlined below. Except for
the CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Funds or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by a Fund or its agent.
Written Redemption
You can write to each Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares. The request must be signed by all
owners of the account or your investment dealer of record. For redemptions of
more than $50,000, or when the proceeds are not sent to the shareholder(s) at
the address of record, each Fund requires a signature by all owners of the
account and a signature guarantee for each owner. A signature guarantee can be
obtained from a commercial bank, a trust company, a member firm of a domestic
stock exchange or a member of a securities transfer association medallion
program. A signature guarantee cannot be provided by a notary public. A
signature guarantee is designed to protect the shareholders, Income Funds, Inc.
and its agents from fraud. The Funds may require further documentation from
corporations, executors, a retirement plans, administrators, trustees or
guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
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Written Exchange
You may also write to each Fund (at 1818 Market Street, Philadelphia,
PA 19103) to request an exchange of any or all of your shares into another
mutual fund available from Delaware Investments, subject to the same conditions
and limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificate(s).
The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. Each Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Funds by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, that Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption proceeds. If you ask for a check, it will normally be mailed the next
business day after receipt of your redemption request to your predesignated bank
account. There are no separate fees for this redemption method, but the mail
time may delay getting funds into your bank account. Simply call the Shareholder
Service Center prior to the time the offering price and net asset value are
determined, as noted above.
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MoneyLine(SM) On Demand
Through the MoneyLine(SM) On Demand service, you or your investment
dealer may call the Funds to request a transfer of funds from your Fund account
to your predesignated bank account. See MoneyLine(SM) Services under The
Delaware Difference for additional information about this service.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds available from Delaware Investments under the same
registration, subject to the same conditions and limitations as other exchanges
noted above. As with the written exchange service, telephone exchanges are
subject to the requirements of each fund, as described above. Telephone
exchanges may be subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or
quarterly) payment. This is particularly useful to shareholders living on fixed
incomes, since it can provide them with a stable supplemental amount. With
accounts of at least $5,000, you may elect monthly withdrawals of $25 (quarterly
$75) or more. The Funds do not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine(SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. See MoneyLine (SM) Services under The Delaware Difference for
more information about this service.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to
receive benefits in periodic payments, the Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required. The MoneyLine (SM) Direct Deposit Service described above
is not available for certain retirement plans.
* * *
Shareholders should not purchase additional shares while participating
in a Systematic Withdrawal Plan.
Redemptions of Class A Shares via a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the original purchase was made at net asset value
within the 2 years prior to the withdrawal and a dealer's commission was paid on
that purchase. See Contingent Deferred Sales Charge for Certain Redemptions of
Class A Shares Purchased at Net Asset Value, below.
The applicable CDSC for Class B Shares and Class C Shares redeemed via
a Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
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redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or were
acquired through the reinvestment of distributions. The 12% annual limit will be
reset on the date that any Systematic Withdrawal Plan is modified (for example,
a change in the amount selected to be withdrawn or the frequency or date of
withdrawals), based on the balance in the account on that date. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares, below.
For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more, a Limited CDSC will be imposed on
certain redemptions of Class A Shares (or shares into which such Class A Shares
are exchanged) according to the following schedule: (1) 1.00% if shares are
redeemed during the first year after purchase; and (2) 0.50% if such shares are
redeemed during the second year after purchase, if such purchases were made at
net asset value and triggered the payment by the Distributor of the dealer's
commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser of (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the two-year
holding period. The Limited CDSC is assessed if such two-year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of a Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from a Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2,
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<PAGE>
and IRA distributions qualifying under Section 72(t) of the Code; (v) returns of
excess contributions to an IRA; (vi) distributions by other employee benefit
plans to pay benefits; (vii) distributions described in (ii), (iv), and (vi)
above pursuant to a systematic withdrawal plan; and (viii) redemptions by the
classes of shareholders who are permitted to purchase shares at net asset value,
regardless of the size of the purchase (see Buying Class A Shares at Net Asset
Value under Classes of Shares).
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from a
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA or 403(b)(7) or 457 Deferred Compensation Plans; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of all registered owners of the account (in the case of accounts
established under the Uniform Gifts to Minors or Uniform Transfers to Minors
Acts or trust accounts, the waiver applies upon the death of all beneficial
owners) or a total and permanent disability (as defined in Section 72 of the
Code) of all registered owners occurring after the purchase of the shares being
redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from a Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution Plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Code; (iv)
distributions from a 403(b)(7) or 457 Deferred Compensation Plan, Profit Sharing
Plan, or 401(k) Defined Contribution Plan, under hardship provisions of the
plan; (v) distributions from a 403(b)(7) or 457 Deferred Compensation Plan,
Profit Sharing Plan, Money Purchase Pension Plan or a 401(k) Defined
Contribution Plan upon attainment of normal retirement age under the plan or
upon separation from service; (vi) periodic distributions from an IRA or SIMPLE
IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of all registered owners of the
account (in the case of accounts established under the Uniform Gifts to Minors
or Uniform Transfers to Minors Acts or trust accounts, the waiver applies upon
the death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
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<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares a dividend to all shareholders of record at the time
the offering price of shares is determined. See Purchase Price and Effective
Date under How to Buy Shares. Thus, when redeeming shares, dividends continue to
be credited up to and including the date of redemption.
Each Fund's dividends are expected to be declared daily and paid
monthly. Distributions from net realized securities profits, if any, will be
distributed twice a year. The first payment normally would be made during the
first quarter of the next fiscal year. The second payment would be made near the
end of the calendar year to comply with certain requirements of the Code.
Purchases of Fund shares by wire begin earning dividends when converted
into Federal Funds and available for investment, normally the next business day
after receipt. However, if a Fund is given prior notice of Federal Funds wire
and an acceptable written guarantee of timely receipt from an investor
satisfying the Fund's credit policies, the purchase will start earning dividends
on the date the wire is received. Purchases by check earn dividends upon
conversion to Federal Funds, normally one business day after receipt.
Each class of a Fund will share proportionately in the investment
income and expenses of the Fund, except that the per share dividends from net
investment income on Class A Shares, Class B Shares and Class C Shares will vary
due to the expenses under the 12b-1 Plan applicable to each Class. Generally,
the dividends per share on Class B Shares and Class C Shares can be expected to
be lower than the dividends per share on Class A Shares because the expenses
under the 12b-1 Plans relating to Class B and Class C Shares will be higher than
the expenses under the 12b-1 Plan relating to Class A Shares. See Distribution
(12b-1) and Service under Management of the Funds.
Both dividends and distributions, if any, are automatically reinvested
in your account at net asset value unless you elect otherwise. Any check in
payment of dividends or other distributions which cannot be delivered by the
United States Post Office or which remains uncashed for a period of more than
one year may be reinvested in your account at the then-current net asset value
and the dividend option may be changed from cash to reinvest. If you elect to
take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may choose the MoneyLine (SM)
Direct Deposit Service and have such payments transferred from your Fund account
to your predesignated bank account. This service is not available for certain
retirement plans. See MoneyLine (SM) Services under The Delaware Difference for
more information about this service.
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<PAGE>
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in a Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping changes in the
Code. Because many of these changes are complex, and only indirectly affect the
Funds and their distributions to you, they are discussed in Part B. Changes in
the treatment of capital gains, however, are discussed in this section.
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. As such, a Fund will not be subject to federal income
tax, or to any excise tax, to the extent its earnings are distributed as
provided in the Code and by satisfying certain other requirements relating to
the sources of its income and diversification of its assets.
Each Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, even though received in additional shares.
It is expected that only a nominal portion of a Fund's dividends will be
eligible for the dividends-received deduction for corporations.
Distributions paid by a Fund from long-term capital gains, received in
additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Funds do not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a by-product
of Fund management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in a Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
Treatment of Capital Gain Distributions under the Taxpayer Relief Act of 1997
The 1997 Act creates a category of long-term capital gain for
individuals who will be taxed at new lower tax rates. For investors who are in
the 28% or higher federal income tax brackets, these gains will be taxed at a
maximum rate of 20%. For investors who are in the 15% federal income tax
bracket, these gains will be taxed at a maximum rate of 10%. Capital gain
distributions will qualify for these new maximum tax rates, depending on when a
Fund's securities were sold and how long they were held by that Fund before they
were sold. Investors who want more information on holding periods and other
qualifying rules relating to these new rates should contact their own tax
advisers.
Income Funds, Inc. will advise you in its annual information reporting
at calendar year end of the amount of its capital gain distributions which will
qualify for these maximum federal tax rates.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by a Fund and received by the shareholder on
December 31 of the calendar year in which they are declared.
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<PAGE>
The sale of shares of a Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Funds and any other fund available from Delaware Investments. Any loss
incurred on a sale or exchange of Fund shares that had been held for six months
or less will be treated as a long-term capital loss to the extent of capital
gains dividends received with respect to such shares. All or a portion of the
sales charge incurred in acquiring Fund shares will be excluded from the federal
tax basis of any of such shares sold or exchanged within 90 days of their
purchase (for purposes of determining gain or loss upon the sale of such shares)
if the sale proceeds are reinvested in the Funds or in another fund available
from Delaware Investments of funds and a sales charge that would otherwise apply
to the reinvestment is reduced or eliminated. Any portion of such sales charge
excluded from the tax basis of the shares sold will be added to the tax basis of
the shares acquired in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the
end of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
Each Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities.
In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes. For example, distributions
of interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisers.
Each year, Income Funds, Inc. will mail to you information on the tax
status of each Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any, that
is derived from U.S. government securities that are exempt from state income
tax. Of course, shareholders who are not subject to tax on their income would
not be required to pay tax on amounts distributed to them by a Fund.
Income Funds, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your proper
Taxpayer Identification Number and by certifying that you are not subject to
backup withholding.
See Taxes in Part B for additional information on tax matters relating
to each Fund and its shareholders.
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CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("NAV") per share is computed by adding the value
of all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. Debt securities are priced on the basis of valuations provided by
an independent pricing service using methods approved by Income Fund, Inc.'s
Board of Directors. Equity securities for which marked quotations are available
are priced at market value. Short-term investments having a maturity of less
than 60 days are valued at amortized cost, which approximates market value. All
other securities are valued at their fair value as determined in good faith and
in a method approved by Income Funds, Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per share, while
Class B Shares and Class C Shares are purchased at the NAV per share. The
offering price per share of Class A Shares consists of the NAV per share next
computed after the order is received, plus any applicable front-end sales
charges.
The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when the Exchange is open.
The net asset values of all outstanding shares of each class of a Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in that Fund represented by the value of shares of
that class. All income earned and expenses incurred by a Fund will be borne on a
pro-rata basis by each outstanding share of a class, based on each class'
percentage in that Fund represented by the value of shares of such classes,
except that Institutional Shares of each Fund will not incur any of the expenses
under Income Funds, Inc.'s 12b-1 Plans and Class A, Class B and Class C Shares
alone will bear the 12b-1 Plan expenses payable under their respective 12b-1
Plans. Due to the specific distribution expenses and other costs that will be
allocable to each class, the NAV of each class of a Fund will vary.
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<PAGE>
MANAGEMENT OF THE FUNDS
Directors
The business and affairs of Income Funds, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Income Funds, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to each Fund.
The Manager and its predecessors have been managing the funds in
Delaware Investments since 1938. On ___________, 1998, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $00 billion in assets in
the various institutional or separately managed (approximately $00,000,000,000)
and investment company (approximately $00,000,000,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). DMH is, in turn, a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") and is subject to the ultimate
control of Lincoln National. Lincoln National, with headquarters in Fort Wayne,
Indiana, is a diversified organization with operations in many aspects of the
financial services industry, including insurance and investment management.
The Manager manages each Fund's portfolio and makes investment
decisions for each Fund which are implemented by the Fund's Trading Department.
The Manager also administers Income Funds, Inc.'s affairs and pays the salaries
of all the directors, officers and employees of Income Funds, Inc. who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee equal to for Corporate Bond Fund: 0.50% on the first $500 million of average
daily net assets; 0.475% on the next $500 million; 0.45% on the next $1.5
billion; and 0.425% on the average daily net assets in excess of $2.5 billion
and for Extended Duration Bond Fund: 0.55% on the first $500 million of average
daily net assets; 0.50% on the next $500 million; 0.45% on the next $1.5
billion; and 0.425% on the average daily net assets in excess of $2.5 billion
The directors of Income Funds, Inc. annually review fees paid to the Manager.
The Manager elected voluntarily to waive that portion, if any, of the
annual management fees payable by the Funds and to pay certain expenses of the
Funds to the extent necessary to ensure that the Total Operating Expenses of
each Class of the Funds, excluding each such Class' 12b-1 fees, do not exceed,
on an annual basis, 0.55% of the Corporate Bond Fund's and the Extended Duration
Bond Fund's respective average daily net assets from the commencement of
operations through March 31, 1999.
Gary Reed will have primary responsibility for making day-to-day
investment decisions for the Funds when they commence operations. He holds an AB
in Economics from the University of Chicago and an MA in Economics from Columbia
University. He began his career in 1978 with the Equitable Life Assurance
Company in New York City, where he specialized in credit analysis. Prior to
joining the Delaware Investments in 1989, Mr. Reed was Vice President and
Manager of the fixed-income department at Irving Trust Company in New York. Mr.
Reed has managed both discretionary and structured fixed-income portfolios and
is experienced with a broad range of [high-grade] fixed-income securities.
Additionally, he has developed investment programs for decommissioning trust
funds and supervised their management.
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<PAGE>
The Manager may use its own resources to engage in activities that may
promote the sale of the Funds, including payments to third parties who provide
shareholder support servicing and/or distribution assistance.
Portfolio Trading Practices
The Funds normally will not invest for short-term trading purposes.
However, each Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
a Fund and may affect taxes payable by the Fund's shareholders. Given each
Fund's investment objective and current market conditions, its annual portfolio
turnover rate is [expected to exceed 100%. A turnover rate of 100% occurs, for
example, when all the investments in a Fund's portfolio at the beginning of the
year were replaced by the end of the year.]
Each Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
to their advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, each Fund
may consider a broker/dealer's sales of shares of funds in the Delaware
Investments family of funds in placing portfolio orders and may place orders
with broker/dealers that have agreed to defray certain expenses of such funds,
such as custodian fees.
Performance Information
From time to time, each Fund may quote yield or total return
performance of the Classes in advertising and other types of literature.
The current yield for each Class will be calculated by dividing the
annualized net investment income earned by that Class during a recent 30-day
period by the maximum offering price per share on the last day of the period.
The yield formula provides for semi-annual compounding, which assumes that net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value and: (i) in
the case of Class A Shares, the impact of the maximum front-end sales charge at
the beginning of each specified period; and (ii) in the case of Class B Shares
and Class C Shares, the deduction of any applicable CDSC at the end of the
relevant period. Each presentation will include the average annual total return
for one-, five- and ten-year (or life-of-fund, if applicable) periods. Each Fund
may also advertise aggregate and average total return information concerning a
Class over additional periods of time. In addition, each Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC. In this case, such total return information
would be more favorable than total return information that includes the
deductions of the maximum front-end sales charge or any applicable CDSC.
Yield and net asset value fluctuate and are not guaranteed. Past
performance is not considered a guarantee of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor for each Fund's shares under a separate Distribution Agreement with
Income Funds, Inc. dated as of September , 1998.
Income Funds, Inc. has adopted a separate distribution plan under Rule
12b-1 for each of the Class A Shares, Class B Shares and Class C Shares of the
Funds (the "Plans"). The Plans permit the Fund to which the
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Plan relates to pay the Distributor from the assets of the respective Classes a
monthly fee for the Distributor's services and expenses in distributing and
promoting sales of shares.
These expenses include, among other things, preparing and distributing
advertisements, sales literature, and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, holding special promotions
for specified periods of time, and paying distribution and maintenance fees to
brokers, dealers and others. In connection with the promotion of shares of the
Classes, the Distributor may, from time to time, pay to participate in
dealer-sponsored seminars and conferences, and reimburse dealers for expenses
incurred in connection with preapproved seminars, conferences, and advertising.
The Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and increase sales of the Class. In addition,
each Fund may make payments from the 12b-1 Plan fees of its respective Classes
directly to others, such as banks, who aid in the distribution of Class shares
or provide services in respect of a Class, pursuant to service agreements with
Income Funds, Inc.
The 12b-1 Plan expenses relating to each of the Class B Shares and
Class C Shares of the Funds are also used to pay the Distributor for advancing
the commission costs to dealers with respect to the initial sale of such shares.
The aggregate fees paid by a Fund from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed (i) 0.30%
of the Class A Shares' average daily net assets in any year, and (ii) 1% (0.25%
of which are service fees to be paid to the Distributor, dealers and others for
providing personal service and/or maintaining shareholder accounts) of the
average daily net assets of that Fund's Class B Shares and Class C Shares in any
year. The Class A, Class B and Class C Shares will not incur any distribution
expenses beyond these limits, which may not be increased without shareholder
approval.
Although the maximum fee payable under the Plan relating to Class A
Shares is 0.30% of average daily net assets, the Board of Directors has
currently set the annual fee for the Class at 0.25% of the average daily net
assets. The Board of Directors may increase the fee to the full 0.30% on all
Class A Shares' assets at any time.
While payments, if any, pursuant to the Plans may not exceed 0.30%
annually with respect to Class A Shares, and 1% annually with respect to each of
the Class B Shares and Class C Shares, the Plans do not limit fees to amounts
actually expended by the Distributor. It is therefore possible that the
Distributor may realize a profit in any particular year. However, the
Distributor currently expects that its distribution expenses will likely equal
or exceed payments to it under the Plans. The Distributor may, however incur
such additional expenses and make additional payments to dealers from its own
resources to promote the distribution of shares of the Classes. The monthly fees
paid to the Distributor under the Plans are subject to the review and approval
of Income Funds, Inc.'s unaffiliated directors, who may reduce the fees or
terminate the Plans at any time.
The Plans do not apply to a Fund's Institutional Shares. Those shares
are not included in calculating the Plans' fees, and the Plans are not used to
assist in the distribution and marketing the Funds' Institutional Shares.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Funds
pursuant to an agreement dated as of September , 1998. The Transfer Agent also
provides accounting services to each Fund pursuant to the terms of a separate
Fund Accounting Agreement.
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The directors of Income Funds, Inc. annually review service fees paid
to the Distributor and the Transfer Agent. The Distributor and the Transfer
Agent are also indirect, wholly owned subsidiaries of DMH.
* * *
As with other mutual funds, financial and business organizations and
individuals around the world, each Fund could be adversely affected if the
computer systems used by its service providers do not properly process and
calculate date-related information from and after January 1, 2000. This is
commonly known as the "Year 2000 Problem." Income Funds, Inc. is taking
steps to obtain satisfactory assurances that the Funds' major service providers
are taking steps reasonably designed to address the Year 2000 Problem with
respect to the computer systems that such service providers use. There can be no
assurances that these steps will be sufficient to avoid any adverse impact on
the business of the Funds.
Several European countries are participating in the European Economic
and Monetary Union, which will establish a common European currency for
participating countries. This currency will commonly be known as the "Euro." It
is anticipated that each such participating country will replace its existing
currency with the Euro on January 1, 1999. Additional European countries may
elect to participate after that date. If a Fund is invested in securities of
participating countries it could be adversely affected if the computer systems
used by its major service providers are not properly prepared to handle the
implementation of this single currency or the adoption of the Euro by additional
countries in the future. Income Funds, Inc. is taking steps to obtain
satisfactory assurances that the major service providers of Funds are taking
steps reasonably designed to address these matters with respect to the computer
systems that such service providers use. There can be no assurances that these
steps will be sufficient to avoid any adverse impact on the business of the
Funds.
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Expenses
Each Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The ratios of expenses to
average daily net assets are expected to be as follows:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Corporate Bond Fund 0.00% 0.00% 0.00%
Extended Duration Bond Fund 0.00% 0.00% 0.00%
</TABLE>
The foregoing ratios reflect the voluntary waivers of fees and payments of
expenses by the Manager as described above. These ratios would be higher if such
waivers and payments were not in effect. See Summary of Expenses.
Shares
Income Funds, Inc. is an open-end management investment company. Each
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Income Funds, Inc. was organized as a Maryland
corporation on March 4, 1983 and was previously organized as a Delaware
corporation in 1970. In addition to the Funds, Income Funds, Inc. presently
offers three other series of shares, the High-Yield Opportunities Fund series,
the Delchester Fund series and the Strategic Income Fund series.
Each Fund reserves the right to operate in a "master-feeder" structure,
that is, to invest its assets in another mutual fund with the same investment
objective and substantially similar investment policies as those of the Fund.
Each Fund has no present intention to operate in a master-feeder structure;
however, should the Board of Directors approve the implementation of a
master-feeder structure for a Fund, shareholders will be notified prior to the
implementation of the new structure.
Fund shares have a par value of $1.00, equal voting rights, except as
noted below, and are equal in all other respects.
Income Funds, Inc.'s shares have noncumulative voting rights which
means that the holders of more than 50% of Income Funds, Inc.'s shares voting
for the election of directors can elect 100% of the directors if they choose to
do so. Under Maryland law, Income Funds, Inc. is not required, and does not
intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act.
In addition to Class A Shares, Class B Shares and Class C Shares, each
Fund also offers Institutional Shares. Shares of each class of a Fund represent
proportionate interests in the assets of that Fund and have the same voting and
other rights and preferences as the other classes of that Fund, except that
Institutional Shares are not subject to, and may not vote on matters affecting,
the Distribution Plans under Rule 12b-1 relating to Class A, Class B and Class C
Shares. Similarly, as a general matter, the shareholders of Class A Shares,
Class B Shares and Class C Shares may vote only on matters affecting the 12b-1
Plan that relates to the class of shares that they hold. However, Class B Shares
of a Fund may vote on any proposal to increase materially the fees to be paid by
a Fund under the Rule 12b-1 Plan relating to Class A Shares.
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<PAGE>
OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
High-Yield, High Risk Securities
Each Fund may invest up to 20% of its [total] assets in securities
rated BB by S&P or Ba by Moody's, or similarly rated by another
nationally-recognized statistical rating organization or, if unrated (which may
be more speculative in nature than rated bonds), judged to be of comparable
quality by the Manager. If a corporate bond held by a Fund drops below these
levels, the Fund will commence with an orderly sale of the security in a manner
devised to minimize any adverse affect on the Fund. If a sale of the security is
not practicable for any reason, the Fund will pursue other available measures
reasonably anticipated by the Manager to facilitate repayment of the bond. See
Appendix A--Ratings in this Prospectus for more rating information. The
discussion in this section supplements the description of the risks of
high-yield securities found earlier in this Prospectus in Investment Objective
and Policies and investors should refer to those sections for a further
discussion of the risks of high-yield bonds.
Fixed-income securities of this type are considered to be of poor
standing and predominantly speculative. Such securities are subject to a
substantial degree of credit risk. In the past, the high-yields from these bonds
have more than compensated for their higher default rates. There can be no
assurance, however, that yields will continue to offset default rates on these
bonds in the future. The Manager intends to maintain an adequately diversified
portfolio of these bonds. While diversification can help to reduce the effect of
an individual default on the Funds, there can be no assurance that
diversification will protect a Fund from widespread bond defaults brought about
by a sustained economic downturn.
Medium and low-grade bonds held by the Funds may be issued as a
consequence of corporate restructurings, such as leveraged buy-outs, mergers,
acquisitions, debt recapitalizations or similar events. Also, these bonds are
often issued by smaller, less creditworthy companies or by highly leveraged
(indebted) firms, which are generally less able than more financially stable
firms to make scheduled payments of interest and principal. The risks posed by
bonds issued under such circumstances are substantial.
The economy and interest rates may affect these high-yield, high risk
securities differently from other securities. Prices have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. Changes by recognized rating agencies in their rating of any security
and in the ability of an issuer to make payments of interest and principal will
also ordinarily have a more dramatic effect on the values of these investments
than on the values of higher rated securities. Such changes in value will not
affect cash income derived from these securities, unless the issuers fail to pay
interest or dividends when due. Such changes will, however, affect each Fund's
net asset value per share.
Zero-Coupon Bonds and Pay-In-Kind Bonds
Each Fund may purchase zero-coupon bonds and pay-in-kind ("PIK") bonds.
A zero-coupon bond has no cash coupon payments. Instead, the issuer sells the
security at a substantial discount from its maturity value. The interest
received by the investor from holding this security to maturity is the
difference between the maturity value and the purchase price. The advantage to
the investor is that the reinvestment risk of the income received during the
life of the bond is eliminated. However, zero-coupon bonds, like other bonds,
retain interest rate and credit risk and usually display more price volatility
than securities that pay a cash coupon. Since there are no periodic interest
payments made to the holder of a zero-coupon bond, when interest rates rise, the
value of such a security will fall more dramatically than a bond paying out
interest on a current basis. When interest rates fall, however, zero-coupon
bonds rise more rapidly in value because the bonds have locked in a specific
rate of return which becomes more attractive the further interest rates fall.
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<PAGE>
PIK bonds are securities that pay interest in either cash or additional
securities, at the issuer's option, for a specified period. PIKs, like
zero-coupon bonds, are designed to give an issuer flexibility in managing cash
flow. PIK bonds can be either senior or subordinated debt and trade flat (i.e.,
without accrued interest). The price of PIK bonds is expected to reflect to the
market value of the underlying debt plus an amount representing accrued interest
since the last payment. PIKs are usually less volatile than zero-coupon bonds,
but more volatile than cash-pay securities. PIK bonds may provide an attractive
yield on a Fund's investment even when the interest paid is in the form of
additional securities of the issuer instead of cash.
Zero-coupon bonds and PIK bonds are generally considered to be more
interest-sensitive than income bearing bonds, to be more speculative than
interest-bearing bonds, and to have certain tax consequences which could, under
certain circumstances, be adverse to a Fund. For example, with zero-coupon
bonds, a Fund accrues, and is required to distribute to shareholders, income on
such bonds, However, a Fund may not receive the cash associated with this income
until the bonds are sold or mature. If a Fund did not have sufficient cash to
make the required distribution of accrued income, the Fund could be required to
sell other securities in its portfolio or to borrow to generate the cash
required.
Duration
Most fixed income securities provide interest (coupon) payments in
addition to a final (par) payment at maturity and some also have call
provisions. Depending on the relative magnitude of these payments and the nature
of the call provisions, the market value of fixed income securities may respond
differently to interest rate changes. Traditionally, term to maturity has been
used to measure a fixed income security's sensitivity to interest rate changes.
However, this measure considers only the time until final payment and takes no
account of the pattern of payments prior to maturity.
Duration is a more precise measure of the expected life of a fixed
income security that combines consideration of yield, coupon interest payments,
final maturity and call features into one measure. Duration takes the length of
the time intervals between the present time and the time that the interest and
principal payments are scheduled or, in the case of a callable bond, expected to
be received, and weights them by the present values of the cash to be received
at each future point in time. For any fixed income security with interest
payments occurring prior to the payment of principal, duration is always less
than maturity. In general, all other factors being the same, the lower the
stated or coupon rate of interest of a fixed income security, the longer the
duration of the security; conversely, the higher the stated or coupon rate of
interest of a fixed income security, the shorter the duration of the security.
The average duration of a Fund's portfolio provides a measure of a
Fund's interest-rate sensitivity. In general, the longer a Fund's duration, the
more sensitive the Fund is to shifts in interest rates. The relationship between
funds with different durations is straightforward: A fund with a duration of 10
years would be expected to be about twice as volatile as a fund with a five-year
duration. Duration also gives an general indication of how a fund's NAV will
change in response to small interest rate changes. The NAV of a fund with a
ten-year duration would be expected to fall by approximately 10% if interest
rates rose by one percentage point or rise by approximately 10% if interest
rates fell by one percentage point. In addition to a fund's duration, the size
of the interest rate change, the composition and credit quality of its portfolio
and other factors would impact the actual change to the fund's NAV.
Foreign Investment Information
Each Fund may invest up to 15% of its total assets in securities of
foreign issuers, including Yankee Bonds. Investments in obligations of foreign
issuers involve somewhat different investment risks than those
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<PAGE>
affecting obligations of United States issuers. There is limited publicly
available information with respect to foreign issuers, and foreign issuers are
not subject to uniform accounting, auditing and financial standards and
requirements comparable to those applicable to domestic companies. There is also
less government supervision and regulation of foreign securities exchanges,
brokers and listed companies than in the United States and it is more difficult
to enforce legal rights outside of the United States. Many foreign securities
markets have substantially less volume than U.S. national securities exchanges,
and securities of some foreign issuers are less liquid and more volatile than
securities of comparable domestic issuers. Settlement practices of certain
foreign countries may include delays and may otherwise differ from those
customary in U.S. markets. Brokerage commissions and other transaction costs on
foreign securities exchanges are generally higher than in the United States. It
is also expected that the expenses for custodial arrangements of each Fund's
foreign securities will be somewhat greater than the expenses for the custodial
arrangements for U.S. securities of equal value. Dividends and interest paid by
foreign issuers may be subject to withholding and other foreign taxes. Although
in some countries a portion of these taxes is recoverable, the non-recovered
portion of foreign withholding taxes will reduce the income a Fund receives from
the companies comprising the Fund's investments. See Taxes. Additional risks
include future political and economic developments, the possibility that a
foreign jurisdiction might impose or change withholding taxes on income payable
with respect to foreign securities, possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits and the possible
adoption of foreign government restrictions such as exchange controls. Also,
because stocks of foreign companies are normally denominated in foreign
currencies, a Fund may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations, and may incur costs in
connection with conversions between various currencies.
The risks noted above often are heightened for investments in emerging
or developing countries. Compared to the United States and other developed
countries, emerging or developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities. Prices on these exchanges tend to be
volatile and, in the past, securities in these countries have offered greater
potential for gain (as well as loss) than securities of companies located in
developed countries. Further, investments by foreign investors are subject to a
variety of restrictions in many emerging or developing countries. These
restrictions may take the form of prior governmental approval, limits on the
amount or type of securities held by foreigners, and limits on the type of
companies in which foreigners may invest. Additional restrictions may be imposed
at any time by these or other countries in which the Funds invest. In addition,
the repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including in
some cases the need for certain government consents. Although these restrictions
may in the future make it undesirable to invest in emerging or developing
countries, the Manager does not believe that any current repatriation
restrictions would affect each Fund's decision to invest in such countries.
U.S. Government Securities
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies and U.S.
government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, investors in such securities
look principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, and others. Certain agencies and instrumentalities, such
as the Government National Mortgage Association ("GNMA"), are, in effect, backed
by the full faith and credit of the
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<PAGE>
United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Fannie Mae (formerly, the Federal National Mortgage
Association), are not guaranteed by the United States, but those institutions
are protected by the discretionary authority for the U.S. Treasury to purchase
certain amounts of their securities to assist the institutions in meeting their
debt obligations. Finally, other agencies and instrumentalities, such as the
Farm Credit System, Tennessee Valley Authority and the Federal Home Loan
Mortgage Corporation, are federally chartered institutions under U.S. government
supervision, but their debt securities are backed only by the creditworthiness
of those institutions, not the U.S. government.
An instrumentality of a U.S. government agency is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Immediate
Credit Banks and Fannie Mae.
Short-Term Investments
The short-term investments in which each Fund may invest are:
(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a U.S.
commercial bank. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time at a stated interest rate.
Time deposits maturing in more than seven days will not be purchased by the
Funds, and time deposits maturing from two business days through seven calendar
days will not exceed 15% of the total assets of a Fund. Certificates of deposit
are negotiable short-term obligations issued by commercial banks against funds
deposited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A bankers'
acceptance is a time draft drawn on a commercial bank by a borrower usually in
connection with an international commercial transaction (to finance the import,
export, transfer or storage of goods).
A Fund will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion or, in the case of a
bank which does not have total assets of at least $1 billion, the aggregate
investment made in any one such bank is limited to $100,000 and the principal
amount of such investment is insured in full by the Federal Deposit Insurance
Corporation, (ii) it is a member of the Federal Deposit Insurance Corporation,
and (iii) the bank or its securities have received the highest quality rating by
a nationally-recognized statistical rating organization;
(2) Commercial paper with the highest quality rating by a
nationally-recognized statistical rating organization (e.g., A-1 by S&P or
Prime-1 by Moody's) or, if not so rated, of comparable quality as determined by
the Manager;
(3) Short-term corporate obligations with the highest quality rating by
a nationally-recognized statistical rating organization (e.g., AAA by S&P or Aaa
by Moody's) or, if not so rated, of comparable quality as determined by the
Manager;
(4) U.S. government securities (see U.S. Government Securities, above);
and
(5) Repurchase agreements collateralized by securities listed above.
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<PAGE>
Repurchase Agreements
In order to invest its short-term cash reserves or when in a temporary
defensive posture, each Fund may enter into repurchase agreements with banks or
broker/dealers deemed to be creditworthy by the Manager, under guidelines
approved by the Board of Directors. A repurchase agreement is a short-term
investment in which the purchaser (i.e., a Fund) acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, thereby determining the yield during the purchaser's holding period.
Generally, repurchase agreements are of short duration, often less than one week
but on occasion for longer periods. Not more than 15% of a Fund's assets may be
invested in illiquid securities, including repurchase agreements of over seven
days' maturity. Should an issuer of a repurchase agreement fail to repurchase
the underlying security, the loss to a Fund, if any, would be the difference
between the repurchase price and the market value of the security. Each Fund
will limit its investments in repurchase agreements to those which the Manager
under guidelines of the Board of Directors determines to present minimal credit
risks and which are of high quality. In addition, each Fund must have collateral
of at least 102% of the repurchase price, including the portion representing the
Fund's yield under such agreements, which is monitored on a daily basis.
Restricted/Illiquid Securities
Each Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the 1933 Act. Rule 144A exempts many privately placed and
legally restricted securities from the registration requirements of the 1933 Act
and permits such securities to be freely traded among certain institutional
buyers such as the Funds.
Each Fund may invest no more than 15% of the value of its net assets in
illiquid securities. Illiquid securities, for purposes of this policy, include
repurchase agreements maturing in more than seven days.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day functions of determining whether or not individual
Rule 144A Securities are liquid for purposes of a Fund's 15% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, a
Fund's holdings of illiquid securities exceed a Fund 15% limit on investment in
such securities, the Manager will determine what action shall be taken to ensure
that the Fund continues to adhere to such limitation.
Unseasoned Companies
Each Fund may invest in relatively new or unseasoned companies which
are in their early stages of development, or small companies positioned in new
and emerging industries where the opportunity for rapid growth is expected to be
above average. Securities of unseasoned companies present greater risks than
securities of larger, more established companies. The companies in which each
Fund may invest may have relatively small revenues, limited product lines, and
may have a small share of the market for their products or services. Small
companies may lack depth of management, they may be unable to internally
generate funds necessary for growth or potential development or to generate such
funds through external financing or favorable terms, or they may be developing
or marketing new products or services for which markets are not yet
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<PAGE>
established and may never become established. Due these and other factors, small
companies may suffer significant losses as well as realize substantial growth,
and investments in such companies tend to be volatile and are therefore
speculative.
Borrowing from Banks
Each Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. A Fund will not borrow money in excess of
one-third of the value of its net assets. Each Fund has no intention of
increasing its net income through borrowing. Any borrowing will be done from a
bank and, to the extent that such borrowing exceeds 5% of the value of a Fund's
net assets, asset coverage of at least 300% is required. In the event that such
asset coverage shall at any time fall below 300%, a Fund shall, within three
days thereafter (not including Sundays or holidays, or such longer period as the
Securities and Exchange Commission may prescribe by rules and regulations),
reduce the amount of its borrowings to such an extent that the asset coverage of
such borrowings shall be at least 300%. Each Fund will not pledge more than 10%
of its net assets, or issue senior securities as defined in the 1940 Act, except
for notes to banks. Investment securities will not be purchased by a Fund while
the Fund has an outstanding borrowing.
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<PAGE>
APPENDIX A--RATINGS
Each Fund's assets may be invested in corporate bonds that may be rated
BB by S&P or Ba by Moody's, or similarly rated by another nationally-recognized
statistical rating organization or that may be unrated. These credit ratings
evaluate only the safety of principal and interest and do not consider the
market value risk associated with high-yield securities.
General Rating Information
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to
be the best quality. They carry the smallest degree of investment risk;
Aa--judged to be of high quality by all standards; A--possess favorable
attributes and are considered "upper medium" grade obligations; Baa--considered
as medium grade obligations. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
Commercial Paper
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Excerpts from S&P's description of its two highest commercial paper
ratings: A-1--judged to be the highest investment grade category possessing the
highest relative strength; A-2--investment grade category possessing less
relative strength than the highest rating.
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<PAGE>
Delaware Investments offer funds CORPORATE BOND FUND
with a wide range of investment EXTENDED DURATION BOND FUND
objectives. Stock funds, income funds,
national and state-specific tax-exempt ------------------------------------
funds, money market funds, global and
international funds and closed-end funds
give investors the ability to create a A CLASS
portfolio that fits their personal B CLASS
financial goals. For more information, C CLASS
contact your financial adviser or call ------------------------------------
Delaware Investments at 800-523-1918.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street PROSPECTUS
Philadelphia, PA 19103
------------------------------------
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES [SEPTEMBER , 1998]
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
DELAWARE(sm)
INVESTMENTS
===========
<PAGE>
SUBJECT TO CHANGE
CORPORATE BOND FUND
EXTENDED DURATION FUND PROSPECTUS
INSTITUTIONAL CLASS SHARES [SEPTEMBER , 1998]
----------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about
Delaware Corporate Bond Fund Institutional Class
or
Delaware Extended Duration Fund Institutional Class
call Delaware Investments at 800-828-5052.
This Prospectus describes shares of Delaware Corporate Bond Fund series
and the Extended Duration Fund series (together, the "Funds") of Delaware Group
Income Funds, Inc. ("Income Funds, Inc."), a professionally-managed mutual fund
of the series type. The investment objective of each Fund is to seek to provide
investors with total return.
Each Fund offers an Institutional Class, which is referred to
individually as a "Class" and together as the "Classes."
This Prospectus sets forth information that you should read and
consider before you invest. Please retain it for future reference. The Funds'
Statement of Additional Information ("Part B" of Income Funds, Inc.'s
registration statement) dated September __, 1998, as it may be amended from time
to time, contains additional information about the Funds and has been filed with
the Securities and Exchange Commission (the "SEC"). Part B is incorporated by
reference into this Prospectus and is available, without charge, by writing to
Delaware Distributors, L.P. at the above address or by calling the above
telephone numbers. The SEC also maintains a Web site (http://www.sec.gov) that
contains Part B, material incorporated by reference into Income Funds, Inc.'s
registration statement, and other information regarding registrants that
electronically file with the SEC. The Funds' financial statements, when
available, will appear in their Annual Report, which will accompany any response
to requests for Part B.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
-1-
<PAGE>
Each Fund also offers Class A Shares, Class B Shares and Class C
Shares. Shares of these classes are subject to sales charges and other expenses,
which may affect their performance. A prospectus for these classes can be
obtained by writing to Delaware Distributors, L.P. at the above address or by
calling 800-523-4640.
TABLE OF CONTENTS
Cover Page
Synopsis
Summary of Expenses
Financial Highlights
Investment Objectives and Policies
Suitability
Investment Strategy
Risk Factors
Classes of Shares
How to Buy Shares
Redemption and Exchange
Dividends and Distributions
Taxes
Calculation of Net Asset
Value Per Share
Management of the Funds
Other Investment Policies and
Risk Considerations
Appendix A--Ratings
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUNDS ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUNDS ARE NOT BANK OR CREDIT UNION DEPOSITS.
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<PAGE>
SYNOPSIS
Investment Objectives
The investment objective of each Fund is to seek to provide investors
with total return. Each Fund seeks to achieve its objective by investing
primarily in corporate bonds rated at least BBB by Standard & Poor's Ratings
Group ("S&P") or Baa by Moody's Investors Service, Inc. ("Moody's"), or
similarly rated by another nationally-recognized statistical rating
organization, or, if unrated (which may be more speculative in nature than rated
bonds), judged to be of comparable quality by the Manager (as defined below).
The average duration of the Corporate Bond Fund is expected to be between 4 and
7 years and that of the Extended Duration Bond Fund is expected to be between 8
and 11 years. Each Fund may also invest in U.S. and foreign government
securities and commercial paper. For further details, see Investment Objectives
and Policies, Risk Factors and Other Investment Policies and Risk
Considerations.
