<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-97889
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. ________ [ ]
Post-Effective Amendment No. 17 [ X ]
--------
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 17
------
DELAWARE GROUP GOVERNMENT FUND, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 751-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: November 29, 1995
-----------------
It is proposed that this filing will become effective:
_________ immediately upon filing pursuant to paragraph (b)
____X____ on November 29, 1995 pursuant to paragraph (b)
_________ 60 days after filing pursuant to paragraph (a)(1)
_________ on (date) pursuant to paragraph (a)(1)
_________ 75 days after filing pursuant to paragraph (a)(2)
_________ on (date) pursuant to paragraph (a)(2) of Rule 485.
Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f)
of the Investment Company Act of 1940. Registrant's 24f-2 Notice
for its most recent fiscal year was filed on September 27, 1995.
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
--- C O N T E N T S ---
This Post-Effective Amendment No. 17 to Registration File No. 2-97889
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>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
CROSS-REFERENCE SHEET*
---------------------
PART A
------
<TABLE>
<CAPTION>
Location in
Item No. Description Prospectuses
- -------- ----------- ------------
<S> <C> <C> <C>
A Class/ Institutional
B Class/ Class
C Class
1 Cover Page............................... Cover Cover
2 Synopsis................................. Synopsis, Synopsis,
Summary of Summary of
Expenses Expenses
3 Condensed Financial Information.......... Financial Financial
Highlights Highlights
4 General Description of Registrant........ Investment Investment
Objectives, Objectives,
Investment Investment
Policies, Policies,
Shares Shares
5 Management of the Fund................... Management Management
of the Fund of the Fund
6 Capital Stock and Other Securities....... Delaware Dividends
Difference, and
Dividends and Distributions,
Distributions, Taxes,
Taxes, Shares
Shares
7 Purchase of Securities Being Offered..... Cover, Cover,
Buying Shares, Buying
Calculation Shares,
of Offering Price Calculation
and Net Asset of Net Asset
Value Per Share, Value Per
Management of Share,
the Fund Management
of the Fund
8 Redemption or Repurchase................. Redemption and Redemption
Exchange, and
Buying Shares Exchange,
Buying
Shares
9 Pending Legal Proceedings................ None None
</TABLE>
* This filing relates to Registrant's U.S. Government Fund A Class, U.S.
Government Fund B Class and U.S. Government Fund C Class which are combined
in one prospectus, and U.S. Government Fund Institutional Class, which has
its own prospectus. The four classes have a common Part B and Part C.
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
CROSS-REFERENCE SHEET
---------------------
PART B
------
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
10 Cover Page............................... Cover
11 Table of Contents........................ Table of Contents
12 General Information and History.......... General Information
13 Investment Objectives and Policies....... Investment 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
Agreement, 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................. Buying Shares, Determining
Offering Price and
Net Asset Value, Redemption
and Repurchase,
Exchange Privilege
20 Tax Status............................... Accounting and Tax
Issues, Taxes
21 Underwriters............................. Purchasing Shares
22 Calculation of Performance Data.......... Performance Information
23 Financial Statements..................... Financial Statements
</TABLE>
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
CROSS-REFERENCE SHEET
---------------------
PART C
------
<TABLE>
<CAPTION>
Location 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>
U.S. GOVERNMENT FUND
PROSPECTUS
A CLASS SHARES NOVEMBER 29, 1995
B CLASS SHARES
C CLASS SHARES
--------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance:
Nationwide 800-523-4640
Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
This Prospectus describes the U.S. Government Fund A Class of shares (the
"Class A Shares"), the U.S. Government Fund B Class of shares (the "Class B
Shares") and the U.S. Government Fund C Class of shares (the "Class C Shares")
(collectively, the "Classes") of the Government Income Series (the "Series") of
Delaware Group Government Fund, Inc. (the "Fund"), a professionally-managed
mutual fund of the series type. The objective of the Series is high current
income consistent with safety of principal by investing primarily in debt
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
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 B Shares and Class C Shares may be purchased at a price equal to
the next determined net asset value per share. Class A Shares are subject to a
maximum front-end sales charge of 4.75% and annual 12b-1 Plan expenses of up to
.30%. 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 1%, which are assessed against the Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Buying Shares. Class C Shares are subject to a CDSC which may be
imposed on redemptions made within twelve
-1-
<PAGE>
months of purchase and annual 12b-1 Plan expenses of 1%, which are assessed
against the Class C Shares for the life of the investment. See Summary of
Expenses. These alternatives permit an investor to choose the method of
purchasing shares that is most suitable for his or her needs. In choosing the
most suitable class, an investor should consider the differences among the
Classes, including the effect of sales charges and 12 b-1 Plan expenses, given
the amount of the purchase, the length of time the investor expects to hold the
shares and other circumstances. See Buying Shares.
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. Part B of the Fund's registration statement, dated
November 29, 1995, as it may be amended from time to time, contains additional
information about the Series and has been filed with the Securities and Exchange
Commission. Part B is incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors, L.P. at the
above address or by calling the above numbers.
The Series' financial statements appear in its Annual Report, which will
accompany any response to requests for Part B. The Series also offers the U.S.
Government Fund Institutional Class. That class is available for purchase only
by certain investors. A prospectus for the U.S. Government Fund Institutional
Class can be obtained by writing to Delaware Distributors, L.P. at the above
address or by calling the above number.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Cover Page Buying Shares
Synopsis Redemption and Exchange
Summary of Expenses Dividends and Distributions
Financial Highlights Taxes
Investment Objectives Calculation of Offering
Investment Policies Price and Net Asset
The Delaware Difference Value Per Share
Plans and Services Management of the Fund
Retirement Planning Appendix A - Investment
Illustrations
</TABLE>
-2-
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-3-
<PAGE>
SYNOPSIS
Capitalization
The Series offers four classes of shares: Class A Shares, Class B Shares,
Class C Shares and the U.S. Government Fund Institutional Class of shares. The
Fund has a present authorized capitalization of five hundred million shares of
capital stock, with a $.01 par value per share. Eighty million shares of that
stock have been allocated to each of the Class A Shares and Class B Shares,
fifty million shares have been allocated to the Class C Shares and twenty
million shares have been allocated to the U.S. Government Fund Institutional
Class. See Shares under Management of the Fund.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment manager
for the Fund. The Manager or its affiliate, Delaware International Advisers
Ltd., also manages the other funds in the Delaware Group. Delaware Distributors,
L.P. (the "Distributor") is the national distributor for the Fund and for all of
the other mutual funds in the Delaware Group. Delaware Service Company, Inc.
(the "Transfer Agent") is the shareholder servicing, dividend disbursing and
transfer agent for the Fund and for all of the other mutual funds in the
Delaware Group. See Management of the Fund.
Sales Charges
The price of the Class A Shares includes a maximum front-end sales charge
of 4.75% of the offering price, which, based on the net asset value per share of
the Class A Shares as of the end of the Fund's most recent fiscal year, is
equivalent to 4.96% of the amount invested. 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. Class A Shares are
subject to annual 12b-1 Plan expenses.
The price of the Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed within
two years of purchase; (ii) 3% if shares are redeemed during the third or fourth
year following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class B Shares are subject to annual 12b-1 Plan expenses for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares under Buying Shares.
-4-
<PAGE>
The price of the 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 twelve
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses for
the life of the investment.
See Buying Shares and Distribution (12b-1) and Service under Management of
the Fund.
Purchase Amounts
Generally, the minimum initial investment is $1,000 for Class A Shares,
Class B Shares and Class C Shares. 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 the 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 of Class A
Shares, which 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. The minimum
and maximum purchase amounts for retirement plans may vary. See Buying Shares.
Investment Objective
The objective of the Series is to seek high current income consistent with
safety of principal by investing primarily in debt obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. For
further details, see Investment Objectives.
Risk Factors and Special Considerations
The Series may enter into options and futures transactions for hedging
purposes to counterbalance portfolio volatility. While the Series does not
engage in options and futures for speculative purposes, there are risks which
result from use of these instruments by the Series, and the investor should
review the descriptions of such in this Prospectus. See Options and Futures
under Investment Policies.
Open-End Investment Company
The Fund, which was organized as a Maryland corporation in 1985, is an
open-end management investment company. The Series' portfolio of assets is
diversified as defined by the Investment Company Act of 1940 (the "1940 Act").
See Shares under Management of the Fund.
-5-
<PAGE>
Investment Management Fees
The Manager furnishes investment management services to the Fund, subject
to the supervision and direction of the Board of Directors. Under the Investment
Management Agreement, the annual compensation paid to the Manager is equal to
.60% of the Series' average daily net assets, less the Series' proportionate
share of all directors' fees paid to the unaffiliated directors of the Fund. See
Management of the Fund.
Redemption and Exchange
Class A Shares of the Series may be redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Series nor the Distributor assesses a charge for redemptions or exchanges of
Class A Shares, except for certain redemptions of shares purchased at net asset
value, which may be subject to a contingent deferred sales charge if such
purchase triggered the payment of a dealer's commission. See Front-End Sales
Charge Alternative -- Class A Shares under Buying 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 Fund 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.
-6-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
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* 4.00%* 1.00%*
Redemption Fees. . . . . . . . . . . . None** None** None**
Annual Operating Expenses
(as a percentage of Class A Class B Class C
average daily net assets) Shares Shares Shares
- ------------------------------------------------------------------------
Management Fees . . . . . . . . . . . 0.59% 0.59% 0.59%
12b-1 Plan Expenses
(including service fees) . . . . . 0.30%+/++ 1.00%+ 1.00%+
Other Operating Expenses. . . . . . . 0.35% 0.35% 0.35%+++
----- ----- -----
Total Operating Expenses . . . . 1.24%++ 1.94% 1.94%
===== ===== =====
</TABLE>
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in any of the Classes will bear directly or
indirectly.
*With respect to Class A Shares, purchases of $1 million or more may be made at
net asset value; however, if in connection with any such purchase, certain
dealer commissions are paid to the financial adviser through whom such purchase
is effected, a contingent deferred sales charge of 1% will be imposed on certain
redemptions within 12 months of purchase ("Limited CDSC"). 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
-7-
<PAGE>
purchase; and (v) 0% thereafter. Class C Shares are subject to a CDSC of 1% if
the shares are redeemed within 12 of purchase. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made at Net Asset Value under
Redemption and Exchange; Deferred Sales Charge Alternative --Class B Shares and
Level Sales Charge Alternative - Class C Shares under Buying Shares.
**CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.
+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"). See Distribution (12b-1) and Service
under Management of the Fund.
++The actual 12b-1 Plan expenses to be paid and, consequently, the Total
Operating Expenses of the Class A Shares, may be somewhat more (but the 12b-1
Plan expenses may be no more than .30%) or somewhat less (but the 12b-1 Plan
expenses may be no less than .10%) because of the formula adopted by the Board
of Directors for use in calculating the 12b-1 Plan expenses beginning June 1,
1992. See Distribution (12b-1) and Service under Management of the Fund.
+++"Other Operating Expenses" for Class C Shares are estimates based on the
actual expenses incurred by the Class B Shares for the fiscal year ended July
31, 1995.
See U.S. Government Fund Institutional Class under Buying Shares for expense
information for that class.
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 at the end of each time period and (3) with respect to
Class B Shares and Class C Shares, payment of a CDSC at the time of redemption,
if applicable.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $60(1) $85 $112 $190
1 year 3 years 5 years 10 years
------ ------- ------- --------
Class B Shares $60 $91 $125 $208(2)
1 year 3 years 5 years 10 years
------ ------- ------- --------
Class C Shares $30 $61 $105 $226
</TABLE>
-8-
<PAGE>
An investor would pay the following expenses on the same $1,000 investment,
assuming no redemption at the end of the period:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A Shares $60 $85 $112 $190
1 year 3 years 5 years 10 years
------ ------- ------- --------
Class B Shares $20 $61 $105 $208(2)
1 year 3 years 5 years 10 years
------ ------- ------- --------
Class C Shares $20 $61 $105 $226
</TABLE>
(1) Generally, the Fund does not assess a redemption charge upon redemption of
Class A Shares. Under certain circumstances, however, a Limited CDSC, which
has not been reflected in this calculation, may be imposed on certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made at Net Asset Value
under Redemption and Exchange.
(2) At the end of approximately eight years after purchase, Class B Shares will
be automatically converted into Class A Shares. The example above assumes
conversion of Class B Shares at the end of the eighth year. However, the
conversion may occur as late as three months after the eighth anniversary
of purchase, during which time the higher 12b-1 Plan fees payable by Class
B Shares will continue to be assessed. Information for the ninth and tenth
years reflects expenses of the Class A Shares. See Automatic Conversion of
Class B Shares under Buying 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.
-9-
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Government Fund, Inc. Government Income Series and have been
audited by Ernst & Young LLP, independent auditors. The data should be read in
conjunction with the financial statements, related notes, and the report of
Ernst & Young LLP covering such financial information and highlights, all of
which are incorporated by reference into Part B. Further information about the
Series' performance is contained in its Annual Report to shareholders. A copy of
the Series' Annual Report (including the report of Ernst & Young LLP) may be
obtained from the Fund upon request at no charge. Information regarding Class C
Shares has not been included in these tables because such shares were not
offered to the public prior to the date of this Prospectus.
- --------------------------------------------------------------------------------
-10-
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES
---------------------------------------------------------------
YEAR ENDED
7/31/95 7/31/94 7/31/93 7/31/92 7/31/91
<C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period . . . . . . $8.000 $9.010 $9.020 $8.700 $8.590
INCOME FROM IN-
- ---------------
VESTMENT OPERATIONS
- -------------------
Net Investment
Income . . . . . . 0.656 0.714 0.763 0.769 0.753
Net Gains (Losses)
on Securities (both
realized and
unrealized). . . . (0.140) (1.010) (0.010) 0.320 0.110
------- ------- ------- ----- -----
Total From
Investment
Operations. . . 0.516 (0.296) 0.753 1.089 0.863
----- ------- ----- ----- -----
LESS DISTRIBUTIONS
- ------------------
Dividends from
Net Investment
Income . . . . . . (0.656) (0.714) (0.763) (0.769) (0.753)
Distributions
from Capital
Gains. . . . . . . none none none none none
Returns of
Capital. . . . . . none none none none none
---- ---- ---- ---- ----
Total Distri-
butions . . . . (0.656) (0.714) (0.763) (0.769) (0.753)
------- ------- ------- ------- -------
Net Asset Value,
End of Period. . . $7.860 $8.000 $9.010 $9.020 $8.700
====== ====== ====== ====== ======
- -------------------------------------------------------------
TOTAL RETURN(4). . 6.82% (3.51%) 8.70% 12.98% 10.48%
- ------------
- -------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL
- -------------------
DATA
- ----
<S> <C> <C> <C> <C> <C>
Net Assets, End
of Period (000's
omitted) . . . . . $206,083 $222,555 $223,416 $184,401 $150,491
Ratio of Expenses
to Average Daily
Net Assets . . . . 1.24% 1.23% 1.26% 1.17% 1.13%
Ratio of Net
Investment Income
to Average Daily
Net Assets . . . . 8.40% 8.31% 8.45% 8.60% 8.74%
Portfolio Turnover
Rate . . . . . . . 70% 309% 285% 196% 149%
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------
Period
8/16/85(1)
YEAR ENDED through
7/31/90 7/31/89 7/31/88 7/31/87 7/31/86
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period . . . . . . $8.750 $8.650 $8.810 $9.320 $9.330
INCOME FROM IN-
- ---------------
VESTMENT OPERATIONS
- -------------------
Net Investment
Income . . . . . . 0.749 0.772 0.817 0.901 0.919
Net Gains (Losses)
on Securities (both
realized and
unrealized). . . . (0.160) 0.100 (0.160) (0.465) (0.010)
------- ----- ------- ------- -------
Total From
Investment
Operations. . . 0.589 0.872 0.657 0.436 0.909
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
- ------------------
Dividends from
Net Investment
Income . . . . . . (0.749) (0.772) (0.817) (0.901) (0.919)
Distributions
from Capital
Gains. . . . . . . none none none (0.045) none
Returns of
Capital. . . . . . none none none none none
---- ---- ---- ---- ----
Total Distri-
butions . . . . (0.749) (0.772) (0.817) (0.946) (0.919)
------- ------- ------- ------- -------
Net Asset Value,
End of Period. . . $8.590 $8.750 $8.650 $8.810 $9.320
====== ====== ====== ====== ======
- -------------------------------------------------------------
TOTAL RETURN(4). . 7.14% 10.65% 7.79% 4.80% 10.22%
- ------------
- -------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL
- -------------------
DATA
- ----
<S> <C> <C> <C> <C> <C>
Net Assets, End
of Period (000's
omitted) . . . . . $140,772 $138,904 $158,167 $154,735 $73,622
Ratio of Expenses
to Average Daily
Net Assets . . . . 1.14% 1.22% 1.02%(2) 0.97%(2) 0.95%(2)
Ratio of Net
Investment Income
to Average Daily
Net Assets . . . . 8.75% 9.01% 9.29%(3) 9.62%(3) 9.51%(3)
Portfolio Turnover
Rate . . . . . . . 127% 172% 210% 210% 321%
</TABLE>
-12-
<PAGE>
- ------------------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Ratios of expenses to average daily net assets prior to expense limitation
were 1.09% for 1988, 1.30% for 1987 and 1.39% for 1986.
(3) Ratios of net investment income to average daily net assets prior to
expense limitation were 9.21% for 1988, 9.29% for 1987 and 9.07% for 1986.
(4) Does not reflect maximum sales charge of 4.75% nor the 1% Limited CDSC that
would apply in the event of certain redemptions within 12 months of
purchase. Total return for 1986, 1987 and 1988 reflect the expense
limitations referenced in notes 2 and 3.
-13-
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES
------------------------
PERIOD
YEAR 5/2/94(1)
ENDED THROUGH
7/31/95 7/31/94
<S> <C> <C>
Net Asset Value,
Beginning of
Period . . . . . . $8.000 $8.190
INCOME FROM IN-
- ---------------
VESTMENT OPERATIONS
- -------------------
Net Investment
Income . . . . . . 0.601 0.151
Net Gains (Losses)
on Securities (both
realized and
unrealized). . . . (0.140) (0.190)
----- -------
Total From
Investment
Operations. . . 0.461 (0.039)
----- -------
LESS DISTRIBUTIONS
- ------------------
Dividends from
Net Investment
Income . . . . . . (0.601) (0.151)
Distributions
from Capital
Gains. . . . . . . none none
Returns of
Capital. . . . . . none none
---- ----
Total Distri-
butions . . . . (0.601) (0.151)
----- -------
Net Asset Value,
End of Period. . . $7.860 $8.000
====== ======
- -------------------------------------------------------------
TOTAL RETURN(2). . 6.08% (0.46%)(1)
- ------------
- -------------------------------------------------------------
<CAPTION>
RATIOS/SUPPLEMENTAL
- -------------------
DATA
- ----
<S> <C> <C>
Net Assets, End
of Period (000's
omitted) . . . . . $7,394 $2,215
Ratio of Expenses
to Average Daily
Net Assets . . . . 1.94% 1.94%(1)
Ratio of Net
Investment Income
to Average Daily
Net Assets . . . . 7.66% 7.60%(1)
Portfolio Turnover
Rate . . . . . . . 70% 309%
</TABLE>
-14-
<PAGE>
- ------------------------------
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized. Total return for this short of a time
period may not be representative of longer-term results.
(2) Total return does not include the CDSC which varies from 1%-4%, depending
on the holding period.
-15-
<PAGE>
INVESTMENT OBJECTIVES
The investment objective of the Series described below is a matter of
fundamental policy and may not be changed without shareholder approval.
The objective of the Series is high current income consistent with safety
of principal by investing primarily in debt obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, including securities
issued or backed by U.S. Government agencies and government-sponsored
corporations which may not be backed by the full faith and credit of the U.S.
Government, such as the Export-Import Bank, Federal Housing Authority, Federal
National Mortgage Association and Federal Home Loan Banks and mortgage-backed
securities issued by non-government entities but collateralized by securities of
the U.S. Government, its agencies and instrumentalities. The weighted average
maturity will be approximately ten years. Although these securities are
guaranteed as to principal and interest by the U.S. Government or its
instrumentalities, the market value of these securities, upon which daily net
asset value is based, may fluctuate and is not guaranteed. The Series may also
invest up to 20% of its assets in (1) corporate notes and bonds rated A or
above, (2) certificates of deposit and obligations of both U.S. and foreign
banks if they have assets of at least one billion dollars, (3) commercial paper
rated P-1 by Moody's Investors Service, Inc. ("Moody's") and/or A-1 by Standard
& Poor's Rating Group ("Standard & Poor's") and (4) asset-backed securities
rated Aaa by Moody's or AAA by Standard & Poor's.
U.S. Government securities include U.S. Treasury securities consisting of
Treasury Bills, Treasury Notes and Treasury bonds. Some of the other Government
securities in which the Series may invest include securities of the Federal
Housing Administration, the Government National Mortgage Association, the
Department of Housing and Urban Development, the Export-Import Bank, the Farmers
Home Administration, the General Services Administration, the Maritime
Administration and the Small Business Administration. The maturities of such
securities usually range from three months to 30 years.
INVESTMENT POLICIES
GNMA SECURITIES--The Series may invest in certificates of the Government
National Mortgage Association ("GNMA"). GNMA Certificates are mortgage-backed
securities. Each Certificate evidences an interest in a specific pool of
mortgages insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Scheduled payments
of principal and interest
-16-
<PAGE>
are made to the registered holders of GNMA Certificates. The GNMA Certificates
in which the Series will invest are of the modified pass-through type. GNMA
guarantees the timely payment of monthly installments of principal and interest
on modified pass-through Certificates at the time such payments are due, whether
or not such amounts are collected by the issuer on the underlying mortgages. The
National Housing Act provides that the full faith and credit of the United
States is pledged to the timely payment of principal and interest by GNMA of
amounts due on these GNMA Certificates.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgage instruments with maximum maturities of 30 years. The average
life is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as the result of prepayments of
refinancing of such mortgages or foreclosure. Such prepayments are passed
through to the registered holder with the regular monthly payments of principal
and interest, and have the effect of reducing future payments. Due to the GNMA
guarantee, foreclosures impose no risk to principal investments.
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates vary widely, it is not possible to accurately predict the
average life of a particular pool. However, statistics indicate that the average
life of the type of mortgages backing the majority of GNMA Certificates is
approximately 12 years. For this reason, it is standard practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year. Pools of mortgages with other maturities or different
characteristics will have varying assumptions for average life. The assumed
average life of pools of mortgages having terms of less than 30 years is less
than 12 years, but typically not less than five years.
The coupon rate of interest of GNMA Certificates is lower than the interest
rate paid on the VA-guaranteed or FHA-insured mortgages underlying the
Certificates, but only by the amount of the fees paid to GNMA and the issuer.
Such fees in the aggregate usually amount to approximately 1/2 of 1%.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life
-17-
<PAGE>
assumption. In periods of falling interest rates, the rate of prepayment tends
to increase, thereby shortening the actual average life of a pool of mortgage-
related securities. Conversely, in periods of rising rates, the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
pool. Prepayments generally occur when interest rates have fallen. Reinvestments
of prepayments will be at lower rates. Historically, actual average life has
been consistent with the 12-year assumption referred to above. The actual yield
of each GNMA Certificate is influenced by the prepayment experience of the
mortgage pool underlying the Certificates and may differ from the yield based on
the assumed average life. Interest on GNMA Certificates is paid monthly rather
than semi-annually as for traditional bonds.
Mortgage-Backed Securities--The Series may also invest in securities issued
by certain private, non-government corporations, such as financial institutions,
if the securities are fully collateralized at the time of issuance by securities
or certificates issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Two principal types of mortgage-backed securities are
collateralized mortgage obligations (CMOs) and real estate mortgage investment
conduits (REMICs).
CMOs are debt securities issued by U.S. Government agencies or by financial
institutions and other mortgage lenders and collateralized by a pool of
mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
CMOs and REMICs issued by private entities are not Government securities
and are not directly guaranteed by any Government agency. They are secured by
the underlying collateral of the private issuer. The Series will invest in such
private-backed securities only if they are 100% collateralized at the time of
issuance by securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities. The Series currently invests in
-18-
<PAGE>
privately-issued CMOs and REMICs only if they are rated at the time of purchase
in the two highest grades by a nationally-recognized rating agency.
ASSET-BACKED SECURITIES--As noted and subject to the limitations set forth
above, the Series may also invest in securities which are backed by assets such
as receivables on home equity and credit card loans, and receivables regarding
automobile, mobile home and recreational vehicle loans, wholesale dealer floor
plans and leases. Such receivables are securitized in either a pass-through or a
pay-through structure. Pass-through securities provide investors with an income
stream consisting of both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through asset-backed securities are debt
obligations issued usually by a special purpose entity, which are collateralized
by the various receivables and in which the payments on the underlying
receivables provide the funds to pay the debt service on the debt obligations
issued. The Series may invest in these and other types of asset-backed
securities that may be developed in the future. It is the Series' current policy
to limit asset-backed investments to those represented by interests in credit
card receivables, wholesale dealer floor plans, home equity loans and automobile
loans.
Due to the shorter maturity of the collateral backing such securities,
there is less of a risk of substantial prepayment than with mortgage-backed
securities. Such asset-backed securities do, however, involve certain risks not
associated with mortgage-backed securities, including the risk that security
interests cannot be adequately or in many cases, ever, established. In addition,
with respect to credit card receivables, a number of state and federal consumer
credit laws give debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the outstanding balance. In the case of automobile
receivables, there is a risk that the holders may not have either a proper or
first security interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance and technical
requirements under state laws. Therefore, recoveries on repossessed collateral
may not always be available to support payments on the securities. For further
discussion concerning the risks of investing in such asset-backed securities,
see Part B.
Repurchase Agreements--In order to invest its short-term cash reserves or
when in a temporary defensive posture, the Series may enter into repurchase
agreements with banks or broker/dealers deemed to be creditworthy by the
Manager,
-19-
<PAGE>
under guidelines approved by the Board of Directors. A repurchase agreement is a
short-term investment in which the purchaser (i.e., the Series) acquires
ownership of a debt security and the seller agrees to repurchase the obligation
at a future time and set price, thereby determining the yield during the
purchaser's holding period. Generally, repurchase agreements are of short
duration, often less than one week but on occasion for longer periods. Not more
than 10% of the Series' assets may be invested in repurchase agreements of over
seven-days' maturity or other illiquid assets. Should an issuer of a repurchase
agreement fail to repurchase the underlying security, the loss to the Series, if
any, would be the difference between the repurchase price and the market value
of the security. The Series will limit its investments in repurchase agreements
to those which the Manager under the guidelines of the Board of Directors
determines to present minimal credit risks and which are of high quality. In
addition, the Series must have collateral of at least 100% of the repurchase
price, including the portion representing the Series' yield under such
agreements which is monitored on a daily basis. Such collateral is held by the
Morgan Guaranty Trust Company of New York ("Custodian") in book entry form. Such
agreements may be considered loans under the 1940 Act, but the Series considers
repurchase agreements contracts for the purchase and sale of securities, and it
seeks to perfect a security interest in the collateral securities so that it has
the right to keep and dispose of the underlying collateral in the event of
default.
The funds in the Delaware Group have obtained an exemption from the joint-
transaction prohibitions of Section 17(d) of the 1940 Act to allow the Delaware
Group funds jointly to invest cash balances. The Series 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.
OPTIONS--The Series may write put and call options on a covered basis
only, and will not engage in option writing strategies for speculative purposes.
The Series may write covered call options and secured put options from time to
time on such portion of its portfolio, without limit, as the Manager determines
is appropriate in seeking to obtain the Series' investment objective. The Series
may also purchase (i) call options to the extent that premiums paid for such
options do not exceed 2% of the Series' total assets and (ii) put options to the
extent that premiums paid for such options do not exceed 2% of the Series' total
assets.
-20-
<PAGE>
A. COVERED CALL WRITING--A call option gives the purchaser of such
option the right to buy, and the writer, in this case the Series, has the
obligation to sell the underlying security at the exercise price during the
option period. There is no percentage limitation on writing covered call
options.
The advantage to the Series of writing covered calls is that the Series
receives a premium which is additional income. The disadvantage is that if the
security rises in value the Series will lose the appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Series to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Series may realize a
net gain or loss from a closing purchase transaction depending upon whether the
net amount of the original premium received on the call option is more or less
than the cost of effecting the closing purchase transaction. Any loss incurred
in a closing purchase transaction may be partially or entirely offset by the
premium received from a sale of a different call option on the same underlying
security. Such a loss may also be wholly or partially offset by unrealized
appreciation in the market value of the underlying security. Conversely, a gain
resulting from a closing purchase transaction could be offset in whole or in
part by a decline in the market value of the underlying security.
If a call option expires unexercised, the Series will realize a short-term
capital gain in the amount of the premium on the option less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
the Series will realize a gain or loss from the sale of the underlying security
equal to the difference between the cost of the underlying security and the
proceeds of the sale of the security plus the amount of the premium on the
option less the commission paid.
-21-
<PAGE>
The market value of a call option generally reflects the market price of
the underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.
Call options will be written only on a covered basis, which means that the
Series will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, the
Series would be required to continue to hold a security which it might otherwise
wish to sell. Options written by the Series will normally have expiration dates
between three and nine months from the date written. The exercise price of a
call option may be below, equal to or above the current market value of the
underlying security at the time the option is written.
B. PURCHASING CALL OPTIONS--The Series may purchase call options to the
extent that premiums paid by the Series do not aggregate more than 2% of the
Series' total assets. When the Series purchases a call option, in return for a
premium paid by the Series to the writer of the option, the Series obtains the
right to buy the security underlying the option at a specified exercise price at
any time during the term of the option. The writer of the call option, who
receives the premium upon writing the option, has the obligation, upon exercise
of the option, to deliver the underlying security against payment of the
exercise price. The advantage is that the Series may hedge against an increase
in the price of securities which it ultimately wishes to buy. However, the
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Series upon exercise of the option.
The Series may, following the purchase of a call option, liquidate its
position by effecting a "closing sale transaction." This is accomplished by
selling an option of the same Series as the option previously purchased. The
Series will realize a profit from a closing sale transaction if the price
received on the transaction is more than the premium paid to purchase the
original call option; the Series will realize a loss from a closing sale
transaction if the price received on the transaction is less than the premium
paid to purchase the original call option.
Although the Series will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that the Series would be
-22-
<PAGE>
required to exercise its options in order to realize any profit and would incur
brokerage commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Series may expire without any value
to the Series.
C. SECURED PUT WRITING--A put option gives the purchaser of the option
the right to sell, and the writer, in this case the Series, the obligation to
buy the underlying security at the exercise price during the option period.
During the option period, the writer of a put option may be assigned an exercise
notice by the broker/dealer through whom the option was sold requiring the
writer to make payment of the exercise price against delivery of the underlying
security. In this event, the exercise price will usually exceed the then market
value of the underlying security. This obligation terminates upon expiration of
the put option or at such earlier time at which the writer effects a closing
purchase transaction. The operation of put options in other respects is
substantially identical to that of call options. Premiums on outstanding put
options written or purchased by the Series may not exceed 2% of its total
assets.
The advantage to the Series of writing such options is that it receives
premium income. The disadvantage is that the Series may have to purchase
securities at higher prices than the current market price if the put is
exercised.
Put options will be written only on a secured basis, which means that the
Series will maintain in a segregated account with its Custodian cash or U.S.
Government securities in an amount not less than the exercise price of the
option at all times during the option period. The amount of cash or U.S.
Government securities held in the segregated account will be adjusted on a daily
basis to reflect changes in the market value of the securities covered by the
put option written by the Series. Secured put options will generally be written
in circumstances where the Manager wishes to purchase the underlying security
for the Series' portfolio at a price lower than the current market price of the
security. In such event, the Series would write a secured put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay.
D. PURCHASING PUT OPTIONS--The Series may purchase put options to the
extent that premiums paid for such options do not exceed 2% of the Series' total
assets. The Series will, at all times during which it holds a put option, own
the security covered by such option.
-23-
<PAGE>
The Series intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow the Series to protect unrealized gain in an
appreciated security in its portfolio without actually selling the security. In
addition, the Series will continue to receive interest income on the security.
If the security does not drop in value, the Series will lose the value of the
premium paid. The Series may sell a put option which it has previously purchased
prior to the sale of the securities underlying such option. Such sales will
result in a net gain or loss depending on whether the amount received on the
sale is more or less than the premium and other transaction costs paid on the
put option which is sold.
FUTURES--The Series may invest in futures contracts and options on such
futures contracts subject to certain limitations. Futures contracts are
agreements for the purchase or sale for future delivery of securities. When a
futures contract is sold, the Series incurs a contractual obligation to deliver
the securities underlying the contract at a specified price on a specified date
during a specified future month. A purchase of a futures contract means the
acquisition of a contractual right to obtain delivery to the Series of the
securities called for by the contract at a specified price during a specified
future month.
While futures contracts provide for the delivery of securities, deliveries
usually do not occur. Contracts are generally terminated by entering into an
offsetting transaction. When the Series enters into a futures transaction, it
must deliver to the futures commission merchant selected by the Series an amount
referred to as "initial margin." This amount is maintained by the futures
commission merchant in an account at the Series' Custodian bank. Thereafter, a
"variation margin" may be paid by the Series to, or drawn by the Series from,
such account in accordance with controls set for such account, depending upon
changes in the price of the underlying securities subject to the futures
contract.
The Series may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.
-24-
<PAGE>
The purpose of the purchase or sale of futures contracts for the Series,
which consists of a substantial number of Government securities, is to protect
the Series against the adverse effects of fluctuations in interest rates without
actually buying or selling such securities. Similarly, when it is expected that
interest rates may decline, futures contracts may be purchased to hedge in
anticipation of subsequent purchases of Government securities at higher prices.
With respect to options on futures contracts, when the Series is not fully
invested, it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates. The writing of a call option on
a futures contract constitutes a partial hedge against declining prices of the
securities which are deliverable upon exercise of the futures contract. If the
futures price at the expiration of the option is below the exercise price, the
Series will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the securities which are deliverable
upon exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Series will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of Government securities which the Series intends to purchase.
If a put or call option the Series has written is exercised, the Series
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between the value of its
portfolio securities and changes in the value of its futures positions, the
Series' losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The Series will
purchase a put option on a futures contract to hedge the Series' portfolio
against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Series may not achieve the anticipated benefits of futures contracts or options
on futures contracts or may realize a loss. For example, if the Series is hedged
against the possibility of an increase in interest rates which would adversely
affect the price of Government securities held in its portfolio and interest
rates decrease instead, the Series will lose part or all of the benefit of the
increased value of its Government securities which it has because it will have
offsetting losses in its futures position. In addition, in such situations, if
the Series had insufficient cash, it may be required to sell Government
-25-
<PAGE>
securities from its portfolio to meet daily variation margin requirements. Such
sales of Government securities may, but will not necessarily, be at increased
prices which reflect the rising market. The Series may be required to sell
securities at a time when it may be disadvantageous to do so.
To the extent that the Series purchases an option on a futures contract and
fails to exercise the option prior to the exercise date, it will suffer a loss
of the premium paid. Further, with respect to options on futures contracts, the
Series may seek to close out an option position by writing or buying an
offsetting position covering the same securities or contracts and have the same
exercise price and expiration date. The ability to establish and close out
positions on options will be subject to the existence of a liquid secondary
market, which cannot be assured.
The Series will not enter into futures contracts to the extent that more
than 5% of the Series' assets are required as futures contract margin deposits
and will not invest in futures contracts or options thereon to the extent that
obligations relating to such transactions exceed 20% of the Series' assets.
Rule 144A Securities
The Series may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many privately
placed and legally restricted securities to be freely traded among certain
institutional buyers such as the Series. The Series may invest no more than 10%
of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day function of determining whether or not individual Rule
144A Securities are liquid for purposes of the Series' 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Series'
holdings of illiquid securities exceed the Series' 10% limit on investments
in
-26-
<PAGE>
such securities, the Manager will determine what action to take to ensure that
the Series continues to adhere to such limitation.
PORTFOLIO LOAN TRANSACTIONS--The Series may loan up to 25% of its assets to
qualified broker/dealers or institutional investors.
The major risk to which the Series would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Series will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager. See Part B.
PORTFOLIO TURNOVER--The Series may experience a high rate of portfolio
turnover, which is not expected to exceed 400%. High portfolio turnover rates
may occur, for example, if the Series writes a substantial number of covered
call options and the market prices of the underlying securities appreciate. A
100% turnover rate would occur if all of the securities in the portfolio were
sold and replaced within one year. The rate of portfolio turnover is not a
limiting factor when the Manager deems it desirable to purchase or sell
securities or to engage in options transactions. High portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs and may affect taxes payable by the Series' shareholders. The turnover
rate may also be affected by cash requirements from redemptions and repurchases
of the Series' shares. The degree of portfolio activity may affect brokerage
costs of the Series and taxes payable by shareholders.
For the fiscal years ended July 31, 1994 and 1995, the portfolio turnover
rates for the Series were 309% and 70%, respectively.
Other Restrictions--The Fund may borrow from banks. No investment
securities will be purchased while the Series has an outstanding borrowing. Part
B sets forth other more specific investment restrictions, some of which limit
the percentage of assets of the Series which may be invested in certain types of
securities.
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<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 Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information
Literature
Price, Yield and Performance Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular Investment
Accounts and Retirement Plan Accounts
Wire Investments
Wire Liquidations
Telephone Liquidations
Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
SHAREHOLDER SERVICES
During business hours, you can call the Fund's Shareholder Service Center.
Our representatives can answer any questions about your account, the Series,
various service features and other funds in the Delaware Group.
PERFORMANCE INFORMATION
During business hours, you can call the Investor Information Center to get
current 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.
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 is available seven days a week,
24 hours a day.
STATEMENTS AND CONFIRMATIONS
You will receive quarterly statements of your account summarizing all
transactions during the period. A
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confirmation statement will be sent following all transactions other than those
involving a reinvestment of distributions. You should examine statements and
confirmations immediately and promptly report any discrepancy by calling the
Shareholder Service Center.
DUPLICATE CONFIRMATIONS
If your investment dealer is noted on your investment application, we will
send your dealer a duplicate confirmation. This makes it easier for your
investment dealer to help you manage your investments.
DIVIDEND REINVESTMENT PLAN
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Also, you may invest
your distributions in certain other funds in the Delaware Group, subject to the
exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Series or of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Series or of other
Delaware Group funds or into Class C Shares of the Series or of other Delaware
Group 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 Buying
Shares for information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.
Holders of Class A Shares of the Series may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the Delaware
Group, including the Series. Holders of Class B Shares of the Series may
reinvest their distributions only into Class B Shares of the funds in the
Delaware Group which offer that class of shares (the "Class B Funds").
Similarly, holders of Class C Shares of the Series may reinvest their
distributions only into Class C Shares of the funds in the Delaware Group which
offer that class of shares (the "Class C Funds"). See Class B Funds and Class C
Funds under Buying Shares for a list of the funds offering those classes of
shares. For more information about reinvestments, please call the Shareholder
Service Center.
EXCHANGE PRIVILEGE
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of the other funds in the Delaware Group, subject to
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
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WEALTH BUILDER OPTION
You may elect to have amounts in your account automatically invested in
shares of other funds in the Delaware Group. Investments under this feature are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges of Class A, Class B and Class C Shares. See Redemption and
Exchange.
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 the Series with the dollar amount of new purchases
of Class A Shares to qualify for a reduced front-end sales charge. Under the
Combined Purchases Privilege, you may also include certain shares that you own
in other funds in the Delaware Group. See Buying 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 Group fund shares over a 13-month period. See Buying
Shares and Part B.
12-MONTH REINVESTMENT PRIVILEGE
The 12-Month Reinvestment Privilege permits you to reinvest proceeds of
Class A Shares within one year of the date of redemption, without a front-end
sales charge. See Part B.
DELAWARE GROUP ASSET PLANNER
Delaware Group Asset Planner is an asset allocation service that gives
investors, working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four pre-
designed allocation Strategies (each with a different risk/reward profile) made
up of separate investments in predetermined percentages of Delaware Group funds.
With the guidance of a financial adviser, investors may also tailor a Strategy
that meets their personal needs and goals. See How to Buy Shares under Buying
Shares.
FINANCIAL INFORMATION ABOUT THE FUND
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Series' investments and performance. The Fund's fiscal year ends on July 31.
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RETIREMENT PLANNING
An investment in the Series may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based on
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.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase the U.S. Government Fund Institutional
Class. For additional information on any of the plans and Delaware's retirement
services, call the Shareholder Service Center or see Part B.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
Individuals, even if they participate in an employer-sponsored retirement
plan, may establish their own retirement program for investments in each of the
Classes. Contributions to an IRA may be tax-deductible and earnings are tax-
deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted, and in some cases eliminated, for individuals who
participate in certain employer-sponsored retirement plans and whose annual
income exceeds certain limits. Existing IRAs and future contributions up to the
IRA maximums, whether deductible or not, still earn on a tax-deferred basis.
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")
Offers employers with 25 or fewer eligible employees the ability to
establish a SEP/IRA that permits salary deferral contributions. An employer may
also elect to make additional contributions to this plan. Class B Shares are not
available for purchase by such plans.
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<PAGE>
403(B)(7) DEFERRED COMPENSATION PLAN
Permits employees of public school systems or of certain types of non-
profit organizations to enter into a deferred compensation arrangement for the
purchase of shares of each of the Classes.
457 DEFERRED COMPENSATION PLAN
Permits employees of state and local governments and certain other entities
to enter into a deferred compensation arrangement for the purchase of shares of
each of the Classes.
PROTOTYPE PROFIT SHARING OR MONEY PURCHASE PENSION PLAN
Offers self-employed individuals, partnerships and corporations a tax-
qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.
PROTOTYPE 401(K) DEFINED CONTRIBUTION PLAN
Permits employers to establish a tax-qualified plan based on salary
deferral contributions. Class B Shares are not available for purchase by such
plans.
ALLIED PLANS
Class A Shares are available for purchase by participants in 401(k) 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 Group funds ("eligible Delaware Group fund shares"), as well
as shares of designated classes of non-Delaware Group funds ("eligible non-
Delaware Group 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 Group and eligible non-Delaware Group fund shares held by a
participant under the Allied Plan, may be combined with the dollar amount of new
purchases by that participant to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Group fund shares. See Front-End Sales
Charge Alternative - Class A Shares under Buying Shares.
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<PAGE>
Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a front-end
sales charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Group 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.
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 below under the heading Waiver of Limited CDSC --
Class A Shares, apply to redemptions by participants in Allied Plans, except in
the case of exchanges between eligible Delaware Group and non-Delaware Group
fund shares. When eligible Delaware Group fund shares are exchanged into
eligible non-Delaware Group 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 CDSC will be paid by the financial adviser or selling dealer. See
Contingent Deferred Sales Charge for Certain Purchases of Class A Shares Made at
Net Asset Value under Redemption and Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Group 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 Group fund shares in connection with Allied Plans, all participant
holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative - Class A Shares under Buying Shares.
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<PAGE>
BUYING SHARES
PURCHASE AMOUNTS
Generally, the minimum initial purchase is $1,000 for Class A Shares, Class
B Shares and Class C Shares. Subsequent purchases generally must be $100 or
more. In addition, 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 are (i) subject to lower annual 12b-1 Plan expenses than Class B
Shares and Class C Shares and (ii) generally 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. 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.
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 with respect to Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis with
respect to Class B Shares ("deferred sales charge alternative") 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. Class A Shares 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 .30% of average daily net assets of such shares. See Contingent
Deferred Sales Charge for Certain Purchases of Class A Shares Made at Net Asset
Value and Distribution (12b-1) and Service. Certain purchases of Class A Shares
qualify for reduced front-end sales charges. See Front-End Sales Charge
Alternative-Class A Shares, below.
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<PAGE>
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares. Class B Shares do not incur a front-end
sales charge when they are purchased, but are subject to a sales charge if they
are redeemed within six years of purchase and are subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (.25% of which are service fees to be paid 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 those related to the Class A
Shares. At the end of approximately eight years after purchase, the Class B
Shares will automatically be converted into Class A Shares. See Automatic
Conversion of Class B Shares, below.
Class C Shares. An investor who elects the level sales charge alternative
acquires Class C Shares. Class C Shares do not incur a front-end sales charge
when they are purchased, but are subject to a sales charge if they are redeemed
within twelve months of purchase and are subject to annual 12b-1 Plan expenses
of up to a maximum of 1% (.25% of which are service fees to be paid 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 those
related to the Class A Shares. Unlike Class B Shares, Class C Shares do not
convert to another class.
The alternative purchase arrangements described above permit investors in
the Series 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 the Series 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
the Series 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 to which each of the
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Classes is subject and, in comparing Class B Shares to Class C Shares, the
desirability of an automatic conversion feature, which is available only for
Class B Shares.
As an illustration, investors who qualify for significantly reduced front-
end sales charges on purchases of Class A Shares, as described below, might
elect the front-end sales charge alternative because similar sales charge
reductions are not available under either the deferred sales charge alternative
or the level sales charge alternative. Moreover, shares acquired under the
front-end sales charge alternative are subject to annual 12b-1 Plan expenses of
up to .30%, whereas Class B Shares acquired under the deferred sales charge
alternative are subject to annual 12b-1 Plan expenses of up to 1% for
approximately eight years after purchase (see Automatic Conversion of Class B
Shares) and Class C Shares acquired under the level sales charge alternative are
subject to annual 12b-1 Plan expenses of up to 1% for the life of the
investment. However, because front-end sales charges are deducted from the
purchase amount at the time of purchase, investors who buy Class A Shares will
not have their full purchase amount invested in the Series.
Certain other investors might determine it to be more advantageous to purchase
Class B Shares and have all their funds invested initially, although they would
be subject to a CDSC for up to six years after purchase, as well as annual 12b-1
Plan expenses of up to 1% until the shares are automatically converted into
Class A Shares. Still other investors might determine it to be more advantageous
to purchase Class C Shares and have all of their funds invested initially,
recognizing that they would be subject to a CDSC for just twelve months after
purchase but that Class C Shares do not offer a conversion feature, so their
shares would be subject to annual 12b-1 Plan expenses of up to 1% for the life
of the investment. 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 under the deferred sales charge alternative or the level
sales charge alternative. However, there can be no assurance as to the return,
if any, that will be realized on such additional money.
Prospective investors should refer to Appendix A to this Prospectus for an
illustration of the potential impact on a long-term shareholder's investment in
the Series under each of the purchase options.
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<PAGE>
For the distribution and related services provided to, and the expenses
borne on behalf of, the Series, the Distributor and others will be paid, in the
case of the Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of the Class B Shares and the Class C Shares,
from the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred
upon redemption. Sales personnel may receive different compensation for selling
Class A, Class B 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 PROVIDE FOR THE FINANCING OF THE DISTRIBUTION OF THE RESPECTIVE CLASSES.
See 12b-1 Distribution Plans - Class A, Class B and class C Shares.
Dividends paid by the Series with respect to the Class A, Class B and Class
C Shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day and will be in the same amount, except
that the additional amount of 12b-1 Plan expenses relating to the Class B shares
and the 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. The fund and the Distributor intend to operate in compliance with these
rules.
FRONT-END SALES CHARGE ALTERNATIVE--CLASS A SHARES
The Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
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<TABLE>
<CAPTION>
U.S. Government Fund A Class
- --------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge Concession***
as % of as % of
Offering Amount Offering
Amount of Purchase Price Invested** Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.96% 4.00%
$100,000 but
under $250,000 3.75 3.94 3.00
$250,000 but
under $500,000 2.50 2.54 2.00
$500,000 but
under $1,000,000* 2.00 2.04 1.60
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited
CDSC may apply upon redemption of such shares.
** Based on the net asset value per share of the Class A Shares as of the
end of the Fund's most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Fund. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow 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 Group products and services and who increase sales of Delaware
Group funds may receive an additional concession of up to .15% of the
offering price. Dealers who receive 90% or more of the sales charge may
be deemed to be underwriters under the Securities Act of 1933.
- --------------------------------------------------------------------------------
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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:
<TABLE>
<CAPTION>
DEALER'S COMMISSION
-------------------
AMOUNT OF PURCHASE (as a percentage of
- ------------------ amount purchased)
<S> <C>
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
</TABLE>
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies may be aggregated with those of the Class A Shares
of the Series. 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 Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's commission
are subject to change or termination at any time by the Distributor in its
discretion.
Redemptions of Class A Shares purchased at net asset value may result in
the imposition of a Limited CDSC if the dealer's commission described above was
paid in connection with the purchase of those shares. See Contingent Deferred
Sales Charge for Certain Purchases of Class A Shares Made at Net Asset Value
under Redemption and Exchange.
COMBINED PURCHASES PRIVILEGE
By combining your holdings of Class A Shares with your holdings of Class B
Shares and/or Class C Shares of the Series and shares of the other funds in the
Delaware Group, 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 Group fund holdings.
Shares of other funds that do not carry a front-end sales charge or CDSC may not
be included, unless
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<PAGE>
they were acquired through an exchange from a Delaware Group 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.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of Intention.
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 trigger 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 under Buying
Shares.
BUYING AT NET ASSET VALUE
Class A Shares may be purchased at net asset value under the Delaware Group
Dividend Reinvestment Plan and, under certain circumstances, the 12-Month
Reinvestment Privilege and the Exchange Privilege. (See The Delaware Difference
and Redemption and Exchange for additional information.)
Purchases of Class A Shares may be made at net asset value by current and
former officers, directors and employees (and members of their immediate
families) of the Manager, any affiliate, any of the funds in the Delaware Group,
certain of their agents and registered representatives and employees of
authorized investment dealers and by employee benefit plans for such entities.
Individual purchases include retirement accounts and must be for accounts in the
name of the individual or a qualifying family member. Purchases of Class A
Shares may be made by clients of registered representatives of an authorized
investment dealer at net asset value within six months of a change of the
registered representative's employment, if the purchase is funded by proceeds
from an investment where a front-end sales charge has been assessed and the
redemption of the investment did not result in the imposition of a contingent
deferred sales charge or other redemption charge. Purchases of Class A Shares
also may be made at net asset value by bank employees who provide services in
connection with agreements between the bank and unaffiliated brokers or dealers
concerning sales of Class A Shares. 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
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<PAGE>
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.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
The Fund must be notified in advance that an investment qualifies for
purchase of Class A Shares at net asset value.
GROUP INVESTMENT PLANS
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, Prototype Profit Sharing,
Pension and 401(k) Defined Contribution Plans) may benefit from the reduced
front-end sales charges relating to the Class A Shares set forth in the table on
page _____, based on total plan assets. In addition, 403(b)(7) and 457
Retirement Plan Accounts may benefit from a reduced front-end sales charge on
Class A Shares based on the total amount invested by all participants in the
plan by satisfying the following criteria: (i) the employer for which the plan
was established has 250 or more eligible employees and the plan lists only one
broker of record, or (ii) the plan includes employer contributions and the plan
lists only one broker of record. If a company has more than one plan investing
in the Delaware Group of funds, then the total amount invested in all plans 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 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 Delaware Group investment accounts if,
at the time of each such purchase, they notify the Fund that they are eligible
to combine purchase amounts held in their plan account.
For additional information on these Plans, including Plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
For other retirement plans and special services, see Retirement
Planning.
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DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B Shares may be purchased at net asset value without the imposition
of a front-end sales charge and, as a result, the Series will invest the full
amount of the investor's purchase payment. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount purchased. As discussed below, however, Class B Shares are subject to
annual 12b-1 Plan expenses and, if redeemed within six years of purchase,
a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for 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 facilitates the ability of the Series to
sell the Class B Shares without deducting a front-end sales charge at the time
of purchase.
Shareholders of the Series' Class B Shares exercising the exchange
privilege described below will continue to be subject to the CDSC schedule
described in this Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule relating to the Class B Shares acquired as a
result of the exchange. See Redemption and Exchange.
AUTOMATIC CONVERSION OF CLASS B SHARES
Except for shares acquired through a reinvestment of dividends, Class B
Shares held for eight years after purchase are eligible for automatic conversion
into Class A Shares. The Fund will effect conversions of Class B Shares into
Class A Shares only four times in any calendar year, on the last business day of
the second full week of March, June, September and December (each, a "Conversion
Date"). If the eighth anniversary after a purchase of Class B Shares falls on a
Conversion Date, an investor's Class B Shares will be converted on that date. If
the eighth anniversary occurs between Conversion Dates, an investor's Class B
Shares will be converted on the next Conversion Date after such anniversary.
Consequently, if a shareholder's eighth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B Shares for as long
as three additional months after the eighth anniversary after purchase before
the shares will automatically convert into Class A Shares.
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Class B Shares of a fund acquired through reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
LEVEL SALES CHARGE ALTERNATIVE - CLASS C SHARES
Class C Shares may be purchased at net asset value without the imposition
of a front-end sales charge and, as a result, the Series will invest the full
amount of the investor's purchase payment. 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 twelve months of purchase, a
CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees 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.
Shareholders of the Series' Class C Shares who exercise the exchange
privilege described below will continue to be subject to the CDSC schedule for
the Series' C Class shares 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 twelve
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. In addition, no CDSC will be assessed on redemptions of
shares received through reinvestments of dividends or capital gains
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distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of either the Class B Shares
or the Class C Shares of the Series, even if those shares are later exchanged
for shares of another Delaware Group 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.
The following table sets forth the rates of the CDSC for the Class B Shares
of the Series:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR AFTER PURCHASE MADE SUBJECT TO CHARGE)
- ------------------------ -------------------
<S> <C>
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
</TABLE>
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares of the Series, the 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 the Class B Shares
will convert are subject to ongoing annual 12b-1 Plan expenses of up to a
maximum of .30% of average daily net assets representing such shares.
In determining whether a CDSC is applicable to a redemption 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 the Class C Shares, it will be assumed that shares held for more
than twelve months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for
twelve 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 CDSC under Redemption and Exchange.