Risk Factors
Each Fund may invest in high-yield securities (junk bonds) and greater
risks may be involved with an investment in a Fund than an investment in a
mutual fund comprised exclusively of investment grade bonds.
See Risk Factors under Investment Objectives and Policies.
Investment Manager, Distributor and Transfer Agent
Delaware Management Company (the "Manager") furnishes investment
management services to each Fund, subject to the supervision and direction of
Income Funds, Inc.'s Board of Directors. The Manager also provides investment
management services to certain of the other funds available from Delaware
Investments. Delaware Distributors, L.P. (the "Distributor") is the national
distributor for the Funds and for all of the other mutual funds available from
Delaware Investments. Delaware Service Company, Inc. (the "Transfer Agent") is
the shareholder servicing, dividend disbursing, accounting services and transfer
agent for each Fund and for all of the other mutual funds available from
Delaware Investments. See Summary of Expenses and Management of the Funds for
further information regarding the Manager and the fees payable under each Fund's
Investment Management Agreement.
Purchase Price
Shares of the Class for each Fund offered by this Prospectus are
available at net asset value, without a front-end or contingent deferred sales
charge, and are not subject to distribution fees under a Rule 12b-1 distribution
plan. See Classes of Shares.
Redemption and Exchange
Shares of the Class of each Fund are redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request. See
Redemption and Exchange.
Open-End Investment Company
Income Funds, Inc. is an open-end management investment company. Each
Fund's portfolio of assets is diversified as defined by the Investment Company
Act of 1940 (the "1940 Act"). Income Funds, Inc. was first organized as a
Delaware corporation in 1970 and subsequently organized as a Maryland
corporation on March 4, 1983. See Shares under Management of the Funds.
-3-
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
Corporate Extended
Shareholder Transaction Expenses Bond Duration
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).............................. None None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).............................. None None
Exchange Fees*............................................................ None None
Annual Operating Expenses Corporate Extended
(as a percentage of average daily net assets) Bond Duration
- -------------------------------------------------------------------------------------------------------------------
Management Fees........................................................... 0.00%+ 0.00%+
12b-1 Fees................................................................ None None
Other Operating Expenses (after voluntary reimbursement).................. 0.00%+ 0.00%+
----- -----
Total Operating Expenses......................................... 0.55%+ 0.55%+
===== =====
</TABLE>
*Exchanges are subject to the requirements of each Fund and a front-end sales
charge may apply.
+Total Operating Expenses and Other Operating Expenses for are based on
estimated amounts for the first full fiscal year of the Classes, after giving
effect to the voluntary expense waivers and payments. The Manager has elected
voluntarily to waive that portion, if any, of the annual management fees payable
by each Fund and to pay each Fund's expenses to the extent necessary to ensure
that the "Total Operating Expenses" of a Fund do not exceed 0.55% for each Fund
on an annualized basis from the commencement of operations through March 31,
1999. If the voluntary fee waivers and expense payments by the Manager through
March 31, 1999 were not in effect, it is estimated that for the first full year,
the Total Operating Expenses, as a percentage of average daily net assets, would
be 0.00% for Corporate Bond Fund, including other operating expenses of 0.00%
and management fees of 0.00%; and 0.00% for the Extended Duration Bond Fund,
including other operating expenses of 0.00% and management fees of 0.00%. See
Management of the Funds.
For expense information about Class A Shares, Class B Shares and
Class C Shares of each Fund, see the separate prospectus relating to those
classes.
-4-
<PAGE>
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, and (2) redemption at the end of each time period. The Funds
charge no redemption fees. The following example assumes the voluntary waiver by
the Manager as discussed in this Prospectus.
1 year 3 years
------ -------
Corporate Bond Fund Institutional Class $00 $00
1 year 3 years
------ -------
Extended Duration Fund Institutional Class $00 $00
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in the Class of
each Fund will bear directly or indirectly.
-5-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Fund is to seek total return. Each
Fund seeks to achieve its objective by investing primarily in corporate bonds
rated BBB or higher by S&P or Baa or higher by Moody's, or similarly rated by
another nationally-recognized statistical rating organization or, if unrated
(which may be more speculative in nature than rated bonds), judged to be of
comparable quality by the Manager. See Appendix A Ratings for more rating
information.
Each Fund's investment objective is non-fundamental and may be changed
by the Board of Directors without shareholder approval; however, it is the Board
of Directors' policy to notify shareholders prior to a material change in a
Fund's objective.
SUITABILITY
Each Fund may be suitable for the investor interested in total return
and the Manager's primary focus in selecting securities for each Fund will be
total return. Investors in each Fund should be willing to accept the risks
associated with investments in fixed income securities.
The net asset value per share of each Class may fluctuate in response
to the condition of individual companies and general market and economic
conditions and, as a result, the Funds are not appropriate for a short-term
investor. The Funds cannot assure a specific rate of return or yield, or that
principal will be protected. However, through the cautious selection and
supervision of its portfolio, the Manager will strive to achieve each Fund's
objective.
Naturally, the Funds cannot assure a specific rate of return or that
principal will be protected. The value of each Fund's shares can be expected to
move up and down depending upon market conditions. Consequently, appreciation
may be obtained in periods of generally rising markets, while in declining
markets, the value of its shares may, of course, decline. For this reason,
neither Fund is appropriate for short-term investors. However, through the
cautious selection and supervision of its portfolio, each Fund will strive to
achieve its objective set forth above.
Investors should not consider a purchase of Fund shares as equivalent
to a complete investment program. Delaware Investments offers a family of funds,
generally available through registered investment dealers, which may be used
together to create a more complete investment program.
Ownership of Fund shares can reduce the bookkeeping and administrative
inconveniences that would be connected with direct purchases of the types of
securities in which each Fund invests.
INVESTMENT STRATEGY
Each Fund will invest at least 65% of its assets at the time of
purchase in investment grade corporate bonds, that is corporate bonds rated BBB
or higher by S&P or Baa or higher by Moody's, or similarly rated by another
nationally-recognized statistical rating organization, or if unrated, judged to
be of comparable quality by the Manager.
-6-
<PAGE>
The Corporate Bond Fund will seek to maintain an average duration of
between 4 and 7 years and the Extended Duration Bond Fund will seek to maintain
an average duration of between 8 and 11 years. Duration is a measure of the
expected life of a fixed income security on a present value basis that was
developed as a more precise alternative to the concept of term-to-maturity. See
Other Investment Policies and Risk Considerations for a discussion of duration.
Each Fund may also invest in securities of, or guaranteed by, the U.S.
and foreign governments, their agencies or instrumentalities and commercial
paper of companies having, at the time of purchase, an issue of outstanding debt
securities rated as described above or commercial paper rated A-1 or A-2 by S&P
or rated P-1 or P-2 by Moody's or, if unrated, judged to be of comparable
quality by the Manager.
Each Fund may acquire zero-coupon bonds and, to a lesser extent,
pay-in-kind (PIK) bonds. See Zero-Coupon Bonds and Pay-In-Kind Bonds under
Other Investment Policies and Risk Considerations. Each Fund may also invest in
other types of income-producing securities, including common stocks and
preferred stocks, some of which may have convertible features or attached
warrants and which may be speculative. See Convertible, Debt and Non-Traditional
Equity Securities under Other Investment Policies and Risk Considerations.
Each Fund may purchase privately-placed debt and other securities the
resale of which is restricted under applicable securities laws. Such securities
may be less liquid than securities that are not subject to resale restrictions.
Each Fund will not purchase illiquid assets, if more than 15% of its net assets
would consist of such illiquid securities. See Restricted/Illiquid Securities
under Other Investment Policies and Risk Considerations.
Each Fund may invest up to 15% of its total assets in securities of
issuers domiciled in foreign countries. See Foreign Investment Information under
Other Investment Policies and Risk Considerations.
Each Fund may invest up to 20% of its [total] assets in high yield,
higher risk fixed-income securities, which are commonly called "junk" bonds and
are considered to be speculative. See Other Investment Policies and Risk
Considerations for a description of the risks associated with investing in
lower-rated fixed-income securities.
Each Fund may hold cash or invest in short-term debt securities and
other money market instruments when, in the Manager's opinion, such holdings are
prudent given then prevailing market conditions or pending investment in other
types of securities. All these short-term investments will be of the highest
quality as determined by a nationally-recognized statistical rating organization
(e.g., AAA by S&P or Aaa by Moody's) or, if unrated, judged to be of comparable
quality as determined by the Manager. See Short-Term Investments under Other
Investment Policies and Risk Considerations.
The Manager does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the Manager may take advantage of short-term opportunities that are
consistent with its investment objective.
* * *
For a description of the Funds' other investment policies and for a
further description of some of the policies described above, see Other
Investment Policies and Risk Considerations.
-7-
<PAGE>
Although each Fund will constantly strive to attain its objective,
there can be no assurance that it will be attained.
Each Fund's designation as an open-end investment company and as a
diversified fund, may not be changed unless authorized by the vote of a majority
of that Fund's outstanding voting securities. A "majority vote of the
outstanding voting securities" of a Fund is the vote by the holders of the
lesser of a) 67% or more of the Fund's voting securities present in person or
represented by proxy if the holders of more than 50% of the outstanding voting
securities of the Fund are present or represented by proxy; or b) more than 50%
of the outstanding voting securities. Part B lists other more specific
investment restrictions of each Fund which may not be changed without a majority
shareholder vote.
The investment policies of a Fund that are not identified above or in
Part B as fundamental are not fundamental and may be changed by the Board of
Directors of Income Funds, Inc. without a shareholder vote.
RISK FACTORS
Generally
Each Fund invests principally in investment grade fixed-income
securities. The market values of fixed-income securities generally fall when
interest rates rise and, conversely, rise when interest rates fall. Each Fund
may also invest in lower-rated and unrated fixed-income securities tend to
reflect short-term corporate and market developments to a greater extent than
higher-rated fixed-income securities, which react primarily to fluctuations in
the general level of interest rates. These lower-rated or unrated securities
generally have a greater potential for price appreciation and can offer higher
yields, but, as a result of factors such as reduced creditworthiness of issuers,
increased risk of default and a more limited and less liquid secondary market,
are subject to greater volatility and risk of loss of income and principal than
are higher-rated securities. The Manager will attempt to reduce such risk
through portfolio diversification, credit analysis, and attention to trends in
the economy, industries and financial markets.
See High-Yield, High Risk Securities under Other Investment Policies
and Risk Considerations for further information about high-yield securities.
-8-
<PAGE>
CLASSES OF SHARES
The Distributor serves as the national distributor for the Funds.
Shares of the Class of each Fund may be purchased directly by contacting the
Funds or their agent or through authorized investment dealers. All purchases of
shares of the Class of each Fund are at net asset value. There is no front-end
or contingent deferred sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager, or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager or its affiliates and those having client relationships with Delaware
Investment Advisers, a division of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement accounts from such institutional advisory
accounts; (d) a bank, trust company and similar financial institution investing
for its own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing shares
of the Class, except where the investment is part of a program that requires
payment to the financial institution of a Rule 12b-1 Plan fee; (e) registered
investment advisers investing on behalf of clients that consist solely of
institutions and high net-worth individuals having at least $1,000,000 entrusted
to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services; and (f)
clients of brokers, dealers and registered investment advisers affiliated with a
broker or dealer, if such broker, dealer or investment adviser has entered into
an agreement with the Distributor providing specifically for the purchase of
shares of the Class in connection with special investment products, such as wrap
accounts or similar fee based programs. Investors may be charged a fee when
effecting transactions in shares of the Class through a broker or agent that
offers these special products.
Class A Shares, Class B Shares and Class C Shares
In addition to offering Institutional Class shares, each Fund also
offers Class A Shares, Class B Shares and Class C Shares, which are described in
a separate prospectus. The Class A, Class B and Class C Shares of each Fund may
be purchased through authorized investment dealers or directly by contacting the
Funds or their Distributor. Class A Shares, Class B Shares and Class C Shares of
each Fund may have different sales charges and other expenses which may affect
performance. To obtain a prospectus relating to such classes, contact the
Distributor by writing to the address or by calling the phone numbers listed on
page 1 of this Prospectus.
-9-
<PAGE>
HOW TO BUY SHARES
The Funds makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application, or in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to the specific Fund and Class selected, to
Delaware Investments at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Fund and Class selected. Your check should be
identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number).
1. Initial Purchases--Before you invest, telephone the Funds' Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application, or in the case of a retirement account, an
appropriate retirement plan application, for the specific Fund and Class
selected, to Delaware Investments at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your
wire.
Investing by Exchange
If you have an investment in another mutual fund available from
Delaware Investments and you qualify to purchase shares of a Class, you may
write and authorize an exchange of part or all of your investment into a Fund.
However, Class B Shares and Class C Shares of the other funds available from
Delaware Investments offering such a class of shares may not be exchanged into
the Classes. If you wish to open an account by exchange, call your Client
Services Representative at 800-828-5052 for more information. See Redemption and
Exchange for more complete information concerning your exchange privileges.
Investing through Your Investment Dealer
You can make a purchase of Fund shares through most investment dealers
who, as part of the service they provide, must transmit orders promptly to the
Funds. They may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is
the date the order is received by the appropriate Fund, its agent or designee.
The effective date of a direct purchase is the day your wire, electronic
transfer or check is received, unless it is received after the time the share
price is determined, as noted above. Purchase orders received after such time
will be effective the next business day.
-10-
<PAGE>
The Conditions of Your Purchase
Each Fund reserves the right to reject any purchase order. If a
purchase is canceled because your check is returned unpaid, you are responsible
for any loss incurred. Each Fund can redeem shares from your account(s) to
reimburse itself for any loss, and you may be restricted from making future
purchases in any of the funds available from Delaware Investments. Each Fund
reserves the right to reject purchase orders paid by third-party checks or
checks that are not drawn on a domestic branch of a United States financial
institution. If a check drawn on a foreign financial institution is accepted,
you may be subject to additional bank charges for clearance and currency
conversion.
Each Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of redemptions.
-11-
<PAGE>
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged based on the net asset value
next determined after a Fund receives your request in good order. For example,
redemption and exchange requests received in good order after the time the net
asset value of shares is determined, as noted above, will be processed on the
next business day. See Purchase Price and Effective Date under How to Buy
Shares. Except as otherwise noted below, for a redemption request to be in "good
order," you must provide your Class account number, account registration, and
the total number of shares or dollar amount of the transaction. With regard to
exchanges, you must also provide the name of the fund you want to receive the
proceeds. Exchange instructions and redemption requests must be signed by the
record owner(s) exactly as the shares are registered. You may request a
redemption or an exchange by calling the Funds at 800-828-5052. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Each Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. Each Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the check has cleared, which may take up to 15 days
from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. Each Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
Shares of a Class may be exchanged into any other Delaware Investments
mutual fund, provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Class, such exchange will be exchanged at
net asset value. Shares of the Classes may not be exchanged into Class B Shares
or Class C Shares of any of the funds available from Delaware Investments. Each
Fund may suspend, terminate or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by a Fund or the Distributor for redeeming or exchanging your shares,
although in the case of an exchange, a sales charge may apply. You may also have
your investment dealer arrange to have your shares redeemed or exchanged. Your
investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by a Fund or its agent.
-12-
<PAGE>
Written Redemption and Exchange
You can write to each Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your shares or to request an exchange of any or
all of your shares into another mutual fund available from Delaware Investments,
subject to the same conditions and limitations as other exchanges noted above.
The request must be signed by all owners of the account or your investment
dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent
to the shareholder(s) at the address of record, each Fund requires a signature
by all owners of the account and a signature guarantee for each owner. A
signature guarantee can be obtained from a commercial bank, a trust company, a
member firm of a domestic stock exchange or a member of a securities transfer
association medallion program. A signature guarantee cannot be provided by a
notary public. A signature guarantee is designed to protect the shareholders,
Income Funds, Inc. and its agents from fraud. Each Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. Certificates are issued for shares only if you submit a
specific request. If your shares are in certificate form, the certificate must
accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificates.
The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify your Fund in writing that you do not
wish to have such services available with respect to your account. Each Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Funds by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Funds nor their Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, that Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption-Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record. Payment is normally mailed the next business day
after receipt of the redemption request.
-13-
<PAGE>
Telephone Redemption-Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account. There are
no fees for this redemption method, but the mail time may delay getting funds
into your bank account. Simply call your Client Services Representative prior to
the time the net asset value is determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund available from Delaware Investments under the same registration. As with
the written exchange service, telephone exchanges are subject to the same
conditions and limitations as other exchanges noted above. Telephone exchanges
may be subject to limitations as to amounts or frequency.
-14-
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares a dividend to all shareholders of record at the time
the offering price of shares is determined. See Purchase Price and Effective
Date under How to Buy Shares. Thus, when redeeming shares, dividends continue to
be credited up to and including the date of redemption.
Purchases of Fund shares by wire begin earning dividends when converted
into Federal Funds and available for investment, normally the next business day
after receipt. However, if a Fund is given prior notice of Federal Funds wire
and an acceptable written guarantee of timely receipt from an investor
satisfying the Fund's credit policies, the purchase will start earning dividends
on the date the wire is received. Purchases by check earn dividends upon
conversion to Federal Funds, normally one business day after receipt.
Each class of a Fund will share proportionately in the investment
income and expenses of that Fund, except that the Classes will not incur
distribution fees under the Rule 12b-1 Plans which apply to the Class A Shares,
Class B Shares and Class C Shares of the Funds.
Each Fund's dividends are expected to be declared daily and paid
monthly. Distributions from net realized securities profits, if any, will be
distributed twice a year. The first payment normally would be made during the
first quarter of the next fiscal year. The second payment would be made near the
end of the calendar year to comply with certain requirements of the Code. Both
dividends and distributions are automatically reinvested in your account at net
asset value.
-15-
<PAGE>
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in a Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer
Relief Act of 1997 (the "1997 Act"). This new law makes sweeping changes in the
Code. Because many of these changes are complex, and only indirectly affect the
Funds and their distributions to you, they are discussed in Part B. Changes in
the treatment of capital gains, however, are discussed in this section.
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. As such, each Fund will not be subject to federal
income tax, or to any excise tax, to the extent its earnings are distributed as
provided in the Code and by satisfying certain other requirements relating to
the sources of its income and diversification of its assets.
Each Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, even though received in additional shares.
It is expected that only a nominal portion of a Fund's dividends will be
eligible for the dividends-received deduction for corporations.
Distributions paid by a Fund from long-term capital gains, received in
additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Funds do not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a by-product
of Fund management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in a Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
Treatment of Capital Gain Distributions under the Taxpayer Relief Act of 1997
The 1997 Act creates a category of long-term capital gain for
individuals who will be taxed at new lower tax rates. For investors who are in
the 28% or higher federal income tax brackets, these gains will be taxed at a
maximum rate of 20%. For investors who are in the 15% federal income tax
bracket, these gains will be taxed at a maximum rate of 10%. Capital gain
distributions will qualify for these new maximum tax rates, depending on when a
Fund's securities were sold and how long they were held by that Fund before they
were sold. Investors who want more information on holding periods and other
qualifying rules relating to these new rates should contact their own tax
advisers.
Income Funds, Inc. will advise you in its annual information reporting
at calendar year end of the amount of its capital gain distributions which will
qualify for these maximum federal tax rates.
Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by a Fund and received by the shareholder on
December 31 of the calendar year in which they are declared.
-16-
<PAGE>
The sale of shares of a Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
a Fund and any other fund available from Delaware Investments. Any loss incurred
on a sale or exchange of Fund shares that had been held for six months or less
will be treated as a long-term capital loss to the extent of capital gain
dividends received with respect to such shares.
Each Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities.
In addition to the federal taxes described above, shareholders may or
may not be subject to various state and local taxes. For example, distributions
of interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisers.
Each year, Income Funds, Inc. will mail to you information on the tax
status of each Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any, that
is derived from U.S. government securities that are exempt from state income
tax. Of course, shareholders who are not subject to tax on their income would
not be required to pay tax on amounts distributed to them by a Fund.
Income Funds, Inc. is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your Investment Application your proper
Taxpayer Identification Number and by certifying that you are not subject to
backup withholding.
See Taxes in Part B for additional information on tax matters relating
to a Fund and its shareholders.
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CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of a Class is the net asset value
("NAV") per share of the Class shares next computed after the order is received.
The NAV is computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The net asset value ("NAV") per share is computed by adding the value
of all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) dividing by the number of shares
outstanding. Debt securities are priced on the basis of valuations provided by
an independent pricing service using methods approved by Income Fund, Inc.'s
Board of Directors. Equity securities for which market quotations are available
are priced at market value. Short-term investments having a maturity of less
than 60 days are valued at amortized cost, which approximates market value. All
other securities are valued at their fair value as determined in good faith and
in a method approved by Income Funds, Inc.'s Board of Directors.
The net asset values of all outstanding shares of each class of a Fund
will be computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
that class. All income earned and expenses incurred by a Fund will be borne on a
pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that the Class will not incur any of the expenses under the Income Funds,
Inc.'s 12b-1 Plans and the Class A Shares, Class B Shares and Class C Shares of
each Fund alone will bear the 12b-1 Plan fees payable under their respective
Plans.
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MANAGEMENT OF THE FUNDS
Directors
The business and affairs of Income Funds, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Income Funds, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Funds.
The Manager and its predecessors have been managing the funds in
Delaware Investments since 1938. On ___________, 1998, the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $00 billion in assets in
the various institutional or separately managed (approximately $00,000,000,000)
and investment company (approximately $00,000,000,000) accounts.
The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). DMH is, in turn, a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") and is subject to the ultimate
control of Lincoln National. Lincoln National, with headquarters in Fort Wayne,
Indiana, is a diversified organization with operations in many aspects of the
financial services industry, including insurance and investment management.
The Manager manages each Fund's portfolio and makes investment
decisions for each Fund which are implemented by the Fund's Trading Department.
The Manager also administers Income Funds, Inc.'s affairs and pays the salaries
of all the directors, officers and employees of Income Funds, Inc. who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee equal to for Corporate Bond Fund: 0.50% on the first $500 million of average
daily net assets; 0.475% on the next $500 million; 0.45% on the next $1.5
billion; and 0.425% on the average daily net assets in excess of $2.5 billion
and for Extended Duration Bond Fund: 0.55% on the first $500 million of average
daily net assets; 0.50% on the next $500 million; 0.45% on the next $1.5
billion; and 0.425% on the average daily net assets in excess of $2.5 billion
The directors of Income Funds, Inc. annually review fees paid to the Manager.
The Manager elected voluntarily to waive that portion, if any, of the
annual management fees payable by the Funds and to pay certain expenses of the
Funds to the extent necessary to ensure that the Total Operating Expenses of
each Class of the Funds, excluding each such Class' 12b-1 fees, do not exceed,
on an annual basis, 0.55% of the Corporate Bond Fund's and the Extended Duration
Bond Fund's respective average daily net assets from the commencement of
operations through March 31, 1999.
Gary Reed will have primary responsibility for making day-to-day
investment decisions for the Funds when they commence operations. He holds an AB
in Economics from the University of Chicago and an MA in Economics from Columbia
University. He began his career in 1978 with the Equitable Life Assurance
Company in New York City, where he specialized in credit analysis. Prior to
joining the Delaware Investments in 1989, Mr. Reed was Vice President and
Manager of the fixed-income department at Irving Trust Company in New York. Mr.
Reed has managed both discretionary and structured fixed-income portfolios and
is experienced with a broad range of [high-grade] fixed-income securities.
Additionally, he has developed investment programs for decommissioning trust
funds and supervised their management.
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The Manager may use its own resources to engage in activities that may
promote the sale of the Funds, including payments to third parties who provide
shareholder support servicing and/or distribution assistance.
Portfolio Trading Practices
The Funds normally will not invest for short-term trading purposes.
However, each Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
a Fund and may affect taxes payable by the Fund's shareholders. Given each
Fund's investment objective and current market conditions, its annual portfolio
turnover rate is [expected to exceed 100%. A turnover rate of 100% occurs, for
example, when all the investments in a Fund's portfolio at the beginning of the
year were replaced by the end of the year.]
Each Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
to their advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, each Fund
may consider a broker/dealer's sales of shares of funds in the Delaware
Investments family of funds in placing portfolio orders and may place orders
with broker/dealers that have agreed to defray certain expenses of such funds,
such as custodian fees.
Performance Information
From time to time, each Fund may quote yield or total return
performance of its Class in advertising and other types of literature.
The current yield for the Class of a Fund will be calculated by
dividing the annualized net investment income earned by the Class during a
recent 30-day period by the net asset value per share on the last day of the
period. The yield formula provides for semi-annual compounding, which assumes
that net investment income is earned and reinvested at a constant rate and
annualized at the end of a six-month period.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions. Each presentation will include
the average annual total return for one-, five- and ten-year (or life-of-fund,
if applicable) periods. Each Fund may also advertise aggregate and average total
return information concerning its Class over additional periods of time.
Because securities prices fluctuate, investment results of the Classes
will fluctuate over time. Past performance should not be considered as a
representation of future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling your Client Services Representative.
Financial Information about the Funds
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
each Fund's investments and performance. The Funds' fiscal year ends on July 31.
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Distribution and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor for the Fund's shares under a separate Distribution Agreement with
Income Funds, Inc. dated as of September , 1998. The Distributor bears all of
the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for Income Funds,
Inc. under an amended and restated agreement dated as of September , 1998. The
Transfer Agent also provides accounting services to the Funds pursuant to the
terms of a separate Fund Accounting Agreement. Certain recordkeeping services
and other shareholder services that otherwise would be performed by the Transfer
Agent may be performed by certain other entities and the Transfer Agent may
elect to enter into an agreement to pay such other entities for their services.
In addition, participant account maintenance fees may be assessed for certain
recordkeeping provided as part of retirement plan and administration service
packages. These fees are based on the number of participants in the plan and the
various services selected. Fees will be quoted upon request and are subject to
change.
The directors of Income Funds, Inc. annually review fees paid to the
Distributor and the Transfer Agent. The Distributor and the Transfer Agent are
also indirect, wholly owned subsidiaries of DMH.
Expenses
Each Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The ratio of operating
expenses to average daily net assets for the Class of the Corporate Bond Fund is
expected to equal 0.00% on an annual basis and for the Class of the Extended
Duration Fund is expected to equal 0.00% on an annual basis. The ratios reflect
the voluntary waiver of fees and payment of expenses by the Manager as described
above.
Shares
Income Funds, Inc. is an open-end management investment company. Each
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Income Funds, Inc. was organized as a Maryland
corporation on March 4, 1983 and was previously organized as a Delaware
corporation in 1970. In addition to the Funds, Income Funds, Inc. presently
offers three other series of shares, the High-Yield Opportunities Fund series,
the Delchester Fund series and the Strategic Income Fund series.
Each Fund reserves the right to operate in a "master-feeder" structure,
that is, to invest its assets in another mutual fund with the same investment
objective and substantially similar investment policies as those of the Fund.
Each Fund has no present intention to operate in a master-feeder structure;
however, should the Board of Directors approve the implementation of a
master-feeder structure for a Fund, shareholders will be notified prior to the
implementation of the new structure.
Fund shares have a par value of $1.00, equal voting rights, except as
noted below, and are equal in all other respects.
Income Funds, Inc.'s shares have noncumulative voting rights which
means that the holders of more than 50% of Income Funds, Inc.'s shares voting
for the election of directors can elect 100% of the directors if they choose to
do so. Under Maryland law, Income Funds, Inc. is not required, and does not
intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act.
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Each Fund also offers Class A Shares, Class B Shares and Class C
Shares. Shares of those classes represent proportionate interests in the assets
of the respective Fund and have the same voting and other rights and preferences
as the Class, except that shares of the Class are not subject to, and may not
vote on matters affecting, the Distribution Plans under Rule 12b-1 relating to
the Class A Shares, Class B Shares and Class C Shares of the Funds.
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OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS
High-Yield, High Risk Securities
Each Fund may invest up to 20% of its [total] assets in securities
rated BB by S&P or Ba by Moody's, or similarly rated by another
nationally-recognized statistical rating organization or, if unrated (which may
be more speculative in nature than rated bonds), judged to be of comparable
quality by the Manager. If a corporate bond held by a Fund drops below these
levels, the Fund will commence with an orderly sale of the security in a manner
devised to minimize any adverse affect on the Fund. If a sale of the security is
not practicable for any reason, the Fund will pursue other available measures
reasonably anticipated by the Manager to facilitate repayment of the bond. See
Appendix A--Ratings in this Prospectus for more rating information. The
discussion in this section supplements the description of the risks of
high-yield securities found earlier in this Prospectus in Investment Objective
and Policies and investors should refer to those sections for a further
discussion of the risks of high-yield bonds.
Fixed-income securities of this type are considered to be of poor
standing and predominantly speculative. Such securities are subject to a
substantial degree of credit risk. In the past, the high-yields from these bonds
have more than compensated for their higher default rates. There can be no
assurance, however, that yields will continue to offset default rates on these
bonds in the future. The Manager intends to maintain an adequately diversified
portfolio of these bonds. While diversification can help to reduce the effect of
an individual default on the Funds, there can be no assurance that
diversification will protect a Fund from widespread bond defaults brought about
by a sustained economic downturn.
Medium and low-grade bonds held by the Funds may be issued as a
consequence of corporate restructurings, such as leveraged buy-outs, mergers,
acquisitions, debt recapitalizations or similar events. Also, these bonds are
often issued by smaller, less creditworthy companies or by highly leveraged
(indebted) firms, which are generally less able than more financially stable
firms to make scheduled payments of interest and principal. The risks posed by
bonds issued under such circumstances are substantial.
The economy and interest rates may affect these high-yield, high risk
securities differently from other securities. Prices have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. Changes by recognized rating agencies in their rating of any security
and in the ability of an issuer to make payments of interest and principal will
also ordinarily have a more dramatic effect on the values of these investments
than on the values of higher rated securities. Such changes in value will not
affect cash income derived from these securities, unless the issuers fail to pay
interest or dividends when due. Such changes will, however, affect each Fund's
net asset value per share.
Zero-Coupon Bonds and Pay-In-Kind Bonds
Each Fund may purchase zero-coupon bonds and pay-in-kind ("PIK") bonds.
A zero-coupon bond has no cash coupon payments. Instead, the issuer sells the
security at a substantial discount from its maturity value. The interest
received by the investor from holding this security to maturity is the
difference between the maturity value and the purchase price. The advantage to
the investor is that the reinvestment risk of the income received during the
life of the bond is eliminated. However, zero-coupon bonds, like other bonds,
retain interest rate and credit risk and usually display more price volatility
than securities that pay a cash coupon. Since there are no periodic interest
payments made to the holder of a zero-coupon bond, when interest rates rise, the
value of such a security will fall more dramatically than a bond paying out
interest on a current basis. When interest rates fall, however, zero-coupon
bonds rise more rapidly in value because the bonds have locked in a specific
rate of return which becomes more attractive the further interest rates fall.
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PIK bonds are securities that pay interest in either cash or additional
securities, at the issuer's option, for a specified period. PIKs, like
zero-coupon bonds, are designed to give an issuer flexibility in managing cash
flow. PIK bonds can be either senior or subordinated debt and trade flat (i.e.,
without accrued interest). The price of PIK bonds is expected to reflect to the
market value of the underlying debt plus an amount representing accrued interest
since the last payment. PIKs are usually less volatile than zero-coupon bonds,
but more volatile than cash-pay securities. PIK bonds may provide an attractive
yield on a Fund's investment even when the interest paid is in the form of
additional securities of the issuer instead of cash.
Zero-coupon bonds and PIK bonds are generally considered to be more
interest-sensitive than income bearing bonds, to be more speculative than
interest-bearing bonds, and to have certain tax consequences which could, under
certain circumstances, be adverse to a Fund. For example, with zero-coupon
bonds, a Fund accrues, and is required to distribute to shareholders, income on
such bonds, However, a Fund may not receive the cash associated with this income
until the bonds are sold or mature. If a Fund did not have sufficient cash to
make the required distribution of accrued income, the Fund could be required to
sell other securities in its portfolio or to borrow to generate the cash
required.
Duration
Most fixed income securities provide interest (coupon) payments in
addition to a final (par) payment at maturity and some also have call
provisions. Depending on the relative magnitude of these payments and the nature
of the call provisions, the market value of fixed income securities may respond
differently to interest rate changes. Traditionally, term to maturity has been
used to measure a fixed income security's sensitivity to interest rate changes.
However, this measure considers only the time until final payment and takes no
account of the pattern of payments prior to maturity.
Duration is a more precise measure of the expected life of a fixed
income security that combines consideration of yield, coupon interest payments,
final maturity and call features into one measure. Duration takes the length of
the time intervals between the present time and the time that the interest and
principal payments are scheduled or, in the case of a callable bond, expected to
be received, and weights them by the present values of the cash to be received
at each future point in time. For any fixed income security with interest
payments occurring prior to the payment of principal, duration is always less
than maturity. In general, all other factors being the same, the lower the
stated or coupon rate of interest of a fixed income security, the longer the
duration of the security; conversely, the higher the stated or coupon rate of
interest of a fixed income security, the shorter the duration of the security.
The average duration of a Fund's portfolio provides a measure of a
Fund's interest-rate sensitivity. In general, the longer a Fund's duration, the
more sensitive the Fund is to shifts in interest rates. The relationship between
funds with different durations is straightforward: A fund with a duration of 10
years would be expected to be about twice as volatile as a fund with a five-year
duration. Duration also gives an general indication of how a fund's NAV will
change in response to small interest rate changes. The NAV of a fund with a
ten-year duration would be expected to fall by approximately 10% if interest
rates rose by one percentage point or rise by approximately 10% if interest
rates fell by one percentage point. In addition to a fund's duration, the size
of the interest rate change, the composition and credit quality of its portfolio
and other factors would impact the actual change to the fund's NAV.
Foreign Investment Information
Each Fund may invest up to 15% of its total assets in securities of
foreign issuers, including Yankee Bonds. Investments in obligations of foreign
issuers involve somewhat different investment risks than those
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affecting obligations of United States issuers. There is limited publicly
available information with respect to foreign issuers, and foreign issuers are
not subject to uniform accounting, auditing and financial standards and
requirements comparable to those applicable to domestic companies. There is also
less government supervision and regulation of foreign securities exchanges,
brokers and listed companies than in the United States and it is more difficult
to enforce legal rights outside of the United States. Many foreign securities
markets have substantially less volume than U.S. national securities exchanges,
and securities of some foreign issuers are less liquid and more volatile than
securities of comparable domestic issuers. Settlement practices of certain
foreign countries may include delays and may otherwise differ from those
customary in U.S. markets. Brokerage commissions and other transaction costs on
foreign securities exchanges are generally higher than in the United States. It
is also expected that the expenses for custodial arrangements of each Fund's
foreign securities will be somewhat greater than the expenses for the custodial
arrangements for U.S. securities of equal value. Dividends and interest paid by
foreign issuers may be subject to withholding and other foreign taxes. Although
in some countries a portion of these taxes is recoverable, the non-recovered
portion of foreign withholding taxes will reduce the income a Fund receives from
the companies comprising the Fund's investments. See Taxes. Additional risks
include future political and economic developments, the possibility that a
foreign jurisdiction might impose or change withholding taxes on income payable
with respect to foreign securities, possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits and the possible
adoption of foreign government restrictions such as exchange controls. Also,
because stocks of foreign companies are normally denominated in foreign
currencies, a Fund may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations, and may incur costs in
connection with conversions between various currencies.
The risks noted above often are heightened for investments in emerging
or developing countries. Compared to the United States and other developed
countries, emerging or developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities. Prices on these exchanges tend to be
volatile and, in the past, securities in these countries have offered greater
potential for gain (as well as loss) than securities of companies located in
developed countries. Further, investments by foreign investors are subject to a
variety of restrictions in many emerging or developing countries. These
restrictions may take the form of prior governmental approval, limits on the
amount or type of securities held by foreigners, and limits on the type of
companies in which foreigners may invest. Additional restrictions may be imposed
at any time by these or other countries in which the Funds invest. In addition,
the repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including in
some cases the need for certain government consents. Although these restrictions
may in the future make it undesirable to invest in emerging or developing
countries, the Manager does not believe that any current repatriation
restrictions would affect each Fund's decision to invest in such countries.
U.S. Government Securities
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies and U.S.
government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, investors in such securities
look principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, and others. Certain agencies and instrumentalities, such
as the Government National Mortgage Association ("GNMA"), are, in effect, backed
by the full faith and credit of the
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United States through provisions in their charters that they may make
"indefinite and unlimited" drawings on the Treasury, if needed to service its
debt. Debt from certain other agencies and instrumentalities, including the
Federal Home Loan Bank and Fannie Mae (formerly, the Federal National Mortgage
Association), are not guaranteed by the United States, but those institutions
are protected by the discretionary authority for the U.S. Treasury to purchase
certain amounts of their securities to assist the institutions in meeting their
debt obligations. Finally, other agencies and instrumentalities, such as the
Farm Credit System, Tennessee Valley Authority and the Federal Home Loan
Mortgage Corporation, are federally chartered institutions under U.S. government
supervision, but their debt securities are backed only by the creditworthiness
of those institutions, not the U.S. government.
An instrumentality of a U.S. government agency is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Immediate
Credit Banks and Fannie Mae.
Short-Term Investments
The short-term investments in which each Fund may invest are:
(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a U.S.
commercial bank. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time at a stated interest rate.
Time deposits maturing in more than seven days will not be purchased by the
Funds, and time deposits maturing from two business days through seven calendar
days will not exceed 15% of the total assets of a Fund. Certificates of deposit
are negotiable short-term obligations issued by commercial banks against funds
deposited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A bankers'
acceptance is a time draft drawn on a commercial bank by a borrower usually in
connection with an international commercial transaction (to finance the import,
export, transfer or storage of goods).
A Fund will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion or, in the case of a
bank which does not have total assets of at least $1 billion, the aggregate
investment made in any one such bank is limited to $100,000 and the principal
amount of such investment is insured in full by the Federal Deposit Insurance
Corporation, (ii) it is a member of the Federal Deposit Insurance Corporation,
and (iii) the bank or its securities have received the highest quality rating by
a nationally-recognized statistical rating organization;
(2) Commercial paper with the highest quality rating by a
nationally-recognized statistical rating organization (e.g., A-1 by S&P or
Prime-1 by Moody's) or, if not so rated, of comparable quality as determined by
the Manager;
(3) Short-term corporate obligations with the highest quality rating by
a nationally-recognized statistical rating organization (e.g., AAA by S&P or Aaa
by Moody's) or, if not so rated, of comparable quality as determined by the
Manager;
(4) U.S. government securities (see U.S. Government Securities, above);
and
(5) Repurchase agreements collateralized by securities listed above.
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Repurchase Agreements
In order to invest its short-term cash reserves or when in a temporary
defensive posture, each Fund may enter into repurchase agreements with banks or
broker/dealers deemed to be creditworthy by the Manager, under guidelines
approved by the Board of Directors. A repurchase agreement is a short-term
investment in which the purchaser (i.e., a Fund) acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, thereby determining the yield during the purchaser's holding period.
Generally, repurchase agreements are of short duration, often less than one week
but on occasion for longer periods. Not more than 15% of a Fund's assets may be
invested in illiquid securities, including repurchase agreements of over seven
days' maturity. Should an issuer of a repurchase agreement fail to repurchase
the underlying security, the loss to a Fund, if any, would be the difference
between the repurchase price and the market value of the security. Each Fund
will limit its investments in repurchase agreements to those which the Manager
under guidelines of the Board of Directors determines to present minimal credit
risks and which are of high quality. In addition, each Fund must have collateral
of at least 102% of the repurchase price, including the portion representing the
Fund's yield under such agreements, which is monitored on a daily basis.
Restricted/Illiquid Securities
Each Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the 1933 Act. Rule 144A exempts many privately placed and
legally restricted securities from the registration requirements of the 1933 Act
and permits such securities to be freely traded among certain institutional
buyers such as the Funds.
Each Fund may invest no more than 15% of the value of its net assets in
illiquid securities. Illiquid securities, for purposes of this policy, include
repurchase agreements maturing in more than seven days.
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day functions of determining whether or not individual
Rule 144A Securities are liquid for purposes of a Fund's 15% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, a
Fund's holdings of illiquid securities exceed a Fund 15% limit on investment in
such securities, the Manager will determine what action shall be taken to ensure
that the Fund continues to adhere to such limitation.