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12b-1 Distribution Plans - Class A, Class B and Class C Shares
Under the distribution plans adopted by the Fund in accordance with Rule
12b-1 under the 1940 Act, the Series is permitted to pay the Distributor annual
distribution fees of up to .30% of the average daily net assets of the Class A
Shares, 1% of the average daily net assets of the Class B Shares and 1% of the
average daily net assets of the Class C Shares. These fees, which are payable
monthly, compensate the Distributor for providing distribution and related
services and bearing certain expenses of each Class. The 12b-1 Plans applicable
to the Class B Shares and the Class C Shares are designed to permit an investor
to purchase Class B Shares or Class C Shares through dealers or brokers without
the assessment of a front-end sales charge while enabling the Distributor to
compensate dealers and brokers for the sale of such shares. For more detailed
discussion of the 12b-1 Plans relating to the Class A, Class B and Class C
Shares, see Distribution (12b-1) and Service under Management of the Fund.
OTHER PAYMENTS TO DEALERS -- CLASS A, CLASS B AND CLASS C SHARES
In addition, from time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed certain
limits as set by the Distributor, may receive from the Distributor an additional
payment of up to .25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice 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 Rules of Fair Practice as they may be amended. In addition, as noted
above, the Distributor may pay dealers a commission in connection with net asset
value purchases.
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CLASS B FUNDS AND CLASS C FUNDS
The following funds currently offer Class B Shares and Class C Shares:
Delaware Group Delchester High-Yield Bond Fund, Inc., Limited-Term Government
Fund of Delaware Group Limited-Term Government Funds, Inc., Delaware Group Cash
Reserve, Inc., Tax-Free USA Fund, Tax-Free Insured Fund and Tax-Free USA
Intermediate Fund of Delaware Group Tax-Free Fund, Inc., Delaware Group DelCap
Fund, Inc., Delaware Fund and Devon Fund of Delaware Group Delaware Fund, Inc.,
Delaware Group Value Fund, Inc., Decatur Income Fund and Decatur Total Return
Fund of Delaware Group Decatur Fund, Inc., Delaware Group Trend Fund, Inc.,
International Equity Series, Global Bond Series and Global Assets Series of
Delaware Group Global & International Funds, Inc., DMC Tax-Free Income Trust-
Pennsylvania and the Series.
U.S. GOVERNMENT FUND INSTITUTIONAL CLASS
In addition to offering the Class A, Class B and Class C Shares, the Series
also offers the U.S. Government Fund Institutional Class of shares, which is
described in a separate prospectus relating to that class of shares and is
available for purchases only by certain investors. U.S. Government Fund
Institutional Class 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 distribution expenses. To obtain a prospectus which describes
the U.S. Government Fund Institutional Class, contact the Distributor by writing
to the address or by calling the telephone number listed on the cover of this
Prospectus.
DIVIDEND ORDERS
You may have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective. For more
information, see Dividend Reinvestment Plan under The Delaware Difference or
call the Shareholder Service Center.
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer.
INVESTING THROUGH YOUR INVESTMENT DEALER
You can make a purchase of shares of the Classes through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.
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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 U.S. Government Fund A Class,
U.S. Government Fund B Class or U.S. Government Fund C Class at 1818 Market
Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to U.S. Government Fund A Class, U.S. Government Fund B
Class or U.S. Government Fund C Class. Your check should be identified with your
name(s) and account number. An investment slip (similar to a deposit slip) is
provided at the bottom of transaction confirmations and dividend statements that
you will receive from the Fund. 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 0114-2596 (include your
name(s) and your account number for the Class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Fund's Shareholder
Service Center to get an account number. If you do not call first, 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, to U.S. Government Fund A Class, U.S. Government
Fund B Class or U.S. Government Fund C Class 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 should advise the Fund's
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a Retirement Plan Account, call the
Shareholder Service Center for special wiring instructions.
DELAWARE GROUP ASSET PLANNER
To invest in Delaware Group funds using the Asset Planner service, you
should complete a Delaware Group Asset Planner Account Registration Form, which
is available only from a financial adviser. The sales charge on the investment
is determined by the individual sales charges of the underlying funds and their
percentage allocation in the
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selected Strategy. 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 for use inside the Asset Planner service; however,
only "like" class shares may be used within the same Strategy.
An annual maintenance fee, currently $35 per Strategy, is due at the time
of initial investment and by September 30th 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 your Fund accounts if not paid by September 30th. See the Statement of
Additional Information.
Investors will receive a customized quarterly Strategy Report summarizing
all Delaware Group 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.
INVESTING BY EXCHANGE
If you have an investment in another mutual fund in the Delaware Group, you
may write and authorize an exchange of part or all of your investment into
shares of the Series. 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.
Shareholders of Class A Shares may exchange all or part of their shares for
certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their shares for Class B Shares or Class C
Shares of the Series or for Class B Shares or Class C Shares of any other fund
in the Delaware Group. Shareholders of Class B Shares of the Series are
permitted to exchange all or part of their Class B Shares only into the
corresponding class of shares of the Class B Funds. Similarly, shareholders of
Class C Shares of the Series are permitted to exchange all or part of their
Class C Shares only into the corresponding class of shares of the Class C Funds.
Class B Shares of the Series and Class C Shares of the Series acquired by
exchange will continue to carry the contingent deferred sales charge 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 the Class B Shares
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of the Series 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 Series.
Permissible exchanges into Class A Shares of the Series will be made
without a front-end sales charge imposed by the Series, except for exchanges
from funds not subject to a front-end sales charge (unless such shares were
acquired in an exchange from a fund subject to such a charge or such shares were
acquired through the reinvestment of dividends). Permissible exchanges into
Class B Shares or Class C Shares of the Series will be made without the
imposition of a contingent deferred sales charge by the fund from which the
exchange is being made at the time of the exchange.
See Allied Plans under the heading Retirement Planning 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. Direct Deposit
You may have your employer or bank make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). The Series 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.
2. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize the Fund to
transfer a designated amount monthly from your checking account to your Series
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.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
Should investments by these two methods be reclaimed or returned for some
reason, the Fund has the right to liquidate your shares to reimburse the
government or transmitting bank.
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If there are insufficient funds in your account, you are obligated to reimburse
the Series.
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 made through an investment dealer is the
date the order is received by the Series. 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
The 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. The Fund can redeem shares from your account(s) to reimburse itself
for any loss, and you may be restricted from making future purchases in any of
the funds in the Delaware Group. The Fund reserves the right 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.
The Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts that 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 below minimum status 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 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 contingent deferred sales charge will apply
to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under a Class' 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. Exchanges are subject to the requirements of each fund and
all exchanges of shares from one fund or class to another 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 the Delaware Group will best meet
your changing objectives and the consequence of any exchange transaction. You
may also call the Delaware Group directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net asset
value next determined after we receive your request in good order subject, in
the case of a redemption, to any applicable CDSC or Limited CDSC. Redemption or
exchange requests received in good order after the time the offering price and
net asset value of shares are determined, as noted above, will be processed on
the next business day. See Purchase Price and Effective Date under Buying
Shares. A shareholder submitting a redemption 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,
the Fund will redeem the number of shares necessary to deduct the applicable
CDSC in the case of Class B or Class C Shares or, 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.
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 you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Fund at 800-523-1918. The Fund may suspend, terminate,
or amend the terms of the exchange privilege upon 60 days' written notice to
shareholders.
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The Fund will honor written redemption requests of shareholders who
recently purchased shares by check, but will not mail the proceeds until it is
reasonably satisfied the purchase check has cleared, which may take up to 15
days from the purchase date. The Fund will not honor telephone redemptions for
shares recently purchased by check unless it is reasonably satisfied that the
purchase check has cleared. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.
There is no front-end sales charge or fee for exchanges made between shares
of funds which both carry a front-end sales charge. Any applicable front-end
sales charge will apply to exchanges from shares of funds not subject to a
front-end sales charge, except for transfers involving assets that were
previously invested in a fund with a front-end sales charge and/or transfers
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for Class B Shares of other Class B Funds or Class C Shares
of other Class C Funds, as applicable (in each case, "New Shares"), 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. In an exchange of Class B Shares, the Series' 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 the New Shares by exchange may subject an
investor to the higher 12b-1 fees applicable to Class B Shares for a longer
period of time than if the investment in the 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 Fund or the Distributor for
redeeming or exchanging your
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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 the Fund or its agent.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
CHECKWRITING FEATURE
YOU CAN REQUEST SPECIAL CHECKS BY MARKING THE BOX ON THE INVESTMENT
APPLICATION.
Checks must be drawn for $500 or more and, unless otherwise indicated on
the Investment Application or your checkwriting authorization form, must be
signed by all owners of the account.
Because the value of shares fluctuates, you cannot use checks to close your
account. The Checkwriting Feature is not available with respect to the Class B,
Class C Shares or for retirement plan accounts, regardless of class. See Part B
for additional information.
WRITTEN REDEMPTION
You can write to the 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, the Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day, but no later than seven
days, after receipt of your redemption request. If your Class A Shares are in
certificate form, the certificate must accompany your request and also be in
good order. The Fund issues certificates for Class A Shares only if a
shareholder submits a specific request. The Fund does not issue certificates for
Class B Shares or Class C Shares.
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WRITTEN EXCHANGE
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in the Delaware Group, subject to the same conditions and limitations as
other exchanges noted above.
TELEPHONE REDEMPTION AND EXCHANGE
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may only
redeem or exchange 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 the Fund in writing that you do not wish to have such
services available with respect to your account. The Fund reserves the right to
modify, terminate or suspend these procedures upon 60 days' written notice to
shareholders. It may be difficult to reach the Fund by telephone during periods
when market or economic conditions lead to an unusually large volume of
telephone requests.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Series shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, 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, but no later than seven days, after receipt of the request. This service is
only available to individual, joint and individual fiduciary-type accounts.
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TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, the Fund requires an Authorization Form with your signature guaranteed.
For your protection, your authorization must be on file. If you request a wire,
your funds will normally be sent the next business day. CoreStates Bank, N.A.'s
fee (currently $7.50) will be deducted from your redemption. If you ask for a
check, it will normally be mailed the next business day, but no later than seven
days, after receipt of your request to your predesignated bank account. Except
for any CDSC which may be applicable to Class B and Class C Shares and Limited
CDSC which may be applicable to certain Class A Shares, there are no fees for
this redemption method, but the mail time may delay getting funds into your bank
account. Simply call the Fund's Shareholder Service Center prior to the time the
offering price and net asset value are determined, as noted above .
If expedited payment could adversely affect the Series, the Fund may take
up to seven days to pay.
TELEPHONE EXCHANGE
The Telephone Exchange feature is a convenient and efficient way to adjust
your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into any fund in the Delaware Group under the same registration, subject
to the same conditions and limitations as other exchanges noted above. As with
the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
SYSTEMATIC WITHDRAWAL 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 Fund does not recommend any particular monthly amount, as each shareholder's
situation and needs vary. Payments are normally made by check. You may elect to
have your payments transferred from your Series account to your predesignated
bank account through the Delaware Group's MoneyLine service. Your funds will
normally
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be credited to your bank account two business days after the payment date.
Except for the Limited CDSC which may be applicable to Class A Shares and the
CDSC which may be applicable to Class B and Class C Shares as noted below, there
are no fees for this redemption method. You can initiate the MoneyLine service
by completing an Authorization Agreement. If the name and address on your bank
account are not identical to the name and address on your Series account, you
must have your signature guaranteed. Please call the Shareholder Service Center
for additional information.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to receive
benefits in periodic payments, the Fund's Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals, depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required. The MoneyLine service described above is not available for
retirement plans.
* * *
Shareholders should not purchase Class A Shares while participating in a
Systematic Withdrawal Plan. Also, 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 12 months prior to the withdrawal and a
dealer's commission has been paid on that purchase. See Contingent Deferred
Sales Charge for Certain Purchases of Class A Shares Made at Net Asset Value,
below. With respect to Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan, any applicable CDSC 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 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 CDSC - Class B and Class C Shares below.
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For more information on Systematic Withdrawal Plans, call the Shareholder
Service Center.
Wealth Builder Option
Shareholders may elect to invest in other mutual funds in the Delaware
Group through our Wealth Builder Option. Under this automatic exchange program,
shareholders can authorize regular monthly amounts (minimum of $100 per fund) to
be liquidated from their Series account and invested automatically into an
account in one or more Delaware Group funds. If, in connection with the Wealth
Builder Option, a shareholder wishes to open a new account in such other fund or
funds to receive the automatic investment, such new account in any fund must
meet such other fund's minimum initial purchase requirements. Investments under
this option are exchanges and are therefore subject to the same conditions and
limitations as other exchanges noted above.
Shareholders can use the Wealth Builder Option to invest in the Series
through regular liquidations of shares in their accounts in other funds in the
Delaware Group, subject to the same conditions and limitations as other
exchanges noted above. Shareholders can terminate their participation at any
time by written notice to the Fund. See Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
CONTINGENT DEFERRED SALES CHARGE FOR CERTAIN PURCHASES OF CLASS A SHARES MADE AT
NET ASSET VALUE
A Limited CDSC will be imposed by the Series upon certain redemptions of
Class A Shares (or shares into which such Class A Shares are exchanged) made
within 12 months of purchase, if such purchases were made at net asset value and
triggered the payment by the Distributor of the dealer's commission described
above. See Buying Shares.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of: (1) the net asset value at the time of purchase of the Class A
Shares being redeemed; or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A Shares
even if those shares are later exchanged for shares of another Delaware Group
fund and, in the event of an exchange of Class A Shares, the "net asset value of
such shares at the time of
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redemption" will be the net asset value of the shares acquired in the
exchange.
Redemptions of such Class A Shares held for more than 12 months will not be
subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Series assesses the Limited CDSC if such 12-month period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of the Series or the 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 CDSC--CLASS A SHARES
The Limited CDSC for the Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended ("the Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) distributions from a section 403(b)(7)
Plan or an IRA due to death, disability, or attainment of age 59 1/2; (v)
returns of excess contributions to an IRA; (vi) distributions by other employee
benefit plans to pay benefits; (vii) distributions described in (ii), (iv), and
(vi) above pursuant to a Systematic Withdrawal Plan; and (viii) redemptions by
the classes of shareholders who are permitted to purchase shares at net asset
value, regardless of the size of the purchase (see Buying at Net Asset Value
under Buying Shares).
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WAIVER OF CDSC--CLASS B AND CLASS C SHARES
The CDSC is waived on redemptions of Class B Shares in connection with the
following redemptions: (i) redemptions that result from the Fund's right to
liquidate a shareholder's account if the aggregate net asset value of the shares
held in the account is less than the then-effective minimum account size; (ii)
returns of excess contributions to an IRA or 403(b)(7) Deferred Compensation
Plan; (iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, or 457 Deferred Compensation Plan; and (iv) distributions
from an IRA, 403(b)(7) Deferred Compensation Plan or 457 Deferred Compensation
Plan due to death or disability.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, 403(b)(7) Deferred Compensation Plan, Profit
Sharing Plan, Money Purchase Pension Plan or 401(k) Defined Contribution Plan;
(iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money
Purchase Pension Plan, or 401(k) Defined Contribution Plan; (iv) distributions
from a 403(b)(7) Deferred Compensation Plan, 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) Deferred Compensation
Plan, 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)
distributions from an 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 Internal Revenue Code) of
all registered owners occurring after the purchase of the shares being
redeemed.
In addition, the CDSC will be waived on Class B Shares 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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DIVIDENDS AND DISTRIBUTIONS
The 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 Buying Shares. Thus, when redeeming shares, dividends continue to be
credited up to and including the date of redemption.
The Series' dividends are declared daily and paid monthly on the first
business day following the end of each month. Payment by check of cash dividends
will ordinarily be mailed within three business days after the payable date. Any
net short-term capital gains after deducting any net long-term capital losses
(including carryforwards) and, pursuant to an Exemptive Order under Section
19(b) of the Investment Company Act, any long-term gains that would have been
short-term gains except for 60/40 treatment under Section 1256(a) of the
Internal Revenue Code may be distributed quarterly, but in the discretion of the
Fund's Board of Directors, may be distributed less frequently. Any distribution
from net long-term realized securities profits will be made 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 Internal Revenue Code. During the fiscal
year ended July 31, 1995, dividends totaling $0.656 per share of the Class A
Shares and $0.601 per share of the Class B Shares were paid from net investment
income. Class C Shares were not offered prior to the date of this
Prospectus.
Purchases by wire of the shares begin earning dividends when converted into
Federal Funds and available for investment, normally the next business day after
receipt. However, if the 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 of the Classes will share proportionately in the investment income and
expenses of the Series, except that the per share dividends from net investment
income on the Class A Shares, the Class B Shares and the 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
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Plan relating to Class A Shares. See Distribution (12b-1) and Service under
Management of the Fund.
Both dividends and distributions are 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 the shareholder's account at the then-current net asset value and the
dividend option may be changed from cash to reinvest. If you elect to take your
dividends and distributions in cash and such dividends and distributions are in
an amount of $25 or more, you may choose the Delaware Group's MoneyLine service
and have such payments transferred from your Series account to your
predesignated bank account. Your funds will normally be credited to your bank
account two business days after the payment date. There are no fees for the
MoneyLine service. See Systematic Withdrawal Plans under Redemption and Exchange
for information regarding authorization of this service. This service is not
available for retirement plans. (See The Delaware Difference for more
information on reinvestment options.)
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TAXES
The Series has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Internal Revenue Code
(the "Code"). As such, the Series will not be subject to federal income tax, or
to any excise tax, to the extent its earnings are distributed as provided in the
Code.
The Series intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to you as ordinary income, whether
received in cash or in additional shares. No portion of the Series'
distributions will be eligible for the dividends-received deduction for
corporations.
Distributions paid by the Series from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Series. The Series does not seek to
realize any particular amount of capital gains during a year; rather, realized
gains are a byproduct of Series management activities. Consequently, capital
gains distributions may be expected to vary considerably from year to year.
Also, for those investors subject to tax, if purchases of shares in the Series
are made shortly before the record date for a dividend or capital gains
distribution, a portion of the investment will be returned as a taxable
distribution.
Dividends which are declared in October, November or December to
shareholders of record on a specified date in one of those months, but which,
for operational reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by the Series and received
by the shareholder on December 31 of the calendar year in which they are
declared.
The sale of shares of the Series is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two series or portfolios of a mutual fund). Any loss
incurred on sale or exchange of the Series' shares which had been held for six
months or less will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares. All or a portion of
the sales charge incurred in acquiring Series shares will be excluded from the
federal tax basis of any of such shares sold or exchanged within the ninety days
of their purchase (for purposes of determining gain or loss upon the sale of
such shares) if the sale proceeds are
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reinvested in the Series or in another fund in the Delaware Group of funds and a
sales charge that would otherwise apply to the reinvestment is reduced or
eliminated. Any portion of such sales charge excluded from the tax basis of the
shares sold will be added to the tax basis of the shares acquired in the
reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the end
of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Buying Shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government securities may be exempt from
state personal income taxes. Shares of the Series are exempt from Pennsylvania
county personal property taxes.
Each year, the Fund will mail you information on the tax status of the
Series' dividends and distributions. Shareholders will also receive each year
information as to the portion of dividend income that is derived from U.S.
Government securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Series.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Account Registration Form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Series.
See Accounting and Tax Issues and Taxes in Part B for additional
information on tax matters relating to the Series and its shareholders.
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CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
Class A Shares are purchased at the offering price per share, while Class B
Shares and Class C Shares are purchased at the net asset value ("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 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. U.S. Government
securities are valued at the mean between the bid and asked prices. Options are
valued at the last reported sale price or, if no sales are reported, at the mean
between the last reported bid and asked prices. Any short-term investments
having a maturity of less than 60 days are valued at amortized cost, which
approximates market value. Non-Exchange-traded options are valued at fair value
using a mathematical model. All other securities are valued at their fair value
by an independent pricing service using methods approved by the Fund's Board of
Directors.
Each of the Series' four classes will bear, pro-rata, all of the common
expenses of the Series. The net asset values of all outstanding shares of each
class of the Series will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Series represented by the
value of shares of that class. All income earned and expenses incurred by the
Series will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Series represented by the value of shares
of such classes, except that the U.S. Government Fund Institutional Class will
not incur any of the expenses under the Series' 12b-1 Plans and the 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 will be allocable to each class, the dividends paid to each class of
the Series may vary. However, the NAV per share of each class is expected to be
equivalent.
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MANAGEMENT OF THE FUND
DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors. Part B contains additional information regarding the
directors and officers.
INVESTMENT MANAGER
The Manager furnishes investment management services to the Series.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On July 31, 1995, the Manager and its affiliate,
Delaware International Advisers Ltd., were supervising in the aggregate more
than $27 billion in assets in the various institutional (approximately
$17,356,716,000) and investment company (approximately $9,964,548,000)
accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a wholly-
owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now 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. In connection with the merger, a new Investment Management Agreement
between the Fund on behalf of the Series and the Manager was executed following
shareholder approval.
The Manager manages the Series' portfolio and makes investment decisions
which are implemented by the Fund's Trading Department. The Manager also
administers the Fund's affairs and pays the salaries of all the directors,
officers and employees of the Fund who are affiliated with the Manager. For
these services, the annual compensation paid to the Manager is equal to .60% of
the Series' average daily net assets, less a proportionate share of all
directors' fees paid to the unaffiliated directors by the Series. Investment
management fees paid by the Series for the fiscal year ended July 31, 1995 were
0.59% of average daily net assets.
Roger A. Early has assumed primary responsibility for making day-to-day
investment decisions for the Fund as of July 18, 1994. Mr. Early has an
undergraduate degree in economics from the University of Pennsylvania's Wharton
School and an MBA in finance and accounting from the University of Pittsburgh.
He is also a CPA and a CFA. Prior to joining the Delaware Group, Mr. Early was a
portfolio manager for Federated Investment Counseling's fixed income group, with
over $1 billion in assets.
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In making investment decisions for the Fund, Mr. Early consults regularly
with Paul E. Suckow and Gary A. Reed. Mr. Suckow is the Manager's Chief
Investment Officer for fixed income. A Chartered Financial Analyst, he is a
graduate of Bradley University with an MBA from Western Illinois University. Mr.
Suckow was a fixed income portfolio manager at the Delaware Group from 1981 to
1985. He returned to the Delaware Group in 1993 after eight years with
Oppenheimer Management Corporation. Mr. Reed holds an AB in Economics from the
University of Chicago and an MA in Economics from Columbia University. He began
his career in 1978 with the Equitable Life Assurance Company in New York City,
where he specialized in credit analysis. Prior to joining the Delaware Group in
1989, Mr. Reed was Vice President and Manager of the fixed income department at
Irving Trust Company in New York.
PORTFOLIO TRADING PRACTICES
Portfolio trades are generally made on a net basis without brokerage
commissions. However, the price may include a mark-up or mark-down. Banks,
brokers or dealers are selected by the Manager to execute the Series' portfolio
transactions.
The Fund uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, the Series may consider a
broker/dealer's sales of Series shares in placing portfolio orders and may place
orders with broker/dealers that have agreed to defray certain Series expenses
such as custodian fees.
PERFORMANCE INFORMATION
From time to time, the Series may quote yield or total return performance
of the Classes in advertising and other types of literature.
The current yield for each of the Classes 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,
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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 periods, as relevant. The Series may also advertise aggregate and
average total return information concerning a Class over additional periods of
time. In addition, the Series may present total return information that does not
reflect the deduction of the maximum front-end sales charge or any applicable
CDSC. In this case, such total return information would be more favorable than
total return information that includes 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 an indication of future results.
DISTRIBUTION (12B-1) AND SERVICE
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
the Series under a Distribution Agreement dated April 3, 1995, as amended on
November 29, 1995.
The Fund has adopted a separate distribution plan under Rule 12b-1 for each
of the Class A Shares, Class B Shares and Class C Shares (the "Plans"). The
Plans permit the Series to pay the Distributor from the assets of the respective
Classes a monthly fee for its services and expenses in distributing and
promoting sales of shares. These expenses include, among other things, preparing
and distributing advertisements, sales literature, and prospectuses and reports
used for sales purposes, compensating sales and marketing personnel, holding
special promotions for specified periods of time, and paying distribution and
maintenance fees to brokers, dealers and others. In connection with the
promotion of Class A, Class B and Class C Shares, the Distributor may, from time
to time, pay to participate in dealer-sponsored seminars and conferences, and
reimburse dealers for expenses incurred in connection with preapproved seminars,
conferences and advertising. The Distributor may pay or allow additional
promotional incentives to dealers as part of preapproved sales contests and/or
to dealers who provide extra training and information concerning a Class and
increase sales of the Class. In addition, the Series may make payments from the
assets of the respective Class directly to others, such as banks, who aid in the
distribution of its shares or provide services in respect of the shares,
pursuant to service agreements with the Series.
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The 12b-1 Plan expenses relating to each of the Class B Shares and the
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.
The aggregate fees paid by the Series from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed .30% of the
Class A Shares' average daily net assets in any year, and 1% (.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 the Class C Shares' average daily net assets 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. The
Distributor may, however, incur additional expenses and make additional payments
to dealers from its own resources to promote the distribution of shares of the
Classes.
On July 21, 1988, the Board of Directors set the fee for the Class A
Shares, pursuant to the Plan relating to the Class A Shares, at .25% of average
daily net assets represented by the Class A Shares. This fee was effective until
May 31, 1992. Effective June 1, 1992, the Board of Directors has determined that
the annual fee payable on a monthly basis, under the Plan relating to the Class
A Shares, will be equal to the sum of: (i) the amount obtained by multiplying
.10% by the average daily net assets represented by the Class A Shares which
were originally purchased prior to June 1, 1992 in the Government Income Series
I class (which was converted into what is now referred to as the Class A Shares)
on June 1, 1992 pursuant to a Plan of Recapitalization approved by shareholders
of the Government Income Series I class), and (ii) the amount obtained by
multiplying .30% by the average daily net assets represented by all other Class
A Shares. While this is the method to be used to calculate the 12b-1 expenses to
be paid by the Class A Shares under its Plan, the fee is a Class A Shares'
expense so that all shareholders of the Class A Shares regardless of whether
they originally purchased or received shares in the Government Income Series I
class, or in one of the other classes that is now known as Class A Shares will
bear 12b-1 expenses at the same rate. While this describes the current formula
for calculating the fees which will be payable under the Class A Shares' Plan,
the Plan permits a full .30% on all Class A Shares' assets to be paid at any
time following appropriate Board approval. See Shares.
The Series' Plans do not apply to the U.S. Government Fund Institutional
Class of shares. Those shares are not included in calculating the Plans' fees,
and the Plans are not used to assist in the distribution and marketing of U.S.
Government Fund Institutional Class shares.
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While payments pursuant to the Plans may not exceed .30% annually with
respect to the Class A Shares, and 1% annually with respect to each of the Class
B Shares and the 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 monthly fees paid to the Distributor are subject to the
review and approval of the Fund's unaffiliated directors, who may reduce the
fees or terminate the Plans at any time.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Series
under an Agreement dated June 29, 1988. The directors annually review service
fees paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
EXPENSES
The Series is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The ratios of expenses to
average daily net assets were 1.24% and 1.94% for the Class A Shares and the
Class B Shares, respectively, for the fiscal year ended July 31, 1995. The Fund
anticipates that the expense ratio for Class C Shares will be identical to the
expense ratio for Class B Shares. The expense ratio of each Class reflects the
impact of its 12b-1 Plan.
SHARES
The Fund is an open-end management investment company currently offering
one series of shares. The Series' portfolio of assets is diversified as defined
by the 1940 Act. Commonly known as a mutual fund, the Fund was organized as a
Maryland corporation on April 23, 1985.
Series shares have a par value of $.01, equal voting rights, except as
noted below, and are equal in all other respects. All Fund shares have
noncumulative voting rights which means that the holders of more than 50% of the
Fund's shares voting for the election of directors can elect 100% of the
directors if they choose to do so. Under Maryland law, the Fund is not required,
and does not intend, to hold annual meetings of shareholders unless, under
certain circumstances, it is required to do so under the 1940 Act. Shareholders
of 10% or more of the Fund's shares may request that a special meeting be called
to consider the removal of a director.
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In addition to Class A Shares, Class B Shares and Class C Shares, the
Series also offers the U.S. Government Fund Institutional Class shares. Shares
of each class represent proportionate interests in the assets of the Series and
have the same voting and other rights and preferences as the other class of
shares of the Series, except that shares of the U.S. Government Fund
Institutional Class are not subject to, and may not vote on matters affecting,
the Distribution Plans under Rule 12b-1 relating to the Class A, Class B and
Class C Shares. Similarly, as a general matter, 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, the Class B
Shares may vote on any proposal to increase materially the fees to be paid by
the Series under the Rule 12b-1 Plan relating to the Class A Shares.
Until May 31, 1992, the Series offered shares of two retail classes of
shares, Government Income Series II class (now the U.S. Government Fund A Class)
and the Government Income Series I class. Shares of Government Income Series I
class were offered with a sales charge, but without the imposition of a Rule
12b-1 fee. Effective June 1, 1992, following shareholder approval of a plan of
recapitalization on May 8, 1992, shareholders of the Government Income Series I
class had their shares converted into shares of the Government Income Series II
class and became subject to the latter class' Rule 12b-1 charges. Effective at
the same time, following approval by shareholders, the name of the Government
Income Series II class was changed to the U.S. Government Fund class. Prior to
May 2, 1994, the U.S. Government Fund Institutional Class was known as U.S.
Government Fund (Institutional) class and U.S. Government Fund A Class was known
as the U.S. Government Fund class.
-70-
<PAGE>
APPENDIX A
Illustrations of the Potential Impact on Investment Based on Purchase Option
$10,000 Purchase
<TABLE>
<CAPTION>
Scenario 1 Scenario 2 Scenario 3 Scenario 4
No Redemption Redeem 1st Year Redeem 3rd Year Redeem 5th Year
------------------------------- ------------------------- ------------------------ ------------------------
Year Class A Class B Class C Class A Class B Class C Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,630 10,630 10,192 10,230 10,530+ 10,192 10,630 10,630 10,192 10,630 10,630
2 10,905 11,300 11,300 10,905 11,300 11,300 10,905 11,300 11,300
3 11,669 12,012 12,012 11,669 11,712 12,012+ 11,669 12,012 12,012
4 12,485 12,768 12,768 12,485 12,768 12,768
5 13,359 13,573 13,573 13,359 13,373 13,573+
6 14,294 14,428 14,428
7 15,295 15,337 15,337
8 16,366+ 16,303 16,303
9 17,511 17,444* 17,330
10 18,737 18,665* 18,422
</TABLE>
*This assumes that Class B Shares were converted to Class A Shares at the end
of the eighth year.
<TABLE>
<CAPTION>
$250,000 Purchase
Scenario 1 Scenario 2 Scenario 3 Scenario 4
No Redemption Redeem 1st Year Redeem 3rd Year Redeem 5th Year
------------------------------- ------------------------- ------------------------ ------------------------
Year Class A Class B Class C Class A Class B Class C Class A Class B Class C Class A Class B Class C
---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,750 265,750 260,813 255,750 263,250+ 260,813 265,750 265,750 260,813 265,750 265,750
2 279,069 282,492 282,492 279,069 282,492 282,492 279,069 282,492 282,492
3 298,604 300,289 300,289 298,604 292,789 300,289+ 298,604 300,289 300,289
4 319,507+ 319,207 319,207 319,507+ 319,207 319,207
5 341,872 339,318 339,318 341,872 334,318 339,318
6 365,803 360,695 360,695
7 391,409 383,418 383,418
8 418,808 407,574 407,574
9 448,124 436,104* 433,251
10 479,493 466,631* 460,546
</TABLE>
*This assumes that Class B Shares were converted to
Class A Shares at the end of the eighth year.
Assumes a hypothetical return for Class A of 7% per year, a hypothetical return
for Class B of 6.3% for years 1-8 and 7% for years 9-10, and a hypothetical
return for Class C of 6.3% per year. Hypothetical returns vary due to the
different expense structure for each Class and do not represent actual
performance.
Class A purchase subject to appropriate sales charge breakpoint
(4.75% @ $10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1% in
years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which class offers the greater return potential
based on investment amount and holding period.
-71-
<PAGE>
- ------------------------
U.S. GOVERNMENT FUND
- ------------------------
A CLASS
B CLASS
C CLASS
- ------------------------
PROSPECTUS
- ------------------------
NOVEMBER 29, 1995
DELAWARE
GROUP
---------
The Delaware Group includes funds with a wide range of investment objectives.
Stock funds, income funds, tax-free 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, contact your financial adviser or call Delaware Group at 800-523-
4640, in Philadelphia call 215-988-1333.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
<PAGE>
U.S. GOVERNMENT FUND INSTITUTIONAL PROSPECTUS
NOVEMBER 29, 1995
--------------------------------------------------
1818 MARKET STREET, PHILADELPHIA, PA 19103
FOR MORE INFORMATION ABOUT
THE U.S. GOVERNMENT FUND INSTITUTIONAL CLASS
CALL THE DELAWARE GROUP AT 800-828-5052.
Delaware Group Government Fund, Inc. (the "Fund") is a professionally-
managed mutual fund of the series type. This Prospectus describes the Fund's
U.S. Government Fund Institutional Class (the "Class") of the Government Income
Series (the "Series").
The objective of the Series is high current income consistent with safety
of principal by investing primarily in debt obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
Shares of this Class are available for purchase only by certain enumerated
investors and are offered at net asset value without the imposition of a front-
end or contingent deferred sales charge and without a 12b-1 charge. See Buying
Shares.
This Prospectus relates only to the Class and sets forth information that
you should read and consider before you invest. Please retain it for future
reference. Part B of the Fund's registration statement, dated November 29,
1995, as it may be amended from time to time, contains additional information
about the Series and has been filed with the Securities and Exchange Commission.
Part B is incorporated by reference into this Prospectus and is available,
without charge, by writing to Delaware Distributors, L.P. at the above address
or by calling the above number. The Fund's financial statements appear in its
Annual Report, which will accompany any response to requests for Part B.
The Series also offers the U.S. Government Fund A Class, the U.S.
Government Fund B Class and the U.S. Government Fund C Class. Shares of U.S.
Government Fund A Class carry a front-end sales charge and are subject to
ongoing distribution expenses. 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.
-1-
<PAGE>
TABLE OF CONTENTS
COVER PAGE REDEMPTION AND EXCHANGE
SYNOPSIS DIVIDENDS AND DISTRIBUTIONS
SUMMARY OF EXPENSES TAXES
FINANCIAL HIGHLIGHTS CALCULATION OF NET ASSET
INVESTMENT OBJECTIVES VALUE PER SHARE
INVESTMENT POLICIES MANAGEMENT OF THE FUND
BUYING SHARES
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
CAPITALIZATION
The Series offers the U.S. Government Fund Institutional Class, the U.S.
Government Fund A Class, the U.S. Government Fund B Class and the U.S.
Government Fund C Class. The Series has a present authorized capitalization of
two hundred million shares of capital stock, with a $.01 par value per share.
Twenty million shares of that stock have been allocated to the U.S. Government
Fund Institutional Class, eighty million shares have been allocated to each of
the U.S. Government Fund A Class and the U.S. Government Fund B Class and fifty
million shares have been allocated to the U.S. Government Fund C Class. See
Shares under Management of the Fund.
INVESTMENT MANAGER, DISTRIBUTOR AND SERVICE AGENT
Delaware Management Company, Inc. (the "Manager") is the investment manager
for the Fund. The Manager or its affiliate, Delaware International Advisers
Ltd., also manages the other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor for the Fund
and for all of the other mutual funds in the Delaware Group. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing and transfer agent for the Fund and for all of the other mutual funds
in the Delaware Group. See Management of the Fund.
PURCHASE PRICE
Shares of the Class offered by this Prospectus are available at net asset
value, without a front-end or contingent deferred sales charge, and are not
subject to distribution fees under a Rule 12b-1 distribution plan. See Buying
Shares.
INVESTMENT OBJECTIVE
The objective of the Series is high current income consistent with safety
of principal by investing primarily in debt obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. For further details,
see Investment Objectives.
RISK FACTORS AND SPECIAL CONSIDERATIONS
The Series may enter into options and futures transactions for hedging
purposes to counterbalance portfolio volatility. While the Series does not
engage in options and futures for speculative purposes, there are risks which
result from use of these instruments by the Series, and the investor should
review the descriptions of such in this Prospectus. See Options and Futures
under Investment Policies.
-3-
<PAGE>
OPEN-END INVESTMENT COMPANY
The Fund, which was organized as a Maryland corporation in 1985, is an
open-end management investment company and the Series' portfolio of assets is
diversified as defined by the Investment Company Act of 1940 (the "1940 Act").
See Shares under Management of the Fund.
INVESTMENT MANAGEMENT FEES
The Manager furnishes investment management services to the Fund, subject
to the supervision and direction of the Board of Directors. Under the
Investment Management Agreement, the annual compensation paid to the Manager is
equal to .60% of the Series' average daily net assets, less a proportionate
share of all directors' fees paid to the unaffiliated directors by the Series.
See Management of the Fund.
REDEMPTION AND EXCHANGE
Shares of the Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
-4-
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price). . . . . None
Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price). . . . . . . . None
Redemption Fees . . . . . . . . . . . . . . . . . None*
Exchange Fees . . . . . . . . . . . . . . . . . . None**
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS)
- --------------------------------------------------------------------
Management Fees . . . . . . . . . . . . . . . . . 0.59%
12b-1 Fees. . . . . . . . . . . . . . . . . . . . None
Other Operating Expenses. . . . . . . . . . . . . 0.35%
-----
Total Operating Expenses . . . . . . . . . . 0.94%
=====
</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Class will bear directly or
indirectly.
*CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.
**Exchanges are subject to the requirements of each fund and a front-end sales
charge may apply. See U.S. Government Fund A Class, U.S. Government Fund B
Class and U.S. Government Fund C Class for expense information about those
classes.
The following example illustrates the expenses that an investor would pay
on a $1,000 investment over various time periods, assuming (1) a 5% annual rate
of return and (2) redemption at the end of each time period. As noted in the
table above, the Fund charges no redemption fees.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$10 $30 $52 $115
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
-5-
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Government Fund, Inc - Government Income Series and have been
audited by Ernst & Young LLP, independent auditors. The data should be read in
conjunction with the financial statements, related notes, and the report of
Ernst & Young LLP covering such financial information and highlights, all of
which are incorporated by reference into Part B. Further information about the
Series' performance is contained in its Annual Report to shareholders. A copy of
the Series' Annual Report (including the report of Ernst & Young LLP) may be
obtained from the Fund upon request at no charge.
- --------------------------------------------------------------------------------
-6-
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
7/31/95 7/31/94 7/31/93 7/31/92(2) 7/31/91(1)
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period . . . . . . $8.000 $9.010 $9.020 $8.700 $8.590
INCOME FROM IN-
- ---------------
VESTMENT OPERATIONS
- -------------------
Net Investment
Income . . . . . . 0.679 0.739 0.791 0.792 0.774
Net Gains or Losses
on Securities (both
realized and
unrealized). . . . (0.140) (1.010) (0.010) 0.320 0.110
------- ------- ------- ----- -----
Total From
Investment
Operations. . . 0.539 (0.271) 0.781 1.112 0.884
----- ------- ----- ----- -----
LESS DISTRIBUTIONS
- ------------------
Dividends (from
net investment
income). . . . . . (0.679) (0.739) (0.791) (0.792) (0.774)
Distributions
(from capital
gains) . . . . . . none none none none none
Returns of
Capital. . . . . . none none none none none
---- ---- ---- ---- ----
Total Distri-
butions........ (0.679) (0.739) (0.791) (0.792) (0.774)
------- ------- ------- ------- -------
Net Asset Value,
End of Period..... $7.860 $8.000 $9.010 $9.020 $8.700
====== ====== ====== ====== ======
- ------------------------------------------------------------
TOTAL RETURN . . . 7.14% (3.23%) 9.04% 13.27% 10.76%
- ------------
- ------------------------------------------------------------
RATIOS/SUPPLEMENTAL
- -------------------
DATA
- ----
Net Assets, End
of Period (000's
omitted) . . . . . $8,316 $14,016 $16,475 $19,421 $13,427
Ratio of Expenses
to Average Daily
Net Assets . . . . 0.94% 0.94% 0.97% 0.91% 0.88%
Ratio of Net
Investment Income
to Average Daily
Net Assets . . . . 8.66% 8.60% 8.74% 8.85% 8.99%
Portfolio Turnover
Rate . . . . . . . 70% 309% 285% 196% 149%
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
7/31/90(1) 7/31/89(1)
<S> <C> <C>
Net Asset Value,
Beginning of
Period............... $8.750 $8.650
INCOME FROM IN-
- ---------------
VESTMENT OPERATIONS
- -------------------
Net Investment
Income............... 0.771 0.793
Net Gains or Losses
on Securities (both
realized and
unrealized).......... (0.160) 0.100
------- -----
Total From
Investment
Operations......... 0.611 0.893
----- -----
LESS DISTRIBUTIONS
- ------------------
Dividends (from
net investment
income).............. (0.771) (0.793)
Distributions
(from capital
gains)............... none none
Returns of
Capital.............. none none
---- ----
Total Distri-
butions............ (0.771) (0.793)
-------- --------
Net Asset Value,
End of Period........ $8.590 $8.750
====== ======
- -----------------------
TOTAL RETURN......... 7.40% 10.92%
- ------------
- -----------------------
RATIOS/SUPPLEMENTAL
- -------------------
DATA
- ----
Net Assets, End
of Period (000's
omitted)............. $8,359 $3,506
Ratio of Expenses
to Average Daily
Net Assets........... 0.89% 0.97%
Ratio of Net
Investment Income
to Average Daily
Net Assets........... 9.00% 9.26%
Portfolio Turnover
Rate................. 127% 172%
</TABLE>
-8-
<PAGE>
- ------------------------------
(1) The data for the period 1989 through 1991 are derived from data of the
Government Income Series I class which, like the U.S. Government Fund
Institutional Class, (prior to May 2, 1994 was referred to as U.S.
Government Fund (Institutional) class), was not subject to Rule 12b-1
distribution expenses. Government Income Series I class was converted into
U.S. Government Fund class on June 1, 1992, pursuant to a Plan of
Recapitalization approved by shareholders of Government Income Series I
class. Prior to May 2, 1994, U.S. Government Fund A Class was known as
U.S. Government Fund class.
(2) The U.S. Government Fund Institutional Class was first offered for sale on
June 1, 1992. The data and ratios for Government Income Series I class
(see note 1) and the U.S. Government Fund (Institutional) class have been
combined for 1992. For the ten months ended May 31, 1992, the Government
Income Series I class' operating expenses and net investment income per
share were $0.068 and $0.657, respectively. For the two months ended July
31, 1992, the U.S. Government Fund Institutional Class' operating expenses
and net investment income per share were $0.014 and $0.135, respectively.
All net investment income was distributed to shareholders.
-9-
<PAGE>
INVESTMENT OBJECTIVES
The investment objective of the Series described below is a matter of
fundamental policy and may not be changed without shareholder approval.
The objective of the Series is high current income consistent with safety
of principal by investing primarily in debt obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, including securities
issued or backed by U.S. Government agencies and government-sponsored
corporations which may not be backed by the full faith and credit of the U.S.
Government, such as the Export-Import Bank, Federal Housing Authority, Federal
National Mortgage Association and Federal Home Loan Banks and mortgage-backed
securities issued by nongovernment entities but collateralized by securities of
the U.S. Government, its agencies and instrumentalities. The weighted average
maturity will be approximately ten years. Although these securities are
guaranteed as to principal and interest by the U.S. Government or its
instrumentalities, the market value of these securities, upon which daily net
asset value is based, may fluctuate and is not guaranteed. The Series may also
invest up to 20% of its assets in (1) corporate notes and bonds rated A or
above, (2) certificates of deposit and obligations of both U.S. and foreign
banks if they have assets of at least one billion dollars, (3) commercial paper
rated P-1 by Moody's Investors Service, Inc. ("Moody's) and/or A-1 by Standard &
Poor's Rating Group ("Standard & Poor's) and (4) asset-backed securities rated
Aaa by Moody's or AAA by Standard & Poor's.
U.S. Government securities include U.S. Treasury securities consisting of
Treasury Bills, Treasury Notes and Treasury bonds. Some of the other government
securities in which the Series may invest include securities of the Federal
Housing Administration, the Government National Mortgage Association, the
Department of Housing and Urban Development, the Export-Import Bank, the Farmers
Home Administration, the General Services Administration, the Maritime
Administration and the Small Business Administration. The maturities of such
securities usually range from three months to 30 years.
INVESTMENT POLICIES
GNMA SECURITIES--The Series may invest in certificates of the Government
National Mortgage Association ("GNMA"). GNMA Certificates are mortgage-backed
securities. Each Certificate evidences an interest in a specific pool of
mortgages insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Scheduled payments
of principal and interest
-10-
<PAGE>
are made to the registered holders of GNMA Certificates. The GNMA Certificates
in which the Series will invest are of the modified pass-through type. GNMA
guarantees the timely payment of monthly installments of principal and interest
on modified pass-through Certificates at the time such payments are due, whether
or not such amounts are collected by the issuer on the underlying mortgages.
The National Housing Act provides that the full faith and credit of the United
States is pledged to the timely payment of principal and interest by GNMA of
amounts due on these GNMA Certificates.
The average life of GNMA Certificates varies with the maturities of the
underlying mortgage instruments with maximum maturities of 30 years. The
average life is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities as the result of prepayments of
refinancing of such mortgages or foreclosure. Such prepayments are passed
through to the registered holder with the regular monthly payments of principal
and interest, and have the effect of reducing future payments. Due to the GNMA
guarantee, foreclosures impose no risk to principal investments.
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates vary widely, it is not possible to accurately predict the
average life of a particular pool. However, statistics indicate that the
average life of the type of mortgages backing the majority of GNMA Certificates
is approximately 12 years. For this reason, it is standard practice to treat
GNMA Certificates as 30-year mortgage-backed securities which prepay fully in
the twelfth year. Pools of mortgages with other maturities or different
characteristics will have varying assumptions for average life. The assumed
average life of pools of mortgages having terms of less than 30 years is less
than 12 years, but typically not less than five years.
The coupon rate of interest of GNMA Certificates is lower than the interest
rate paid on the VA-guaranteed or FHA-insured mortgages underlying the
Certificates, but only by the amount of the fees paid to GNMA and the issuer.
Such fees in the aggregate usually amount to approximately 1/2 of 1%.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average-life
-11-
<PAGE>
assumption. In periods of falling interest rates, the rate of prepayment tends
to increase, thereby shortening the actual average life of a pool of mortgage-
related securities. Conversely, in periods of rising rates, the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
pool. Prepayments generally occur when interest rates have fallen.
Reinvestments of prepayments will be at lower rates. Historically, actual
average life has been consistent with the 12-year assumption referred to above.
The actual yield of each GNMA Certificate is influenced by the prepayment
experience of the mortgage pool underlying the Certificates and may differ from
the yield based on the assumed average life. Interest on GNMA Certificates is
paid monthly rather than semi-annually as for traditional bonds.
MORTGAGE-BACKED SECURITIES--The Series may also invest in securities issued
by certain private, nongovernment corporations, such as financial institutions,
if the securities are fully collateralized at the time of issuance by securities
or certificates issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Two principal types of mortgage-backed securities are
collateralized mortgage obligations (CMOs) and real estate mortgage investment
conduits (REMICs).
CMOs are debt securities issued by U.S. Government agencies or by financial
institutions and other mortgage lenders and collateralized by a pool of
mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
CMOs and REMICs issued by private entities are not government securities
and are not directly guaranteed by any government agency. They are secured by
the underlying collateral of the private issuer. The Series will invest in such
private-backed securities only if they are 100% collateralized at the time of
issuance by securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities. The Series currently invests in privately-issued CMOs and
REMICs only if they are rated at
-12-
<PAGE>
the time of purchase in the two highest grades by a nationally-recognized rating
agency.
ASSET-BACKED SECURITIES--As noted and subject to the limitations set forth
above, the Series may also invest in securities which are backed by assets such
as receivables on home equity and credit card loans, and receivables regarding
automobile, mobile home and recreational vehicle loans, wholesale dealer floor
plans and leases. Such receivables are securitized in either a pass-through or
a pay-through structure. Pass-through securities provide investors with an
income stream consisting of both principal and interest payments in respect of
the receivables in the underlying pool. Pay-through asset-backed securities are
debt obligations issued usually by a special purpose entity, which are
collateralized by the various receivables and in which the payments on the
underlying receivables provide the funds to pay the debt service on the debt
obligations issued. The Series may invest in these and other types of asset-
backed securities that may be developed in the future. It is the Series'
current policy to limit asset-backed investments to those represented by
interests in credit card receivables, wholesale dealer floor plans, home equity
loans and automobile loans.
Due to the shorter maturity of the collateral backing such securities,
there is less of a risk of substantial prepayment than with mortgage-backed
securities. Such asset-backed securities do, however, involve certain risks not
associated with mortgaged-backed securities, including the risk that security
interests cannot be adequately or in many cases, ever, established. In
addition, with respect to credit card receivables, a number of state and federal
consumer credit laws give debtors the right to set off certain amounts owed on
the credit cards, thereby reducing the outstanding balance. In the case of
automobile receivables, there is a risk that the holders may not have either a
proper or first security interest in all of the obligations backing such
receivables due to the large number of vehicles involved in a typical issuance
and technical requirements under state laws. Therefore, recoveries on
repossessed collateral may not always be available to support payments on the
securities. For further discussion concerning the risks of investing in such
asset-backed securities, see Part B.
REPURCHASE AGREEMENTS--In order to invest its short-term cash reserves or
when in a temporary defensive posture, the Series may enter into repurchase
agreements with banks or broker/dealers deemed to be creditworthy by the
Manager, under guidelines approved by the Board of Directors. A repurchase
agreement is a short-term investment in which the purchaser (i.e., the Series)
acquires ownership of a debt
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security and the seller agrees to repurchase the obligation at a future time and
set price, thereby determining the yield during the purchaser's holding period.
Generally, repurchase agreements are of short duration, often less than one week
but on occasion for longer periods. Not more than 10% of the Series' assets may
be invested in repurchase agreements of over seven-days' maturity or other
illiquid assets. Should an issuer of a repurchase agreement fail to repurchase
the underlying security, the loss to the Series, if any, would be the difference
between the repurchase price and the market value of the security. The Series
will limit its investments in repurchase agreements to those which the Manager
under the guidelines of the Board of Directors determines to present minimal
credit risks and which are of high quality. In addition, the Series must have
collateral of at least 100% of the repurchase price, including the portion
representing the Series' yield under such agreements which is monitored on a
daily basis. Such collateral is held by the Morgan Guaranty Trust Company of
New York ("Custodian") in book entry form. Such agreements may be considered
loans under the Investment Company Act of 1940 (the "1940 Act"), but the Series
considers repurchase agreements contracts for the purchase and sale of
securities, and it seeks to perfect a security interest in the collateral
securities so that it has the right to keep and dispose of the underlying
collateral in the event of default.
The funds in the Delaware Group have obtained an exemption from the joint-
transaction prohibitions of Section 17(d) of the 1940 Act to allow the Delaware
Group funds jointly to invest cash balances. The Series 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.
OPTIONS--The Series may write put and call options on a covered basis only,
and will not engage in option writing strategies for speculative purposes. The
Series may write covered call options and secured put options from time to time
on such portion of its portfolio, without limit, as the Manager determines is
appropriate in seeking to obtain the Series' investment objective. The Series
may also purchase (i) call options to the extent that premiums paid for such
options do not exceed 2% of the Series' total assets and (ii) put options to the
extent that premiums paid for such options do not exceed 2% of the Series' total
assets.
A. COVERED CALL WRITING--A call option gives the purchaser of such option
the right to buy, and the writer, in this case the Series, has the obligation to
sell the underlying security at the exercise price during the option period.
There is no percentage limitation on writing covered call options.
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The advantage to the Series of writing covered calls is that the Series
receives a premium which is additional income. The disadvantage is that if the
security rises in value the Series will lose the appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Series to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Series may realize a
net gain or loss from a closing purchase transaction depending upon whether the
net amount of the original premium received on the call option is more or less
than the cost of effecting the closing purchase transaction. Any loss incurred
in a closing purchase transaction may be partially or entirely offset by the
premium received from a sale of a different call option on the same underlying
security. Such a loss may also be wholly or partially offset by unrealized
appreciation in the market value of the underlying security. Conversely, a gain
resulting from a closing purchase transaction could be offset in whole or in
part by a decline in the market value of the underlying security.
If a call option expires unexercised, the Series will realize a short-term
capital gain in the amount of the premium on the option less the commission
paid. Such a gain, however, may be offset by depreciation in the market value
of the underlying security during the option period. If a call option is
exercised, the Series will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security and the proceeds of the sale of the security plus the amount of the
premium on the option less the commission paid.
The market value of a call option generally reflects the market price of
the underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.
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Call options will be written only on a covered basis, which means that the
Series will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected,
the Series would be required to continue to hold a security which it might
otherwise wish to sell. Options written by the Series will normally have
expiration dates between three and nine months from the date written. The
exercise price of a call option may be below, equal to or above the current
market value of the underlying security at the time the option is written.
B. PURCHASING CALL OPTIONS--The Series may purchase call options to the
extent that premiums paid by the Series do not aggregate more than 2% of the
Series' total assets. When the Series purchases a call option, in return for a
premium paid by the Series to the writer of the option, the Series obtains the
right to buy the security underlying the option at a specified exercise price at
any time during the term of the option. The writer of the call option, who
receives the premium upon writing the option, has the obligation, upon exercise
of the option, to deliver the underlying security against payment of the
exercise price. The advantage is that the Series may hedge against an increase
in the price of securities which it ultimately wishes to buy. However, the
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Series upon exercise of the option.
The Series may, following the purchase of a call option, liquidate its
position by effecting a "closing sale transaction." This is accomplished by
selling an option of the same Series as the option previously purchased. The
Series will realize a profit from a closing sale transaction if the price
received on the transaction is more than the premium paid to purchase the
original call option; the Series will realize a loss from a closing sale
transaction if the price received on the transaction is less than the premium
paid to purchase the original call option.