Unseasoned Companies
Each Fund may invest in relatively new or unseasoned companies which
are in their early stages of development, or small companies positioned in new
and emerging industries where the opportunity for rapid growth is expected to be
above average. Securities of unseasoned companies present greater risks than
securities of larger, more established companies. The companies in which each
Fund may invest may have relatively small revenues, limited product lines, and
may have a small share of the market for their products or services. Small
companies may lack depth of management, they may be unable to internally
generate funds necessary for growth or potential development or to generate such
funds through external financing or favorable terms, or they may be developing
or marketing new products or services for which markets are not yet
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established and may never become established. Due these and other factors, small
companies may suffer significant losses as well as realize substantial growth,
and investments in such companies tend to be volatile and are therefore
speculative.
Borrowing from Banks
Each Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. A Fund will not borrow money in excess of
one-third of the value of its net assets. Each Fund has no intention of
increasing its net income through borrowing. Any borrowing will be done from a
bank and, to the extent that such borrowing exceeds 5% of the value of a Fund's
net assets, asset coverage of at least 300% is required. In the event that such
asset coverage shall at any time fall below 300%, a Fund shall, within three
days thereafter (not including Sundays or holidays, or such longer period as the
Securities and Exchange Commission may prescribe by rules and regulations),
reduce the amount of its borrowings to such an extent that the asset coverage of
such borrowings shall be at least 300%. Each Fund will not pledge more than 10%
of its net assets, or issue senior securities as defined in the 1940 Act, except
for notes to banks. Investment securities will not be purchased by a Fund while
the Fund has an outstanding borrowing.
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<PAGE>
APPENDIX A--RATINGS
Each Fund's assets may be invested in corporate bonds that may be rated
BB by S&P or Ba by Moody's, or similarly rated by another nationally-recognized
statistical rating organization or that may be unrated. These credit ratings
evaluate only the safety of principal and interest and do not consider the
market value risk associated with high-yield securities.
General Rating Information
Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to
be the best quality. They carry the smallest degree of investment risk;
Aa--judged to be of high quality by all standards; A--possess favorable
attributes and are considered "upper medium" grade obligations; Baa--considered
as medium grade obligations. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
Commercial Paper
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.
Excerpts from S&P's description of its two highest commercial paper
ratings: A-1--judged to be the highest investment grade category possessing the
highest relative strength; A-2--investment grade category possessing less
relative strength than the highest rating.
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<PAGE>
For more information contact Delaware Investments at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
- --------------------------------------------------------------------------------
CORPORATE BOND FUND
EXTENDED DURATION FUND
- --------------------------------------------------------------------------------
INSTITUTIONAL
- --------------------------------------------------------------------------------
<PAGE>
Delaware Investments offers funds with a wide range of investment
objectives. Stock funds, income funds, national and state-specific tax-exempt
funds, money market funds, global and international funds and closed-end equity
funds give investors the ability to create a portfolio that fits their personal
financial goals. For more information, shareholders of the Fund Classes should
contact their financial adviser or call Delaware Investments at 800-523-1918,
and shareholders of the Institutional Class should contact Delaware Investments
at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIANS
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
- ---------------------------------
DELAWARE GROUP INCOME FUNDS, INC.
- ---------------------------------
CORPORATE BOND FUND
- ---------------------------------
EXTENDED DURATION BOND FUND
- ---------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- --------------------------------
SEPTEMBER __, 1998
DELAWARE(SM)
INVESTMENTS
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER , 1998
- --------------------------------------------------------------------------------
DELAWARE GROUP INCOME FUNDS, INC.
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
For more information about the Institutional Class of Corporate Bond Fund,
and Extended Duration Bond Fund: 800-828-5052
For Prospectus and Performance of Class A Shares, Class B Shares and
Class C Shares of Corporate Bond Fund, and Extended Duration Bond Fund:
800-523-1918
Information on Existing Accounts of Class A Shares, Class B Shares and
Class C Shares of Corporate Bond Fund, and Extended Duration Bond Fund:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Cover Page
- --------------------------------------------------------------------------------
Investment Objectives and Policies
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Trading Practices and Brokerage
- --------------------------------------------------------------------------------
Purchasing Shares
- --------------------------------------------------------------------------------
Investment Plans
- --------------------------------------------------------------------------------
Determining Offering Price and
Net Asset Value
- --------------------------------------------------------------------------------
Redemption and Repurchase
- --------------------------------------------------------------------------------
Dividends and Realized Securities
Profits Distributions
- --------------------------------------------------------------------------------
Taxes
- --------------------------------------------------------------------------------
Investment Management Agreements
- --------------------------------------------------------------------------------
Officers and Directors
- --------------------------------------------------------------------------------
Exchange Privilege
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
Appendix A--IRA Information
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
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<PAGE>
Delaware Group Income Funds, Inc. ("Income Funds, Inc.") is a
professionally-managed mutual fund of the series type which currently offers
five series of shares: the Delchester Fund series (the "Delchester Fund"), the
Strategic Income Fund series (the "Strategic Income Fund"), the High-Yield
Opportunities Fund series (the "High-Yield Opportunities Fund"), the Corporate
Bond Fund and the Extended Duration Bond Fund. This Statement of Additional
Information relates to the Corporate Bond Fund and the Extended Duration Bond
Fund only (individually, a "Fund" and collectively, the "Funds").
Each Fund offers three retail classes: Corporate Bond Fund A Class and
Extended Duration Bond Fund A Class (the "Class A Shares"); Corporate Bond Fund
B Class and Extended Duration Bond Fund B Class (the "Class B Shares"); and
Corporate Bond Fund C Class and Extended Duration Bond Fund C Class (the "Class
C Shares"). Class A Shares, Class B Shares and Class C Shares are collectively
referred to as the "Fund Classes." Each Fund also offers an institutional class:
Corporate Bond Fund Institutional Class and Extended Duration Institutional
Class (collectively, the "Institutional Classes").
Class B Shares, Class C Shares and Institutional Class shares of each
Fund may be purchased at a price equal to the next determined net asset value
per share. Class A Shares may be purchased at the public offering price, which
is equal to the next determined net asset value per share, plus a front-end
sales charge. Class A Shares are subject to a maximum front-end sales charge of
4.75%, absent any applicable fee waiver, and annual 12b-1 Plan expenses which
for Class A Shares of each Fund may not exceed 0.30% and have currently been
fixed by the Board at 0.25%. Class B Shares are subject to a contingent deferred
sales charge ("CDSC") which may be imposed on redemptions made within six years
of purchase and annual 12b-1 Plan expenses of up to 1% which are assessed
against Class B Shares for approximately eight years after purchase. See
Automatic Conversion of Class B Shares under Classes of Shares in the
Prospectuses for the Fund Classes. Class C Shares are subject to a CDSC which
may be imposed on redemptions made within 12 months of purchase and annual 12b-1
Plan expenses of up to 1%, which are assessed against Class C Shares for the
life of the investment.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectuses for
Corporate Bond Fund and Extended Duration Bond Fund, each dated September __,
1998, as they may be amended from time to time. Part B should be read in
conjunction with the respective class' Prospectus. Part B is not itself a
prospectus but is, in its entirety, incorporated by reference into each class'
Prospectus. A Prospectus for each class may be obtained by writing or calling
your investment dealer or by contacting Income Funds, Inc.'s national
distributor, Delaware Distributors, L.P. (the "Distributor"), 1818 Market
Street, Philadelphia, PA 19103.
All references to "shares" in this Part B refer to all classes of
shares of Income Funds, Inc., except where noted.
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Corporate Bond Fund and Extended Duration Bond Fund
The types of securities in which each Fund invests are subject to price
fluctuations particularly due to changes in interest rates and economic
conditions. Management will seek to achieve each Fund's objective by investing
at least 65% of the Fund's assets at time of purchase in investment grade
corporate bonds. Each Fund may also invest in corporate bonds rated BB by S&P or
Ba by Moody's or similarly rated by other rating agencies, and in unrated bonds
judged to be of comparable quality by Delaware Management Company (the
"Manager"). Unrated bonds may be more speculative in nature than rated bonds.
Each Fund may also invest in securities of, or guaranteed by, the U.S.
and foreign governments, their agencies or instrumentalities and commercial
paper of companies having, at the time of purchase, an issue of outstanding debt
securities rated as described above or commercial paper rated A-1 or A-2 by S&P
or rated P-1 or P-2 by Moody's or similarly rated by other rating agencies, and
in unrated paper judged to be of comparable quality by the Manager.
Appendix A - Ratings in the Funds' Prospectuses describes the ratings
of S&P and Moody's.
Duration
Most debt obligations provide interest (coupon) payments in addition to
a final (par) payment at maturity. Some obligations also have call provisions.
Depending on the relative magnitude of these payments and the nature of the call
provisions, the market values of debt obligations may respond differently to
changes in the level and structure of interest rates. Traditionally, a debt
security's term-to-maturity has been used as a proxy for the sensitivity of the
security's price to changes in interest rates (which is the interest rate risk
or volatility of the security). However, term-to-maturity measures only the time
until a debt security provides its final payment, taking no account of the
pattern of the security's payments prior to maturity.
Duration is a measure of the expected life of a fixed income security
that was developed as a more precise alternative to the concept of
term-to-maturity. Duration incorporates a bond's yield, coupon interest
payments, final maturity and call features into one measure. Duration is one of
the fundamental tools used by the Manager in the selection of fixed income
securities. Duration is a measure of the expected life of a fixed income
security on a present value basis. Duration takes the length of the time
intervals between the present time and the time that the interest and principal
payments are scheduled or, in the case of a callable bond, expected to be
received, and weights them by the present values of the cash to be received at
each future point in time. For any fixed income security with interest payments
occurring prior to the payment of principal, duration is always less than
maturity. In general, all other factors being the same, the lower the stated or
coupon rate of interest of a fixed income security, the longer the duration of
the security; conversely, the higher the stated or coupon rate of interest of a
fixed income security, the shorter the duration of the security.
There are some situations where even the standard duration calculation
does not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or more
years; however, their interest rate exposure corresponds to the frequency of the
coupon reset. Another example where the interest rate exposure is not properly
captured by duration is the case of mortgage pass-through securities. The stated
final maturity of such securities is generally 30 years, but current prepayment
rates are more critical in determining the securities' interest rate exposure.
In these and other
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<PAGE>
similar situations, the Manager will use sophisticated analytical techniques
that incorporate the economic life of a security into the determination of its
interest rate exposure.
Foreign and Emerging Markets Securities
Investors should recognize that investing in foreign issuers, including
issuers located in emerging market countries, involves certain considerations,
including those set forth in the Funds' Prospectuses, which are not typically
associated with investing in United States issuers. Since the stocks of foreign
companies are frequently denominated in foreign currencies, a Fund will be
affected favorably or unfavorably by changes in currency rates and in exchange
control regulations, and may incur costs in connection with conversions between
various currencies.
As disclosed in the Funds' Prospectuses, there are a number of risks
involved in investing in foreign securities. For example, the assets and profits
appearing on the financial statements of a developing or emerging country issuer
may not reflect its financial position or results of operations in the way they
would be reflected had the financial statements been prepared in accordance with
United States generally accepted accounting principles. Also, for an issuer that
keeps accounting records in local currency, inflation accounting rules may
require for both tax and accounting purposes, that certain assets and
liabilities be restated on the issuer's balance sheet in order to express items
in terms of currency or constant purchasing power. Inflation accounting may
indirectly generate losses on profits.
There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by the Funds. Payment of
such interest equalization tax, if imposed, would reduce a Fund's rate of return
on its investment. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes which may decrease the net return on such
investments as compared to dividends paid to a Fund by United States
corporations. Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules generally
include the following: (i) the acquisition of, or becoming the obligor under, a
bond or other debt instrument (including, to the extent provided in Treasury
Regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instruments other than
any "regulated futures contract" or "nonequity option" marked to market. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also
treated as a transaction subject to the special currency rules. With respect to
transactions covered by the special rules, foreign currency gain or loss is
calculated separately from any gain or loss on the underlying transaction and is
normally taxable as ordinary gain or loss. A taxpayer may elect to treat as
capital gain or loss foreign currency gain or loss arising from certain
identified forward contracts, futures contracts and options that are capital
assets in the hands of the taxpayer and which are not part of a straddle.
Certain transactions subject to the special currency rules that are part of a
"section 988 hedging transaction" (as defined in the Internal Revenue Code of
1986, as amended (the "Code"), and the Treasury Regulations) will be integrated
and treated as a single transaction or otherwise treated consistently for
purposes of the Code. The income tax effects of integrating and treating a
transaction as a single transaction are generally to create a synthetic debt
instrument that is subject to the original discount provisions. It is
anticipated that some of the non-U.S. dollar denominated investments and foreign
currency contracts a Fund may make or enter into will be subject to the special
currency rules described above.
-5-
<PAGE>
Investments and opportunities for investments by foreign investors in
emerging market countries are subject to a variety of national policies and
restrictions. These restrictions may take the form of prior governmental
approval, limits on the amount or type of securities held by foreigners, limits
on the types of companies in which foreigners may invest and prohibitions on
foreign investments in issuers or industries deemed sensitive to national
interests. Additional restrictions may be imposed at any time by these or other
countries in which each Fund invests.
Zero-Coupon and Pay-In-Kind Bonds
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero-coupon, deferred interest and pay-in-kind bonds. These bonds
carry an additional risk in that, unlike bonds that pay interest throughout the
period to maturity, each Fund will realize no cash until the cash payment date
and, if the issuer defaults, a Fund may obtain no return at all on its
investment. Zero coupon, deferred interest and pay-in- kind bonds involve
additional special considerations.
Zero-coupon or deferred interest securities are debt obligations that
do not entitle the holder to any periodic payments of interest prior to maturity
or a specified date when the securities begin paying current interest (the "cash
payment date") and therefore are generally issued and traded at a discount from
their face amounts or par value. The discount varies depending on the time
remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer. The
discount, in the absence of financial difficulties of the issuer, typically
decreases as the final maturity or cash payment date of the security approaches.
The market prices of zero-coupon securities are generally more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to changes in interest rates to a greater degree than do non-zero-coupon
or deferred interest securities having similar maturities and credit quality.
Current federal income tax law requires that a holder of a zero coupon security
report as income each year the portion of the original issue discount on the
security that accrues that year, even though the holder receives no cash
payments of interest during the year.
Pay-in-kind bonds are securities that pay interest through the issuance
of additional bonds. A Fund will be deemed to receive interest over the life of
these bonds and be treated as if interest were paid on a current basis for
federal income tax purposes, although no cash interest payments are received by
the Fund until the cash payment date or until the bonds mature. Accordingly,
during periods when a Fund receive no cash interest payments on its zero coupon
securities or deferred interest or pay-in-kind bonds, it may be required to
dispose of portfolio securities to meet the distribution requirements and these
sales may be subject to the risk factors discussed above. The Funds are not
limited in the amount of its assets that may be invested in these types of
securities.
Convertible, Debt And Non-Traditional Equity Securities
From time to time, a portion of a Fund's assets may be invested in
convertible and debt securities of issuers in any industry. A convertible
security is a security which may be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the same
or a different issuer. Convertible and debt securities are senior to common
stocks in a corporation's capital structure, although convertible securities are
usually subordinated to similar nonconvertible securities. Convertible and debt
securities provide a fixed-income stream and the opportunity, through its
conversion feature, to participate in the capital appreciation resulting from a
market price advance in the convertible security's underlying common stock. Just
as with debt securities, convertible securities tend to increase in market value
when interest rates decline and tend to decrease in value when interest rates
rise. However, the price of a convertible security is also influenced by the
market value of the security's underlying common stock and tends to increase as
the
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<PAGE>
market value of the underlying stock rises, whereas it tends to decrease as the
market value of the underlying stock declines. Convertible and debt securities
acquired by a Fund may be rated below investment grade, or unrated. These lower
rated convertible and debt securities are subject to credit risk considerations
substantially similar to such considerations affecting high risk, high-yield
bonds, commonly referred to as "junk bonds."
Each Fund may invest in convertible preferred stocks that offer
enhanced yield features, such as Preferred Equity Redemption Cumulative Stock
("PERCS"), which provide an investor, such as a Fund, with the opportunity to
earn higher dividend income than is available on a company's common stock. A
PERCS is a preferred stock which generally features a mandatory conversion date,
as well as a capital appreciation limit which is usually expressed in terms of a
stated price. Upon the conversion date, most PERCS convert into common stock of
the issuer (PERCS are generally not convertible into cash at maturity). Under a
typical arrangement, if after a predetermined number of years the issuer's
common stock is trading at a price below that set by the capital appreciation
limit, each PERCS would convert to one share of common stock. If, however, the
issuer's common stock is trading at a price above that set by the capital
appreciation limit, the holder of the PERCS would receive less than one full
share of common stock. The amount of that fractional share of common stock
received by the PERCS holder is determined by dividing the price set by the
capital appreciation limit of the PERCS by the market price of the issuer's
common stock. PERCS can be called at any time prior to maturity, and hence do
not provide call protection. However, if called early, the issuer may pay a call
premium over the market price to the investor. This call premium declines at a
preset rate daily, up to the maturity date of the PERCS.
Each Fund may also invest in other enhanced convertible securities.
These include but are not limited to ACES (Automatically Convertible Equity
Securities), PEPS (Participating Equity Preferred Stock), PRIDES (Preferred
Redeemable Increased Dividend Equity Securities), SAILS (Stock Appreciation
Income Linked Securities), TECONS (Term Convertible Notes), QICS (Quarterly
Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS and DECS all have the
following features: they are company-issued convertible preferred stock; unlike
PERCS, they do not have capital appreciation limits; they seek to provide the
investor with high current income, with some prospect of future capital
appreciation; they are typically issued with three to four-year maturities; they
typically have some built-in call protection for the first two to three years;
investors have the right to convert them into shares of common stock at a preset
conversion ratio or hold them until maturity; and upon maturity, they will
automatically convert to either cash or a specified number of shares of common
stock.
When-Issued And Delayed Delivery Securities
Each Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. Each Fund will maintain with its Custodian Bank a
separate account with a segregated portfolio of securities in an amount at least
equal to these commitments. The payment obligation and the interest rates that
will be received are each fixed at the time a Fund enters into the commitment
and no interest accrues to the Fund until settlement. Thus, it is possible that
the market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed.
Borrowing From Banks
A Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. A Fund will not borrow money in excess of
one-third of the value of its net assets. Each Fund has
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<PAGE>
no intention of increasing its net income through borrowing. Any borrowing will
be done from a bank and, to the extent that such borrowing exceeds 5% of the
value of a Fund's net assets, asset coverage of at least 300% is required. In
the event that such asset coverage shall at any time fall below 300%, the Fund
shall, within three days thereafter (not including Sundays or holidays, or such
longer period as the Securities and Exchange Commission may prescribe by rules
and regulations), reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. A Fund will not pledge
more than 10% of its net assets, or issue senior securities as defined in the
1940 Act, except for notes to banks. Investment securities will not be purchased
while a Fund has an outstanding borrowing.
-8-
<PAGE>
High-Yield, High Risk Securities
Investing in so-called "high-yield" or "high risk" securities entails
certain risks, including the risk of loss of principal, which may be greater
than the risks involved in investment grade securities, and which should be
considered by investors contemplating an investment in the Funds. Such
securities are sometimes issued by companies whose earnings at the time of
issuance are less than the projected debt service on the high-yield securities.
The risks include the following:
A. Youth and Volatility of the High-Yield Market--Although the market
for high-yield securities has been in existence for many years, including
periods of economic downturns, the high-yield market grew rapidly during the
long economic expansion which took place in the United States during the 1980s.
During that economic expansion, the use of high-yield debt securities to fund
highly leveraged corporate acquisitions and restructurings increased
dramatically. As a result, the high-yield market grew substantially during that
economic expansion. Although experts disagree on the impact recessionary periods
have had and will have on the high-yield market, some analysts believe a
protracted economic downturn would severely disrupt the market for high-yield
securities, would adversely affect the value of outstanding bonds and would
adversely affect the ability of high-yield issuers to repay principal and
interest. Those analysts cite volatility experienced in the high-yield market in
the past as evidence for their position. It is likely that protracted periods of
economic uncertainty would result in increased volatility in the market prices
of high-yield securities, an increase in the number of high-yield bond defaults
and corresponding volatility in a Fund's net asset value.
The Funds will not purchase securities rated below BB by S&P or Ba by
Moody's. The Funds will not invest more than 20% of its assets in such
securities.
B. Liquidity and Valuation--The secondary market for high-yield
securities is currently dominated by institutional investors, including mutual
funds and certain financial institutions. There is generally no established
retail secondary market for high-yield securities. As a result, the secondary
market for high-yield securities is more limited and less liquid than other
secondary securities markets. The high-yield secondary market is particularly
susceptible to liquidity problems when the institutions which dominate it
temporarily cease buying such securities for regulatory, financial or other
reasons, such as the savings and loan crisis. A less liquid secondary market may
have an adverse effect on a Fund's ability to dispose of particular issues, when
necessary, to meet a Fund's liquidity needs or in response to a specific
economic event, such as the deterioration in the creditworthiness of the issuer.
In addition, a less liquid secondary market makes it more difficult for a Fund
to obtain precise valuations of the high-yield securities in its portfolio.
During periods involving such liquidity problems, judgment plays a greater role
in valuing high-yield securities than is normally the case. The secondary market
for high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. Privately placed high-yield securities
are particularly susceptible to the liquidity and valuation risks outlined
above.
C. Legislative and Regulatory Action and Proposals--There are a variety
of legislative actions which have been taken or which are considered from time
to time by the United States Congress which could adversely affect the market
for high-yield bonds. For example, Congressional legislation limited the
deductibility of interest paid on certain high-yield bonds used to finance
corporate acquisitions. Also, Congressional legislation has, with some
exceptions, generally prohibited federally-insured savings and loan institutions
from investing in high-yield securities. Regulatory actions have also affected
the high-yield market. For example, many insurance companies have restricted or
eliminated their purchases of high-yield bonds as a result of, among other
factors, actions taken by the National Association of Insurance Commissioners.
If
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<PAGE>
similar legislative and regulatory actions are taken in the future, they could
result in further tightening of the secondary market for high-yield issues and
could reduce the number of new high-yield securities being issued.
Restricted Securities
The Funds may purchase privately-placed debt and other securities whose
resale is restricted under applicable securities laws. Such restricted
securities generally offer a higher return than comparable registered securities
but involve some additional risk since they can be resold only in
privately-negotiated transactions or after registration under applicable
securities laws. The registration process may involve delays which could result
in the Funds obtaining a less favorable price on a resale. Each Fund will not
purchase illiquid assets if more than 15% of its respective net assets would
then consist of such illiquid securities.
Repurchase Agreements
The Funds are permitted to invest in repurchase agreements, but they
normally so only to invest cash balances. A repurchase agreement is a short-term
investment by which the purchaser acquires ownership of a debt security and the
seller agrees to repurchase the obligation at a future time and set price,
thereby determining the yield during the purchaser's holding period. Should an
issuer of a repurchase agreement fail to repurchase the underlying security, the
loss to a Fund, if any, would be the difference between the repurchase price and
the market value of the security. Each Fund will limit its investments in
repurchase agreements to those which the Manager, under the guidelines of the
Board of Directors, determines present minimal credit risks and which are of
high quality. In addition, each Fund must have collateral of at least 102% of
the repurchase price, including the portion representing the Fund's yield under
such agreements, which is monitored on a daily basis.
The funds in the Delaware Investments family have obtained an exemption
from the joint-transaction prohibitions of Section 17(d) of the Investment
Company Act of 1940 (the "1940 Act") to allow the such funds jointly to invest
cash balances. The Funds may invest cash balances in a joint repurchase
agreement in accordance with the terms of the Order and subject generally to the
conditions described above.
Portfolio Loan Transactions
Each Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of the Manager that the staff of the Securities
and Exchange Commission (the "SEC" or the "Commission") permits portfolio
lending by registered investment companies if certain conditions are met. These
conditions are as follows: 1) each transaction must have 100% collateral in the
form of cash, short-term U.S. government securities, or irrevocable letters of
credit payable by banks acceptable to the Fund involved from the borrower; 2)
this collateral must be valued daily and should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Fund; 3) the Fund must be able to terminate any loan after notice, at any time;
4) the Fund must receive reasonable interest on any loan, and any dividends,
interest or other distributions on the lent securities, and any increase in the
market value of such securities; 5) the Fund may pay reasonable custodian fees
in connection with the loan; 6) the voting rights on the lent securities may
pass to the borrower; however, if the directors of Income Funds, Inc. know that
a material event will occur affecting an investment loan, they must either
terminate the loan in order to vote the proxy or enter into an alternative
arrangement with the borrower to enable the directors to vote the proxy.
The major risk to which a Fund would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, each Fund will only enter into
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loan arrangements after a review of all pertinent facts by the Manager, under
the supervision of the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Investment Restrictions
Corporate Bond Fund and Extended Duration Bond Fund
Each Fund has the following investment restrictions which may not be
amended without approval of a majority of the outstanding voting securities,
which is the lesser of more than 50% of the outstanding voting securities of the
Fund, or 67% of the voting securities of that Fund present at a shareholder
meeting if 50% or more of the voting securities are present in person or
represented by proxy. The percentage limitations contained in the restrictions
and policies set forth herein apply at the time a Fund purchases securities.
A Fund shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the 1940 Act, any rule or order thereunder, or SEC staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does not
limit a Fund from investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Fund may
engage in transactions involving the acquisition, disposition or resale of its
portfolio securities, under circumstances where it may be considered to be an
underwriter under the Securities Act of 1933.
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent a Fund from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent a Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent a Fund
from purchasing debt obligations, entering into repurchase agreements, loaning
its assets to qualified broker/dealers or institutional investors and investing
in loans, including assignments and participation interests.
In addition to the fundamental policies and investment restrictions
described above, and the various general investment policies described in the
Prospectus, each Fund will be subject to the following investment restrictions,
which are considered non-fundamental and may be changed by the Board of
Directors without shareholder approval.
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1. Each Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, or without regard to
percentage limits in connection with a merger, reorganization, consolidation or
other similar transaction. However, a Fund may not operate as a "fund of funds"
which invests primarily in the shares of other investment companies as permitted
by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
2. Neither Fund may invest more than 15% of its net assets in
securities which it can not sell or dispose of in the ordinary course of
business within seven days at approximately the value at which a Fund has valued
the investment.
Concentration
In applying a Fund's policy on concentration; (i) utility companies
will be divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (ii)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (iii) asset backed
securities will be classified according to the underlying assets securing such
securities.
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PERFORMANCE INFORMATION
From time to time, each Fund may state its Classes' total return in
advertisements and other types of literature. Any statement of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year (or life-of-fund, if applicable) periods. Each
Fund may also advertise aggregate and average total return information of its
Classes over additional periods of time.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1 + T) = ERV
Where: P = a hypothetical initial purchase order of $1,000 from which,
in the case of only Class A Shares, the maximum front-end
sales charge is deducted;
T = average annual total return;
n = number of years; and
ERV = redeemable value of the hypothetical $1,000
purchase at the end of the period after the deduction
of the applicable CDSC, if any, with respect to Class
B Shares and Class C Shares.
In presenting performance information for Class A Shares, the Limited
CDSC applicable to only certain redemptions of those shares will not be deducted
from any computation of total return. See the Prospectuses for the Fund Classes
for a description of the Limited CDSC and the limited instances in which it
applies. All references to a CDSC in this Performance Information section will
apply to Class B Shares or Class C Shares of the Funds.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to Class B Shares and Class
C Shares, reflects the deduction of the CDSC that would be applicable upon
complete redemption of such shares. In addition, each Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
As stated in the Funds' Prospectuses, each Fund may also quote the
current yield of each of its Classes in advertisements and investor
communications.
The yield computation is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the resulting figure,
according to the following formula:
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a--b 6
YIELD = 2[(-------- + 1) -- 1]
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = the maximum offering price per share on the last
day of the period.
The above formula will be used in calculating quotations of yield for
each Class of the Funds, based on specified 30-day periods identified in
advertising by the Funds. Yield calculations assume the maximum front-end sales
charge, if any, and do not reflect the deduction of any contingent deferred
sales charge. Actual yield on Class A Shares may be affected by variations in
sales charges on investments. Past performance, such as is reflected in quoted
yields, should not be considered as a representation of the results which may be
realized from an investment in any class of Income Funds, Inc. in the future.
Investors should note that the income earned and dividends paid by the
Funds will vary with the fluctuation of interest rates and performance of the
portfolio to the extent of the Funds' investments in debt securities. The net
asset values of the Funds may change. Unlike money market funds, the Funds
invest in longer-term securities that fluctuate in value and do so in a manner
inversely correlated with changing interest rates. The Funds' net asset values
will tend to rise when interest rates fall. Conversely, the Funds' net asset
values will tend to fall as interest rates rise. Normally, fluctuations in
interest rates have a greater effect on the prices of longer-term bonds. The
value of the securities held by the Funds will vary from day to day and
investors should consider the volatility of the Funds' net asset values as well
as their yields before making a decision to invest.
From time to time, each Fund may quote actual total return and/or yield
performance for its Classes in advertising and other types of literature. This
information may be compared to that of other mutual funds with similar
investment objectives and to stock, bond an other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of a Fund (or Class) may be compared to data prepared by Lipper
Analytical Services, Inc., Morningstar, Inc. or the performance of unmanaged
indices compiled or maintained by statistical research firms such as Lehman
Brothers or Salomon Brothers, Inc.
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the Fund's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The total
return performance reported for these indices will reflect the reinvestment of
all distributions on a quarterly basis and market price fluctuations. The
indices do not take into account any sales charge or other fees. A direct
investment in an unmanaged index is not possible.
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<PAGE>
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well as
unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations. In addition, the performance of multiple
indices compiled and maintained by these firms may be combined to create a
blended performance result for comparative purposes. Generally, the indices
selected will be representative of the types of securities in which a Fund may
invest and the assumptions that were used in calculating the blended performance
will be described.
Comparative information on the Consumer Price Index may also be
included in advertisements or other literature. The Consumer Price Index, as
prepared by the U.S. Bureau of Labor Statistics, is the most commonly used
measure of inflation. It indicates the cost fluctuations of a representative
group of consumer goods. It does not represent a return from an investment.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. Each Fund may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of a Fund. Each Fund may also compare performance to that of other compilations
or indices that may be developed and made available in the future.
The Funds may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of a Fund (such as value investing, market timing, dollar
cost averaging, asset allocation, constant ratio transfer, automatic account
rebalancing, the advantages and disadvantages of investing in tax-deferred and
taxable investments or global or international investments), economic and
political conditions, the relationship between sectors of the economy and the
economy as a whole, the effects of inflation and historical performance of
various asset classes, including but not limited to, stocks, bonds and Treasury
bills. From time to time advertisements, sales literature, communications to
shareholders or other materials may summarize the substance of information
contained in shareholder reports (including the investment composition of a
Fund), as well as the views as to current market, economic, trade and interest
rate trends, legislative, regulatory and monetary developments, investment
strategies and related matters believed to be of relevance to a Fund. In
addition, selected indices may be used to illustrate historic performance of
selected asset classes. The Funds may also include in advertisements, sales
literature, communications to shareholders or other materials, charts, graphs or
drawings which illustrate the potential risks and rewards of investment in
various investment vehicles, including but not limited to, domestic and
international stocks, and/or bonds, treasury bills and shares of a Fund. In
addition, advertisements, sales literature, communications to shareholders or
other materials may include a discussion of certain attributes or benefits to be
derived by an investment in a Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning (such as information on Roth IRAs and
Educational IRAs) and investment alternatives to certificates of deposit and
other financial instruments. Such sales literature,
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<PAGE>
communications to shareholders or other materials may include symbols, headlines
or other material which highlight or summarize the information discussed in more
detail therein.
Materials may refer to the CUSIP numbers of the Funds and may
illustrate how to find the listings of the Funds in newspapers and periodicals.
Materials may also include discussions of other Funds, products, and services.
The Funds may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Funds may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. A Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to a Fund may include information
regarding the background and experience of its portfolio managers.
Total return performance for each Class of the Funds will reflect the
appreciation or depreciation of principal, reinvestment of income and any
capital gains distributions paid during any indicated period, and, in the case
of Class A Shares, the impact of the maximum front-end sales charge, if any,
paid on the illustrated investment amount, annualized. Performance of Class A
Shares may also be shown without reflecting the impact of any front-end sales
charge. The performance of Class B Shares and Class C Shares will be calculated
both with the applicable CDSC included and excluded. The results will not
reflect any income taxes, if applicable, payable by shareholders on the
reinvested distributions included in the calculations. The net asset values of
the Funds fluctuate so shares, when redeemed, may be worth more or less than the
original investment, and the Funds' results should not be considered a guarantee
of future performance.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for Income Funds, Inc. and other mutual funds in the
Delaware Investments family, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible personal financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of time the individual
has to attain these goals to his or her risk threshold. In addition, the
Distributor will provide information that discusses the Manager's and, in the
case of Strategic Income Fund, the Sub-Adviser's, overriding investment
philosophy and how that philosophy impacts the Funds', and other Delaware
Investments funds', investment disciplines employed in seeking their objectives.
The Distributor may also from time to time cite general or specific information
about the institutional clients of the Manager and the Sub-Adviser, including
the number of such clients serviced by the Manager and the Sub-Adviser.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
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<PAGE>
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Investments offers three services -- Automatic Investing Plan, Direct Deposit
Purchase Plan and the Wealth Builder Option -- that can help to keep your
regular investment program on track. See Investing by Electronic Fund Transfer -
Direct Deposit Purchase Plan and Automatic Investing Plan under Investment Plans
and Wealth Builder Option under Investment Plans for a complete description of
these services, including restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 20
Month 4 $100 $10.00 10
---------------------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of any stock or bond fund in the Delaware
Investments family.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding. Each Fund may include illustrations showing the power
of compounding in advertisements and other types of literature.
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TRADING PRACTICES AND BROKERAGE
Each Fund selects banks, brokers or dealers to execute transactions for
the purchase or sale of portfolio securities on the basis of the Fund's judgment
of the professional capability of such banks, brokers or dealers to provide the
service. The primary consideration is to have banks, brokers or dealers execute
transactions at best price and execution. Best price and execution refers to
many factors, including the price paid or received for a security, the
commission charged, the promptness and reliability of execution, the
confidentiality and placement accorded the order and other factors affecting the
overall benefit obtained by the account on the transaction. In most instances,
trades of fixed-income securities are made on a net basis where the Funds either
buy the securities directly from the dealer or sell them to the dealer. In these
instances, there is no direct commission charged but there is a spread (the
difference between the buy and sell price) which is the equivalent of a
commission. When a commission is paid, the Fund involved pays reasonably
competitive brokerage commission rates based upon the professional knowledge of
the Manager as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, a Fund pays a minimal share transaction
cost when the transaction presents no difficulty.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making processes with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") and
the Funds' Investment Management Agreements higher commissions are permitted to
be paid to broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Funds believe that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager which constitute in some part brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to the Funds and to other funds in the Delaware
Investments family. Subject to best price and execution, commissions allocated
to brokers providing such pricing services may or may not be generated by the
funds receiving the pricing service.
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The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and Income Funds,
Inc.'s Board of Directors that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Funds may place orders with broker/dealers that have agreed to
defray certain expenses of the funds in the Delaware family such as custodian
fees, and may, at the request of the Distributor, give consideration to sales of
shares of such funds as a factor in the selection of brokers and dealers to
execute the Funds' portfolio transactions.
Portfolio Turnover
The rate of portfolio turnover will not be a limiting factor when
portfolio changes are deemed appropriate. Given each Fund's investment objective
and current market conditions, its annual portfolio turnover rate is [expected
to exceed 100%. A turnover rate of 100% occurs, for example, when all the
investments in a Fund's portfolio at the beginning of the year were replaced by
the end of the year.]
The degree of portfolio activity may affect taxes payable by the Funds'
shareholders. A turnover rate of 100% would occur, for example, if all the
investments in a Fund's portfolio at the beginning of the year were replaced by
the end of the year. In investing for total return, the Funds may hold
securities for any period of time. To the extent a Fund realizes gains on
securities held for less than six months, such gains are taxable to the
shareholder or to the Fund at ordinary income tax rates. The turnover rates also
may be affected by cash requirements from redemptions and repurchases of Fund
shares.
The portfolio turnover rate of each Fund is calculated by dividing the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by the monthly average of the value of the portfolio securities owned by
the Fund during the particular fiscal year, exclusive of securities whose
maturities at the time of acquisition are one year or less.
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PURCHASING SHARES
The Distributor serves as the national distributor for each Fund's
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class - and has agreed to use its best efforts to sell shares of
each Fund. See the Prospectuses for additional information on how to invest.
Shares of the Funds are offered on a continuous basis, and may be purchased
through authorized investment dealers or directly by contacting Income Funds,
Inc. or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of such classes
generally must be at least $100. The initial and subsequent minimum investments
for Class A Shares will be waived for purchases by officers, directors and
employees of any fund in the Delaware Investments family, the Manager or any of
the its affiliates if the purchases are made pursuant to a payroll deduction
program. Shares purchased pursuant to the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act and shares purchased in connection with an Automatic
Investing Plan are subject to a minimum initial purchase of $250 and a minimum
subsequent purchase of $25. Accounts opened under the Asset Planner service are
subject to a minimum initial investment of $2,000 per Asset Planner Strategy
selected. There are no minimum purchase requirements for the Funds'
Institutional Classes, but certain eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Income Funds, Inc. will reject any purchase
order for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more in Class A
Shares, and that, absent any applicable fee waiver, Class A Shares are subject
to lower annual 12b-1 Plan expenses than Class B Shares and Class C Shares and
generally are not subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Income Funds, Inc. reserves the right to reject any order for the purchase of
shares of either Fund if in the opinion of management such rejection is in such
Fund's best interests.
The NASD has adopted Conduct Rules, as amended, relating to investment
company sales charges. Income Funds, Inc. and the Distributor intend to operate
in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales charges
apply for larger purchases. Class A Shares are also subject to annual 12b-1 Plan
expenses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Classes of Shares in the Fund Classes' Prospectuses.
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Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Fund's assets and will receive a
proportionate interest in that Fund's income, before application, as to Class A,
Class B and Class C Shares, of any expenses under a Fund's 12b-1 Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares or in the case of any retirement plan
accounts including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Income Funds, Inc. for any certificate issued. A shareholder may be subject
to fees for replacement of a lost or stolen certificate, under certain
conditions, including the cost of obtaining a bond covering the lost or stolen
certificate. Please contact a Fund for further information. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and the Class C Shares permit investors to choose the method of purchasing
shares that is most suitable for their needs given the amount of their purchase,
the length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and incur a
front-end sales charge and annual 12b-1 Plan expenses of up to a maximum of
0.30% (no more than 0.25% pursuant to Board action) of the average daily net
assets of Class A Shares or to purchase either Class B or Class C Shares and
have the entire initial purchase amount invested in a Fund with the investment
thereafter subject to a CDSC and annual 12b-1 Plan expenses.
Class A Shares - Corporate Bond Fund and Extended Duration Bond Fund
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges and may include a series of purchases over
a 13-month period under a Letter of Intention signed by the purchaser. See
Front-End Sales Charge Alternative in the Fund Classes' Prospectus for a table
illustrating reduced front-end sales charges. See Special Purchase Features -
Class A Shares, below, for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
Certain dealers who enter into an agreement to provide extra training
and information on Delaware Investments products and services and who increase
sales of the funds in the Delaware Investments family may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and
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their ability to increase sales. The Distributor should be contacted for further
information on these requirements as well as the basis and circumstances upon
which the additional commission will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
Dealer's Commission
As described more fully in the Prospectus for the Fund Classes, for
initial purchases of Class A Shares of $1,000,000 or more, a dealer's commission
may be paid by the Distributor to financial advisers through whom such purchases
are effected. See Front-End Sales Charge Alternative - Class A Shares in the
Prospectus for the Fund Classes for the applicable schedule and further details.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. See Waiver of Contingent Deferred Sales Charge - Class B and
Class C Shares under Redemption and Exchange in the Prospectus for the Fund
Classes for a list of the instances in which the CDSC is waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the Fund.