Although the Series will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that the Series would be
required to exercise its options in order to realize any profit and would incur
brokerage commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of
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such options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Series may expire without any value
to the Series.
C. SECURED PUT WRITING--A put option gives the purchaser of the option the
right to sell, and the writer, in this case the Series, the obligation to buy
the underlying security at the exercise price during the option period. During
the option period, the writer of a put option may be assigned an exercise notice
by the broker/dealer through whom the option was sold requiring the writer to
make payment of the exercise price against delivery of the underlying security.
In this event, the exercise price will usually exceed the then market value of
the underlying security. This obligation terminates upon expiration of the put
option or at such earlier time at which the writer effects a closing purchase
transaction. The operation of put options in other respects is substantially
identical to that of call options. Premiums on outstanding put options written
or purchased by the Series may not exceed 2% of its total assets.
The advantage to the Series of writing such options is that it receives
premium income. The disadvantage is that the Series may have to purchase
securities at higher prices than the current market price if the put is
exercised.
Put options will be written only on a secured basis, which means that the
Series will maintain in a segregated account with its Custodian cash or U.S.
Government securities in an amount not less than the exercise price of the
option at all times during the option period. The amount of cash or U.S.
Government securities held in the segregated account will be adjusted on a daily
basis to reflect changes in the market value of the securities covered by the
put option written by the Series. Secured put options will generally be written
in circumstances where the Manager wishes to purchase the underlying security
for the Series' portfolio at a price lower than the current market price of the
security. In such event, the Series would write a secured put option at an
exercise price which, reduced by the premium received on the option, reflects
the lower price it is willing to pay.
D. PURCHASING PUT OPTIONS--The Series may purchase put options to the
extent that premiums paid for such options do not exceed 2% of the Series' total
assets. The Series will, at all times during which it holds a put option, own
the security covered by such option.
The Series intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow the Series to protect unrealized gain in an
appreciated security in its portfolio
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without actually selling the security. In addition, the Series will continue to
receive interest income on the security. If the security does not drop in
value, the Series will lose the value of the premium paid. The Series may sell
a put option which it has previously purchased prior to the sale of the
securities underlying such option. Such sales will result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid on the put option which is sold.
FUTURES--The Series may invest in futures contracts and options on such
futures contracts subject to certain limitations. Futures contracts are
agreements for the purchase or sale for future delivery of securities. When a
futures contact is sold, the Series incurs a contractual obligation to deliver
the securities underlying the contract at a specified price on a specified date
during a specified future month. A purchase of a futures contract means the
acquisition of a contractual right to obtain delivery to the Series of the
securities called for by the contract at a specified price during a specified
future month.
While futures contracts provide for the delivery of securities, deliveries
usually do not occur. Contracts are generally terminated by entering into an
offsetting transaction. When the Series enters into a futures transaction, it
must deliver to the futures commission merchant selected by the Series an amount
referred to as "initial margin." This amount is maintained by the futures
commission merchant in an account at the Series' Custodian bank. Thereafter, a
"variation margin" may be paid by the Series to, or drawn by the Series from,
such account in accordance with controls set for such account, depending upon
changes in the price of the underlying securities subject to the futures
contract.
The Series may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.
The purpose of the purchase or sale of futures contracts for the Series,
which consists of a substantial number of government securities, is to protect
the Series against the adverse effects of fluctuations in interest rates without
actually buying or selling such securities. Similarly, when it is expected that
interest rates may decline, futures contracts may be purchased to hedge in
anticipation of subsequent purchases of government securities at higher prices.
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With respect to options on futures contracts, when the Series is not fully
invested, it may purchase a call option on a futures contract to hedge against a
market advance due to declining interest rates. The writing of a call option on
a futures contract constitutes a partial hedge against declining prices of the
securities which are deliverable upon exercise of the futures contract. If the
futures price at the expiration of the option is below the exercise price, the
Series will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the securities which are deliverable
upon exercise of the futures contract. If the futures price at expiration of
the option is higher than the exercise price, the Series will retain the full
amount of the option premium which provides a partial hedge against any increase
in the price of government securities which the Series intends to purchase.
If a put or call option the Series has written is exercised, the Series
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between the value of its
portfolio securities and changes in the value of its futures positions, the
Series' losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The Series will
purchase a put option on a futures contract to hedge the Series' portfolio
against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Series may not achieve the anticipated benefits of futures contracts or options
on futures contracts or may realize a loss. For example, if the Series is
hedged against the possibility of an increase in interest rates which would
adversely affect the price of government securities held in its portfolio and
interest rates decrease instead, the Series will lose part or all of the benefit
of the increased value of its government securities which it has because it will
have offsetting losses in its futures position. In addition, in such
situations, if the Series had insufficient cash, it may be required to sell
government securities from its portfolio to meet daily variation margin
requirements. Such sales of government securities may, but will not
necessarily, be at increased prices which reflect the rising market. The Series
may be required to sell securities at a time when it may be disadvantageous to
do so.
To the extent that the Series purchases an option on a futures contract and
fails to exercise the option prior to the exercise date, it will suffer a loss
of the premium paid.
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Further, with respect to options on futures contracts, the Series may seek to
close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the existence of a liquid secondary market, which cannot be
assured.
The Series will not enter into futures contracts to the extent that more
than 5% of the Series' assets are required as futures contract margin deposits
and will not invest in futures contracts or options thereon to the extent that
obligations relating to such transactions exceed 20% of the Series' assets.
RULE 144A SECURITIES
The Series may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many privately
placed and legally restricted securities to be freely traded among certain
institutional buyers such as the Series. The Series may invest no more than 10%
of the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day function of determining whether or not individual Rule
144A Securities are liquid for purposes of the Series' 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to
consider the following factors in determining the liquidity of a Rule 144A
Security: (i) the frequency of trades and trading volume for the security; (ii)
whether at least three dealers are willing to purchase or sell the security and
the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security; (iv) the nature of the security and the nature
of the marketplace trades (e.g., the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer).
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If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Series'
holdings of illiquid securities exceed the Series' 10% limit on investments in
such securities, the Manager will determine what action to take to ensure that
the Series continues to adhere to such limitation.
PORTFOLIO LOAN TRANSACTIONS--The Series may loan up to 25% of its assets to
qualified broker/dealers or institutional investors.
The major risk to which the Series would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Series will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager. See Part B.
PORTFOLIO TURNOVER--The Series may experience a high rate of portfolio
turnover, which is not expected to exceed 400%. High portfolio turnover rates
may occur, for example, if the Series writes a substantial number of covered
call options and the market prices of the underlying securities appreciate. A
100% turnover rate would occur if all of the securities in the portfolio were
sold and replaced within one year. The rate of portfolio turnover is not a
limiting factor when the Manager deems it desirable to purchase or sell
securities or to engage in options transactions. High portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs and may affect taxes payable by the Series' shareholders. The turnover
rate may also be affected by cash requirements from redemptions and repurchases
of the Series' shares. The degree of portfolio activity may affect brokerage
costs of the Series and taxes payable by shareholders.
For the fiscal years ended July 31, 1994 and 1995, the portfolio turnover
rates for the Series were 309% and 70%, respectively.
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OTHER RESTRICTIONS--The Fund may borrow from banks. No investment
securities will be purchased while the Series has an outstanding borrowing.
Part B sets forth other more specific investment restrictions, some of which
limit the percentage of assets of the Series which may be invested in certain
types of securities.
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BUYING SHARES
The Distributor serves as the national distributor for the Fund. Shares of
the Class may be purchased directly by contacting the Fund or its agent or
through authorized investment dealers. All purchases of shares of the Class 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 plans from such plans; (b) tax-exempt employee benefit plans of the
Manager or its affiliates and securities dealer firms with a selling agreement
with the Distributor; (c) institutional advisory accounts of the Manager or its
affiliates and those having client relationships with Delaware Investment
Advisers, a division of the Manager, or its affiliates and their corporate
sponsors, as well as subsidiaries and related employee benefit plans and
rollover individual retirement accounts from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the Class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.
U.S. GOVERNMENT FUND A CLASS, U.S. GOVERNMENT FUND B CLASS AND U.S. GOVERNMENT
FUND C CLASS
In addition to offering the U.S. Government Fund Institutional Class, the
Series also offers the U.S. Government Fund A Class, the U.S. Government Fund B
Class and the U.S. Government Fund C Class, which are described in a separate
prospectus relating only to those classes. Shares of the U.S. Government Fund A
Class, U.S. Government Fund B Class and the U.S. Government Fund C Class may be
purchased
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through authorized investment dealers or directly by contacting the Fund or its
agent. The U.S. Government Fund A Class carries a front-end sales charge and
has annual 12b-1 expenses equal to a maximum of .30%. The maximum front-end
sales charge as a percentage of the offering price is 4.75% (which, based on the
net asset value per share of such shares as of the end of the Fund's most recent
fiscal year, is equivalent to 4.96% as a percentage of the amount invested) and
is reduced on certain transactions of $100,000 or more. The U.S. Government
Fund B Class and the U.S. Government Fund C Class have no front-end sales charge
but are subject to annual 12b-1 expenses equal to a maximum of 1%. Shares of
U.S. Government Fund B Class and U.S. Government Fund C Class and certain shares
of U.S. Government Fund A Class may be subject to a contingent deferred sales
charge upon redemption. To obtain a prospectus relating to the U.S. Government
Fund A Class, the U.S. Government Fund B Class and the U.S. Government Fund C
Class, contact the Distributor by writing to the address on the cover of this
Prospectus or by calling 800-523-4640.
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
INVESTING DIRECTLY BY MAIL
1. Initial Purchases--An Investment Application or, in the case of a
retirement account, an appropriate retirement plan application, must be
completed, signed and sent with a check payable to U.S. Government Fund
Institutional Class, at 1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by
mailing a check payable to U.S. Government Fund Institutional Class. Your check
should be identified with your name(s) and account number.
INVESTING DIRECTLY BY WIRE
You may purchase shares by requesting your bank to transmit funds by wire
to CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include your
name(s) and your account number for the class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Fund's Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application or, in the case of a retirement account, an
appropriate retirement plan application, to U.S. Government Fund Institutional
Class, 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 must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your wire.
INVESTING BY EXCHANGE
If you have an investment in another mutual fund in the Delaware Group and
you qualify to purchase shares of the Class, you may write and authorize an
exchange of part or all of your investment into the Class. However, shares of
the U.S. Government Fund B Class and the U.S. Government Fund C Class and the
Class B Shares and the Class C Shares of the other funds in the Delaware Group
offering such classes of shares may not be exchanged into the Class. If you
wish to open an account by exchange, call your Client Services Representative at
800-828-5052 for more information.
INVESTING THROUGH YOUR INVESTMENT DEALER
You can make a purchase of Class shares through most investment dealers
who, as part of the service they provide, must promptly transmit orders to the
Fund. 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 Fund. The effective date of a direct purchase
is the day your wire, electronic transfer or check is received, unless it is
received after the time the share price is determined, as noted above. Purchase
orders received after such time will be effective the next business day.
THE CONDITIONS OF YOUR PURCHASE
The Fund reserves the right to reject any purchase order. If a purchase is
canceled because your check is returned unpaid, you are responsible for any loss
incurred. The Fund can redeem shares from your account(s) to reimburse itself
for any loss, and you may be restricted from making future purchases in any of
the funds in the Delaware Group. The Fund reserves the right 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
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drawn on a foreign financial institution is accepted, you may be subject to
additional bank charges for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to redeem
accounts that remain under $250 as a result of redemptions.
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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 at a price based on the net asset
value next determined after we receive your request in good order. Redemption
and exchange requests received in good order after the time the net asset value
of shares is determined, as noted above, will be processed on the next business
day. See Purchase Price and Effective Date under Buying Shares. Except as
otherwise noted below, for a redemption request to be in "good order," you must
provide your 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 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 also request a redemption or an
exchange by calling the Fund at 800-828-5052.
The Fund will honor written redemption requests of shareholders who
recently purchased Class shares by check but will not mail the proceeds until it
is reasonably satisfied that the purchase check has cleared, which may take up
to 15 days from the purchase date. The Fund will not honor telephone
redemptions for shares recently purchased by check unless it is reasonably
satisfied that the purchase check has cleared. You can avoid this potential
delay if you purchase shares by wiring Federal Funds. The Fund reserves the
right to reject a written or telephone redemption request or delay payment of
redemption proceeds if there has been a recent change to the shareholder's
address of record.
Shares of the Class may be exchanged into any other Delaware Group mutual
fund provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Class, such exchanges will be exchanged at
net asset value. Shares of the Class may not be exchanged into the Class B
Shares or the Class C Shares of any of the funds in the Delaware Group. The
Fund may suspend, terminate, or amend the terms of the exchange privilege upon
60 days' written notice to shareholders.
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Various redemption and exchange methods are outlined below. No fee is
charged by the Fund or the Distributor for redeeming or exchanging your shares.
You may also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, 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 the Fund or its agent.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
CHECKWRITING FEATURE
YOU CAN REQUEST SPECIAL CHECKS BY MARKING THE BOX ON THE INVESTMENT
APPLICATION.
Checks must be drawn for $500 or more and, unless otherwise indicated on
the Investment Application or your checkwriting authorization form, must be
signed by all owners of the account.
Because the value of shares fluctuates, you cannot use checks to close your
account. The Checkwriting Feature is not available for Retirement Plans. See
Part B for additional information.
WRITTEN REDEMPTION AND EXCHANGE
You can write to the 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 your
shares into another mutual fund in the Delaware Group, subject to the same
conditions and limitations as other exchanges noted above. The request must be
signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent to
the shareholder(s) at the address of record, the Fund requires a signature by
all owners of the account and may require a signature guarantee. Each signature
guarantee must be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
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Payment is normally mailed the next business day, but no later than seven
days, after receipt of your redemption request. The Fund issues certificates
for Class 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.
Shareholders also may submit their 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 only redeem
or exchange 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 the Fund in writing that you do not wish to have such
service available with respect to your account. The Fund reserves the right to
modify, terminate or suspend these procedures upon 60 days' written notice to
shareholders. It may be difficult to reach the Fund by telephone during periods
when market or economic conditions lead to an unusually large volume of
telephone requests.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Class shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, 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 address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the
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next business day, but no later than seven days, after receipt of the request.
TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, the Fund requires a written authorization and may require that you have
your signature guaranteed. For your protection, your authorization must be on
file. If you request a wire, your funds will normally be sent the next business
day. CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next
business day, but no later than seven days, after receipt of your request to
your predesignated bank account. There are no fees for this redemption, but the
mail time may delay getting funds into your bank account. Simply call your
Client Services Representative prior to the time the net asset value is
determined, as noted above.
TELEPHONE EXCHANGE
You or your investment dealer of record can exchange shares into any fund
in the Delaware Group under the same registration. As with the written exchange
service, telephone exchanges are subject to the same conditions and limitations
as other exchanges noted above. Telephone exchanges may be subject to
limitations as to amounts or frequency.
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<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Fund declares a dividend to all shareholders of record at the time the
net asset value per share is determined. See Purchase Price and Effective Date
under Buying Shares. Thus, when redeeming shares, dividends continue to be
credited up to and including the date of redemption.
Purchases of Class shares by wire begin earning dividends when converted
into Federal Funds and available for investment, normally the next business day
after receipt. However, if the Fund is given prior notice of a 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 the Series will share proportionately in the investment
income and expenses of the Series, except that the Class will not incur any
distribution fees under the 12b-1 Plans which apply to the U.S. Government Fund
A Class, the U.S. Government Fund B Class and the U.S. Government Fund C Class.
The Series' dividends are declared daily and paid monthly on the first
business day following the end of each month. Dividends and distributions, if
any, will be automatically reinvested in a shareholder's account at net asset
value. Any net short-term capital gains after deducting any net long-term
capital losses (including carryforwards) and, pursuant to an Exemptive Order
under Section 19(b) of the Investment Company Act, any long-term gains that
would have been short-term gains except for 60/40 treatment under Section
1256(a) of the Internal Revenue Code may be distributed quarterly, but in the
discretion of the Fund's Board of Directors, may be distributed less frequently.
Any distribution from net long-term realized securities profits will be made
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 Internal Revenue Code.
During the fiscal year ended July 31, 1995, dividends totaling $0.679 per share
of the Class were paid from net investment income.
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<PAGE>
TAXES
The Series has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Internal Revenue Code
(the "Code"). As such, the Series will not be subject to federal income tax, or
to any excise tax, to the extent its earnings are distributed as provided in the
Code.
The Series intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to investors who are subject to
income tax as ordinary income, even though received in additional shares. No
portion of the Series' distributions will be eligible for the dividends-received
deduction for corporations.
Distributions paid by the Series from long-term capital gains, received in
additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Series. The Series does not seek to realize any
particular amount of capital gains during a year; rather, realized gains are a
byproduct of Series management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Series are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
Dividends which are declared in October, November or December to
shareholders of record on a specified date in one of those months, but which,
for operational reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by the Series and received
by the shareholder on December 31 of the calendar year in which they are
declared.
The sale of shares of the Series is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may
be realized from an ordinary redemption of shares or an exchange of shares
between two mutual funds (or two portfolios or series of a mutual fund). Any
loss incurred on sale or exchange of the Series' shares which had been held for
six months or less will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital
gains realized from certain types of U.S. Government securities may be
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<PAGE>
exempt from state personal income taxes. Shares of the Series are exempt from
Pennsylvania county personal property taxes.
Each year, the Fund will mail you information on the tax status of the
Series' dividends and distributions. Shareholders will also receive each year
information as to the portion of dividend income that is derived from U.S.
Government securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Series.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Account Registration Form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Series.
See Accounting and Tax Issues and Taxes in Part B for additional
information on tax matters relating to the Series and its shareholders.
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<PAGE>
CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of the Class is the net asset value
("NAV") per share of the Class 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 such exchange is open.
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. U.S.
Government securities are valued at the mean between the bid and asked prices.
Options are valued at the last reported sale price or, if no sales are reported,
at the mean between the last reported bid and asked prices. Any short-term
investments having a maturity of less than 60 days are valued at amortized cost,
which approximates market value. Non-Exchange-traded options are valued at fair
value using a mathematical model. All other securities are valued at their fair
value by an independent pricing service using methods approved by the Fund's
Board of Directors.
Each of the Series' four classes will bear, pro-rata, all of the common
expenses of the Series. The net asset values of all outstanding shares of each
class of the Series will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Series represented by the
value of shares of that class. All income earned and expenses incurred by the
Series will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Series represented by the value of shares
of such classes, except that the Class will not incur any of the expenses under
the Series' 12b-1 Plans and U.S. Government Fund A, B and C Classes alone will
bear the 12b-1 Plan fees payable under their respective Plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the dividends paid to each class of the Series may vary. However, the
NAV per share of each class is expected to be equivalent.
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<PAGE>
MANAGEMENT OF THE FUND
DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors. Part B contains additional information regarding the Fund's
directors and officers.
INVESTMENT MANAGER
The Manager furnishes investment management services to the Series.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On July 31, 1995, the Manager and its affiliate,
Delaware International Advisers Ltd., were supervising in the aggregate more
than $27 billion in assets in the various institutional (approximately
$17,356,716,000) and investment company (approximately $9,964,548,000) accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a wholly-
owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now 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. In connection with the merger, a new
Investment Management Agreement between the Fund on behalf of the Series and the
Manager was executed following shareholder approval.
The Manager manages the Series' portfolio and makes investment decisions
which are implemented by the Fund's Trading Department. The Manager also
administers the Fund's affairs and pays the salaries of all the directors,
officers and employees of the Fund who are affiliated with the Manager. For
these services, the Manager is paid an annual fee equal to .60% of the Series'
average daily net assets, less a proportionate share of all directors' fees paid
to the unaffiliated directors by the Series. Investment management fees paid by
the Series for the fiscal year ended July 31, 1995 were 0.59% of average daily
net assets.
Roger A. Early has assumed primary responsibility for making day-to-day
investment decisions for the Fund as of July 18, 1994. Mr. Early has an
undergraduate degree in economics from the University of Pennsylvania's Wharton
School and an MBA in finance and accounting from the University of Pittsburgh.
He is also a CPA and a CFA. Prior to joining the Delaware Group, Mr. Early was
a portfolio
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<PAGE>
manager for Federated Investment Counseling's fixed income group, with over $1
billion in assets.
In making investment decisions for the Fund, Mr. Early consults regularly
with Paul E. Suckow and Gary A. Reed.
Mr. Suckow is the Manager's Chief Investment Officer for fixed income. A
Chartered Financial Analyst, he is a graduate of Bradley University with an MBA
from Western Illinois University. Mr. Suckow was a fixed income portfolio
manager at the Delaware Group from 1981 to 1985. He returned to the Delaware
Group in 1993 after eight years with Oppenheimer Management Corporation. Mr.
Reed holds an AB in Economics from the University of Chicago and an MA in
Economics from Columbia University. He began his career in 1978 with the
Equitable Life Assurance Company in New York City, where he specialized in
credit analysis. Prior to joining the Delaware Group in 1989, Mr. Reed was Vice
President and Manager of the fixed income department at Irving Trust Company in
New York.
PORTFOLIO TRADING PRACTICES
Portfolio trades are generally made on a net basis without brokerage
commissions. However, the price may include a mark-up or mark-down. Banks,
brokers or dealers are selected by the Manager to execute the Series' portfolio
transactions.
The Fund uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing
any of its accounts. Subject to best price and execution, the Series may
consider a broker/dealer's sales of Series shares in placing portfolio orders
and may place orders with broker/dealers that have agreed to defray certain
Series expenses such as custodian fees.
PERFORMANCE INFORMATION
From time to time, the Series may quote yield or total return performance
of the Class in advertising and other types of literature.
The current yield for the Class 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.
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<PAGE>
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 periods. The Series
may also advertise aggregate and average total return information concerning the
Class over additional periods of time.
Yield and net asset value fluctuate and are not guaranteed. Past
performance is not an indication 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 distributions.
You should examine statements and confirmations immediately and promptly report
any discrepancy by calling your Client Services Representative.
FINANCIAL INFORMATION ABOUT THE FUND
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Series' investments and performance. The Fund's fiscal year ends on July
31.
DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
the Fund under a Distribution Agreement dated April 3, 1995, as amended on
November 29, 1995. 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 the Series
under an Agreement dated June 29, 1988. The directors annually review service
fees paid to the Transfer Agent. Certain recordkeeping and other shareholder
services that otherwise would be performed by the Transfer Agent may be
performed by certain other entities and the Transfer Agent may elect to enter
into an agreement to pay such other entities for those services. In addition,
participant account maintenance fees may be assessed for certain recordkeeping
provided as part of retirement plan and administration service packages. These
fees are based on the number of participants in the plan and the various
services selected. Fees will be quoted upon request and are subject to change.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
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<PAGE>
EXPENSES
The Series is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The ratio of operating
expenses to average daily net assets for the Class was 0.94% for the fiscal year
ended July 31, 1995.
SHARES
The Fund is an open-end management investment company, currently offering
one series of shares. The Series' portfolio of assets is diversified as defined
by the 1940 Act. Commonly known as a mutual fund, the Fund was organized as a
Maryland corporation on April 23, 1985.
Series shares have a par value of $.01, equal voting rights, except as
noted below, and are equal in all other respects. All Fund shares have
noncumulative voting rights which means that the holders of more than 50% of the
Fund's shares voting for the election of directors can elect 100% of the
directors if they choose to do so. Under Maryland law, the Fund is not
required, and does not intend, to hold annual meetings of shareholders unless,
under certain circumstances, it is required to do so under the 1940 Act.
Shareholders of 10% or more of the Fund's shares may request that a special
meeting be called to consider the removal of a director.
In addition to the Class, the Series also offers the U.S. Government Fund A
Class, the U.S. Government Fund B Class and the U.S. Government Fund C Class.
Shares of each class represent proportionate interests in the assets of the
Series and have the same voting and other rights and preferences as the other
classes of the Series, except that shares of the Class are not subject to, and
may not vote on matters affecting, the Series' Distribution Plans under Rule
12b-1 relating to the U.S. Government Fund A Class, the U.S. Government Fund B
Class and the U.S. Government Fund C Class.
Until May 31, 1992, the Series offered shares of two retail classes of
shares, Government Income Series II class (now the U.S. Government Fund A Class)
and the Government Income Series I class. Shares of Government Income Series I
class were offered with a sales charge, but without the imposition of a Rule
12b-1 fee. Effective June 1, 1992, following shareholder approval of a plan of
recapitalization on May 8, 1992, shareholders of the Government Income Series I
class had their shares converted into shares of the Government Income Series II
class and became subject to the latter class' Rule 12b-1 charges. Effective at
the same time, following approval by shareholders, the name of the Government
Income Series II class was changed to the U.S. Government Fund class. Prior to
May 2, 1994, the Class was known as U.S. Government Fund (Institutional) class
and U.S. Government Fund A Class was known as the U.S. Government Fund class.
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<PAGE>
- -------------------------------
U.S. GOVERNMENT FUND
- -------------------------------
INSTITUTIONAL
- -------------------------------
- -------------------------------
P R O S P E C T U S
- -------------------------------
NOVEMBER 29, 1995
DELAWARE
GROUP
--------
For more information contact the Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
<PAGE>
- ------------------------------------
U.S. GOVERNMENT FUND
- ------------------------------------
A CLASS
- ------------------------------------
B CLASS
- ------------------------------------
C CLASS
- ------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------
CLASSES OF DELAWARE GROUP
- ------------------------------------
GOVERNMENT FUND, INC.
- ------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ------------------------------------
NOVEMBER 29, 1995
DELAWARE
GROUP
--------
The Delaware Group includes funds with a wide range of investment objectives.
Stock funds, income funds, tax-free 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 Group at 800-523-4640, and shareholders of the
Institutional Class should contact Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, Pa 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 29, 1995
- --------------------------------------------------------------------------------
DELAWARE GROUP
GOVERNMENT FUND, INC.
- --------------------------------------------------------------------------------
1818 MARKET STREET
PHILADELPHIA, PA 19103
- --------------------------------------------------------------------------------
FOR MORE INFORMATION ABOUT THE
U.S. GOVERNMENT FUND INSTITUTIONAL
CLASS: 800-828-5052
FOR PROSPECTUS AND PERFORMANCE OF THE
U.S. GOVERNMENT FUND A CLASS, THE
U.S. GOVERNMENT FUND B CLASS AND THE
U.S. GOVERNMENT FUND C CLASS:
NATIONWIDE 800-523-4640
INFORMATION ON EXISTING ACCOUNTS OF THE
U.S. GOVERNMENT FUND A CLASS, THE
U.S. GOVERNMENT FUND B CLASS AND THE
U.S. GOVERNMENT FUND C CLASS:
(SHAREHOLDERS ONLY)
NATIONWIDE 800-523-1918
DEALER SERVICES:
(BROKER/DEALERS ONLY)
NATIONWIDE 800-362-7500
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
COVER PAGE
- --------------------------------------------------------------------------------
INVESTMENT POLICIES
- --------------------------------------------------------------------------------
ACCOUNTING AND TAX ISSUES
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
TRADING PRACTICES AND BROKERAGE
- --------------------------------------------------------------------------------
PURCHASING SHARES
- --------------------------------------------------------------------------------
INVESTMENT PLANS
- --------------------------------------------------------------------------------
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DETERMINING OFFERING PRICE AND
NET ASSET VALUE
- --------------------------------------------------------------------------------
REDEMPTION AND REPURCHASE
- --------------------------------------------------------------------------------
DIVIDENDS AND REALIZED SECURITIES
PROFITS DISTRIBUTIONS
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AGREEMENT
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
- --------------------------------------------------------------------------------
EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
APPENDIX A -- IRA INFORMATION
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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<PAGE>
Delaware Group Government Fund, Inc. (the "Fund") is a professionally-
managed mutual fund of the series type, which currently offers one series, the
Government Income Series (the "Series"). The Series offers four classes
(individually, a "Class" and collectively, the "Classes") of shares -- U.S.
Government Fund A Class (the "Class A Shares"), U.S. Government Fund B Class
(the "Class B Shares") and the U.S. Government Fund C Class (the "Class C
Shares") (together, the "Fund Classes") and U.S. Government Fund Institutional
Class (the "Institutional Class"). Class B Shares, Class C Shares and
Institutional Class shares 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% and annual 12b-1 Plan expenses of up to .30%.
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 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 Buying Shares in the Fund Classes' Prospectus. Class C Shares are
subject to a CDSC which may be imposed on redemptions made within twelve months
of purchase and annual 12b-1 Plan expenses of up to 1%, which are assessed
against the Class C Shares for the life of the investment. All references to
"shares" in this Statement of Additional Information ("Part B" of the
registration statement) refer to all Classes of shares of the Series, except
where noted.
This Part B supplements the information contained in the current Prospectus
for the Fund Classes dated November 29, 1995 and the current Prospectus for the
Institutional Class dated November 29, 1995, as they may be amended from time to
time. It 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. Each Class' Prospectus may be obtained
by writing or calling your investment dealer or by contacting the Fund's
national distributor, Delaware Distributors, L.P. (the "Distributor"), 1818
Market Street, Philadelphia, PA 19103.
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<PAGE>
INVESTMENT POLICIES
INVESTMENT RESTRICTIONS--The Fund has adopted the following restrictions
for the Series which, along with its investment objectives, cannot be changed
without approval by the holders of a "majority" of the Series' outstanding
shares, which is a vote by the holders of the lesser of a) 67% or more of the
voting securities present in person or by proxy at a meeting, if the holders of
more than 50% of the outstanding voting securities are present or represented by
proxy; or b) more than 50% of the outstanding voting securities. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time of purchase of securities.
The Government Income Series shall not:
1. Invest more than 5% of the market or other fair value of its assets in
the securities of any one issuer (other than obligations of, or guaranteed by,
the U.S. Government, its agencies or instrumentalities).
2. Invest in securities of other investment companies except as part of a
merger, consolidation or other acquisition, and except to the extent that an
issuer of mortgage-backed securities may be deemed to be an investment company,
provided that any such investment in securities of an issuer of a mortgage-
backed security which is deemed to be an investment company will be subject to
the limits set forth in Section 12(d)(1)(A) of the Investment Company Act of
1940, as amended (the "1940 Act").
The Fund has been advised by the staff of the Securities and Exchange
Commission (the "Commission") that it is the staff's position that, under the
1940 Act, the Series may invest (a) no more than 10% of its assets in the
aggregate in certain CMOs and REMICs which are deemed to be investment companies
under the 1940 Act and issue their securities pursuant to an exemptive order
from the Commission, and (b) no more than 5% of its assets in any single issue
of such CMOs or REMICs.
3. Make loans, except to the extent the purchases of debt obligations
(including repurchase agreements) in accordance with the Series' investment
objective and policies are considered loans and except that the Series may loan
up to 25% of its assets to qualified broker/dealers or institutional investors
for their use relating to short sales or other security transactions.
4. Purchase or sell real estate but this shall not prevent the Series
from investing in securities secured by real estate or interests therein.
5. Purchase more than 10% of the voting securities of any issuer, or
invest in companies for the purpose of exercising control or management.
-4-
<PAGE>
6. Engage in the underwriting of securities of other issuers, except that
in connection with the disposition of a security, the Series may be deemed to be
an "underwriter" as that term is defined in the Securities Act of 1933.
7. Make any investment which would cause more than 25% of the market or
other fair value of its total assets to be invested in the securities of issuers
all of which conduct their principal business activities in the same industry.
This restriction does not apply to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
8. Write, purchase or sell options, puts, calls or combinations thereof,
except that the Series may: (a) write covered call options with respect to any
part or all of its portfolio securities; (b) purchase call options to the extent
that the premiums paid on all outstanding call options do not exceed 2% of the
Series' total assets; (c) write secured put options; (d) purchase put options to
the extent that the premiums paid on all outstanding put options do not exceed
2% of the Series' total assets and only if the Series owns the security covered
by the put option at the time of purchase. The Series may sell put options or
call options previously purchased or enter into closing transactions with
respect to such options.
9. Enter into futures contracts or options thereon, except that the
Series may enter into futures contracts to the extent that not more than 5% of
the Series' assets are required as futures contract margin deposits and only to
the extent that obligations under such contracts or transactions represent not
more than 20% of the Series' assets.
10. Purchase securities on margin, make short sales of
securities or maintain a net short position.
11. Invest in warrants or rights except where acquired in units or
attached to other securities.
12. Purchase or retain the securities of any issuer any of whose officers,
directors or security holders is a director or officer of the Series or of its
investment manager if or so long as the directors and officers of the Series and
of its investment manager together own beneficially more than 5% of any class of
securities of such issuer.
13. Invest in interests in oil, gas or other mineral exploration or
development programs.
14. Invest more than 10% of the Series' net assets in repurchase
agreements maturing in more than seven days or in other illiquid assets.
15. Borrow money in excess of one-third of the value of its net assets and
then only as a temporary measure for extraordinary purposes or to facilitate
redemptions. The
-5-
<PAGE>
Series 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 the Series' 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 Series shall, within three days thereafter (not including Sunday or
holidays) or such longer period as the 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%. The Series will not
pledge more than 10% of its net assets. The Series will not issue senior
securities as defined in the 1940 Act, except for notes to banks. No investment
securities will be purchased while the Series has an outstanding borrowing.
Although not a fundamental investment restriction, the Series currently
does not invest its assets in real estate limited partnerships.
CORPORATE DEBT--The Series may invest in corporate notes and bonds rated A
or above. Excerpts from Moody's Investors Service, Inc.'s ("Moody's")
description of those categories of 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.
Excerpts from Standard & Poor's Rating Group's ("Standard & Poor's")
description of those categories of 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.
COMMERCIAL PAPER--The Series may invest in short-term promissory notes
issued by corporations which at the time of purchase are rated P-1 and/or A-1.
Commercial paper ratings P-1 by Moody's and A-1 by Standard & Poor's are the
highest investment grade category.
BANK OBLIGATIONS--The Series may invest in certificates of deposit,
bankers' acceptances and other short-term obligations of U.S. commercial banks
and their overseas branches and foreign banks of comparable quality, provided
each such bank combined with its branches has total assets of at least one
billion dollars. Any obligations of foreign banks shall be denominated in U.S.
dollars. Obligations of foreign banks and obligations of overseas branches of
U.S. banks are subject to somewhat different regulations and risks than those of
U.S. domestic banks. In particular, a foreign country could impose exchange
controls which might delay the
-6-
<PAGE>
release of proceeds from that country. Such deposits are not covered by the
Federal Deposit Insurance Corporation. Because of conflicting laws and
regulations, an issuing bank could maintain that liability for an investment is
solely that of the overseas branch which could expose the Series to a greater
risk of loss. The Series will only buy short-term instruments in nations where
risks are minimal. The Series will consider these factors along with other
appropriate factors in making an investment decision to acquire such obligations
and will only acquire those which, in the opinion of management, are of an
investment quality comparable to other debt securities bought by the Series.
MORTGAGE-BACKED SECURITIES--In addition to mortgage-backed securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
the Series may also invest its assets in securities issued by certain private,
nongovernment corporations, such as financial institutions, if the securities
are fully collateralized at the time of issuance by securities or certificates
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
Two principal types of mortgage-backed securities are collateralized mortgage
obligations (CMOs) and real estate mortgage investment conduits (REMICs).
CMOs are debt securities issued by U.S. Government agencies or by financial
institutions and other mortgage lenders and collateralized by a pool of
mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
Stripped mortgage securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on a
pool of mortgage assets. A common type of stripped mortgage security will have
one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive
all of the interest (the "interest-only" class), while the other class will
receive all of the principal (the "principal-only" class). The yield to
maturity on an interest-only class is extremely sensitive not only to changes in
prevailing interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal
-7-
<PAGE>
payments may have a material adverse effect on the Series' yield to maturity.
If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Series may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating categories.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not yet been fully developed and, accordingly,
these securities are generally illiquid and to such extent, together with any
other illiquid investments, will not exceed 10% of the Series' net assets.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
CMOs and REMICs issued by private entities are not government securities
and are not directly guaranteed by any government agency. They are secured by
the underlying collateral of the private issuer. The Series will invest in such
private-backed securities only if they are 100% collateralized at the time of
issuance by securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities. The Series currently invests in privately-issued CMOs and
REMICs only if they are rated at the time of purchase in the two highest grades
by a nationally-recognized rating agency.
ASSET-BACKED SECURITIES--The Series may invest a portion of its assets in
asset-backed securities. The rate of principal payment on asset-backed
securities generally depends on the rate of principal payments received on the
underlying assets. Such rate of payments may be affected by economic and
various other factors such as changes in interest rates. Therefore, the yield
may be difficult to predict and actual yield to maturity may be more or less
than the anticipated yield to maturity. The credit quality of most asset-backed
securities depends primarily on the credit quality of the assets underlying such
securities, how well the entities issuing the securities are insulated from the
credit risk of the originator or affiliated entities, and the amount of credit
support provided to the securities.
Asset-backed securities are often backed by a pool of assets representing
the obligations of a number of different parties. To lessen the effect of
failures by obligors on underlying assets to make payments, such securities may
contain elements of credit support. Such credit support falls into two
categories: (i) liquidity protection, and
-8-
<PAGE>
(ii) protection against losses resulting from ultimate default by an obligor on
the underlying assets. Liquidity protection refers to the provisions of
advances, generally by the entity administering the pool of assets, to ensure
that the receipt of payments due on the underlying pool is timely. Protection
against losses resulting from ultimate default enhances the likelihood of
payments of the obligations on at least some of the assets in the pool. Such
protection may be provided through guarantees, insurance policies or letters of
credit obtained by the issuer or sponsor from third parties, through various
means of structuring the transaction or through a combination of such
approaches. The Series will not pay any additional fees for such credit
support, although the existence of credit support may increase the price of a
security.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments, sometimes funded from a portion of the
payments on the underlying assets, are held in reserve against future losses)
and "over collateralization" (where the scheduled payments on, or the principal
amount of, the underlying assets exceeds that required to make payments of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information respecting
the level of credit information respecting the level of credit risk associated
with the underlying assets. Delinquencies or losses in excess of those
anticipated could adversely affect the return on an investment in such issue.
PORTFOLIO LOAN TRANSACTIONS
The Series may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
It is the understanding of Delaware Management Company, Inc. (the
"Manager") that the staff of 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 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 the loan
-9-
<PAGE>
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 the
Fund 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 the Series would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Series will only enter into loan arrangements
after a review of all pertinent facts by the Manager, 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.
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<PAGE>
ACCOUNTING AND TAX ISSUES
The following supplements the information supplied in the Classes'
Prospectuses under Taxes.
When the Series writes a call or a put option, an amount equal to the
premium received by it is included in the Series' Statement of Assets and
Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently "marked to market" to reflect the current market value
of the option written. If an option which the Series has written either expires
on its stipulated expiration date, or if the Series enters into a closing
purchase transaction, the Series realizes a gain (or loss if the cost of the
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. Any such gain or loss is
a short-term capital gain or loss for federal income tax purposes. If a call
option which the Series has written is exercised, the Series realizes a capital
gain or loss (long-term or short-term, depending on the holding period of the
underlying security) from the sale of the underlying security and the proceeds
from such sale are increased by the premium originally received. If a put
option which the Series has written is exercised, the amount of the premium
originally received will reduce the cost of the security which the Series
purchases upon exercise of the option.
The premium paid by the Series for the purchase of a put option is included
in the section of the Series' Statement of Assets and Liabilities as an
investment and subsequently adjusted daily to the current market value of the
option. For example, if the current market value of the option exceeds the
premium paid, the excess would be unrealized appreciation and, conversely, if
the premium exceeds the current market value, such excess would be unrealized
depreciation. If a put option which the Series has purchased expires on the
stipulated expiration date, the Series realizes a short-term or long-term
(depending on the holding period of the underlying security) capital loss for
federal income tax purposes in the amount of the cost of the option. If the
Series sells the put option, it realizes a short-term or long-term (depending on
the holding period of the underlying security) capital gain or loss, depending
on whether the proceeds from the sale are greater or less than the cost of the
option. If the Series exercises a put option, it realizes a capital gain or
loss (long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and proceeds from such sale
will be decreased by the premium originally paid. However, since the purchase
of a put option
-11-
<PAGE>
is treated as a short sale for federal income tax purposes, the holding period
of the underlying security will be affected by such a purchase.
The Internal Revenue Code includes special rules applicable to regulated
futures contracts and non-equity related listed options which the Series may
write, and listed options which the Series may write, purchase or sell. Such
regulated futures contracts and options are classified as Section 1256 contracts
under the Code. The character of gain or loss under a Section 1256 contract is
generally treated as 60% long-term gain or loss and 40% short-term gain or loss.
When held by the Series at the end of a fiscal year, these options are required
to be treated as sold at market value on the last day of the fiscal year for
federal income tax purposes ("marked to market").
Over-the-counter options are not classified as Section 1256 contracts and
are not subject to the 60/40 gain or loss treatment or the marked to market
rule. Any gains or losses recognized by the Series from over-the-counter option
transactions generally constitute short-term capital gains or losses.
The initial margin deposits made when entering into futures contracts are
recognized as assets due from the broker. During the period the futures
contract is open, changes in the value of the contract will be reflected at the
end of each day.
The Series has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. The Series must meet several requirements to maintain its
status as a regulated investment company. Among these requirements are that at
least 90% of its investment company taxable income be derived from dividends,
interest, payment with respect to securities loans and gains from the sale or
disposition of securities; that at the close of each quarter of its taxable year
at least 50% of the value of its assets consist of cash and cash items,
government securities, securities of other regulated investment companies and,
subject to certain diversification requirements, other securities; and that less
than 30% of its gross income be derived from sales of securities held for less
than three months.
The Internal Revenue Service has ruled publicly that an Exchange-traded
call option is a security for purposes of the 50% of assets tests and that its
issuer is the issuer of the underlying security, not the writer of the option,
for purposes of the diversification requirements.
The requirement that not more than 30% of the Series' gross income be
derived from gains from the sale or other disposition of securities held for
less than three months may restrict the Series in its ability to write covered
call
-12-
<PAGE>
options on securities which it has held less than three months, to write options
which expire in less than three months, to sell securities which have been held
less than three months, and to effect closing purchase transactions with respect
to options which have been written less than three months prior to such
transactions. Consequently, in order to avoid realizing a gain within the
three-month period, the Series may be required to defer the closing out of a
contract beyond the time when it might otherwise be advantageous to do so. The
Series may also be restricted in the sale of purchased put options and the
purchase of put options for the purpose of hedging underlying securities because
of the application of the short sale holding period rules with respect to such
underlying securities.
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<PAGE>
PERFORMANCE INFORMATION*
From time to time, the Series may state each Class' total return in
advertisements and other types of literature. Any statements 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 the most recent one-, five-
and ten-year (or life of fund, if applicable) periods, as relevant. The Series
may also advertise aggregate and average total return information of each Class
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
[C]
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, if
any, is deducted;
T = average annual total return;
n = number of years;
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 the case of Class A Shares, the Limited CDSC applicable to only certain
redemptions of those shares, will not be deducted from any computations of
total return. See the Prospectus for the Fund Classes for a description of
the Limited CDSC and the instances in which it applies. All references to
contingent deferred sales charges or a CDSC will apply to Class B Shares or
Class C Shares.
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<PAGE>
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, the Series may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.
The performance of Class A Shares and the Institutional Class, as shown
below, is the average annual total return quotations for the one-, three- and
five-year periods ended July 31, 1995 and for the life of these Classes,
computed as described above. The average annual total return for Class A Shares
at offer reflects the maximum front-end sales charges paid on the purchase of
shares. The average annual total return for Class A Shares at net asset value
(NAV) does not reflect the payment of the maximum front-end sales charge.
Securities prices fluctuated during the periods covered and past results should
not be considered as representative of future performance. Pursuant to
applicable regulation, total return shown for the Institutional Class for the
periods prior to the commencement of operations of such class is calculated by
taking the performance of Class A Shares and adjusting it to reflect the
elimination of all sales charges. However, for those periods, no adjustment has
been made to eliminate the impact of 12b-1 payments, and performance may have
been affected had such an adjustment been made. The performance of the Class B
Shares, as shown below, is the average annual total return quotation for the
one-year period ended July 31, 1995 and for the life of this Class. The average
annual total return for Class B Shares including deferred sales charge reflects
the deduction of the applicable CDSC that would be paid if the shares were
redeemed at July 31, 1995. The average annual total return for Class B Shares
excluding deferred sales charge assumes the shares were not redeemed at July 31,
1995 and therefore does not reflect the deduction of a CDSC.
-15-
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
CLASS A CLASS A
SHARES SHARES INSTITUTIONAL
(AT OFFER) (AT NAV) CLASS (1)
<S> <C> <C> <C>
1 year ended
7/31/95 1.74% 6.82% 7.14%
3 years ended
7/31/95 2.19% 3.86% 4.17%
5 years ended
7/31/95 5.90% 6.94% 7.24%
Period 8/16/85(2)
through 7/31/95 7.02% 7.55% 7.75%
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS B SHARES
(INCLUDING DEFERRED (EXCLUDING DEFERRED
SALES CHARGE) SALES CHARGE)
<S> <C> <C>
1 year ended
7/31/95 2.15% 6.08%
Period 5/2/94(3)
through 7/31/95 1.40% 4.45%
</TABLE>
(1) Date of initial public offering of the Institutional Class was June 1,
1992.
(2) Date of initial public offering of the Class A Shares.
(3) Date of initial public offering of the Class B Shares.
Information regarding the performance of Class C Shares is not shown
because such shares were not offered to the public prior to the date of this
Part B.
As stated in the Fund's Prospectuses, the Fund may also quote each Class'
current yield in advertisements and investor communications.
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<PAGE>
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:
a -- b
------ 6
YIELD = 2[(cd + 1) -- 1]
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;
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 of each
Class, based on specific 30-day periods identified in advertising by the Fund.
The yields of the Class A Shares, the Class B Shares and the Institutional Class
as of July 31, 1995 using this formula were 6.20%, 5.77% and 6.82%,
respectively. Yield calculation assumes the maximum front-end sales charge, if
any, and does 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. Information regarding the performance of Class C Shares is not
shown because such shares were not offered to the public prior to the date of
this Part B.
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 the Series in the future.
Investors should note that the income earned and dividends paid by the
Series will vary with the fluctuation of interest rates and performance of the
portfolio. The net asset value of the Series may change. Unlike money market
funds, the Series invests in longer-term securities that fluctuate in value and
do so in a manner inversely correlated with changing interest rates. The
Series' net asset value will tend to rise when interest rates fall. Conversely,
the Series' net asset value will tend to fall as interest rates
-17-
<PAGE>
rise. Normally, fluctuations in interest rates have a greater effect on the
prices of longer-term bonds. The value of the securities held in the Series
will vary from day to day and investors should consider the volatility of the
Series' net asset value as well as its yield before making a decision to invest.
The Series' average weighted portfolio maturity at July 31, 1995 was 16
years for the Class A Shares, the Class B Shares and the Institutional Class of
the Series.
Statistical and performance information and various indices compiled and
maintained by organizations such as the following may also be used in preparing
exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Fund activity and performance and in illustrating
general financial planning principles. From time to time, certain mutual fund
performance ranking information, calculated and provided by these organizations,
may also be used in the promotion of sales of the Series. Any indices used are
not managed for any investment goal.
CDA Technologies, Inc., Lipper Analytical Services, Inc. and Morningstar,
Inc. are performance evaluation services that maintain statistical
performance databases, as reported by a diverse universe of independently-
managed mutual funds.
Ibbotson Associates, Inc. is a consulting firm that provides a variety of
historical data including total return, capital appreciation and income on
the stock market as well as other investment asset classes, and inflation.
With their permission, this information will be used primarily for
comparative purposes and to illustrate general financial planning
principles.
Interactive Data Corporation is a statistical access service that maintains
a database of various international industry indicators, such as historical
and current price/earning information, individual equity and fixed income
price and return information.
Compustat Industrial Databases, a service of Standard & Poor's, may also be
used in preparing performance and historical stock and bond market
exhibits. This firm maintains fundamental databases that provide
financial, statistical and market information covering more than 7,000
industrial and non-industrial companies.
-18-
<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.
Current interest rate and yield information on government debt obligations
of various durations, as reported weekly by the Federal Reserve (Bulletin H.15),
may also be used. In addition, current rate information on municipal debt
obligations of various durations, as reported daily by the Bond Buyer, may also
be used. The Bond Buyer is published daily and is an industry-accepted source
for current municipal bond market information.
From time to time, the Series may also quote actual yield and/or total
return performance for each Class in advertising and other types of literature
compared to indices or averages of alternative financial products available to
prospective investors. For example, the performance comparisons may include the
average return of various bank instruments, some of which may carry certain
return guarantees offered by leading banks and thrifts as monitored by Bank Rate
Monitor, and those of generally-accepted corporate bond and government security
price indices of various durations prepared by Lehman Brothers and Salomon
Brothers, Inc. These indices are not managed for any investment goal.
Comparative information on the Consumer Price Index may also be included. 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.
The total return performance for each Class of the Series will reflect the
appreciation or depreciation of principal, reinvestment of income and any
capital gains distributions paid during any indicated period and the impact of
the maximum front-end or contingent deferred sales charge, if any, paid on the
illustrated investment amount, annualized. The performance of Class B Shares
may also be calculated without taking into account the impact of any applicable
CDSC. The results will not reflect any income taxes, if applicable, payable by
shareholders on the reinvested distributions included in the calculations. The
net asset value of the Series fluctuates so shares, when redeemed, may be worth
more or less than the original investment, and past performance should not be
considered as representative of future results.
-19-
<PAGE>
The following table is an example, for purposes of illustration only, of
cumulative total return performance for the Class A Shares and the Institutional
Class for the three-, six- and nine-month periods ended July 31, 1995, for the
one-, three-and five-year periods ended July 31, 1995 and for the life of these
Classes, and for the Class B Shares for the three-, six- and nine month periods
ended July 31, 1995, for the one-year period ended July 31, 1995 and for the
life of this Class. Information regarding the performance of Class C Shares is
not shown because such shares were not offered to the public prior to the date
of this Part B.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
CLASS A CONSUMER
SHARES INSTITUTIONAL PRICE
(AT OFFER) CLASS (1) INDEX (2)
<S> <C> <C> <C>
3 months ended
7/31/95 (2.04%) 2.94% 0.40%
6 months ended
7/31/95 1.68% 6.86% 1.46%
9 months ended
7/31/95 2.46% 7.83% 2.01%
1 year ended
7/31/95 1.74% 7.14% 2.76%
3 years ended
7/31/95 6.72% 13.05% 8.54%
5 years ended
7/31/95 33.19% 41.83% 16.95%
Period 8/16/85(3)
through 7/31/95 96.51% 110.34% 41.52%
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING CONSUMER
DEFERRED DEFERRED PRICE
SALES CHARGE) SALES CHARGE) INDEX (2)
<S> <C> <C> <C>
3 months ended
7/31/95 (1.32%) 2.68% 0.40%
6 months ended
7/31/95 2.34% 6.34% 1.46%
9 months ended
7/31/95 3.04% 7.04% 2.01%
1 year ended
7/31/95 2.15% 6.08% 2.76%
Period 5/2/94(4)
through 7/31/95 1.75% 5.59% 3.46%
</TABLE>
(1) Date of initial public offering was June 1, 1992. Pursuant to applicable
regulation, total return shown for the Institutional Class for the periods
prior to the commencement of operations of such class is calculated by
taking the performance of Class A Shares and adjusting it to reflect the
elimination of all sales charges. However, for those periods, no
adjustment has been made to eliminate the impact of 12b-1 payments, and
performance may have been affected had such an adjustment been made.
(2) Source--Department of Labor
(3) Date of initial public offering of the Class A Shares.
(4) Date of initial public offering of the Class B Shares.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Group, 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 overriding investment
philosophy and how that philosophy impacts the Fund's, and other Delaware Group
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, including the number of such
clients serviced by the Manager.
-21-
<PAGE>
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Series shares,
your investment is given yet another opportunity to grow. It's called the Power
of Compounding and the following chart illustrates just how powerful it can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000 investment
compounded monthly for 10 years:
<TABLE>
<CAPTION>
7% Rate of Return 8% Rate of Return 9% Rate of Return
<S> <C> <C> <C>
12-'85 $10,723 $10,830 $10,938
12-'86 $11,498 $11,729 $11,964
12-'87 $12,330 $12,702 $13,086
12-'88 $13,221 $13,757 $14,314
12-'89 $14,177 $14,898 $15,657
12-'90 $15,201 $16,135 $17,126
12-'91 $16,300 $17,474 $18,732
12-'92 $17,479 $18,924 $20,489
12-'93 $18,743 $20,495 $22,411
12-'94 $20,098 $22,196 $24,514
</TABLE>
These figures are calculated assuming a fixed constant investment return
and assume no fluctuation in the value of principal. These figures do not
reflect payment of applicable taxes or sales charges, are not intended to be a
projection of investment results and do not reflect the actual performance
results of any of the Classes.
-22-
<PAGE>
TRADING PRACTICES AND BROKERAGE
The Fund selects brokers or dealers to execute transactions for the
purchase or sale of portfolio securities on the basis of its judgment of their
professional capability to provide the service. The primary consideration is to
have 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. Trades are generally made on a net basis where the Fund either
buys the securities directly from the dealer or sells 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 pays reasonably competitive
brokerage commission rates based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry.
During the fiscal years ended July 31, 1993, 1994 and 1995, no brokerage
commissions were paid by the Fund.
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 process 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.
During the fiscal year ended July 31, 1995, there were no portfolio
transactions of the Fund resulting in brokerage commissions directed to brokers
for brokerage and research services.
-23-
<PAGE>
As provided in the Securities Exchange Act of 1934 and the Fund's
Investment Management Agreement, 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 Fund believes 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 Fund and to other funds in the Delaware
Group. 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.
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 the
Fund's Board of Directors that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
-24-
<PAGE>
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Fund may place orders with broker/dealers that have agreed to
defray certain Series expenses such as custodian fees, and may, at the request
of the Distributor, give consideration to sales of shares of the Series as a
factor in the selection of brokers and dealers to execute Fund portfolio
transactions.
PORTFOLIO TURNOVER
Portfolio trading will be undertaken principally to accomplish the Series'
objective in relation to anticipated movements in the general level of interest
rates. The Series is free to dispose of portfolio securities at any time,
subject to complying with the Internal Revenue Code and the 1940 Act, when
changes in circumstances or conditions make such a move desirable in light of
the investment objective. The Fund will not attempt to achieve or be limited to
a predetermined rate of portfolio turnover for the Series, such a turnover
always being incidental to transactions undertaken with a view to achieving the
Series' investment objective.
The Series may experience a high rate of portfolio turnover, which is not
expected to exceed 400%. High portfolio turnover rates may occur, for example,
if the Series writes a large number of call options which are subsequently
exercised. To the extent the Series realizes gains on securities held for less
than six months, such gains are taxable to the shareholder or to the Series at
ordinary income tax rates. This would result in higher than normal brokerage
commissions. The portfolio turnover rate of the Series 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 Series during the particular fiscal year, exclusive of
securities whose maturities at the time of acquisition are one year or less.
The turnover rate may also be affected by cash requirements from redemptions and
repurchases of Series shares.
During the fiscal years ended July 31, 1994 and 1995, the portfolio
turnover rates for the Series were 309% and 70%, respectively.
-25-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for the Series' four
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
the Fund. See the Prospectuses for additional information on how to invest.
Shares of the Fund are offered on a continuous basis, and may be purchased
through authorized investment dealers or directly by contacting the Fund or its
agent.
The minimum investment generally is $1,000 for each of the Fund Classes.
Subsequent purchases generally must be at least $100 for each of the Class A,
Class B and Class C Shares. The initial and subsequent minimum investment with
respect to the Class A Shares will be waived for purchases by officers,
directors and employees of any Delaware Group fund, the Manager or any of the
Manager's affiliates if the purchases are made pursuant to a payroll deduction
program. Accounts opened under the Delaware Group Asset Planner service are
subject to a minimum initial investment of $2,000 per Asset Planner strategy
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. (See Investment Plans for purchase limitations applicable
to each of the Fund's master retirement plans.) The Fund will reject any order
for purchase of more than $250,000 of Class B Shares and $1,000,000 or more for
Class C Shares. An investor may exceed these limitations by making cumulative
purchases over a period of time. In doing so, an investor should keep in mind,
however, that reduced front-end sales charges apply to investments of $100,000
of more of Class A Shares, which 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.
There are no minimum purchase requirements for the Institutional Class, but
certain eligibility requirements must be satisfied.
Selling dealers have the responsibility of transmitting orders promptly.
The Fund reserves the right to reject any order for the purchase of Series
shares if in the opinion of management such rejection is in the Series' best
interest.
The NASD has adopted amendments to its Rules of Fair Practice relating to
investment company sales charges. The Fund and the Distributor intend to
operate in compliance with these rules.
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. See the following table. 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
-26-
<PAGE>
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.
Class C Shares are purchased at net asset value and are subject to a CDSC of 1%
if shares are redeemed within twelve 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.
Institutional Class shares, Class A Shares, Class B Shares and Class C
Shares represent a proportionate interest in the Series' assets and will receive
a proportionate interest in the Series' income, before application, as to the
Class A, Class B and Class C Shares, of any expenses under the Series' 12b-1
Plans.
See Automatic Conversion of Class B Shares under Buying Shares in the Fund
Classes' Prospectus, and Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Certificates representing shares purchased are not ordinarily issued unless
a shareholder submits a specific request. Certificates are not issued in the
case of Class B Shares or Class C Shares. 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
shares purchased by sending a letter to the Transfer Agent requesting the
certificate. No charge is made for any certificate issued. 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, Class B and Class C
Shares permit investors to choose the method of purchasing shares that is most
suitable to his or her needs
-27-
<PAGE>
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 .30% 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 the Series with the investment thereafter subject to a CDSC
and annual 12b-1 Plan expenses. Class B Shares are subject to a CDSC if the
shares are redeemed within six years of purchase, and Class C Shares are subject
to a CDSC if the shares are redeemed within twelve months of purchase. Class B
and Class C Shares are each subject to annual 12b-1 Plan expenses of up to a
maximum of 1% (.25% of which are service fees to be paid by the Series to the
Distributor, dealers or others for providing personal service and/or maintaining
shareholder accounts) of average daily net assets of the respective Class.
Class B Shares will automatically convert to Class A Shares at the end of
approximately eight years after purchase and, thereafter, be subject to annual
12b-1 Plan expenses of up to a maximum of .30% of average daily net assets of
such shares. Unlike Class B Shares, Class C Shares do not convert into another
class.
CLASS A SHARES
Purchases of $100,000 or more of Class A Shares at the offering price carry
reduced front-end sales charges as shown in the accompanying table, and may
include a series of purchases over a 13-month period under a Letter of Intention
signed by the purchaser. 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.
-28-
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES
- --------------------------------------------------------------------------------
DEALER'S
FRONT-END SALES CHARGE CONCESSION***
AS % OF AS % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED** PRICE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.96% 4.00%
$100,000 but
under $250,000 3.75 3.94 3.00
$250,000 but
under $500,000 2.50 2.54 2.00
$500,000 but
under $1,000,000* 2.00 2.04 1.60
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% contingent
deferred sales charge may apply upon redemption of such shares. The
contingent deferred sales charge ("Limited CDSC") that may be applicable
arises only in the case of certain net asset value purchases which have
triggered the payment of a dealer's commission.
** Based on the net asset value per share of the Class A Shares as of the end
of the Fund's most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Fund. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which
the Distributor may reallow to dealers up to the full amount of front-end
sales charge shown above. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the Securities Act of
1933.
- --------------------------------------------------------------------------------
-29-
<PAGE>
Certain dealers who enter into an agreement to provide extra training and
information on Delaware Group products and services and who increase sales of
Delaware Group funds may receive an additional concession of up to .15% of the
offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and 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 concession will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
DEALER'S COMMISSION
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 in accordance with the following schedule:
<TABLE>
<CAPTION>
DEALER'S COMMISSION
-------------------
(as a percentage
AMOUNT PURCHASE of amount of purchased)
- ---------------
<S> <C>
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25
</TABLE>
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies (see Redemption and Repurchase) may be aggregated
with those of Class A Shares of the Series. 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 Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's
commission are subject to change or termination at any time by the Distributor
in its discretion.
-30-
<PAGE>
CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES AND CLASS C SHARES
Class B Shares and Class C Shares are purchased without the imposition of 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 below and Class C Shares
redeemed within twelve months of purchase may be subject to a CDSC of 1%. CDSC
fees 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. In addition, no CDSC will be
assessed on redemption of shares received through reinvestment of dividends or
capital gains distributions. See the Prospectus for the Fund Classes under
Redemption and
Exchange - Waiver of CDSC - Class B and Class C Shares for a list of the
instances in which the CDSC is waived.
The following table sets forth the rates of the CDSC for Class B Shares of
the Series:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR AFTER PURCHASE MADE SUBJECT TO CHARGE)
- ------------------------ ---------------------
<S> <C>
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None
</TABLE>
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares of the Series, the 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 Series. See Automatic Conversion of Class B Shares under Buying
Shares in the Fund Classes' Prospectus. Such conversion will constitute a tax-
free exchange for federal income tax purposes. See Taxes under the Prospectus
for the Fund Classes.
-31-
<PAGE>
PLANS UNDER RULE 12B-1 FOR THE FUND CLASSES
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a separate
plan for each of the Class A Shares, the Class B Shares and Class C Shares of
the Series (the "Plans"). Each Plan permits the Series to pay for certain
distribution, promotional and related expenses involved in the marketing of only
the Class to which the Plan applies. The Plans do not apply to the
Institutional Class 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 Institutional Class shares. Shareholders of the Institutional
Class may not vote on matters affecting the Plans.
The Plans permit the Series, pursuant to the Distribution Agreement, to pay
out of the assets of the Class A Shares, the Class B Shares and the 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.
In addition, the Series may make payments out of the assets of the Class A,
Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares, or provide services to,
such classes.
The maximum aggregate fee payable by the Series under the Plans, and the
Series' Distribution Agreement, is on an annual basis up to .30% of the Class A
Shares' average daily net assets for the year, and up to 1% (.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. The Fund's
Board of Directors may reduce these amounts at any time. The Distributor has
agreed to waive these distribution fees to the extent such fee for any day
exceeds the net investment income realized by the Class A, Class B and Class C
Shares for such day.
On July 21, 1988, the Board of Directors set the fee for the Class A Shares
pursuant to the Plan relating to that class, at .25% of average daily net
assets. This fee was
-32-
<PAGE>
effective until May 31, 1992. Effective June 1, 1992, the Board of Directors
has determined that the annual fee, payable on a monthly basis, under the Plan
relating to the Class A Shares, will be equal to the sum of: (i) the amount
obtained by multiplying .10% by the average daily net assets represented by the
Class A Shares which were originally purchased prior to June 1, 1992 in the
Government Income Series I class (which was converted into what is now referred
to as the Class A Shares) on June 1, 1992 pursuant to a Plan of Recapitalization
approved by shareholders of the Government Income Series I class), and (ii) the
amount obtained by multiplying .30% by the average daily net assets represented
by all other Class A Shares. While this is the method to be used to calculate
the 12b-1 fees to be paid by the Class A Shares under its Plan, the fee is a
Class A Shares' expense so that all shareholders of the Class A Shares
regardless of whether they originally purchased or received shares in the
Government Income Series I class, or in one of the other Classes that is now
known as Class A Shares will bear 12b-1 expenses at the same rate. While this
describes the current formula for calculating the fees which will be payable
under the Class A Shares' Plan, the Plan permits a full .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 Classes. Subject to seeking best price and execution, the Series 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 Agreement, as amended, have been approved by
the Board of Directors of the Fund, including a majority of the directors who
are not "interested persons" (as defined in the 1940 Act) of the Fund 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 Agreement, 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 the shareholders of, respectively, Class A Shares,
Class B Shares
-33-
<PAGE>
and Class C Shares 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 Agreement, as amended, may be terminated 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 maximum percentage payable under the
Plans must likewise be approved by a majority vote of the relevant Fund Class'
outstanding voting securities, as well as by a majority vote of those directors
who are not "interested persons." With respect to the Class A Share Plan, any
material increase in the maximum percentage payable thereunder must be approved
by a majority of the outstanding voting Class B Shares. 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 the Fund 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 the Fund 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.
For the fiscal year ended July 31, 1995, payments from the Class A Shares
pursuant to its Plan amounted to $622,143 and such amount was used for the
following purposes: Advertising - $573; Annual and Semi-Annual Reports -
$18,539; Broker Trails - $490,138; Commissions to Wholesalers -$30,068; Dealer
Service Expenses - $13,031; Promotional-Broker Meetings - $8,889; Promotional-
Other - $940; Prospectus Printing - $1,513; Telephone Expenses - $4,315;
Wholesaler Expenses - $54,137.
For the fiscal year ended July 31, 1995, payments from the Class B Shares
to its Plan amounted to $48,843 and such amount was used for the following
purposes: Broker Sales Charges - $16,861; Broker Trails - $12,113; Commissions
to Wholesalers - $2,212; Interest on Broker Sales Charges -$17,327; Promotional-
Broker Meetings - $165; Telephone Expenses - $52; Wholesaler Expenses -
$113.
The Staff of the Securities and Exchange Commission ("SEC") has proposed
amendments to Rule 12b-1 and other related regulations that could impact Rule
12b-1 Distribution Plans. The Fund intends to amend the Plans, if necessary, to
comply with any new rules or regulations the SEC may adopt with respect to Rule
12b-1.
-34-
<PAGE>
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 Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to .25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Payments to dealers made in connection with seminars, conferences or
contests relating to the promotion of fund shares may be in an amount up to 100%
of the expenses incurred or awards made.
SPECIAL PURCHASE FEATURES -- CLASS A SHARES
BUYING 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 12-Month
Reinvestment Privilege and the Exchange Privilege.
Current and former officers, directors and employees of the Fund, any other
fund in the Delaware Group, the Manager or any of the Manager's affiliates 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 and any such class
of shares of any of the funds in the Delaware Group, including any fund that may
be created, at the net asset value per share. Spouses, parents, brothers,
sisters and children (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
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asset value. Purchases of Class A Shares may also be made by clients of
registered representatives of an authorized investment dealer at net asset value
within six months of a change of the registered representative's employment, if
the purchase is funded by proceeds from an investment where a front-end sales
charge has been assessed and the redemption of the investment did not result in
the imposition of a contingent deferred sales charge or other redemption
charges. Purchases of Class A Shares also may 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 Class A Shares.
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 the Fund may reasonably require to
establish eligibility for purchase at net asset value. The Fund must be
notified in advance that the trade qualifies for purchase 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
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested 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 by any such
purchaser previously enumerated 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 the Fund, which provides for the holding in
escrow by the Transfer Agent, of 5% of the total amount of the 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
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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 the Series and of any class of any of the other mutual funds in the Delaware
Group (except shares of any Delaware Group fund 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 Group fund 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. For purposes of satisfying an
investor's obligation under a Letter of Intention, Class B Shares and Class C
Shares of the Series and the corresponding classes of shares of other Delaware
Group funds which offer such shares may be aggregated with Class A Shares of the
Series and the corresponding class of shares of the other Delaware Group funds.
Employers offering a Delaware Group 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
Delaware Group funds 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
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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 the Series and other Delaware Group funds 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 the Class A Shares, Class B Shares and/or
Class C Shares of the Series, as well as shares of any other class of any of the
other Delaware Group funds (except shares of any Delaware Group fund 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 Group fund which carried a front-end sales charge, CDSC
or Limited CDSC).
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 the age
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 the Series, as well as
shares of any other class of any of the other Delaware Group funds which offer
such classes (except shares of any Delaware Group fund which do 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 Group 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 be 3.75%. For the purpose of this calculation, the
shares presently held shall be valued at the public offering price that
would
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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 to determine the applicability of the Right of Accumulation to their
particular circumstances.
12-MONTH REINVESTMENT PRIVILEGE
Holders of Class A Shares (and of the Institutional Class holding shares
which were acquired through an exchange of one of the other mutual funds in the
Delaware Group offered with a front-end sales charge) who redeem such shares of
the Series have one year from the date of redemption to reinvest all or part of
their redemption proceeds in Class A Shares of the Series or in Class A Shares
of any of the other funds in the Delaware Group, 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 Group 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 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 proposed 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 Fund's shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Purchases of Class A Shares Made at Net Asset Value under Redemption and
Exchange in the Fund Classes' Prospectus) in connection with the features
described above.
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GROUP INVESTMENT PLANS
Group Investment Plans that are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the table on page _____, based on
total plan assets. If a company has more than one plan investing in the
Delaware Group of funds, then the total amount invested in all plans would be
used in determining the applicable front-end sales charge reduction upon each
purchase, both initial and subsequent, upon notification to the Fund 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 Delaware Group
investment accounts 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.
U.S. GOVERNMENT FUND INSTITUTIONAL CLASS
The Institutional Class 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 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 account from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.
Shares of the Institutional Class 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.
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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 Fund Class (based
on the net asset value in effect on the reinvestment date) and credited to the
shareholder's account on that date. All dividends and distributions of the
Institutional Class are reinvested in the account of the holders of such shares
(based on the net asset value of the Series in effect on the reinvestment 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 Fund. Such
purchases, which must meet the minimum subsequent purchase requirements set
forth in the Prospectus 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 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 DELAWARE GROUP FUNDS
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 from the Fund
in any of the other mutual funds in the Delaware Group, including the Series, 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 proposed to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
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Subject to the following limitations, dividends and/or distributions from
other funds in the Delaware Group may be invested in shares of the Series,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares of another fund in the Delaware
Group. Dividends from Class B Shares may only be directed to Class B Shares of
another fund in the Delaware Group that offers such class of shares. Dividends
from Class C Shares may only be directed to Class C Shares of another fund in
the Delaware Group that offers such class of shares. See Class B Funds and
Class C Funds under Buying Shares in the Fund Classes' Prospectus for the funds
in the Delaware Group that are eligible for investment by holders of Series
shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
INVESTING BY ELECTRONIC FUND TRANSFER
Direct Deposit Purchase Plan -- Investors may arrange for the 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 Series
account. This type of investment will be handled in either of the two ways
noted below. (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.
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This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
Investments under the Direct Deposit Purchase Plan and the Automatic
Investing Plan must be for $25 or more for Class A Shares and $100 or more for
Class B and Class C Shares. 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 the Series 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,
the 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 Series.
DIRECT DEPOSIT PURCHASES BY MAIL
Shareholders may authorize a third party, such as a bank or employer, to
make investments directly to their Series accounts. The Series 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 the Fund
for proper instructions.
RETIREMENT PLANS FOR THE FUND CLASSES
An investment in the Series may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and
Class C Shares. See the Prospectus for the Fund Classes under Redemption and
Exchange - Waiver of CDSC - Class B and Class C Shares for a list of the
instances in which the CDSC is waived.
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Each purchase of Class B Shares is subject to a maximum purchase limitation
of $250,000 for retirement plans. Each purchase 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
("IRAs") 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.
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 shares of the Institutional Class. See
U.S. Government Fund Institutional Class above. 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
and corporations which replace the former Keogh and corporate retirement plans.
These plans contain profit sharing or money purchase pension plan provisions.
Contributions may be invested only in Class A and Class C Shares.
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INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
A document is available for an individual who wants to establish an IRA by
making 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 or elects to be treated
as having no compensation for the year. Investments in each of the Fund Classes
are permissible.
The Tax Reform Act of 1986 ("the Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an employer-
sponsored retirement plan. Even if a taxpayer (or his or her spouse) is covered
by an employer-sponsored retirement plan, the full deduction is still available
if the taxpayer's adjusted gross income is below $25,000 ($40,000 for taxpayers
filing joint returns). A partial deduction is allowed for married couples with
incomes between $40,000 and $50,000, and for single individuals with incomes
between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules
apply for determining the deductibility of contributions made by married
individuals filing separate returns.
A company or association may establish a Group IRA for employees or members
who want to purchase shares of the Series. Purchases of $1 million or more of
Class A Shares qualify for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. See Purchasing Shares concerning
reduced front-end sales charges applicable to Class A Shares.
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
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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 be
subject to a 10% excise tax on the amount prematurely distributed, in addition
to the income tax resulting from the distribution. See Class B Shares and Class
C Shares under Alternative Purchase Arrangements in the Fund Classes' Prospectus
concerning the applicability of a CDSC upon redemption.
See Appendix A for additional IRA information.
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 Fund Classes is available for investment by a SEP/IRA.
SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION PLAN ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan which
permits employer contributions and salary deferral contributions in Class A
Shares and Class C Shares only.
PROTOTYPE 401(K) DEFINED CONTRIBUTION PLAN
Section 401(k) of the Code permits employers to establish qualified plans
based on salary deferral contributions. 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 Group.
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 on
page _____.
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
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account agreement is available for those employers who wish to purchase any of
the Fund Classes in conjunction with such an arrangement. Applicable front-end
sales charges with respect to Class A Shares for such purchases are set forth in
the table on page _____.
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 invest in shares of any of the Fund Classes. Although investors may use
their own plan, there is available a Delaware Group 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. Applicable front-end sales charges for
such purchases of Class A Shares are set forth in the table on page _____.
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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 after receipt of the order by the Fund or its agent.
Orders for purchases of Class B Shares, Class C Shares and the Institutional
Class are effected at the net asset value per share next calculated after
receipt of the order by the Fund or its agent. 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 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 New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York
Stock Exchange is closed, the Fund 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 the
Fund's financial statements which are incorporated by reference into this Part
B.
The Series' net asset value per share is computed by adding the value of
all of 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 the Series' total net assets, U.S. Government
and other debt securities are valued at the mean between the last reported bid
and asked prices. Options are valued at the last reported sales price or, if no
sales are reported, at the mean between bid and asked prices. Short-term
investments having remaining maturities of 60 days or less are valued at
amortized cost. Non-Exchange-traded options are valued at fair value using a
mathematical model. 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 of
the Fund.
Each Class of the Series will bear, pro-rata, all of the common expenses of
the Series. The net asset values of all outstanding shares of each Class of the
Series will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Series represented by the value of shares
of that Class. All income earned and expenses incurred by the Series will be
borne on a pro-rata basis by each outstanding share of a Class, based on each
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Class' percentage in the Fund represented by the value of shares of such
Classes, except that the Institutional Class will not incur any of the expenses
under the Fund's 12b-1 Plans and the 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 will be allocable to
each Class, the dividends paid to each Class of the Fund may vary. However, the
net asset value per share of each Class is expected to be equivalent.
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REDEMPTION AND REPURCHASE
Any shareholder may require the Fund to redeem Series shares by sending a
WRITTEN REQUEST, signed by the record owner or owners exactly as the shares are
registered, to the Fund, 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. The Fund does not issue
certificates for Class A Shares or Institutional Class shares, unless a
shareholder specifically requests them. The Fund does not issue certificates
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 Fund requires a request signed by all owners of the shares or the investment
dealer of record, but does not require signature guarantees. 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. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may request further documentation from corporations,
retirement plans, executors, administrators, trustees or guardians.
In addition to redemption of shares by the Fund, the Distributor, acting as
agent of the Fund, 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 Fund or its agent,
less 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 Fund and the Distributor end their
business day 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 Series 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 any 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
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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 Purchases of Class A Shares Made at Net Asset Value under
Redemption and Exchange in the Series' Prospectus 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 twelve months following purchase. See Contingent Deferred Sales
Charge under Buying Shares in the Series' Prospectus 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 there is currently a $7.50
bank wiring cost, neither the Fund nor the Distributor charges a fee for
redemptions or repurchases, but such fees could be charged at any time in the
future.
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.
If a shareholder who recently purchased shares by check seeks to redeem all
or a portion of those shares in a written request, the Fund will honor the
redemption request but will not mail the proceeds until it is reasonably
satisfied of the collection of the investment check. 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 will automatically redeem from the shareholder's account the Series shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Series 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 the Series of securities owned by it is not reasonably practical, or
it is not reasonably practical for the Series fairly to value its assets, or in
the event that the Commission has provided for such suspension for the
protection of shareholders, the Fund may postpone payment or suspend the right
of redemption or repurchase. In such case, the shareholder may withdraw the
request for redemption or
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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, the Fund
has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which
the Series is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Series during any 90-day period for
any one shareholder.
The value of the Series' investments is subject to changing market prices.
Thus, a shareholder reselling shares to the Series may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
SMALL ACCOUNTS
Before the 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 Series' Prospectus 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 Buying Shares in
the Series' 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.
CHECKWRITING FEATURE
Shareholders of the Class A Shares and the Institutional Class holding
shares for which certificates have not been issued may request on the investment
application that they be provided with special forms of checks which may be
issued to redeem their shares by drawing on the Delaware Group Government Fund
account with CoreStates Bank, N.A. Normally, it takes two weeks from the date
the shareholder's initial purchase check clears to receive the first order of
checks. The use of any form of check other than the Fund's check will not be
permitted unless approved by the Fund. The Checkwriting Feature is not
available for Retirement Plans, Class B Shares and Class C Shares.
(1) Redemption checks must be made payable in an amount of $500 OR MORE.
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(2) Checks must be signed by the shareholder(s) of record, or in the case
of an organization, by the authorized person(s). If registration is in more
than one name, unless otherwise indicated on the investment application or your
checkwriting authorization form, these checks must be signed by ALL OWNERS
before the Fund will honor them. Through this procedure the shareholder will
continue to be entitled to distributions paid on these shares up to the time the
check is presented for payment.
(3) If a shareholder who recently purchased shares by check seeks to redeem
all or a portion of those shares through the Checkwriting Feature, the Fund will
not honor the redemption request unless it is reasonably satisfied of the
collection of the investment check. The hold period against a recent purchase
may be up to but not in excess of 15 business days, depending upon the origin of
the investment check.
(4) If the amount of the check is greater than the value of the shares held
in the shareholder's account, the check will be returned and the shareholder may
be subject to extra charges.
(5) Checks may not be used to close accounts.
The Fund reserves the right to revoke the Checkwriting Feature of
shareholders who overdraw their accounts or, if in the opinion of management,
such revocation is in the Fund's best interest.
Shareholders will be subject to CoreStates Bank, N.A.'s rules and
regulations governing similar accounts. This service may be terminated or
suspended at any time by CoreStates Bank, N.A., the Fund or the Transfer Agent.
As the Fund must redeem shares at their net asset value next determined
(subject, in the case of Class A Shares, to any Limited CDSC), it will not be
able to redeem all shares held in a shareholder's account by means of a check
presented directly to the bank. The Fund and the Transfer Agent will not be
responsible for the inadvertent processing of post-dated checks or checks more
than six months old.
Stop-Payment Requests--Investors may request a stop payment on checks by
providing the Fund with a written authorization to do so. Oral requests will be
accepted provided that the Fund promptly receives a written authorization. Such
requests will remain in effect for six months unless renewed or cancelled. The
Fund will use its best efforts to effect stop-payment instructions, but does not
promise or guarantee that such instructions will be effective. Shareholders
requesting a stop payment will be charged a $5 service fee per check for each
six-month period which will be deducted from their accounts.
* * *
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The Series has available certain redemption privileges, as described below.
The Fund reserves 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 Fund at 800-523-1918 or, in the case of
shareholders of the Institutional Class, 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 record
address. 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 Fund, as
described above. An authorization form must have been completed by the
shareholder and filed with the 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. 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, after 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.
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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 Fund and a
signature guarantee may be required. Each signature guarantee must be supplied
by an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness.
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.
The Fund will not honor telephone redemptions for Series shares recently
purchased by check unless it is reasonably satisfied that the purchase check has
cleared.
If expedited payment under these procedures could adversely affect the
Series, the Fund may take up to seven days to pay the shareholder.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Series shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. 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 PLAN
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 Fund does not recommend any specific
amount of withdrawal. This $5,000 minimum does not apply for the 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.
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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 by the holders of Class A Shares or any similar
plan of any other investment company charging a front-end sales charge made
concurrently with the purchases of Class A Shares of this or any other
investment company will ordinarily be disadvantageous to the shareholder because
of the payment of duplicative sales charges. Shareholders should not purchase
Class A Shares while participating in a Systematic Withdrawal Plan and a
periodic investment program in a fund managed by the Manager must be terminated
before a Systematic Withdrawal Plan can take effect, except if the shareholder
is a participant in one of our retirement plans or is investing in Delaware
Group funds which do not carry a sales charge. Also, 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 CDSC -
Class B and Class C Shares and Waiver of Limited CDSC - Class A Shares under
Redemption and Exchange in the Prospectus for the Fund Classes.
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
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registered shareholder, the shareholder's signature on this authorization must
be guaranteed. Each signature guarantee must be supplied by an eligible
guarantor institution. The Fund reserves the right to reject a signature
guarantee supplied by an eligible institution based on its creditworthiness.
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
Class.
WEALTH BUILDER OPTION
Shareholders of the Fund Classes may elect to invest in one or more of the
other mutual funds in the Delaware Group through our Wealth Builder Option.
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
Group, subject to the conditions and limitations set forth in the Fund Classes'
Prospectus. See Wealth Builder Option and Redemption and Exchange in the
Prospectus for the Fund Classes.
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 also 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 Group, subject to the conditions and limitations described
in the Fund Classes' Prospectus. Shareholders can terminate their participation
at any time by written notice to the Fund.
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This option is not available to participant's in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans. This option also is not available to shareholders
of the Institutional Class.
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DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
In determining daily dividends, the amount of net investment income for the
Series will be determined as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when such exchange is
open, and shall include investment income accrued by the Series, less the
estimated expenses of the Series incurred since the last determination of net
asset value. Gross investment income consists principally of interest accrued
and, where applicable, net pro-rata amortization of premiums and discounts since
the last determination. The dividend declared, as noted above, will be deducted
immediately before the net asset value calculation is made. Net investment
income earned on days when the Fund is not open will be declared as a dividend
on the next business day.
Purchases of Series shares by wire begin earning dividends when converted
into Federal Funds and available for investment, normally the next business day
after receipt. However, if the 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 Fund. The Fund 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 the Fund will share proportionately in the
investment income and expenses of the Series, except that the Class A, Class B
and Class C Shares alone will incur distribution fees under their respective
12b-1 Plans.
Dividends and any realized securities profits distributions are
automatically reinvested in additional shares of the Series at the net asset
value in effect on the first business day after month end which provides the
effect of compounding dividends, unless the election to receive dividends in
cash has been made. 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. Payment by check of cash dividends will ordinarily be
mailed within three business days after the payable date. 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
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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. The Series may deduct
from a shareholder's account the costs of the Series' effort to locate a
shareholder if a shareholder's mail is returned by the Post Office or the Series
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 Internal Revenue Code. Such
distributions will be reinvested in shares at the net asset value in effect on
the first business day after month end, unless the shareholder elects to receive
it in cash. The Fund will mail a quarterly statement showing the dividends paid
and all the transactions made during the previous period. During the fiscal
year ended July 31, 1995, dividends totaling $0.656, $0.601 and $0.679 per share
of the Class A Shares, the Class B Shares and the Institutional Class,
respectively, were paid from net investment income.
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TAXES
The Series has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. As such, the Series will not be subject to federal income tax
to the extent its earnings are distributed. The Fund intends to meet the
calendar year distribution requirements imposed by the Code to avoid the
imposition of a 4% excise tax.
Persons not subject to tax will not be required to pay taxes on
distributions.
Dividends paid by the Series from its ordinary income and distributions of
net realized short-term capital gains are taxable to shareholders as ordinary
income for federal income tax purposes. Distributions made from the Series' net
realized long-term capital gains, if any, are taxable to shareholders as long-
term capital gains, 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.
The Fund intends to offset the Series' realized securities profits to the
extent of the Series' capital losses carried forward. For the fiscal year ended
July 31, 1995, the Series had a capital loss of $9,205,797. The Series had
accumulated capital losses at July 31, 1995 of $38,309,234, which may be carried
forward and applied against future capital gains. The capital loss carryforward
expires as follows: 1996 -- $5,736,818, 1997 -- $2,596,096, 1998 --$1,746,916,
2001 -- $1,622,896, 2002 -- $17,400,711 and 2003 -- $9,205,797.
Distributions may also be subject to state and local taxes; shareholders
are advised to consult with their tax advisers in this regard.
Shares of the Series will be exempt from Pennsylvania county personal
property taxes. Shareholders will be notified annually as to the federal income
tax status of dividends and distributions paid by the Series.
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INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Fund, subject to the supervision
and direction of the Fund's Board of Directors.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. The aggregate assets of these funds on July 31, 1995
were approximately $9,964,548,000. Investment advisory services are also
provided to institutional accounts with assets on July 31, 1995 of approximately
$17,356,716,000.
The Investment Management Agreement for the Series is dated April 3, 1995
and was approved by shareholders on March 29, 1995.
The 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 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 thereto or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval. The Agreement
is terminable without penalty on 60 days' notice by the directors of the Fund or
by the Manager. The Agreement will terminate automatically in the event of its
assignment.
The Investment Management Agreement provides that the Series shall pay the
Manager a management fee equal to (on an annual basis) .60% of its average daily
net assets, less all directors' fees paid to the unaffiliated directors by the
Series. On July 31, 1995, the total net assets of the Series were $221,792,573.
Under the general supervision of the Board of Directors, the Manager makes all
investment decisions which are implemented by the Fund. The Manager pays the
salaries of all directors, officers and employees who are affiliated with both
the Manager and the Fund. The investment management fees paid by the Series for
the fiscal years ended July 31, 1993, 1994 and 1995 were $1,307,628, $1,476,723
and $1,338,755, respectively.
Except for those expenses borne by the Manager under the Investment
Management Agreement and the Distributor under the Distribution Agreement, the
Series is responsible for all of its own expenses. Among others, these include
the 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
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shareholders. The ratios of expenses to average daily net assets for the fiscal
year ended July 31, 1995 for Class A Shares, Class B Shares and the
Institutional Class were 1.24%, 1.94% and 0.94%, respectively. The ratios for
the Class A Shares and the Class B Shares reflect the impact of their respective
12b-1 Plans. The Fund anticipates that the ratio of expenses to average daily
net assets of Class C Shares will be identical to that of the Class B Shares.
By California regulation, the Manager is required to waive certain fees and
reimburse the Fund for certain expenses to the extent that the Fund's annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed 2 1/2% of its first $30 million of average daily
net assets, 2% of the next $70 million of average daily net assets and 1 1/2% of
any additional average daily net assets. For the fiscal year ended July 31,
1995, no such reimbursement was necessary or paid.
DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of Series shares
under a Distribution Agreement dated April 3, 1995, as amended on November 29,
1995. The Distributor is an affiliate of the Manager and bears all of the costs
of promotion and distribution, except for payments by the Series on behalf of
Class A Shares, Class B Shares and Class C Shares under their respective 12b-1
Plans. Prior to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as
the national distributor of the Series' shares. On that date Delaware
Distributors, L.P., a newly formed limited partnership, succeeded to the
business of DDI. All officers and employees of DDI became officers and
employees of Delaware Distributors, L.P. DDI is the corporate general partner
of Delaware Distributors, L.P. and both DDI and Delaware Distributors, L.P. are
indirect, wholly-owned subsidiaries of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate of
the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as the
Series' shareholder servicing, dividend disbursing and transfer agent pursuant
to a Shareholders Services Agreement dated June 29, 1988. The Transfer Agent is
also an indirect, wholly-owned subsidiary of Delaware Management Holdings, Inc.
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OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors.
Certain officers and directors of the Fund hold identical positions in each
of the other funds in the Delaware Group. On October 31, 1995, the Fund's
officers and directors owned less than 1% of the outstanding shares of the
Class A Shares and the Class B Shares approximately 2.51% of the outstanding
shares of, the Institutional Class.
As of October 31, 1995, the Fund believes the following accounts held 5% or
more of the outstanding shares of, respectively, the Class A Shares,
Institutional Class and Class B Shares: Merrill, Lynch, Pierce, Fenner & Smith
Inc., Mutual Fund Operations, P.O. Box 41621, Jacksonville, FL 32203 held of
record for the benefit of others 1,259,736 shares (5.10%) of the outstanding
shares of the Class A Shares. Amalgamated Bank of New York, Cust. TWU-NYC PVT
Bus Lines Pension Fund, Amivest Corp. Discretionary Investment Manager, P.O. Box
370 Coopers Station, New York, NY 10276 held 556,202 shares (51.57%); The City
of Groton, 295 Meridian Street, Groton, CT 06340 held 248,654 shares (23.05%);
Delaware Management Company, Inc. Employee Profit Sharing Trust, 1818 Market
Street, Philadelphia, PA 19103 held 82,406 shares (7.64%); and Amalgamated Bank
of New York, Cust. Local Union 154 Roofers, Waterproofers & Allied Workers
Pension Fund, Amivest Corp. Discretionary Investment Manager, P.O. Box 370
Cooper Station, New York, NY 10276 held 57,821 (5.36%) of the outstanding shares
of the Institutional Class. Shares held by Delaware Management Company, Inc.
Employee Profit Sharing Trust are beneficially owned by the participants in the
plan. Merrill, Lynch, Pierce, Fenner & Smith Inc., Mutual Fund Operations,
Attention Book Entry, 4800 Deer Lake Drive East, 3rd Fl., Jacksonville, FL 32246
held of record for the benefit of others 146,414 shares (13.24%) of the
outstanding shares of the Class B Shares.
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DMH Corp., Delaware Management Company, Inc., 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. and Delaware Investment Counselors, 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 Corporation ("Lincoln National") was
completed. In connection with the merger, a new Investment Management Agreement
between the Fund on behalf of the Series and the Manager was executed following
shareholder approval. DMH and the Manager are now 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.
Directors and principal officers of the Fund are noted below along with
their ages and their business experience for the past five years. Unless
otherwise noted, the address of each officer and director is One Commerce
Square, Philadelphia, PA 19103.
*WAYNE A. STORK (58)
Chairman, President, Chief Executive Officer, Director and/or Trustee
of the Fund, 15 other funds in
the Delaware Group (which excludes Delaware Pooled Trust, Inc.) and
Delaware Management Holdings, Inc.
Chairman and Director of Delaware Investment Counselors,
Inc. and Delaware Pooled Trust, Inc.
Chairman, Chief Executive Officer, Chief Investment
Officer and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of
DMH Corp., Delaware International Advisers Ltd., Delaware
International Holdings Ltd. and Founders Holdings, Inc.
Director of Delaware Distributors, Inc. and Delaware
Service Company, Inc.
During the past five years, Mr. Stork has served in
various executive capacities at different times
within the Delaware organization.
______________________________
*Director affiliated with the investment manager of the Fund
and considered an "interested person" as defined in the
Investment Company Act of 1940.
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WINTHROP S. JESSUP (50)
Executive Vice President of the Fund, 15 other funds in
the Delaware Group (which excludes Delaware Pooled Trust, Inc.) and
Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled
Trust, Inc.
President and Director of Delaware Investment
Counselors, Inc.
Executive Vice President and Director of DMH Corp.,
Delaware Management Company, Inc., Delaware International Holdings
Ltd. and Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors,
Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Management Trust Company, Delaware
Service Company, Inc. and Delaware International Advisers Ltd.
During the past five years, Mr. Jessup has served in
various executive capacities at different times within the Delaware
organization.
RICHARD G. UNRUH, JR. (56)
Executive Vice President of the Fund and each of the
other 16 funds in the Delaware Group.
Executive Vice President and Director of Delaware
Management Company, Inc.
Senior Vice President of Delaware Management Holdings,
Inc.
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.
WALTER P. BABICH (68)
Director and/or Trustee of the Fund and each of the
other 16 funds in the Delaware Group.
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.
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<PAGE>
ANTHONY D. KNERR (56)
Director and/or Trustee of the Fund and each of the
other 16 funds in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Consultant, 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 (55)
Director and/or Trustee of the Fund and each of the
other 16 funds in the Delaware Group.
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 1994, she was Adjunct Professor of Columbia Business
School.
W. THACHER LONGSTRETH (75)
Director and/or Trustee of the Fund and each of the
other 16 funds in the Delaware Group.
1617 John F. Kennedy Boulevard, Philadelphia, PA 19103.
Vice Chairman, Packquisition Corp., a financial
printing, commercial printing and information
processing firm.
Philadelphia City Councilman.
President, MLW, Associates.
Director, Tasty Baking Company.
Director, Healthcare Services Group.
CHARLES E. PECK (69)
Director and/or Trustee of the Fund and each of the
other 16 funds in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary, 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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DAVID K. DOWNES (55)
Senior Vice President/Chief Administrative Officer/Chief
Financial Officer of the Fund, each of the other 16 funds in the
Delaware Group and Delaware Management Company, Inc.
Chairman and Director of Delaware Management Trust
Company.
Senior Vice President/Chief Administrative Officer/Chief
Financial Officer/Treasurer of Delaware Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer
and Director of DMH Corp.
Senior Vice President/Chief Administrative Officer/Chief
Financial Officer and Director of Delaware Service
Company, Inc.
Senior Vice President/Chief Administrative Officer of
Delaware Distributors, L.P.
Senior Vice President/Chief Administrative Officer
and Director of Delaware Distributors, Inc.
Chief Financial Officer and Director of Delaware
International Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer
of Delaware Investment Counselors, Inc.
Senior Vice President and Director of Founders Holdings,
Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes
was Chief Administrative Officer, Chief Financial Officer and
Treasurer of Equitable Capital Management Corporation, New York, from
December 1985 through August 1992, Executive Vice President from
December 1985 through March 1992, and Vice Chairman from March 1992
through August 1992.
GEORGE M. CHAMBERLAIN, JR. (48)
Senior Vice President and Secretary of the Fund, each of
the other 16 funds in the Delaware Group, Delaware Management
Holdings, Inc., Delaware Distributors, L.P. and Delaware Investment
Counselors, Inc.
Executive Vice President and Secretary of Delaware
Management Trust Company.
Senior Vice President, Secretary and Director of DMH
Corp., Delaware Management Company, Inc., Delaware Distributors, Inc.
and Delaware Service Company, Inc.
Corporate Vice President and Secretary of Founders
Holdings, Inc.
Secretary and Director of Delaware International
Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served
in various capacities at different times within the Delaware
organization.
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ROGER A. EARLY (41)
Vice President/Senior Portfolio Manager of the Fund, of
nine other income funds in the Delaware Group and of Delaware
Management Company, Inc.
Before joining the Delaware Group in 1994, Mr. Early was
Senior Vice President/Portfolio Manager for Federated Investors,
Pittsburgh, PA from 1984 to 1994.
JOSEPH H. HASTINGS (45)
Vice President/Corporate Controller of the Fund, each of
the other 16 funds in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Investment Counselors, Inc. and Founders
Holdings, Inc.
Executive Vice President/Treasurer/Chief Financial
Officer of Delaware Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings
was Chief Financial Officer for Prudential Residential Services, L.P.,
New York, NY from 1989 to 1992. Prior to that, Mr. Hastings served as
Controller and Treasurer for Fine Homes International, L.P., Stamford,
CT from 1987 to 1989.
MICHAEL P. BISHOF (33)
Vice President/Treasurer of the Fund, each of the other
16 funds in the Delaware Group, Delaware Management Company, Inc.,
Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings, Inc. and Founders CBO
Corporation.
Prior to joining the Delaware Group 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.
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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 Group funds for the fiscal year
ended July 31, 1995 and an estimate of annual benefits to be received upon
retirement under the Delaware Group Retirement Plan for Directors/Trustees as of
July 31, 1995.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS ESTIMATED TOTAL
AGGREGATE ACCRUED ANNUAL COMPENSATION
COMPEN- AS PART BENEFITS FROM ALL 17
SATION OF FUND UPON DELAWARE
NAME FROM FUND EXPENSES RETIREMENT* GROUP FUNDS
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,273.50 None $18,100 $51,187.97
Ann R. Leven $2,625.01 None $18,100 $59,323.96
Walter P. Babich $2,663.61 None $18,100 $60,323.88
Anthony D. Knerr $1,756.10 None $18,100 $41,974.22
Charles E. Peck $2,115.50 None $18,100 $48,052.01
</TABLE>
* Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director 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 fund in the Delaware Group for a period equal to the lesser of
the number of years that such person served as a director 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 of each fund at the time of such person's retirement. If an
eligible director retired as of July 31, 1995, he or she would be entitled
to annual payments totaling $18,100, in the aggregate, from all of the
funds in the Delaware Group, based on the number of funds in the Delaware
Group as of that date.
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<PAGE>
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Group are set forth in
the relevant prospectuses for such classes. The following supplements that
information. The 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 such an exchange will be sent a current
prospectus and an authorization form for any of the other mutual funds in the
Delaware Group. 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 or series
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 Group 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 Group. This service is automatically
provided unless the Fund receives written notice from the shareholder to the
contrary.
Shareholders or their investment dealers of record may contact the Transfer
Agent at 800-523-1918 or, in the case of shareholders of the Institutional
Class, their Client Services Representative at 800-828-5052 to effect an
exchange. The shareholder's current Series 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
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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 Group. Telephone exchanges may be subject to limitations
as to amounts or frequency. The Transfer Agent and the Fund reserve the right
to record exchange instructions received by telephone and to reject exchange
requests at any time in the future.
As described in the Fund's Prospectuses, neither the Fund nor the Transfer
Agent is responsible for any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Series shares which are
reasonably believed to be genuine.
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"), the Fund will refuse any new Timing
Arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. The 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 Delaware Group funds: (1) Decatur Income
Fund, (2)
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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 Delaware Group funds will be available for
Timed Exchanges. Assets redeemed or exchanged out of Timing Accounts in
Delaware Group funds not listed above may not be reinvested back into that
Timing Account. The 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).
The 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 the 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 the 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 Delaware
Group funds:
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.
TREND FUND seeks long-term growth by investing in common stock issued by
emerging growth companies exhibiting strong capital appreciation potential.
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.
DECATUR INCOME FUND seeks the highest possible current income by investing
primarily in common stocks that provide the potential for income and capital
appreciation without undue risk to principal. DECATUR TOTAL RETURN FUND seeks
long-term growth by investing primarily in securities that
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<PAGE>
provide the potential for income and capital appreciation without undue risk to
principal.
DELCHESTER FUND seeks as high a current income as possible by investing
principally in corporate bonds, and also in U.S. Government securities and
commercial paper.
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 PENNSYLVANIA FUND seeks a high level of current interest income
exempt 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.
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<PAGE>
DELAWARE GROUP PREMIUM FUND offers nine series available exclusively as
funding vehicles for certain insurance company separate accounts. EQUITY/INCOME
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. HIGH YIELD 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. MONEY
MARKET SERIES seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. GROWTH SERIES seeks long-term capital appreciation by investing
its assets in a diversified portfolio of securities exhibiting the potential for
significant growth. MULTIPLE STRATEGY 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. VALUE SERIES seeks capital
appreciation by investing in small- to mid-cap common stocks whose market value
appears 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.
EMERGING GROWTH SERIES seeks long-term capital appreciation by investing
primarily in small-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.
For more complete information about any of these 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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<PAGE>
GENERAL INFORMATION
The Manager is the investment manager of the Series. The Manager or its
affiliate, Delaware International Advisers Ltd., also manages the other funds in
the Delaware Group. The Manager, through a separate division, also manages
private investment accounts. While investment decisions of the Series are made
independently from those of the other funds and accounts, they may make
investment decisions at the same time.
Access persons and advisory persons of the Delaware Group of funds, 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 Distributor acts as national distributor for the Fund and for the other
mutual funds in the Delaware Group. As previously described, prior to January
3, 1995, DDI served as the national distributor for the Fund. The Distributor
and, in its capacity as such, DDI received net commissions from the Fund on
behalf of Class A Shares after reallowances to dealers, as follows:
<TABLE>
<CAPTION>
CLASS A SHARES
TOTAL
AMOUNT OF AMOUNTS NET
FISCAL UNDERWRITING REALLOWED COMMISSION
YEAR ENDING COMMISSION TO DEALERS TO DISTRIBUTOR
----------- ------------ -------------- --------------
<S> <C> <C> <C>
July 31, 1995 $ 421,205 $ 352,504 $ 68,701
July 31, 1994 1,460,993 1,218,796 242,197
July 31, 1993 2,086,401 1,740,241 346,160
</TABLE>
For the fiscal years ended July 31, 1994 and 1995, the Distributor and, in
its capacity as the Fund's national distributor, DDI received Limited CDSC
payments in the amounts of $2,781 and $5,405, respectively, with respect to
Class A Shares. No payments were received during the fiscal year ended July 31,
1993 with respect to the Class A Shares.
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<PAGE>
During the period from inception on May 2, 1994 through July 31, 1994 and
the fiscal year ended July 31, 1995, the Distributor and, in its capacity as the
Fund's national distributor, DDI received CDSC payments in the amounts of $354
and $21,099, respectively, with respect to Class B Shares.
Effective as of January 3, 1995, all such payments described above have
been paid to the Distributor.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the other
mutual funds in the Delaware Group. The Transfer Agent is paid a fee by the
Fund for providing these services consisting of an annual per account charge of
$11.00 plus 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 unaffiliated directors.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of the Fund's advisory
relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause the Fund to delete the
words "Delaware Group" from the Fund's name.
Morgan Guaranty Trust Company of New York ("Morgan"), 60 Wall Street, New
York, NY 10260, is custodian of the Fund's securities and cash. As custodian
for the Fund, Morgan maintains a separate account or accounts for the Fund;
receives, holds and releases portfolio securities on account of the Fund;
receives and disburses money on behalf of the Fund; and collects and receives
income and other payments and distributions on account of the Fund's portfolio
securities.
The legality of the issuance of the shares offered hereby, registered
pursuant to Rule 24f-2 under the Investment Company Act of 1940, has been passed
upon for the Fund by Stradley, Ronon, Stevens & Young, Philadelphia,
Pennsylvania.
CAPITALIZATION
The Fund has a present authorized capitalization of five hundred million
shares of capital stock with a $.01 par value per share. The Series offers four
classes of shares, each representing a proportionate interest in the assets of
the Series, and each having the same voting and other rights and preferences as
the other classes, except that shares of the Institutional Class may not vote on
matters affecting the Fund's Distribution Plans under Rule 12b-1. Similarly, as
a general matter, the shareholders of the Class A Shares, Class B Shares and
Class C Shares may only vote on matters affecting the 12b-1 Plan that relates to
the class of shares that they hold. However, Class B Shares may vote on
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any proposal to increase materially the fees to be paid by the Series under the
Rule 12b-1 Plan relating to Class A Shares. General expenses of the 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 Class A, Class B and Class C Shares
will be allocated solely to those classes. The Board of Directors has allocated
eighty million shares to each of the Class A Shares and Class B Shares, fifty
million shares to the Class C Shares and twenty million shares to the
Institutional Class.
Shares have no preemptive rights, are fully transferable and, when issued,
are fully paid and nonassessable.
Until May 31, 1992, the Fund offered two retail classes of shares,
Government Income Series I class and Government Income Series II class (now,
Class A Shares). Shares of the Government Income Series I class were offered
with a higher sales charge than that applicable to the Government Income Series
II class, but without the imposition of a Rule 12b-1 fee. Effective June 1,
1992, following shareholder approval of a plan of recapitalization on May 8,
1992, shareholders of the Government Income Series I class had their shares
converted into shares of the Government Income Series II class and became
subject to the latter class' Rule 12b-1 charges. Effective at the same time,
following approval by shareholders, the name of the Government Income Series II
class was changed to U.S. Government Fund class. Effective May 2, 1994, the
U.S. Government Fund class is known as the U.S. Government Fund A Class and the
U.S. Government Fund (Institutional) class is known as the U.S. Government Fund
Institutional Class.
NONCUMULATIVE VOTING
THESE SHARES HAVE NONCUMULATIVE VOTING RIGHTS WHICH MEANS THAT THE HOLDERS
OF MORE THAN 50% OF THE SHARES OF THE FUND 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 Securities and Exchange
Commission.
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APPENDIX A -- IRA INFORMATION
The Tax Reform Act of 1986 restructured, and in some cases eliminated, the
tax deductibility of IRA contributions. Under the Act, the full deduction for
IRAs ($2,000 for each working spouse and $2,250 for one-income couples) was
retained for all taxpayers who are not covered by an employer-sponsored
retirement plan. Even if a taxpayer (or his or her spouse) is covered by an
employer-sponsored retirement plan, the full deduction is still available if the
taxpayer's adjusted gross income is below $25,000 ($40,000 for taxpayers filing
joint returns). A partial deduction is allowed for married couples with incomes
between $40,000 and $50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for contributions to
IRAs by taxpayers whose adjusted gross income before IRA deductions exceeds
$50,000 ($35,000 for singles) and who are active participants in an employer-
sponsored retirement plan. Taxpayers who were not allowed deductions on IRA
contributions still can make nondeductible IRA contributions of as much as
$2,000 for each working spouse ($2,250 for one-income couples), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for
determining the deductibility of contributions made by married individuals
filing separate returns.
As illustrated in the following tables, maintaining an Individual
Retirement Account remains a valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with its
tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity--a way to have
money grow faster due to tax-deferred compounding.
-79-
<PAGE>
Even if your IRA contribution is no longer deductible, the benefits of
saving on a tax-deferred basis can be substantial. The following tables
illustrate the benefits of tax-deferred versus taxable compounding. Each
reflects a constant 9% rate of return, compounded annually, with the
reinvestment of all proceeds. The tables do not take into account any sales
charges or fees. Of course, earnings accumulated in your IRA will be subject to
tax upon withdrawal. If you choose a mutual fund with a fluctuating net asset
value, like the Fund, your bottom line at retirement could be lower--it could
also be much higher.