See Automatic Conversion of Class B Shares under Classes of Shares in the Fund
Classes' Prospectus. Such conversion will constitute a tax-free exchange for
federal income tax purposes. See Taxes in the Prospectus for the Fund Classes.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Income Funds, Inc. has
adopted a separate plan for each of the Class A Shares, Class B Shares and Class
C Shares of each Fund (the "Plans"). Each Plan permits the relevant Fund to pay
for certain distribution, promotional and related expenses involved in the
marketing of only the class of shares to which the Plan applies. The Plans do
not apply to Institutional Classes of shares. Such shares are not included in
calculating the Plans' fees, and the Plans are not used to assist in the
distribution and marketing of shares of the Institutional Classes. Shareholders
of the Institutional Classes may not vote on matters affecting the Plans.
The Plans permit a Fund, pursuant to its Distribution Agreement, to pay
out of the assets of Class A Shares, Class B Shares and Class C Shares monthly
fees to the Distributor for its services and expenses in distributing and
promoting sales of shares of such classes. These expenses include, among other
things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
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In addition, each Fund may make payments out of the assets of Class A,
Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of, or provide services to,
such classes.
The maximum aggregate fee payable by a Fund under its Plans, and the
Funds' Distribution Agreements, is on an annual basis, up to 0.30% of the Class
A Shares' average daily net assets for the year, and up to 1% (0.25% of which
are service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and Class C Shares' average daily net assets for the year. Income Funds,
Inc.'s Board of Directors may reduce these amounts at any time. [The Distributor
has agreed to waive the distribution fees with respect to each Fund to the
extent such fee for any day exceeds the net investment income realized by such
Funds' respective Class A, Class B and Class C Shares for such day.]
Although the maximum fee payable under the 12b-1 Plans relating to
Class A Shares is 0.30% of average daily net assets of such class, the Board of
Directors has determined that the annual fee, payable on a monthly basis, under
the Plans relating to Class A Shares is 0.25%. While this describes the current
basis for calculating the fees which will be payable under the each Fund's Class
A Share Plan, such Plans permit a full 0.30% on all Class A Shares' assets to be
paid at any time following appropriate Board approval.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A, Class B and Class C Shares would be borne by such persons without any
reimbursement from such Fund Classes. Subject to seeking best price and
execution, a Fund may, from time to time, buy or sell portfolio securities from
or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreements, as amended, have all been
approved by the Board of Directors of Income Funds, Inc., including a majority
of the directors who are not "interested persons" (as defined in the 1940 Act)
of Income Funds, Inc. and who have no direct or indirect financial interest in
the Plans, by vote cast in person at a meeting duly called for the purpose of
voting on the Plans and such Agreements. Continuation of the Plans and the
Distribution Agreements, as amended, must be approved annually by the Board of
Directors in the same manner as specified above.
Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares of each Fund and that there is a reasonable
likelihood of the Plan relating to a Fund Class providing a benefit to that
Class. The Plans and the Distribution Agreements, as amended, may be terminated
with respect to a Class at any time without penalty by a majority of those
directors who are not "interested persons" or by a majority vote of the
outstanding voting securities of the relevant Fund Class. Any amendment
materially increasing the percentage payable under the Plans must likewise be
approved by a majority vote of the outstanding voting securities of the relevant
Fund Class, as well as by a majority vote of those directors who are not
"interested persons." With respect to each Class A Shares' Plan, any material
increase in the maximum percentage payable thereunder must also be approved by a
majority of the outstanding voting securities of Class B of the same Fund. Also,
any other material amendment to the Plans must be approved by a majority vote of
the directors including a majority of the noninterested directors of Income
Funds, Inc. having no interest in the Plans. In addition, in order for the Plans
to remain effective, the selection and nomination of directors who are not
"interested persons" of Income
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<PAGE>
Funds, Inc. must be effected by the directors who themselves are not "interested
persons" and who have no direct or indirect financial interest in the Plans.
Persons authorized to make payments under the Plans must provide written reports
at least quarterly to the Board of Directors for their review.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Fund Classes exceed certain limits
as set by the Distributor, may receive from the Distributor an additional
payment of up to 0.25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the funds available from Delaware Investments. In some instances,
these incentives or payments may be offered only to certain dealers who
maintain, have sold or may sell certain amounts of shares. The Distributor may
also pay a portion of the expense of preapproved dealer advertisements promoting
the sale of shares of the funds in the Delaware Investments family.
Special Purchase Features -- Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, directors and employees of Income Funds,
Inc., any other fund in the Delaware Investments family, the Manager, the
Manager's affiliates, or any of the Manager's current affiliates and those that
may in the future be created, legal counsel to the funds, and registered
representatives and employees of broker/dealers who have entered into Dealer's
Agreements with the Distributor may purchase Class A Shares of the Fund and any
of the other funds in the Delaware Investments family, including any fund that
may be created, at the net asset value per share. Family members (regardless of
age) of such persons at their direction, and any employee benefit plan
established by any of the foregoing funds, corporations, counsel or
broker/dealers may also purchase shares at net asset value. Class A Shares may
also be purchased at net asset value by current and former officers, directors
and employees (and members of their families) of the Dougherty Financial Group
LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charges has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees that provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of the funds in the
Delaware Investments family. Officers, directors and key employees of
institutional clients of the Manager, or any of its affiliates, may purchase
Class A Shares at net asset value. Moreover, purchases may be effected at net
asset value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs. Such purchasers are required to sign a letter stating that the
purchase is for investment only and that the securities may not be resold except
to the issuer. Such purchasers may also be required to sign or deliver such
other documents as Income Funds, Inc. may reasonably require to establish
eligibility for purchase at net asset value.
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<PAGE>
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their customers
when they are not eligible to purchase shares of the Institutional Class of the
Fund; and any group retirement plan (excluding defined benefit pension plans),
or such plans of the same employer, for which plan participant records are
maintained on the Delaware Investment & Retirement Services, Inc. ("DIRSI")
proprietary record keeping system that (i) has in excess of $500,000 of plan
assets invested in Class A Shares of the funds in the Delaware Investments
family and any stable value product available through Delaware Investments, or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented to DIRSI
in writing that it has the requisite number of employees and has received
written confirmation back from DIRSI.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class shares as a result of a change in distribution arrangements.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds available from Delaware Investments at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Investment account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
The Funds must be notified in advance that the trade qualifies for
purchase at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Income Funds, Inc., which provides for the holding in escrow by the
Transfer Agent of 5% of the total amount of Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of a Fund and of any class of any
of the other mutual funds in the Delaware Investments family (except shares of
any fund in the Delaware Investments family which do not carry a front-end sales
charge or CDSC or Limited CDSC, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a fund in
the Delaware Investments family which carried a front-end sales charge, CDSC or
Limited CDSC) previously purchased and still held as of the date of their Letter
of Intention toward the completion of such Letter.
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<PAGE>
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in funds that are available from Delaware Investments that are
offered with a front-end sales charge, CDSC or Limited CDSC for a 13-month
period. The Transfer Agent reserves the right to adjust the signed Letter of
Intention based on this acceptance criteria. The 13-month period will begin on
the date this Letter of Intention is accepted by the Transfer Agent. If actual
investments exceed the anticipated level and equal an amount that would qualify
the plan for further discounts, any front-end sales charges will be
automatically adjusted. In the event this Letter of Intention is not fulfilled
within the 13-month period, the Plan level will be adjusted (without completing
another Letter of Intention) and the employer will be billed for the difference
in front-end sales charges due, based on the plan's assets under management at
that time. Employers may also include the value (at offering price at the level
designated in their Letter of Intention) of all their shares intended for
purchase that are offered with a front-end sales charge, CDSC or Limited CDSC of
any class. Class B Shares and Class C Shares of a Fund and other fund available
from Delaware Investments which offer corresponding classes of shares may also
be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Funds, as well as shares of any other class of any of the other
funds in the Delaware Investments family (except shares of any fund in the
Delaware Investments family which do not carry a front-end sales charge, CDSC or
Limited CDSC, other than shares of Delaware Group Premium Fund, Inc.
beneficially owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from a fund in the
Delaware Investments family which carried a front-end sales charge, CDSC or
Limited CDSC). In addition, assets held by investment advisory clients of the
Manager or its affiliates in a stable value account may be combined with other
holdings of shares of funds in the Delaware Investments family.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund, as
well as shares of any other class of any of the other funds in the Delaware
Investments funds which offer such classes (except shares of any fund in the
Delaware Investments family which do not carry a front-end sales charge, CDSC or
Limited CDSC, other than shares of Delaware Group Premium Fund, Inc.
beneficially owned in connection with the ownership of variable insurance
products, unless they were acquired through an exchange from a Delaware
Investments fund which carried a front-end sales charge, CDSC or Limited CDSC).
If, for example, any such purchaser has previously purchased and still holds
Class A Shares and/or shares of any other of the classes described in the
previous sentence with a value of $40,000 and subsequently purchases $60,000 at
offering price of additional shares of Class A Shares, the charge applicable to
the $60,000 purchase would currently be 3.75%. For the purpose of this
calculation, the shares presently held shall be valued at the public offering
price that would have been in effect were the shares purchased simultaneously
with the current purchase. Investors should refer to the table of sales charges
for Class A Shares
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to determine the applicability of the Right of Accumulation to their particular
circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of a Fund (and of the Institutional Classes
holding shares which were acquired through an exchange from one of the other
mutual funds in the Delaware Investments family offered with a front-end sales
charge) who redeem such shares have one year from the date of redemption to
reinvest all or part of their redemption proceeds in Class A Shares of that Fund
or in Class A Shares of any of the other funds in the Delaware Investments
family, subject to applicable eligibility and minimum purchase requirements, in
states where shares of such other funds may be sold, at net asset value without
the payment of a front-end sales charge. This privilege does not extend to Class
A Shares where the redemption of the shares triggered the payment of a Limited
CDSC. Persons investing redemption proceeds from direct investments in mutual
funds in the Delaware Investments family offered without a front-end sales
charge will be required to pay the applicable sales charge when purchasing Class
A Shares. The reinvestment privilege does not extend to a redemption of either
Class B Shares or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Funds' shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Fund Classes' Prospectus) in connection with the
features described above.
Group Investment Plans
Group Investment Plans that are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales charges
for investments in Class A Shares, based on total plan assets. If a company has
more than one plan investing in the Delaware Investments family of funds, then
the total amount invested in all plans would be used in determining the
applicable front-end sales charge reduction upon each purchase, both initial and
subsequent, upon notification to the Fund in which the investment is being made
at the time of each such purchase. Employees participating in such Group
Investment Plans may also combine the investments made in their plan account
when determining the applicable front-end sales charge on purchases to
non-retirement investment accounts of Delaware Investments if they so notify the
Fund in connection with each purchase. For other retirement plans and special
services, see Retirement Plans for the Fund Classes under Investment Plans.
The Institutional Classes
The Institutional Class of each Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager, or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment
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Advisers, an affiliate of the Manager, or its affiliates and their corporate
sponsors, as well as subsidiaries and related employee benefit plans and
rollover individual retirement accounts from such institutional advisory
accounts; (d) a bank, trust company and similar financial institution investing
for its own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing shares
of the Class, except where the investment is part of a program that requires
payment to the financial institution of a Rule 12b-1 fee; and (e) registered
investment advisers investing on behalf of clients that consist solely of
institutions and high net-worth individuals having at least $1,000,000 entrusted
to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services.
Shares of the Institutional Classes are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Classes in which an investor has an account (based on the net asset value
in effect on the reinvestment date) and will be credited to the shareholder's
account on that date. A confirmation of each distribution from realized
securities profits, if any, will be mailed to shareholders in the first quarter
of the fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Fund and class in which shares are being purchased. Such purchases, which must
meet the minimum subsequent purchase requirements set forth in the Prospectuses
and this Part B, are made, for Class A Shares at the public offering price, and
for Class B Shares, Class C Shares and Institutional Class shares at the net
asset value, at the end of the day of receipt. A reinvestment plan may be
terminated at any time. This plan does not assure a profit nor protect against
depreciation in a declining market.
Reinvestment of Dividends in Other Funds in the Delaware Investments Family
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest dividends and/or distributions in
any of the mutual funds in the Delaware Investments family, including the Funds,
in states where their shares may be sold. Such investments will be at net asset
value at the close of business on the reinvestment date without any front-end
sales charge or service fee. The shareholder must notify the Transfer Agent in
writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses. See
also Additional Methods of Adding to Your Investment - Dividend Reinvestment
Plan under How to Buy Shares in the Prospectus for the Fund Classes.
Subject to the following limitations, dividends and/or distributions
from other funds in the Delaware Investments family may be invested in shares of
the Funds, provided an account has been established.
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Dividends from Class A Shares may not be directed to Class B Shares or Class C
Shares. Dividends from Class B Shares may only be directed to other Class B
Shares and dividends from Class C Shares may only be directed to other Class C
Shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan -- Investors may arrange for a Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
Automatic Investing Plan -- Shareholders of Class A, Class B and Class
C Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such Plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
a Fund may liquidate sufficient shares from a shareholder's account to reimburse
the government or the private source. In the event there are insufficient shares
in the shareholder's account, the shareholder is expected to reimburse the Fund.
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Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. A Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact Income Funds, Inc. for proper
instructions.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in the Delaware
Investments family through the Wealth Builder Option. See Wealth Builder Option
and Redemption and Exchange in the Prospectus for the Fund Classes.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in the
Fund Classes' Prospectuses. The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the next business day) at
the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month if
the value of the shareholder's account is less than the amount specified for
investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation in Wealth Builder at
any time by written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Classes.
Asset Planner
To invest in the funds in the Delaware Investments family using the
Asset Planner asset allocation service, you should complete a Asset Planner
Account Registration Form, which is available only from a financial adviser or
investment dealer. Effective September 1, 1997, the Asset Planner Service is
only available to financial advisers or investment dealers who have previously
used this service. The Asset Planner service offers a choice of four predesigned
asset allocation strategies (each with a different risk/reward profile) in
predetermined percentages in funds in the Delaware Investments family. With the
help of a financial adviser, you may also design a customized asset allocation
strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the
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circumstances described under Investing by Exchange in the Prospectus. Also see
Buying Class A Shares at Net Asset Value under Classes of Shares in the
Prospectus. The minimum initial investment per Strategy is $2,000; subsequent
investments must be at least $100. Individual fund minimums do not apply to
investments made using the Asset Planner service. Class A, Class B and Class C
Shares are available through the Asset Planner service. Generally, only shares
within the same class may be used within the same Strategy. However, Class A
Shares of the Fund and of other funds in the Delaware Investments family may be
used in the same Strategy with consultant class shares that are offered by
certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number.
Investors will receive a customized quarterly Strategy Report
summarizing all Asset Planner investment performance and account activity during
the prior period. Confirmation statements will be sent following all
transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Retirement Plans for the Fund Classes
An investment in a Fund may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) deferred compensation plan, Individual Retirement Account
("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans the Delaware Investments offers, Class B
Shares are available for investment only by Individual Retirement Accounts,
SIMPLE IRAs, Roth IRAs, Education IRAs, Simplified Employee Pension Plans,
Salary Reduction Simplified Employee Pension Plans and 403(b) and 457 Deferred
Compensation Plans. The CDSC may be waived on certain redemptions of Class B
Shares and Class C Shares. See Waiver of Contingent Deferred Sales Charge under
Redemption and Exchange in the Prospectus for Class B Shares and Class C Shares
for a list of the instances in which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25 regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such plans.
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Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase Institutional Class Shares. For
additional information on any of the Plans and Delaware's retirement services,
call the Shareholder Service Center telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year; however, participation
may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
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Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(i) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(ii) Substantially equal installment payments for a period certain of
10 or more years;
(iii) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(iv) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(v) A distribution of after-tax contributions which is not includable
in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. The $2,000
annual limit is reduced by any contributions to a deductible or nondeductible
IRA for the same year. The maximum contribution that can be made to a Roth IRA
is phased out for single filers with AGI between $95,000 and $110,000, and for
couples filing jointly with AGI between $150,000 and $160,000. Qualified
distributions from a Roth IRA would be exempt from federal taxes. Qualified
distributions are distributions (1) made after the five-taxable year period
beginning with the first taxable year for which a contribution was made to a
Roth IRA and (2) that are (a) made on or after the date on which the individual
attains age 59 1/2, (b) made to a beneficiary on or after the death of the
individual, (c) attributed to the individual being disabled, or (d) for a
qualified special purpose (e.g., first time homebuyer expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done
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prior to January 1, 1999, then the income from the conversion can be included in
income ratably over a four-year period beginning with the year of conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includible in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
educations expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of a Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will
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be subject to a 10% excise tax on the amount prematurely distributed, in
addition to the income tax resulting from the distribution. For information
concerning the applicability of a CDSC upon redemption of Class B Shares and
Class C Shares, see Contingent Deferred Sales Charge - Class B Shares and Class
C Shares under Classes of Shares in the Prospectus for Class B Shares and Class
C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware Investments family. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge applicable
to Class A Shares as set forth in the table the Prospectus for the Fund Classes.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectus for
the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may
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invest in shares of the Fund. Although investors may use their own plan, there
is available a Delaware Investments 457 Deferred Compensation Plan. Interested
investors should contact the Distributor or their investment dealers to obtain
further information. Purchases under the Plan may be combined for purposes of
computing the reduced front-end sales charge applicable to Class A Shares as set
forth in the table the Prospectus for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is not required.
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DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund, its agent or certain other authorized persons.
See Distribution and Service under Investment Management Agreements. Orders for
purchases of Class B Shares, Class C Shares and Institutional Class shares are
effected at the net asset value per share next calculated by the Fund in which
shares are being purchased after receipt of the order by the Fund, its agent or
designee. Selling dealers have the responsibility of transmitting orders
promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable front-end sales charges. Offering price and net
asset value are computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open. The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except for the days when the following holidays are
observed: New Year's Day, Presidents' Day, Martin Luther King, Jr.'s Birthday,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. When the New York Stock Exchange is closed, the Funds will generally
be closed, pricing calculations will not be made and purchase and redemption
orders will not be processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in each
Fund's financial statements which are incorporated by reference into this Part
B.
Each Fund's net asset value per share is computed by adding the value
of all the securities and other assets in the portfolio, deducting any
liabilities and dividing by the number of shares outstanding. Expenses and fees
are accrued daily. In determining a Fund's total net assets, portfolio
securities listed or traded on a national securities exchange, except for bonds,
are valued at the last sale price on the exchange upon which such securities are
primarily traded. Securities not traded on a particular day, over-the-counter
securities and government and agency securities are valued at the mean value
between bid and asked prices. Money market instruments having a maturity of less
than 60 days are valued at amortized cost. Debt securities (other than
short-term obligations) are valued on the basis of valuations provided by a
pricing service when such prices are believed to reflect the fair value of such
securities. Foreign currencies and the prices of foreign securities denominated
in foreign currencies are translated to U.S. Dollars based on rates in effect as
of 12 p.m., Eastern time. Use of a pricing service has been approved by the
Board of Directors. Prices provided by a pricing service take into account
appropriate factors such as institutional trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. If no quotations are available, all other
securities and assets are valued at fair value as determined in good faith and
in a method approved by the Board of Directors.
Each Class of a Fund will bear, pro-rata, all of the common expenses of
that Fund. The net asset values of all outstanding shares of each Class of a
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in that Fund represented by the value of shares
of that Class. All income earned and expenses incurred by a Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except
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that Institutional Classes will not incur any of the expenses under Income
Funds, Inc.'s 12b-1 Plans and Class A, Class B and Class C Shares alone will
bear the 12b-1 Plan expenses payable under their respective Plans. Due to the
specific distribution expenses and other costs that may be allocable to each
Class of a Fund, the dividends paid to each Class of the Fund may vary. The net
asset value per share of each Class of a Fund is expected to be equivalent.
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REDEMPTION AND REPURCHASE
Any shareholder may require a Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares and Institutional Class shares only if a shareholder specifically
requests them. Certificates are not issued for Class B Shares or Class C Shares.
If stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the request must be signed by all owners
of the shares or the investment dealer of record, but a signature guarantee is
not required. When the redemption is for more than $50,000, or if payment is
made to someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. Each signature guarantee
must be supplied by an eligible guarantor institution. See Redemption and
Exchange in the Prospectuses. Each Fund reserves the right to reject a signature
guarantee supplied by an eligible institution based on its creditworthiness. The
Funds may request further documentation from corporations, retirement plans,
executors, administrators, trustees or guardians.
In addition to redemption of Fund shares, the Distributor, acting as
agent of the Funds, offers to repurchase Fund shares from broker/dealers acting
on behalf of shareholders. The redemption or repurchase price, which may be more
or less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by the respective Fund,
its agent or certain other authorized persons (see Distribution and Service
under Investment Management Agreements), subject to any applicable CDSC or
Limited CDSC. This is computed and effective at the time the offering price and
net asset value are determined. See Determining Offering Price and Net Asset
Value. The Funds and the Distributor end their business days at 5 p.m., Eastern
time. This offer is discretionary and may be completely withdrawn without
further notice by the Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectuses for the Fund Classes. Class B Shares
are subject to a CDSC of: (i) 4% if shares are redeemed within two years of
purchase; (ii) 3% if shares are redeemed during the third or fourth year
following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Classes of Shares in the
Prospectuses for the Fund Classes. Except for the applicable CDSC or Limited
CDSC and, with respect to the expedited payment by wire described below for
which, in the case of the Fund Classes, there is currently a $7.50 bank wiring
cost, neither the Funds nor the Funds' Distributor charges a fee for redemptions
or repurchases, but such fees could be charged at any time in the future.
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Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.
Each Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. A Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the check has cleared. This potential delay can be
avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund involved will automatically redeem from the shareholder's account the
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a Fund fairly to value its assets, or in
the event that the SEC has provided for such suspension for the protection of
shareholders, a Fund may postpone payment or suspend the right of redemption or
repurchase. In such case, the shareholder may withdraw the request for
redemption or leave it standing as a request for redemption at the net asset
value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Income
Funds, Inc. has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940 pursuant to which each Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the net asset value of such
Fund during any 90-day period for any one shareholder.
The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Small Accounts
Before a Fund involuntarily redeems shares from an account that, under
the circumstances listed in the relevant Prospectus, has remained below the
minimum amounts required by the Fund's Prospectuses and sends the proceeds to
the shareholder, the shareholder will be notified in writing that the value of
the shares in the account is less than the minimum required and will be allowed
60 days from the date of notice to make an additional investment to meet the
required minimum. See The Conditions of Your Purchase under How to Buy Shares in
the Prospectuses. Any redemption in an inactive account established with a
minimum investment may trigger mandatory redemption. No CDSC or Limited CDSC
will apply to the redemptions described in this paragraph.
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* * *
Each Fund has made available certain redemption privileges, as
described below. The Funds reserve the right to suspend or terminate these
expedited payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of shares of $50,000 or less for which certificates
have not been issued may call the Shareholder Service Center at 800-523-1918 or,
in the case of shareholders of the Institutional Classes, their Client Services
Representative at 800-828-5052 prior to the time the offering price and net
asset value are determined, as noted above, and have the proceeds mailed to them
at the address of record. Checks payable to the shareholder(s) of record will
normally be mailed the next business day, but no later than seven days, after
the receipt of the redemption request. This option is only available to
individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the relevant Fund before the request is received.
Payment will be made by wire or check to the bank account designated on the
authorization form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank account
designated on the authorization form. Redemption proceeds will normally be wired
on the next business day following receipt of the redemption request. There is a
$7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A. which will
be deducted from the withdrawal proceeds each time the shareholder requests a
redemption from Class A Shares, Class B Shares and Class C Shares. If the
proceeds are wired to the shareholder's account at a bank which is not a member
of the Federal Reserve System, there could be a delay in the crediting of the
funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account designated on
the authorization form. Redemption proceeds will normally be mailed the next
business day, but no later than seven days, from the date of the telephone
request. This procedure will take longer than the Payment by Wire option (1
above) because of the extra time necessary for the mailing and clearing of the
check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the
relevant Fund and a signature guarantee may be required. Each signature
guarantee must be supplied by an eligible guarantor institution. The Funds
reserve the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form.
If expedited payment under these procedures could adversely affect a
Fund, the Fund may take up to seven days to pay the shareholder.
Neither the Funds nor the Funds' Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable
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<PAGE>
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
Systematic Withdrawal Plans
Shareholders of Class A, Class B and Class C Shares who own or purchase
$5,000 or more of shares at the offering price, or net asset value, as
applicable, for which certificates have not been issued may establish a
Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or quarterly
withdrawals of $75 or more, although the Funds do not recommend any specific
amount of withdrawal. This $5,000 minimum does not apply for a Fund's prototype
retirement plans. Shares purchased with the initial investment and through
reinvestment of cash dividends and realized securities profits distributions
will be credited to the shareholder's account and sufficient full and fractional
shares will be redeemed at the net asset value calculated on the third business
day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital and the share balance
may, in time, be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in funds in the Delaware Investments family
which do not carry a sales charge. Redemptions of Class A Shares pursuant to a
Systematic Withdrawal Plan may be subject to a Limited CDSC if the purchase was
made at net asset value and a dealer's commission has been paid on that
purchase. Redemptions of Class B Shares or Class C Shares pursuant to a
Systematic Withdrawal Plan may be subject to a CDSC, unless the annual amount
selected to be withdrawn is less than 12% of the account balance on the date
that the Systematic Withdrawal Plan was established. See Waiver of Contingent
Deferred Sales Charge - Class B and Class C Shares and Waiver of Limited
Contingent Deferred Sales Charge - Class A Shares under Redemption and Exchange
in the Prospectus for the Fund Classes. Shareholders should consult their
financial advisers to determine whether a Systematic Withdrawal Plan would be
suitable for them.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible
-42-
<PAGE>
guarantor institution. The Funds reserve the right to reject a signature
guarantee supplied by an eligible institution based on its creditworthiness.
This plan may be terminated by the shareholder or the Transfer Agent at any time
by giving written notice.
The Systematic Withdrawal Plan is not available for the Institutional
Classes.
-43-
<PAGE>
DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
Each Fund declare a dividend to shareholders of each Class of the
respective Fund's shares from net investment income on a daily basis. Dividends
are declared each day the respective Fund is open and paid monthly. Net
investment income earned on days when the respective Fund is not open will be
declared as a dividend on the next business day. Purchases of shares of the
respective Fund by wire begin earning dividends when converted into Federal
Funds and are available for investment, normally the next business day after
receipt. However, if the respective Fund is given prior notice of Federal Funds
wire and an acceptable written guarantee of timely receipt from an investor
satisfying the Fund's credit policies, the purchase will start earning dividends
on the date the wire is received. Investors desiring to guarantee wire payments
must have an acceptable financial condition and credit history in the sole
discretion of the respective Fund. Income Funds, Inc. reserves the right to
terminate this option at any time. Purchases by check earn dividends upon
conversion to Federal Funds, normally one business day after receipt.
Each Class of shares of a Fund will share proportionately in the
investment income and expenses of that Fund, except that Class A Shares, Class B
Shares and Class C Shares alone will incur distribution fees under their
respective 12b-1 Plans.
Dividends are automatically reinvested in additional shares of the same
Class of the respective Fund at net asset value, unless, in the case of
shareholders of the Fund Classes, an election to receive dividends in cash has
been made. Payment by check of cash dividends will ordinarily be mailed within
three business days after the payable date. Dividend payments of $1.00 or less
will be automatically reinvested, notwithstanding a shareholder's election to
receive dividends in cash. If such a shareholder's dividends increase to greater
than $1.00, the shareholder would have to file a new election in order to begin
receiving dividends in cash again. If a shareholder redeems an entire account,
all dividends accrued to the time of the withdrawal will be paid by separate
check at the end of that particular monthly dividend period, consistent with the
payment and mailing schedule described above. Any check in payment of dividends
or other distributions which cannot be delivered by the United States Post
Office or which remains uncashed for a period of more than one year may be
reinvested in the shareholder's account at the then-current net asset value and
the dividend option may be changed from cash to reinvest. A Fund may deduct from
a shareholder's account the costs of the Fund's effort to locate a shareholder
if a shareholder's mail is returned by the United States Post Office or the Fund
is otherwise unable to locate the shareholder or verify the shareholder's
mailing address. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for their location services.
Any distributions from net realized securities profits will be made
twice a year. The first payment would be made during the first quarter of the
next fiscal year. The second payment would be made near the end of the calendar
year to comply with certain requirements of the Code. Such distributions will be
reinvested in shares, unless the shareholders of the Fund Classes elect to
receive them in cash. The Funds will mail a quarterly statement showing the
dividends paid and all the transactions made during the period.
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<PAGE>
TAXES
It is each Fund's policy to pay out substantially all net investment
income and net realized gains to relieve each Fund of federal income tax
liability on that portion of its income paid to shareholders under Subchapter M
of the Code. Each Fund intends to meet these requirements when it commences
operations. The Funds also intend to meet the calendar year distribution
requirements imposed by the Code to avoid the imposition of a 4% excise tax.
The Funds have no fixed policy with regard to distributions of realized
securities profits when such realized securities profits may be offset by
capital losses carried forward. Presently, however, the Funds intend to offset
realized securities profits to the extent of the capital losses carried forward.
The capital loss carryforward expires as follows: 1998--$10,862,000,
1999--$89,261,000, 2002--$3,628,000 and 2003-- $87,594,000.
Distributions of net investment income and short-term realized
securities profits are taxable as ordinary income to shareholders. Since the
major portion of each Fund's investment income is derived from interest rather
than dividends, no portion of such distributions will be eligible for the
dividends-received deduction available to corporations. Distributions of
long-term capital gains, if any, are taxable as long-term capital gains, for
federal income tax purposes, regardless of the length of time an investor has
held such shares, and these gains are currently taxed at long-term capital gain
rates. The tax status of dividends and distributions paid to shareholders will
not be affected by whether they are paid in cash or in additional shares.
Net long-term gain from the sale of securities when realized and
distributed (actually or constructively) is taxable as capital gain. If the net
asset value of shares were reduced below a shareholder's cost by distribution of
gain realized on sale of securities, such distribution would be a return of
investment though taxable as stated above.
Under the Taxpayer Relief act of 1997 (the "1997 Act"), a Fund is
required to track its sales of portfolio securities and to report its capital
gain distributions to you as follows:
"Mid-term capital gains" or "28 percent rate gain": securities sold
by a Fund after July 28, 1997 that were held more than one year but
not more than 18 months. These gains will be taxable to individual
investors at a maximum rate of 28%.
"1997 Act long-term capital gains" or "20 percent rate gain":
securities sold by a Fund between May 7, 1997 and July 28, 1997 that
were held for more than 12 months, and securities sold by the Fund
after July 28, 1997 that were held for more than 18 months. These
gains will be taxable to individual investors at a maximum rate of
20% for investors in the 28% or higher federal income tax
brackets, and at a maximum rate of 10% for investors in the 15%
federal income tax bracket.
"Qualified 5-year gains": For individuals in the 15% bracket,
qualified 5-year gains are net gains on securities held for
more than 5 years which are sold after December 31, 2000. For
individuals who are subject to tax at higher rate brackets,
qualified 5-year gains are net gains on securities which are
purchased after December 31, 2000 and are held for more than 5
years. Taxpayers subject to tax at a higher rate brackets may
also make an election for shares held on January 1, 2001 to
recognize gain on their shares (any loss is disallowed) in
order to qualify such shares as qualified 5-year property as
though purchased after December 31, 2000. These gains will be
taxable to individual investors at a maximum rate of 18% for
investors in the 28% or higher federal income tax brackets, and
at a maximum rate of 8% for investors in the 15% federal income
tax bracket when sold after the 5 year holding period.
Shareholders will be notified annually by Income Funds, Inc. as to the
federal income tax status of dividends and distributions paid by a Fund.
-45-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENTS
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Funds, subject to the
supervision and direction of Income Funds, Inc.'s Board of Directors.
The Manager and its predecessors have been managing the funds in
Delaware Investments since 1938. On July 31, 1998, the Manager and its
affiliates in Delaware Investments, were managing in the aggregate more than $00
billion in assets in various institutional or separately managed (approximately
$00,000,000,000) and investment company (approximately $00,000,000,000)
accounts.
Each Fund's Investment Management Agreement is dated , 1998 and was
approved by the initial shareholder on , 1998. Each Agreement has an initial
term of two years and may be renewed each year only so long as such renewal and
continuance are specifically approved at least annually by the Board of
Directors or by vote of a majority of the outstanding voting securities of the
Fund to which the Agreement relates, and only if the terms and the renewal
thereof have been approved by the vote of a majority of the directors of Income
Funds, Inc. who are not parties thereto or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
Each Agreement is terminable without penalty on 60 days' notice by the directors
of Income Funds, Inc. or by the Manager. Each Agreement will terminate
automatically in the event of its assignment.
For these services, the Manager is paid an annual fee equal to for
Corporate Bond Fund: 0.50% on the first $500 million of average daily net
assets; 0.475% on the next $500 million; 0.45% on the next $1.5 billion; and
0.425% on the average daily net assets in excess of $2.5 billion and for
Extended Duration Bond Fund: 0.55% on the first $500 million of average daily
net assets; 0.50% on the next $500 million; 0.45% on the next $1.5 billion; and
0.425% on the average daily net assets in excess of $2.5 billion The directors
of Income Funds, Inc. annually review fees paid to the Manager. The Manager pays
the salaries of all directors, officers and employees who are affiliated with
both the Manager and Income Funds, Inc.
The Manager has elected voluntarily to waive that portion, if any, of
the annual management fees payable by each Fund and to pay certain expenses of
each Fund to the extent necessary to ensure that the total operating expenses of
each Class do not exceed 0.55% (exclusive of taxes, interest, brokerage
commissions, extraordinary expenses and 12b-1 expenses) during the commencement
of the public offering of each Fund through March 31, 1999.
Except for those expenses borne by the Manager under the Investment
Management Agreements and the Distributor under the Distribution Agreements, the
Funds are responsible for all of their own expenses. Among others, these include
a Fund's proportionate share of rent and certain other administrative expenses;
the investment management fees; transfer and dividend disbursing agent fees and
costs; custodian expenses; federal and state securities registration fees; proxy
costs; and the costs of preparing prospectuses and reports sent to shareholders.
The ratios for Class A Shares, Class B Shares and Class C Shares reflect the
impact of their respective 12b-1 Plans.
Distribution and Service
The Distributor, Delaware Distributors, L.P., located at 1818 Market
Street, Philadelphia, PA 19103, serves as the national distributor of each
Fund's shares under separate Distribution Agreements dated as of September ,
1998. The Distributor is an affiliate of the Manager and bears all of the costs
of promotion and
-46-
<PAGE>
distribution, except for payments by each Fund on behalf of its Class A Shares,
Class B Shares and Class C Shares under the 12b-1 Plan for each such class.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Funds' shareholder servicing, dividend disbursing and transfer agent
pursuant to an Amended and Restated Shareholders Services Agreement dated as of
September , 1998. The Transfer Agent also provides accounting services to the
Funds pursuant to the terms of a separate Fund Accounting Agreement. The
Transfer Agent is also an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc.
The Funds have authorized one or more brokers to accept on their behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Funds. For purposes of pricing, the Funds
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
-47-
<PAGE>
OFFICERS AND DIRECTORS
The business and affairs of Income Funds, Inc. are managed under the
direction of its Board of Directors.
Certain officers and directors of Income Funds, Inc. hold identical
positions in each of the other funds in the Delaware Investments family. On May
31, 1998, Income Funds, Inc.'s officers and directors owned 0% of the
outstanding shares of Class A Shares, Class B Shares, Class C Shares and
Institutional Class shares of Delchester Fund, Strategic Income Fund, and
High-Yield Opportunities Fund.
As of May 31, 1998, management believes the following accounts held of
record 5% or more of the outstanding shares of a Class of shares of Delchester
Fund. Management does not have knowledge of beneficial owners.
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ---------- --------------------------- ------------ ----------
<S> <C> <C> <C>
Delchester Fund Merrill Lynch, Pierce, Fenner & Smith
Class B Mutual Fund Operations
Attention Fund Administration
4800 Deer Lake Dr East 3rd Floor
Jacksonville, FL 32246
Delchester Fund Merrill Lynch, Pierce, Fenner & Smith
C Class Mutual Fund Operations
Attention Fund Administration
4800 Deer Lake Dr. East, 3rd Floor
Jacksonville, FL 32246
Delchester Fund Nationwide Life Insurance Co.
Institutional Class c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218
Bear Stearns
FBO Raymond G. Perelman
Charitable Remainder Unitrust
One Metrotech Center North
Brooklyn, NY 11201
</TABLE>
-48-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Delchester Fund Delaware Management Company
Institutional Class Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market Street
Philadelphia, PA 19103
Ogden Financial Services Inc.
Attention George Warren
3411 Silverside Road
103 Springer Building
Wilmington, DE 19810
</TABLE>
As of May 31, 1998, management believes the following accounts held of
record 5% or more of the outstanding shares of a Class of shares of Strategic
Income Fund. Management does not have knowledge of beneficial owners.
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Strategic Income Merrill Lynch, Inc.
Fund B Class Mutual Fund Operations
P.O. Box 41621
Jacksonville, FL 32203
Strategic Income Merrill Lynch, Inc.
Fund C Class Mutual Funds Operations
P.O. Box 41621
Jacksonville, FL 32203
Advest, Inc.
90 State House Square
Hartford, CT 06103
Strategic Income Fund Chicago Trust Company
Institutional Class FBO Lincoln National Corporation
Employees Retirement Trust
1000 N. Water Street TR 14
Milwaukee, WI 53202
</TABLE>
-49-
<PAGE>
As of May 31, 1998, management believes the following accounts held of
record 5% or more of the outstanding shares of a Class of shares of High-Yield
Opportunities Fund. Management does not have knowledge of beneficial owners.
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
High-Yield Opportunities Wayne A. Stork
Fund A Class 5727 Twin Silo Road
Doylestown, PA 18901
DMTC Custodian for
Richard G. Unruh
164 Rose Lane
Haverford, PA 19041
High-Yield Opportunities Chicago Trust Company
Fund Institutional Class FBO Lincoln National Corp
Employee Retirement Plan
c/o Marshall & Ilsley Trust Company
P.O. Box 2977
Milwaukee, WI 53201
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc. and Delaware
Investment & Retirement Services, Inc. are direct or indirect, wholly owned
subsidiaries of Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a
merger between DMH and a wholly owned subsidiary of Lincoln National was
completed. DMH and the Manager are indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
-50-
<PAGE>
*Wayne A. Stork (60)
Chairman and Director and/or Trustee of Income Funds, Inc., 33 other
investment companies in the Delaware Investments family and
Delaware Capital Management, Inc.
Chairman, President, Chief Executive Officer and Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director/Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust
Chairman, President, Chief Executive Officer and Chief Investment
Officer of Delaware Management Company (a series of Delaware
Management Business Trust)
Chairman, Chief Executive Officer and Chief Investment Officer of
Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd., Delaware International
Holdings Ltd. and Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delvoy, Inc.
Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Delaware Investment
& Retirement Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.
*Jeffrey J. Nick (45)
President, Chief Executive Officer and Director of Income Funds, Inc.
and 33 other investment companies in the Delaware
Investments family
President and Director of Delaware Management Holdings, Inc.
President, Chief Executive Officer and Director of Lincoln National
Investment Companies, Inc.
President of Lincoln Funds Corporation
Director of Delaware International Advisers Ltd.
From 1992 to 1996, Mr. Nick was Managing Director of Lincoln
National UK plc and from 1989 to 1992, he was Senior Vice
President responsible for corporate planning and development
for Lincoln National Corporation.
Richard G. Unruh, Jr. (58)
Executive Vice President of Income Funds, Inc., 33 other investment
companies in the Delaware Investments family, Delaware
Management Holdings, Inc., Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware
Capital Management, Inc.
President of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Executive Vice President and Director/Trustee of Delaware Management
Company, Inc. and Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various
executive capacities at different times within the Delaware
organization.
- ----------------------
*Director affiliated with the Funds' investment manager and considered an
"interested person" as defined in the 1940 Act.
-51-
<PAGE>
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed Income of
Income Funds, Inc., 33 other investment companies in the
Delaware Investments family, Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and Delaware
Management Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, Inc. and
Delaware Management Business Trust
Director of Founders CBO Corporation
Director of HYPPCO Finance Company Ltd.
Before returning to Delaware Investments in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York, NY from 1985 to
1992. Prior to that, Mr. Suckow was a fixed-income portfolio
manager for Delaware Investments.
David K. Downes (58)
Executive Vice President, Chief Operating Officer, Chief Financial
Officer of Income Funds, Inc., 33 other investment companies
in the Delaware Investments family, Delaware Management
Holdings, Inc., Founders CBO Corporation, Delaware Capital
Management, Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and
Delaware Distributors, L.P.
Executive Vice President, Chief Financial Officer, Chief Administrative
Officer and Trustee of Delaware Management Business Trust
Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware Management Company, Inc.,
DMH Corp., Delaware Distributors, Inc., Founders
Holdings, Inc. and Delvoy, Inc.
President, Chief Executive Officer, Chief Financial Officer and
Director of Delaware Service Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and
Director of Delaware International Holdings Ltd.
Chairman, Chief Executive Officer and Director of Delaware Management
Trust Company and Delaware Investment & Retirement Services,
Inc.
Director of Delaware International Advisers Ltd.
Vice President of Lincoln Funds Corporation
During the past five years, Mr. Downes has served in various executive
capacities at different times within the Delaware organization.
Walter P. Babich (70)
Director and/or Trustee of Income Funds, Inc. and 33 other investment
companies in the Delaware Investments family.
460 North Gulph Road, King of Prussia, PA 19406 Board Chairman, Citadel
Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
-52-
<PAGE>
Anthony D. Knerr (59)
Director and/or Trustee of Income Funds, Inc. and 33 other investment
companies in the Delaware Investments family.
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance
and Treasurer of Columbia University, New York. From 1987 to
1989, he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.
Ann R. Leven (57)
Director and/or Trustee of Income Funds, Inc. and 33 other investment
companies in the Delaware Investments family.
785 Park Avenue, New York, NY 10021
Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer
of the Smithsonian Institution, Washington, DC, and from 1975
to 1992, she was Adjunct Professor of Columbia Business
School.
W. Thacher Longstreth (77)
Director and/or Trustee of Income Funds, Inc. and 33 other investment
companies in the Delaware Investments family.
City Hall, Philadelphia, PA 19107
Philadelphia City Councilman.
Thomas F. Madison (62)
Director and/or Trustee of Income Funds, Inc. and 33 other investment
companies in the Delaware Investments family.
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of the Board of Communications
Holdings, Inc. since 1996.
From February to September 1994, Mr. Madison served as Vice
Chairman--Office of the CEO of The Minnesota Mutual Life
Insurance Company and from 1988 to 1993, he was President of
U.S. WEST Communications--Markets.
Charles E. Peck (72)
Director and/or Trustee of Income Funds, Inc. and 33 other investment
companies in the Delaware Investments family.
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive
Officer of The Ryland Group, Inc., Columbia, MD.
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<PAGE>
George M. Chamberlain, Jr. (51)
Senior Vice President, Secretary and General Counsel of Income Funds,
Inc., 33 other investment companies in the Delaware
Investments family, Delaware Distributors, L.P., Delaware
Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware Management Holdings,
Inc.
Senior Vice President, Secretary, General Counsel and
Director/Trustee of DMH Corp., Delaware Management Company,
Inc., Delaware Distributors, Inc., Delaware Service Company,
Inc., Founders Holdings, Inc., Delaware Investment &
Retirement Services, Inc., Delaware Capital Management, Inc.,
Delvoy, Inc. and Delaware Management Business Trust
Executive Vice President, Secretary, General Counsel and Director of
Delaware Management Trust Company
Senior Vice President and Director of Delaware International
Holdings Ltd.
Director of Delaware International Advisers Ltd.
Secretary of Lincoln Funds Corporation
Attorney.
During the past five years, Mr. Chamberlain has served in various
executive capacities at different times within the Delaware
organization.
Joseph H. Hastings (48)
Senior Vice President/Corporate Controller of Income Funds, Inc., 33
other investment companies in the Delaware Investments family
and Founders Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Capital Management, Inc., Delaware
International Holdings Ltd., Delvoy, Inc. and Delaware
Management Business Trust
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of
Delaware Management Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
Treasurer of Lincoln Funds Corporation
During the past five years, Mr. Hastings has served in various
executive capacities at different times within the Delaware
organization.
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<PAGE>
Michael P. Bishof (35)
Senior Vice President/Treasurer of Income Funds, Inc., 33 other
investment companies in the Delaware Investments family and
Founders Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management
Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust) and Delaware Service
Company, Inc.
Senior Vice President and Treasurer/Manager of Investment Accounting
of Delaware Distributors, L.P. and Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Senior Vice President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a
Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for
Equitable Capital Management Corporation, New York, NY from
1987 to 1993.
Gary A. Reed (43)
Vice President/Senior Portfolio Manager of the Fund, of nine other
investment companies in the Delaware Investments family, of
Delaware Management Company, Inc., Delaware Investment
Advisers (a series of Delaware Management Business Trust),
Delaware Management Company (a series of Delaware Management
Business Trust) and Delaware Capital Management, Inc.
During the past five years, Mr. Reed has served in such
capacities within the Delaware organization.
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<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from the
Fund and the total compensation received from all Delaware Investments funds for
the fiscal year ended July 31, 1997 and an estimate of annual benefits to be
received upon retirement under the Delaware Investments Retirement Plan for
Directors/Trustees as of July 31, 1997. Only the independent directors of Income
Funds, Inc. receive compensation from Income Funds, Inc.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total
Accrued Estimated Compensation
as Part Annual from all
Aggregate of Income Benefits Delaware
Compensation from Funds, Inc. Upon Investments
Name Income Funds, Inc. Expenses Retirement(1) Companies(2)
<S> <C> <C> <C> <C>
W. Thacher Longstreth $4,412 None $38,500 $53,598
Ann R. Leven $4,942 None $38,500 $58,557
Walter P. Babich $4,835 None $38,500 $57,557
Anthony D. Knerr $4,835 None $38,500 $57,557
Charles E. Peck $4,313 None $38,500 $50,412
Thomas F. Madison(3) $1,032 None $38,500 $15,123
John H. Durham (4) N/A None $31,000 N/A
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time
of his or her retirement from the Board, has attained the age of 70 and
served on the Board for at least five continuous years, is entitled to
receive payments from each investment company in the Delaware Investments
family for which he or she serves as a director or trustee for a period
equal to the lesser of the number of years that such person served as a
director or trustee or the remainder of such person's life. The amount of
such payments will be equal, on an annual basis, to the amount of the
annual retainer that is paid to directors/trustees of each investment
company at the time of such person's retirement. If an eligible
director/trustee retired as of July 31, 1997, he or she would be entitled
to annual payments totaling $38,500, in the aggregate, from all of the
investment companies in the Delaware Investments family for which he or
she served as director or trustee, based on the number of investment
companies in the Delaware Investments family as of that date.
(2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,500 for serving as a director
or trustee for all 34 investment companies in Delaware Investments, plus
$3,145 for each Board Meeting attended. John H. Durham currently receives
a total annual retainer fee of $31,000 for serving as a director or
trustee for 19 investment companies in Delaware Investments, plus
$1,757.50 for each Board Meeting attended. Ann R. Leven, Walter P. Babich,
and Anthony D. Knerr serve on the Fund's audit committee; Ms. Leven is the
chairperson. Members of the audit committee currently receive additional
annual compensation of $5,000 from all investment companies, in the
aggregate, with the exception of the chairperson, who receives $6,000.
(3) Thomas F. Madison joined the Board of Directors on April 30, 1997.
(4) John H. Durham joined the Board of Directors of the Income Funds, Inc. and
18 other investment companies in Delaware Investments on April 16, 1998.
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EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Investments family are
set forth in the relevant prospectuses for such classes. The following
supplements that information. Each Fund may modify, terminate or suspend the
exchange privilege upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses. A shareholder requesting an exchange will be sent a current prospectus
and an authorization form for any of the other mutual funds in the Delaware
Investments family. Exchange instructions must be signed by the record owner(s)
exactly as the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between
funds in the Delaware Investments family on behalf of their clients by telephone
or other expedited means. This service may be discontinued or revised at any
time by the Transfer Agent. Such exchange requests may be rejected if it is
determined that a particular request or the total requests at any time could
have an adverse effect on any of the funds. Requests for expedited exchanges may
be submitted with a properly completed exchange authorization form, as described
above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued or
their investment dealers of record may exchange shares by telephone for shares
in other mutual funds in the Delaware Investments family. This service is
automatically provided unless the relevant Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 or, in the case of shareholders of
the Institutional Classes, their Client Services Representative at 800-828-5052,
to effect an exchange. The shareholder's current Fund account number must be
identified, as well as the registration of the account, the share or dollar
amount to be exchanged and the fund into which the exchange is to be made.
Requests received on any day after the time the offering price and net asset
value are determined will be processed the following day. See Determining
Offering Price and Net Asset Value. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
sales charges, eligibility and investment minimums, must be met. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent or, as
relevant, your Client Services Representative.) Certain funds are not available
for retirement plans.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and each Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
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<PAGE>
As described in the Funds' Prospectuses, neither the Funds nor the
Transfer Agent is responsible for any shareholder loss incurred in acting upon
written or telephone instructions for redemption or exchange of Fund shares
which are reasonably believed to be genuine.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), each Fund will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in funds in
the Delaware Investments family from Timing Firms. Each Fund reserves the right
to temporarily or permanently terminate the exchange privilege or reject any
specific purchase order for any person whose transactions seem to follow a
timing pattern who: (i) makes an exchange request out of the Fund within two
weeks of an earlier exchange request out of the Fund, or (ii) makes more than
two exchanges out of the Fund per calendar quarter, or (iii) exchanges shares
equal in value to at least $5 million, or more than 1/4 of 1% of the Fund's net
assets. Accounts under common ownership or control, including accounts
administered so as to redeem or purchase shares based upon certain predetermined
market indicators, will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight funds in the Delaware Investments
family: (1) Decatur Income Fund, (2) Decatur Total Return Fund, (3) Delaware
Fund, (4) Limited-Term Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash
Reserve, (7) Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other funds
in the Delaware Investments family are available for timed exchanges. Assets
redeemed or exchanged out of Timing Accounts in Delaware Investments funds not
listed above may not be reinvested back into that Timing Account. Each Fund
reserves the right to apply these same restrictions to the account(s) of any
person whose transactions seem to follow a timing pattern (as described above).
Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers of
record will be permitted to make exchanges or redemptions.
* * *
Following is a summary of the investment objectives of the other funds in
the Delaware Investments family:
Delaware Fund seeks long-term growth by a balance of capital appreciation,
income and preservation of capital. It uses a dividend-oriented valuation
strategy to select securities issued by established companies that are believed
to demonstrate potential for income and capital growth. Devon Fund seeks current
income and capital appreciation by investing primarily in income-producing
common stocks, with a focus on common stocks the Manager believes have the
potential for above average dividend increases over time.
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<PAGE>
Trend Fund seeks long-term growth by investing in common stocks issued by
emerging growth companies exhibiting strong capital appreciation potential.
Small Cap Value Fund seeks capital appreciation by investing primarily in
common stocks whose market values appear low relative to their underlying value
or future potential.
DelCap Fund seeks long-term capital growth by investing in common stocks
and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Delchester Fund seeks as high a current income as possible by investing
principally in high-yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Strategic Income Fund seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high-yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
U.S. Government Fund seeks high current income by investing primarily in
long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instruments secured by such securities. U.S. Government Money Fund seeks maximum
current income with preservation of principal and maintenance of liquidity by
investing only in short-term securities issued or guaranteed as to principal and
interest by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities, while maintaining a
stable net asset value.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income tax
by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from federal income
tax, by investing in short-term municipal obligations, while maintaining a
stable net asset value.
Tax-Free New Jersey Fund seeks a high level of current interest income
exempt from federal income tax and New Jersey state and local taxes, consistent
with preservation of capital. Tax-Free Ohio Fund seeks a high level of current
interest income exempt from federal income tax and Ohio state and local taxes,
consistent with preservation of capital. Tax-Free Pennsylvania Fund seeks a high
level of current interest income exempt
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<PAGE>
from federal and, to the extent possible, certain Pennsylvania state and local
taxes, consistent with the preservation of capital.
International Equity Fund seeks to achieve long-term growth without undue
risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation. Global Assets Fund seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth. Emerging Markets Fund
seeks long-term capital appreciation by investing primarily in equity securities
of issuers located or operating in emerging countries.
U.S. Growth Fund seeks to maximize capital appreciation by investing in
companies of all sizes which have low dividend yields, strong balance sheets and
high expected earnings growth rates relative to their industry. Overseas Equity
Fund seeks to maximize total return (capital appreciation and income),
principally through investments in an internationally diversified portfolio of
equity securities. New Pacific Fund seeks long-term capital appreciation by
investing primarily in companies which are domiciled in or have their principal
business activities in the Pacific Basin.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds"). Foundation
Funds Income Portfolio seeks a combination of current income and preservation of
capital with capital appreciation by investing in primarily a mix of fixed
income and domestic equity securities, including fixed income and domestic
equity Underlying Funds. Foundation Funds Balanced Portfolio seeks capital
appreciation with current income as a secondary objective by investing primarily
in domestic equity and fixed income securities, including domestic equity and
fixed income Underlying Funds. Foundation Funds Growth Portfolio seeks long term
capital growth by investing primarily in equity securities, including equity
Underlying Funds, and, to a lesser extent, in fixed income securities, including
fixed-income Underlying Funds.
Delaware Group Premium Fund, Inc. offers 16 funds available exclusively as
funding vehicles for certain insurance company separate accounts. Decatur Total
Return Series seeks the highest possible total rate of return by selecting
issues that exhibit the potential for capital appreciation while providing
higher than average dividend income. Delchester Series seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves Series seeks a high
stable level of current income while minimizing fluctuations in principal by
investing in a diversified portfolio of short- and intermediate-term securities.
Cash Reserve Series seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term money
market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Series seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. International
Equity Series seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. Small Cap Value Series seeks
capital appreciation by investing primarily in small-cap common stocks whose
market values appear low relative to their underlying value or future earnings
and growth potential. Emphasis will also be placed on securities of companies
that may be temporarily out of favor or whose value is not yet recognized by the
market. Trend Series seeks long-term capital appreciation by investing primarily
in small-
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cap common stocks and convertible securities of emerging and other
growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry.
Delaware-Voyageur US Government Securities Fund seeks to provide a high
level of current income consistent with the prudent investment risk by investing
in U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Minnesota Insured Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to provide a
high level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Insured Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
Delaware-Voyageur Tax-Free Florida Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. The Fund will seek to select investments that will enable its shares to
be exempt from the Florida intangible personal property tax. Delaware-Voyageur
Tax-Free Kansas Fund seeks to provide a high level of current income exempt from
federal income tax, the Kansas personal income tax and the Kansas Intangible
personal property tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Missouri Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the Missouri personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free New Mexico Fund seeks to provide a high level of current income
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exempt from federal income tax and the New Mexico personal income tax,
consistent with the preservation of capital. Delaware-Voyageur Tax-Free Oregon
Insured Fund seeks to provide a high level of current income exempt from federal
income tax and the Oregon personal income tax, consistent with the preservation
of capital. Delaware-Voyageur Tax-Free Utah Fund seeks to provide a high level
of current income exempt from federal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Washington Insured Fund
seeks to provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Intermediate Fund seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital. The Fund will seek to select investments that will
enable its shares to be exempt from the Florida intangible personal property
tax. The Fund seeks to reduce market risk by maintaining an average weighted
maturity from five to ten years.
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
California Fund seeks to provide a high level of current income exempt from
federal income tax and the California personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Iowa Fund seeks to provide a
high level of current income exempt from federal income tax and the Iowa
personal income tax, consistent with the preservation of capital. Delaware-
Voyageur Tax-Free Idaho Fund seeks to provide a high level of current income
exempt from federal income tax and the Idaho personal income tax, consistent
with the preservation of capital. Delaware-Voyageur Minnesota High Yield
Municipal Bond Fund seeks to provide a high level of current income exempt from
federal income tax and the Minnesota personal income tax primarily through
investment in medium and lower grade municipal obligations. National High Yield
Municipal Fund seeks to provide a high level of income exempt from federal
income tax, primarily through investment in medium and lower grade municipal
obligations. Delaware-Voyageur Tax-Free New York Fund seeks to provide a high
level of current income exempt from federal income tax and the personal income
tax of the state of New York and the city of New York, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Wisconsin Fund seeks to
provide a high level of current income exempt from federal income tax and the
Wisconsin personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities believed to
have the potential for high earnings growth. Although the Fund, in seeking its
objective, may receive current income from dividends and interest, income is
only an incidental consideration in the selection of the Fund's investments.
Growth Stock Fund has an objective of long-term capital appreciation. The Fund
seeks to achieve its objective from equity securities diversified among
individual companies and industries. Tax-Efficient Equity Fund seeks to obtain
for taxable investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-term
after-tax total return through managing its portfolio in a manner that will
defer the realization of accrued capital gains and minimize dividend income.
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Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
North Dakota Fund seeks to provide a high level of current income exempt from
federal income tax and the North Dakota personal income tax, consistent with the
preservation of capital.
For more complete information about any of the funds in the Delaware
Investments family funds, including charges and expenses, you can obtain a
prospectus from the Distributor. Read it carefully before you invest or forward
funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
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GENERAL INFORMATION
The Manager is the investment manager of the Funds. The Manager also
provides investment management services to certain of the other funds in the
Delaware Investments family. While investment decisions of the Funds are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Funds.
The Manager, or its affiliate Delaware International Advisers Ltd., also
manages the investment options for Delaware Medallion (sm) III Variable Annuity.
Medallion is issued by Allmerica Financial Life Insurance and Annuity Company
(First Allmerica Financial Life Insurance Company in New York and Hawaii).
Delaware Medallion offers a variety of investment series ranging from domestic
equity funds, international equity and bond funds and domestic fixed income
funds. Each investment series available through Medallion utilizes an investment
strategy and discipline the same as or similar to one of the mutual funds in the
Delaware Investments family as available outside the annuity. See Delaware Group
Premium Fund, Inc., above.
Access persons and advisory persons of the funds in the Delaware
Investments family, as those terms are defined in SEC Rule 17j-1 under the 1940
Act, who provide services to the Manager, Delaware International Advisers Ltd.
or their affiliates, are permitted to engage in personal securities transactions
subject to the exceptions set forth in Rule 17j-1 and the following general
restrictions and procedures: (1) certain blackout periods apply to personal
securities transactions of those persons; (2) transactions must receive advance
clearance and must be completed on the same day as the clearance is received;
(3) certain persons are prohibited from investing in initial public offerings of
securities and other restrictions apply to investments in private placements of
securities; (4) opening positions may only be closed-out at a profit after a
60-day holding period has elapsed; and (5) the Compliance Officer must be
informed periodically of all securities transactions and duplicate copies of
brokerage confirmations and account statements must be supplied to the
Compliance Officer.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for Income Funds, Inc. and for
the other mutual funds in the Delaware Group. The Transfer Agent is paid a fee
by the Funds for providing these services consisting of an annual per account
charge, in each case, of $11.00 plus, in each case, transaction charges for
particular services according to a schedule. Compensation is fixed each year and
approved by the Board of Directors, including a majority of the disinterested
directors. The Transfer Agent also provides accounting services to the Funds.
Those services include performing all functions related to calculating each
Fund's net asset value and providing all financial reporting services,
regulatory compliance testing and other related accounting services. For its
services, the Transfer Agent is paid a fee based on total assets of all funds in
the Delaware Group for which it provides such accounting services. Such fee is
equal to 0.25% multiplied by the total amount of assets in the complex for which
the Transfer Agent furnishes accounting services, where such aggregate complex
assets are $10 billion or less, and 0.20% of assets if such aggregate complex
assets exceed $10 billion. The fees are charged to each fund, including the
Funds, on an aggregate pro-rata basis. The asset-based fee payable to the
Transfer Agent is subject to a minimum fee calculated by determining the total
number of investment portfolios and associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Income Funds, Inc.'s
advisory relationships with the Manager or their distribution relationships with
the Distributor, the Manager and its affiliates could cause Income Funds, Inc.
to delete the words "Delaware Group" from Income Funds, Inc.'s name.
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The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn, NY
11245 is custodian of each Fund's securities and cash. As custodian for each
Fund, Chase maintains a separate account or accounts for the Funds; receives,
holds and releases portfolio securities on account of the Funds; receives and
disburses money on behalf of the Funds; and collects and receives income and
other payments and distributions on account of the Fund's portfolio securities.
Capitalization
Income Funds, Inc. has a present authorized capitalization of one billion
shares of capital stock with a $1.00 par value per share. Each fund offers four
classes of shares, each representing a proportionate interest in the assets of
that Fund, and each having the same voting and other rights and preferences as
the other classes, except that shares of a fund's Institutional Class may not
vote on matters affecting that fund's Distribution Plans under Rule 12b-1.
Similarly, as a general matter, shareholders of Class A Shares, Class B Shares
and Class C Shares of a fund may vote only on matters affecting the 12b-1 Plan
that relates to the class of shares that they hold. However, Class B Shares of a
fund may vote on any proposal to increase materially the fees to be paid by the
Fund under the Rule 12b-1 Plans relating to its Class A Shares. General expenses
of a fund will be allocated on a pro-rata basis to the classes according to
asset size, except that expenses of the Rule 12b-1 Plans of each Fund's Class A,
Class B and Class C Shares will be allocated solely to those classes. The Board
of Directors of Income Funds, Inc. has allocated the following number of shares
to each fund and class:
Delchester Fund 500 million
Delchester Fund A Class 350 million
Delchester Fund B Class 50 million
Delchester Fund C Class 50 million
Delchester Fund Institutional Class 50 million
Strategic Income Fund 200 million
Strategic Income Fund A Class 100 million
Strategic Income Fund B Class 25 million
Strategic Income Fund C Class 25 million
Strategic Income Fund Institutional Class 50 million
High-Yield Opportunities Fund 200 million
High-Yield Opportunities Fund A Class 100 million
High-Yield Opportunities Fund B Class 25 million
High-Yield Opportunities Fund C Class 25 million
High-Yield Opportunities Fund Institutional Class 50 million
Corporate Bond Fund
Corporate Bond Fund A Class
Corporate Bond Fund B Class
Corporate Bond Fund C Class
Corporate Bond Fund Institutional Class
Extended Duration Bond Fund
Extended Duration Bond Fund A Class
Extended Duration Bond Fund B Class
Extended Duration Bond Fund C Class
Extended Duration Bond Fund Institutional Class
-65-
<PAGE>
All shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable and, except as described above, have
equal voting rights.
Until September 30, 1996, Income Funds, Inc. operated as Delaware Group
Delchester High-Yield Bond Fund, Inc., and offered one series of shares, the
Delchester Fund series. Beginning September 30, 1996, Income Funds, Inc. began
offering Strategic Income Fund series, beginning December 27, 1996 began
offering the High-Yield Opportunities Fund series and beginning September , 1998
began offering Corporate Bond Fund and Extended Duration Bond Fund.
Noncumulative Voting
Income Funds, Inc.'s shares have noncumulative voting rights which means
that the holders of more than 50% of the shares of Income Funds, Inc. voting for
the election of directors can elect all the directors if they choose to do so,
and, in such event, the holders of the remaining shares will not be able to
elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Income Funds,
Inc. and, in its capacity as such, will audit the annual financial statements of
each Fund.
-66-
<PAGE>
PART C
-------
Other Information
-----------------
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - N/A
Part B - N/A
(b) Exhibits:
(1) Articles of Incorporation.
(a) Articles of Incorporation, as amended
and supplemented through November 22,
1995, incorporated into this filing by
reference to Post- Effective Amendment
No. 52 filed November 22, 1995.
(b) Executed Articles Supplementary
(November 28, 1995) incorporated into
this filing by reference to
Post-Effective Amendment No. 53 filed
July 17, 1996.
(c) Executed Articles of Amendment
(September 24, 1996) incorporated into
this filing by reference to
Post-Effective Amendment No. 55 filed
October 17, 1996.
(d) Executed Articles Supplementary
(September 24, 1996) incorporated into
this filing by reference to
Post-Effective Amendment No. 55 filed
October 17, 1996.
(e) Executed Articles Supplementary
(December 27, 1996) incorporated into
this filing by reference to
Post-Effective Amendment No. 56 filed
March 3, 1997.
(f) Articles Supplementary (1998) to be
filed by Amendment.
(g) Articles of Amendment (1998) to be
filed by Amendment.
<PAGE>
PART C - Other Information
(Continued)
(2) By-Laws. By-Laws, as amended to date,
incorporated into this filing by reference to
Post-Effective Amendment No. 52 filed November
22, 1995.
(3) Voting Trust Agreement. Inapplicable.
(4) Copies of All Instruments Defining the Rights
of Holders.
(a) Articles of Incorporation, Articles of
Amendment and Articles Supplementary.
(i) Article Second of Articles
Supplementary (June 1, 1992 and
April 29, 1995), Article Fifth
of Articles of Incorporation
(March 4, 1983) and Article
Tenth of Articles of Amendment
(May 2, 1985) incorporated into
this filing by reference to
Post-Effective Amendment No. 52
filed November 22, 1995.
(ii) Article Third of Articles
Supplementary (November 28,
1995) incorporated into this
filing by reference to
Post-Effective Amendment No. 53
filed July 17, 1996.
(iii) Article Fourth of Articles
Supplementary (September, 24,
1996) incorporated into this
filing by reference to
Post-Effective Amendment No. 55
filed October 17, 1996.
(iv) Article Fourth of Articles
Supplementary (December 27,
1996) incorporated into this
filing by reference to
Post-Effective Amendment No. 56
filed March 3, 1997.
(b) By-Laws. Article II, Article III, as
amended, and Article XIII, which was
subsequently redesignated as Article
XIV, incorporated into this filing by
reference to Post-Effective Amendment
No. 52 filed November 22, 1995.
<PAGE>
PART C - Other Information
(Continued)
(5) Investment Management Agreements.
(a) Executed Investment Management
Agreement (April 3, 1995) between
Delaware Management Company, Inc. and
the Registrant on behalf of Delchester
Fund incorporated into this filing by
reference to Post-Effective Amendment
No. 52 filed November 22, 1995.
(b) Executed Investment Management
Agreement (September 30, 1996) between
Delaware Management Company, Inc. and
the Registrant on behalf of Strategic
Income Fund incorporated into this
filing by reference to Post-Effective
Amendment No. 55 filed October 17,
1996.
(c) Executed Sub-Advisory Agreement
(September 30, 1996) between Delaware
Management Company, Inc. and Delaware
International Advisers Ltd. with
respect to Strategic Income Fund
incorporated into this filing by
reference to Post-Effective Amendment
No. 55 filed October 17, 1996.
(d) Executed Investment Management
Agreement (December 27, 1996) between
Delaware Management Company, Inc. and
the Registrant on behalf of High-Yield
Opportunities Fund attached as Exhibit.
(e) Form of Investment Management Agreement
(1998) between Delaware Management
Company and the Registrant on behalf of
Corporate Bond Fund attached as
Exhibit.
(f) Form of Investment Management Agreement
(1998) between Delaware Management
Company and the Registrant on behalf of
Extended Duration Bond Fund attached as
Exhibit.
(6) (a) Distribution Agreements.
(i) Executed Distribution Agreement
(April 3, 1995) between
Delaware Distributors, L.P. and
the Registrant on behalf of
Delchester Fund incorporated
into this filing by reference
to Post-Effective Amendment No.
53 filed July 17, 1996.
(ii) Executed Amendment No. 1 to
Distribution Agreement
(November 29, 1995) between
Delaware Distributors, L.P. and
the Registrant on behalf of
Delchester Fund incorporated
into this filing by reference
to Post-Effective Amendment No.
53 filed July 17, 1996.
<PAGE>
PART C - Other Information
(Continued)
(iii) Executed Distribution Agreement
(September 30, 1996) between Delaware
Distributors, L.P. and the Registrant
on behalf of Strategic Income Fund
incorporated into this filing by
reference to Post-Effective Amendment
No. 55 filed October 17, 1996.
(iv) Form of Distribution Agreement (1996)
between Delaware Distributors, L.P. and
the Registrant on behalf of High-Yield
Opportunities Fund (Module)
incorporated into this filing by
reference to Post-Effective Amendment
No. 55 filed October
17, 1996.
(v) Form of Distribution Agreement (1998)
between Delaware Distributors, L.P. and
the Registrant on behalf of Corporate
Bond Fund attached as Exhibit.
(vi) Form of Distribution Agreement (1998)
between Delaware Distributors, L.P. and
the Registrant on behalf of Extended
Duration Bond Fund attached as Exhibit.
(b) Administration and Service Agreement. Form of
Administration and Service Agreement (as
amended November 1995) incorporated into this
filing by reference to Post-Effective
Amendment No. 52 filed November 22, 1995.
(c) Dealer's Agreement. Dealer's Agreement (as
amended November 1995) incorporated into this
filing by reference to Post-Effective
Amendment No. 52 filed November 22, 1995.
(d) Mutual Fund Agreement for the Delaware Group
of Funds (as amended November 1995)
incorporated into this filing by reference to
Post-Effective Amendment No. 53 filed July 17,
1996.
(7) Bonus, Profit Sharing, Pension Contracts.
(a) Amended and Restated Profit Sharing Plan
(November 17, 1994) incorporated into this
filing by reference to Post-Effective
Amendment No. 52 filed November 22, 1995.
<PAGE>
PART C - Other Information
(Continued)
(b) Amendment to Profit Sharing Plan (December 21,
1995) incorporated into this filing by
reference to Post-Effective Amendment No. 53
filed July 17, 1996.
(8) Custodian Agreements.
(a) Executed Custodian Agreement (May 1, 1996)
between The Chase Manhattan Bank and the
Registrant on behalf of Delchester Fund
incorporated into this filing by reference to
Post-Effective Amendment No. 53 filed July 17,
1996.
(b) Form of Securities Lending Agreement (1996)
between The Chase Manhattan Bank and the
Registrant on behalf of Delchester Fund
incorporated into this filing by reference to
Post-Effective Amendment No. 53 filed July 17,
1996.
(c) Form of Custodian Agreement (1996) between
Bankers Trust Company and the Registrant on
behalf of Strategic Income Fund incorporated
into this filing by reference to
Post-Effective Amendment No. 53 filed July 17,
1996.
(d) Form of Securities Lending Agreement (1996)
between Bankers Trust Company and the
Registrant on behalf of Strategic Income Fund
incorporated into this filing by reference to
Post-Effective Amendment No. 53 filed July 17,
1996.
(e) Executed Letter (December 27, 1996) to The
Chase Manhattan Bank to add the High-Yield
Opportunities Fund to the Custodian Agreement
between The Chase Manhattan Bank and the
Registrant attached as Exhibit.
(f) Form of Letter (1998) to The Chase Manhattan
Bank to add the Corporate Bond Fund and the
Extended Duration Bond Fund to the Custodian
Agreement between The Chase Manhattan Bank and
the Registrant attached as Exhibit.
<PAGE>
PART C - Other Information
(Continued)
(9) Other Material Contracts.
(a) Executed Second Amended and Restated
Shareholders Services Agreement (December 27,
1996) between Delaware Service Company, Inc.
and the Registrant on behalf of Delchester
Fund, Strategic Income Fund and High-Yield
Opportunities Fund incorporated into this
filing by reference to Post-Effective
Amendment No. 56 filed March 3, 1997.
(b) Form of Third Amended and Restate Shareholders
Services Agreement (1998) between Delaware
Service Company, Inc. and the Registrant on
behalf of each Fund attached as Exhibit.
(c) Executed Delaware Group of Funds Fund
Accounting Agreement between Delaware Service
Company, Inc. and the Registrant (August 19,
1996) incorporated into this filing by
reference to Post- Effective Amendment No. 54
filed September 27, 1996.
(i) Executed Amendment No. 7 to Delaware
Group of Funds Fund Accounting
Agreement attached as Exhibit.
(ii) Executed Amendment No. 8 to Delaware
Group of Funds Fund Accounting
Agreement attached as Exhibit.
(iii) Executed Amendment No. 9 to Delaware
Group of Funds Fund Accounting
Agreement attached as Exhibit.
(iv) Form of Amendment No. 10 to Delaware
Group of Funds Fund Accounting
Agreement attached as Exhibit.
(v) Form of Amendment No. 11 to Delaware
Group of Funds Fund Accounting
Agreement attached as Exhibit.
(vi) Form of Amendment No. 12 to Delaware
Group of Funds Fund Accounting
Agreement attached as Exhibit.
(10) Opinion of Counsel. Attached as Exhibit.
(11) Consent of Auditors. Inapplicable.
(12-14) Inapplicable.
**(15) Plans under Rule 12b-1.
(a) Plan under Rule 12b-1 for Delchester Fund A
Class (November 29, 1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 53 filed July 17, 1996.
<PAGE>
PART C - Other Information
(Continued)
(b) Plan under Rule 12b-1 for Delchester Fund B
Class (November 29, 1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 53 filed July 17, 1996.
(c) Plan under Rule 12b-1 for Delchester Fund C
Class (November 29, 1995) incorporated into
this filing by reference to Post-Effective
Amendment No. 53 filed July 17, 1996.
(d) Plan under Rule 12b-1 for Strategic Income
Fund A Class (September 30, 1996) incorporated
into this filing by reference to
Post-Effective Amendment No. 55 filed October
17, 1996.
(e) Plan under Rule 12b-1 for Strategic Income
Fund B Class (September 30, 1996) incorporated
into this filing by reference to
Post-Effective Amendment No. 55 filed October
17, 1996.
(f) Plan under Rule 12b-1 for Strategic Income
Fund C Class (September 30, 1996) incorporated
into this filing by reference to
Post-Effective Amendment No. 55 filed October
17, 1996.
(g) Plan under Rule 12b-1 for High-Yield
Opportunities Fund A Class (December 27, 1996)
attached as Exhibit.
(h) Plan under Rule 12b-1 for High-Yield
Opportunities Fund B Class (December 27, 1996)
attached as Exhibit.
(i) Plan under Rule 12b-1 for High-Yield
Opportunities Fund C Class (December 27, 1996)
attached as Exhibit.
(j) Form of Plan under Rule 12b-1 for Corporate
Bond Fund A Class (1998) attached as Exhibit.
(k) Form of Plan under Rule 12b-1 for Corporate
Bond Fund B Class (1998) attached as Exhibit.
(l) Form of Plan under Rule 12b-1 for Corporate
Bond Fund C Class (1998) attached as Exhibit.
(m) Form of Plan under Rule 12b-1 for Extended
Duration Fund A Class (1998) attached as
Exhibit.
(n) Form of Plan under Rule 12b-1 for Extended
Duration Fund B Class (1998) attached as
Exhibit.
<PAGE>
PART C - Other Information
(Continued)
(o) Form of Plan under Rule 12b-1 for Extended
Duration Fund C Class (1998) attached as
Exhibit.
** Relates only to A, B and C Classes of Delchester Fund, Strategic Income
Fund and High-ield Opportunities Fund.
(16) Schedules of Computation for each Performance Quotation.
(a) Incorporated into this filing by reference to
Post-Effective Amendment No. 52 filed November
22, 1995, Post-Effective Amendment No. 54
filed September 27, 1996, Post-Effective
Amendment No. 56 filed March 3, 1997,
Post-Effective Amendment No. 57 filed June 30,
1997 and Post-Effective Amendment No. 58 filed
.
(17) Financial Data Schedules. Incorporated into this filing
by reference to Post- Effective Amendment No. 58 filed
.
***(18) Plan under Rule 18f-3.
(a) Amended Plan under Rule 18f-3 (September 18,
1997) attached as Exhibit.
(b) Proposed Amended Appendix A to Plan under Rule
18f-3 (1998) attached as Exhibit.
(19) Other: Directors' Power of Attorney. Attached as
Exhibit.
Item 25. Persons Controlled by or under Common Control with Registrant. None.
***Relates only to Strategic Income Fund.
<PAGE>
PART C - Other Information
(Continued)
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
Delaware Group Income Funds, Inc.'s
Delchester Fund series:
Delchester Fund A Class
Common Stock Par Value 43,476 Accounts as of
$1.00 Per Share May 31, 1998
Delchester Fund B Class
Common Stock Par Value 12,661 Accounts as of
$1.00 Per Share May 31, 1998
Delchester Fund C Class
Common Stock Par Value 1,598 Accounts as of
$1.00 Per Share May 31, 1998
Delchester Fund Institutional Class
Common Stock Par Value 43 Accounts as of
$1.00 Per Share May 31, 1998
Delaware Group Income Funds, Inc.'s
Strategic Income Fund series:
Strategic Income Fund A Class
Common Stock Par Value 829 Accounts as of
$1.00 Per Share May 31, 1998
<PAGE>
PART C - Other Information
(Continued)
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
Strategic Income Fund B Class
Common Stock Par Value 763 Accounts as of
$1.00 Per Share May 31, 1998
Strategic Income Fund C Class
Common Stock Par Value 182 Accounts as of
$1.00 Per Share May 31, 1998
Strategic Income Fund Institutional Class
Common Stock Par Value 14 Accounts as of
$1.00 Per Share May 31, 1998
Delaware Group Income Funds, Inc.'s
High-Yield Opportunities Fund series:
High-Yield Opportunities Fund A Class
Common Stock Par Value 58 Accounts as of
$1.00 Per Share May 31, 1998
High-Yield Opportunities Fund B Class
Common Stock Par Value 22 Accounts as of
$1.00 Per Share May 31, 1998
High-Yield Opportunities Fund C Class
Common Stock Par Value 18 Accounts as of
$1.00 Per Share May 31, 1998
High-Yield Opportunities Fund
Institutional Class
Common Stock Par Value 5 Accounts as of
$1.00 Per Share May 31, 1998
Delaware Group Income Funds, Inc.'s
Corporate Bond Fund series:
Corporate Bond Fund A Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share May 31, 1998
<PAGE>
PART C - Other Information
(Continued)
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
Corporate Bond Fund B Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share May 31, 1998
Corporate Bond Fund C Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share May 31, 1998
Corporate Bond Fund
Institutional Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share May 31, 1998
Delaware Group Income Funds, Inc.'s
Extended Duration Bond Fund series:
Extended Duration Bond Fund A Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share May 31, 1998
Extended Duration Bond Fund B Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share May 31, 1998
Extended Duration Bond Fund C Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share May 31, 1998
Extended Duration Bond Fund
Institutional Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share May 31, 1998
Item 27. Indemnification. Incorporated into this filing by reference to
Post-Effective Amendment No. 30 filed July 28, 1983 and Article VII
of the By-Laws, as amended, incorporated into this filing by
reference to Post-Effective Amendment No. 52 filed November 22,
1995.
<PAGE>
PART C - Other Information
(Continued)
Item 28. Business and Other Connections of Investment Adviser.
(a) Delaware Management Company, a series of Delaware Management Business
Trust, (the "Manager") serves as investment manager to the Registrant and also
serves as investment manager or sub-adviser to certain of the other funds in the
Delaware Investments family (Delaware Group Equity Funds I, Inc., Delaware Group
Equity Funds II, Inc., Delaware Group Equity Funds III, Inc., Delaware Group
Equity Funds IV, Inc., Delaware Group Equity Funds V, Inc., Delaware Group
Government Fund, Inc., Delaware Group Limited-Term Government Funds, Inc.,
Delaware Group Cash Reserve, Inc., Delaware Group Tax-Free Fund, Inc., Delaware
Group State Tax-Free Income Trust, Delaware Group Tax-Free Money Fund, Inc.,
Delaware Group Premium Fund, Inc., Delaware Group Global & International Funds,
Inc., Delaware Pooled Trust, Inc., Delaware Group Adviser Funds, Inc., Delaware
Group Foundation Funds, Delaware Group Dividend and Income Fund, Inc., Delaware
Group Global Dividend and Income Fund, Inc., Voyageur Tax-Free Funds, Inc.,
Voyageur Intermediate Tax-Free Funds, Inc., Voyageur Insured Funds, Inc.,
Voyageur Funds, Inc., Voyageur Investment Trust, Voyageur Investment Trust II,
Voyageur Mutual Funds, Inc., Voyageur Mutual Funds II, Inc., Voyageur Mutual
Funds III, Inc., Voyageur Arizona Municipal Income Fund, Inc., Voyageur Colorado
Insured Municipal Income Fund, Inc., Voyageur Florida Insured Municipal Income
Fund, Voyageur Minnesota Municipal Fund, Inc., Voyageur Minnesota Municipal Fund
II, Inc. and Voyageur Minnesota Municipal Fund III, Inc.) In addition, certain
directors of the Manager also serve as directors/trustees of the other funds in
the Delaware Investments family and certain officers are also officers of these
other funds. A company owned by the Manager's parent company acts as principal
underwriter to the mutual funds in the Delaware Investments family (see Item 29
below) and another such company acts as the shareholder servicing, dividend
disbursing, accounting servicing and transfer agent for all of the mutual funds
in the Delaware Investments family.