$2,000 INVESTED ANNUALLY ASSUMING A 9% ANNUALIZED RETURN
15% Tax Bracket Single -- $0 - $22,750
--------------- Joint -- $0 - $38,000
<TABLE>
<CAPTION>
HOW MUCH
CUMULATIVE HOW MUCH YOU HAVE
END OF INVESTMENT YOU HAVE WITH FULL
YEAR AMOUNT WITHOUT IRA IRA DEDUCTION
<S> <C> <C> <C>
1 $ 2,000 $ 1,830 $ 2,180
5 10,000 10,661 13,047
10 20,000 26,075 33,121
15 30,000 48,357 64,007
20 40,000 80,570 111,529
25 50,000 127,139 184,648
30 60,000 194,463 297,150
35 70,000 291,791 470,249
40 80,000 432,496 736,584
</TABLE>
[Without IRA-investment of $1,700 ($2,000 less 15%) earning 7.65% (9% less
15%)]
-80-
<PAGE>
28% Tax Bracket Single -- $22,751 - $55,100
--------------- Joint -- $38,001 - $91,850
<TABLE>
<CAPTION>
HOW MUCH HOW MUCH YOU HAVE
CUMULATIVE YOU HAVE WITH FULL IRA
END OF INVESTMENT WITHOUT NO
YEAR AMOUNT IRA DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,533 $ 1,570 $ 2,180
5 10,000 8,727 9,394 13,047
10 20,000 20,672 23,847 33,121
15 30,000 37,022 46,085 64,007
20 40,000 59,402 80,301 111,529
25 50,000 90,037 132,947 184,648
30 60,000 131,969 213,948 297,150
35 70,000 189,366 338,580 470,249
40 80,000 267,931 530,340 736,584
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%)
earning 6.48% (9% less 28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000
less 28%) earning 9%]
31% Tax Bracket Single -- $55,101 - $115,000
--------------- Joint -- $91,851 - $140,000
<TABLE>
<CAPTION>
HOW MUCH HOW MUCH YOU HAVE
CUMULATIVE YOU HAVE WITH FULL IRA
END OF INVESTMENT WITHOUT NO
YEAR AMOUNT IRA DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,466 $ 1,504 $ 2,180
5 10,000 8,297 9,002 13,047
10 20,000 19,511 22,853 33,121
15 30,000 34,666 44,165 64,007
20 40,000 55,150 76,955 111,529
25 50,000 82,834 127,407 184,648
30 60,000 120,250 205,034 297,150
35 70,000 170,818 324,472 470,249
40 80,000 239,164 508,243 736,584
</TABLE>
[Without IRA--investment of $1,380 ($2,000 less 31%)
earning 6.21% (9% less 31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000
less 31%) earning 9%]
-81-
<PAGE>
36% Tax Bracket* Single -- $115,001 - $250,000
--------------- Joint -- $140,001 - $250,000
<TABLE>
<CAPTION>
HOW MUCH HOW MUCH YOU HAVE
CUMULATIVE YOU HAVE WITH FULL IRA
END OF INVESTMENT WITHOUT NO
YEAR AMOUNT IRA DEDUCTION DEDUCTION
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,354 $ 1,395 $ 2,180
5 10,000 7,595 8,350 13,047
10 20,000 17,643 21,197 33,121
15 30,000 30,939 40,964 64,007
20 40,000 48,532 71,379 111,529
25 50,000 71,809 118,175 184,648
30 60,000 102,609 190,176 297,150
35 70,000 143,361 300,960 470,249
40 80,000 197,281 471,414 736,584
</TABLE>
[Without IRA--investment of $1,280 ($2,000 less 36%)
earning 5.76% (9% less 36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000
less 36%) earning 9%]
39.6% Tax Bracket* Single -- over $250,000
----------------- Joint -- over $250,000
<TABLE>
<CAPTION>
HOW MUCH HOW MUCH YOU HAVE
CUMULATIVE YOU HAVE WITH FULL IRA
END OF INVESTMENT WITHOUT NO
YEAR AMOUNT IRA DEDUCTION DEDUCTION
<S> <C> <C> <C>
1 $ 2,000 $ 1,274 $ 1,317 $ 2,180
5 10,000 7,100 7,880 13,047
10 20,000 16,350 20,005 33,121
15 30,000 28,403 38,660 64,007
20 40,000 44,108 67,364 111,529
25 50,000 64,573 111,527 184,648
30 60,000 91,238 179,479 297,150
35 70,000 125,983 284,031 470,249
40 80,000 171,255 444,897 736,584
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%)
earning 5.436% (9% less 39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000
less 39.6%) earning 9%]
-82-
<PAGE>
$2,000 SINGLE INVESTMENT AT A RETURN OF 9%
COMPOUNDED MONTHLY
<TABLE>
<CAPTION>
TAXABLE-- TAXABLE-- TAXABLE--
YEARS 39.6%* 36%* 31%
- ------------------------------------------------------------------------
<S> <C> <C> <C>
10 $ 3,440 $ 3,553 $ 3,716
15 4,512 4,735 5,064
20 5,917 6,312 6,903
30 10,178 11,212 12,824
40 17,508 19,918 23,825
<CAPTION>
TAXABLE-- TAXABLE-- TAX
YEARS 28% 15% DEFERRED
- ------------------------------------------------------------------------
<S> <C> <C> <C>
10 $ 3,817 $ 4,288 $ 4,903
15 5,273 6,278 7,676
20 7,284 9,192 12,018
30 13,900 19,705 29,461
40 26,527 42,243 72,220
</TABLE>
$2,000 INVESTED ANNUALLY AT A RETURN OF 9%
COMPOUNDED MONTHLY
<TABLE>
<CAPTION>
TAXABLE-- TAXABLE-- TAXABLE--
YEARS 39.6%* 36%* 31%
- ------------------------------------------------------------------------
<S> <C> <C> <C>
10 $ 27,280 $ 27,809 $ 28,565
15 47,579 48,985 51,023
20 74,203 77,210 81,633
30 154,915 164,970 180,223
40 293,746 320,871 363,386
<CAPTION>
TAXABLE-- TAXABLE-- TAX
YEARS 28% 15% DEFERRED
- ------------------------------------------------------------------------
<S> <C> <C> <C>
10 $ 29,030 $ 31,156 $ 33,846
15 52,294 58,262 66,184
20 84,431 97,949 116,815
30 190,158 241,137 320,202
40 391,924 548,102 818,777
</TABLE>
- -----------------------
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $250,000. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-83-
<PAGE>
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing $2,000
each January--the earliest opportunity--compared to contributing on April 15th
of the following year--the latest, for each tax year.
<TABLE>
<S> <C>
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
</TABLE>
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can make
a big difference when you retire. A constant 8% versus 10% return, compounded
monthly, illustrates the point. This chart is based on a yearly investment of
$2,000 on January 1. After 30 years the difference can mean as much as 50%
more!
<TABLE>
<CAPTION>
8% 10%
<S> <C> <C>
10 years $ 31,828 $ 36,018
30 years 259,288 397,466
</TABLE>
The statistical exhibits above are for illustration purposes only and do
not reflect the actual performance for the Fund either in the past or in the
future.
-84-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for the Fund and, in
its capacity as such, audits the financial statements contained in the Fund's
Annual Report. The Series' Statement of Net Assets, Statement of Operations,
Statement of Changes in Net Assets and Notes to Financial Statements, as well as
the report of Ernst & Young LLP, independent auditors, for the fiscal year ended
July 31, 1995, are included in the Fund's Annual Report to shareholders. The
financial statements, the notes relating thereto and the report of Ernst & Young
LLP listed above are incorporated by reference from the Annual Report into this
Part B.
-85-
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
PART C
------
Other Information
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Accountant's Report
* The financial statements and Accountant's Report listed above
are incorporated by reference from the Registrant's Annual
Report for the fiscal year ended July 31, 1995 into Part B.
(b) Exhibits:
(1) Articles of Incorporation.
-------------------------
(a) Articles of Incorporation, as amended and
supplemented to date, attached as Exhibit.
(b) Form of Articles Supplementary (November 1995)
attached as Exhibit.
(2) By-Laws. By-Laws, as amended to date, attached as Exhibit.
-------
(3) Voting Trust Agreement. Inapplicable.
----------------------
i
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
(4) Copies of All Instruments Defining the Rights of Holders.
--------------------------------------------------------
(a) Articles of Incorporation, Articles of Amendment and
----------------------------------------------------
Articles Supplementary. Article Second of Articles
----------------------
Supplementary (April 29, 1994), Article Fourth of
Articles Supplementary (June 1, 1992), Article Fifth of
Articles of Amendment (June 14, 1988) and Article
Eighth of Articles of Incorporation (April 19, 1985)
attached as Exhibit 24(b)(1)(a) and Article Fourth of
Form of Articles Supplementary attached as Exhibit
24(b)(1)(b).
(b) By-Laws. Article II, Article III, as amended, and
-------
Article XIII, which was subsequently redesignated as
Article XIV, attached as Exhibit 24(b)(2).
(5) Investment Management Agreement. Investment Management
-------------------------------
Agreement between Delaware Management Company, Inc. and the
Registrant dated April 3, 1995 attached as Exhibit.
(6) (a) Distribution Agreement.
----------------------
(i) Form of Distribution Agreement (April 1995)
included as Module.
(ii) Form of Amendment No. 1 to Distribution
Agreement (November 1995) included as Module.
(b) Administration and Service Agreement. Form of
------------------------------------
Administration and Service Agreement (as amended
November 1995) included as Module.
(c) Dealer's Agreement. Form of Dealer's Agreement (as
------------------
amended November 1995) included as Module.
(d) Form of Mutual Fund Agreement for the Delaware Group
of Funds included as Module.
(7) Bonus, Profit Sharing, Pension Contracts. Amended and
----------------------------------------
Restated Profit Sharing Plan included as Module.
(8) Custodian Agreement. Incorporated into this filing by
-------------------
reference to Post-Effective Amendment No. 7 filed September
28, 1989, Post-Effective Amendment No. 9 filed July 29, 1991
and Post-Effective Amendment No. 16 filed September 29, 1994.
(9) Other Material Contracts. Shareholders Services Agreement
------------------------
incorporated into this filing by reference to Post-Effective
Amendment No. 5 filed July 28, 1988.
ii
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
(10) Opinion of Counsel. Filed with letter relating to Rule
------------------
24f-2 on September 7, 1995.
(11) Consent of Auditors. Attached as Exhibit.
-------------------
(12-13) Inapplicable.
(14) Model Plans. Incorporated into this filing by reference
-----------
to Post-Effective Amendment No. 14 filed September 29, 1993.
Amended Model Plans included as Module.
**(15) Plans under Rule 12b-1.
----------------------
(a) Form of Plan under Rule 12b-1 for Class A (November 1995)
included as Module.
(b) Form of Plan under Rule 12b-1 for Class B (November 1995)
included as Module.
(c) Form of Plan under Rule 12b-1 for Class C (November 1995)
included as Module.
(16) Schedules of Computation for each Performance Quotation.
-------------------------------------------------------
Attached as Exhibit.
(17) Financial Data Schedules. Attached as Exhibit.
------------------------
(18) Inapplicable.
(19) Other: Directors' Power of Attorney. Attached as Exhibit.
----------------------------
** Relates only to U.S. Government Fund A Class, U.S. Government Fund B
Class and U.S. Government Fund C Class.
Item 25. Persons Controlled by or under Common Control with Registrant. None.
-------------------------------------------------------------
iii
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
Item 26. Number of Holders of Securities.
-------------------------------
(1) (2)
Number of
Title of Class Record Holders*
-------------- --------------
Delaware Group Government Fund, Inc.'s:
U.S. Government Fund A Class
Common Stock Par Value 9,687 Accounts as of
$.01 Per Share October 31, 1995
U.S. Government Fund B Class
Common Stock Par Value 317 Accounts as of
$.01 Per Share October 31, 1995
U.S. Government Fund C Class
Common Stock Par Value 0 Accounts as of
$.01 Per Share October 31, 1995
U.S. Government Fund Institutional Class
Common Stock Par Value 17 Accounts as of
$.01 Per Share October 31, 1995
* U.S. Government Fund C Class was not offered prior to the effective date of
this Registration Statement.
Item 27. Indemnification. Incorporated into this filing by reference to
---------------
initial Registration Statement filed May 17, 1985 and Article VII of
the By-Laws, as amended, attached as Exhibit 24(b)(2).
iv
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
Item 28. Business and Other Connections of Investment Adviser.
----------------------------------------------------
Delaware Management Company, Inc. (the "Manager") or its affiliate,
Delaware International Advisers Ltd., also serves as investment manager to the
other funds in the Delaware Group (Delaware Group Delaware Fund, Inc., Delaware
Group Trend Fund, Inc., Delaware Group Value Fund, Inc., Delaware Group DelCap
Fund, Inc., Delaware Group Decatur Fund, Inc., Delaware Group Delchester High-
Yield Bond Fund, Inc., Delaware Group Limited-Term Government Funds, Inc.,
Delaware Group Cash Reserve, Inc., Delaware Group Tax-Free Fund, Inc., DMC Tax-
Free Income Trust-Pennsylvania, Delaware Group Tax-Free Money Fund, Inc.,
Delaware Group Premium Fund, Inc., Delaware Group Global & International Funds,
Inc., Delaware Pooled Trust, Inc., Delaware Group Dividend and Income Fund, Inc.
and Delaware Group Global Dividend and Income Fund, Inc.) and provides
investment advisory services to institutional accounts, primarily retirement
plans and endowment funds. In addition, certain directors of the Manager also
serve as directors/trustees of the other Delaware Group funds, 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 Group (see Item 29 below) and another such company acts as the
shareholder servicing, dividend disbursing and transfer agent for all of the
mutual funds in the Delaware Group.
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------
Wayne A. Stork Chairman of the Board, Chief Executive Officer, Chief
Investment Officer and Director of Delaware Management
Company, Inc.; President, Chief Executive Officer,
Chairman of the Board and Director of the Registrant, and
with the exception of Delaware Pooled Trust, Inc., each
of the other funds in the Delaware Group and Delaware
Management Holdings, Inc.; Chairman of the Board and
Director of Delaware Pooled Trust, Inc. and Delaware
Investment Counselors, Inc.; Chairman, Chief Executive
Officer and Director of DMH Corp., Delaware International
Advisers Ltd., Delaware International Holdings Ltd. and
Founders Holdings, Inc.; and Director of Delaware
Distributors, Inc. and Delaware Service Company, Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
v
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------
Winthrop S. Jessup Executive Vice President and Director of Delaware
Management Company, Inc., DMH Corp., Delaware
International Holdings Ltd. and Founders Holdings, Inc.;
Executive Vice President of the Registrant and, with the
exception of Delaware Pooled Trust, Inc., each of the
other funds in the Delaware Group and Delaware Management
Holdings, Inc.; President and Chief Executive Officer of
Delaware Pooled Trust, Inc.; Vice Chairman of Delaware
Distributors, L.P.; Vice Chairman and Director of
Delaware Distributors, Inc.; Director of Delaware Service
Company, Inc., Delaware Management Trust Company and
Delaware International Advisers Ltd.; and President and
Director of Delaware Investment Counselors, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware
Management Company, Inc.; Executive Vice President of the
Registrant and each of the other funds in the Delaware
Group; Senior Vice President of Delaware Management
Holdings, Inc.; 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, Mid Atlantic, Inc., since 1989, 2040
Market Street, Philadelphia, PA
Paul E. Suckow Senior Vice President/Chief Investment Officer, Fixed
Income of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group
and Delaware Management Holdings, Inc.; Senior Vice
President and Director of Founders Holdings, Inc.; and
Director of Founders CBO Corporation
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
vi
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------
David K. Downes Senior Vice President, Chief Administrative Officer and
Chief Financial Officer of Delaware Management Company,
Inc., the Registrant and each of the other funds in the
Delaware Group; Chairman and Director of Delaware
Management Trust Company; Senior Vice President, Chief
Administrative Officer, Chief Financial Officer and
Treasurer of Delaware Management Holdings, Inc.; Senior
Vice President, Chief Financial Officer, Treasurer and
Director of DMH Corp.; Senior Vice President, Chief
Administrative Officer and Director of Delaware
Distributors, Inc.; Senior Vice President and Chief
Administrative Officer of Delaware Distributors, L.P.;
Senior Vice President, Chief Administrative Officer,
Chief Financial Officer and Director of Delaware Service
Company, Inc.; Chief Financial Officer and Director of
Delaware International Holdings Ltd.; Senior Vice
President, Chief Financial Officer and Treasurer of
Delaware Investment Counselors, Inc.; Senior Vice
President and Director of Founders Holdings, Inc.; and
Director of Delaware International Advisers Ltd.
George M. Chamberlain,
Jr. Senior Vice President, Secretary and Director of
Delaware Management Company, Inc., DMH Corp., Delaware
Distributors, Inc. and Delaware Service Company, Inc.;
Senior Vice President and Secretary of the Registrant,
each of the other funds in the Delaware Group, Delaware
Distributors, L.P., Delaware Investment Counselors, Inc.
and Delaware Management Holdings, Inc.; Executive Vice
President, Secretary and Director of Delaware Management
Trust Company; Corporate Vice President, Secretary and
Director of Founders Holdings, Inc.; Secretary and
Director of Delaware International Holdings Ltd.; and
Director of Delaware International Advisers Ltd.
Director of ICI Mutual Insurance Co. since 1992, P.O.
Box 730, Burlington, VT
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
vii
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------
Richard J. Flannery Managing Director/Corporate Tax & Affairs of Delaware
Management Company, Inc., Delaware Management Holdings,
Inc., DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Delaware International
Holdings Ltd., Delaware Investment Counselors, Inc. and
Founders CBO Corporation; Vice President of the
Registrant and each of the other funds in the Delaware
Group; Managing Director/Corporate Tax & Affairs and
Director of Founders Holdings, Inc.; and Director of
Delaware International Advisers 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/1/ Vice President and Treasurer of Delaware Management
Company, Inc., the Registrant, each of the other funds in
the Delaware Group, Delaware Management Holdings, Inc.,
DMH Corp., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc.,
Founders Holdings, Inc. and Founders CBO Corporation
Eric E. Miller Vice President and Assistant Secretary of Delaware
Management Company, Inc., the Registrant, each of the
other funds in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors Inc., Delaware Service Company,
Inc., Delaware Management Trust Company, Founders
Holdings, Inc. and Delaware Investment Counselors, Inc.
Richelle S. Maestro Vice President and Assistant Secretary of Delaware
Management Company, Inc., the Registrant, each of the
other funds in the Delaware Group, Delaware Management
Holdings, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., DMH
Corp., Delaware Management Trust Company, Delaware
Investment Counselors, Inc. and Founders Holdings, Inc.;
and Assistant Secretary of Founders CBO Corporation
General Partner of Tri-R Associates since 1989, 10001
Sandmeyer Ln., Philadelphia, PA
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
viii
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------
Joseph H. Hastings Vice President/Corporate Controller of Delaware Manage-
ment Company, Inc., the Registrant, each of the other
funds in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Investment Counselors, Inc. and Founders
Holdings, Inc.; Executive Vice President, Chief Financial
Officer and Treasurer of Delaware Management Trust
Company; and Assistant Treasurer of Founders CBO
Corporation
Bruce A. Ulmer Vice President/Director of Internal Audit of Delaware
Management Company, Inc., the Registrant, each of the
other funds in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp. and Delaware Management Trust
Company
Lisa O. Brinkley/2/ Vice President/Compliance of Delaware Management Company,
Inc., the Registrant, each of the other funds in the
Delaware Group, DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Management Trust Company and Delaware
Investment Counselors, Inc.
Rosemary E. Milner Vice President/Legal of Delaware Management Company,
Inc., the Registrant, each of the other funds in the
Delaware Group, Delaware Distributors, L.P. and Delaware
Distributors, Inc.
Douglas L. Anderson/3/ Vice President/Operations of Delaware Management Company,
Inc. and Delaware Service Company, Inc.; and Vice
President/Operations and Director of Delaware Management
Trust Company
Michael T. Taggart/4/ Vice President/Facilities Management and Administrative
Services of Delaware Management Company, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of the
tax-exempt funds, the fixed income funds and the closed-
end funds in the Delaware Group; Vice President of
Founders Holdings, Inc.; and Treasurer and Director of
Founders CBO Corporation
J. Michael Pokorny Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of the
tax-exempt funds and the fixed income funds in the
Delaware Group
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
ix
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of the
tax-exempt funds and the fixed income funds in the
Delaware Group and Delaware Investment Counselors, Inc.
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of the
tax-exempt funds, the fixed income funds and the closed-
end funds in the Delaware Group; Vice President of
Founders Holdings, Inc.; and Secretary and Director of
Founders CBO Corporation
James R. Raith, Jr. Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of the
tax-exempt funds, the fixed income funds and the closed-
end funds in the Delaware Group; Vice President of
Founders Holdings, Inc.; and President and Director of
Founders CBO Corporation
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of the
tax-exempt funds and the fixed income funds in the
Delaware Group
Roger A. Early/5/ Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant, each of the
tax-exempt funds and the fixed income funds in the
Delaware Group
Edward N. Antoian Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and each of the equity funds in
the Delaware Group
George H. Burwell Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and each of the equity funds in
the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., each of the equity funds in the
Delaware Group and Delaware Investment Counselors, Inc.
Edward A. Trumpbour Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and each of the equity funds in
the Delaware Group
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
x
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ ---------------------------------------------------------
David C. Dalrymple Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and each of the equity funds in
the Delaware Group
/1/ VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS, Bankers Trust
and VICE PRESIDENT, CS First Boston Investment Management prior to
June 1995.
/2/ VICE PRESIDENT AND COMPLIANCE OFFICER, Banc One Securities Corporation
prior to June 1994 and ASSISTANT VICE PRESIDENT AND COMPLIANCE OFFICER,
Aetna Life and Casualty prior to March 1993.
/3/ VICE PRESIDENT OF OPERATIONS, Supervised Service Company prior to
March 1994.
/4/ ASSISTANT VICE PRESIDENT/ADMINISTRATIVE SERVICES, United Pacific Life
Insurance prior to January 1994.
/5/ SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER, Federated Investors prior
to July 1994.
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 Management
Company, Inc. Limited Partner Investment Manager
Delaware Investment Limited Partner None
Counselors, Inc.
Winthrop S. Jessup Vice Chairman Executive Vice President
Keith E. Mitchell President and Chief None
Executive Officer
David K. Downes Senior Vice President and Senior Vice President/Chief
Chief Administrative Officer Administrative Officer/Chief
Financial Officer
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xi
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary Secretary
J. Lee Cook Senior Vice President/ None
National Sales Manager
Stephen H. Slack Senior Vice President/ None
Wholesaler
William F. Hostler Senior Vice President/ None
Marketing Services
Minette van Noppen Senior Vice President/ None
Retirement Services
Richard J. Flannery Managing Director/Corporate Vice President
& Tax Affairs
Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
Michael P. Bishof Vice President/Treasurer Vice President/Treasurer
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Diane M. Anderson Vice President/ None
Retirement Services
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xii
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Denise F. Guerriere Vice President/Client Services None
Julia R. Vander Els Vice President/ None
Retirement Services
Jerome J. Alrutz Vice President/ None
Retirement Services
Martin J. Cole Vice President/ None
Retirement Services
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Thomas S. Butler Vice President/ None
DDI Administration
Frank Albanese Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William S. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Robert M. Frank Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Alan D. Kessler Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xiii
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
<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
Henry W. Orvin Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Dion D. Rooney Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Thomas E. Sawyer Vice President/Wholesaler None
Sanford G. Simmons, Jr. Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone 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.
Item 31. Management Services. None.
-------------------
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 latest
annual report to shareholders, upon request and without charge.
xiv
<PAGE>
Form N-1A
File No. 2-97889
Delaware Group Government Fund, Inc.
(d) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of
removal of any director when requested in writing to do so by the
record holders of not less than 10% of the outstanding shares.
xv
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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 16th day of November, 1995.
DELAWARE GROUP GOVERNMENT FUND, INC.
By /s/ Wayne A. Stork
------------------------------------
Wayne A. Stork
Chairman of the Board, President,
Chief Executive Officer and Director
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>
Chairman of the Board, President,
/s/ Wayne A. Stork Chief Executive Officer and Director
- ---------------------------
Wayne A. Stork November 16, 1995
Senior Vice President/Chief Financial
Officer/Chief Administrative Officer
(Principal Financial Officer and
/s/ David K. Downes Principal Accounting Officer) November 16, 1995
- ---------------------------
David K. Downes
/s/ Walter P. Babich * Director November 16, 1995
- ---------------------------
Walter P. Babich
/s/ Anthony D. Knerr * Director November 16, 1995
- ---------------------------
Anthony D. Knerr
/s/ Ann R. Leven * Director November 16, 1995
- ---------------------------
Ann R. Leven
/s/ W. Thacher Longstreth * Director November 16, 1995
- ---------------------------
W. Thacher Longstreth
/s/ Charles E. Peck * Director November 16, 1995
- ---------------------------
Charles E. Peck
</TABLE>
*By /s/ Wayne A. Stork
-----------------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B1A Articles of Incorporation, as amended and supplemented to date
EX-99.B1B Form of Articles Supplementary (November 1995)
EX-99.B2 By-Laws, as amended to date
EX-99.B5 Investment Management Agreement (April 3, 1995)
EX-99.B6AI Form of Distribution Agreement (April 1995)
(Module Name
DIS_AGR_NON_MON)
EX-99.B6AII Form of Amendment No. 1 to Distribution Agreement (November
(Module Name 1995)
AMD_DIS_AGR_NON)
EX-99.B6B Form of Administration and Service Agreement (as amended
(Module Name November 1995)
ADMIN_SER_AGR)
EX-99.B6C Form of Dealer's Agreement (as amended, November 1995)
(Module Name
DEALERS_AGREE)
EX-99.B6D Form of Mutual Fund Agreement for the Delaware Group of Funds
(Module Name
MUTUAL_FUND_AGR)
EX-99.B7 Amended and Restated Profit Sharing Plan
(Module Name
PROF_SHARE_PLAN)
EX-99.B11 Consent of Auditors
EX-99.B14 Amended Model Plans
(Module Name
MODEL_PLAN)
EX-99.B15A Form of Plan under Rule 12b-1 for Class A (November 1995)
(Module Name
CL_A_SHARE_NON)
EX-99.B15B Form of Plan under Rule 12b-1 for Class B (November 1995)
(Module Name
CL_B_SHARE_ALL)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
EX-99.B15C Form of Plan under Rule 12b-1 for Class C (November 1995)
(Module Name
CL_C_SHARE_ALL)
EX-99.B16 Schedules of Computation for each Performance Quotation
EX-27 Financial Data Schedules
EX-99.B19 Directors' Power of Attorney
</TABLE>
<PAGE>
EX-99.B1A ARTICLES, AS AMENDED AND SUPPLEMENTED TO DATE
DELAWARE GROUP GOVERNMENT FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Government Fund, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies,
in accordance with Section 2-208 of the Maryland General Corporation Law, to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation has adopted
resolutions classifying a third class of shares of the Government Income
Series of Common Stock of the Corporation as the U.S. Government Fund B Class
and allocating 80,000,000 shares of authorized, unissued and unclassified
Common Stock, par value $.01 per share, to the U.S. Government Fund B Class
(the "B Class").
SECOND: The shares of the B Class shall represent proportionate
interests in the same portfolio of investments as the shares of the U.S.
Government Fund (Institutional) class and the U.S. Government Fund class of
the Government Income Series of the Corporation. The shares of the B Class
shall have the same preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption as the shares of the U.S. Government Fund
(Institutional) class and the U.S. Government Fund class, all as set forth in
the Articles of Incorporation of the Corporation, except for the differences
hereafter set forth:
1. The dividends and distributions of investment income
and capital gains with respect to the B Class of shares of the Government
Income Series shall be in such amounts as may be declared from time to time by
the Board of Directors, and such dividends and distributions may vary with
respect to such class from the dividends and distributions of investment
income and capital gains with respect to the other classes of the Government
Income Series of the Corporation to reflect differing allocations of the
expenses of the Corporation among the classes and any resultant difference
among the net asset values per share of the classes, to such extent and for
such purposes as the Board of Directors may deem appropriate. The allocation
of
<PAGE>
investment income and capital gains and expenses and liabilities of the
Corporation among the three classes of the Government Income Series of the
Corporation shall be determined by the Board of Directors in a manner that is
consistent with the orders, as applicable, dated April 10, 1987 and November 9,
1992 (Investment Company Act of 1940 Release Nos. 15675 and 19086) issued by the
Securities and Exchange Commission, and any existing or future amendment to such
orders or any rule or interpretation under the Investment Company Act of 1940,
as amended, that modifies or supersedes such orders.
2. Except as may otherwise be required by law pursuant to
any applicable order, rule or interpretation issued by the Securities and
Exchange Commission, or otherwise, the holders of the B Class shares shall
have (i) exclusive voting rights with respect to any matter submitted to a
vote of stockholders that affects only holders of the B Class shares,
including without limitation, the provisions of any Distribution Plan adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended,
(a "Distribution Plan") applicable to the B Class and (ii) no voting rights
with respect to the provisions of any Distribution Plan applicable to the
existing classes of the Government Income Series or with regard to any other
matter submitted to a vote of stockholders which does not affect holders of
the B Class shares.
3. (a)Each share of the B Class, other than shares
described in paragraph (3)(b) herein, shall be converted automatically, and
without any action or choice on the part of the holder thereof, into shares of
the U.S. Government Fund class on the Conversion Date. The term "Conversion
Date" when used herein shall mean a date set forth in the Corporation's
prospectus, as such prospectus may be amended from time to time, that is no
later than three months after either (i) the date on which the eighth
anniversary of the date of issuance of the share occurs, or (ii) any such
other anniversary date as may be determined by the Board of Directors and set
forth in the Corporation's prospectus, as such prospectus may be amended from
time to time; provided that any such other anniversary date determined by the
Board of Directors shall be a date that will occur prior to the anniversary
date set forth in clause (i) and any such other date theretofore determined by
the Board of Directors pursuant to this clause (ii); but further provided
that, subject to the provisions of the next sentence, for any shares of the B
Class acquired through an exchange, or through a series of exchanges, as
permitted by the Corporation as provided in the Corporation's prospectus, as
such prospectus may be amended from time to time, from another investment
company (an "eligible investment company"), the Conversion Date shall be the
conversion date applicable to the shares of stock of the eligible investment
<PAGE>
company originally subscribed for in lieu of the Conversion Date of any stock
acquired through exchange if such eligible investment company issuing the
stock originally subscribed for had a conversion feature, but not later than
the Conversion Date determined under (i) above. For the purpose of
calculating the holding period required for conversion, the date of issuance
of a share of the B Class shall mean (i) in the case of a share of the B Class
obtained by the holder thereof through an original subscription to the
Corporation, the date of the issuance of such share of the B Class, or (ii) in
the case of a share of the B Class obtained by the holder thereof through an
exchange, or through a series of exchanges, from an eligible investment
company, the date of issuance of the share of the eligible investment company
to which the holder originally subscribed.
(b) Each share of the B Class (i) purchased through the
automatic reinvestment of a dividend or distribution with respect to the B Class
or the corresponding B Class of any other investment company issuing such class
of shares or (ii) issued pursuant to an exchange privilege granted by the
Corporation in an exchange or series of exchanges for shares originally
purchased through the automatic reinvestment of a dividend or distribution with
respect to shares of capital stock of an eligible investment company shall be
segregated in a separate sub-account on the stock records of the Corporation for
each of the holders of record thereof. On any Conversion Date, a number of the
shares held in the separate sub-account of the holder of record of the share or
shares being converted, calculated in accordance with the next following
sentence, shall be converted automatically, and without any action or choice on
the part of the holder, into shares of the U.S. Government Fund class. The
number of shares in the holder's separate sub-account so converted shall (i)
bear the same ratio to the total number of shares maintained in the separate
sub-account on the Conversion Date (immediately prior to conversion) as the
number of shares of the holder converted on the Conversion Date pursuant to
paragraph (3)(a) hereof bears to the total number of B Class shares of the
holder on the Conversion Date (immediately prior to conversion) after
subtracting the shares then maintained in the holder's separate sub-account, or
(ii) be such other number as may be calculated in such other manner as may be
determined by the Board of Directors and set forth in the Corporation's
prospectus, as such prospectus may be amended from time to time.
(c) The number of shares of the U.S. Government Fund class
into which a share of the B Class is converted pursuant to paragraphs 3(a) and
3(b) hereof shall equal the number (including for this purpose fractions of a
share) obtained by dividing the net asset value per share of the B Class for
purposes of sales and redemption thereof on
<PAGE>
the Conversion Date by the net asset value per share of the U.S. Government Fund
class for purposes of sales and redemption thereof on the Conversion Date.
(d) On the Conversion Date, the shares of the B Class
converted into shares of the U.S. Government Fund class will no longer be deemed
outstanding and the rights of the holders thereof (except the right to receive
(i) the number of shares of the U.S. Government Fund class into which the shares
of the B Class have been converted and (ii) declared but unpaid dividends to the
Conversion Date or such other date set forth in the Corporation's prospectus, as
such prospectus may be amended from time to time and (iii) the right to vote
converting shares of the B Class held as of any record date occurring on or
before the Conversion Date and theretofore set with respect to any meeting held
after the Conversion Date) will cease. Certificates representing shares of the
U.S. Government Fund class resulting from the conversion need not be issued
until certificates representing shares of the B Class converted, if issued, have
been received by the Corporation or its agent duly endorsed for transfer.
(e) The automatic conversion of the B Class into the U.S.
Government Fund class as set forth in paragraphs 3(a) and 3(b) of this Article
SECOND shall be suspended at any time that the Board of Directors determines (i)
that there is not available a reasonably satisfactory opinion of counsel to the
effect that (x) the assessment of the higher fee under the Distribution Plan
with respect to the B Class does not result in the Corporation's dividends or
distributions constituting a "preferential dividend" under the Internal Revenue
Code of 1986, as amended, and (y) the conversion of the B Class does not
constitute a taxable event under federal income tax law, or (ii) any other
condition to conversion set forth in the Corporation's prospectus, as such
prospectus may be amended from time to time, is not satisfied.
(f) The automatic conversion of the B Class into the U.S.
Government Fund class as set forth in paragraphs 3(a) and 3(b) hereof may also
be suspended by action of the Board of Directors at any time that the Board of
Directors determines such suspension to be appropriate in order to comply with,
or satisfy the requirements of the Investment Company Act of 1940, as amended,
and in effect from time to time, or any rule, regulation or order issued
thereunder relating to voting by the holders of the B Class on any Distribution
Plan with respect to the U.S. Government Fund class and in effect from time to
time, and in connection with, or in lieu of, any such suspension, the Board of
Directors may provide holders of the B Class with alternative conversion or
exchange rights into other classes of stock of the Corporation in a manner
consistent with the law, rule,
<PAGE>
regulation or order giving rise to the possible suspension of the conversion
right.
THIRD: The shares of the B Class have been classified by the
Board of Directors pursuant to authority contained in the Articles of
Incorporation of the Corporation.
IN WITNESS WHEREOF, Delaware Group Government Fund, Inc. has caused
these Articles Supplementary to be signed in its name and on this behalf this
28th day of April, 1994.
DELAWARE GROUP GOVERNMENT FUND, INC.
By:/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Senior Vice President
ATTEST:
/s/Eric E. Miller
- ---------------------
Eric E. Miller
Assistant Secretary
THE UNDERSIGNED, Senior Vice President of DELAWARE GROUP GOVERNMENT
FUND, INC., who executed on behalf of the said Corporation the foregoing
Articles Supplementary, of which this instrument is made a part, hereby
acknowledges, in the name of and on behalf of said Corporation, said Articles
Supplementary to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the authorization and approval thereof
are true in all material respects, under the penalties of perjury.
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Senior Vice President
<PAGE>
DELAWARE GROUP GOVERNMENT FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Government Fund, Inc., a Maryland corporation having
its principal office in Baltimore, Maryland (the "Corporation") and registered
under the Investment Company Act of 1940 as an open-end company, hereby
certifies, in accordance with Sections 2-208 and 2-208.1 of the Maryland
General Corporation Law, to the State Department of Assessments and Taxation
of Maryland that:
FIRST: The Corporation has authority to issue a total of One
Hundred Million (100,000,000) shares of Common Stock, with a par value of One
Cent ($.01) per share, having an aggregate par value of $1,000,000, Eighty
Million (80,000,000) shares of which have been classified and allocated to the
U.S. Government Fund class of the Government Income Series. The Board of
Directors of the Corporation, in accordance with Section 2-105(c) of the
Maryland General Corporation Law, has adopted a resolution increasing the
aggregate number of shares of Common Stock that the Corporation has authority
to issue to Two Hundred Million (200,000,000) shares.
SECOND: The Board of Directors of the Corporation has adopted a
resolution designating the U.S. Government fund (Institutional) class of
shares of the Government Income Series (as distinguished from the existing
U.S. Government Fund class of shares) as the second class of Common Stock of
the Government Income Series of the Corporation and allocating Twenty Million
(20,000,000) shares of the newly authorized, unissued and unallocated Common
Stock of the Corporation, with a par value of One Cent ($.01) per share, to
the U.S. Government Fund (Institutional) class.
THIRD: (a) The total number of shares of stock which the
Corporation was authorized to issue prior to the aforesaid actions was One
Hundred Million (100,000,000) shares, with a par value of One Cent ($.01) per
share and an aggregate par value of One Million Dollars ($1,000,000). One
series of shares was designated as the Government Income Series and Eighty
Million (80,000,000) shares of common stock (par value $.01 per share) were
classified and allocated to such series, with an aggregate par value of Eight
Hundred Thousand Dollars ($800,000). One class of the Government Income
Series had been designated as the U.S. Government Fund class, and Eighty
Million (80,000,000) shares of the Government Income Series (par value $.01
per share) had been designated and allocated to the U.S. Government Fund
class,
<PAGE>
with an aggregate par value of Eight Hundred Thousand Dollars ($800,000);
(b) The total number of shares of stock which the Corporation is
authorized to issue, following the aforesaid actions, is Two Hundred Million
(200,000,000) shares, with a par value of One Cent ($.01) per share and an
aggregate par value of Two Million Dollars ($2,000,000). One series of shares is
designated as the Government Income Series and One Hundred Million (100,000,000)
shares of common stock (par value $.01 per share) are classified and allocated
to such series, with an aggregate par value of One Million Dollars ($1,000,000).
Two classes of the Government Income Series have been designated as the U.S.
Government Fund class, and Eighty Million (80,000,000) shares of common stock
(par value $.01 per share) have been classified and allocated to the U.S.
Government Fund class, with an aggregate par value of Eight Hundred Thousand
Dollars ($800,000), and the U.S. Government Fund (Institutional) class, and
Twenty Million (20,000,000) shares (par value $.01 per share) of common stock
were classified and allocated to such class, with an aggregate par value of Two
Hundred Thousand Dollars ($200,000). One Hundred Million 100,000,000) shares of
common stock are authorized, unissued and unallocated shares.
FOURTH: The shares of the U.S. Government Fund (Institutional)
class and the U.S. Government Fund class shall represent proportionate
interests in the same portfolio of investments of the Government Income
Series. The shares of the U.S. Government Fund (Institutional) class of the
Government Income Series of the Corporation shall have the same rights and
privileges, and shall be subject to the same limitations and priorities as the
shares of the U.S. Government Fund class of the Government Income Series, all
as set forth in the Articles of Incorporation of the Corporation, provided
that dividends paid on the shares of the U.S. Government Fund (Institutional)
class of shares shall not reflect any reduction for payment of fees under the
Distribution Plan of the U.S. Government Fund class adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, and provided
further, that the shares of the U.S. Government Fund (Institutional) class
shall not vote upon or with respect to any matter relating to or arising from
any such Distribution Plan.
FIFTH: The shares of the U.S. Government Fund (Institutional)
class and the U.S. Government Fund class of the Government Income Series of
the Corporation have been classified by the Board of Directors pursuant to
authority contained in the Articles of Incorporation of the Corporation.
IN WITNESS WHEREOF, Delaware Group Government Fund, Inc. has caused
these Articles Supplementary to be
<PAGE>
signed in its name and on its behalf this 21st day of May, 1992.
DELAWARE GROUP GOVERNMENT FUND, INC.
By:/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Vice President
ATTEST:
/s/Eric E. Miller
--------------------
Eric E. Miller
Assistant Secretary
THE UNDERSIGNED, Vice President of DELAWARE GROUP GOVERNMENT FUND,
INC., who executed on behalf of the said Corporation the foregoing Articles
Supplementary, of which this instrument is made a part, hereby acknowledges,
in the name of and on behalf of said corporation, said Articles Supplementary
to be the corporate act of said Corporation and further certifies that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material
respects, under the penalties of perjury.
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
<PAGE>
DELAWARE GROUP GOVERNMENT FUND, INC.
ARTICLES OF AMENDMENT
DELAWARE GROUP GOVERNMENT FUND, INC., a Maryland corporation having
its principal office in Baltimore City (hereinafter called the "Corporation"),
certifies that:
FIRST: The Articles of Incorporation of the Corporation are
hereby amended by deleting the fourth paragraph of Article FIFTH in its
entirety and inserting the following paragraph in lieu thereof:
Subject to the aforesaid power of the Board of Directors, one series
of shares is hereby designated as the Government Income Series and Eighty
Million (80,000,000) shares of common stock are classified and allocated to
such series. The Government Income Series shall consist of one class of
common stock designated as the U.S. Government Fund class. Eighty Million
(80,000,000) shares of common stock in the Government Income Series are
classified and allocated to the U.S. Government Fund class. The shares of the
U.S. Government Fund class shall reflect a reduction for payment by the U.S.
Government Fund class of distribution fees pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, and all shares of the U.S.
Government Fund class shall be entitled to vote upon or with respect to any
matter relating to or arising from any such Plan of Distribution.
SECOND: (a) The total number of shares of stock which the
Corporation was authorized to issue prior to the amendment was One Hundred
Million (100,000,000) shares, with a par value of One Cent ($0.01) per share
and with an aggregate par value of One Million Dollars ($1,000,000). One
series of shares was initially designated as the Government Income Series and
Eighty Million (80,000,000) shares of common stock (par value $0.01 per share)
were initially classified and allocated to such Series, with an aggregate par
value of Eight Hundred Thousand Dollars ($800,000). Two classes of the
Government Income Series were initially designated and classified as the
Original Class, and Sixty Million (60,000,000) shares (par value $0.01 per
share) of the Government Income Series were classified and allocated to such
class, with an aggregate par value of Six Hundred Thousand Dollars ($600,000),
and the Institutional Class, and Twenty Million (20,000,000) shares (par value
$0.01 per share) of the Government Income Series were classified and allocated
to such class, with an aggregate par value of Two Hundred Thousand Dollars
($200,000);
(b) The total number of shares of stock which the Corporation is
authorized to issue, following the
<PAGE>
aforesaid amendment, is One Hundred Million (100,000,000) shares, with a par
value of One Cent ($0.01) per share, with an aggregate par value of One Million
Dollars ($1,000,000). One series of shares is designated as the Government
Income Series and Eighty Million (80,000,000) shares of common stock (par value
$0.01 per share) are classified and allocated to such series, with an aggregate
par value of Eight Hundred Thousand Dollars ($800,000). One class of the
Government Income Series has been designated as the U.S. Government Fund class,
and Eighty Million (80,000,000) shares of the Government Income Series (par
value $0.01 per share) have been designated and allocated to the U.S. Government
Fund class, with an aggregate par value of Eight Hundred Thousand Dollars
($800,000); and
(c) The total number of shares of all classes and series of stock
and the individual and aggregate par value of such shares have not been
changed by this amendment.
THIRD: The amendment was advised by the Board of Directors and
approved by the stockholders.
FOURTH: The Articles of Amendment shall become effective at
5:00 P.M. on the date of filing.
FIFTH: At the effective time, each issued share of the
Institutional Class shall be changed into a share of the U.S. Government Fund
Class, and the Original Class shares shall be redesignated U.S. Government
Fund Class shares. Outstanding certificates of Institutional Class shall be
deemed to represent the same number of shares of the U.S. Government Fund
Class.
THE UNDERSIGNED, Vice President of DELAWARE GROUP GOVERNMENT FUND,
INC., who executed on behalf of said Corporation the foregoing Articles of
amendment, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, the foregoing Articles of
Amendment to be the corporate act of said Corporation and further certifies
that to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.
/s/Eric E. Miller
-----------------
Eric E. Miller
Vice President
IN WITNESS WHEREOF, DELAWARE GROUP GOVERNMENT FUND, INC. has caused
these Articles of Amendment to be
<PAGE>
signed in its name and on its behalf by its Vice President and attested by its
Assistant Secretary, on May 15, 1992.
DELAWARE GROUP GOVERNMENT FUND, INC.
By:/s/Eric E. Miller
-----------------
Eric E. Miller
Vice President
Attest:
/s/Richard J. Flannery
- -----------------------
Richard J. Flannery
Assistant Secretary
<PAGE>
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC., a Maryland corporation having
its principal office in Baltimore City, Maryland (the "Corporation") hereby
certifies to the State Department of Assessments and Taxation of Maryland,
that:
ONE: ARTICLE FIFTH of the Articles of Incorporation is hereby
amended in its entirety to read as follows:
FIFTH: The total number of shares of stock which the
-----
corporation shall have authority to issue is One Hundred Million (100,000,000)
share of stock, with a par value of One Cent ($.01) per share, to be known and
designated as Common Stock, such shares of Common Stock having an aggregate
par value of One Million Dollars ($1,000,000).
Subject to the provisions of these Articles of Incorporation, the
Board of Directors shall have the power to issue shares of Common Stock of the
corporation from time to time, at prices not less than the net asset value or
par value thereof, whichever is greater, for such consideration as may be
fixed from time to time pursuant to the direction of the Board of Directors.
Pursuant to Section 2-105 of the Maryland General Corporation Law,
the Board of Directors of the corporation shall have the power to designate
one or more series of shares of Common Stock and to classify or reclassify any
unissued shares with respect to such series and such series (subject to any
applicable rule, regulation or order of the Securities and Exchange Commission
or other applicable law or regulation) shall have such preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics
as the Board may determine in the absence of contrary determination set forth
herein.
Subject to the aforesaid power of the Board of Directors, one series
of shares will be deemed initially designated as the Government Income Series
and Eighty Million (80,000,000) shares of common stock shall be deemed
initially classified and allocated to such series. The Government Income
Series shall be divided into two classes of common stock initially designated
as the Original Class and the Institutional Class. Sixty Million (60,000,000)
shares of
<PAGE>
common stock in the Government Income Series shall be deemed initially
classified and allocated to the Original Class and Twenty Million (20,000,000)
shares of common stock in the Government Income Series shall be deemed initially
classified and allocated to the Institutional Class. The shares of the Original
Class and the shares of the Institutional Class shall have the same rights,
privileges, limitations and priorities, provided that dividends paid on the
Institutional Class of shares shall not reflect any reduction for payment of the
Original Class pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as amended, and provided further, that the shares of the Institutional Class
shall not vote upon or with respect to any matter relating to or arising from
any such Plan of Distribution.
At any time when there are no shares outstanding or subscribed for
of a particular series, or a particular class within a series, previously
established and designated herein or by the Board of Directors, the series of
class may be liquidated by similar means. Each share of a series shall have
equal rights with each other share of that series with respect to the assets
of the corporation pertaining to that series. The dividends payable to the
holders of any series (subject to any applicable rule, regulation or order of
the Securities and Exchange Commission or any other applicable law or
regulation) shall be determined by the Board and need not be individually
declared, but may be declared and paid in accordance with a formula adopted by
the Board. Except as otherwise provided herein, all references in these
Articles of Incorporation to Common Stock or series of stock shall apply
without discrimination to the shares of each series of stock.
The holder of each share of stock of the corporation shall be
entitled to one vote for each full share, and a fractional vote for each
fractional share of stock, irrespective of the series then standing in his or
her name in the books of the corporation. On any matter submitted to a vote
of shareholders, all shares of the corporation then issued and outstanding and
entitled to vote, irrespective of the series, shall be voted in the aggregate
and not by series except (1) when otherwise expressly provided by the Maryland
General Corporation Law, or (2) when required by the Investment Company Act of
1940, as amended, shares shall be voted by individual series; and (3) when the
matter does not affect any interest of a particular series, then only
shareholders of the affected series shall be entitled to vote thereon.
Holders of shares of stock of the corporation shall not be entitled to
cumulative voting in the election of directors or on any other matter.
Each series of stock of the corporation shall have the following
powers, preferences and participating,
<PAGE>
voting, or other special rights and the qualifications, restrictions, and
limitations thereof shall be as follows:
1. All consideration received by the corporation for the issue or
sale of stock of each series, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be, shall irrevocably belong to
the series of shares of stock with respect to which such assets, payments or
funds were received by the corporation for all purposes, subject only to the
rights of creditors, and shall be so handled upon the books of account of the
corporation. Such assets, income, earnings, profits and proceeds thereof,
including any proceeds derived from the sale, exchange or liquidation thereof
and any assets derived from any reinvestment of such proceeds, in whatever form
the same may be, are herein referred to as "assets belonging to" such series.
2. The Board of Directors may from time to time declare and pay
dividends or distributions, in stock or in cash, on any or all series of
stock; provided, such dividends or distributions on shares of any series of
stock shall be paid only out of earnings, surplus, or other lawfully available
assets belonging to such series.
3. The Board of Directors shall have the power, in its discretion,
to make such elections as to the tax status of the corporation or any series
or class of the corporation as may be permitted or required under the Internal
Revenue Code of 1986, as amended, or any successor or comparable statute
thereto, without the vote of shareholders of the corporation or any series of
class thereof.
4. In the event of the liquidation or dissolution of the
corporation, shareholders of each series shall be entitled to receive, as a
series, out of the assets of the corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
series of stock, the assets belonging to such series, and the assets so
distributable to the shareholders of any series shall be distributed among
such shareholders in proportion to the number of shares of such series held by
them and recorded on the books of the corporation. In the event that there
are any general assets not belonging to any particular series of stock and
available for distribution, such distribution shall be made to the holders of
stock of all series in proportion to the net asset value of the respective
series determined as hereinafter provided.
<PAGE>
5. The assets belonging to any series of stock shall be charged
with the liabilities in respect to such series, and shall also be charged with
its share of the general liabilities of the corporation, in proportion to the
net asset value of the respective series determined as hereinafter provided.
The determination of the Board of Directors shall be conclusive as to the
amount of liabilities, including accrued expenses and reserves, as to the
allocation of the same as to a given series, and as to whether the same or
general assets of the corporation are allocable to one or more series.
The Board of Directors may provide for a holder of any series of
stock of the corporation, who surrenders his certificate in good form for
transfer to the corporation or, if the shares in question are not represented
by certificates, who delivers to the corporation a written request in good
order signed by the shareholder, to convert the shares in question on such
basis as the Board may provide, into shares of stock of any other series of
the corporation.
The net asset value per share of a series of the corporation's
common stock shall be determined in accordance with the Investment Company Act
of 1940, as amended, and with generally accepted accounting principles, by
adding the market or appraised value of all securities, cash and other assets of
the corporation pertaining to that series, subtracting the liabilities
determined by the Board of Directors to be applicable to that series, allocating
any general assets and general liabilities to that series, and dividing the net
result by the number of shares of that series outstanding. Securities and other
investments and assets will be valued at the current market value, and in the
absence of a readily available market value, will be valued at fair value as
determined in good faith by the Board of Directors.
The holders of the shares of Common Stock or other securities of
the corporation shall have no preemptive rights to subscribe to new or
additional shares of its Common Stock or other securities.
TWO: Pursuant to Section 2-604(b) of the Maryland General
Corporation Law, the board of directors of the Corporation on January 21, 1988
duly adopted a resolution setting forth the foregoing amendment to the Articles
of Incorporation, declaring said amendment to the Articles of Incorporation
advisable and directing that it be submitted for consideration by the
shareholders of the Corporation at the annual meeting to be held on April 19,
1988, which annual meeting was postponed until June 14, 1988.
<PAGE>
THIRD: Notice setting forth said amendment to the Articles of
Incorporation and stating that a purpose of the meeting of the shareholders
would be to take action thereon was given, as required by law, to all
shareholders entitled to vote thereon. The amendment to the Articles of
Incorporation was approved by the shareholders of the Corporation at said
meeting by the affirmative vote of a majority of all the votes entitled to be
cast thereon. (Approval by a majority of all the votes entitled to be cast on
the matter is authorized pursuant to the Articles of Incorporation of the
Corporation.)
FOURTH: The amendment to the Articles of Incorporation as
hereinabove set forth has been duly advised by the board of directors and
approved by the shareholders of the Corporation.
FIFTH: The amendment to the Articles of Incorporation as
hereinabove set forth shall be duly filed with Maryland Department of
Assessments and Taxation on June 15, 1988, the effective time being 5:00 p.m.
on that date.
IN WITNESS WHEREOF, Delaware Group Government Fund, Inc., has caused
these Articles of Amendment to be signed by its President and attested by its
Secretary on June 14, 1988.
DELAWARE GROUP GOVERNMENT FUND, INC.
/s/John H. Durham
-----------------
John H. Durham
President
Attest:
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
THE UNDERSIGNED, President of Delaware Group Government Fund, Inc.,
who executed on behalf of said Corporation the foregoing Articles of
Amendment, of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, the foregoing Articles of
Amendment to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the approval thereof are true
<PAGE>
in all material respects, under the penalties of perjury.
/s/John H. Durham
------------------
John H. Durham
President
<PAGE>
DELAWARE GROUP GOVERNMENT FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Government Fund, Inc., a Maryland corporation having
its principal office in Baltimore, Maryland (the "Corporation") hereby
certifies, in accordance with Section 2-208 of the Maryland General Corporation
Law, to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting
held on June 18, 1987, adopted a resolution designating the Institutional
Class of shares (as distinguished from the existing Original Class of shares)
as the second class of the Government Series of common stock of the
Corporation and allocated Ten Million (10,000,000) shares of authorized and
unissued Common Stock, with a par value of One Cent ($.01) per share, to such
Institutional Class of the Government Series.
SECOND: The Board of Directors of the Corporation, at a meeting
held on June 18, 1987, adopted a resolution designating the Institutional
Class of shares (as distinguished from the existing Original Class of shares)
as the second class of the GNMA Series of common stock of the Corporation and
allocated Ten Million (10,000,000) shares of authorized and unissued Common
Stock, with a par value of One Cent ($.01) per share, to such Institutional
Class of the GNMA Series.
THIRD: The shares of the Institutional Class of the Government
Series shall have the same rights and privileges, and shall be subject to the
limitations and priorities as the shares of the Original Class, all set forth
in the Articles of Incorporation of the Corporation, provided, that dividends
paid on the Institutional Class of shares shall not reflect any reduction for
payment of fees under the Distribution Plan of the Original Class adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended,
and provided further, that the shares of the Institutional Class shall not
vote upon or with respect to any matter relating to or arising from any such
Plan of Distribution.
FOURTH: The shares of the Institutional Class of the GNMA
Series shall have the same rights and privileges, and shall be subject to the
limitations and priorities as the shares of the Original Class, all set forth
in the Articles of Incorporation of the Corporation, provided, that dividends
paid on the Institutional Class of shares shall not reflect
<PAGE>
any reduction for payment of fees under the Distribution Plan of the Original
Class adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940,
as amended, and provided further, that the shares of the Institutional Class
shall not vote upon or with respect to any matter relating to or arising from
any such Plan of Distribution.
FIFTH: The shares of the Institutional Class of said Government
and GNMA Series have been classified by the Board of Directors pursuant to
authority contained in the Articles of Incorporation of the Corporation.
IN WITNESS WHEREOF, Delaware Group Government Fund, Inc. has caused
these Articles Supplementary to be signed in its name and on its behalf this
29th day of June, 1987.
DELAWARE GROUP GOVERNMENT FUND, INC.