<PAGE>
PART C - Other Information
(Continued)
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Wayne A. Stork Chairman of the Board, President, Chief Executive Officer and Chief
Investment Officer of Delaware Management Company (a series of
Delaware Management Business Trust); Chairman of the Board,
President, Chief Executive Officer, Chief Investment Officer and
Director/Trustee of Delaware Management Company, Inc. and
Delaware Management Business Trust; Chairman of the Board,
President, Chief Executive Officer and Director of DMH Corp.,
Delaware Distributors, Inc. and Founders Holdings, Inc.; Chairman,
Chief Executive Officer and Chief Investment Officer of Dealware
Investment Advisers (a series of Delaware Management Business
Trust); Chairman, Chief Executive Officer and Director of Delaware
International Holdings Ltd. and Delaware International Advisers Ltd.;
Chairman of the Board and Director of the Registrant, each of the other
funds in the Delaware Investments family, Delaware Management
Holdings, Inc., and Delaware Capital Management, Inc.; Chairman of
Delaware Distributors, L.P.; President and Chief Executive Officer of
Delvoy, Inc.; and Director and/or Trustee of Delaware Service
Company, Inc. and Delaware Investment & Retirement Services, Inc.
Richard G. Unruh, Jr. Executive Vice President of the Registrant, each of the other funds in
the Delaware Investments family, Delaware Management Holdings, Inc.,
Delaware Capital Management, Inc. and Delaware Management Company (a
series of Delaware Management Business Trust); Executive Vice President
and Director/Trustee of Delaware Management Company, Inc. and Delaware
Management Business Trust; President of Delaware Investment Advisers (a
series of Delaware Management Business Trust); and Director of Delaware
International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance
Company since 1989, 2040 Market Street, Philadelphia, PA; Board of
Directors, Chairman of Finance Committee, AAA Mid Atlantic, Inc. since
1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Metron,
Inc. since 1995, 11911 Freedom Drive, Reston, VA
* Business address of each is 1818 Market Street, Philadelphia PA 19103.
</TABLE>
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Paul E. Suckow Executive Vice President/Chief Investment Officer, Fixed Income of
Delaware Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business
Trust), the Registrant, each of the other funds in the Delaware
Investments family and Delaware Management Holdings, Inc.;
Executive Vice President and Director of Founders Holdings, Inc.;
Executive Vice President of Delaware Capital Management, Inc. and
Delaware Management Business Trust; and Director of Founders CBO
Corporation
Director, HYPPCO Finance Company Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
David K. Downes Executive Vice President, Chief Operating Officer and Chief Financial
Officer of the Registrant and each of the other funds in the Delaware
Investments family, Delaware Management Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Delaware Distributors, L.P.; Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Director of Delaware Management
Company, Inc., DMH Corp, Delaware Distributors, Inc., Founders Holdings,
Inc. and Delvoy, Inc.; Executive Vice President, Chief Financial
Officer, Chief Administrative Officer and Trustee of Delaware Management
Business Trust; President, Chief Executive Officer, Chief Financial
Officer and Director of Delaware Service Company, Inc.; President, Chief
Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.; Chairman, Chief Executive Officer and
Director of Delaware Investment & Retirement Services, Inc.; Chairman
and Director of Delaware Management Trust Company; Director of Delaware
International Advisers Ltd.; and Vice President of Lincoln Funds
Corporation
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8
Clayton Place, Newtown Square, PA
George M. Senior Vice President, Secretary and General Counsel of the Registrant,
Chamberlain, Jr. each of the other funds in the Delaware Investments family, Delaware
Distributors, L.P., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware Management Holdings,
Inc.; Senior Vice President, General Counsel, Secretary and
Director/Trustee of Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Founders
Holdings, Inc., Delaware Capital Management, Inc., Delaware Investment &
Retirement Services, Inc., Delvoy, Inc. and Delaware Management Business
Trust; Senior Vice President and Director of Delaware International
Holdings Ltd.; Executive Vice President, Secretary, General Counsel and
Director of Delaware Management Trust Company; Director of Delaware
International Advisers Ltd.; Secretary of Lincoln Funds Corporation
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Richard J. Flannery Senior Vice President/Corporate and International Affairs of the
Registrant, each of the other funds in the Delaware Investments family,
Delaware Management Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, Inc., Delaware Distributors, L.P.,
Delaware Management Trust Company, Delaware Capital Management, Inc.,
Delaware Service Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and Delaware Investment &
Retirement Services, Inc.; Executive Vice President/Corporate &
International Affairs and Director of Delaware International Holdings
Ltd.; Senior Vice President/Corporate and International Affairs and
Director of Founders Holdings, Inc. and Delvoy, Inc.; Senior Vice
President of Founders CBO Corporation; and Director of Delaware
International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd.,
Elverton, PA; Director and Member of Executive Committee of Stonewall
Links, Inc. since 1991, Bulltown Rd., Elverton, PA
Michael P. Bishof Senior Vice President/Investment Accounting of Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust) and Delaware Service Company, Inc.; Senior
Vice President and Treasurer of the Registrant, each of the other funds
in the Delaware Investments family and Founders Holdings, Inc.; Senior
Vice President and Treasurer/ Manager, Investment Accounting of Delaware
Distributors, L.P. and Delaware Investment Advisers (a series of
Delaware Management Business Trust); Assistant Treasurer of Founders CBO
Corporation; and Senior Vice President and Manager of Investment
Accounting of Delaware International Holdings Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital Management, Inc., Delaware
Distributors, L.P., Delaware Service Company, Inc., Delaware
International Holdings Ltd., Delaware Management Company (a series of
Delaware Management Business Trust), Delvoy, Inc. and Delaware
Management Business Trust; Senior Vice President/Corporate Controller of
the Registrant, each of the other funds in the Delaware Investments
family and Founders Holdings, Inc.; Executive Vice President, Chief
Financial Officer and Treasurer of Delaware Management Trust Company;
Chief Financial Officer and Treasurer of Delaware Investment &
Retirement Services, Inc.; Senior Vice President/Assistant Treasurer of
Founders CBO Corporation; and Treasurer of Lincoln Funds Corporation.
Michael T. Taggart Senior Vice President/Facilities Management and Administrative Services
of Delaware Management Company, Inc. and Delaware Management Company (a
series of Delaware Management Business Trust)
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment and Retirement Services, Inc. and Delaware
Service Company, Inc.; Senior Vice President/Operations and Director of
Delaware Management Trust Company
James L. Shields Senior Vice President/Chief Information Officer of Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Service Company, Inc. and Delaware
Investment & Retirement Services, Inc.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Eric E. Miller Vice President, Assistant Secretary and Deputy General Counsel of the
Registrant and each of the other funds in the Delaware Investments
family, Delaware Management Company, Inc., Delaware Management Company
(a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust), Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Founders Holdings, Inc., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services, Inc.;
Assistant Secretary of Delaware Management Business Trust; and Vice
President and Assistant Secretary of Delvoy, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of the Registrant, each of the
other funds in the Delaware Investments family, Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), Delaware Management Holdings, Inc.,
Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware
Service Company, Inc., DMH Corp., Delaware Management Trust Company,
Delaware Capital Management, Inc., Delaware Investment & Retirement
Services, Inc., Founders Holdings, Inc. and Delvoy, Inc.; Vice President
and Secretary of Delaware International Holdings Ltd.; and Secretary of
Founders CBO Corporation
Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane,
Philadelphia, PA
Richard Salus(1) Vice President/Assistant Controller of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust) and Delaware Management Trust Company
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of the Registrant, each of
the other funds in the Delaware Investments family, Delaware Management
Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Management Holdings, Inc., DMH
Corp., Delaware Management Trust Company and Delaware Investment &
Retirement Services, Inc.; Vice President/Director of Internal Audit of
Delvoy, Inc.
Joel A. Ettinger(2) Vice President/Director of Taxation of the Registrant, each of the other
funds in the Delaware Investments family, Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust) and Delaware Management Holdings, Inc.
Christopher Adams Vice President/Strategic Planning of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Service Company, Inc.
Susan L. Hanson Vice President/Strategic Planning of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Service Company, Inc.
Dennis J. Mara(3) Vice President/Acquisitions of Delaware Management Company, Inc. and
Delaware Management Company (a series of Delaware Management Business
Trust)
Scott Metzger Vice President/Business Development of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust) and Delaware Service Company, Inc.
Lisa O. Brinkley Vice President/Compliance of the Registrant, Delaware Management
Company, Inc., each of the other funds in the Delaware Investments
family, Delaware Management Company (a series of Delaware Management
Business Trust), DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware Capital Management, Inc. and Delaware Investment
& Retirement Services, Inc.; Vice President/Compliance Officer of
Delaware Management Business Trust; and Vice President of Delvoy, Inc.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Mary Ellen Carrozza Vice President/Client Services of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management
Business Trust) and the Registrant
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant and 22 investment companies
in the Delaware Investments family; Vice President of Founders Holdings,
Inc.; and Treasurer, Assistant Secretary and Director of Founders CBO
Corporation
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant and 21 investment companies
in the Delaware Investments family; Vice President of Founders Holdings,
Inc.; and President and Director of Founders CBO Corporation
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant and 19 investment companies
in the Delaware Investments family and Delaware Capital Management, Inc.
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant and 19 investment companies
in the Delaware Investments family and Delaware Capital Management, Inc.
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant and 19 other investment
companies in the Delaware Investments family
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Mitchell L. Conery(4) Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant and 20 investment companies
in the Delaware Investments family and Delaware Capital Management, Inc.
George H. Burwell Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), 10 investment companies in the Delaware Investments
family
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), the Registrant and 17 investment companies in the Delaware
Investments family
John B. Fields Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), 10 investment companies in the Delaware
Investments family, Delaware Capital Management, Inc. and Trustee of
Delaware Management Business Trust
Gerald S. Frey(5) Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), 10 investment companies in the Delaware
Investments family
Christopher Beck(6) Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), the Registrant and 10 investment companies
in the Delaware Investments family
Elizabeth H. Howell(7) Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), seven investment companies in the Delaware Investments
family
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Andrew M.
McCullagh, Jr.(8) Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust) eight investment companies in the Delaware Investments
family
Babak Zenouzi Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management
Business Trust), 13 investment companies in the Delaware Investments
family
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management
Business Trust), the Registrant and 19 other investment companies in the
Delaware Investments family
J. Paul Dokas(9) Vice President/Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), and two investment companies in the Delaware Investments family
Marshall T. Bassett(10) Vice President/Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management
Business Trust), and 10 investment companies in the Delaware Investments
family
John A. Heffern(11) Vice President/Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust) and 10 investment companies in the Delaware Investments family
Lori P. Wachs Vice President/Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business
Trust) and 10 investment companies in the Delaware Investments family
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 TAX PRINCIPAL, Ernst & Young LLP prior to April 1998.
3 CORPORATE CONTROLLER, IIS prior to July 1997.
4 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
5 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
6 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
7 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May 1997.
8 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset
Management LLC prior to May 1997.
9 DIRECTOR OF TRUST INVESTMENTS, Bell Atlantic Corporation prior to
February 1997.
10 VICE PRESIDENT, Morgan Stanley Asset Management prior to March 1997.
11 SENIOR VICE PRESIDENT, EQUITY RESEARCH, NatWest Securities Corporation
prior to March 1997.
(b) Delaware International Advisers Ltd. ("Delaware International")
serves as sub-investment adviser to Strategic Income Fund of the Registrant and
also serves as investment manager or sub- investment adviser to certain of the
other funds in the Delaware Group (Delaware Group Global Dividend and Income
Fund, Inc., Delaware Group Global & International Funds, Inc., Delaware Pooled
Trust, Inc., Delaware Group Premium Fund, Inc. and Delaware Group Adviser Funds,
Inc.) and other institutional accounts.
Information regarding the officers and directors of Delaware
International and the positions they have held with the Registrant during the
past two fiscal years is provided below.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------------
<S> <C>
*Wayne A. Stork Chairman of the Board, President, Chief Executive Officer and Chief
Investment Officer of Delaware Management Company (a series of Delaware
Management Business Trust); Chairman of the Board, President, Chief
Executive Officer, Chief Investment Officer and Director/Trustee of
Delaware Management Company, Inc. and Delaware Management Business
Trust; Chairman of the Board, President, Chief Executive Officer and
Director of DMH Corp., Delaware Distributors, Inc. and Founders
Holdings, Inc.; Chairman, Chief Executive Officer and Chief Investment
Officer of Dealware Investment Advisers (a series of Delaware Management
Business Trust); Chairman, Chief Executive Officer and Director of
Delaware International Holdings Ltd. and Delaware International Advisers
Ltd.; Chairman of the Board and Director of the Registrant, each of the
other funds in the Delaware Investments family, Delaware Management
Holdings, Inc., and Delaware Capital Management, Inc.; Chairman of
Delaware Distributors, L.P.; President and Chief Executive Officer of
Delvoy, Inc.; and Director and/or Trustee of Delaware Service Company,
Inc. and Delaware Investment & Retirement Services, Inc.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England
EC2V 6EE.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------------
<S> <C>
**G. Roger H. Kitson Vice Chairman and Director of Delaware International Advisers Ltd.
**Ian G. Sims Chief Investment Officer/Global Fixed Income and Director of Delaware
International Advisers Ltd.
**David G. Tilles Managing Director, Chief Investment Officer and Director of Delaware
International Advisers Ltd.
**John Emberson Secretary, Compliance Officer, Finance Director and Director of Delaware
International Advisers Ltd.
**Nigel G. May Director/Head of Pacific Basin Group and Director of Delaware
International Advisers Ltd.
**Elizabeth A. Desmond Director/Head of European Group and Director of Delaware International
Advisers Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England EC2V
6EE.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------------
<S> <C>
*David K. Downes Executive Vice President, Chief Operating Officer and Chief Financial
Officer of the Registrant and each of the other funds in the Delaware
Investments family, Delaware Management Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and
Delaware Distributors, L.P.; Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Director of Delaware Management
Company, Inc., DMH Corp, Delaware Distributors, Inc., Founders Holdings,
Inc. and Delvoy, Inc.; Executive Vice President, Chief Financial
Officer, Chief Administrative Officer and Trustee of Delaware Management
Business Trust; President, Chief Executive Officer, Chief Financial
Officer and Director of Delaware Service Company, Inc.; President, Chief
Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.; Chairman, Chief Executive Officer and
Director of Delaware Investment & Retirement Services, Inc.; Chairman
and Director of Delaware Management Trust Company; Director of Delaware
International Advisers Ltd.; and Vice President of Lincoln Funds
Corporation
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8
Clayton Place, Newtown Square, PA
*Richard G. Unruh, Jr. Executive Vice President of the Registrant, each of the other funds in
the Delaware Investments family, Delaware Management Holdings, Inc.,
Delaware Capital Management, Inc. and Delaware Management Company (a
series of Delaware Management Business Trust); Executive Vice President
and Director/Trustee of Delaware Management Company, Inc. and Delaware
Management Business Trust; President of Delaware Investment Advisers (a
series of Delaware Management Business Trust); and Director of Delaware
International Advisers Ltd.
Board of Directors, Chairman of Finance Committee, Keystone Insurance
Company since 1989, 2040 Market Street, Philadelphia, PA; Board of
Directors, Chairman of Finance Committee, AAA Mid Atlantic, Inc. since
1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Metron,
Inc. since 1995, 11911 Freedom Drive, Reston, VA
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England EC2V
6EE.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------------
<S> <C>
*Richard J. Flannery Senior Vice President/Corporate and International Affairs of the
Registrant, each of the other funds in the Delaware Investments family,
Delaware Management Holdings, Inc., DMH Corp., Delaware Management
Company, Inc., Delaware Distributors, Inc., Delaware Distributors, L.P.,
Delaware Management Trust Company, Delaware Capital Management, Inc.,
Delaware Service Company, Inc., Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and Delaware Investment &
Retirement Services, Inc.; Executive Vice President/Corporate &
International Affairs and Director of Delaware International Holdings
Ltd.; Senior Vice President/Corporate and International Affairs and
Director of Founders Holdings, Inc. and Delvoy, Inc.; Senior Vice
President of Founders CBO Corporation; and Director of Delaware
International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd.,
Elverton, PA; Director and Member of Executive Committee of Stonewall
Links, Inc. since 1991, Bulltown Rd., Elverton, PA
*John C. E. Campbell Director of Delaware International Advisers Ltd.: Senior Vice
President/International Marketing of Delaware Investment Advisers (a
series of Delaware Management Trust)
*George M. Chamberlain, Jr. Senior Vice President, Secretary and General Counsel of the Registrant,
each of the other funds in the Delaware Investments family, Delaware
Distributors, L.P., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware Management Holdings,
Inc.; Senior Vice President, General Counsel, Secretary and
Director/Trustee of Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Founders
Holdings, Inc., Delaware Capital Management, Inc., Delaware Investment &
Retirement Services, Inc., Delvoy, Inc. and Delaware Management Business
Trust; Senior Vice President and Director of Delaware International
Holdings Ltd.; Executive Vice President, Secretary, General Counsel and
Director of Delaware Management Trust Company; Director of Delaware
International Advisers Ltd.; Secretary of Lincoln Funds Corporation
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England EC2V
6EE.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
*George E. Deming Director of Delaware International Advisers Ltd.; Vice President
and Senior Portfolio Manager of Delaware Investment Advisers (a
series of Delaware Management Business Trust)
**Timothy W. Sanderson Senior Portfolio Manager, Deputy Compliance Officer, Director
Equity Research and Director of Delaware International Advisers
Ltd.
**Clive A. Gillmore Senior Portfolio Manager, Director U.S. Mutual Fund Liaison and
Director of Delaware International Advisers Ltd.
**Hamish O. Parker Senior Portfolio Manager, Director U.S. Marketing Liaison and
Director of Delaware International Advisers Ltd.
**Gavin A. Hall Senior Portfolio Manager of Delaware International Advisers Ltd.
**Robert Akester Senior Portfolio Manager of Delaware International Advisers Ltd.
**Hywel Morgan Senior Portfolio Manager of Delaware International Advisers Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
** Business address of each is Third Floor, 80 Cheapside, London, England EC2V
1NQ.
<PAGE>
PART C - Other Information
(Continued)
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter
for all the mutual funds in the Delaware Group.
(b) Information with respect to each director, officer or
partner of principal underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Investment Limited Partner None
Advisers
Delaware Capital Limited Partner None
Management, Inc.
Wayne A. Stork Chairman Chairman
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Executive Vice President, Executive Vice President,
Chief Operating Officer Chief Operating Officer
and Chief Financial Officer and Chief Financial
Officer
George M. Chamberlain, Jr. Senior Vice President/Secretary/ Senior Vice President/
General Counsel Secretary/General Counsel
Richard J. Flannery Senior Vice President/Corporate Senior Vice President/
and International Affairs Corporate and
International
Affairs
Joseph H. Hastings Senior Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller
Terrence P. Cunningham Senior Vice President/Financial None
Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
J. Chris Meyer Senior Vice President/ None
Director Product Management
William M. Kimbrough Senior Vice President/Wholesaler None
Daniel J. Brooks Senior Vice President/Wholesaler None
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager
Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice
Manager, Investment Accounting President/Treasurer
Eric E. Miller Vice President/Assistant Secretary/ Vice President/Assistant
Deputy General Counsel Secretary/
Deputy General Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Lisa O. Brinkley Vice President/Compliance Vice President/Compliance
Daniel H. Carlson Vice President/Strategic Marketing None
Diane M. Anderson Vice President/Plan Record Keeping None
and Administration
Anthony J. Scalia Vice President/Defined Contribution None
Sales, SW Territory
Courtney S. West Vice President/Defined Contribution None
Sales, NE Territory
Denise F. Guerriere Vice President/Client Services None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Gordon E. Searles Vice President/Client Services None
Lori M. Burgess Vice President/Client Services None
Julia R. Vander Els Vice President/Participant Services None
Jerome J. Alrutz Vice President/Retail Sales None
Scott Metzger Vice President/Business Development Vice President/Business
Development
Stephen C. Hall Vice President/Institutional Sales None
Gregory J. McMillan Vice President/ National Accounts None
Holly W. Reimel Vice President/Manager, National None
Accounts
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis VicePresident/Product None
Development
Andrew W. Whitaker Vice President/Financial Institutions None
Jesse Emery Vice President/ Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales
Dinah J. Huntoon Vice President/Product None
Manager Equity
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Soohee Lee Vice President/Fixed Income None
Product Management
Michael J. Woods Vice President/UIT Product None
Management
Ellen M. Krott Vice President/Marketing None
Dale L. Kurtz Vice President/Marketing Support None
David P. Anderson Vice President/Wholesaler None
Lee D. Beck Vice President/Wholesaler None
Gabriella Bercze Vice President/Wholesaler None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
Jeffrey A. Keinert Vice President/Wholesaler None
Thomas P. Kennett Vice President/ Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ----------------------
<S> <C> <C>
Patrick L. Murphy Vice President/Wholesaler None
Stephen C. Nell Vice President/Wholesaler None
Julia A. Nye Vice President/Wholesaler None
Joseph T. Owczarek Vice President/Wholesaler None
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
Mark A. Pletts Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Julia A. Stanton Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Edward J. Wagner Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
John A. Wells Vice President/Marketing Technology None
Scott Whitehouse Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818 Market Street,
Philadelphia, PA 19103 or One Commerce Square, Philadelphia, PA 19103 and in
London at Third Floor, 80 Cheapside, London, England EC2V 6EE.
Item 31. Management Services. None.
<PAGE>
PART C - Other Information
(continued)
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's annual report to
shareholders, upon request and without charge.
(d) Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
this City of Philadelphia and Commonwealth of Pennsylvania on this 1st day of
July, 1998.
DELAWARE GROUP INCOME FUNDS, INC.
By /s/ Wayne A. Stork
----------------------
Wayne A. Stork
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ------------------- ------------------------------------ ------------
<S> <C> <C>
/s/Wayne A. Stork Chairman of the Board and Director July 1, 1998
- -------------------
Wayne A. Stork
Executive Vice President/Chief Operating
Officer/Chief Financial Officer
/s/David K. Downes (Principal Financial Officer and Principal July 1, 1998
- ------------------- Accounting Officer)
David K. Downes
/s/Charles E. Peck Director July 1, 1998
- -------------------
Charles E. Peck
/s/Anthony D. Knerr Director July 1, 1998
- -------------------
Anthony D. Knerr
/s/Jeffrey J. Nick Director July 1, 1998
- -------------------
Jeffrey J. Nick
/s/Ann R. Leven Director July 1, 1998
- -------------------
Ann R. Leven
/s/Walter P. Babich Director July 1, 1998
- -------------------
Walter P. Babich
/s/John H. Durham Director July 1, 1998
- -------------------
John H. Durham
/s/W. Thacher Longstreth Director July 1, 1998
- -------------------------
W. Thacher Longstreth
/s/Thomas F. Madison Director July 1, 1998
- --------------------
Thomas F. Madison
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B5D Executed Investment Management Agreement (December 27, 1996) between Delaware
Management Company, Inc. and the Registrant on behalf of High-Yield Opportunities
Fund
EX-99.B5E Form of Investment Management Agreement (1998) between Delaware Management
Company and the Registrant on behalf of Corporate Bond Fund
EX-99.B5F Form of Investment Management Agreement (1998) between Delaware Management
Company and the Registrant on behalf of Extended Duration Bond Fund
EX-99.B6AV Form of Distribution Agreement (1998) between Delaware Distributors, L.P. and the
Registrant on behalf of Corporate Bond Fund
EX-99.B6AVI Form of Distribution Agreement (1998) between Delaware Distributors, L.P. and the
Registrant on behalf of Extended Duration Bond Fund
EX-99.B8E Executed Letter (December 27, 1996) to The Chase Manhattan Bank to add the High-
Yield Opportunities Fund to the Custodian Agreement between The Chase Manhattan
Bank and the Registrant
EX-99.B8F Form of Letter (1998) to The Chase Manhattan Bank to add the Corporate Bond Fund and
the Extended Duration Bond Fund to the Custodian Agreement between The Chase
Manhattan Bank and the Registrant
EX-99.B9B Form of Third Amended and Restated Shareholders Services Agreement (1998) between
Delaware Service Company, Inc. and the Registrant
EX-99.B9CI Executed Amendment No. 7 to Delaware Group of Funds Fund Accounting Agreement
EX-99.B9CII Executed Amendment No. 8 to Delaware Group of Funds Fund Accounting Agreement
EX-99.B9CIII Executed Amendment No. 9 to Delaware Group of Funds Fund Accounting Agreement
EX-99.B9CIV Form of Amendment No. 10 to Delaware Group of Funds Fund Accounting Agreement
EX-99.B9CV Form of Amendment No. 11 to Delaware Group of Funds Fund Accounting Agreement
EX-99.B9CVI Form of Amendment No. 12 to Delaware Group of Funds Fund Accounting Agreement
EX-99.B10 Opinion of Counsel
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
(Continued)
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B15G Plan under Rule 12b-1 for High-Yield Opportunities Fund A Class (December 27, 1996)
EX-99.B15H Plan under Rule 12b-1 for High-Yield Opportunities Fund B Class (December 27, 1996)
EX-99.B15I Plan under Rule 12b-1 for High-Yield Opportunities Fund C Class (December 27, 1996)
EX-99.B15J Plan under Rule 12b-1 for Corporate Bond Fund A Class (1998)
EX-99.B15K Plan under Rule 12b-1 for Corporate Bond Fund B Class (1998)
EX-99.B15L Plan under Rule 12b-1 for Corporate Bond Fund C Class (1998)
EX-99.B15M Plan under Rule 12b-1 for Extended Duration Fund A Class (1998)
EX-99.B15N Plan under Rule 12b-1 for Extended Duration Fund B Class (1998)
EX-99.B15O Plan under Rule 12b-1 for Extended Duration Fund C Class (1998)
EX-99.B18A Amended Plan under Rule 18f-3 (September 18, 1997)
EX-99.B18B Proposed Amended Appendix A to Plan under Rule 18f-3 (1998)
EX-99.B19 Directors' Power of Attorney
</TABLE>
<PAGE>
EX-99.B5D
EXHIBIT 24(b)(5)(d)
DELAWARE GROUP INCOME FUNDS, INC.
HIGH-YIELD OPPORTUNITIES FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP INCOME FUNDS, INC. (the
"Fund"), a Maryland corporation, for its HIGH-YIELD OPPORTUNITIES FUND series
(the "Series"), and DELAWARE MANAGEMENT COMPANY, INC. (the "Investment
Manager"), a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 and engages in the
business of investing and reinvesting its assets in securities; and
WHEREAS, the Investment Manager is a registered Investment Adviser
under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and
WHEREAS, the Investment Manager serves as the investment manager for
the other series of the Fund and the Fund desires to retain the Investment
Manager to serve as the investment manager for the Series effective as of the
date of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the Series' assets and to administer its affairs,
subject to the direction of the Board of Directors and officers of the Fund for
the period and on the terms hereinafter set forth. The Investment Manager hereby
accepts such employment and agrees during such period to render the services and
assume the obligations herein set forth for the compensation herein provided.
The Investment Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Fund in any way, or in
any way be deemed an agent of the Fund. The Investment Manager shall regularly
make decisions as to what securities to purchase and sell on behalf of the
Series, and shall give written instructions to the Trading Department maintained
by the Fund for implementation of such decisions, and shall furnish the Board of
Directors of the Fund with such information and reports regarding the Series'
investments as the Investment Manager deems appropriate or as the Directors of
the Fund may reasonably request.
-1-
<PAGE>
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in the following: the
maintenance of its corporate existence; the maintenance of its own books,
records and procedures; dealing with its own shareholders; the payment of
dividends; transfer of stock, including issuance, redemption and repurchase of
shares; preparation of share certificates; reports and notices to shareholders;
calling and holding of shareholders' meetings; miscellaneous office expenses;
brokerage commissions; custodian fees; legal and accounting fees; taxes; and
federal and state registration fees. The Series shall bear all of its own
organizational costs.
Directors, officers and employees of the Investment Manager may be
directors, officers and employees of the funds of which Delaware Management
Company, Inc. is Investment Manager. Directors, officers and employees of the
Investment Manager who are directors, officers and/or employees of the funds
shall not receive any compensation from the funds for acting in such dual
capacity.
In the conduct of the respective businesses of the parties hereto and
in the performance of this Agreement, the Fund and Investment Manager may share
facilities common to each, with appropriate proration of expenses between them.
3. (a) The Fund shall place and execute its own orders for the purchase
and sale of portfolio securities with broker/dealers. Subject to the primary
objective of obtaining the best available prices and execution, the Fund will
place orders for the purchase and sale of portfolio securities with such
broker/dealers selected from among those designated from time to time by the
Investment Manager, who provide statistical, factual and financial information
and services to the Fund, to the Investment Manager, or to any other fund for
which the Investment Manager provides investment advisory services and/or with
broker/dealers who sell shares of the Fund or who sell shares of any other fund
for which the Investment Manager provides investment advisory services.
Broker/dealers who sell shares of the funds of which Delaware Management
Company, Inc. is investment manager, shall only receive orders for the purchase
or sale of portfolio securities to the extent that the placing of such orders is
in compliance with the Rules of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above and
subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Investment Manager may ask the Fund, and
the Fund may agree, to pay a member of an exchange, broker or dealer an amount
of commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in such instances where it, and the Investment
Manager, have determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the Investment Manager's overall responsibilities with
respect to the Fund and to other funds or other advisory accounts for which the
Investment Manager exercises investment discretion.
4. As compensation for the services to be rendered to the Fund by the
Investment Manager under the provisions of this Agreement, the Fund shall pay to
the Investment Manager monthly from the Series' assets a fee based on the
average daily net assets of the Series during the month. Such fee shall be
calculated in accordance with the following schedule.
-2-
<PAGE>
Equivalent
Monthly Rate Annual Rate Average Daily Net Assets
------------ ----------- ------------------------
6.50/12 of 1% 0.65% on the first $500,000,00
6.25/12 of 1% 0.625% on the next $500,000,000
6.00/12 of 1% 0.60% on assets over $1,000,000,000
If this Agreement is terminated prior to the end of any calendar month,
the management fee shall be prorated for the portion of any month in which this
Agreement is in effect according to the proportion which the number of calendar
days during which the Agreement is in effect bears to the number of calendar
days in the month, and shall be payable within 10 days after the date of
termination.
5. The services to be rendered by the Investment Manager to the Fund
under the provisions of this Agreement are not to be deemed to be exclusive, and
the Investment Manager shall be free to render similar or different services to
others so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
6. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
7. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of duties of the Investment Manager
to the Fund, the Investment Manager shall not be subject to liabilities to the
Fund or to any shareholder of the Fund for any action or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security, or otherwise.
8. This Agreement shall be executed and become effective as of the date
written below. It shall continue in effect for a period of two years from such
date and may be renewed thereafter only so long as such renewal and continuance
is specifically approved at least annually by the Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities of the Series and
only if the terms and the renewal hereof have been approved by the vote of a
majority of the Directors of the Fund who are not parties hereto or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this Agreement may be
terminated by the Fund at any time, without the payment of a penalty, on sixty
days' written notice to the Investment Manager of the Fund's intention to do so,
pursuant to action by the Board of Directors of the Fund or pursuant to vote of
a majority of the outstanding voting securities of the Series. The Investment
Manager may terminate this Agreement at any time, without the payment of
penalty, on sixty days' written notice to the Fund of its intention to do so.
Upon termination of this Agreement, the obligations of all the parties hereunder
shall cease and terminate as of the date of such termination, except for any
obligation to respond for a breach of this Agreement committed prior to such
termination, and except for the obligation of the Fund to pay to the Investment
Manager the fee provided in paragraph 4 hereof, prorated to the date of
termination. This Agreement shall automatically terminate in the event of its
assignment.
-3-
<PAGE>
9. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
10. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities;" "interested persons;" and "assignment"
shall have the meanings defined in the Investment Company Act of 1940.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
having it signed by their duly authorized officers as of the 27th day of
December, 1996.
DELAWARE GROUP INCOME FUNDS, INC.
for the HIGH-YIELD OPPORTUNITIES FUND
/s/Wayne A. Stork
By:______________________________________
Name: Wayne A. Stork
Title: Chairman/President and
Chief Executive Officer
/s/Michael D. Mabry
Attest:____________________________________
Name: Michael D. Mabry
Title: Assistant Vice President
Assistant Secretary
DELAWARE MANAGEMENT COMPANY, INC.
/s/David K. Downes
By:_______________________________________
Name: David K. Downes
Title: Senior Vice President/Chief Administrative
Officer/Chief Financial Officer
/s/David P. O'Connor
Attest:____________________________________
Name: David P. O'Connor
Title: Assistant Vice President
Assistant Secretary
-4-
<PAGE>
EX-99.B5E
EXHIBIT 24(b)(5)(e)
FORM OF INVESTMENT MANAGEMENT AGREEMENT
DELAWARE GROUP INCOME FUNDS, INC.
CORPORATE BOND FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP INCOME FUNDS, INC. (the
"Fund"), a Maryland corporation, for its CORPORATE BOND FUND series (the
"Series"), and DELAWARE MANAGEMENT COMPANY (the "Investment Manager"), a
Delaware business trust.
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 and engages in the
business of investing and reinvesting its assets in securities; and
WHEREAS, the Investment Manager is a registered Investment Adviser
under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and
WHEREAS, the Board of Directors and shareholders of the Fund have
determined to enter into a new Investment Management Agreement with the
Investment Manager to be effective as of the date hereof; and
WHEREAS, the Investment Manager serves as the investment manager for
the other series of the Fund, known as the Delchester Bond Fund, Strategic
Income Fund and High-Yield Opportunities Fund, pursuant to an Investment
Management Agreement dated as of April 3, 1995, September 30, 1996, and December
27, 1996, respectively, and the Fund desires to retain the Investment Manager to
serve as the investment manager for this Series effective as of the date of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the Series' assets and to administer its affairs,
subject to the direction of the Board and officers of the Fund for the period
and on the terms hereinafter set forth. The Investment Manager hereby accepts
such employment and agrees during such period to render the services and assume
the obligations herein set forth for the compensation herein provided.
<PAGE>
The Investment Manager shall, for all purposes herein, be deemed to be an
independent contractor, shall not in any way be deemed an agent of the Fund and
shall, unless otherwise expressly provided and authorized, have no authority to
act for or represent the Fund in any way. The Investment Manager shall regularly
make decisions as to what securities to purchase and sell on behalf of the
Series, and shall give written instructions to the Trading Department maintained
by the Fund for implementation of such decisions, and shall furnish the Board of
Directors of the Fund with such information and reports regarding the Series'
investments as the Investment Manager deems appropriate or as the Directors of
the Fund may reasonably request.
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees. The Series shall bear all of its own organizational costs.
Directors, officers and employees of the Investment Manager
may be directors, officers and employees of the funds of which Delaware
Management Company, Inc. is Investment Manager. Directors, officers and
employees of the Investment Manager who are directors, officers and/or employees
of the funds shall not receive any compensation from the funds for acting in
such dual capacity.
In the conduct of the respective businesses of the parties
hereto and in the performance of this Agreement, the Fund and Investment Manager
may share facilities common to each, with appropriate proration of expenses
between them.
3. (a) The Fund shall place and execute its own orders for the purchase
and sale of portfolio securities with broker/dealers. Subject to the primary
objective of obtaining the best available prices and execution, the Fund will
place orders for the purchase and sale of portfolio securities with such
broker/dealers selected from among those designated from time to time by the
Investment Manager, who provide statistical, factual and financial information
and services to the Fund, to the Investment Manager, or to any other fund for
which the Investment Manager provides investment advisory services and/or with
broker/dealers who sell shares of the Fund or who sell shares of any other fund
for which the Investment Manager provides investment advisory services.
Broker/dealers who sell shares of the funds of which Delaware Management
Company, Inc. is investment manager, shall only receive orders for the purchase
or sale of portfolio securities to the extent that the placing of such orders is
in compliance with the Rules of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above
and subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Investment Manager may ask the Fund, and
-2-
<PAGE>
the Fund may agree, to pay a member of an exchange, broker or dealer an amount
of commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in such instances where it, and the Investment
Manager, have determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the Investment Manager's overall responsibilities with
respect to the Fund and to other funds or other advisory accounts for which the
Investment Manager exercises investment discretion.
4. As compensation for the services to be rendered to the Fund by the
Investment Manager under the provisions of this Agreement, the Fund shall pay to
the Investment Manager a fee calculated in accordance with the following
schedule:
Monthly Annual Rate Average Daily Net Assets
------- ----------- ------------------------
If this Agreement is terminated prior to the end of any calendar month,
the management fee shall be prorated for the portion of any month in which this
Agreement is in effect according to the proportion which the number of calendar
days during which the Agreement is in effect bears to the number of calendar
days in the month, and shall be payable within 10 days after the date of
termination.
5. The services to be rendered by the Investment Manager to the Fund
under the provisions of this Agreement are not to be deemed to be exclusive, and
the Investment Manager shall be free to render similar or different services to
others so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
6. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
-3-
<PAGE>
7. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of duties of the Investment Manager
to the Fund, the Investment Manager shall not be subject to liabilities to the
Fund or to any shareholder of the Fund for any action or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security, or otherwise.
8. This Agreement shall be executed and become effective as of the date
written below [if approved by the vote of a majority of the outstanding voting
securities of the Series]. It shall continue in effect for a period of two years
from such date and may be renewed thereafter only so long as such renewal and
continuance is specifically approved at least annually by the Board of Directors
of the Fund or by vote of a majority of the outstanding voting securities of the
Series and only if the terms and the renewal hereof have been approved by the
vote of a majority of the Directors of the Fund who are not parties hereto or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated by the Fund at any time, without the payment of a
penalty, on sixty days' written notice to the Investment Manager of the Fund's
intention to do so, pursuant to action by the Board of Directors of the Fund or
pursuant to vote of a majority of the outstanding voting securities of the
Series. The Investment Manager may terminate this Agreement at any time, without
the payment of penalty, on sixty days' written notice to the Fund of its
intention to do so. Upon termination of this Agreement, the obligations of all
the parties hereunder shall cease and terminate as of the date of such
termination, except for any obligation to respond for a breach of this Agreement
committed prior to such termination, and except for the obligation of the Fund
to pay to the Investment Manager the fee provided in paragraph 4 hereof,
prorated to the date of termination. This Agreement shall automatically
terminate in the event of its assignment.
9. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
10. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities;" "interested persons;" and "assignment"
shall have the meanings defined in the Investment Company Act of 1940.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by having it signed by their duly authorized officers as of the ____
day of _______________, 199_.
Attest: DELAWARE GROUP INCOME FUNDS, INC. for the
CORPORATE BOND FUND series
___________________________ By:______________________________________
Attest: DELAWARE MANAGEMENT COMPANY
___________________________ By:______________________________________
-5-
<PAGE>
EX-99.B5F
EXHIBIT 24(b)(5)(f)
FORM OF INVESTMENT MANAGEMENT AGREEMENT
DELAWARE GROUP INCOME FUNDS, INC.
EXTENDED DURATION BOND FUND
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP INCOME FUNDS, INC. (the
"Fund"), a Maryland corporation, for its EXTENDED DURATION BOND FUND series (the
"Series"), and DELAWARE MANAGEMENT COMPANY (the "Investment Manager"), a
Delaware business trust.
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 and engages in the
business of investing and reinvesting its assets in securities; and
WHEREAS, the Investment Manager is a registered Investment Adviser
under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and
WHEREAS, the Board of Directors and shareholders of the Fund have
determined to enter into a new Investment Management Agreement with the
Investment Manager to be effective as of the date hereof; and
WHEREAS, the Investment Manager serves as the investment manager for
the other series of the Fund, known as the Delchester Bond Fund, Strategic
Income Fund and High-Yield Opportunities Fund, pursuant to an Investment
Management Agreement dated as of April 3, 1995, September 30, 1996, and December
27, 1996, respectively, and the Fund desires to retain the Investment Manager to
serve as the investment manager for this Series effective as of the date of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the Series' assets and to administer its affairs,
subject to the direction of the Board and officers of the Fund for the period
and on the terms hereinafter set forth. The Investment Manager hereby accepts
such employment and agrees during such period to render the services and assume
the obligations herein set forth for the compensation herein provided.
<PAGE>
The Investment Manager shall, for all purposes herein, be deemed to be an
independent contractor, shall not in any way be deemed an agent of the Fund and
shall, unless otherwise expressly provided and authorized, have no authority to
act for or represent the Fund in any way. The Investment Manager shall regularly
make decisions as to what securities to purchase and sell on behalf of the
Series, and shall give written instructions to the Trading Department maintained
by the Fund for implementation of such decisions, and shall furnish the Board of
Directors of the Fund with such information and reports regarding the Series'
investments as the Investment Manager deems appropriate or as the Directors of
the Fund may reasonably request.
2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees. The Series shall bear all of its own organizational costs.
Directors, officers and employees of the Investment Manager
may be directors, officers and employees of the funds of which Delaware
Management Company, Inc. is Investment Manager. Directors, officers and
employees of the Investment Manager who are directors, officers and/or employees
of the funds shall not receive any compensation from the funds for acting in
such dual capacity.
In the conduct of the respective businesses of the parties
hereto and in the performance of this Agreement, the Fund and Investment Manager
may share facilities common to each, with appropriate proration of expenses
between them.
3. (a) The Fund shall place and execute its own orders for the purchase
and sale of portfolio securities with broker/dealers. Subject to the primary
objective of obtaining the best available prices and execution, the Fund will
place orders for the purchase and sale of portfolio securities with such
broker/dealers selected from among those designated from time to time by the
Investment Manager, who provide statistical, factual and financial information
and services to the Fund, to the Investment Manager, or to any other fund for
which the Investment Manager provides investment advisory services and/or with
broker/dealers who sell shares of the Fund or who sell shares of any other fund
for which the Investment Manager provides investment advisory services.
Broker/dealers who sell shares of the funds of which Delaware Management
Company, Inc. is investment manager, shall only receive orders for the purchase
or sale of portfolio securities to the extent that the placing of such orders is
in compliance with the Rules of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above
and subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the
-2-
<PAGE>
Fund, the Investment Manager may ask the Fund, and the Fund may agree, to pay a
member of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
in such instances where it, and the Investment Manager, have determined in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such member, broker or dealer,
viewed in terms of either that particular transaction or the Investment
Manager's overall responsibilities with respect to the Fund and to other funds
or other advisory accounts for which the Investment Manager exercises investment
discretion.
4. As compensation for the services to be rendered to the Fund by the
Investment Manager under the provisions of this Agreement, the Fund shall pay to
the Investment Manager a fee calculated in accordance with the following
schedule:
Monthly Annual Rate Average Daily Net Assets
------- ----------- ------------------------
If this Agreement is terminated prior to the end of any calendar month,
the management fee shall be prorated for the portion of any month in which this
Agreement is in effect according to the proportion which the number of calendar
days during which the Agreement is in effect bears to the number of calendar
days in the month, and shall be payable within 10 days after the date of
termination.
5. The services to be rendered by the Investment Manager to the Fund
under the provisions of this Agreement are not to be deemed to be exclusive, and
the Investment Manager shall be free to render similar or different services to
others so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
6. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
-3-
<PAGE>
7. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of duties of the Investment Manager
to the Fund, the Investment Manager shall not be subject to liabilities to the
Fund or to any shareholder of the Fund for any action or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security, or otherwise.
8. This Agreement shall be executed and become effective as of the date
written below [if approved by the vote of a majority of the outstanding voting
securities of the Series]. It shall continue in effect for a period of two years
from such date and may be renewed thereafter only so long as such renewal and
continuance is specifically approved at least annually by the Board of Directors
of the Fund or by vote of a majority of the outstanding voting securities of the
Series and only if the terms and the renewal hereof have been approved by the
vote of a majority of the Directors of the Fund who are not parties hereto or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated by the Fund at any time, without the payment of a
penalty, on sixty days' written notice to the Investment Manager of the Fund's
intention to do so, pursuant to action by the Board of Directors of the Fund or
pursuant to vote of a majority of the outstanding voting securities of the
Series. The Investment Manager may terminate this Agreement at any time, without
the payment of penalty, on sixty days' written notice to the Fund of its
intention to do so. Upon termination of this Agreement, the obligations of all
the parties hereunder shall cease and terminate as of the date of such
termination, except for any obligation to respond for a breach of this Agreement
committed prior to such termination, and except for the obligation of the Fund
to pay to the Investment Manager the fee provided in paragraph 4 hereof,
prorated to the date of termination. This Agreement shall automatically
terminate in the event of its assignment.
9. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
10. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities;" "interested persons;" and "assignment"
shall have the meanings defined in the Investment Company Act of 1940.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by having it signed by their duly authorized officers as of the ____
day of _______________, 199_.
Attest: DELAWARE GROUP INCOME FUNDS, INC. for the
EXTENDED DURATION BOND FUND series
__________________________ By:______________________________________
Attest: DELAWARE MANAGEMENT COMPANY
__________________________ By:______________________________________
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<PAGE>
EX-99.B6AV
Exhibit 24(b)(6)(a)(v)
Form
DELAWARE GROUP INCOME FUNDS, INC.
CORPORATE BOND FUND
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of this day of
September, 1998 by and between DELAWARE GROUP INCOME FUNDS, INC., a Maryland
Corporation (the "Fund"), for the CORPORATE BOND FUND series (the "Series"), and
DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware limited partnership.
WITNESSETH
WHEREAS, the Fund is an investment company regulated by Federal and
State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of promoting the
distribution of the securities of investment companies and, in connection
therewith and acting solely as agent for such investment companies and not as
principal, advertising, promoting, offering and selling their securities to the
public, and
WHEREAS, the Fund desires to enter into an agreement with the
Distributor on behalf of the Series, pursuant to which the Distributor shall
serve as the national distributor of the Series' Corporate Bond Fund A Class
("Class A Shares"), Corporate Bond Fund B Class ("Class B Shares"), Corporate
Bond Fund C Class ("Class C Shares"), and Corporate Bond Fund Institutional
Class ("Institutional Class Shares"), which Series and classes may do business
under these or such other names as the Board of Directors may designate from
time to time, on the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the distribution
of the Series' shares and, in connection therewith and as agent for
the Fund and not as principal, to advertise, promote, offer and sell
the Series' shares to the public.
2. (a) The Distributor agrees to serve as distributor of the Series'
shares and, as agent for the Fund and not as principal, to
advertise, promote and use its best efforts to sell the Series'
shares wherever their sale is legal, either through dealers or
otherwise, in such places and in such manner, not inconsistent
with the law and the provisions of this Agreement and the Fund's
Registration Statement under
<PAGE>
the Securities Act of 1933, including the Prospectuses and the
Statement of Additional Information contained therein, as may be
mutually determined by the Fund and the Distributor from time to
time.
(b) For the Institutional Class Shares, the Distributor will bear
all costs of financing any activity which is primarily intended
to result in the sale of that class of shares, including, but
not limited to, advertising, compensation of underwriters,
dealers and sales personnel, the printing and mailing of sales
literature and distribution of that class of shares.
(c) For its services as agent for the Class A Shares, Class B
Shares, and Class C Shares, the Distributor shall be entitled to
compensation on each sale or redemption, as appropriate, of
shares of such classes equal to any front-end or deferred sales
charge described in the Prospectus from time to time and may
allow concessions to dealers in such amounts and on such terms
as are therein set forth.
(d) For the Class A Shares, Class B Shares, and Class C Shares, the
Fund shall, in addition, compensate the Distributor for its
services as provided in the Distribution Plan as adopted on
behalf of the Class A Shares, Class B Shares, and Class C
Shares, respectively, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plans"), copies of which as
presently in force are attached hereto as, respectively, Exhibit
"A," "B," and "C."
3. (a) The Fund agrees to make available for sale by the Fund through
the Distributor all or such part of the authorized but unissued
shares of the Series as the Distributor shall require from time
to time and, except as provided in Paragraph 3(b) hereof, the
Fund will not sell Series' shares other than through the efforts
of the Distributor.
(b) The Fund reserves the right from time to time (1) to sell and
issue shares other than for cash; (2) to issue shares in
exchange for substantially all of the assets of any corporation
or trust, or in exchange of shares of any corporation or trust;
(3) to pay stock dividends to its shareholders, or to pay
dividends in cash or stock at the option of its stockholders, or
to sell stock to existing stockholders to the extent of
dividends payable from time to time in cash, or to split up or
combine its outstanding shares of common stock; (4) to offer
shares for cash to its stockholders as a whole, by the use of
transferable rights or otherwise, and to sell and issue shares
pursuant to such offers; and (5) to act as its own distributor
in any jurisdiction in which the Distributor is not registered
as a broker-dealer.
4. The Fund warrants the following:
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<PAGE>
(a) The Fund is, or will be, a properly registered investment
company, and any and all Series' shares which it will sell
through the Distributor are, or will be, properly registered
with the Securities and Exchange Commission ("SEC").
(b) The provisions of this Agreement do not violate the terms of any
instrument by which the Fund is bound, nor do they violate any
law or regulation of any body having jurisdiction over the Fund
or its property.
5. (a) The Fund will supply to the Distributor a conformed copy of the
Registration Statement and all amendments thereto, including all
exhibits and each Prospectus and Statement of Additional
Information.
(b) The Fund will register or qualify the Series' shares for sale in
such states as is deemed desirable.
(c) The Fund, without expense to the Distributor:
(1) will give and continue to give such financial statements and
other information as may be required by the SEC or the
proper public bodies of the states in which the Series'
shares may be qualified;
(2) from time to time, will furnish to the Distributor as soon
as reasonably practicable true copies of its periodic
reports to stockholders;
(3) will promptly advise the Distributor in person or by
telephone or telegraph, and promptly confirm such advice in
writing, (a) when any amendment or supplement to the
Registration Statement becomes effective, (b) of any request
by the SEC for amendments or supplements to the Registration
Statement or the Prospectuses or for additional information,
and (c) of the issuance by the SEC of any Stop Order
suspending the effectiveness of the Registration Statement,
or the initiation of any proceedings for that purpose;
(4) if at any time the SEC shall issue any Stop Order suspending
the effectiveness of the Registration Statement, will make
every reasonable effort to obtain the lifting of such order
at the earliest possible moment;
(5) will from time to time, use its best effort to keep a
sufficient supply of Series' shares authorized, any
increases being subject to the approval of shareholders as
may be required;
(6) before filing any further amendment to the Registration
Statement or to any Prospectus, will furnish to the
Distributor copies of the proposed amendment and will not,
at any time, whether before or after the effective date of
the Registration Statement, file any amendment to the
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<PAGE>
Registration Statement or supplement to any Prospectus of
which the Distributor shall not previously have been advised
or to which the Distributor shall reasonably object (based
upon the accuracy or completeness thereof) in writing;
(7) will continue to make available to its stockholders (and
forward copies to the Distributor) of such periodic, interim
and any other reports as are now, or as hereafter may be,
required by the provisions of the Investment Company Act of
1940; and
(8) will, for the purpose of computing the offering price of
Series' shares, advise the Distributor within one hour after
the close of the New York Stock Exchange (or as soon as
practicable thereafter) on each business day upon which the
New York Stock Exchange may be open of the net asset value
per share of the Series' shares of common stock outstanding,
determined in accordance with any applicable provisions of
law and the provisions of the Articles of Incorporation, as
amended, of the Fund as of the close of business on such
business day. In the event that prices are to be calculated
more than once daily, the Fund will promptly advise the
Distributor of the time of each calculation and the price
computed at each such time.
6. The Distributor agrees to submit to the Fund, prior to its use, the
form of all sales literature proposed to be generally disseminated
by or for the Distributor, all advertisements proposed to be used by
the Distributor, all sales literature or advertisements prepared by
or for the Distributor for such dissemination or for use by others
in connection with the sale of the Series' shares, and the form of
dealers' sales contract the Distributor intends to use in connection
with sales of the Series' shares. The Distributor also agrees that
the Distributor will submit such sales literature and advertisements
to the NASD, SEC or other regulatory agency as from time to time may
be appropriate, considering practices then current in the industry.
The Distributor agrees not to use such form of dealers' sales
contract or to use or to permit others to use such sales literature
or advertisements without the written consent of the Fund if any
regulatory agency expresses objection thereto or if the Fund
delivers to the Distributor a written objection thereto.
7. The purchase price of each share sold hereunder shall be the
offering price per share mutually agreed upon by the parties hereto
and, as described in the Fund's Prospectuses, as amended from time
to time, determined in accordance with any applicable provision of
law, the provisions of its Articles of Incorporation and the Conduct
Rules of the National Association of Securities Dealers, Inc.
8. The responsibility of the Distributor hereunder shall be limited to
the promotion of sales of Series' shares. The Distributor shall
undertake to promote such sales solely as agent of the Fund, and
shall not purchase or sell such shares as principal. Orders for
Series'
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<PAGE>
shares and payment for such orders shall be directed to the Fund's
agent, Delaware Service Company, Inc. for acceptance on behalf of
the Fund. The Distributor is not empowered to approve orders for
sales of Series' shares or accept payment for such orders. Sales of
Series' shares shall be deemed to be made when and where accepted by
Delaware Service Company, Inc. on behalf of the Fund.
9. With respect to the apportionment of costs between the Fund and the
Distributor of activities with which both are concerned, the
following will apply:
(a) The Fund and the Distributor will cooperate in preparing the
Registration Statements, the Prospectuses, the Statement of
Additional Information, and all amendments, supplements and
replacements thereto. The Fund will pay all costs incurred in
the preparation of the Fund's Registration Statement, including
typesetting, the costs incurred in printing and mailing
Prospectuses and Annual, Semi-Annual and other financial reports
to its own shareholders and fees and expenses of counsel and
accountants.
(b) The Distributor will pay the costs incurred in printing and
mailing copies of Prospectuses to prospective investors.
(c) The Distributor will pay advertising and promotional expenses,
including the costs of literature sent to prospective investors.
(d) The Fund will pay the costs and fees incurred in registering or
qualifying the Series' shares with the various states and with
the SEC.
(e) The Distributor will pay the costs of any additional copies of
Fund financial and other reports and other Fund literature
supplied to the Distributor by the Fund for sales promotion
purposes.
10. The Distributor may engage in other business, provided such other
business does not interfere with the performance by the Distributor
of its obligations under this Agreement.
11. The Fund agrees to indemnify, defend and hold harmless from the
assets of the Series the Distributor and each person, if any, who
controls the Distributor within the meaning of Section 15 of the
Securities Act of 1933, from and against any and all losses,
damages, or liabilities to which, jointly or severally, the
Distributor or such controlling person may become subject, insofar
as the losses, damages or liabilities arise out of the performance
of its duties hereunder, except that the Fund shall not be liable
for indemnification of the Distributor or any controlling person
thereof for any liability to the Fund or its security holders to
which they would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of
their duties under this Agreement.
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<PAGE>
12. Copies of financial reports, Registration Statements and
Prospectuses, as well as demands, notices, requests, consents,
waivers, and other communications in writing which it may be
necessary or desirable for either party to deliver or furnish to
the other will be duly delivered or furnished, if delivered to such
party at its address shown below during regular business hours, or
if sent to that party by registered mail or by prepaid telegram
filed with an office or with an agent of Western Union or another
nationally recognized telegraph service, in all cases within the
time or times herein prescribed, addressed to the recipient at 1818
Market Street, Philadelphia, Pennsylvania 19103, or at such other
address as the Fund or the Distributor may designate in writing and
furnish to the other.
13. This Agreement shall not be assigned, as that term is defined in
the Investment Company Act of 1940, by the Distributor and shall
terminate automatically in the event of its attempted assignment by
the Distributor. This Agreement shall not be assigned by the Fund
without the written consent of the Distributor signed by its duly
authorized officers and delivered to the Fund. Except as
specifically provided in the indemnification provision contained in
Paragraph 11 herein, this Agreement and all conditions and
provisions hereof are for the sole and exclusive benefit of the
parties hereto and their legal successors and no express or implied
provision of this Agreement is intended or shall be construed to
give any person other than the parties hereto and their legal
successors any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provisions herein contained.
14.(a) This Agreement shall remain in force for a period of two years
from the date hereof and from year to year thereafter, but only
so long as such continuance is specifically approved at least
annually by the Board of Directors or by vote of a majority of
the outstanding voting securities of the Series and only if the
terms and the renewal thereof have been approved by the vote of
a majority of the Directors of the Fund who are not parties
hereto or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval.
(b) The Distributor may terminate this Agreement on written notice
to the Fund at any time in case the effectiveness of the
Registration Statement shall be suspended, or in case Stop Order
proceedings are initiated by the SEC in respect of the
Registration Statement and such proceedings are not withdrawn or
terminated within thirty days. The Distributor may also
terminate this Agreement at any time by giving the Fund written
notice of its intention to terminate the Agreement at the
expiration of three months from the date of delivery of such
written notice of intention to the Fund.
(c) The Fund may terminate this Agreement at any time on at least
thirty days' prior written notice to the Distributor (1) if
proceedings are commenced by the Distributor or any of its
partners for the Distributor's liquidation or dissolution or the
winding up of the Distributor's affairs; (2) if a receiver or
trustee of the
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<PAGE>
Distributor or any of its property is appointed and such
appointment is not vacated within thirty days thereafter; (3)
if, due to any action by or before any court or any federal or
state commission, regulatory body, or administrative agency or
other governmental body, the Distributor shall be prevented from
selling securities in the United States or because of any action
or conduct on the Distributor's part, sales of the shares are
not qualified for sale. The Fund may also terminate this
Agreement at any time upon prior written notice to the
Distributor of its intention to so terminate at the expiration
of three months from the date of the delivery of such written
notice to the Distributor.
15. The validity, interpretation and construction of this Agreement,
and of each part hereof, will be governed by the laws of the
Commonwealth of Pennsylvania.
16. In the event any provision of this Agreement is determined to be
void or unenforceable, such determination shall not affect the
remainder of the Agreement, which shall continue to be in force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
Attest:
_____________________________ By:__________________________________
Name: Name:
Title: Title:
DELAWARE GROUP INCOME FUNDS, INC.,
for the CORPORATE BOND FUND
Attest:
_____________________________ By:__________________________________
Name: Name:
Title: Title:
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<PAGE>
EX-99.B6AVI
Exhibit 24(b)(6)(a)(vi)
Form
DELAWARE GROUP INCOME FUNDS, INC.
EXTENDED DURATION FUND
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of this day of
September, 1998 by and between DELAWARE GROUP INCOME FUNDS, INC., a Maryland
Corporation (the "Fund"), for the EXTENDED DURATION FUND series (the "Series"),
and DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware limited
partnership.
WITNESSETH
WHEREAS, the Fund is an investment company regulated by Federal and
State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of promoting the
distribution of the securities of investment companies and, in connection
therewith and acting solely as agent for such investment companies and not as
principal, advertising, promoting, offering and selling their securities to the
public, and
WHEREAS, the Fund desires to enter into an agreement with the
Distributor on behalf of the Series, pursuant to which the Distributor shall
serve as the national distributor of the Series' Extended Duration Fund A Class
("Class A Shares"), Extended Duration Fund B Class ("Class B Shares"), Extended
Duration Fund C Class ("Class C Shares"), and Extended Duration Fund
Institutional Class ("Institutional Class Shares"), which Series and classes may
do business under these or such other names as the Board of Directors may
designate from time to time, on the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the distribution
of the Series' shares and, in connection therewith and as agent for
the Fund and not as principal, to advertise, promote, offer and sell
the Series' shares to the public.
2. (a) The Distributor agrees to serve as distributor of the
Series' shares and, as agent for the Fund and not as
principal, to advertise, promote and use its best efforts to
sell the Series' shares wherever their sale is legal, either
through dealers or otherwise, in such places and in such
manner, not inconsistent with the law and the provisions of
this Agreement and the Fund's Registration Statement under
<PAGE>
the Securities Act of 1933, including the Prospectuses and
the Statement of Additional Information contained therein,
as may be mutually determined by the Fund and the
Distributor from time to time.
(b) For the Institutional Class Shares, the Distributor will bear
all costs of financing any activity which is primarily intended
to result in the sale of that class of shares, including, but
not limited to, advertising, compensation of underwriters,
dealers and sales personnel, the printing and mailing of sales
literature and distribution of that class of shares.
(c) For its services as agent for the Class A Shares, Class B
Shares, and Class C Shares, the Distributor shall be entitled to
compensation on each sale or redemption, as appropriate, of
shares of such classes equal to any front-end or deferred sales
charge described in the Prospectus from time to time and may
allow concessions to dealers in such amounts and on such terms
as are therein set forth.
(d) For the Class A Shares, Class B Shares, and Class C Shares, the
Fund shall, in addition, compensate the Distributor for its
services as provided in the Distribution Plan as adopted on
behalf of the Class A Shares, Class B Shares, and Class C
Shares, respectively, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "Plans"), copies of which as
presently in force are attached hereto as, respectively, Exhibit
"A," "B," and "C."
3. (a) The Fund agrees to make available for sale by the Fund through
the Distributor all or such part of the authorized but unissued
shares of the Series as the Distributor shall require from time
to time and, except as provided in Paragraph 3(b) hereof, the
Fund will not sell Series' shares other than through the efforts
of the Distributor.
(b) The Fund reserves the right from time to time (1) to sell and
issue shares other than for cash; (2) to issue shares in
exchange for substantially all of the assets of any corporation
or trust, or in exchange of shares of any corporation or trust;
(3) to pay stock dividends to its shareholders, or to pay
dividends in cash or stock at the option of its stockholders, or
to sell stock to existing stockholders to the extent of
dividends payable from time to time in cash, or to split up or
combine its outstanding shares of common stock; (4) to offer
shares for cash to its stockholders as a whole, by the use of
transferable rights or otherwise, and to sell and issue shares
pursuant to such offers; and (5) to act as its own distributor
in any jurisdiction in which the Distributor is not registered
as a broker-dealer.
4. The Fund warrants the following:
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<PAGE>
(a) The Fund is, or will be, a properly registered investment
company, and any and all Series' shares which it will sell
through the Distributor are, or will be, properly registered
with the Securities and Exchange Commission ("SEC").
(b) The provisions of this Agreement do not violate the terms of any
instrument by which the Fund is bound, nor do they violate any
law or regulation of any body having jurisdiction over the Fund
or its property.
5. (a) The Fund will supply to the Distributor a conformed copy of the
Registration Statement and all amendments thereto, including all
exhibits and each Prospectus and Statement of Additional
Information.
(b) The Fund will register or qualify the Series' shares for sale in
such states as is deemed desirable.
(c) The Fund, without expense to the Distributor:
(1) will give and continue to give such financial statements and
other information as may be required by the SEC or the
proper public bodies of the states in which the Series'
shares may be qualified;
(2) from time to time, will furnish to the Distributor as soon
as reasonably practicable true copies of its periodic
reports to stockholders;
(3) will promptly advise the Distributor in person or by
telephone or telegraph, and promptly confirm such advice in
writing, (a) when any amendment or supplement to the
Registration Statement becomes effective, (b) of any request
by the SEC for amendments or supplements to the Registration
Statement or the Prospectuses or for additional information,
and (c) of the issuance by the SEC of any Stop Order
suspending the effectiveness of the Registration Statement,
or the initiation of any proceedings for that purpose;
(4) if at any time the SEC shall issue any Stop Order suspending
the effectiveness of the Registration Statement, will make
every reasonable effort to obtain the lifting of such order
at the earliest possible moment;
(5) will from time to time, use its best effort to keep a
sufficient supply of Series' shares authorized, any
increases being subject to the approval of shareholders as
may be required;
(6) before filing any further amendment to the Registration
Statement or to any Prospectus, will furnish to the
Distributor copies of the proposed amendment and will not,
at any time, whether before or after the effective date of
the Registration Statement, file any amendment to the
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<PAGE>
Registration Statement or supplement to any Prospectus of
which the Distributor shall not previously have been advised
or to which the Distributor shall reasonably object (based
upon the accuracy or completeness thereof) in writing;
(7) will continue to make available to its stockholders (and
forward copies to the Distributor) of such periodic, interim
and any other reports as are now, or as hereafter may be,
required by the provisions of the Investment Company Act of
1940; and
(8) will, for the purpose of computing the offering price of
Series' shares, advise the Distributor within one hour after
the close of the New York Stock Exchange (or as soon as
practicable thereafter) on each business day upon which the
New York Stock Exchange may be open of the net asset value
per share of the Series' shares of common stock outstanding,
determined in accordance with any applicable provisions of
law and the provisions of the Articles of Incorporation, as
amended, of the Fund as of the close of business on such
business day. In the event that prices are to be calculated
more than once daily, the Fund will promptly advise the
Distributor of the time of each calculation and the price
computed at each such time.
6. The Distributor agrees to submit to the Fund, prior to its use, the
form of all sales literature proposed to be generally disseminated
by or for the Distributor, all advertisements proposed to be used by
the Distributor, all sales literature or advertisements prepared by
or for the Distributor for such dissemination or for use by others
in connection with the sale of the Series' shares, and the form of
dealers' sales contract the Distributor intends to use in connection
with sales of the Series' shares. The Distributor also agrees that
the Distributor will submit such sales literature and advertisements
to the NASD, SEC or other regulatory agency as from time to time may
be appropriate, considering practices then current in the industry.
The Distributor agrees not to use such form of dealers' sales
contract or to use or to permit others to use such sales literature
or advertisements without the written consent of the Fund if any
regulatory agency expresses objection thereto or if the Fund
delivers to the Distributor a written objection thereto.
7. The purchase price of each share sold hereunder shall be the
offering price per share mutually agreed upon by the parties hereto
and, as described in the Fund's Prospectuses, as amended from time
to time, determined in accordance with any applicable provision of
law, the provisions of its Articles of Incorporation and the Conduct
Rules of the National Association of Securities Dealers, Inc.
8. The responsibility of the Distributor hereunder shall be limited to
the promotion of sales of Series' shares. The Distributor shall
undertake to promote such sales solely as agent of the Fund, and
shall not purchase or sell such shares as principal. Orders for
Series'
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<PAGE>
shares and payment for such orders shall be directed to the Fund's
agent, Delaware Service Company, Inc. for acceptance on behalf of
the Fund. The Distributor is not empowered to approve orders for
sales of Series' shares or accept payment for such orders. Sales of
Series' shares shall be deemed to be made when and where accepted by
Delaware Service Company, Inc. on behalf of the Fund.
9. With respect to the apportionment of costs between the Fund and the
Distributor of activities with which both are concerned, the
following will apply:
(a) The Fund and the Distributor will cooperate in preparing the
Registration Statements, the Prospectuses, the Statement of
Additional Information, and all amendments, supplements and
replacements thereto. The Fund will pay all costs incurred in
the preparation of the Fund's Registration Statement, including
typesetting, the costs incurred in printing and mailing
Prospectuses and Annual, Semi-Annual and other financial reports
to its own shareholders and fees and expenses of counsel and
accountants.
(b) The Distributor will pay the costs incurred in printing and
mailing copies of Prospectuses to prospective investors.
(c) The Distributor will pay advertising and promotional expenses,
including the costs of literature sent to prospective investors.
(d) The Fund will pay the costs and fees incurred in registering or
qualifying the Series' shares with the various states and with
the SEC.
(e) The Distributor will pay the costs of any additional copies of
Fund financial and other reports and other Fund literature
supplied to the Distributor by the Fund for sales promotion
purposes.
10. The Distributor may engage in other business, provided such other
business does not interfere with the performance by the Distributor
of its obligations under this Agreement.
11. The Fund agrees to indemnify, defend and hold harmless from the
assets of the Series the Distributor and each person, if any, who
controls the Distributor within the meaning of Section 15 of the
Securities Act of 1933, from and against any and all losses,
damages, or liabilities to which, jointly or severally, the
Distributor or such controlling person may become subject, insofar
as the losses, damages or liabilities arise out of the performance
of its duties hereunder, except that the Fund shall not be liable
for indemnification of the Distributor or any controlling person
thereof for any liability to the Fund or its security holders to
which they would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of
their duties under this Agreement.
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<PAGE>
12. Copies of financial reports, Registration Statements and
Prospectuses, as well as demands, notices, requests, consents,
waivers, and other communications in writing which it may be
necessary or desirable for either party to deliver or furnish to
the other will be duly delivered or furnished, if delivered to such
party at its address shown below during regular business hours, or
if sent to that party by registered mail or by prepaid telegram
filed with an office or with an agent of Western Union or another
nationally recognized telegraph service, in all cases within the
time or times herein prescribed, addressed to the recipient at 1818
Market Street, Philadelphia, Pennsylvania 19103, or at such other
address as the Fund or the Distributor may designate in writing and
furnish to the other.
13. This Agreement shall not be assigned, as that term is defined in
the Investment Company Act of 1940, by the Distributor and shall
terminate automatically in the event of its attempted assignment by
the Distributor. This Agreement shall not be assigned by the Fund
without the written consent of the Distributor signed by its duly
authorized officers and delivered to the Fund. Except as
specifically provided in the indemnification provision contained in
Paragraph 11 herein, this Agreement and all conditions and
provisions hereof are for the sole and exclusive benefit of the
parties hereto and their legal successors and no express or implied
provision of this Agreement is intended or shall be construed to
give any person other than the parties hereto and their legal
successors any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provisions herein contained.
14. (a) This Agreement shall remain in force for a period of two years
from the date hereof and from year to year thereafter, but only
so long as such continuance is specifically approved at least
annually by the Board of Directors or by vote of a majority of
the outstanding voting securities of the Series and only if the
terms and the renewal thereof have been approved by the vote of
a majority of the Directors of the Fund who are not parties
hereto or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval.
(b) The Distributor may terminate this Agreement on written notice
to the Fund at any time in case the effectiveness of the
Registration Statement shall be suspended, or in case Stop
Order proceedings are initiated by the SEC in respect of the
Registration Statement and such proceedings are not withdrawn
or terminated within thirty days. The Distributor may also
terminate this Agreement at any time by giving the Fund written
notice of its intention to terminate the Agreement at the
expiration of three months from the date of delivery of such
written notice of intention to the Fund.
(c) The Fund may terminate this Agreement at any time on at least
thirty days' prior written notice to the Distributor (1) if
proceedings are commenced by the Distributor or any of its
partners for the Distributor's liquidation or dissolution or
the winding up of the Distributor's affairs; (2) if a receiver
or trustee of the
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<PAGE>
Distributor or any of its property is appointed and such
appointment is not vacated within thirty days thereafter; (3)
if, due to any action by or before any court or any federal or
state commission, regulatory body, or administrative agency or
other governmental body, the Distributor shall be prevented
from selling securities in the United States or because of any
action or conduct on the Distributor's part, sales of the
shares are not qualified for sale. The Fund may also terminate
this Agreement at any time upon prior written notice to the
Distributor of its intention to so terminate at the expiration
of three months from the date of the delivery of such written
notice to the Distributor.
15. The validity, interpretation and construction of this Agreement,
and of each part hereof, will be governed by the laws of the
Commonwealth of Pennsylvania.
16. In the event any provision of this Agreement is determined to be
void or unenforceable, such determination shall not affect the
remainder of the Agreement, which shall continue to be in force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
Attest:
_____________________________ By:___________________________________
Name: Name:
Title: Title:
DELAWARE GROUP INCOME FUNDS, INC.,
for the EXTENDED DURATION FUND
Attest:
_____________________________ By:___________________________________
Name: Name:
Title: Title:
-7-
<PAGE>
EX-99.B8E
EXHIBIT 24 (b)(8)(e)
As of December 27, 1996
VIA UPS OVERNIGHT
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Re: Global Custody Agreement, Effective May 1, 1996
between The Chase Manhattan Bank and those registered
investment companies (and on behalf of certain series
thereof), listed on Schedule A attached thereto
("Agreement")
------------------------------------------------------
Ladies and Gentlemen:
Pursuant to the provisions of Section 1 of the Agreement, the undersigned, on
behalf of Delaware Group Income Funds, Inc. (formerly, Delaware Group Delchester
High-Yield Bond Fund, Inc.) for the benefit of the High-Yield Opportunities Fund
series ("Series") hereby appoints The Chase Manhattan Bank to provide custodial
services for the Series under and in accordance with the terms of the Agreement
and accordingly, requests that the Series be added to Schedule A to the
Agreement effective December 27, 1996. Kindly acknowledge your agreement to
provide such services and to add the Series to Schedule A by signing in the
space provided below.
DELAWARE GROUP INCOME FUNDS, INC.
on behalf of High-Yield
Opportunities Fund series
/s/David K. Downes
By:___________________________
David K. Downes
Its: Senior Vice President
Chief Administrative Officer
Chief Financial Officer
AGREED:
THE CHASE MANHATTAN BANK
/s/Rosemary M. Stidmon
By:________________________
Rosemary M. Stidmon
Its: Vice President
--------------
<PAGE>
EX-99.B8F
EXHIBIT 24(b)(8)(f)
Form
As of September , 1998
VIA UPS OVERNIGHT
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Re: Global Custody Agreement, Effective May 1, 1996
between The Chase Manhattan Bank and those registered
investment companies (and on behalf of certain series
thereof), listed on Schedule A attached thereto
("Agreement")
------------------------------------------------------
Ladies and Gentlemen:
Pursuant to the provisions of Section 1 of the Agreement, the undersigned, on
behalf of Delaware Group Income Funds, Inc. (formerly, Delaware Group Delchester
High-Yield Bond Fund, Inc.) for the benefit of the Corporate Bond Fund series
and the Extended Duration Bond series ("Series") hereby appoints The Chase
Manhattan Bank to provide custodial services for the two Series under and in
accordance with the terms of the Agreement and accordingly, requests that the
two Series be added to Schedule A to the Agreement effective September , 1998.
Kindly acknowledge your agreement to provide such services and to add these
Series to Schedule A by signing in the space provided below.
DELAWARE GROUP INCOME FUNDS, INC.
on behalf of Corporate Bond Fund
series and Extended Duration Bond
Fund series
By:___________________________
David K. Downes
Its: Executive Vice President
Chief Operating Officer
Chief Financial Officer
AGREED:
THE CHASE MANHATTAN BANK
By:_____________________
Its:____________________
<PAGE>
EX-99.B9B
EXHIBIT 24(b)(9)(b)
Form
DELAWARE GROUP INCOME FUNDS, INC.
DELCHESTER FUND SERIES
STRATEGIC INCOME FUND SERIES
HIGH-YIELD OPPORTUNITIES SERIES
CORPORATE BOND FUND SERIES
EXTENDED DURATION BOND FUND SERIES
THIRD AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of the day of September, 1998 by and between
DELAWARE GROUP INCOME FUNDS, INC. ("Fund"), a Maryland corporation, for the
DELCHESTER FUND series, the STRATEGIC INCOME FUND, the HIGH-YIELD OPPORTUNITIES
series, the CORPORATE BOND FUND series, and the EXTENDED DURATION BOND FUND
series (together, the "Series"), and DELAWARE SERVICE COMPANY, INC. ("DSC"), a
Delaware corporation.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Fund on
behalf of the Series and Delaware Management Company provide that the Fund shall
conduct its own business affairs and shall bear the expenses and salaries
necessary and incidental thereto including, but not in limitation of the
foregoing, the costs incurred in: the maintenance of its corporate existence;
the maintenance of its own books, records and procedures; dealing with its own
shareholders; the payment of dividends; transfers of stock, including issuance,
redemption and repurchase of shares; preparation of share certificates; reports
and notices to stockholders; calling and holding of stockholders' meetings;
miscellaneous office expenses; brokerage commissions; custodian fees; legal and
accounting fees; taxes; and federal and state registration fees; and
WHEREAS, the FUND and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor;
and
WHEREAS, the Fund and DSC previously entered into a Shareholders
Services Agreement dated as of June 29, 1988 (the "1998 Agreement"), providing
for the provision of services to the Delchester Fund series;
WHEREAS, the Fund and DSC amended the 1988 Agreement on October 30,
1996 ("First Amended and Restated Shareholders Services Agreement") to add the
Strategic Income Fund series;
WHEREAS, the Fund and DSC amended the October 30, 1996 ("Second Amended
and Restated Shareholder Services Agreement") to add the High-Yield
Opportunities Fund series; and
WHEREAS, the Fund and DSC wish to amend the Second Amended and Restated
Agreement to add the Corporate Bond Fund series and the Extended Duration Bond
Fund series;
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
1.1 The Fund hereby appoints DSC Shareholder Services Agent for the
Series to provide as agent for the Fund services as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent and DSC hereby accepts such
appointment and agrees to provide the Fund, as its agent, the services described
herein.
1.2 The Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. The
Fund also shall reimburse DSC for expenses incurred or advanced by it for the
Fund in connection with its services hereunder.
II. DOCUMENTATION
2.1 The Fund represents that it has provided or made available to DSC
(or has given DSC an opportunity to examine) copies of, and DSC represents that
it has received from the Fund (or is otherwise familiar with), the following
documents:
(a) The Articles of Incorporation or other documents
evidencing the Fund's form of organization and any current amendments or
supplements thereto;
(b) The By-Laws of the Fund;
(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, including those relating
to the Series, or altering or abolishing such class or series;
(d) A certified copy of a resolution of the Board of Directors
of the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;
(e) The forms of share certificates for the Series in the form
approved by the Board of Directors of the Fund;
(f) A copy of the Fund's currently effective Prospectuses and
Statement of Additional Information under the Securities Act of 1933, if
effective;
(g) Copies of all account application forms and other
documents relating to stockholder accounts in the Series;
(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including periodic payment or
withdrawal plans, reinvestment plans or retirement plans, if any;
-2-
<PAGE>
(i) Any opinion of counsel to the Fund relating to the
authorization and validity of the shares of the Series issued or proposed to be
issued under the law of the State of the Fund's organization, including the
status thereof under any applicable securities laws;
(j) A certified copy of any resolution of the Board of
Directors of the Fund authorizing any person to give instructions to DSC under
this Agreement (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and
(k) Any amendment, revocation or other documents altering,
adding, qualifying or repealing any document or authority called for under this
Section 2.1.
2.2 The Fund and DSC may consult as to forms or documents that may be
required in performing services hereunder.
2.3 The Fund shall provide or make available to DSC a certified copy of
any resolution of the stockholders or the Board of Directors of the Fund
providing for a dividend, capital gains distribution, distribution of capital,
stock dividend, stock split or other similar action affecting the authorization
or issuance of shares of the Series or the payment of dividends.
2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificates or the books recording the
same, the Fund shall deliver or make available to DSC:
(a) A certified copy of any document authorizing or effecting
such change;
(b) Written instructions from an authorized officer
implementing such change; and
(c) An opinion of counsel to the Fund as to the validity of
such action, if requested by DSC.
2.5 The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment
company under the Investment Company Act of 1940 and any and all Series shares
which it issues will be properly registered and lawfully issued under applicable
federal and state laws.
(b) The provisions of this Agreement do not violate the terms
of any instrument by which the Fund is bound; nor do they violate any law or
regulation of any body having jurisdiction over the Fund or its property.
2.6 DSC warrants the following:
(a) DSC is and will be properly registered as a transfer agent
under the Securities Exchange Act of 1934 and is duly authorized to serve, and
may lawfully serve as such.
(b) The provisions of this Agreement do not violate the terms
of any instrument by which DSC is bound; nor do they violate any law or
regulation of any body having jurisdiction over DSC or its property.
-3-
<PAGE>
III. STOCK CERTIFICATES
3.1 The Fund shall furnish or authorize DSC to obtain, at the Fund's
expense, a sufficient supply of blank stock certificates for the Series, and
from time to time will replenish such supply upon the request of DSC. The Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this Section.
3.2 DSC shall safeguard, and shall account to the Fund, upon its demand
for, all such stock certificates: (a) as issued, showing to whom issued, or (b)
as unissued, establishing the safekeeping, cancellation or destruction thereof.
3.3 The Fund shall promptly inform DSC in writing of any change in the
officers authorized to sign stock certificates or in the form thereof. If an
officer whose manual or facsimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such certificate notwithstanding such
death, resignation or removal, and the Fund shall with respect thereto promptly
provide to DSC any approval, adoption or ratification as may be required by DSC.