/s/John H. Durham
-----------------
John H. Durham
ATTEST:
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
THE UNDERSIGNED, President of DELAWARE GROUP GOVERNMENT FUND, INC.,
who executed on behalf of said Corporation the foregoing Articles
Supplementary, of which this instrument is made a part, hereby acknowledges,
in the name and on behalf of said Corporation, said Articles Supplementary to
be the corporate act of said Corporation and further certifies that, to the
best of his knowledge, information and belief, the matters and facts set forth
therein with respect to the approval thereof are true in all material
respects, under the penalties of perjury.
/s/John H. Durham
-----------------
John H. Durham
<PAGE>
ARTICLES OF INCORPORATION
OF
DELAWARE GROUP GOVERNMENT FUND, INC.
FIRST: The undersigned, Donald M. Allen whose post office
-----
address is Ten Penn Center Plaza, Philadelphia, Pennsylvania 19103, and being
at least eighteen years of age, does hereby cause to be filed these Articles
of Incorporation for the purpose of forming a corporation under the General
Corporation Law of the State of Maryland.
SECOND: The name of the corporation is Delaware Group
------
Government Fund, Inc.
THIRD: The purpose for which the corporation is formed is to
-----
operate as an investment company and to exercise all of the powers and to do
any and all of the things as fully and to the same extent as any other
corporation incorporated under the laws of the State of Maryland, now or
hereinafter in force, including, without limitation, the following:
1. To Purchase, hold, invest and reinvest in, sell,
exchange, transfer, mortgage, and otherwise acquire and dispose of securities
of every kind, character and description.
2. To exercise all rights, powers and privileges with
reference to or incident to ownership, use and enjoyment of any of such
securities, including, but without limitation, the right, power and privilege
to own, vote, hold, purchase, sell, negotiate, assign, exchange, transfer,
mortgage, pledge or otherwise deal with, dispose of, use, exercise or enjoy
any rights, title, interest, powers or privileges under or with reference to
any of such securities; and to do any and all acts and things for the
preservation, protection, improvement and enhancement in value of any of such
securities.
3. To purchase or otherwise acquire, own, hold, sell,
exchange, assign, transfer, mortgage, pledge or otherwise dispose of, property
of all kinds.
4. To buy, sell, mortgage, encumber, hold, own, exchange,
rent or otherwise acquire and dispose of, and to develop, improve, manage,
subdivide, and generally to deal and trade in real property, improved and
unimproved, and wheresoever situate; and to build, erect, construct, alter and
maintain buildings, structures, and other improvements on real property.
5. To borrow or raise moneys for any of the purposes of
the corporation, and to mortgage or pledge
<PAGE>
the whole or any part of the property and franchises of the corporation, real,
personal, and mixed, tangible or intangible, and wheresoever situate.
6. To enter into, make and perform contracts and
undertakings of every kind for any lawful purpose, without limit as to amount.
7. To issue, purchase, sell and transfer, reacquire, hold,
trade and deal in, to the extent permitted under the General Corporation Law
of the State of Maryland, capital stock, bonds, debentures and other
securities of the corporation, from time to time, to such extent as the Board
of Directors shall, consistent with the provisions of these Articles of
Incorporation, determine; and to repurchase, re-acquire and redeem, to the
extent permitted under the General Corporation law of the State of Maryland,
from time to time, the shares of its own capital stock, bonds, debentures and
other securities.
The foregoing clauses shall each be construed as purposes, objects
and powers, and it is hereby expressly provided that the foregoing enumeration
of specific purposes, objects and powers shall not be held to limit or
restrict in any manner the powers of the corporation, and that they are in
furtherance of, and in addition to, and not in limitation of, the general
powers conferred upon the corporation by the laws of the State of Maryland or
otherwise; nor shall the enumeration of one thing be deemed to exclude
another, although it be of like nature, not expressed.
FOURTH: The post office address of the principal office of the
------
corporation in the State of Maryland is:
c/o The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202
The name and post office address of the initial resident agent of
the corporation in the State of Maryland is:
The Corporation Trust, Incorporated
32 South Street
Baltimore, Maryland 21202
FIFTH: The total number of shares of stock which the
-----
corporation shall have authority to issue is One Hundred Million (100,000,000)
shares of stock, with a par value of One Cent ($.01) per share, to be known
and designated as Common Stock, such shares of Common Stock having an
aggregate par value of One Million Dollars ($1,000,000).
<PAGE>
Subject to the provisions of these Articles of Incorporation, the
Board of Directors shall have the power to issue shares of Common Stock of the
corporation from time to time, at prices not less than the net asset value or
par value thereof, whichever is greater, for such consideration as may be
fixed from time to time pursuant to the direction of the Board of Directors.
Pursuant to Section 2-105 of the Maryland General Corporation Law,
the Board of Directors of the corporation shall have the power to designate
one or more series of shares of Common Stock and to classify or reclassify any
unissued shares with respect to such series and such series (subject to any
applicable rule, regulation or order of the Securities and Exchange Commission
or other applicable law or regulation) shall have such preferences, conversion
or other rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics as
the Board may determine in the absence of contrary determination set forth
herein. Subject to the aforesaid power of the Board of Directors, two series of
shares will be deemed initially designated as the US Government Series and GNMA
Series and Thirty Million (30,000,000) shares of common stock shall be deemed
initially classified and allocated to each such series. At any time when there
are no shares outstanding or subscribed for a particular series previously
established and designated herein or by the Board of Directors, the series may
be liquidated by either means. Each share of a series shall have equal rights
with each other share of that series with respect to the assets of the
corporation pertaining to that series. The dividends payable to the holders of
any series (subject to any applicable rule, regulation or order of the
Securities and Exchange Commission or any other applicable law or regulation)
shall be determined by the Board and need not be individually declared, but may
be declared and paid in accordance with a formula adopted by the Board. Except
as otherwise provided herein, all references in these Articles of Incorporation
to Common Stock or series of stock shall apply without discrimination to the
shares of each series of stock.
The holder of each share of stock of the corporation shall be entitled
to one vote for each full share, and a fractional vote for each fractional share
of stock, irrespective of the series then standing in his or her name in the
books of the corporation. On any matter submitted to a vote of shareholders, all
shares of the corporation then issued and outstanding and entitled to vote,
irrespective of the series, shall be voted in the aggregate and not by series
except (1) when otherwise expressly provided by the Maryland General Corporation
Law, or (2) when required by the Investment Company Act of 1940, as amended,
<PAGE>
shares shall be voted by individual series; and (3) when the matter does not
affect any interest of a particular series, then only shareholders of affected
series shall be entitled to vote thereon. Holders of shares of stock of the
corporation shall not be entitled to cumulative voting in the election of
directors or on any other matter.
Each series of stock of the corporation shall have the following
powers, preferences and participating, voting, or other special rights and the
qualifications, restrictions, and limitations thereof shall be as follows:
1. All consideration received by the corporation for the
issue or sale of stock of each series, together with all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the series of shares of stock with respect to which such
assets, payments or funds were received by the corporation for all purposes,
subject only to the rights of creditors, and shall be so handled upon the books
of account of the corporation. Such assets, income, earnings, profits and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof and any assets derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
belonging to" such series.
2. The Board of Directors may from time to time declare
and pay dividends or distributions, in stock or in cash, on any or all series
of stock; provided, such dividends or distributions on shares of any series of
stock shall be paid only out of earnings, surplus, or other lawfully available
assets belonging to such series.
3. The Board of Directors shall have the power in its
discretion to distribute in any fiscal year as dividends, including dividends
designated in whole or in part as capital gain distributions, amounts
sufficient, in the opinion of the Board of Directors, to enable the
corporation to qualify as a "regulated investment company" under the Internal
Revenue Code of 1954, as amended, or any successor or comparable statute
thereto, and regulations promulgated thereunder (collectively, the "IRC"), and
to avoid liability for the corporation for Federal income tax in respect of
that year and to make other appropriate adjustments in connection therewith.
In furtherance, and not in limitation of the foregoing, to the extent deemed
necessary or appropriate by the Board of Directors to comply with the
provisions of the IRC, in the event that a series of shares has a net capital
loss for a fiscal year, and to the extent that the net capital loss offsets
net capital gains from another series, the amounts to be deemed available for
distribution to the series with the net capital gain shall be reduced by the
amount of offset. The shareholders of the series with the net capital gain
shall be entitled to a full distribution of the net income to the extent
earned and to recognition in the net asset value of such series of the amount
of the realized net capital gain to the extent not distributed. If the net
capital loss of a series exceeds the net capital gain from another series,
<PAGE>
the amounts to be deemed available for distribution to the series with the net
capital gain shall be reduced by the amount of offset. The shareholders of the
series with the net capital gain shall be entitled to a full distribution of the
net income to the extent earned and to recognition in the net asset value of
such series of the amount of the realized net capital gain to the extent not
distributed. If the net capital loss of a series exceeds the net capital gain
from another series, the excess loss shall not reduce the net investment income
available for distribution to the series with the loss, but shall be carried
forward.
4. In the event of the liquidation or dissolution of the
corporation, shareholders of each series shall be entitled to receive, as a
series, out of the assets of the corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
series of stock, the assets belonging to such series, and the assets so
distributable to the shareholders of any series shall be distributed among
such shareholders in proportion to the number of shares of such series held by
them and recorded on the books of the corporation. In the event that there
are any general assets not belonging to any particular series of stock and
available for distribution, such distribution shall be made to the holders of
stock of all series in proportion to the net asset value of the respective
series determined as hereinafter provided.
5. The assets belonging to any series of stock shall be
charged with the liabilities in respect to such series, and shall also be
charged with its share of the general liabilities of the corporation, in
proportion to the net asset value of the respective series determined as
hereinafter provided. The determination of the Board of Directors shall be
conclusive as to the amount of liabilities, including accrued expenses and
reserves, as to the allocation of the same as to a given series, and as to
whether the same or general assets of the corporation are allocable to one or
more series.
The Board of Directors may provide for a holder of any series of stock
of the corporation, who surrenders his certificate in good form for transfer to
the corporation or, if the shares in question are not represented by
certificates, who delivers to the corporation a written request in good order
signed by the shareholder, to convert the shares in question on such basis as
the Board may provide, into shares of stock of any other series of the
corporation.
The net asset value per share of a series of the corporation's common
stock shall be determined in accordance with the Investment Company Act of 1940,
as amended, and with generally accepted accounting principles, by adding the
<PAGE>
market or appraised value of all securities, cash and other assets of the
corporation pertaining to that series, subtracting the liabilities determined by
the Board of Directors to be applicable to that series, allocating any general
assets and general liabilities to that series, and dividing the net result by
the number of shares of that series outstanding. Securities and other
investments and assets will be valued at the current market value, and in the
absence of a readily available market value, will be valued at fair value as
determined in good faith by the Board of Directors.
The holders of the shares of Common Stock or other securities of the
corporation shall have no preemptive rights to subscribe to new or additional
shares of its Common Stock or other securities.
SIXTH: The number of directors of the Corporation shall be
-----
such number as may from time to time be fixed by the By-Laws of the
corporation or pursuant to authorization contained in such By-Laws; provided,
notwithstanding anything herein to the contrary, the board of directors shall
initially consist of seven directors until such time as the number of
directors is fixed as stated above. The name of the directors who shall act
as such until successors are duly chosen and qualify are: James P.
Schellenger, John H. Durham, Milton Fritsche, William Buchanon Gold, Jr., Paul
I. Guest, W. Thacher Longstreth and J. Permar Richards.
SEVENTH: The following provisions are inserted for the
-------
management of the business and for the conduct of the affairs of the
corporation:
1. The Board of Directors shall have power to fix an
initial offering price for the shares of any series which shall yield to the
corporation not less than the par value thereof, at which price the shares of
the Common Stock of the corporation shall be offered for sale, and to determine
from time to time thereafter the offering price which shall yield to the
corporation not less than the par value thereof from sales of the shares of its
Common Stock; provided, however, that no shares of the Common Stock of the
corporation shall be issued or sold for a consideration which shall yield to the
corporation less than the net asset value of shares of such series determined as
hereinafter provided, as of the business day on which such shares are sold, or
at such other times set by the Board of Directors, except in the case of shares
of such Common Stock issued in payment of a dividend properly declared and
payable.
The net asset value of the property and assets of any series of the
corporation shall be determined at such times as the Board of Directors may
direct, by deducting from
<PAGE>
the total appraised value of all of the property and assets of the corporation,
determined in the manner hereinafter provided, all debts, obligations and
liabilities of the corporation (including, but without limitation of the
generality of any of the foregoing, any or all debts, obligations, liabilities
or claims of any and every kind and nature, whether fixed, accrued, or
unmatured, and any reserves or charges, determined in accordance with generally
accepted accounting principles, for any or all thereof, whether for taxes,
including estimated taxes or unrealized book profits, expenses, contingencies or
otherwise).
In determining the total appraised value of all the property and
assets of the corporation or belonging to any series thereof:
(a) Securities owned shall be valued at market value or, in
the absence or readily available market quotations, at fair value as determined
in good faith by or as directed by the Board of Directors in accordance with
applicable statutes and regulations.
(b) Dividends declared but not yet received, or rights, in
respect of securities which are quoted ex-divided or ex-rights, shall be
included in the value of such securities as determined by or pursuant to the
direction of the Board of Directors on the day the particular securities are
first quoted ex-dividend or ex-rights, and on each succeeding day until the said
dividends or rights are received and become part of the assets of the
corporation.
(c) The value of any other assets of the corporation (and any
of the assets mentioned in paragraphs (a) or (b), in the discretion of the Board
of Directors in the event of a national financial emergency, as hereinafter
defined) shall be determined in such manner as may be approved from time to time
by or pursuant to the direction of the Board of Directors.
The net asset value of each share of the Common Stock of the
corporation shall be determined by dividing the total market value of the
property and assets of the relevant series of the corporation by the total
number of shares of its Common Stock then issued and outstanding for such
series, including any shares sold by the corporation up to and including the
date as of which such net asset value is to be determined whether or not
certificates therefor have actually been issued. In case the net asset value of
each share so determined shall include a fraction of one cent, such net asset
value of each share shall be adjusted to the nearest full cent.
For the purposes of these Articles of Incorporation, a "national
financial emergency" is defined as
<PAGE>
the whole or any part of any period (i) during which the New York Stock Exchange
is closed other than customary weekend and holiday closings, (ii) during which
trading on the New York Stock Exchange is restricted, (iii) during which an
emergency exists as a result of which disposal by the corporation of securities
owned by such series is not reasonably practicable or it is not reasonably
practicable for the corporation fairly to determine the value of the net assets
of such series, or (iv) during any other period when the Securities and Exchange
Commission (or any succeeding governmental authority) may for the protection of
security holders of the corporation by order permit suspension of the right of
redemption or postponement of the date of payment on redemption; provided that
applicable rules and regulations of the Securities and Exchange Commission (or
any succeeding governmental authority) shall govern as to whether the conditions
prescribed in (ii), (iii), or (iv) exist. The Board of Directors may, in its
discretion, declare the suspension described in (iv) above at an end, and such
other suspension relating to a natural financial emergency shall terminate as
the case may be on the first business day on which said Stock Exchange shall
have reopened or the period specified in (ii) or (iii) shall have expired (as to
which in the absence of an official ruling by said Commission or succeeding
authority, the determination of the Board of Directors shall be conclusive).
2. To the extent permitted by law, and except in the case
of a national financial emergency, the corporation shall redeem shares of its
Common Stock from its stockholders upon request of the holder thereof received
by the corporation or its designated agent during business hours of any
business day, provided that such request must be accompanied by surrender of
outstanding certificate or certificates for such shares in form for transfer,
together with such proof of the authenticity of signatures as may reasonably
be required on such shares (or, on such request in the event no certificate is
outstanding) by, or pursuant to the direction of the Board of Directors of the
corporation, and accompanied by proper stock transfer stamps. Shares redeemed
upon any such request shall be purchased by the corporation at the net asset
value of such shares determined in the manner provided in Paragraph (1) of
this Article Seventh, as of the close of business on the business day during
which such request was received in good order by the corporation.
Payments for shares of its Common Stock so redeemed by the
corporation shall be made from the assets of the applicable series in cash,
except payment for such shares may, at the option of the Board of Directors,
or such officer or officers as they may duly authorize for the purpose in
their complete discretion, be made from the assets of that series in kind or
partially in cash and partially in kind.
<PAGE>
In case of any payment in kind the Board of Directors, or their delegate, shall
have absolute discretion as to what security or securities of such series shall
be distributed in kind and the amount of the same; and the securities shall be
valued for purposes of distribution at the value at which they were appraised in
computing the current net asset value of the series of the Fund's shares,
provided that any stockholder who cannot legally acquire securities so
distributed in kind by reason of the prohibitions of the Investment Company Act
of 1940 shall receive cash.
Payment for shares of its Common Stock so redeemed by the corporation
shall be made by the corporation as provided above within seven days after the
date which such shares are deposited; provided, however, that if payment shall
be made by delivery of assets of the corporation, as provided above, any
securities to be delivered as part of such payment shall be delivered as
promptly as any necessary transfers of such securities on the books of the
several corporations whose securities are to be delivered may be made, but not
necessarily within such seven day period.
The right of any holder of shares of the Common Stock of the
corporation to receive dividends thereon and all other rights of such
stockholder with respect to the shares so redeemed by the corporation shall
cease and determine from and after the time as of which the purchase price of
such shares shall be fixed, as provided above, except the right of such
stockholder to receive payment for such shares as provided for herein.
3. The Board of Directors, may from time to time, without
the vote or consent of stockholders, establish uniform standards with respect to
the minimum net asset value of a stockholder account or a minimum investment
which may be made by a stockholder. The Board of Directors may authorize the
closing of those stockholder accounts not meeting the specified minimum
standards of net asset value by redeeming all of the shares in such accounts,
provided there is mailed to each affected stockholder account, at least thirty
(30) days prior to the planned redemption date, a notice setting forth the
minimum account size requirement and the date on which the account will be
closed if the minimum size requirement is not met prior to said closing date.
EIGHTH: Subject to the Investment Company Act of 1940, as
------
amended, each of the following actions, to the extent required to be approved
by the shareholders under Maryland General Corporation Law, shall be approved
by a majority of all votes entitled to be cast on the matter:
(i) Amendment or amendment and restatement of the Articles;
(ii) Reduction of stated capital;
<PAGE>
(iii) Consolidation, merger, share exchange or transfer of
assets;
(iv) Distribution in partial liquidation; or
(v) Voluntary dissolution.
NINTH: The corporation expressly reserves the right to amend,
-----
alter, change or repeal any provision contained in these Articles of
Incorporation, and all rights, contract and otherwise, conferred herein upon the
stockholders are granted subject to such reservation.
IN WITNESS WHEREOF, the undersigned incorporation of Delaware Group
Government Fund, Inc. who executed the foregoing Articles of Incorporation
hereby acknowledged the same to be his act and further acknowledge that, to the
best of his knowledge the matters and facts set forth therein are true and all
material respects under the penalties of perjury.
Dated the 19th day of April, 1985.
/s/Donald M. Allen
------------------
Donald M. Allen
<PAGE>
EX-99.B1B FORM OF ARTICLES SUPPLEMENTARY
DELAWARE GROUP GOVERNMENT FUND, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
Delaware Group Government Fund, Inc., a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies,
in accordance with Section 2-208 and Section 2-208.1 of the Maryland General
Corporation Law, to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Corporation has authority to issue a total of Two Hundred
Million (200,000,000) shares of common stock with a par value of One Cent
($0.01) per share of the Corporation ("Common Stock"), having an aggregate par
value of Two Million Dollars ($2,000,000). Of such Two Hundred Million
(200,000,000) shares of Common Stock, One Hundred Eighty Million (180,000,000)
shares have been allocated to the Government Income Series of the Common Stock
as follows: (1) Twenty Million (20,000,000) shares have been allocated to the
U.S. Government Fund (Institutional) class and (2) Eighty Million (80,000,000)
shares have been allocated to each of the U.S. Government Fund B Class and the
U.S. Government Fund class.
SECOND: The Board of Directors of the Corporation, at a meeting held on
July 20, 1995, adopted resolutions increasing the aggregate number of shares of
Common Stock that the Corporation has authority to issue to Five Hundred Million
(500,000,000) shares, classifying a fourth class of shares of the Government
Income Series of the Common Stock as the U.S. Government Fund C Class (the "C
Class") and classifying and allocating Fifty Million (50,000,000) shares of
authorized, unissued and unclassified Common Stock to the C Class.
THIRD: As a result of the aforesaid increase in the authorized Common
Stock and classification, the Corporation has authority to issue Five Hundred
Million (500,000,000) shares of Common Stock, having an aggregate par value of
Five Million Dollars ($5,000,000). Of such Five Hundred Million (500,000,000)
shares of Common Stock, Two Hundred Thirty Million (230,000,000) shares have
been allocated to the Government Income Series of the Common Stock as follows:
(1) Twenty Million (20,000,000) shares have been allocated to the U.S.
Government Fund (Institutional) class; (2) Eighty Million (80,000,000) shares
have been allocated to each of the U.S. Government Fund class and the U.S.
Government
<PAGE>
Fund B Class; and (3) Fifty Million (50,000,000) shares have been allocated to
the C Class.
FOURTH: The shares of the C Class shall represent proportionate interests
in the same portfolio of investments as the shares of the U.S. Government Fund
(Institutional) class, U.S. Government Fund B Class and U.S. Government Fund
class of the Government Income Series of the Common Stock. The shares of the C
Class shall have the same preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption as the shares of the U.S. Government Fund
(Institutional) class, U.S. Government Fund B Class and U.S. Government Fund
class of the Government Income Series of the Common Stock, all as set forth in
the Articles of Incorporation of the Corporation, except for the differences
hereinafter set forth:
1. The dividends and distributions of investment income and capital gains
with respect to shares of the C Class shall be in such amounts as may be
declared from time to time by the Board of Directors, and such dividends
and distributions may vary with respect to such class from the dividends
and distributions of investment income and capital gains with respect to
shares of the other classes of the Government Income Series of the Common
Stock to reflect differing allocations of the expenses of the Corporation
among the shares of such classes and any resultant difference among the net
asset values per share of the shares of such classes, to such extent and
for such purposes as the Board of Directors may deem appropriate. The
allocation of investment income and capital gains and expenses and
liabilities of the Corporation among the four classes of the Government
Income Series of the Common Stock shall be determined by the Board of
Directors in a manner that is consistent with the order, as applicable,
dated September 6, 1994 (Investment Company Act of 1940 Release No. 20529)
issued by the Securities and Exchange Commission, and any amendments to
such order, any future order or any Multiple Class Plan adopted by the
Corporation in accordance with Rule 18f-3 under the Investment Company Act
of 1940, as amended, that modifies or supersedes such order.
2. Except as may otherwise be required by law pursuant to any applicable
order, rule or interpretation issued by the Securities and Exchange
Commission, or otherwise, the holders of shares of the C Class shall have
(i) exclusive voting rights with respect to any matter submitted to a vote
of stockholders that affects only holders of shares of the
<PAGE>
C Class, including without limitation the provisions of any Distribution
Plan adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (a "Distribution Plan") applicable to shares of the C
Class, and (ii) no voting rights with respect to the provisions of any
Distribution Plan applicable to any other class of Common Stock or with
regard to any other matter submitted to a vote of stockholders which does
not affect holders of shares of the C Class.
3. The shares of the C Class shall not automatically convert into shares of
the U.S. Government Fund class of the Government Income Series of the
Common Stock as do the shares of the U.S. Government Fund B Class of the
Government Income Series of the Common Stock.
FIFTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940, as amended.
SIXTH: The total number of shares of Common Stock that the Corporation has
authority to issue has been increased by the Board of Directors in accordance
with Section 2-105(c) of the Maryland General Corporation Law.
SEVENTH: The shares of Common Stock classified as shares of the C Class
pursuant to these Articles Supplementary have been classified by the Board of
Directors pursuant to authority contained in the Articles of Incorporation of
the Corporation.
EIGHTH: These Articles Supplementary shall become effective on November 28,
1995.
IN WITNESS WHEREOF, Delaware Group Government Fund, Inc. has caused these
Articles Supplementary to be signed in its name and on its behalf this ____ day
of November, 1995.
DELAWARE GROUP GOVERNMENT FUND, INC.
By:_____________________________________
George M. Chamberlain, Jr.
Senior Vice President
ATTEST:
_______________________________
Assistant Secretary
<PAGE>
THE UNDERSIGNED, Senior Vice President of DELAWARE GROUP GOVERNMENT FUND,
INC., who executed on behalf of the said Corporation the foregoing Articles
Supplementary, of which this instrument is made a part, hereby acknowledges, in
the name of and on behalf of said Corporation, said Articles Supplementary to be
the corporate act of said Corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth therein
with respect to the authorization and approval thereof are true in all material
respects, under the penalties of perjury.
___________________________________
George M. Chamberlain, Jr.
Senior Vice President
<PAGE>
EX-99.B2 BY-LAWS
DELAWARE GROUP GOVERNMENT FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
AMENDING SECTION 7 OF ARTICLE III
JANUARY 28, 1995
The Undersigned Secretary of Delaware Group Government Fund, Inc.
does hereby certify that at the Board of Directors of the Fund at a meeting duly
called and held on January 28, 1995 did adopt the following resolution amending
Section 7 of Article III of the Fund's by-laws:
RESOLVED, that Article III, Section 7,
be amended in its entirely to read as
follows:
Section 7. At any meeting of the stockholders
of the Corporation every stockholder having
the right to vote shall be entitled, in
person or by proxy appointed by an instrument
in writing subscribed by such stockholder or
by his duly authorized attorney-in-fact and
bearing a date not more than eleven months prior
to said meeting unless such instrument provides
for a longer period, to one vote for each share
of stock having voting power registered
in his name on the books of the Corporation.
IN WITNESS WHEREOF, I have hereto subscribed my name this 28th day
of January, 1995.
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE>
DELAWARE GROUP GOVERNMENT FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
AMENDING SECTION 2 OF ARTICLE VI
NOVEMBER 21, 1991
The Undersigned Secretary of Delaware Group Government Fund, Inc.
does hereby certify that at the Board of Directors of the Fund at a meeting duly
called and held on November 21, 1991 did adopt the following resolution amending
Section 2 of Article VI of the Fund's by-laws:
RESOLVED, that Article VI, Section 2 of the
Fund's by-laws be amended to read in its
entirely as follows:
Section 2. The Chairman of the Board shall
be elected from the membership of the Board of
Directors, but other officers need not
be members of the Board of Directors. Any two
or more offices may be held by the same person
except the offices of President and
Vice President. All officers of the Corporation
shall serve for one year and until their successors
shall have been duly elected
and shall have qualified; provided, however, that
any officer may be removed at any time, either
with our without cause, by action by the Board
of Directors.
AND FURTHER RESOLVED, that the appropriate
officers of the Fund are hereby authorized to
take such other steps as may be necessary
to implement the aforesaid amendment.
IN WITNESS WHEREOF, I have hereto subscribed my name this 21st day
of November, 1991.
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
<PAGE>
DELAWARE GROUP GOVERNMENT FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
AMENDING SECTION 8 OF ARTICLE IV
JULY 22, 1991
The Undersigned Secretary of Delaware Group Government Fund, Inc.
does hereby certify that at the Board of Directors of the Fund at a meeting duly
called and held on July 22, 1991 did adopt the following resolution amending
Section 8 of Article IV of the Fund's by-laws:
RESOLVED, that Article IV, Section 8, be
amended in its entirely to read as follows:
Section 8. The
Board of Directors
may hold their
meetings and keep
the books of the
Corporation outside
of the State of
Maryland at such
place or places as it
may from time to time
determine.
AND FURTHER RESOLVED, that the Secretary of the
Fund is hereby authorized and directed to include
a certified copy of this Amendment with the
corporate records of the Fund; and further
RESOLVED, that the books and records of the Fund
shall be maintained at the offices of the Fund in
the City of Philadelphia.
IN WITNESS WHEREOF, I have hereto subscribed my name this 22nd day
of July, 1991.
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
<PAGE>
DELAWARE GROUP GOVERNMENT FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
AMENDING SECTION 2 OF ARTICLE III
JANUARY 17, 1991
The Undersigned secretary of Delaware Group Government Fund, Inc.
does hereby certify that at the Board of Directors of the Fund at a meeting duly
called and held on January 17, 1991 did adopt the following resolution amending
section 2 of ARTICLE III of the Fund's by-laws:
WHEREAS, the Board of Directors of the Fund
deems it to be in the best interests of the
Fund to amend the By-Laws of the Fund to
provide that holders of at least 10% of the
Fund's shares be permitted, at the Fund's cost,
to call a special stockholders meeting for any
purpose, in order to enable the Fund's shares to
be qualified and sold in the state of California;
and therefore be it
RESOLVED, that the By-Laws of the Fund are hereby
amended by inserting, as amended Section 2 of
ARTICLE III, the following:
Section 2. Special meetings of the stockholders
may be called at any time by the Chairman, President
or a majority of the members of the Board of
Directors and shall be called by the secretary
upon the written request of the holders of at
least ten percent of the shares of the capital
stock of the Corporation issued and
outstanding and entitled to vote at such meeting.
Upon receipt of a written request from such holders
entitled to call a special meeting, which shall
state the purpose of the meeting and the
matter proposed to be acted on at it, the Secretary
shall issue notice of such meeting. The cost of
preparing and mailing the notice of a special meeting
of stockholders shall be borne by the Corporation.
Special meetings of the stockholders
<PAGE>
shall be held at the principal office of the
Corporation, or at such other place within or
without the State of Maryland as the Board of
Directors may from time to time direct, or at
such place within or without the State of Maryland
as shall be specified in the notice of such meeting.
IN WITNESS WHEREOF, I have hereto subscribed my name this 17th day
of January, 1991.
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
<PAGE>
DELAWARE GROUP GOVERNMENT FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
INSERTING A NEW ARTICLE VII AND RENUMBERING THE SUBSEQUENT
ARTICLES
FEBRUARY 16, 1989
The Undersigned Secretary of Delaware Group Government Fund, Inc.
does hereby certify that the Board of Directors of the Fund at a meeting duly
called and held on February 16, 1989 did adopt the following resolutions
inserting a new Article VII and renumbering the subsequent articles of the
Fund's by-laws:
WHEREAS, the Board of Directors of the Fund deems it to
be in the best interests of the Fund to amend the By-Laws of the Fund to allow
indemnification of officers and directors to the full extent provided by
Maryland law;
HOW THEREFORE, BE IT RESOLVED, that the By-Laws of the
Fund are hereby amended by renumbering ARTICLES VIII, IX, X, XI, XII AND XIII
as ARTICLES IX, X, XI, XII, XIII AND XIV, and by inserting as ARTICLE VII, the
following:
"INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 1. The Corporation shall indemnify each Officer and
Director made party to a proceeding, by reason of service in such
capacity, to the fullest extent, and in the manner provided, under
Section 2-418 of the Maryland General Corporation Law: (i) unless
it is proved that the person seeking indemnification did not meet
the standard of conduct set forth in subsection (b)(1) of such
section; and (ii) provided, that the Corporation shall not
indemnify any Officer or Director for any liability to the
Corporation or its security holders arising from the wilful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such person's office.
Section 2. The provisions of clause (i) of Section 1 herein
notwithstanding, the Corporation shall indemnify each Officer and
Director against reasonable expenses incurred in connection with
the successful defense of any proceeding to which each such
Officer or
<PAGE>
Director is a party by reason of service in such capacity.
Section 3. The Corporation, in the manner and to the extent
provided by applicable law, shall advance to each Officer and
Director who is made party to a proceeding by reason of service in
such capacity the reasonable expenses incurred by such person in
connection therewith."
IN WITNESS WHEREOF, I have hereto subscribed my name this 16th day
of February, 1989.
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE>
DELAWARE GROUP GOVERNMENT FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
ARTICLE 3, SECTION 2
JUNE 16, 1988
The Undersigned Secretary of Delaware Group Government Fund, Inc.
does hereby certify that the Board of Directors of the Fund at a meeting duly
called and held on June 16, 1988 did adopt the following resolution amending
Article 3, Section 2 of the Fund's by-laws:
RESOLVED, that Article III, Section 2 of
the By-laws of the Fund be amended to read
as follows:
Section 2. Special meetings of the
stockholders may be called at
any time by the Chairman, President or
a majority of the members of the Board
of Directors and shall be called by the Secretary
upon the written request of the holders of
at least twenty-five percent of the shares
of the capital stock of the Corporation
issued and outstanding and entitled to vote
at such meeting; provided, if the matter
proposed to be acted on is substantially
the same as a matter voted on at any special
meeting held during the preceding twelve months,
such written request shall be made by
holders of at least a majority of the capital
stock of the Corporation issued and outstanding
and entitled to vote at such meetings. A special
meeting of the stockholders shall also be
called by the Secretary upon the written request
of at least ten percent of the shares of the capital
stock of the Corporation issued and outstanding
and entitled to vote at such meeting, for
the express purpose of voting upon the question
of removal of a director or directors. Upon receipt
of a written request from such holders entitled to
call a special meeting, which shall state
the purpose of the meeting and the matter proposed to
<PAGE>
be acted on at it, the Secretary shall inform
the holders who made such request of the reasonably
estimated cost of preparing and mailing
a notice of a meeting and upon payment of such costs
to the Corporation the Secretary shall issue notice
of such meeting. Special meetings of the stockholders
shall be held at the principal office of the
Corporation, or at such other place within or without
the State of Maryland as the Board of Directors may
from time to time direct, or at such place within or
without the State of Maryland as shall be specified
in the notice of such meeting.
IN WITNESS WHEREOF, I have hereto subscribed my name this 16th day
of June, 1988.
/s/George M. Chamberlain, Jr.
-----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE>
DELAWARE GROUP GOVERNMENT FUND, INC.
CERTIFICATION OF AMENDMENT TO BY-LAWS
ARTICLE 3, SECTION 1
AND
ARTICLE 4, SECTION 2 AND 4
JUNE 14, 1988
The Undersigned Secretary of Delaware Group Government Fund, Inc.
does hereby certify that the Shareholders of the Fund at a meeting duly called
and held on June 14, 1988 did adopt the following resolution amending Article 3,
Section 1 and Article 4, Section 2 and 4 of the Fund's by-laws:
ARTICLE III
Section 1. An annual meeting of the shareholders
of the Corporation for the election of directors
and for the transaction of general business shall
not be required to be held in any year except that
an annual meeting must be held in any year if any of
the following items is required to be acted upon
by shareholders under the Investment Company Act of
1940; election of directors, approval of the investment
advisory agreement, ratification of the
selection of independent public accountants, or
approval of a distribution agreement. Any such meeting
shall be held at the principal office of the Corporation,
or at such other place within or without the State of
Maryland as the Board of Directors may
from time to time prescribe, on the third Tuesday in
April at 10:00 am. or at such other date and time
as the Board of Directors may from time to time
prescribe. A notice of any change in the
place of the annual meeting shall be given to
each shareholder not less than ten days before
the election is held.
<PAGE>
ARTICLE IV
* * *
Section 2. The directors shall be elected by the
shareholders of the Corporation at an annual meeting,
if held, or at a special meeting called
for such purpose, and shall hold office until their
successors shall be duly elected and qualified.
* * *
Section 4. The Board of Directors shall have power
to fill vacancies occurring on the Board, whether
by death, resignation or otherwise. A vacancy on
the Board of Directors resulting from any
cause except an increase in the number of directors
may be filled by a vote of the majority of the
remaining members of the Board, though less than
a quorum. A vacancy on the Board of Directors
resulting from an increase in the number of
directors may be filled by a majority of the
entire Board of Directors. A director
elected by the Board of Directors to fill a vacancy
shall serve until the next annual meeting, whenever
held, or special meeting called for that purpose,
and until his successor is elected and
qualifies.
IN WITNESS WHEREOF, I have hereto subscribed my name this 14th day
of June, 1988.
/s/George M. Chamberlain, Jr.
- -----------------------------
George M. Chamberlain, Jr.
Secretary
<PAGE>
AMENDMENT TO BY-LAWS
DELAWARE GROUP GOVERNMENT FUND, INC.
At the meeting of the Board of Directors held July 18, 1985, the
following Resolution amending the By-Laws was adopted:
RESOLVED, THAT Article XI, Section 1 be amended to read as
follows:
Section 1. The fiscal year of the Corporation shall begin on
August 1 of each year, and end on July 31 of each year.
I, Donald M. Allen, Secretary of Delaware Group Government Fund,
Inc., do hereby certify that the foregoing is a true and correct copy of the
Resolution adopted by the Board of Directors at their meeting held July 18,
1985.
/s/Donald M. Allen
- ------------------
Donald M. Allen
DELAWARE GROUP GOVERNMENT FUND, INC.
BY-LAWS
ARTICLE I
OFFICES
Section 1. The principal office of the Corporation shall be in the
City of Baltimore, State of Maryland. The Corporation shall also have offices at
such other places as the Board of Directors may from time to time determine or
the business of the corporation may require.
ARTICLE II
STOCKHOLDERS AND STOCK CERTIFICATES
Section 1. Every stockholder of record shall be entitled to a
stock certificate representing the shares owned by him. Stock certificates shall
be in such form as may be required by law and as the Board of Directors shall
prescribe. Every stock certificate shall be signed by the Chairman or the
President or a Vice President and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary, and sealed with the corporate seal,
which may be a facsimile, either engraved or printed. Stock certificates may
bear the facsimile signatures of the officers authorized to sign such
certificates.
<PAGE>
Section 2. Shares of the capital stock of the Corporation shall be
transferable only on the books of the Corporation by the person in whose name
such shares are registered, or by his duly authorized attorney or
representative. In all cases of transfer by an attorney-in-fact, the original
power of attorney, or an official copy thereof duly certified, shall be
deposited and remain with the Corporation or its duly "authorized transfer
agent. In case of transfers by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Corporation or
its duly authorized transfer agent. No transfer shall be made unless and until
the certificate issued to the transferor shall be delivered to the Corporation
or its duly authorized transfer agent, properly endorsed.
Section 3. Any person desiring a certificate for shares of the
capital stock of the Corporation to be issued in lieu of one lost or destroyed
shall make an affidavit or affirmation setting forth the loss or destruction of
such stock certificate, and shall advertise such loss or destruction in such
manner as the Board of Directors may require, and shall, if the Board of
Directors shall so require, give the Corporation a bond or indemnity, in such
form and with such security as may be satisfactory to the Board, indemnifying
the Corporation against any loss that may result upon the issuance of a new
stock certificate. Upon receipt of such affidavit and proof of publication of
the advertisement of such, loss or destruction, and the bond, if any, required
by the Board of Directors, a new stock certificate may be issued of the same
tenor and for the number of shares as the one alleged to have been lost or
destroyed.
Section 4. The Corporation shall be entitled to treat the holder
of record of any share or shares of its capital stock as the owner thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
the Corporation shall have express or other notice thereof.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. The annual meeting of the stockholders of the
Corporation for the election of Directors and for the transaction of general
business shall be held at the principal office of the Corporation, or at such
other place within or without the State of Maryland as the Board of Directors
may from time to time prescribe, on the third Tuesday in April at 10:00 a.m. in
each year after the year
<PAGE>
1985, unless that day shall be duly designated as a legal holiday, in which
event the annual meeting of the stockholders shall be held on the first day
following which is not a legal holiday. A notice of any change in the place of
the annual meeting shall be given to each stockholder not less than ten days
before the election is held.
Section 2. Special meetings of the stockholders may be called at
any time by the Chairman, President or a majority of the members of the Board of
Directors and shall be called by the Secretary upon the written request of the
holders of at least twenty-five percent of the shares of the capital stock of
the Corporation issued and outstanding and entitled to vote at such meeting;
provided, if the matter proposed to be acted on is substantially the same as a
matter voted on at any special meeting held during the preceding twelve months,
such written request shall be made by holders of at least a majority of the
capital stock of the Corporation issued and outstanding and entitled to vote at
such meetings. Upon receipt of a written request from such holders entitled to
call a special meeting, which shall state the purpose of the meeting and the
matter proposed to be acted on at it, the Secretary shall inform the holders who
made such request of the reasonably estimated cost of preparing and mailing a
notice of a meeting and upon payment of such costs to the Corporation the
Secretary shall issue notice of such meeting. Special meetings of the
stockholders shall be held at the principal office of the Corporation, or at
such other place within or without the State of Maryland as the Board of
Directors may from time to time direct, or at such place within or without the
State of Maryland as shall be specified in the notice of such meeting.
Section 3. Notice of the time and place of the annual or any
special meeting of the stockholders shall be given to each stockholder entitled
to notice of such meeting not less than ten days nor more than ninety days prior
to the date of such meeting. In the case of special meetings of the
stockholders, the notice shall specify the object or objects of such meeting,
and no business shall be transacted at such meeting other than that mentioned in
the call.
Section 4. The Board of Directors may close the stock transfer
books of the Corporation for a period not exceeding twenty days preceding the
date of any meeting of stockholders, or the date for payment of any dividend, or
the date for the allotment of rights, or the date when any change or conversion
or exchange of capital stock shall go into effect, or for a period of not
exceeding twenty days in connection with the obtaining of the consent of
stockholders for any purpose; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding ninety days preceding the date of any meeting of
stockholders, or the
<PAGE>
date for payment of any dividend, or the date for the allotment of rights, or
the date when any change or conversion or exchange of capital stock shall go
into effect, or a date in connection with obtaining such consent, as a record
date for the determination of the stockholders entitled to notice of, and to
vote at any such meeting and any adjournment thereof or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any such change, conversion or exchange of capital
stock or to give such consent, and in such case such stockholders and only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and any adjournment
thereof, or to receive payment of such dividend or to receive such allotment of
rights or to exercise such, rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
Section 5. At all meetings of the stockholders a quorum shall
consist of the holders of a majority of the outstanding shares of the capital
stock of the Corporation entitled to vote at such meeting. In the absence of a
quorum no business shall be transacted except that the stockholders present in
person or by proxy and entitled to vote at such meeting shall have power to
adjourn the meeting from time to time to a date not more than one hundred twenty
days after the original record date without further notice other than
announcement at the meeting. At any such adjourned meeting at which a quorum
shall be present any business may be transacted which might have been transacted
at the meeting on the date specified in the original notice. If a quorum is
present at any meeting, the holders of a majority of the shares of capital stock
of the Corporation issued and outstanding and entitled to vote at the meeting
who shall be present in person or by proxy at such meeting shall have power to
approve any matter properly before the meeting, except a plurality of all votes
cast at a meeting at which a quorum is present shall be sufficient for the
election of a director. The holders of such majority shall also have power to
adjourn the meeting to any specific time or times, and no notice of any such
adjourned meeting need be given to stockholders absent or otherwise.
Section 6. At all meetings of the stockholders the following order
of business shall be substantially observed, as far as it is consistent with the
purpose of the meeting:
Election of Directors;
Ratification of Selection of Auditors;
New business.
<PAGE>
Section 7. At any meeting of the stockholders of the Corporation
every stockholder having the right to vote shall be entitled, in person or by
proxy appointed by an instrument in writing subscribed by such stockholder and
bearing a date not more than eleven months prior to said meeting unless such
instrument provides for a longer period, to one vote for each share of stock
having voting power registered in his name on the books of the Corporation.
ARTICLE IV
DIRECTORS
Section 1. The Board of Directors shall consist of not less than
three nor more than twelve members. The Board of Directors may by a vote of the
entire board increase or decrease the number of directors without a vote of the
stockholders; provided, that any such decrease shall not affect the tenure of
office of any director. Directors need not hold any shares of the capital stock
of the Corporation.
Section 2. The directors shall be elected annually by the
stockholders of the Corporation at their annual meeting, and shall hold office
for the term of one year and until their successors shall be duly elected and
shall qualify.
Section 3. The Board of directors shall have the control and
management of the business of the Corporation, and in addition to the powers and
authority by these By-Laws expressly conferred upon them, may exercise, subject
to the provisions of the laws of the State of Maryland and of the Articles of
Incorporation of the Corporation, all such powers of the Corporation and do all
such acts and things as are not required by law or by the Articles of
Incorporation to be exercised or done by the stockholders.
Section 4. The Board of Directors shall have power to fill
vacancies occurring on the Board, whether by death, resignation or otherwise. A
vacancy on the Board of Directors resulting from any cause except an increase in
the number of directors may be filled by a vote of the majority of the remaining
members of the Board, though less than a quorum. A vacancy on the Board of
Directors resulting from an increase in the number of directors may be filled by
a majority of the entire Board of Directors. A director elected by the Board of
Directors to fill a vacancy shall serve until the next annual meeting of
stockholders and until his successor is elected and qualifies. If less than a
majority of the directors in office shall have been elected by the stockholders,
a meeting of the stockholders shall be called as required under the Investment
Company Act of 1940, as amended.
<PAGE>
Section 5. The Board of Directors shall have power to appoint, and
at its discretion to remove or suspend, any officers, managers, superintendents,
subordinates, assistants clerks, agents and employees, permanently or
temporarily, as the Board may think fit, and to determine their duties and to
fix, and from time to time to change, their salaries or emoluments, and to
require security in such instances and in such amounts as it may deem proper.
Section 6. In case of the absence of an officer of the
Corporation, or for any other reason which may seem sufficient to the Board of
Directors, the Board may delegate his powers and duties for the time being to
any other officer of the Corporation or to any director.
Section 7. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board, designate one or more
committees, each committee to consist of two or more of the directors of the
Corporation which, to the extent provided in such resolution or resolutions and
by applicable law, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. Any such committee
shall keep regular minutes of its proceedings, and shall report the same to the
Board when required.
Section 8. The Board of Directors may hold their meetings and keep
the books of the Corporation except the original or a duplicate stock ledger and
the original or a certified copy of these By-Laws outside of the State of
Maryland, at such place or places as they may from time to time determine.
Section 9. The Board of Directors shall have power to fix, and
from time to time to change the compensation if any, of the directors of the
Corporation.
Section 10. Upon retirement of a Director, the Board may elect him
or her to the position of Director Emeritus. Said Director Emeritus shall serve
for one year and may be reelected by the Board from year to year thereafter.
Said Director Emeritus shall not vote at meetings of Directors and shall not be
held responsible for actions of the Board but shall receive fees paid to Board
members for serving as such.
ARTICLE V
DIRECTORS MEETINGS
Section 1. The first regular meeting of the Board of Directors
shall be held each year within seven business days following the annual meeting
of stockholders at which the
<PAGE>
Directors are elected. Regular meetings of the Board of Directors shall also be
held without notice at such times and places as may be from time to time
prescribed by the Board.
Section 2. Special meetings of the Board of Directors may be
called at any time by the Chairman, and shall be called by the Chairman upon the
written request of a majority of the members of the Board of Directors. Unless
notice is waived by all the members of the Board of Directors, notice-of any
special meeting shall be given to each director at least twenty-four hours prior
to the date of such meeting, and such notice shall provide the time and place of
such special meeting.
Section 3. One-third of the entire Board of Directors shall
constitute a quorum for the transaction of business at any meeting; except that
if the number of directors on the Board is less than six, two members shall
constitute a quorum for the transaction of business at any meeting. The act of a
majority of the directors present at any meeting where there is a quorum shall
be the act of the Board of Directors except as may be otherwise
Section 4. The order of business at meetings of the Board of
Directors shall be prescribed from time to time by the Board.
ARTICLE VI
OFFICERS AND AGENTS
Section 1. At the first meeting of the Board of Directors after
the election of Directors in each year, the Board shall elect a Chairman, a
President and Chief Executive Officer, one or more Vice Presidents, a Secretary
and a Treasurer and may elect or appoint one or more Assistant Secretaries, one
or more Assistant Treasurers, and such other officers and agents as the Board
may deem necessary and as the business of the Corporation may require.
Section 2. The Chairman of the Board and the President shall be
elected from the membership of the Board of Directors, but other officers need
not be members of the Board of Directors. Any two or more offices may be held by
the same person except the offices of President and Vice President. All officers
of the Corporation shall serve for one year and until their successors shall
have been duly elected and shall have qualified; provided, however, that any
officer may be removed at any time, either with or without cause, by action by
the Board of Directors.
<PAGE>
ARTICLE VII
DUTIES OF OFFICERS
CHAIRMAN OF THE BOARD
Section 1. The Chairman of the Board shall preside at all meetings
of the stockholders and the Board of Directors and shall be a member ex officio
of all standing committees. He shall have those duties and responsibilities as
shall be assigned to him by the Board of Directors. In the absence, resignation,
disability or death of the president, the Chairman shall exercise all the powers
and perform all the duties of the President until his return, or until such
disability shall be removed or until a new President shall have been elected.
PRESIDENT
Section 2. The President shall be the Chief Executive Officer and
head of the Corporation, and in the recess of the Board of Directors shall have
the general control and management of its business and affairs, subject, however
to the regulations of the Board of Directors.
The President shall, in the absence of the Chairman,
preside at all meetings of the stockholders and the Board of Directors. In the
event of the absence, resignation, disability or death of the Chairman, the
President shall exercise all powers and perform all duties of the Chairman until
his return, or until such disability shall have been removed or until a new
Chairman shall have been elected.
VICE PRESIDENTS
Section 3. The Executive Vice President, and the Vice Presidents,
shall have those duties and responsibilities as shall be assigned to them by the
Chairman or the President. In the event of the absence, resignation, disability
or death of the Chairman and President, the Executive Vice President shall
exercise all the powers and perform all the duties of the President until his
return, or until such disability shall be removed or until a new president shall
have been elected.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 4. The Secretary shall attend all meetings of the
stockholders and shall record all the proceedings thereof in a book to be kept
for that purpose, and he shall be the custodian of the corporate seal of the
Corporation. In the absence of the Secretary, an Assistant Secretary or any
other person appointed or elected by the Board of Directors, as is elsewhere in
these By-laws provided, may exercise the rights and perform the duties of the
Secretary.
<PAGE>
Section 5. The Assistant Secretary, or, if there be more than one
Assistant Secretary then the Assistant Secretaries in the order of their
seniority, shall, in the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary. Any Assistant Secretary elected
by the Board shall also perform such other duties and exercise such other powers
as the Board of Directors shall from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 6. The Treasurer shall keep full and correct accounts of
the receipts and expenditures of the Corporation in books belonging to the
Corporation, and shall deposit all monies and valuable effects in the name and
to the credit of the Corporation and in such depositories as may be designated
by the Board of Directors, and shall, if the Board shall so direct, give bond
with sufficient security and in such amount as may be required by the Board of
Directors for the faithful performance of his duties.
He shall disburse funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and Board of Directors at the regular meetings of the
Board, or whenever they may require it, an account of all his transactions as
the chief fiscal officer of the Corporation and of the financial condition of
the Corporation, and shall present each year before the annual meeting of the
stockholders a full financial report of the preceding fiscal year.
Section 7. The Assistant Treasurer, or, if there be more than one
Assistant Treasurer, then the Assistant Treasurers in the order of their
seniority shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer. Any Assistant Treasurer elected
by the board shall also perform such duties and exercise such powers as the
Board of Directors shall from time to time prescribe.
ARTICLE VIII
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks shall bear the signature of such person or
persons as the Board of Directors may from time to time direct.
Section 2. All notes and other similar obligations and acceptances
of drafts by the Corporation shall be signed by such person or persons as the
Board of Directors may from time to time direct.
<PAGE>
Section 3. Any officer of the Corporation or any other employee,
as the Board of Directors may from time to time direct, shall have full power to
endorse for deposit all checks and all negotiable paper drawn payable to his or
their order or to the order of the Corporation.
ARTICLE IX
CORPORATE SEAL
Section 1. The corporate seal of the Corporation shall have
inscribed thereon the name of the Corporation, the year of its organization, and
the words "Corporate Seal, Maryland." Such seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE X
DIVIDENDS
Section 1. Dividends upon the shares of the capital stock of the
Corporation may, subject to the provisions of the Articles of Incorporation of
the Corporation, if any, be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock of the Corporation.
Section 2. Before payment of any dividend there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the Board of Directors may, from time to time, in their absolute discretion,
think proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall deem to be for the best
interests of the Corporation, and the Board of Directors may abolish any such
reserve in the manner in which it was created.
ARTICLE XI
FISCAL YEAR
Section 1. The fiscal year of the Corporation shall begin on
October 1 of each year, and end on September 30 of each year.
<PAGE>
ARTICLE XII
NOTICES
Section 1. Whenever under the provisions of these ByLaws notice is
required to be given to any director or stockholder, such notice is deemed given
when it is personally delivered, left at the residence or usual place of
business of the director or stockholder, or mailed to such director or
stockholder at such address as shall appear on the books of the Corporation and
such notice, if mailed, shall be deemed to be given at the time it shall be so
deposited in the United States mail postage prepaid. In the case, of directors,
such notice may also be given orally by telephone or by telegraph or cable.
Section 2. Any notice required to be given under these By-Laws may
be waived in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein.
ARTICLE XIII
AMENDMENTS
Section 1. These By-Laws may be amended, altered or repealed by
the affirmative vote of the holders of a majority of the shares of capital stock
of the Corporation issued and outstanding and entitled to vote thereon, or by a
majority of the Board of Directors, as the case may be.
<PAGE>
EX-99.B5 INVESTMENT MANAGEMENT AGREEMENT
DELAWARE GROUP GOVERNMENT FUND, INC.
GOVERNMENT INCOME SERIES
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP GOVERNMENT
FUND, INC., a Maryland corporation (the "Fund"), for the GOVERNMENT INCOME
SERIES (the "Series"), and DELAWARE MANAGEMENT COMPANY, INC., a Delaware
corporation (the "Investment Manager").
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 indirect parent company of the Investment
Manager completed on the date of this Agreement a merger transaction which
resulted in a change of control of the Investment Manager and an automatic
termination of the previous Investment Management Agreement for the Series dated
as of the 29th day of June, 1988; and
<PAGE>
WHEREAS, the Board of Directors of the Fund and
shareholders of the Series have determined to enter into a new Investment
Management Agreement with the Investment Manager to be effective as of the date
hereof.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, and each of the parties 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.
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.
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
<PAGE>
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; and taxes. 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
<PAGE>
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 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 Series' assets a fee equal to
6/120 of one percent (the equivalent of .60% of one percent per annum) of the
daily average net assets of the Series during the month, less the Series'
proportionate part of all fees paid
<PAGE>
to members of the Board of Directors of the Fund during the same period based on
the number of publicly offered series of the Fund.
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.
<PAGE>
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 and may be renewed thereafter only so long as such renewal
and 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 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. No amendment to this Agreement shall be
effective unless the terms thereof have been approved by the vote of a majority
of the outstanding voting securities of the Series and by the vote of a majority
of Directors of the Fund who are not parties to the Agreement 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
<PAGE>
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
having it signed by their duly authorized officers as of the 3rd day of April,
1995.
DELAWARE GROUP GOVERNMENT FUND, INC. for the
GOVERNMENT INCOME SERIES
Attest:/s/Eric E. Miller By:/s/Brian F. Wruble
----------------- ------------------
Eric E. Miller Brian F. Wruble
DELAWARE MANAGEMENT COMPANY, INC.
Attest:/s/Richelle S. Maestro By:/s/Wayne A. Stork
----------------------- -----------------
Richelle S. Maestro Wayne A. Stork
<PAGE>
[FORM OF DISTRIBUTION AGREEMENT]
[FUND NAME]
[SERIES NAME, IF APPLICABLE]
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of this 3rd
day of April, 1995 by and between [FUND NAME], a [Maryland
corporation/Pennsylvania common law trust] (the "Fund")[, for the [SERIES NAME]
(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 and the Distributor (or its predecessor)
were the parties to a contract under which the Distributor acted as the national
distributor of the shares of the [Fund/Series], which contract was amended and
restated as of the [date] and subsequently readopted as of January 3, 1995 (the
"Prior Distribution Agreement"), and
WHEREAS, Delaware Management Holdings, Inc. ("Holdings"),
the indirect parent company of the Distributor, completed on the
date of this Agreement a merger transaction with a newly-formed
subsidiary of Lincoln National Corporation, pursuant to which
Holdings became a wholly-owned subsidiary of Lincoln National
Corporation, and
<PAGE>
WHEREAS, the merger transaction resulted in a change of
control of the Distributor and an automatic termination of the Prior
Distribution Agreement, and
WHEREAS, the Board of [Directors/Trustees] of the Fund has
determined to enter into a new agreement with the Distributor as of the date
hereof, pursuant to which the Distributor shall continue to be the national
distributor of the [Fund's/Series'] ____________ class (now doing business as
___________ A Class and hereinafter referred to as the "Class A Shares"), the
Fund's ___________ B Class (the "Class B Shares") and the Fund's ______________
(Institutional) class (now doing business as _____________ Institutional Class
and hereinafter referred to as the "Institutional Class Shares"), which classes
may do business under these or such other names as the Board of
[Directors/Trustees] 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 [Fund's/Series'] shares and, in connection therewith and as agent
for the Fund and not as principal, to advertise, promote, offer and
sell the [Fund's/Series'] shares to the public.
<PAGE>
2. (a) The Distributor agrees to serve as distributor of the
[Fund's/Series'] shares and, as agent for the Fund and
not as principal, to advertise, promote and use its best
efforts to sell the [Fund's/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 the Securities Act of
1933, including the Prospectus contained therein 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 necessarily 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 and Class B
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.
<PAGE>
(d) For the Class A Shares and Class B 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 and Class B 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" and "B".
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 [its/the 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.
<PAGE>
4. The Fund warrants the following:
(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, all amendments thereto,
all exhibits, and each Prospectus and Statement of
Additional Information.
(b) The Fund will register or qualify the 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 [Fund's/Series'] shares may be
qualified;
(2) from time to time, will furnish the Distributor as
soon as reasonably practicable true copies of its
periodic reports to stockholders;
<PAGE>
(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 Prospectus 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 approval of the Fund's
shareholders as may be required;
(6) before filing any further amendment to the
Registration Statement or to the Prospectus, will
furnish 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 Registration
Statement or supplement to the 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 [its/the 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 [its/the Series'] shares of common stock outstand-
ing, 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.
<PAGE>
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 [Fund's/Series'] shares, and the form of dealers' sales
contract the Distributor intends to use in connection with
sales of the [Fund's/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 Prospectus, as amended from time to time,
determined in accordance with any applicable provision of law, the
provisions of its Articles of Incorporation and the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.
<PAGE>
8. The responsibility of the Distributor hereunder shall be
limited to the promotion of sales of [Fund/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] 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
shares or accept payment for such orders. Sales of [Fund/
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 Prospectus, 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.
<PAGE>
(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 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 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
<PAGE>
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.
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
<PAGE>
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/Trustees] or by vote of a majority of the
outstanding voting securities of the Fund and only if the
terms and the renewal thereof have been approved by the
vote of a majority of the [Directors/Trustees] 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
<PAGE>
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 stockholders for the Distributor's liquidation
or dissolution or the winding up of the Distributor's
affairs; (2) if a receiver or trustee of the 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.
<PAGE>
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:
[FUND NAME]
[for the SERIES NAME]
Attest:
By:
- -------------------------------- --------------------------------------
Name: Name:
Title: Title:
<PAGE>
[FORM OF 12b-1 PLAN FOR CLASS A SHARES]
Exhibit A
12b-1 PLAN
----------
The following Distribution Plan (the "Plan") has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by [FUND NAME]
(the "Fund")[, for the [SERIES NAME] (the "Series")] on behalf of the _________
class [(now doing business as __________ A Class and] hereinafter referred to as
the "Class"), which Fund[, Series] and Class may do business under these or such
other names as the Board of [Directors/Trustees] of the Fund may designate from
time to time. The Plan has been approved by a majority of the Board of
[Directors/Trustees], including a majority of the [Directors/Trustees] 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, cast
in person at a meeting called for the purpose of voting on such Plan. Such
approval by the [Directors/Trustees] 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 Class and its
shareholders. If the Plan has not yet been approved by a majority of the
outstanding voting securities as required in the Act, the Plan will be presented
to the public shareholders at the next regular annual or special meeting.
<PAGE>
The Fund is a [corporation/common law trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], 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.
("DMC")/Delaware International Advisers Ltd. ("DIA Ltd.")] serves as the
[Fund's/Series'] investment adviser and manager pursuant to an Investment
Management Agreement. Delaware Service Company, Inc. serves as the
[Fund's/Series'] shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. ("the Distributor") is the principal underwriter and
national distributor for the [Fund's/Series'] shares, including shares of the
Class, pursuant to the Distribution Agreement between the Distributor and the
[Fund/Series] ("Distribution Agreement").
The Distributor may enter into agreements with other registered
broker-dealers substantially in the form of the Dealer Agreement approved by the
Fund in the implementation of this Plan and of the Distribution Agreement
between it and the [Fund/Series]. The [Fund/Series] may, in addition, enter into
arrangements with persons other than broker-dealers which are not "affiliated
persons" or "interested persons" of the Fund, [DMC/DIA Ltd.] or the Distributor
to provide to the [Fund/Series] services in the [Fund's/Series'] marketing of
the shares of the Class, such arrangements to be reflected by Service
Agreements.
<PAGE>
The Plan provides that:
l. The Fund shall pay a monthly fee not to exceed 0.3% (3/10
of 1%) per annum of the [Fund's/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/Trustees] from time to time. Such monthly fee shall be
reduced by the aggregate sums paid by the Fund to persons other than
broker-dealers (the "Service Providers") pursuant to Service Agreements referred
to above.
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 Service Agreements and the Plan; both the Distributor and the
<PAGE>
Service Providers shall furnish the Board of [Directors/Trustees] 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/Trustees] 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, which time
shall not be before the first annual or special meeting of the public
shareholders at which the Plan is or was approved by the vote of a majority of
the outstanding voting securities as required in the Act (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/Trustees] of the Fund, and of the [Directors/Trustees] who are not
interested persons of the Fund and have no direct or indirect financial interest
in the operation of the Plan or in any agreements related to the Plan
("non-interested [Directors/Trustees]"), cast in person at a meeting called for
the purpose of voting on such Plan.
<PAGE>
6. (a) The Plan may be terminated at any time by vote
of a majority of the non-interested [Directors/Trustees] 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
thereof without approval by the shareholders of the Class.
7. The Distribution Agreement between the [Fund/Series] and
the Distributor, and the Service Agreements between the [Fund/ Series] and the
Service Providers, shall specifically have a copy of this Plan attached to, and
its terms and provisions incorporated respectively by reference in, such
agreements.
8. All material amendments to this Plan shall be approved by
the non-interested [Directors/Trustees] in the manner described in paragraph 5
above.
9. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested [Directors/Trustees] shall be committed
to the discretion of such non-interested [Directors/Trustees].
10. The definitions contained in Sections 2(a)(3), 2(a)(4),
2(a)(l9) and 2(a)(42) of the Act shall govern the meaning of "affiliated
person," "assignment," "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.
<PAGE>
[FORM OF 12b-1 PLAN FOR CLASS B SHARES]
Exhibit B
12b-1 Plan
----------
The following Distribution Plan (the "Plan") has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by [FUND NAME]
(the "Fund"), [for the [SERIES NAME] (the "Series")] on behalf of the _________
B Class (the "Class"), which Fund[, Series] and Class may do business under
these or such other names as the Board of [Directors/Trustees] of the Fund may
designate from time to time. The Plan has been approved by a majority of the
Board of [Directors/Trustees], including a majority of the [Directors/Trustees]
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, cast in person at a meeting called for the purpose of voting on such
Plan. Such approval by the [Directors/Trustees] 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 Class
and its shareholders. The Plan has been approved by a vote of the holders of a
majority of the outstanding voting securities of the Class, as defined in the
Act.
The Fund is a [corporation/common law trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], 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./Delaware International Advisers Ltd.] serves as the [Fund's/Series']
investment adviser and manager pursuant to an Investment Management Agreement.
Delaware Service Company, Inc. serves as the [Fund's/Series'] shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the [Fund's/Series'] shares, including shares of the Class, pursuant to the
Distribution Agreement between the Distributor and the [Fund/Series]
("Distribution Agreement").
<PAGE>
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 [Fund's/ Series'] average daily net
assets represented by shares of the Class as may be determined by the Fund's
Board of [Directors/Trustees] 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
[Fund's/Series'] average daily net assets represented by shares of the Class, as
a service fee pursuant to dealer or servicing agreements, the forms of which
have been approved from time to time by the Fund's Board of
[Directors/Trustees].
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.
<PAGE>
(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/Trustees] 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.
<PAGE>
4. The officers of the Fund shall furnish to the Board of
[Directors/Trustees] 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/Trustees] of the
Fund, and of the [Directors/Trustees] who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan ("non-interested
[Directors/Trustees]"), 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/Trustees] 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 thereof without
approval by the shareholders of the Class.
<PAGE>
7. The Distribution Agreement between the [Fund/Series] and
the Distributor, and any dealers or servicing agreements between the Distributor
and brokers or others or between the [Fund/Series] and others receiving a
servicing fee, shall specifically have a copy of this Plan attached to, and its
terms and provisions incorporated respectively by reference in, such agreements.
8. All material amendments to this Plan shall be approved by
the non-interested [Directors/Trustees] in the manner described in paragraph 5
above.
9. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested [Directors/Trustees] shall be committed
to the discretion of such non-interested [Directors/Trustees].
10. The definitions contained in Sections 2(a)(3), 2(a)(4),
2(a)(19) and 2(a)(42) of the Act shall govern the meaning of "affiliated
person," "assignment," "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.
<PAGE>
[Form of Amendment to Distribution Agreement]
[FUND NAME]
[SERIES NAME, IF APPLICABLE]
AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT
This Amendment No. 1 to Distribution Agreement (this "Agreement") is
made as of the_____day of___________, 1995, by and between____________(the
"Fund"),[for the____________(the "Series"),] and DELAWARE DISTRIBUTORS, L.P.
(the "Distributor").
WITNESSETH
WHEREAS, the Fund[, for the Series,] and the Distributor are parties to
that certain Distribution Agreement made as of the 3rd day of April, 1995 (the
"Distribution Agreement"); and
WHEREAS, the Board of Directors of the Fund has established [CLASS C
SHARES NAME] (the "Class C Shares") as an additional class of [the Series]
[shares of the Fund] and the Fund and the Distributor desire to amend the
Distribution Agreement to provide that the Distributor shall act as the national
distributor of the Class C Shares pursuant thereto;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. The Class C Shares are hereby included among the shares to which the
Distribution Agreement relates and the Distributor shall act as distributor for
the Class C Shares pursuant to and in accordance with the Distribution
Agreement, as amended hereby.
2. Hereafter, each reference to "Class A Shares and Class B Shares" in
Section 2 (c) and (d) of the Distribution Agreement [compensation of the
Distributor] shall be deemed to include the Class C Shares, provided that the
<PAGE>
Distribution Plan adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940 for the Class C Shares and presently in force is attached hereto as
Exhibit "A."
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
ATTEST:
By:
- ------------------------------ --------------------------------
Name: Name:
Title: Title:
[FUND NAME][,for the [SERIES NAME]]
ATTEST:
By:
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Name: Name:
Title: Title:
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EXHIBIT A
[FORM OF 12b-1 PLAN
C CLASS SHARES]
DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by the Fund
(the "Fund"), on behalf of the Fund's C Class (the "Class"). 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, 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 Fund and its
shareholders. The Plan has been approved by a vote of the holders of a majority
of the outstanding voting securities of the Class, as defined in the Act.
The Fund is a [corporation/business trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], 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.
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("DMC") or Delaware International Advisers Ltd. ("Delaware International"), an
affiliate of DMC,] serves as the Fund's investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company, Inc. serves as
the Fund's shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and
national distributor for the Fund's shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and the Fund
("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 Fund's 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
Fund's average daily net assets represented by shares of the Class, as a service
fee pursuant to dealer or servicing agreements.
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
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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 Fund.
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.
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4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, and the Directors shall 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 Directors who are not interested persons of the Fund and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan ("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 thereof 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.
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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)(3), 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "affiliated person,"
"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.
November 29, 1995
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DELAWARE GROUP
Administration and Service Agreement
Gentlemen:
We are the national distributor of the shares of all of the classes
(now existing or hereafter added) of all of the Funds in the Delaware Group of
Funds. The term "Fund" as used in this Agreement refers to each fund in the
Delaware Group which retains the Distributor to promote and sell its shares, and
any fund which may hereafter be added to the Delaware Group and retain us as
national distributor. You have indicated that you wish to provide certain
services to your customers relating to their ownership of Fund shares, in
accordance with the terms of this Agreement.
TERMS
1. With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), which 12b-1 Plans
provide for the payment of service fees, we expect you to provide administrative
and other services, including, but not limited to, furnishing personal and other
services and assistance to your customers who own Fund shares, answering routine
inquiries regarding a Fund, assisting in changing dividend options, account
designations and addresses, maintaining such accounts, or such other services as
a Fund may require, to the extent permitted by applicable statutes, rules, or
regulations. For such services, we shall pay you a fee, as established by us
from time to time, based on the value of the shares of each class of each Fund
which are attributable to customers of your firm. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time.
2. You shall furnish us and each Fund with such information as shall
reasonably be requested by the Board of Directors or Trustees with respect to
the fees paid to you pursuant to this Agreement.
3. We shall furnish to the Board of Directors or Trustees, for their
review, on a quarterly basis, a written report of the amounts expended under
<PAGE>
the Plan by us with respect to the relevant Fund and the purposes for which
such expenditures were made.
4. This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon any act of
insolvency by you. Notwithstanding the termination of this Agreement, you shall
remain liable for any amounts otherwise owing to the Distributor or the Funds
and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Distributor or the Fund, or upon any one or
more of the Distributor's dealers, based upon a claim that you and such dealers
or any of them constitute a partnership, an unincorporated business or other
separate entity.
5. Any obligation assumed by a Fund pursuant to this Agreement shall be
limited in all cases to the assets of such Fund and no person shall seek
satisfaction thereof from shareholders of a Fund.
6. The 12b-1 Plans in effect on the date of this Agreement are
described in the Funds' Prospectuses. Each Fund reserves the right to terminate
or suspend its 12b-1 Plan(s) at any time as specified in such Plan(s) and we
reserve the right, at any time, without notice, to modify, suspend or terminate
payments hereunder in connection with such 12b-1 Plan(s).
7. This Agreement shall take effect on the date set forth below.
8. The terms and provisions of the current Prospectus and Statement of
Additional Information for each relevant Fund are hereby accepted and agreed to
by the parties hereto as evidenced by our execution hereof.
GENERAL
9. Governing Law. This Agreement will be governed by and construed in
accordance with the law of the State of Pennsylvania, without reference to that
state's choice of law doctrine.
10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one Agreement.
11. Severability. In the event that any provision of this Agreement,
or the application of any such provision to any person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
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to persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
12. Entire Agreement. This Agreement sets forth the entire
understanding of the parties hereto and supersedes all prior agreements and
understandings between the parties hereto relating to the subject matter hereof.
13. Headings. The underlined headings contained herein are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the interpretation
hereof.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
By:
--------------------------------
Agreed and Accepted:
- ------------------------------
(Name)
By:
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(Authorized Officer)
Date:
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DEALER'S AGREEMENT
We invite you, as a selected dealer, to participate as principal in the
distribution of the shares of all of the classes (now existing or hereafter
added) of all of the Funds in the Delaware Group of Investment Companies which
retain us, Delaware Distributors, L.P., to act as exclusive national
distributor. The term "Fund" as used in this Agreement, refers to each Fund in
the Delaware Group which retains us to promote and sell its shares, and any Fund
which may hereafter be added to the Delaware Group and retain us as national
distributor. Such additional Funds will be included in this Agreement upon our
providing you with written notice of such inclusion.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by a
Fund or its agent, Delaware Service Company, Inc., will be at the public
offering price applicable to each order as set forth in that Fund's Prospectus.
The manner of computing the net asset value of shares, the public offering price
and the effective time of orders received from you are described in the
Prospectus for each Fund. We reserve the right, at any time and without notice,
to suspend the sale of Fund shares.
CONCESSIONS TO YOU: You will be entitled to deduct the applicable concession as
set forth in the then current Prospectus of a Fund from the purchase price of
certain purchase orders placed by you for shares of a Fund having a sales
charge. We reserve the right from time to time, without prior notice, to modify,
suspend or eliminate such concessions by amendment, sticker or supplement to the
Prospectus for the Fund. If any shares confirmed to you under the terms of this
Agreement are redeemed or repurchased by the Fund or by us as agent for the
Fund, or are tendered for redemption or repurchase, within seven business days
after the date of our confirmation of the original purchase order, you shall
promptly refund to us the concession allowed to you on such shares.
PURCHASE PLANS: The purchase price on all orders placed by you and any
concessions or other fees otherwise due to you under this Agreement will be
subject to the then current terms and provisions of any applicable special plans
and accounts (e.g., volume purchases, letters of intent, rights of accumulation,
combined purchases privilege, exchange and reinvestment privileges and
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retirement plan accounts) as set forth from time to time in the Prospectus. We
must be notified when an order is placed if it qualifies for a reduced sales
charge under any of these plans. We reserve the right, at any time, without
prior notice, to modify, suspend or eliminate any such plans or accounts by
amendment, sticker or supplement to the Prospectus for the Fund.
SALES, ORDERS AND CONFIRMATIONS: In offering Fund shares to the public or
otherwise, you shall act as dealer for your own account, and in no transaction
shall you have any authority to act as agent for the Fund, for any other
selected dealer or for us. No person is authorized to make any representations
concerning the shares to the Fund except those contained in the Prospectus and
in written information issued by the Fund or by us as a supplement to such
Prospectus. In purchasing Fund shares, you shall rely only on such
representations.
All sales must be made subject to confirmation and orders are subject
to acceptance or rejection by the Fund in its sole discretion. Your orders must
be wired, telephoned or written to the Fund or its agent. You agree to place
orders for the same number of shares sold by you at the price at which such
shares are sold. You agree that you will not purchase Fund shares except for
investment or for the purpose of covering purchase orders already received and
that you will not, as principal, sell Fund shares unless purchased by you from
the Fund under the terms hereof. You also agree that you will not withhold
placing with us orders received from your customers so as to profit yourself
from such withholding. Each of your orders shall be confirmed by you in writing
on the same day.
PAYMENT AND ISSUANCE OF CERTIFICATES: The shares purchased by you hereunder
shall be paid for in full at the public offering price, less any concession to
you as set forth above, by check payable to the Fund, at its office, within
three business days after our acceptance of your order. If not so paid, we
reserve the right to cancel the sale and to hold you responsible for any loss
sustained by us or the Fund (including lost profit) in consequence. Certificates
representing the Fund's shares will not be issued unless (i) the Fund's
Prospectus indicates that certificates may be issued for the class of shares
being purchased, and (ii) a specific request is received from the purchaser.
Certificates, if requested, will be issued in the names indicated by
registration instructions accompanying your payment.
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REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will redeem shares held by shareholders on demand. You
agree that you will not make any representations to shareholders relating to the
redemption of their shares other than the statements contained in the Prospectus
and the underlying organizational documents of the Fund, to which it refers, and
that you will quote as the redemption price only the price determined by the
Fund. You shall not repurchase any shares from your customers at a price below
that next quoted by the Fund for redemption. You may charge a reasonable fee for
services in connection with the repurchase by you from your customers of shares.
You may hold such repurchased shares only for investment purposes or submit such
shares to the Fund for redemption.
12b-1 PLAN: With respect to any Fund that offers shares of classes for which
Distribution Plans have been adopted under Rule 12b-1 (individually a "12b-1
Plan") of the Investment Company Act of 1940 (the "1940 Act"), we expect you to
provide distribution and marketing services in the promotion of the Fund's
shares. In connection with the receipt of distribution fees and/or the receipt
of service fees as set forth under the 12b-1 Plan(s) applicable to the class or
classes of Fund shares purchased by your customers, we expect you to provide
administrative and other services to your customers who own Fund shares,
including, but not limited to, furnishing personal and other services and
assistance, answering routine inquiries regarding a Fund, assisting in changing
dividend options, account designations and addresses, maintaining such accounts,
or such other services as the Fund may require, to the extent permitted by
applicable statutes, rules, or regulations. For such services we will pay you a
fee, as established by us from time to time, based on a portion of the net asset
value of the accounts of your clients in the Fund. We are permitted to make this
payment under the terms of the 12b-1 Plans adopted by certain of the Funds, as
such Plans may be in effect from time to time. The 12b-1 Plans in effect on the
date of this Agreement are described in the Funds' Prospectuses. Each Fund
reserves the right to terminate or suspend its 12b-1 Plan at any time as
specified in the Plan and we reserve the right, at any time, without notice, to
modify, suspend or terminate payments hereunder in connection with such 12b-1
Plan. You will furnish the Fund and us with such information as may be
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reasonably requested by the Fund or its directors or trustees or by us with
respect to such fees paid to you pursuant to this Agreement.
LEGAL COMPLIANCE: This Agreement and any transaction with, or payment to, you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are, and at all times during its
effectiveness you will be: (a) a registered broker/dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws in
each jurisdiction in which you are required to be qualified to act as a
broker/dealer in securities, and a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); or (b) a foreign
broker/dealer not eligible for membership in the NASD and otherwise in
compliance with applicable U.S. federal and state securities laws. You agree to
notify us promptly in writing and immediately suspend sales of Fund shares if
this representation ceases to be true. You also agree that, whether you are a
member of the NASD or a foreign broker/dealer not eligible for such membership,
you will comply with the rules of the NASD including, in particular, Sections 2
and 26 of Article III thereof, and that you will maintain adequate records with
respect to your transactions with the Funds.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we may furnish you with information identifying the states and jurisdictions
under the securities laws of which it is believed a Fund's shares may be sold.
You will not transact orders for Fund shares in states or jurisdictions in which
we indicate Fund shares may not be sold. You agree to offer and sell Fund shares
outside the United States only in compliance with all applicable laws, rules and
regulations of any foreign government having jurisdiction over such transactions
in addition to any applicable laws, rules and regulations of the United States.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicity available by the Fund, in
reasonable quantities upon your request. You agree to deliver a copy of the
current Prospectus in accordance with the provisions of the Securities Act of
1933 to each purchaser of Fund shares for whom you act as broker. We shall file
Fund sales literature and promotional material with the NASD and SEC as
required.
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You may not publish or use any sales literature or promotional materials with
respect to the Funds without our prior review and written approval.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at One Commerce Square, 2005 Market Street, Philadelphia, PA 19103. Any
notice from us to you shall be deemed to have been duly given if mailed or
telegraphed to you at the address set forth below. Each of us may change the
address to which notices shall be sent by notice to the other in accordance with
the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect and will terminate without notice upon the
appointment of a trustee for you under the Securities Investor Protection Act,
or any other act of insolvency by you. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Funds and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, or us, or upon any one or more of the
selected dealers based upon the claim that the selected dealers or any of them
constitute a partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you notify us in writing to the contrary, you will be
deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach and we may offset any
such damages, losses, costs and expenses against any amounts due to you
hereunder. Nothing contained herein shall constitute you, us and any dealers an
association or partnership. All references in this Agreement to the "Prospectus"
refer to the then current version of the Prospectus and include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto. This Agreement supercedes and replaces any prior agreement
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between us and you with respect to your purchase and sale of Fund shares and is
to be construed in accordance with the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement
below and returning it to us. Keep the enclosed duplicate copy for your records.
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
By:/s/Keith E. Mitchell
----------------------
Name: Keith E. Mitchell
Title: President/Chief Executive Officer
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DEALER'S AGREEMENT ACCEPTANCE
DELAWARE DISTRIBUTORS, L.P.
The undersigned hereby confirms the Dealer's Agreement and acknowledges
that any purchase of Fund shares made during the effectiveness of this Agreement
is subject to all the applicable terms and conditions set forth in this
Agreement, and agrees to pay for the shares at the price and upon the terms and
conditions stated in the Agreement. The undersigned hereby acknowledges receipt
of Prospectuses relating to the Fund shares and confirms that, in executing the
Dealer's Agreement, it has relied on such Prospectuses and not on any other
statement whatsoever, written or oral.
INVESTMENT DEALER PLEASE SIGN HERE AND COMPLETE BELOW
By: DATE
------------------------------- ----------------------------
Name:
-----------------------------
Title:
----------------------------
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FIRM
- ----------------------------------
FIRM'S TAX IDENTIFICATION NUMBER
- ----------------------------------
STREET ADDRESS
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CITY/STATE/ZIP
<PAGE>
MUTUAL FUND AGREEMENT
FOR THE DELAWARE GROUP OF FUNDS
Gentlemen:
We are the national distributor for the Delaware Group of Funds with exclusive
right to sell and distribute Fund shares. (The term "Funds" in this Agreement
refers to each or any of the Funds that from time to time comprise the Delaware
Group and for whom we act as distributor.) You have indicated that you wish to
act as agent for your customers in connection with the purchase, sale and
redemption of Fund shares and desire to provide certain services to your
customers relating to their ownership of Fund shares, all in accordance with the
terms of this Agreement.
AGENT FOR CUSTOMERS: In placing orders for the purchase and sale of Fund shares,
you will be acting as agent for your customers and will not have any authority
to act as agent for us, any of the Funds or any of our affiliates or
representatives. Neither you nor any of your employees or agents are authorized
to make any representations concerning the Funds or Fund shares except those
contained in the then current "Prospectus" and in written information issued by
the Fund or by us as a supplement to the Prospectus. In purchasing Fund shares
your customers may rely only on such authorized information.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by
the Fund or its agent, Delaware Service Co. Inc., will be at the public offering
price applicable to each order as set forth in the Prospectus. The manner of
computing the net asset value, the public offering price and the effective time
of orders received from you are described in the Prospectus for each Fund. We
reserve the right at any time, without notice, to suspend the sale of Fund
shares or withdraw the public offering.
SALES, ORDERS AND CONFIRMATIONS: All orders must be made subject to
confirmation. Your orders must be wired, telephoned or written to the Fund or
its agent. You agree to place orders on behalf of your customers for the number
of shares, and at the price, as in bona fide orders from your customers. We will
not accept any conditional orders. We will send a written confirmation of each
trade indicating that the trade was on a fully disclosed basis to your customer.
It is agreed and understood that, whether shares are registered in the
purchaser's name, in your name or in the name of your nominee, your customer
will have full beneficial ownership of the Fund shares.
AGENCY FEES: On each order accepted by us for a Fund with a sales charge, we
understand that you will charge your customer an agency commission or agency
transaction fee ("agency fee") as set forth in the schedule of sales concessions
and agency fees set forth in that Fund's Prospectus, as it may be amended from
time to time. This fee shall be subject to the provisions of all terms set forth
in the Prospectus for volume purchases and special plans and accounts (e.g.
retirement plans, letters of intent, etc.) You will not receive from us a
dealer's concession or similar allowance out of the sales charge. In accordance
with interpretations by the Staff of the Securities and Exchange Commission (the
"Commission"), the agency fee will be your sole charge to your customers for
placing such orders. You may elect to make payments in either of two ways: (a)
you may send us the public offering price for the Fund shares purchased less the
amount of the agency fee due you or (b) you or your customer may send us the
entire public offering price for the Fund shares and we will, on a periodic
basis, remit to you the agency fee due. You will notify us in writing of which
method of payment you elect. If any shares sold to your customer under the terms
of this Agreement are repurchased by the Fund or by us, or are tendered to a
Fund for redemption or repurchase, within seven (7) business days after the date
of the confirmation of the original purchase order, you will promptly refund to
us full agency fee paid or allowed to you on such shares.
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PAYMENT AND ISSUANCE OF CERTIFICATES: Regardless of the payment method elected,
Fund shares purchased by you for your customers hereunder shall be paid for in
fully by check payable to the Fund at its office within five business days after
our acceptance of your order. If not so paid, the Fund reserves the right,
without notice, to cancel the sale and to hold you responsible for any loss,
including lost profit, sustained by us or the Fund in consequence. Certificates
representing Fund shares will not be issued unless a specific request is
received from you or your customer. Certificates, if requested, will be issued
in the names indicated by registration instructions accompanying payment.
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will repurchase its shares from shareholders on demand.
You agree that you will not make any representations to shareholders relating to
the purchase of their Fund shares other than the statements contained in the
Prospectus and the underlying organizational documents of the Fund, to which it
refers, and that you will quote to your customers as the redemption price only
the price determined by the Fund.
12b-1 PLAN: With respect to any Fund that has a Distribution Plan under Rule
12b-1 (a "12b-1 Plan") of the Investment Company Act of 1940 (the "1940 Act"),
we expect you will provide shareholder and administrative services to your
customers, such as: answering inquiries regarding the Fund; assisting in
changing dividend options, account designations and addresses; performing
sub-accounting; establishing and maintaining shareholder accounts and records;
processing purchase and redemption transactions; providing periodic statements
and/or updates showing a customer's account balance and integrating such
statements with those of other transactions and balances in the customer's other
accounts serviced by you; and arranging for bank wires. You will transmit
promptly to customers all communications sent to you for transmittal to clients
by or on behalf of us, any Fund or such Fund's investment advisor, custodian or
transfer or dividend disbursing agent. You will promptly answer all written
complaints received by you relating to Fund accounts or promptly forward such
complaints to us and assist us in answering such complaints. For such services
we will pay you a fee as set by us from time to time, based on a portion of the
net asset value of the accounts of your clients in the Fund. We are permitted to
make this payment under the terms of the 12b-1 Plan adopted by certain of the
Funds, as such 12b-1 Plans may be in effect from time to time, provided,
however, that no payments shall be due and paid to you hereunder with respect to
a Fund unless and until the form of this Agreement shall have been approved by a
majority of the Board of Directors or Trustees of that Fund and by a majority of
the directors or trustees who are not "interested persons" of us, the Fund or
its investment manager, as such term is defined in the 1940 Act (i.e., non-
interested directors) by vote cast in person at a meeting called for the purpose
of voting on this form of Agreement. Each Fund reserves the right, at any time,
to suspend payments under its 12b-1 plan. You will furnish the Fund and us with
such information as may be reasonably requested by the Fund or its directors or
trustees or by us with respect to fees paid to you pursuant to this Agreement.
In accordance with interpretations and rulings to the Staff of the Commission,
you will not charge your customers any fees for services for which you are being
compensated under a 12b-1 Plan of a Fund.
SALE OF NO-LOAD - NON 12B-1 PLAN FUNDS: In connection with any orders placed by
you on behalf of your customers for shares of Funds that do not charge a sales
load and do not have a 12b-1 Plan, we understand that you may charge your
customers a limited service or transaction fee, in accordance with
interpretations and rulings of the Staff of the Commission.
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LEGAL COMPLIANCE: This Agreement and any transaction with or payment to you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are and at all times during its
effectiveness yo will be (a) a registered broker-dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws, if
any, to act as a broker or dealer in securities, and a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"); or (b) a
"bank" as defined in Section 3(a)(6) of the Securities Exchange Act of 1934 (or
other financial institution) and not otherwise required to register as a broker
or dealer under such Act. You agree to notify us promptly in writing if this
representation ceases to be true. You also agree that you will comply with the
rules of the NASD including, in particular, Sections 2 and 26 of Article III
thereof, to the extent applicable, that you will maintain adequate records with
respect to your customers and their transactions, and that such transactions
will be without recourse against you by your customers. We recognize that, in
addition to applicable provisions of state and federal securities laws, you may
be subject to the provisions of the Glass-Steagall Act and other laws governing,
among other things, the conduct of activities by federal and state chartered and
supervised financial institutions and their affiliated organizations. Because
you will be the only one having a direct relationship with the customer, yo will
be responsible in that relationship for insuring compliance with all laws and
regulations, including those of all applicable federal and state regulatory
authorities and bodies having jurisdiction over you or your customers to the
extent applicable to securities purchases hereunder.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we shall furnish you with information identifying the states under the
securities laws of which it is believed a Fund's shares may be sold. You will
not transact orders for Fund shares in states in which we indicate Fund shares
may not be sold.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicly available by the Fund, in
reasonable quantities upon your request. We shall file Fund sales literature and
promotional material with the NASD and SEC as required. You may not publish or
use any sales literature or promotional materials with respect to the Funds
without our prior review and written approval.
CUSTOMERS: The names of your customers will remain your sole property and will
not be used by us except for servicing or informational mailings and other
correspondence in the normal course of business.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at 1818 Market Street, Philadelphia, PA 19103. Any notice from us to you
shall be deemed to have been duly given if mailed or telegraphed to you at the
address set forth above. Each of us may change the address to which notices
shall be sent by notice to the other in accordance with the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Fund and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, us or any one or more of our dealers,
based upon the claim that you and such dealers or any of them constitute a
partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you promptly notify us in writing to the contrary, you
will be deemed to have accepted such modifications.
<PAGE>
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach. Nothing contained
herein shall constitute you, us and any dealers an association or partnership.
All references in this Agreement to the "Prospectus" include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto, provided that any requirement in this Agreement to deliver
a copy of the Prospectus shall not include the Statement of Additional
Information unless requested by the customer. This Agreement is to be construed
in accordance with the laws of the State of Delaware.
Please confirm this Agreement by executing one copy of this Agreement below and
returning it to us. Keep the enclosed duplicate copy for your records.
Date:________________ DELAWARE DISTRIBUTORS, L.P.
BY: DELAWARE DISTRIBUTORS, INC.,
General Partner
Accepted and Agreed to:
- ---------------------------
(Name of Firm)
BY:________________________
Name:
Title:
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE I
PURPOSE CLAUSE . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN . . . . . . . . . . . . . . 6
ARTICLE IV
CONTRIBUTIONS TO PLAN . . . . . . . . . . . . . . . . . 7
ARTICLE V
ALLOCATION OF CONTRIBUTIONS . . . . . . . . . . . . . . 12
ARTICLE VI
RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . 14
ARTICLE VII
DISABILITY BENEFITS . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IX
OTHER SEPARATION FROM SERVICE . . . . . . . . . . . . . 16
ARTICLE X
METHOD OF PAYMENT . . . . . . . . . . . . . . . . . . . 18
ARTICLE XI
ADMINISTRATION OF PLAN . . . . . . . . . . . . . . . . 26
ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER
OR TERMINATION . . . . . . . . . . . . . . . . . . . . 29
(i)
<PAGE>
ARTICLE XIII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XIV
LOANS . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XV
LIMITATIONS ON ALLOCATIONS . . . . . . . . . . . . . . 32
ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES . . . . . . . . . . . . 36
(ii)
<PAGE>
PROFIT SHARING PLAN
OF
DELAWARE GROUP DELAWARE FUND, INC.
SECOND AMENDMENT AND RESTATEMENT
EFFECTIVE APRIL 1, 1989
ARTICLE I
PURPOSE CLAUSE
--------------
This Profit Sharing Plan and the Trust Agreement forming a part hereof are
established for the benefit of the employees of Delaware Group Delaware Fund,
Inc. and the other investment companies of the Delaware Group of Funds to
promote in them a strong interest in the successful operation of the business
and to provide for them an opportunity for accumulation of funds for their
retirement benefit.
ARTICLE II
DEFINITIONS
-----------
When used herein, the following words shall have the following meanings
unless the context clearly indicates otherwise:
2.1 "Administrative Committee" or "Committee" shall mean the Administrative
Committee with authority and responsibility to manage and direct the operation
and administration of this Plan. "Administrative Committee" shall be deemed to
also mean "Administrator" and "Plan Administrator" as defined in ERISA.
2.2 "Anniversary Date" shall mean the first day of each Plan Year.
2.3 "Beneficiary" shall mean the person or persons designated by a
Participant to receive benefits upon the death of said Participant pursuant to
Article VIII.
2.4 "Board of Directors" shall mean the Board of Directors of the Employer.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Effective Date" of the Plan shall mean October 1, 1983. The Effective
Date of this amended and restated Plan shall mean April 1, 1989, except where
indicated otherwise.
2.7 "Eligibility Computation Period" shall mean the period of twelve (12)
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<PAGE>
consecutive months beginning on the date an Employee first performs an Hour of
Service upon hire or rehire after a One Year Break in Service, and any Plan Year
following such date of hire or date of rehire following a One Year Break in
Service.
2.8 "Eligibility Year of Service" shall mean the Eligibility Computation
Period during which the Employee performs one thousand (1,000) or more Hours of
Service. Eligibility Years of Service shall include an Employee's prior service
with Delaware Management Company, Inc. or any Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or(c) of the Code.
2.9 "Employee" shall mean any person employed by the Employer or by any
affiliated Entity which adopts this Plan; provided, however, no person covered
by a collective bargaining agreement under which the Employer has participated
in good faith bargaining concerning retirement benefits shall be considered an
Employee for the purposes of this Plan. Any Leased Employee shall not be
considered an Employee for purposes of the Plan.
2.10 "Employer" shall mean Delaware Group Delaware Fund, Inc. and any other
affiliated investment company which adopts this Plan. Effective October 1, 1987,
and solely for purposes of determining periods of service for eligibility for
participation and vesting, the term "Employer" shall include any corporation
which is a member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Employer; any trade or business (whether
or not incorporated) which is under common control (as defined in Section 414(c)
of the Code) with the Employer; any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in Section 414(m)
of the Code) which includes the Employer; and any other Entity required to be
aggregated with the Employer pursuant to regulations under Section 414(o) of the
Code.
2.11 "Employer Contribution Account" shall mean a Participant's account
derived from Employer contributions and the earnings thereon.
2.12 "Entity" shall mean an individual, partnership, corporation or
unincorporated organization.
2.13 "ERISA" shall mean the Employee Retirement Income Security Act of 1974
and the Regulations promulgated thereunder by either the Department of Labor or
Treasury.
2.14 "Hour of Service" shall mean:
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<PAGE>
(a) Each hour for which an Employee is paid, or entitled to payment, for
the performance of duties for the Employer. These hours will be credited to the
Employee for the computation period in which the duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to payment, by the
Employer on account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, military service or leave of absence. No more than 501 Hours of Service
will be credited under this paragraph for any single continuous period (whether
or not such period occurs in a single computation period); and
(c) Each hour for which back pay, regardless of mitigation of damages, is
either awarded or agreed to by the Employer. The same Hours of Service will not
be credited both under paragraph (a) or paragraph (b), as the case may be, and
under this paragraph (c). These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
(d) Hours of Service will be calculated on the basis described in
Department of Labor Regulations Section 2530.200b-2(b) and (c).
(e) Solely for purposes of determining whether a Break in Service has
occurred, for participation and vesting purposes, an individual who is absent
from work for maternity or paternity reasons will receive credit for the Hours
of Service which would otherwise have been credited to such individual. In the
event these hours cannot be determined, eight (8) Hours of Service per day will
be used. For purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (i) by reason of the pregnancy of the
individual, (ii) by reason of the birth of a child of the individual, (iii) by
reason of the placement of a child with the individual in connection with the
adoption of the child by such individual, or (iv) for purposes of caring for the
child for a period beginning immediately following such birth or placement.
However, in no event will the hours treated as Hours of Service under this
paragraph (e), by reason of any pregnancy or placement, exceed 501 hours. The
Hours of Service credited under this paragraph will be credited (i) in the Plan
Year in which the absence begins if the crediting is necessary to prevent a
Break in Service in that period, or (ii) in all other cases, in the following
Plan Year.
(f) Effective for Plan Years beginning on or after April 1, 1994, an
Employee shall be credited with 45 Hours of Service for each week for which he
would be required to be credited with at least one Hour of Service under
paragraphs (a)-(e) above.
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<PAGE>
2.15 "Leased Employee" shall mean any person described in Section 414(n) of
the Code who is not an employee of the Employer who, pursuant to an agreement
between the Employer and any other person, has performed service for the
Employer (or for any related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full-time basis for a period of at
least one year and such services are of a type historically performed by
employees in the Employer's business field.
2.16 "Named Fiduciary" shall be the Administrative Committee and the
Trustee or Trustees serving from time to time and any other person who is
specifically so designated by the Board of Directors.
2.17 "Normal Retirement Date" shall mean the date on which a Participant
shall reach age 65.
2.18 "One Year Break in Service" or "Break in Service" shall mean a Plan
Year during which an Employee has or was separated from employment with Employer
and has completed 500 or less Hours of Service.
2.19 "Participant" shall mean any Employee who meets the eligibility
requirements under Article III or any Employee who is or may become eligible to
receive a benefit under the Plan or whose Beneficiaries may be eligible to
receive any such benefit.
2.20 "Participant Contribution Account" shall mean a Participant's account
derived from his voluntary contributions and the earnings thereon.
2.21 "Plan" shall mean the Employer's Profit Sharing Plan set forth in this
document and all subsequent amendments thereto.
2.22 "Plan Compensation" shall mean as of each Anniversary Date, the basic
compensation received by an Employee from the Employer during the preceding Plan
Year, including salary, draw, overtime and bonuses, but excluding contributions
to this or any other deferred compensation plan. Plan Compensation includes
salary reduction contributions paid by the Employer on the Employee's behalf to
a cafeteria plan, within the meaning of Section 125 of the Code, maintained by
the Employer. Effective for Plan Years beginning on or after April 1, 1994, Plan
Compensation shall mean the sum of (a) the total earnings which are received by
the Employee from the Employer for the preceding Plan Year and which are
required to be reported as wages on the Employee's Form W-2 (in the wages, tips
and other compensation box) and (b) the total amount contributed by the
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<PAGE>
Employer on behalf of the Employee pursuant to a salary reduction agreement
which is not includable in the gross income of the Employee under Sections 125
or 402 (e)(3) of the Code, but excluding all of the following items (even if
includable in gross income): reimbursements or other expense allowances, fringe
benefits (cash and non-cash), moving expenses, deferred compensation and welfare
benefits.
For Plan Years beginning on or after April 1, 1989, the Plan Compensation
of each Participant taken into account under the Plan shall not exceed $200,000,
as adjusted by the Secretary of the Treasury. In determining the Plan
Compensation of a Participant for purposes of the limitations set forth in the
preceding sentence, the rules of Section 414(q)(6) of the Code shall apply,
except in applying such rules, the term "family" shall include only the spouse
of the Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the Plan Year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is exceeded, then
the limitation shall be prorated among the affected individuals in proportion to
each such individual's Plan Compensation as determined under this Section 2.22
prior to the application of this limitation. Effective for Plan Years beginning
on or after January 1, 1994, the Plan Compensation of a Participant shall not
exceed $150,000, as adjusted at the time and manner prescribed by Section 401
(a)(17)(B) of the Code.
2.23 "Plan Year" shall mean a twelve-month period beginning on April 1st
and ending on March 31st. For the Plan Years beginning before April 1, 1989 and
after December 31, 1986, the term Plan Year means a twelve month period
beginning October 1st and ending September 30th, except that the Plan Year
beginning October 1, 1988 is a short year which ends March 31, 1989.
2.24 "Total and Permanent Disability" shall mean incapacity, resulting from
injury or disease, of a Participant to perform any work for Employer and shall
be presumed permanent after the same has continued uninterrupted for six months
as certified by a qualified physician selected by the Administrative Committee.
2.25 "Trustee" or "Trustees" shall mean the trustee or trustees named in
the Trust Agreement attached hereto and forming a part hereof, or any successor
thereto.
2.26 "Trust Fund" or "Fund" shall mean all property held pursuant to the
Trust Agreement.
2.27 "Valuation Date" means the last day of each Plan Year and such other
quarterly, monthly or daily dates as determined by the Administrative Committee.
-8-
<PAGE>
2.28 "Year of Service" shall mean a Plan Year during which an Employee
completes at least 1,000 Hours of Service; provided, however, that for the
period from October 1, 1988 through March 31, 1990, an Employee shall be given
credit for a Year of Service if he completes 1,000 Hours of Service during the
period October 1, 1988 to September 30, 1989 and shall be given credit for an
additional Year of Service if he completes 1,000 Hours of Service during the
period April 1, 1989 to March 31, 1990. For purposes of determining a
Participant's nonforfeitable right to his Employer Contribution Account, Years
of Service shall include an Employee's prior service with Delaware Management
Company, Inc. or any other Entity required to be aggregated with Delaware
Management Company, Inc. under Sections 414(b) or (c) of the Code. An Employee
shall also receive credit for a Year of Service if he completes 1000 or more
Hours of Service during his initial Eligibility Computation Period.
2.29 Whenever used herein, the masculine provision includes the feminine
and the singular includes the plural.
ARTICLE III
ELIGIBILITY OF EMPLOYEES
TO PARTICIPATE IN THE PLAN
--------------------------
3.1 Each Employee who was a Participant on March 31, 1989 shall continue as
a Participant. Each other Employee shall be eligible to participate in this Plan
on the first day of the Plan Year within which he completes one Eligibility Year
of Service.
3.2 Any Participant who returns to service after a Break in Service shall
be admitted to the Plan as a Participant on his date of re-employment.
3.3 Within 60 days of each Anniversary Date of this Plan, the Employer
shall furnish the Administrator a list showing all eligible Employees, the date
of employment, the Years of Service, the Plan Compensation of each eligible
Employee and the date of termination of any terminated Employees.
3.4 Notwithstanding the provisions of Section 3.1 to the contrary, if an
Employee is employed by the Employer on March 31, 1989 and has completed by such
date 1,000 or more Hours of Service during an Eligibility Computation Period
which began on or before October 1, 1988, such Employee shall be eligible to
participate in the Plan on October 1, 1988.
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<PAGE>
ARTICLE IV
CONTRIBUTIONS TO PLAN
---------------------
4.1 Each participating Employer may contribute to the Plan's Trust Fund for
each taxable year an amount, if any, determined in accordance with a resolution
of the Board of Directors adopted before the date prescribed by law for filing
its Federal income tax return for such taxable year (including extensions
thereof); provided, however, that no contributions shall be made for any year in
excess of the amount deductible for such year under provisions of the Code and
regulations thereunder as then in effect. For Plan Years beginning on or after
April 1, 1989, the Employer may make contributions regardless of whether or not
it has Net Profits and Earnings for its tax year.
4.2 For Plan Years beginning before April 1, 1989, Net Profits and Earnings
in any one year of operations means the net income before provisions for Federal
and State income taxes as determined by the certified public accountants
employed by the Employer in accordance with generally accepted accounting
principles of open-end management investment companies.
4.3 For each taxable year, the contributions shall accrue on the
Anniversary Date thereof, but shall not be considered as accruing during the
said taxable year prior to the Anniversary Date thereof.
4.4 The Trust Fund shall not be diverted to any use other than the
exclusive benefit of eligible Employees and their Beneficiaries.
4.5 Effective August 1, 1991, a Participant may not make voluntary
contributions to his Participant Contribution Account. Prior to August 1, 1991,
a Participant may make voluntary contributions to his Participant Contribution
Account. Such contributions may be made by payroll deductions or in such other
manner and subject to such procedures as the Administrator may prescribe. No
Participant may contribute more than ten percent of his aggregate Plan
Compensation for all Plan Years during which he participated in the Plan.
4.6 Notwithstanding the provisions of Article IX, a Participant shall have
a nonforfeitable interest in all voluntary contributions made by him and in any
increase in his account attributable to such contributions.
4.7 A Participant shall have the right to withdraw the total amount of his
voluntary contributions at any time; provided, however, that such withdrawal
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<PAGE>
shall be permissible only with respect to the amount of such Participant's
voluntary contributions and not to any increase in his account attributable to
such contributions. No Participant shall be permitted to make withdrawals of
his voluntary contributions more than four times in any one calendar year.
Effective as of the date of adoption of this amended and restated Plan, a
Participant shall be permitted to make withdrawals as frequently as monthly of
all or a portion of his voluntary contributions, including the earnings
thereon.
4.8 The Fund may accept rollover contributions on behalf of an Employee
(including an Employee who has not satisfied the requirements to be eligible to
participate) from any other plan maintained for his benefit which satisfies the
requirements of a tax-qualified plan, or a rollover individual retirement
account; provided, however, that such rollovers are permitted by and effected in
accordance with the requirements of the Code. The Administrative Committee may
as a condition of acceptance of such rollovers demand such information, opinions
and statements as it deems necessary to assure that such rollovers conform to
the requirements of the federal tax laws.
4.9 An Employee for whom a rollover has been made shall be deemed a
Participant with respect to the amount contributed and shall have a
nonforfeitable interest in such amount and any increases attributable to it. Any
such rollovers shall be held in a special account for the Participant segregated
from other assets held by the fund. Such contributions will be administered and
distributed pursuant to the provisions of this Plan.
4.10 The following special non-discrimination rules pertaining to voluntary
contributions shall be applicable for Plan Years beginning on or after October
1, 1987 and before April 1, 1990.
(a) For any Plan Year, the Contribution Percentage for all Highly
Compensated Employees will not exceed the greater of (i) or (ii) as follows:
(i) The Contribution Percentage for all Non-Highly Compensated Employees,
times 1.25; or
(ii) The lesser of the Contribution Percentage for all Non-Highly
Compensated Employees, times 2.0, provided that the Contribution Percentage for
all Highly Compensated Employees may not exceed the Contribution Percentage for
all Non-Highly Compensated Employees by more than two (2) percentage points or
such lesser amount as the Secretary of Treasury will prescribe to prevent the
multiple use of this alternative limitation with respect to any Highly
Compensated Employee.
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<PAGE>
(b) Distribution of Excess Aggregate Contributions.
(i) Excess Aggregate Contributions, plus any income and minus any loss
allocable thereto, will be distributed no later than the last day of each Plan
Year to Participants to whose accounts Excess Aggregate Contributions were
allocated for the preceding Plan Year.
(ii) For the Plan Year beginning on October 1, 1987, the income or loss
allocable to Excess Aggregate Contributions shall be determined under any
reasonable method, which method shall be applied on a consistent basis for all
Participants. For Plan Years beginning after 1987, the income or loss allocable
to Excess Aggregate Contributions shall be the sum of (A) and (B) below:
(A) The income or loss for the Plan Year allocable to the Participant's
voluntary contribution Account multiplied by a fraction, the numerator of which
is the Participant's Excess Aggregate Contributions for the year, and the
denominator of which is the balance of the Participant's voluntary contribution
account as of the end of the Plan Year, minus income (or plus losses) allocable
to such account.
(B) The income or loss for the period between the end of the Plan Year and
the date of the distribution allocable to the Participant's voluntary
contribution account multiplied by the fraction described in (A), above.
In lieu of using the formula described in (B), the income or loss for the
period between the end of the Plan Year and the date of the distribution
allocable to Excess Aggregate Contributions for the year may be calculated under
the following alternative method, provided such method is applied on a
consistent basis for all Participants: ten percent (10%) of the amount
determined under (A), above, multiplied by the number of whole calendar months
that have elapsed since the end of the Plan Year. For this purpose, if a
distribution of Excess Aggregate Contributions is made after the 15th day of a
month, that month will be counted as a whole month.
(c) The following definitions apply for purposes of this Section 4.10.:
(i) "Contribution Percentage" means, for a group of Participants, the
average of the following ratios (calculated separately) for each Participant in
the group:
(A) The sum of voluntary contributions made on behalf of each Participant
for the Plan Year; over
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<PAGE>
(B) The Participant's Compensation for that Plan Year, whether or not the
Participant was a Participant for the entire Plan Year.
The Contribution Percentage for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have voluntary employee
contributions or employer matching contributions allocated to his account under
two or more plans described in Section 401(a) of the Code or arrangements
described in Section 401(k) of the Code that are maintained by the employer or
an entity that is required to be aggregated with the employer pursuant to
Sections 414(b), (c), (m), or (o) of the Code will be determined as if all such
contributions were made under a single plan. If a Highly Compensated Employee
participates in two or more arrangements described in Section 401(k) of the Code
that have different plan years, all such arrangements ending with or within the
same calendar year shall be treated as a single arrangement.
For purposes of determining the Contribution Percentage of a Participant
who is a five-percent owner or one of the ten most Highly Compensated Employees,
the Contribution Percentage and compensation of such Participant will include
the Contribution Percentage and Compensation of Family Members, and such Family
Members will be disregarded in determining the Contribution Percentage for
Participants who are Non-Highly Compensated Employees.
Voluntary contributions will be considered made for a Plan Year if made by
the date specified in the applicable regulations and allocated to a
Participant's account for the Plan Year.