IV. TRANSFER AGENT
4.1 As Transfer Agent for the Fund, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
(a) Upon receipt of authority to issue shares, determine the
total shares to be issued and issue such shares by crediting shares to accounts
created and maintained in the registration forms provided; as applicable,
prepare, issue and deliver stock certificates.
(b) Upon proper transfer authorization, transfer shares by
debiting transferor-stockholder accounts and crediting such shares to accounts
created and/or maintained for transferee-stockholders; if applicable, issue
and/or cancel stock certificates.
(c) Upon proper redemption authorization, determine the total
shares redeemed and to be redeemed; determine the total redemption payments made
and to be made; redeem shares by debiting stockholder accounts; as applicable,
receive and cancel stock certificates for shares redeemed; and remit or cause to
be remitted the redemption proceeds to stockholders.
(d) Create and maintain accounts; reconcile and control cash
due and paid, shares issued and to be issued, cash remitted and to be remitted
and shares debited and credited to accounts; provide such notices, instructions
or authorizations as the Fund may require.
4.2 DSC shall not be required to issue, transfer or redeem Series
shares upon receipt of DSC from the Fund, or from any federal or state
regulatory agency or authority, written notice that the issuance, transfer or
redemption of Series shares has been suspended or discontinued.
-4-
<PAGE>
V. DIVIDEND DISBURSING AGENT
5.1 As Dividend Disbursing Agent for the Fund, DSC shall disburse and
cause to be disbursed to stockholders of each Series dividends, capital gains
distributions or any payments from other sources as directed by the Fund. In
connection therewith, but not in limitation thereof, DSC shall:
(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.
(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.
(c) Calculate the total disbursement for each stockholder of
each Series, as aforesaid, for which shares are to be issued and authorized and
instruct the issuance of such shares in accordance with Section IV hereof.
(d) Prepare and mail or deliver such forms and notices
pertaining to disbursements as required by federal or state authority.
(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.
5.2 DSC shall not be required to make any disbursement upon the receipt
of DSC from the Fund, or from any federal or state agency or authority, written
notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
6.1 As Shareholder Servicing Agent for the Fund, DSC shall provide
those services ancillary to but in implementation of the services provided under
Sections I through V hereof, and those generally defined and accepted as
shareholder services. In connection therewith, but not in limitation thereof,
DSC shall:
(a) Except where instructed in writing by the Fund not to do
so, and where in compliance with applicable law, accept orders on behalf of the
Fund; receive and process investments and applications; remit to the Fund or its
custodian payments for shares acquired and to be issued; and direct the issuance
of shares in accordance with Section IV hereof.
(b) Receive, record and respond to communications of
stockholders and their agents.
(c) As instructed by the Fund, prepare and mail stockholder
account information, mail Series stockholder reports and Series prospectuses.
(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.
-5-
<PAGE>
(e) Administer investment plans offered by the Fund to
investors and stockholders of each Series, including retirement plans, including
activities not otherwise provided in Sections I through V of this Agreement
VII. PERFORMANCE OF DUTIES
7.1 The parties hereto intend that Series stockholders and their
stockholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as instructed by the
Fund.
7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.
7.3 DSC may request or receive instructions from the Fund and may, at
the Fund's expense, consult with counsel for the Fund or its own counsel with
respect to any matter arising in connection with the performance of its duties
hereunder, and shall not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or opinions of counsel.
7.4 DSC shall maintain reasonable insurance coverage for errors and
omissions and reasonable bond coverage for fraud.
7.5 Upon notice thereof to the Fund, DSC may employ others to provide
services to DSC in its performance of this Agreement.
7.6 Personnel and facilities of DSC used to perform services hereunder
may be used to perform similar services to other funds of the Delaware Group and
to others, and may be used to perform other services for the Fund, the other
funds of the Delaware Group and others.
7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. Further, the parties intend that the processes,
procedures, safeguard and controls employed should be those generally applied
and accepted for the type services provided hereunder by other institutions
providing the same or similar services, and, those which should provide
efficient, safe and economical services so as to promote promptness and accuracy
and to maintain the integrity of the Fund's records.
7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.
VIII. COMPENSATION
8.1 The Fund and DSC acknowledge that because DSC has common ownership
and close management ties with the Fund's investment advisor and the Fund's
distributor and serves the other funds of the Delaware Group (DSC having been
originally established to provide the services hereunder for the funds
-6-
<PAGE>
of the Delaware Group), advantages and benefits to the Fund in the employment of
DSC hereunder can be available which may not generally be available to it from
others providing similar services.
8.2 The Fund and DSC further acknowledge that the compensation by the
Fund to DSC is intended to induce DSC to provide services under this Agreement
of a nature and quality which the Board of Directors of the Fund, including a
majority who are not parties to this Agreement or interested persons of the
parties hereto, has determined after due consideration to be necessary for the
conduct of the business of the Fund, in the best interests of the Fund, the
Series and their stockholders.
8.3 Compensation by the Fund to DSC hereunder shall be determined in
accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.
8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of
Directors of the Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request, and DSC shall
provide, such information as the Board may reasonably require to evaluate the
basis of and approve the compensation.
IX. STANDARD OF CARE
9.1 The Fund acknowledges that DSC shall not be liable for, and in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this Agreement, agrees to
indemnify DSC against, any claim or deficiency arising from the performance of
DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigating or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by the Fund.
X. CONTRACTUAL STATUS
10.1 This Agreement shall be executed and become effective on the date
first written above if approved by a vote of the Board of Directors of the Fund,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in person at a meeting called for the purpose of voting on such
approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Directors of
the Fund, including an affirmative vote of the majority of the non-interested
members of the Board cast in person at a meeting called for the purpose of
voting on such approval.
-7-
<PAGE>
10.2 This Agreement may not be assigned without the approval of the
Fund.
10.3 This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
Attest: ______________________ By:__________________________________
Name: Name:
Title: Title:
DELAWARE GROUP INCOME FUNDS, INC.
for the DELCHESTER FUND series,
the STRATEGIC INCOME FUND series, the
HIGH-YIELD OPPORTUNITIES FUND series, thE
CORPORATE BOND FUND series and the
EXTENDED DURATION BOND FUND series
Attest: ______________________ By:__________________________________
Name: Name:
Title: Title:
-8-
<PAGE>
SCHEDULE A
DELAWARE GROUP INCOME FUNDS, INC.
THIRD AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
-9-
<PAGE>
SCHEDULE A
DELAWARE GROUP INCOME FUNDS, INC.
THIRD AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT
COMPENSATION SCHEDULE
PAGE 2
-10-
<PAGE>
EX-99.B9CI
Exhibit 24 (b)(9)(c)(i)
AMENDMENT NO.7
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New) The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of October 14, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
----------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/Wayne A. Stork
----------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9CII
Exhibit 24(b)(9)(c)(ii)
AMENDMENT NO. 8
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of December 18, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/David K. Downes
----------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
-------------------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9CIII
EXHIBIT 24 (b)(9)(c)(iii)
AMENDMENT NO. 9
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of March 31, 1998
DELAWARE SERVICE COMPANY, INC.
By: /s/David K. Downes
-----------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
----------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9CIV
EXHIBIT 24(b)(9)(c)(iv)
Form
AMENDMENT NO. 10
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Social Awareness Fund (formerly Quantum Fund) (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
The Small-Cap Growth Equity Portfolio (New)
The Growth and Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly Value Series)
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur US Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of August , 1998
DELAWARE SERVICE COMPANY, INC.
By:
--------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By:
----------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9CV
Exhibit 24(b)(9)(c)(v)
Form
AMENDMENT NO. 11
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
The Small-Cap Growth Equity Portfolio (New)
The Growth and Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly Value Series)
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur US Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of August , 1998
DELAWARE SERVICE COMPANY, INC.
By:
---------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By:
-----------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9CVI
Exhibit 24(b)(9)(c)(vi)
Form
AMENDMENT NO. 12
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Corporate Bond Fund (New)
Extended Duration Bond Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
The Small-Cap Growth Equity Portfolio (New)
The Growth and Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly Value Series)
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur US Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of September , 1998
DELAWARE SERVICE COMPANY, INC.
By:
---------------------------------------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By:
----------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B10
Exhibit 24(b)(10)
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
June 26, 1998
Delaware Group Income Funds, Inc.
1818 Market Street
Philadelphia, PA 19103
Re: Legal Opinion-Securities Act of 1933
Ladies and Gentlemen:
We have examined the Articles of Incorporation, as amended and supplemented (the
"Articles") of Delaware Group Income Funds, Inc. (the "Fund"), a series
corporation organized under Maryland law on March 4, 1983, the By-Laws of the
Fund, all as amended to date, and the various pertinent corporate proceedings we
deem material. We have also examined the Notification of Registration and the
Registration Statements filed under the Investment Company Act of 1940 (the
"Investment Company Act") and the Securities Act of 1933 (the "Securities Act"),
all as amended to date, as well as other items we deem material to this opinion.
The Fund is authorized by the Articles to issue one billion (1,000,000,000)
shares of common stock at a par value of $1.00 and currently issues shares of
the Delchester Fund, the High-Yield Opportunities Fund, the Strategic Income
Fund and intends to issue shares of the Intermediate Bond Fund and the Corporate
Bond Fund. The Articles also empower the Board to designate any additional
series or classes and allocate shares to such series or classes.
The Fund has filed with the U.S. Securities and Exchange Commission, a
registration statement under the Securities Act, which registration statement is
deemed to register an indefinite number of shares of the Fund pursuant to the
provisions of Section 24(f) of the Investment Company Act. You have further
advised us that the Fund has filed, and each year hereafter will timely file, a
Notice pursuant to Rule 24f-2 under the Investment Company Act perfecting the
registration of the shares sold by the Fund during each fiscal year during which
such registration of an indefinite number of shares remains in effect.
You have also informed us that the shares of the Fund have been, and will
continue to be, sold in accordance with the Fund's usual method of distributing
its registered shares, under which prospectuses are made available for delivery
to offerees and purchasers of such shares in accordance with Section 5(b) of the
Securities Act.
<PAGE>
Based upon the foregoing information and examination, so long as the Fund
remains a valid and subsisting entity under the laws of its state of
organization, and the registration of an indefinite number of shares of the Fund
remains effective, the authorized shares of the Fund when issued for the
consideration set by the Board of Directors pursuant to the Articles, and
subject to compliance with Rule 24f-2, will be legally outstanding, fully-paid,
and non-assessable shares, and the holders of such shares will have all the
rights provided for with respect to such holding by the Articles and the laws of
the State of Maryland.
We hereby consent to the use of this opinion, in lieu of any other, as an
exhibit to the Registration Statement of the Fund, along with any amendments
thereto, covering the registration of the shares of the Fund under the
Securities Act and the applications, registration statements or notice filings,
and amendments thereto, filed in accordance with the securities laws of the
several states in which shares of the Fund are offered, and we further consent
to reference in the registration statement of the Fund to the fact that this
opinion concerning the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY: /s/ Bruce G. Leto
--------------------------------
Bruce G. Leto
<PAGE>
EX-99.B15G
EXHIBIT 24(b)(15)(g)
EXHIBIT A
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
HIGH-YIELD OPPORTUNITIES FUND
HIGH-YIELD OPPORTUNITIES FUND A CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-l under the Investment Company Act of l940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the High-Yield Opportunities Fund
series (the "Series") on behalf of the High-Yield Opportunities Fund A Class
("Class"), which Fund, Series and Class may do business under these or such
other names as the Board of Directors of the Fund may designate from time to
time. The Plan has been approved by a majority of the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Directors"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the Directors included a determination that in the exercise of reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Plan has been adopted prior to any public offering of the Class.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").
The Plan provides that:
l. The Fund shall pay to the Distributor a monthly fee not to exceed
0.30% (3/10 of l%) per annum of the Series' average daily net assets represented
by shares of the Class (the "Maximum Amount") as may be determined by the Fund's
Board of Directors from time to time. Such monthly fee shall be reduced by the
aggregate sums paid by the Fund on behalf of the Series to persons other than
broker-dealers (the "Service Providers") who may, pursuant to servicing
agreements, provide to the Series services in the Series' marketing of shares of
the Class.
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph l above to furnish, or cause or encourage others to furnish, services
and incentives in connection with the promotion, offering and sale of Class
shares and, where suitable and appropriate, the retention of Class shares by
shareholders.
(b) The Service Providers shall use the monies paid respectively to
them to reimburse themselves for the actual costs they have incurred in
confirming that their customers have received the Prospectus and Statement of
Additional Information, if applicable, and as a fee for (l) assisting such
customers in maintaining proper records with the Fund, (2) answering questions
relating to their respective accounts, and (3) aiding in maintaining the
investment of their respective customers in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Fund monthly and in writing of the amounts each
claims under the Plan; both the Distributor and the Service Providers shall
furnish the Board of Directors of the Fund with such other information as the
Board may reasonably request in connection with the payments made under the Plan
and the use thereof by the Distributor and the Service Providers, respectively,
in order to enable the Board to make an informed determination of the amount of
the Fund's payments and whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Directors of
the Fund, and of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph l hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
<PAGE>
This Plan shall take effect on the Commencement Date, as previously
defined.
December 27, 1996
<PAGE>
EX-99.B15H
EXHIBIT 24(b)(15)(h)
EXHIBIT B
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
HIGH-YIELD OPPORTUNITIES FUND
HIGH-YIELD OPPORTUNITIES FUND B CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the High-Yield Opportunities Fund
series (the "Series") on behalf of the High-Yield Opportunities Fund B Class
(the "Class"), which Fund, Series and Class may do business under these or such
other names as the Board of Directors of the Fund may designate from time to
time. The Plan has been approved by a majority of the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Directors"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the Directors included a determination that in the exercise of reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Plan has been adopted prior to any public offering of the Class.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.
(b) In addition to the amounts described in (a) above, the Fund
shall pay (i) to the Distributor for payment to dealers or others, or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
December 27, 1996
<PAGE>
EX-99.B15I
EXHIBIT 24(b)(15)(i)
EXHIBIT C
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
HIGH-YIELD OPPORTUNITIES FUND
HIGH-YIELD OPPORTUNITIES FUND C CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the High-Yield Opportunities Fund
series (the "Series) on behalf of the High-Yield Opportunities Fund C Class (the
"Class"), which Fund, Series and Class may do business under these or such other
names as the Board of Directors of the Fund may designate from time to time. The
Plan has been approved by a majority of the Board of Directors, including a
majority of the Directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related thereto ("non-interested Directors"), cast in person at a
meeting called for the purpose of voting on such Plan. Such approval by the
Directors included a determination that in the exercise of reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Plan has been adopted prior to any public offering of the Class.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.
(b) In addition to the amounts described in paragraph 1(a) above,
the Fund shall pay: (i) to the Distributor for payment to dealers or others or
(ii) directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of
the Series' average daily net assets represented by shares of the Class,
as a service fee pursuant to dealer or servicing agreements.
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non- interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
<PAGE>
This Plan shall take effect on the Commencement Date, as previously
defined.
December 27, 1996
<PAGE>
EX-99.B15J
Exhibit 24(b)(15)(j)
Form
EXHIBIT A
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
CORPORATE BOND FUND
CORPORATE BOND FUND A CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-l under the Investment Company Act of l940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the Corporate Bond Fund series (the
"Series") on behalf of the Corporate Bond Fund A Class ("Class"), which Fund,
Series and Class may do business under these or such other names as the Board of
Directors of the Fund may designate from time to time. The Plan has been
approved by a majority of the Board of Directors, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been adopted
prior to any public offering of the Class.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company serves as the Series' investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company, Inc. serves as
the Series' shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and
national distributor for the Series' shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and the Fund on
behalf of the Series ("Distribution Agreement").
The Plan provides that:
l. The Fund shall pay to the Distributor a monthly fee not to exceed
0.30% (3/10 of l%) per annum of the Series' average daily net assets represented
by shares of the Class (the "Maximum Amount") as may be determined by the Fund's
Board of Directors from time to time. Such monthly fee shall be reduced by the
aggregate sums paid by the Fund on behalf of the Series to persons other than
broker-dealers (the "Service Providers") who may, pursuant to servicing
agreements, provide to the Series services in the Series' marketing of shares of
the Class.
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph l above to furnish, or cause or encourage others to furnish, services
and incentives in connection with the promotion, offering and sale of Class
shares and, where suitable and appropriate, the retention of Class shares by
shareholders.
(b) The Service Providers shall use the monies paid respectively to
them to reimburse themselves for the actual costs they have incurred in
confirming that their customers have received the Prospectus and Statement of
Additional Information, if applicable, and as a fee for (l) assisting such
customers in maintaining proper records with the Fund, (2) answering questions
relating to their respective accounts, and (3) aiding in maintaining the
investment of their respective customers in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Fund monthly and in writing of the amounts each
claims under the Plan; both the Distributor and the Service Providers shall
furnish the Board of Directors of the Fund with such other information as the
Board may reasonably request in connection with the payments made under the Plan
and the use thereof by the Distributor and the Service Providers, respectively,
in order to enable the Board to make an informed determination of the amount of
the Fund's payments and whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Directors of
the Fund, and of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph l hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
A-2
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
September , 1998
A-3
<PAGE>
EX-99.B15K
Exhibit 24(b)(15)(k)
Form
EXHIBIT B
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
CORPORATE BOND FUND FUND
CORPORATE BOND FUND B CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the Corporate Bond Fund series (the
"Series") on behalf of the Corporate Bond Fund B Class (the "Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been adopted
prior to any public offering of the Class.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company serves as the Series' investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company, Inc. serves as
the Series' shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and
national distributor for the Series' shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and the Fund on
behalf of the Series ("Distribution Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.
(b) In addition to the amounts described in (a) above, the Fund
shall pay (i) to the Distributor for payment to dealers or others, or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
B-2
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
September , 1998
B-3
<PAGE>
EX-99.B15L
Exhibit 24(b)(15)(l)
Form
EXHIBIT C
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
CORPORATE BOND FUND
CORPORATE BOND FUND C CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the Corporate Bond Fund series (the
"Series) on behalf of the Corporate Bond Fund C Class (the "Class"), which Fund,
Series and Class may do business under these or such other names as the Board of
Directors of the Fund may designate from time to time. The Plan has been
approved by a majority of the Board of Directors, including a majority of the
Directors who are not interested persons of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been adopted
prior to any public offering of the Class.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company serves as the Series' investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company, Inc. serves as
the Series' shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and
national distributor for the Series' shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and the Fund on
behalf of the Series ("Distribution Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.
(b) In addition to the amounts described in paragraph 1(a) above,
the Fund shall pay: (i) to the Distributor for payment to dealers or others or
(ii) directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of
the Series' average daily net assets represented by shares of the Class,
as a service fee pursuant to dealer or servicing agreements.
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
September , 1998
<PAGE>
EX-99.B15M
Exhibit 24(b)(15)(m)
Form
EXHIBIT A
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
EXTENDED DURATION BOND FUND
EXTENDED DURATION BOND FUND A CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-l under the Investment Company Act of l940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the Extended Duration Bond Fund
series (the "Series") on behalf of the Extended Duration Bond Fund A Class
("Class"), which Fund, Series and Class may do business under these or such
other names as the Board of Directors of the Fund may designate from time to
time. The Plan has been approved by a majority of the Board of Directors,
including a majority of the Directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related thereto ("non-interested Directors"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the Directors included a determination that in the exercise of reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Plan has been adopted prior to any public offering of the Class.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company serves as the Series' investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company, Inc. serves as
the Series' shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and
national distributor for the Series' shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and the Fund on
behalf of the Series ("Distribution Agreement").
The Plan provides that:
l. The Fund shall pay to the Distributor a monthly fee not to exceed
0.30% (3/10 of l%) per annum of the Series' average daily net assets represented
by shares of the Class (the "Maximum Amount") as may be determined by the Fund's
Board of Directors from time to time. Such monthly fee shall be reduced by the
aggregate sums paid by the Fund on behalf of the Series to persons other than
broker-dealers (the "Service Providers") who may, pursuant to servicing
agreements, provide to the Series services in the Series' marketing of shares of
the Class.
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph l above to furnish, or cause or encourage others to furnish, services
and incentives in connection with the promotion, offering and sale of Class
shares and, where suitable and appropriate, the retention of Class shares by
shareholders.
(b) The Service Providers shall use the monies paid respectively to
them to reimburse themselves for the actual costs they have incurred in
confirming that their customers have received the Prospectus and Statement of
Additional Information, if applicable, and as a fee for (l) assisting such
customers in maintaining proper records with the Fund, (2) answering questions
relating to their respective accounts, and (3) aiding in maintaining the
investment of their respective customers in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Fund monthly and in writing of the amounts each
claims under the Plan; both the Distributor and the Service Providers shall
furnish the Board of Directors of the Fund with such other information as the
Board may reasonably request in connection with the payments made under the Plan
and the use thereof by the Distributor and the Service Providers, respectively,
in order to enable the Board to make an informed determination of the amount of
the Fund's payments and whether the Plan should be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund in writing of the commencement of the Plan (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Directors of
the Fund, and of the non-interested Directors, cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph l hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
September , 1998
<PAGE>
EX-99.B15N
Exhibit 24(b)(15)(n)
Form
EXHIBIT B
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
EXTENDED DURATION BOND FUND FUND
EXTENDED DURATION BOND FUND B CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the Extended Duration Bond Fund
series (the "Series") on behalf of the Extended Duration Bond Fund B Class (the
"Class"), which Fund, Series and Class may do business under these or such other
names as the Board of Directors of the Fund may designate from time to time. The
Plan has been approved by a majority of the Board of Directors, including a
majority of the Directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related thereto ("non-interested Directors"), cast in person at a
meeting called for the purpose of voting on such Plan. Such approval by the
Directors included a determination that in the exercise of reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Plan has been adopted prior to any public offering of the Class.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company serves as the Series' investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company, Inc. serves as
the Series' shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and
national distributor for the Series' shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and the Fund on
behalf of the Series ("Distribution Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.
(b) In addition to the amounts described in (a) above, the Fund
shall pay (i) to the Distributor for payment to dealers or others, or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
September , 1998
<PAGE>
EX-99.B15O
Exhibit 24(b)(15)(o)
Form
EXHIBIT C
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
EXTENDED DURATION BOND FUND
EXTENDED DURATION BOND FUND C CLASS
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the Extended Duration Bond Fund
series (the "Series) on behalf of the Extended Duration Bond Fund C Class (the
"Class"), which Fund, Series and Class may do business under these or such other
names as the Board of Directors of the Fund may designate from time to time. The
Plan has been approved by a majority of the Board of Directors, including a
majority of the Directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related thereto ("non-interested Directors"), cast in person at a
meeting called for the purpose of voting on such Plan. Such approval by the
Directors included a determination that in the exercise of reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Series and shareholders of the Class.
The Plan has been adopted prior to any public offering of the Class.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company serves as the Series' investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company, Inc. serves as
the Series' shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and
national distributor for the Series' shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and the Fund on
behalf of the Series ("Distribution Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.
(b) In addition to the amounts described in paragraph 1(a) above,
the Fund shall pay: (i) to the Distributor for payment to dealers or others or
(ii) directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of
the Series' average daily net assets represented by shares of the Class,
as a service fee pursuant to dealer or servicing agreements.
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 hereof without approval by the
shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
<PAGE>
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
September , 1998
<PAGE>
EX-99.B18A
Exhibit 24(b)(18)(a)
The Delaware Group of Funds
Multiple Class Plan Pursuant to Rule 18f-3
This Multiple Class Plan (the "Plan") has been adopted by a
majority of the Board of Directors of each of the investment companies listed on
Appendix A as may be amended from time to time (each individually a "Fund," and
collectively, the "Funds"), including a majority of the Directors who are not
interested persons of each Fund, pursuant to Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "Act"). The Board of each Fund has
determined that the Plan, including the allocation of expenses, is in the best
interests of the Fund as a whole, each series of shares offered by such Fund
(individually and collectively the "Series") where the Fund offers its shares in
multiple series, and each class of shares offered by the Fund or Series, as
relevant. The Plan sets forth the provisions relating to the establishment of
multiple classes of shares for each Fund and, if relevant, its Series. To the
extent that a subject matter set forth in this Plan is covered by a Fund's
Articles of Incorporation or By-Laws, such Articles of Incorporation or By-Laws
will control in the event of any inconsistencies with descriptions contained in
this Plan.
The term "Portfolio," when used in this Plan in the context of
a Fund that offers only a single series of shares, shall be a reference to the
Fund, and when used in the context of a Fund that offers multiple series of
shares, shall be a reference to each series of such Fund.
CLASSES
1. Appendix A to this Plan describes the classes to be issued
by each Portfolio and identifies the names of such classes.
FRONT-END SALES CHARGE
2. Class A shares carry a front-end sales charge as described
in the Funds' relevant prospectuses; and Class B, Class C and Institutional
Class shares are sold without a front-end sales charge.
<PAGE>
CONTINGENT DEFERRED SALES CHARGE
3. Class A shares are not subject to a contingent deferred
sales charge ("CDSC"), except as described in the Fund's relevant prospectus.
4. Class B shares redeemed within six years of their purchase
shall be assessed a CDSC at the following rate: (i) 4.00% if shares are redeemed
within two years of purchase; (ii) 3.00% if shares are redeemed during the third
or fourth year following purchase; (iii) 2.00% if shares are redeemed during the
fifth year following purchase; (iv) 1.00% if shares are redeemed during the
sixth year following purchase; and (vi) 0% thereafter.
5. Class C shares redeemed within twelve months of their
purchase shall be assessed a CDSC at the rate of 1.00% of the lesser of (i) the
net asset value at the time of redemption, or (ii) the original net asset value
at the time of purchase.
6. The CDSC for each class is waived in certain circumstances,
as described in the Funds' relevant prospectuses. Shares that are subject to a
CDSC age one month at the end of the month in which the shares were purchased,
regardless of the specific date during the month that the shares were purchased.
7. Institutional Class shares are not subject to a CDSC.
RULE 12b-1 PLANS
8. In accordance with the Rule 12b-1 Plan for the Class A
shares of each Portfolio, the Fund shall pay to Delaware Distributors, L.P. (the
"Distributor") a monthly fee not to exceed 0.30% per annum of such Portfolio's
average daily net assets represented by Class A shares as may be determined by
the Fund's Board of Directors from time to time. The monthly fee shall be
reduced by the aggregate sums paid by or on behalf of such Portfolio to persons
other than broker-dealers (the "Service Providers") pursuant to servicing
agreements.
9. In accordance with the Rule 12b-1 Plan for the Class B
shares of each Portfolio, the Fund shall pay to the Distributor a monthly fee
not to exceed 0.75% per annum of such Portfolio's average daily net assets
represented by Class B shares as may be determined by the Fund's Board of
Directors from time to time. In addition to these amounts, the Fund shall pay
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<PAGE>
(i) to the Distributor for payment to dealers or others, or (ii) directly to
others, an amount not to exceed 0.25% per annum of such Portfolio's average
daily net assets represented by Class B shares, as a service fee pursuant to
dealer or servicing agreements.
10. In accordance with the Rule 12b-1 Plan for the Class C
shares of each Portfolio, the Fund shall pay to the Distributor a monthly fee
not to exceed 0.75% per annum of such Portfolio's average daily net assets
represented by Class C shares as may be determined by the Fund's Board of
Directors from time to time. In addition to these amounts, the Fund shall pay
(i) to the Distributor for payment to dealers or others, or (ii) directly to
others, an amount not to exceed 0.25% per annum of such Portfolio's average
daily net assets represented by Class C shares, as a service fee pursuant to
dealer or servicing agreements.
11. A Rule 12b-1 Plan has not been adopted for the
Institutional Class shares of any Portfolio.
ALLOCATION OF EXPENSES
12. The Fund shall allocate to each class of shares of a
Portfolio any fees and expenses incurred by the Fund in connection with the
distribution or servicing of such class of shares under a Rule 12b-1 Plan, if
any, adopted for such class. In addition, the Fund reserves the right, subject
to approval by the Fund's Board of Directors, to allocate fees and expenses of
the following nature to a particular class of shares of a Portfolio (to the
extent that such fees and expenses actually vary among each class of shares or
vary by types of services provided to each class of shares of the Portfolio):
(i) transfer agency and other recordkeeping costs;
(ii) Securities and Exchange Commission and blue sky registration
or qualification fees;
(iii) printing and postage expenses related to printing and
distributing class specific materials, such as shareholder
reports, prospectuses and proxies to current shareholders of
a particular class or to regulatory authorities with respect
to such class of shares;
(iv) audit or accounting fees or expenses relating solely to such
class;
-3-
<PAGE>
(v) the expenses of administrative personnel and services as
required to support the shareholders of such class;
(vi) litigation or other legal expenses relating solely to such
class of shares;
(vii) Directors' fees and expenses incurred as a result of issues
relating solely to such class of shares; and
(viii) other expenses subsequently identified and determined to
be properly allocated to such class of shares.
13. Except for any expenses that are allocated to a particular
class as described in paragraph 11 above, all expenses incurred by a Portfolio
will be allocated to each class of shares of such Portfolio on the basis of the
net asset value of each such class in relation to the net asset value of the
Portfolio.
ALLOCATION OF INCOME AND GAINS
14. Income and realized and unrealized capital gains and
losses of a Portfolio will be allocated to each class of shares of such
Portfolio on the basis of the net asset value of each such class in relation to
the net asset value of the Portfolio.
CONVERSIONS
15. (a) Except for shares acquired through a reinvestment of
dividends or distributions, Class B shares held for eight years after purchase
are eligible for automatic conversion into Class A shares of the same Portfolio
in accordance with the terms described in the relevant prospectus. Class B
shares acquired through a reinvestment of dividends or distributions will
convert into Class A shares of the same Portfolio pro rata with the Class B
shares that were not acquired through the reinvestment of dividends and
distributions.
(b) The automatic conversion feature of Class B
shares shall be suspended at any time that the Board of Directors of the Fund
determines that there is not available a reasonably satisfactory opinion of
counsel to the effect that (i) the assessment of the higher fee under the Fund's
Rule 12b-1 Plan for Class B does not result in the Fund's dividends or
distributions constituting a preferential dividend under the Internal Revenue
Code of 1986, as amended, and (ii) the conversion of Class B shares into Class A
shares does not constitute a taxable event under federal income tax law. In
addition, the Board of
-4-
<PAGE>
Directors of a Fund may suspend the automatic conversion feature by determining
that any other condition to conversion set forth in the relevant prospectus, as
amended from time to time, is not satisfied.
(c) The Board of Directors of a Fund may also
suspend the automatic conversion of Class B shares if it determines that
suspension is appropriate to comply with the requirements of the Act, or any
rule or regulation issued thereunder, relating to voting by Class B shareholders
on the Fund's Rule 12b-1 Plan for Class A or, in the alternative, the Board of
Directors may provide Class B shareholders with alternative conversion or
exchange rights.
16. Class A, Class C and Institutional Class shares do not
have a conversion feature.
EXCHANGES
17. Exchanges are permitted between Class A Shares and
Institutional Class Shares of a Portfolio or of any other Portfolio in the
Delaware Group funds; Class B shares of a Portfolio may only be exchanged for
Class B shares of any other Portfolio in the Delaware Group; Class C shares of a
Portfolio may only be exchanged for Class C shares of any other Portfolio in the
Delaware Group. All exchanges are subject to the eligibility and minimum
purchase requirements set forth in the Funds' prospectuses. Exchanges cannot be
made between open-end and closed-end funds within the Delaware Group.
18. Each class will vote separately with respect to the Rule
12b-1 Plan related to that class; provided, however, that Class B shares of a
Portfolio may vote on any proposal to materially increase the fees to be paid by
the Fund under the Rule 12b-1 Plan for the Class A shares of the same Portfolio.
19. On an ongoing basis, the Directors, pursuant to their
fiduciary responsibilities under the Act and otherwise, will monitor the
Portfolio for the existence of any material conflicts between the interests of
all the classes of shares offered by such Portfolio. The Directors, including a
majority of the Directors who are not interested persons of the Fund, shall take
such action as is reasonably necessary to eliminate any such conflict that may
develop. The Manager and the Distributor shall be responsible for alerting the
Board to any material conflicts that arise.
20. As described more fully in the Funds' relevant
prospectuses, broker-dealers that sell shares of a Portfolio will be compensated
differently depending on which class of shares the investor selects.
-5-
<PAGE>
21. Each Fund reserves the right to increase, decrease or
waive the CDSC imposed on any existing or future class of shares of a Portfolio
within the ranges permissible under applicable rules and regulations of the
Securities and Exchange Commission (the "SEC") and the rules of the National
Association of Securities Dealers, Inc. (the "NASD"), as such rules may be
amended or adopted from time to time. Each Fund may in the future alter the
terms of the existing classes of such Portfolio or create new classes in
compliance with applicable rules and regulations of the SEC and the NASD.
22. All material amendments to this Plan must be approved by a
majority of the Directors of each Fund affected by such amendments, including a
majority of the Directors who are not interested persons of the Fund.
Effective as of September 18, 1997
-6-
<PAGE>
APPENDIX A
List of Funds and Their Classes
1. Delaware Group Equity Funds I, Inc.
Delaware Fund
Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class
Devon Fund
Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class
2. Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class
Decatur Income Fund Institutional Class
Decatur Total Return Fund
Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class
Blue Chip Fund (Added February 24, 1997)
Blue Chip Fund A Class
Blue Chip Fund B Class
Blue Chip Fund C Class
Blue Chip Fund Institutional Class
-7-
<PAGE>
Quantum Fund (Added February 24, 1997)
Quantum Fund A Class
Quantum Fund B Class
Quantum Fund C Class
Quantum Fund Institutional Class
3. Delaware Group Equity Funds III, Inc. (Formerly Trend)
Trend Fund
Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class
4. Delaware Group Equity Funds V, Inc. (Formerly Value)
Small Cap Value Fund (Formerly Value Fund)
Small Cap Value Fund A Class
Small Cap Value Fund B Class
Small Cap Value Fund C Class
Small Cap Value Fund Institutional Class
Retirement Income Fund (Added November 29, 1996)
Retirement Income Fund A Class
Retirement Income Fund B Class
Retirement Income Fund C Class
Retirement Income Fund Institutional Class
5. Delaware Group Equity Funds IV, Inc.
DelCap Fund
DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class
Capital Appreciation Fund (Added November 29, 1996)
Capital Appreciation Fund A Class
Capital Appreciation Fund B Class
Capital Appreciation Fund C Class
Capital Appreciation Fund Institutional Class
-8-
<PAGE>
6. Delaware Group Global & International Funds, Inc.
International Equity Series
International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class
Global Bond Series
Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class
Global Assets Series
Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class
Emerging Markets Series (Added May 1, 1996)
Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class
International Small Cap Series (Added July 21, 1997)
International Small Cap Fund A Class
International Small Cap Fund B Class
International Small Cap Fund C Class
International Small Cap Fund Institutional Class
Global Equity Series (Added July 21, 1997)
Global Equity Fund A Class
Global Equity Fund B Class
Global Equity Fund C Class
Global Equity Fund Institutional Class
7. Delaware Group Income Funds, Inc.
Strategic Income Fund (Added September 30, 1996)
Strategic Income Fund A Class
Strategic Income Fund B Class
Strategic Income Fund C Class
Strategic Income Fund Institutional Class
-9-
<PAGE>
EX-99.B18B
Exhibit 24(b)(18)(b)
Form
APPENDIX A
(As revised 1998)
List of Funds and Their Classes
-------------------------------
1. Delaware Group Equity Funds I, Inc.
Delaware Fund
Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class
Devon Fund
Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class
2. Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class
Decatur Income Fund Institutional Class
Decatur Total Return Fund
Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class
Blue Chip Fund (Added February 24, 1997)
Blue Chip Fund A Class
Blue Chip Fund B Class
Blue Chip Fund C Class
Blue Chip Fund Institutional Class
<PAGE>
Social Awareness Fund (formerly Quantum Fund) (Added
February 24, 1997)
Social Awareness Fund A Class
Social Awareness Fund B Class
Social Awareness Fund C Class
Social Awareness Fund Institutional Class
Diversified Value Fund (Added 1998)
Diversified Value Fund A Class
Diversified Value Fund B Class
Diversified Value Fund C Class
Diversified Value Fund Insitutional Class
3. Delaware Group Equity Funds III, Inc. (Formerly Trend)
Trend Fund
Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class
4. Delaware Group Equity Funds IV, Inc.
DelCap Fund
DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class
Capital Appreciation Fund (Added November 29, 1996)
Capital Appreciation Fund A Class
Capital Appreciation Fund B Class
Capital Appreciation Fund C Class
Capital Appreciation Fund Institutional Class
5. Delaware Group Equity Funds V, Inc. (Formerly Value)
Small Cap Value Fund (Formerly Value Fund)
Small Cap Value Fund A Class
Small Cap Value Fund B Class
Small Cap Value Fund C Class
Small Cap Value Fund Institutional Class
Retirement Income Fund (Added November 29, 1996)
Retirement Income Fund A Class
Retirement Income Fund B Class
Retirement Income Fund C Class
Retirement Income Fund Institutional Class
<PAGE>
6. Delaware Group Global & International Funds, Inc.
International Equity Series
International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class
Global Bond Series
Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class
Global Assets Series
Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class
Emerging Markets Series (Added May 1, 1996)
Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class
7. Delaware Group Income Funds, Inc.
Strategic Income Fund (Added September 30, 1996)
Strategic Income Fund A Class
Strategic Income Fund B Class
Strategic Income Fund C Class
Strategic Income Fund Institutional Class
8. Delaware Pooled Trust, Inc.
The Real Estate Investment Trust Portfolio (added
October 14, 1997)
REIT Fund A Class
REIT Fund B Class
REIT Fund C Class
REIT Fund Institutional Class
<PAGE>
9. Delaware Group Foundation Funds (added December 18, 1997)
Income Portfolio
Income Fund A Class
Income Fund B Class
Income Fund C Class
Income Fund Institutional Class
Balanced Portfolio
Balanced Fund A Class
Balanced Fund B Class
Balanced Fund C Class
Balanced Fund Institutional Class
Growth Portfolio
Growth Fund A Class
Growth Fund B Class
Growth Fund C Class
Growth Fund Institutional Class
<PAGE>
EX-99.B19
Exhibit 24(b)(19)
POWER OF ATTORNEY
Each of the undersigned, a member of the Boards of Directors/Trustees
of the Delaware Group Funds listed on Exhibit A to this Power of Attorney,
hereby constitutes and appoints on behalf of each of the Funds listed on Exhibit
A, Wayne A. Stork, Jeffrey J. Nick and Walter P. Babich and any one of them
acting singly, his true and lawful attorneys-in-fact, in his name, place, and
stead, to execute and cause to be filed with the Securities and Exchange
Commission and other federal or state government agency or body, such
registration statements, and any and all amendments thereto as either of such
designees may deem to be appropriate under the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and all other
applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 18th day of December, 1997.
/s/Walter P. Babich /s/Thomas F. Madison
- -------------------------------- -----------------------------------
Walter P. Babich Thomas F. Madison
/s/Anthony D. Knerr /s/Jeffrey J. Nick
- -------------------------------- -----------------------------------
Anthony D. Knerr Jeffrey J. Nick
/s/Ann R. Leven /s/Charles E. Peck
- -------------------------------- -----------------------------------
Ann R. Leven Charles E. Peck
/s/W. Thacher Longstreth /s/Wayne A. Stork
- -------------------------------- -----------------------------------
W. Thacher Longstreth Wayne A. Stork
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
<PAGE>
POWER OF ATTORNEY
The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Group Funds listed on Exhibit A to this Power of Attorney, hereby
constitutes and appoints on behalf of each of the Funds listed on Exhibit A,
Wayne A. Stork, Jeffrey J. Nick and Walter P. Babich and any one of them acting
singly, his true and lawful attorneys-in-fact, in his name, place, and stead, to
execute and cause to be filed with the Securities and Exchange Commission and
other federal or state government agency or body, such registration statements,
and any and all amendments thereto as either of such designees may deem to be
appropriate under the Securities Act of 1933, as amended, the Investment Company
Act of 1940, as amended, and all other applicable federal and state securities
laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 16th day of April, 1998.
/s/ John H. Durham
- ------------------------
John H. Durham
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