The determination and treatment of the Contribution Percentage of any
Participant will satisfy such other requirements as may be prescribed by
Secretary of the Treasury.
In the event that this Plan satisfies the requirements of Sections 401(m),
401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans,
or if one or more other plans satisfy the requirements of such Sections only if
aggregated with this Plan, then this Section 4.10 will be applied by determining
the Contribution Percentages of eligible Participants as if all such plans were
a single plan. For plan years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Section 401(m) of the Code only if they have the
same plan year.
(ii) "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of:
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<PAGE>
(A) The aggregate Contribution Percentage amounts taken into account in
computing the numerator of the Contribution Percentage actually made on behalf
of Highly Compensated Employees for such Plan Year; over
(B) The maximum Contribution Percentage amounts permitted by the
Contribution Percentage limits set forth in this Section 4.10 (determined by
reducing contributions made on behalf of Highly Compensated Employees in order
of their Contribution Percentages beginning with the highest of such
percentages).
(iii) "Family Member" means an individual described in Section 414(q)(6)(B)
of the Code.
(iv) "Highly Compensated Employee" means a highly compensated active
employee or a highly compensated former employee, as described below.
A highly compensated active employee includes any employee who performs
service for the employer during the determination year and who, during the
look-back year: (i)received compensation from the employer in excess of $75,000
(as adjusted pursuant to Section 415(d) of the Code); (ii) received compensation
from the employer in excess of $50,000 (as adjusted pursuant to Section 415(d)
of the Code) and was a member of the top-paid group for such year; or (iii) was
an officer of the employer and received compensation during such year that is
greater than 50 percent of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also includes:
(i) employees who are both described in the preceding sentence if the term
"determination year" is substituted for the term "look-back year" and the
employee is one of the 100 employees who received the most compensation from the
Employer during the determination year; and (ii) employees who are five percent
owners at any time during the look-back year or determination year.
If no officer has satisfied the compensation requirement of (iii) above
during either a determination year or a look-back year, the highest paid officer
for such year shall be treated as a Highly Compensated Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back shall be the twelve (12)-month period immediately preceding the
determination year.
A highly compensated former employee includes any employee who separated
from service (or was deemed to have separated) prior to the determination year,
performs no service for the employer during the determination year, and was a
highly compensated active employee for either the separation year or any
determination year ending on or after the employee's fifty-fifth (55th)
birthday.
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If an employee is, during a determination year or look-back year, a Family
Member of either a five percent owner who is an active or former employee or a
Highly Compensated Employee who is one of the ten (10) most Highly Compensated
Employees ranked on the basis of compensation paid by the Employer during such
year, then the Family Member and the five percent owner or top-ten (10) Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
five percent owner or top-ten Highly Compensated Employee shall be treated as a
single employee receiving compensation and Plan contributions or benefits equal
to the sum of such compensation and contributions or benefits of the Family
Member and five percent owner or ten (10) most Highly Compensated Employee.
The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of employees in the top-paid group,
the top one hundred (100) employees, a five percent owner, the number of
employees treated as officers and the compensation that is considered, will be
made in accordance with Section 414(q) of the Code and the regulations
thereunder.
(v) "Compensation" means all of an Employee's compensation, as that term is
defined in Article XV, Limitations on Allocations, and shall include elective
contributions that are made by the Employer on behalf of the Employee and which
are not includable in income under Section 125 of the Code. Compensation shall
be subject to the limitation of Section 401(a)(17) of the Code.
ARTICLE V
ALLOCATION OF CONTRIBUTIONS
---------------------------
5.1 A separate and complete accounting shall be maintained for each
Participant which shall set forth the amount credited to or forfeited from his
Employer Contribution Account and his Participant Contribution Account. Employer
contributions and Participant contributions shall be allocated among investment
companies managed by Delaware Management Company, Inc. Each Participant shall
file a written notice with the Committee thereby making an election as to what
proportion of his contributions, including both contributions made by the
Employer and voluntary contributions, shall be allocated to the eligible
investment company funds, as announced from time to time by the Committee. Each
Participant shall have the right to change the investment allocation of his
contributions and his accumulated account balance, in accordance with rules and
procedures as announced from time to time by the Committee, provided changes are
subject to any limitations imposed on the right of exchange by the investment
media.
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5.2 The Employer's contributions and any forfeitures for each Plan Year
shall be credited to the Employer Contribution Accounts of Participants who are
employed by the Employer on the Anniversary Date and allocated in the proportion
that the Plan Compensation of each Participant bears to the total Plan
Compensation of all Participants for such Plan Year. A Participant who
terminates employment on the Anniversary Date shall be treated as employed by
the Employer on the Anniversary Date. All voluntary contributions made by a
Participant prior to August 1, 1991 shall be credited to his Participant
Contribution Account.
5.3 As of the Anniversary Date, each Participant's Employer Contribution
Account and his Participant Contribution Account shall be valued at its fair
market value. For the purposes of paying benefits to a Participant, his accounts
shall be valued on the most recent Valuation Date as determined by the
Administrative Committee.
5.4 Income when earned less expenses, if any, when charged, shall be
credited to or charged against each Participant's account, in accordance with
the self-directed investments selected by the Participant.
5.5 The Committee shall, as of each Anniversary Date, determine the total
amount of forfeitures which accrued during the Plan Year and shall add the
forfeited amount to the Employer's annual contribution for the purposes of
reallocation to the remaining Participants as provided in Section 5.2.
5.6 Any allocation made and credited to the account of a Participant under
this Article shall not cause such Participant to have any right, title or
interest in or to any assets of the Trust Fund except at the time or times, and
under the terms and conditions, expressly provided for in this Plan.
5.7 (a) In the case of a contribution to the Plan which is made by the
Employer because of a mistake of fact, the Employer may, within one year after
the payment of such contribution, withdraw such contribution from the Trust
Fund.
(b) Employer contributions to the Plan are expressly conditioned on the
deductibility of such contributions under Section 404 of the Code. To the extent
such contributions are disallowed, the Employer may, within one year of the
disallowance of the deduction, withdraw such contribution from the Trust Fund.
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ARTICLE VI
RETIREMENT BENEFITS
-------------------
6.1 Upon attaining Normal Retirement Date, a Participant shall have a fully
vested and nonforfeitable right to his entire Employer Contribution Account and
shall be entitled to retire and upon so retiring shall be entitled to the
commencement of the payment of his benefits, consisting of the balance of his
accounts, in accordance with the method of payment elected pursuant to Article
X.
6.2 A Participant who retires after his Normal Retirement Date shall
continue to be a Participant in the Plan until his actual retirement and shall
be eligible to share in the allocation of Employer contributions as provided in
Section 5.2.
ARTICLE VII
DISABILITY BENEFITS
-------------------
7.1 If the employment of a Participant has been terminated prior to his
retirement date because of Total and Permanent Disability, such Participant
shall be entitled to receive his entire Participant Contribution Account and his
entire Employer Contribution Account in accordance with the manner elected under
Article X.
7.2 Upon a Participant's cessation of Total and Permanent Disability and
upon his return to work for Employer before all of his account has been
distributed, no further payments shall be made therefrom by reason of the
disability. A Participant shall have no right or obligation to repay any amount
distributed to him pursuant to Section 7.1.
ARTICLE VIII
DEATH BENEFITS
--------------
8.1 Notwithstanding anything stated in the Plan to the contrary, if a
Participant dies prior to receiving the entire nonforfeitable amount credited to
his accounts, all such undistributed nonforfeitable amounts shall be paid to the
Participant's surviving spouse, unless there is no surviving spouse or the
surviving spouse consents in writing to the payment of death benefits to another
Beneficiary. A spouse's consent must satisfy the following requirements:
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(a) the consent must be in writing;
(b) the consent must be witnessed by a member of the Administrative
Committee or a notary public;
(c) the consent must approve a designation of a specific Beneficiary,
including any class of Beneficiaries or any contingent Beneficiaries, which may
not be changed without spousal consent, or the spouse expressly permits
designations by the Participant without any further spousal consent; and
(d) the consent acknowledges the effect of the Participant's designation of
Beneficiary. If a consent permits designations by the Participant without any
requirement of further consent by such spouse, it must acknowledge that the
spouse has the right to limit consent to a specific Beneficiary and that the
spouse voluntarily elects to relinquish such right.
Written consent of a spouse need not be obtained if the Participant
establishes to the satisfaction of the Committee that there is no spouse or that
the spouse cannot be located. Any such designation may be changed from time to
time by the Participant by filing a new designation with the Committee, provided
the spousal consent requirements above are satisfied.
8.2 Each Participant may file with the Committee a designation of
Beneficiary to receive amounts payable under this Plan upon his death. The
designation may be changed from time to time by the Participant, except that a
married Participant may not name a Beneficiary other than his spouse without a
written consent which satisfies the requirements of Section 8.1. If no
designation has been filed, or all designated Beneficiaries have predeceased the
Participant, then any amounts payable shall be paid to his surviving spouse. If
there is no surviving spouse, any amounts payable shall be paid to his estate.
8.3 If at, after or during the time when a benefit is payable to any
Beneficiary, the Administrative Committee, upon request of the Trustee or at its
own instance, mails by registered or certified mail to the Beneficiary at the
Beneficiary's last known address a written demand for his then address, or for
satisfactory evidence of his continued life or both, and, if the Beneficiary
shall fail to furnish the information to the Committee within 3 years from the
mailing of the demand, then the Committee shall distribute the remaining
benefits to the Beneficiary next entitled thereto under Section 8.3 above as if
the Beneficiary designated by the Participant or Section 8.3 were then deceased.
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ARTICLE IX
OTHER SEPARATION FROM SERVICE
-----------------------------
9.1 (a) If a Participant separates from service other than under Articles
VI, VII or VIII, he shall be entitled to receive a lump sum distribution of his
entire Participant Contribution Account and his entire nonforfeitable Employer
Contribution Account. Such distribution shall be made upon the written request
of the Participant and shall be made as soon as practicable following the
Participant's separation from service, but not later than the close of the
second Plan which such separation occurs.
(b) If the non-forfeitable portion of the Participant's Employer
Contribution Account and his Participant Contribution Account exceeds $3500 (or
ever exceeded $3500 at the time of an earlier distribution), and the Participant
does not consent in writing to receive a lump sum distribution of his accounts
by the close of the second Plan Year following his separation from service, no
distribution shall be made to the Participant until he attains his Normal
Retirement Date. Regardless of whether the Participant consents in writing, if
the non-forfeitable portion of the Participant's Employer Contribution Account
and Participant Contribution Account does not exceed $3500 (or did not exceed
$3500 at the time of a prior distribution), a lump sum distribution shall be
made to the Participant of the entire value of the non-forfeitable portion of
his accounts not later than the end of the second Plan Year following his
separation from service.
(c) If a distribution is made to the Participant of the nonforfeitable
portion of his Employer Contribution Account upon his separation from service,
the non-vested portion of his Account, if any, will be treated as a forfeiture
and reallocated to remaining Participants as provided in Section 5.2. If the
Participant does not receive a distribution of his Employer Contribution Account
upon his separation from service, such Account shall be held for the Participant
until he attains Normal Retirement Date and the non-vested portion of the
Account shall be treated as a forfeiture when the Participant sustains five
consecutive One Year Breaks in Service.
(d) In the event a Participant who is less than fully vested in his
Employer Contribution Account receives a distribution of his vested interest in
such Account upon his separation from service, and such Participant subsequently
returns to employment of the Employer, the Participant's Employer Contribution
Account will be restored to the value of the Account on the date of the
distribution if the Participant repays to the Trustees the full amount of such
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distribution before the earlier of five consecutive One-Year Breaks in Service
or five years after the Participant's date of reemployment. Restoration of the
forfeited amount of a Participant's Account shall be made from forfeitures or
Employer contributions.
9.2 (a) In the event a Participant separates from service with the Employer
for reasons other than retirement, disability, death or a layoff by the
Employer, he shall have a nonforfeitable right to the amount credited to his
Employer Contribution Account in accordance with the following schedule:
Completed Years of Service Percentage
-------------------------- ----------
At least But less than
0 1 0%
1 2 20%
2 3 40%
3 4 60%
4 5 80%
5 or more 100%
(b) A Participant shall have a wholly vested and nonforfeitable right to
his Employer Contribution Account upon separation from service on account of
retirement on or after the Normal Retirement Date, Total and Permanent
Disability, death while in the employ of the Employer or layoff by the Employer.
For purposes of this Section 9.2, the term "layoff" shall mean any involuntary
separation from service other than separation due to cause. If a Participant
separates from service with the Employer, the non-vested portion of his Employer
Contribution Account, if any, shall be forfeited upon the death of the
Participant.
(c) If the Employer amends the Plan in a manner which directly or
indirectly affects the computation of a Participant's nonforfeitable percentage,
each Participant who completes an Hour of Service in any Plan Year beginning
after December 31, 1988 and who has at least three Years of Service may elect
after the adoption of such amendment to have his nonforfeitable interest
computed under the Plan without regard to such amendment. The period during
which the election may be made shall commence the day the amendment is adopted
and shall end on later of:
(i) sixty (60) days after the amendment is adopted;
(ii) sixty (60) days after the amendment becomes effective; or
(iii) sixty (60) days after the Participant is issued written notice of the
amendment by the Employer or the Committee.
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9.3 (a) In the case of a Participant who has a Break in Service, Years of
Service completed before such Break shall not be counted until the Participant
has completed a Year of Service for the purpose of determining his
nonforfeitable percentage of the amount credited to his Employer Contribution
Account after such Break in Service.
(b) Years of Service completed on reemployment and after separation from
service with the Employer in connection with which he has five consecutive One
Year Breaks in Service shall not be counted for purposes of determining such
Participant's nonforfeitable percentage right to amounts credited to his
Employer Contribution Account before such Break in Service.
ARTICLE X
METHOD OF PAYMENT
-----------------
10.1 At the request of a Participant, the form of benefit payments may be
one of the following in cash:
(a) in a lump sum payment; or
(b) in periodic, monthly, quarterly, semi-annual or annual installments
over a period certain not exceeding the Participant's life expectancy or the
joint life expectancy of the Participant and his designated Beneficiary. If
periodic installments are to be paid, a Participant's account shall be invested
in the investment company funds available under the Plan as designated by the
Participant.
If periodic installments are paid over the life expectancy of the
Participant or joint life expectancy of the Participant and a designated
Beneficiary, a Participant may elect, prior to the time distributions begin,
whether or not to have his life expectancy and his Beneficiary's life expectancy
(if the Beneficiary is his spouse) annually recalculated. In the absence of such
election, life expectancies will not be recalculated.
10.2 In no event shall payments of benefits under this Plan commence later
than sixty (60) days after the close of the Plan Year in which the latest of the
following events occur:
(a) the Participant attains age sixty-five (65); or
(b) the Participant completes ten years of participation in the Plan; or
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(c) the termination of the Participant's service with the Employer.
10.3 (a) Notwithstanding the other requirements of this Plan, distributions
on behalf of any Participant, including a five percent (5%) owner, may be made
in accordance with all of the following requirements (regardless of when such
distribution commences):
(i) The distribution by the Trust Fund is one which would not have
disqualified such Trust under Section 401(a)(9) of the Code as in effect prior
to amendment by the Deficit Reduction Act of 1984.
(ii) The distribution is in accordance with a method of distribution
designated by the Participant whose interest is being distributed or, if the
Participant is deceased, by a Beneficiary of such Participant.
(iii) Such designation was in writing, was signed by the Participant or the
Beneficiary, and was made before January 1, 1984.
(iv) The Participant had accrued a benefit under the Plan as of December
31, 1983.
(v) The method of distribution designated by the Participant or the
Beneficiary specifies the time at which distribution will commence, the period
over which distributions will be made, and in the case of any distribution upon
the Participant's death, the Beneficiaries of the Participant listed in order of
priority.
(b) A distribution upon death will not be covered by this Section unless
the information in the designation contains the required information described
above with the respect to the distributions to be made upon the death of the
Participant.
(c) For any distribution which commenced before January 1, 1984, but
continues after December 31, 1983, the Participant, or the Beneficiary, to whom
such distribution is being made, will be presumed to have designated the method
of distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in subsections (a)(i) and (v) above.
(d) If a designation is revoked, any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code. Any changes in the
designation will be considered to be revocation of the designation. However, the
mere substitution or addition of another Beneficiary (one not named in the
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designation) under the designation will not be considered to be revocation
of the designation, so long as such substitution or addition does not alter the
period over which distributions are to be made under the designation, either
directly or indirectly (for example, by altering the relevant measuring life).
10.4 Required Distributions. All distributions required under this Section
10.4 shall be determined and made in accordance with the proposed regulations
under Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit requirement of Section 1.401(a)(9)-2 of the proposed
regulations.
(a) Required beginning date. The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's required
beginning date.
(b) Limits on Distribution Periods. As of the first distribution calendar
year, distributions, if not made in a single-sum, may only be made over one of
the following periods (or a combination thereof):
(1) a period certain not extending beyond the life expectancy of the
Participant, or
(2) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated beneficiary.
(c) Determination of amount to be distributed each year. If the
Participant's interest is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the required
beginning date:
(1) If a Participant's benefit is to be distributed over (i) a period not
extending beyond the life expectancy of the Participant or the joint life and
last survivor expectancy of the Participant and the Participant's designated
beneficiary or (ii) a period not extending beyond the life expectancy of the
designated beneficiary, the amount required to be distributed for each calendar
year, beginning with distributions for the first distribution calendar year,
must at least equal the quotient obtained by dividing the Participant's benefit
by the applicable life expectancy.
(2) For calendar years beginning before January 1, 1989, if the
Participant's spouse is not the designated beneficiary, the method of
distribution selected must assure that at least fifty percent (50%) of the
present value of the amount available for distribution is paid within the life
expectancy of the Participant.
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(3) For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with distributions for the first distribution
calendar year, shall not be less than the quotient obtained by dividing the
Participant's benefit by the lesser of (1) the applicable life expectancy or (2)
if the Participant's spouse is not the designated beneficiary, the applicable
divisor determined from the table set forth in Q&A-4 of Section 1.401(a)(9)-2 of
the proposed regulations. Distributions after the death of the Participant shall
be distributed using the applicable life expectancy in (c)(i)(A) above as the
relevant divisor without regard to proposed regulations Section 1.401(a)(9)-2.
(4) The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the Participant's required
beginning date. The minimum distribution for other calendar years, including the
minimum distribution for the distribution calendar year in which the
Participant's required beginning date occurs, must be made on or before December
31 of that distribution calendar year.
(d) Death Distribution Provisions.
(1) Distribution beginning before death. If the Participant dies after
distribution of his or her interest has begun, the remaining portion of such
interest will continue to be distributed at least as rapidly as under the method
of distribution being used prior to the Participant's death.
(2) Distribution beginning after death. If the Participant dies before
distribution of his or her interest begins, distribution of the Participant's
entire interest shall be completed by December 31 of the calendar year
containing the fifth (5th) anniversary of the Participant's death except to the
extent that the Participant or his designated beneficiary elects to receive
distributions in accordance with (i) or (ii) below:
(i) if any portion of the Participant's interest is payable to a designated
beneficiary, distributions may be made over a period certain not greater than
the life expectancy of the designated beneficiary commencing on or before
December 31 of the calendar year immediately following the calendar year in
which the Participant died;
(ii) if the designated beneficiary is the Participant's surviving spouse,
the date distributions are required to begin in accordance with (i) above shall
not be earlier than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the Participant died and (2)
December 31 of the calendar year in which the Participant would have attained
age 70 1/2.
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If the Participant has not made an election pursuant to Section 10.4(d)(2)
by the time of his or her death, the Participant's designated beneficiary must
elect the method of distribution no later than the earlier of (1) December 31 of
the calendar year in which distributions would be required to begin under this
Section 10.4(d), or (2) December 31 of the calendar year which contains the
fifth (5th) anniversary of the date of death of the Participant. If the
Participant has no designated beneficiary, or if the designated beneficiary does
not elect a method of distribution, distribution of the Participant's entire
interest must be completed by December 31 of the calendar year containing the
fifth (5th) anniversary of the Participant's death.
(3) For purposes of Section 10.4(d)(2) above, if the surviving spouse dies
after the Participant, but before payments to such spouse begin, the provisions
of Section 10.4(d)(2), with the exception of subparagraph (ii) therein, shall be
applied as if the surviving spouse were the Participant.
(4) For purposes of Section 10.4(d), distribution of a Participant's
interest is considered to begin on the Participant's required beginning date
(or, if Section 10.4(d)(3) above is applicable, the date distribution is
required to begin to the surviving spouse pursuant to Section 10.4(d)(3) above).
(e) Definitions.
(1) Applicable life expectancy. The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Participant (or
designated beneficiary) as of the Participant's (or designated beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first calculated. If life
expectancy is being recalculated, the applicable life expectancy will be the
life expectancy as so recalculated. The applicable calendar year shall be the
first distribution calendar year and if life expectancy is being recalculated,
such succeeding calendar year.
(2) Designated beneficiary. The individual who is designated as the
beneficiary under the Plan in accordance with Section 401(a)(9) and the proposed
regulations thereunder.
(3) Distribution calendar year. A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant's
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year which contains the Participant's required beginning
date. For distributions beginning after the Participant's death, the first
distribution calendar year is the calendar year in which distributions are
required to begin pursuant to Section 10.4(d) above.
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(4) Life expectancy. Life expectancy and joint and last survivor expectancy
are computed by use of the expected return multiples in Tables V and VI of
Section 1.72-9 of the income tax regulations. Unless otherwise elected by the
Participant by the time distributions are required to begin, life expectancies
shall not be recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The life
expectancy of a nonspouse designated beneficiary may not be recalculated. A
spousal designated beneficiary may not elect to have his or her life expectancy
recalculated with respect to any distribution paid pursuant to Section
10.4(d)(2).
(5) Participant's benefit.
(i) The Participant's account balance as of the last valuation date in the
calendar year immediately preceding the distribution calendar year (valuation
calendar year) increased by the amount of any contributions or forfeitures
allocated to the account balance as of dates in the valuation calendar year
after the valuation date and decreased by distributions made in the valuation
calendar year after the valuation date.
(ii) For purposes of paragraph (i) above, if any portion of the minimum
distribution for the first distribution calendar year is made in the second
distribution calendar year on or before the required beginning date, the amount
of the minimum distribution made in the second distribution calendar year shall
be treated as if it had been made in the immediately preceding distribution
calendar year.
(6) Required beginning date.
(i) General rule. The required beginning date of a Participant is the first
day of April of the calendar year following the calendar year in which the
Participant attains age 70 1/2.
(ii) Transitional rules. The required beginning date of a Participant who
attains age 70 1/2 before January 1, 1988, shall be determined in accordance
with (A) or (B) below:
(A) Non-five (5)-percent owners. The required beginning date of a
Participant who is not a five (5)-percent owner is the first day of April of the
calendar year following the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
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(B) Five (5)-percent owners. The required beginning date of a Participant
who is a five (5)-percent owner during any year beginning after December 31,
1979, is the first day of April following the later of:
(I) the calendar year in which the Participant attains age 70 1/2, or
(II) the earlier of the calendar year with or within which ends the Plan
Year in which the Participant becomes a five (5)-percent owner, or the calendar
year in which the Participant retires.
The required beginning date of a Participant who is not a five (5)-percent
owner who attains age 70 1/2 during 1988 and who has not retired as of January
1, 1989, is April 1, 1990.
(iii) Five (5)-percent owner. A Participant is treated as a five
(5)-percent owner for purposes of this section if such Participant is a five
(5)-percent owner as defined in Section 416(i) of the Code (determined in
accordance with Section 416 but without regard to whether the Plan is top-heavy)
at any time during the Plan Year ending with or within the calendar year in
which such owner attains age 66 1/2 or any subsequent Plan Year.
(iv) Once distributions have begun to a five (5)-percent owner under this
section, they must continue to be distributed, even if the Participant ceases to
be a five (5)-percent owner in a subsequent year.
10.5 Restrictions on Distributions Prior to Normal Retirement Date. If the
value of a Participant's vested account balance exceeds (or at the time of any
prior distribution exceeded) $3,500, the Participant must consent to any
distribution made to him before he attains the Normal Retirement Date. The
consent of the Participant shall be obtained in writing within the 90-day period
ending on the date benefits are paid. The Committee shall notify the Participant
of his right to defer any distribution until the Participant attains the Normal
Retirement Date (or would have attained the Normal Retirement Date if not
deceased). Such notification shall include a general description of the material
features, and an explanation of the relative values of, the optional forms of
benefit available under the Plan in a manner that would satisfy the notice
requirements of Section 417(a)(3) of the Code below, and shall be provided no
less than 30 days and no more than 90 days prior to the date benefits are paid.
The consent of the Participant shall not be required to the extent that a
distribution is required to satisfy Sections 401(a)(9) or 415 of the Code. A
distribution may be paid to the Participant less than 30 days after the notice
described in this Section 10.5 is given to him, provided that the Administrative
Committee clearly informs the Participant that he has the right to a period of
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at least 30 days after receiving the notice to consider the decision of
whether or not to elect the distribution and the Participant, after receiving
the notice, affirmatively elects to receive a distribution. In addition, subject
to Section 10.7, upon termination of this Plan, the Participant's entire account
balance may be distributed without the Participant's consent to the Participant
or transferred to another defined contribution plan (other than an employee
stock ownership plan, as defined in Section 4975(e)(7) of the Code) within the
same controlled group as the Employer.
10.6 Withdrawals upon Attainment of Age 59-1/2. Upon the attainment of age
59-1/2, a Participant who is fully vested in his Employer Contribution Account
will be entitled to withdraw once a Plan Year all or any portion of his account
balance in a single sum. Any withdrawal by a Participant under this Section 10.6
will be made only after the Participant files a written request with the
Administrative Committee pursuant to such terms and conditions as the Committee
may prescribe.
10.7 Direct Rollovers
(a) This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Administrative Committee to have
any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(b) Definitions.
(i) Eligible rollover distribution: An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
(ii) Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code, an individual
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retirement annuity described in section 408(b) of the Code, an annuity plan
described in section 403(a) of the Code, or a qualified trust described in
section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(iii) Distributee: A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse or former
spouse who is the alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
(iv) Direct rollover: A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
ARTICLE XI
ADMINISTRATION OF PLAN
----------------------
11.1 (a) This Plan shall be administered by a Committee which shall consist
of not less than two nor more than five members.
(b) The Committee shall serve without compensation from the Plan. Vacancies
may be filled by the Chief Executive Officer of Delaware Group Delaware Fund,
Inc. on an interim basis, until action to fill the vacancy is taken by the Board
of Directors of Delaware Group Delaware Fund, Inc.
(c) The Committee:
(1) shall act by affirmative vote of a majority of its members at a meeting
called with five days notice or in writing without a meeting;
(2) shall appoint a Secretary who may be but need not be one of its own
members. He shall keep complete records of the administration of the Plan;
(3) may authorize each and any one of its members to perform routine acts
and to sign documents on its behalf.
11.2 The Committee may appoint such persons or committees, employ such
attorneys, agents, accountants, investment managers, consultants, actuaries, and
other specialists as it deems necessary or desirable to advise or assist
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it in the performance of its duties hereunder and the Committee may rely upon
their respective written opinions or certificates. To the extent such persons
are empowered by written notification from the Committee to perform duties
defined in ERISA as fiduciary duties, such empowerment shall constitute a
delegation of fiduciary responsibility for purposes of determining the
co-fiduciary liability under ERISA. The Committee shall review the performance
of any such persons periodically.
11.3 Administration of the Plan shall consist of interpreting and carrying
out the provisions of this Plan. The Committee shall determine the eligibility
of Employees to participate in this Plan, their rights while Participants in
this Plan and the nature and amount of benefits to be received therefrom. The
Committee shall decide any disputes which may arise under this Plan and the
Trust Agreement. The Committee may provide rules and regulations for the
administration of the Plan consistent with its terms and provisions. Any
construction or interpretation of the Plan and any determination of fact in
administering the Plan made in good faith by the Committee shall be final and
conclusive for all Plan purposes. The Committee shall have the discretionary
authority to determine eligibility for benefits and to construe the terms of the
Plan.
11.4 (a) The Committee shall prescribe a form for the presentation of
claims under the terms of this Plan and/or Trust Agreement.
(b) Upon presentation to the Committee of a claim on the prescribed form,
the Committee shall make a determination of the validity thereof. If the
determination is adverse to the claimant, the Committee shall furnish to the
claimant within 90 days after the receipt of the claim a written notice setting
forth the following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent provisions of the Plan on which the
denial is based;
(3) A description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of why such material or
information is necessary; and
(4) Appropriate information as to the steps to be taken if the claimant
wishes to submit his or her claim for review.
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(c) In the event of a denial of a claim, the claimant or his duly
authorized representative may appeal such denial to the Committee for a full and
fair review of the adverse determination. Claimant's request for review must be
in writing and made to the Committee within 60 days after receipt by claimant of
the written notification required under Section 11.4(b); provided, however, such
60 day period shall be extended if circumstances so warrant. Claimant or his
duly authorized representative may submit issues and comments in writing which
shall be given full consideration by the Committee in his review.
(d) The Committee may, in its sole discretion, conduct a hearing. A request
for a hearing made by claimant will be given full consideration. At such
hearing, the claimant shall be entitled to appear and present evidence and be
represented by counsel.
(e) A decision on a request for review shall be made by the Committee not
later than 60 days after receipt of the request; provided, however, in the event
of a hearing or other special circumstances, such decision shall be made not
later than 120 days after receipt of such request. If it is necessary to extend
the period of time for making a decision beyond 60 days after the receipt of the
request, the claimant shall be notified in writing of the extension of time
prior to the beginning of such extension.
(f) The Committee's decision on review shall state in writing the specific
reasons and references to the Plan provisions on which it is based. Such
decision shall be promptly provided to the claimant. If the decision on review
is not furnished in accordance with the foregoing, the claim shall be deemed
denied on review.
11.5 The Committee shall have the power to allocate its responsibilities
among its several members, except that all matters involving the hearing of and
decision on the claims and the review of the determination of benefits shall be
made by the full Committee; provided, however, that no member of the Committee
shall participate in any matter relating solely to himself.
11.6 To the extent required by law, the Committee shall give notice in
writing to all interested parties of any amendment of this Plan and/or Trust
Agreement and of any application to any government agency for any determination
of the effect of any such amendment on the Plan within the jurisdiction of that
agency.
11.7 (a) The Committee shall administer the Plan and the Trust Agreement
forming a part thereof under uniform rules of general application.
(b) The Committee or any member thereof:
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(1) May serve under the Plan and/or the Trust Agreement in one or more
fiduciary capacities, as that term is defined in ERISA; and
(2) May resign by giving written notice thereof to the Chief Executive
Officer of Delaware Group Delaware Fund, Inc. not less than fifteen (15) days
before the effective date of such resignation; and
(3) May be removed at any time, without cause, by the Board of Directors of
Delaware Group Delaware Fund, Inc.
ARTICLE XII
AMENDMENT, CONSOLIDATION, MERGER OR TERMINATION
-----------------------------------------------
12.1 Delaware Group Delaware Fund, Inc. may amend the Plan and the Trust
Agreement in any manner and at any time by action of its Board of Directors;
provided, however, that no amendment shall deprive any Participant or his
Beneficiary of any vested interest he may have hereunder unless the amendment is
for the purpose of conforming the Plan to the requirements of the Code or any
other applicable law. No amendment which affects the rights, responsibilities or
duties of the Trustee may be made without the Trustee's written consent. No
amendment shall be made to the Plan which has the effect of eliminating or
reducing an early retirement benefit or a retirement-type subsidy, eliminating
an optional form of benefit or decreasing a Participant's account balance with
respect to benefits attributable to service before the amendment. Further, if
the vesting schedule of the Plan is amended, in the case of an Employee who is a
Participant as of the later of the date such amendment is adopted or the date it
becomes effective, the nonforfeitable percentage (determined as of such date) of
such Employee's right to his Employer derived account balance will not be less
than his percentage computed under the Plan without regard to such amendment.
12.2 Any Participant on the effective date of an amendment who is not
actively participating in the Plan on such effective date shall not benefit from
an amendment unless otherwise required by law or unless such amendment is
specifically made applicable to such Participant.
12.3 In the event of any merger or consolidation with, or transfer of
assets or liabilities to, any other plan, each Participant shall be entitled to
a benefit after the merger, consolidation or transfer (if the Plan then
terminated) which is not less than the benefits he would have been entitled to
receive immediately before the merger, consolidation or transfer (if the Plan
had then terminated).
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12.4 The Employer intends to continue the Plan indefinitely but reserves
the right to discontinue contributions, terminate or partially terminate the
Plan at any time. In the event of a complete discontinuance of contributions,
termination or partial termination of the Plan, the interests of all
Participants affected shall become nonforfeitable. Upon termination of the Plan,
the Employer shall in its complete discretion notify the Trustee to either hold
all assets of the Trust Fund and make payments in accordance with the terms of
the Plan or distribute to each Participant his net account balance in a lump sum
payment in cash or kind. The Employer's contribution to the Trust Fund or the
income thereof shall not be paid to, or shall not revert to Employer and shall
not be used for any purpose other than the exclusive benefit of the Participants
or their Beneficiaries.
ARTICLE XIII
MISCELLANEOUS
-------------
13.1 To the extent permitted by law, it is a condition of the Plan that the
benefits provided hereunder shall not be subject to assignment, anticipation,
alienation, attachment, levy or transfer, and any attempt to do so shall not be
recognized. The preceding sentence shall also apply to the creation, assignment
or recognition of a right to any benefit payable with respect to a Participant
pursuant to a domestic relations order, unless such order is determined to be a
qualified domestic relations order as defined in Section 414(p) of the Code. If
provided by the terms of a qualified domestic relations order, a distribution of
benefits may be made from the Plan to the alternate payee under such order in a
single lump sum as soon as practicable following the determination by the
Administrative Committee that the order constitutes a qualified domestic
relations order. Payment of benefits may be made to the alternate payee even
though the Participant identified in the order has not attained the earliest
retirement age under the Plan. For purposes of this Section 13.1, the "earliest
retirement age" means the earlier of (i) the date in which the Participant is
entitled to a distribution under the Plan or (ii) the later of the date the
Participant attains age 50 or the earliest date on which the Participant would
begin receiving benefits if the Participant separated from service.
13.2 Nothing herein contained shall be deemed to give any Employee the
right to be retained in the employ of Employer or to interfere with the right of
the Employer to discharge any Employee at any time, nor shall it be deemed to
give the Employer the right to require any Employee to remain in its employ, nor
shall it interfere with the Employee's right to terminate his employment at any
time.
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13.3 All expenses incurred by the Trustees in the administration of the
Fund, including but not limited to the compensation of counsel, accountants,
Trustees, other agents or fiduciaries, shall be charged against the Employer,
unless otherwise paid by the Fund.
13.4 This Plan shall be interpreted in accordance with the laws of the
Commonwealth of Pennsylvania, except to the extent superseded by ERISA as in
effect from time to time.
ARTICLE XIV
LOANS
-----
14.1 The Committee, in its sole discretion, may direct the Trustees to make
a loan to a Participant, who is a party-in-interest, as defined in Section 3(14)
of ERISA, from the Participant's account balance upon receipt of a written
request from the Participant. The total amount of any such loan (when added to
the outstanding balance of all other loans to the Participant under the Plan or
any other qualified plan of the Employer) shall not exceed the lesser of $50,000
or 50% of the Participant's vested account balance. The $50,000 limitation shall
be reduced by the excess, if any, of the highest outstanding balance of loans to
the Participant from the Plan during the one-year period ending on the day
before the date on which such loan was made over the outstanding balance of
loans from the Plan to the Participant on the date that such loan was made.
14.2 A request by a Participant for a loan shall be made in writing to the
Committee and shall specify the amount of the loan. The terms and conditions on
which the Committee shall approve loans under the Plan shall be applied on a
reasonably equivalent basis with respect to all Participants. If a Participant's
request for a loan is approved by the Committee, the Committee shall furnish the
Trustees with written instructions directing the Trustees to make the loan in a
lump sum payment of cash to the Participant. In making any loan payment under
this Article XIV, the Trustees shall be fully entitled to rely on the
instructions furnished by the Committee, and shall be under no duty to make any
inquiry or investigation with respect thereto.
14.3 Loans shall be made on such terms and subject to such limitations as
the Committee may prescribe from time to time, provided that any such loan shall
be evidenced by a written note, shall bear a reasonable rate of interest on the
unpaid principal thereof, shall be adequately secured, and shall be repaid by
the Participant over a period not to exceed five years.
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14.4 Any loan to a Participant under the Plan shall be secured by the
pledge of not more than 50% percent of the Participant's right, title and
interest in his vested account balance. Such pledge shall be evidenced by the
execution of a promissory note by the Participant.
14.5 The Committee shall have the sole responsibility for insuring that a
Participant timely makes all loan repayments, and for notifying the Trustees in
the event of any default by the Participant on the loan. Each loan repayment
shall be paid to the Trustees, and shall be accompanied by written instructions
from the Committee that identifies the Participant on whose behalf the loan
repayment is being made. Repayment of loans shall be made solely by means of
payroll deductions, or such other manner approved by the Committee.
14.6 In the event of a default by a Participant on a loan repayment, all
remaining principal payments on the loan shall be immediately due and payable.
The Committee shall be authorized (to the extent permitted by law) to take any
and all actions necessary and appropriate to enforce collection of an unpaid
loan. However, in the event of a default, foreclosure on the note and attachment
of security will not occur until a distributable event occurs under the Plan.
14.7 Upon the occurrence of a Participant's retirement or death, or earlier
distribution of benefits, the unpaid balance of any loan, including any unpaid
interest, shall be deducted from any payment or distribution from the Trust Fund
to which such Participant or his Beneficiary may be entitled and his vested
interest in his account shall be reduced.
14.8 A loan to a Participant shall be considered an investment of the
separate account(s) of the Participant from which the loan is made. All loan
repayments shall be credited to such separate account(s) and reinvested in the
investment company fund designated by the Participant.
14.9 A loan may not be made to a Participant who owns (or is considered as
owning within the meaning of Section 318(a)(1) of the Internal Revenue Code)
more than 5% of the outstanding stock of the Employer.
14.10 For loans granted or renewed on or after the last day of first Plan
Year beginning on or after January 1, 1989, the Committee shall issue written
loan guidelines, which shall form part of the Plan, describing the procedures
and conditions for making loans, and may revise those guidelines at any time,
and for any reason.
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ARTICLE XV
LIMITATIONS ON ALLOCATIONS
--------------------------
15.1 The provisions of this Article XV shall be effective for limitation
years beginning after December 31, 1986.
(a) Notwithstanding any provisions of this Plan to the contrary, the annual
additions which may be credited to a Participant's account for any limitation
year will not exceed the lesser of the maximum permissible amount or any other
limitation contained in this Plan.
(b) As soon as is administratively feasible after the end of the limitation
year, the maximum permissible amount for the limitation year will be determined
on the basis of the Participant's actual compensation for the limitation year.
(c) In the event that it is determined that because of the allocation of
forfeitures, a reasonable error in estimating a Participant's annual
compensation or under other limited facts and circumstances permitted by the
Commissioner of the Internal Revenue Service, if there is an excess amount the
excess will be disposed of as follows:
(1) If the Participant is covered by the Plan at the end of the limitation
year, the excess amount shall be used to reduce employer contributions
(including any allocation of forfeitures) for such Participant in the next
limitation year, and each succeeding limitation year if necessary;
(2) If the Participant is not covered by the Plan at the end of the
limitation year, the excess amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future employer
contributions (including allocation of any forfeitures) for all remaining
Participants in the next limitation year, and each succeeding limitation year if
necessary;
(3) If a suspense account is in existence at any time during the limitation
year pursuant to this Section, it will not participate in the allocation of
investment gains and losses. The entire amount allocated to Participants from a
suspense account, including any such gains or other income or less any losses is
considered an annual addition.
(d) For the purpose of applying the limitations under this Article, all
defined contribution plans maintained by the employer are to be considered as a
single plan.
15.2 Definitions. For purposes of this Article only, the following
definitions and rules of interpretation will apply:
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(a) "annual additions" -- The sum of the following amounts credited to a
Participant's account for the limitation year:
(1) employer contributions;
(2) forfeitures;
(3) voluntary Employee contributions;
(4) amounts allocated after March 31, 1984, to an individual medical
account, as defined in Section 415(1)(1) of the Code, which is part of a pension
or annuity maintained by the employer;
(5) amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a key
employee, as defined in Section 419A(d)(3) of the Code, under a welfare benefit
fund as defined in Section 419(e) of the Code, maintained by the employer; and
(6) excess amounts applied under this Article in the limitation year to
reduce employer contributions.
(b) "compensation" -- a Participant's earned income, wages, salaries, and
fees for professional services and other amounts received (without regard to
whether an amount is paid in cash) for personal services actually rendered in
the course of employment with the employer to the extent that the amounts are
includable in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits,
reimbursements and expense allowances), and excluding the following:
(1) Employer contributions to a plan of deferred compensation which are not
includable in the Employee's gross income for the taxable year in which
contributed, or Employer contributions under a simplified employee pension to
the extent such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(2) Amounts realized from the exercise of a nonqualified stock option, or
when restricted stock (or property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and
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(4) Other amounts which received special tax benefits, or contributions
made by the employer (whether or not under a salary reduction agreement) towards
the purchase of an annuity described in Section 403(b) of the Code (whether or
not the amounts are actually excludable from the gross income of the Employee);
and
(5) Any contribution for medical benefits (within the meaning of Section
419A(f)(2) of the Code) after separation from service which is otherwise treated
as an annual addition; and
(6) Any amount otherwise treated as an annual addition under Section
415(i)(1) of the Code.
For purposes of applying the limitations of this Article, compensation for
a limitation year is the compensation actually paid or includable in gross
income during such year.
Notwithstanding the preceding sentence, compensation for a Participant who
is permanently and totally disabled (as defined in Section 37(e)(3) of the Code)
is the compensation such Participant would have received for the limitation year
if the Participant had been paid at the rate of compensation paid immediately
before becoming permanently and totally disabled; such imputed compensation for
the disabled Participant may be taken into account only if the Participant is
not an officer, an owner, or highly compensated, and contributions made on
behalf of such Participant are nonforfeitable when made.
(c) "employer" -- The Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in Section 414(b) of the Code as
modified by Section 415(h) of the Code), all commonly controlled trades or
businesses (as defined in Section 414(c) of the Code as modified by Section
415(h) of the Code), or affiliated service groups (as defined in Section 414(m)
of the Code) of which the adopting Employer is a part.
(d) "excess amount" -- The excess of the Participant's annual additions for
the limitation year over the maximum permissible amount.
(e) "limitation year" -- Effective April 2, 1989, the twelve-month period
beginning April 2 and ending April 1. Prior to April 2, 1989, the limitation
year is the twelve-month period from November 1 through the following October
31, except the limitation year beginning November 1, 1988 shall end April 1,
1989.
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(f) "maximum permissible amount" -- The lesser of $30,000 (or, if greater,
1/4 of the dollar limitation in effect under Section 415(b)(1)(A) of the Code)
or twenty-five percent (25%) of the Participant's compensation for the
limitation year.
ARTICLE XVI
TOP HEAVY DEFINITIONS AND RULES
-------------------------------
16.1 Key employee. An Employee or former Employee, (or the Beneficiary of
such an Employee or former Employee) who at any time during the determination
period was:
(a) An officer of the Employer having an annual compensation greater than
fifty percent (50%) of the amount in effect under Section 415(b)(1)(A) of the
Code for any such Plan Year;
(b) One of the ten Employees having annual compensation from the Employer
of more than the limitation in effect under Section 415(c)(1)(A) of the Code and
owning (or considered as owning within the meaning of Section 318 of the Code)
the largest interests in the Employer;
(c) A person owning (or considered as owning within the meaning of Section
318 of the Code) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more then five percent (5%) of the total combined
voting power of ail stock of the Employer, or
(d) A person who has annual compensation from the Employer of more than
$150,000 and who would be described in (c) hereof if one percent (1%) were
substituted for five percent (5%).
For purposes of (a) above, no more than fifty (50) Employees (or, if lesser, the
greater of three or ten percent of the Employees will be treated as officers.)
For purposes of (b), if two Employees have the same interest in the Employer,
the Employee having greater annual compensation from the Employer will be
treated as having a larger interest. For purposes of this Article the term
"compensation" shall have the same meaning as provided for in Article XV.
The determination period is the Plan Year containing the determination date
as defined in Section 16.8, and the four (4) preceding Plan Years. The
determination of who is a key employee will be made in accordance with the rules
and regulations under Section 416(i)(1) of the Code.
16.2 Non-key employee. Any Employee who is not a key employee. In addition,
any Beneficiary of a non-key employee will be treated as a non-key employee.
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16.3 Permissive aggregation group. The required aggregation group of plans
plus any other plan or plans of the Employer, which considered as a group with
the required aggregation group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
16.4 Required aggregation group.
(a) Each qualified plan of the Employer in which at least one key employee
participates or participated at any time during the determination period
(regardless of whether the plan has terminated), and
(b) Any other qualified plan of the Employer which enables a plan described
in (a) to meet the requirements of Sections 401 (a)(4) and 410 of the Code.
16.5 Top-heavy plan. This Plan is top-heavy for any Plan Year if any of the
following conditions exist;
(a) If the top-heavy ratio for this Plan exceeds sixty percent (60%) and
this Plan is not part of any required aggregation group or permissive
aggregation group of plans.
(b) If this Plan is part of a required aggregation group of plans but not
part of a permissive aggregation group and the top-heavy ratio for the required
aggregation group of plans exceeds sixty percent (60%).
(c) If this Plan is a part of a permissive aggregation group of plans and
the top-heavy ratio for the required aggregation group exceeds sixty percent
(60%) and the top-heavy ratio for the permissive aggregation group exceeds sixty
percent (60%).
16.6 Super top-heavy plan. For any Plan Year in which this Plan would be a
Top-Heavy Plan pursuant to Section 16.5 above if "ninety percent (90%)" were
substituted for "sixty percent (60%)" at each place where "sixty percent (60%)"
appears therein.
16.7 Top-heavy ratio.
(a) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and has not maintained any
defined benefit plan which during the five (5) year period ending on the
determination date has or has had accrued benefits, the top-heavy ratio for this
Plan alone or for the required or permissive aggregation group as appropriate is
a fraction, the numerator of which is the sum of the account balances of all key
employees as of the determination date (including any part of any account
balance distributed in the five (5) year period ending on the determination
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date), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the five (5) Year
period ending on the determination date), both computed in accordance with
Section 416 of the Code and the regulations thereunder. Both the numerator and
denominator of the top-heavy ratio are increased to reflect any contribution not
actually made as of the determination date, but which is required to be taken
into account on that date under Section 416 of the Code and the regulations
thereunder.
(b) If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and maintains or has maintained
one or more defined benefit plans which during the five (5) year period ending
on the Determination Date has or has had any accrued benefits, the top-heavy
ratio for any required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all key employees determined
in accordance with (2) above, and the present value of accrued benefits under
the aggregated defined benefit plan or plans for all key employees as of the
determination date, and the denominator of which is the sum of the account
balances under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (a) above, and the present value of
accrued benefits under the aggregated defined benefit plan or plans for all
Participants as of the determination dates, all determined in accordance with
Section 416 of the Code and the regulations thereunder. The accrued benefits
under a defined benefit plan in both the numerator and denominator of the
top-heavy ratio are increased for any distribution of an accrued benefit made in
the five year period ending on the determination date.
(c) For the purposes of (a) and (b) above, the value of account balances
and the present value of accrued benefits will be determined as of the most
recent valuation date that falls within or ends with the twelve (12) month
period ending on the determination date, except as provided in Section 416 of
the Code and the regulations thereunder for the first and second plan years of a
defined benefit plan. The account balances and accrued benefits of a Participant
(1) who is a non-key employee but who was a key employee in a prior year, or (2)
who has not been credited with at least one Hour of Service with any Employer
maintaining the Plan at any time during the five (5) year period ending on the
determination date will be disregarded. The calculation of the top-heavy ratio,
and the extent to which distributions, rollovers, and transfers are taken into
account will be made in accordance with Section 416 of the Code and the
regulations thereunder. When aggregating plans the value of account balances and
accrued benefits will be calculated with reference to the determination dates
that fall within the same calendar year. If any individual has not received
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any compensation from any employer maintaining the plan (other than benefits
under the Plan) at any time during the five (5) year period ending on the
determination date, any accrued benefit for such individual (and the account
of such individual) will not be taken into account.
Effective for Plan Years beginning after December 31, 1986, the accrued
benefit of a Participant other than a key employee shall be determined under (i)
the method, if any, that uniformly applies for accrual purposes under all
defined benefit plans maintained by the Employer or (ii) if there is no such
method, as if such benefit accrued not more rapidly than the slowest accrual
rate permitted under the fractional rule of Section 411(b)(1)(C) of the Code.
16.8 Determination date. With respect to any Plan Year subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that Plan Year.
16.9 Valuation date. The last day of the Plan Year.
16.10 Present value. Present value will be based upon the interest and
mortality rates specified in the Employer's defined benefit plan.
16.11 Minimum Allocation.
(a) If in any Plan Year the Plan is a Top Heavy Plan and the Employer does
not maintain any qualified defined benefit plan in addition to this Plan, except
as provided in (b) and (c) below, the Employer contributions and forfeitures
allocated on behalf of any Participant who is a non-key employee will not be
less than the lesser of three percent (3%) of such Participant's compensation or
the largest percentage of Employer contributions and forfeitures, as a
percentage of the first $200,000 of the key employee's compensation (as defined
in Section 15.2(b)), and as limited by Section 401(a)(17) of the Code, allocated
on behalf of any key employee for that year. The minimum allocation is
determined without regard to any Social Security contributions. This minimum
allocation will be made even though, under other Plan provisions, the
Participant would not otherwise be entitled to receive an allocation, or would
have received a lesser allocation for the year because of the Participant's
failure to complete 1,000 Hours of Service. The minimum allocation (if any)
required under this paragraph (a) shall be made to this Plan only to the extent
such allocation is not made for the Participant under any other defined
contribution plan(s) maintained by the Employer.
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(b) In the event the Employer maintains a qualified defined benefit plan(s)
in addition to this Plan, the Employer will provide a minimum allocation at
least equal to five percent (5%) of compensation (as defined in Section 15.2(b))
to each non-key employee, entitled under (a) above to receive a minimum
allocation, who is covered under this Plan and the qualified defined benefit
plan(s). If this Plan enables a defined benefit plan to meet the requirements of
Section 401(a) or 410 of the Code, the minimum allocation described in (a) above
must be at least three percent (3%) of a Participant's compensation, regardless
of the largest percentage of Employer contributions and forfeitures of a key
employee's compensation.
(c) The provisions in (a) and (b) above will not apply to any Participant
who was not employed by the Employer on the last day of the Plan Year.
(d) The minimum allocation required under this Section 16.11 (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Sections 411(a)(3)(B) or 411(a)(3)(D) of the Code.
IN WITNESS WHEREOF, Delaware Group Delaware Fund, Inc. has caused this
amended and restated Plan, effective April 1, 1989, to be executed by its duly
authorized officers and its corporate seal to be impressed hereon this 17th day
of November, 1994.
Attest: DELAWARE GROUP DELAWARE FUND, INC.
/s/ George M. Chamberlain, Jr. By: /s/Brian F. Wruble
- ------------------------------ -------------------------
George M. Chamberlain, Jr. Brian F. Wruble
Senior Vice President/Secretary President and Chief
Executive Officer
-43-
<PAGE>
EX-99.B11 CONSENT OF AUDITORS
Consent of Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this Post-
Effective Amendment No. 17 to the Registration Statement (Form N-1A)
(No. 2-97889) of Delaware Group Government Fund, Inc. - Government Income Series
of our report dated September 7, 1995, included in the 1995 Annual Report to
Shareholders of Delaware Group Government Fund, Inc. -Government Income Series.
/s/ ERNST & YOUNG LLP
---------------------
Philadelphia, Pennsylvania
November 16, 1995
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Government Fund, Inc. - Government Income Series
We have audited the accompanying statement of net assets of Delaware Group
Government Fund, Inc. - Government Income Series as of July 31, 1995, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of July 31, 1995, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Government Fund, Inc. - Government Income Series at July 31,
1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
<PAGE>
Philadelphia, Pennsylvania /s/Ernst & Young LLP
--------------------
September 7, 1995 Ernst & Young LLP
<PAGE>
DELAWARE
GROUP
- ----------
IRA APPLICATION
AND TRANSFER FORM
|| PERSONAL IRA
|| SPOUSAL IRA
|| ROLLOVER IRA
(PHOTO OF LARGE KEY) || DIRECT ROLLOVER
|| PARTICIPANT'S SEP/IRA
|| PARTICIPANT'S SARSEP
||=======================================
RETIREMENT
LOGO PLANNING
IS THE KEY
<PAGE>
Welcome to the Delaware Group
DELAWARE Before completing your Individual Retirement Account (IRA)
GROUP Application, please review the following points so you can
========== take advantage of the many options available to you with
your Delaware Group Account.
________________________________________________________________________________
To Open Your Delaware Group IRA:
When opening both a Personal and Spousal IRA be sure to complete a separate
application for yourself and for your non-working spouse. The overall maximum
for both accounts is $2,250 per year with no more than $2,000 in either account.
When making Your Investment Selection, talk to your financial adviser to
determine whether Class A shares or Class B shares are more appropriate for you.
Please indicate which fund, or funds, you have selected for your IRA investments
by checking the appropriate selection box next to the fund(s). There is no limit
to the number of funds you may select as long as you meet the required minimum
investment of $25 per fund. And there is only one $15 annual maintenance fee,
regardless of the number of funds you select for your Delaware Group IRA. This
fee can either be prepaid by you, or debited from your IRA account. Your initial
contribution must total $250.
When making your contribution by check, make your check payable to: Delaware
Management Trust Company, the Custodian of your Delaware Group IRA.
If this is a Rollover IRA, and you received a distribution check made payable to
you, be sure to sign and endorse the back of the check, "Payable to Delaware
Management Trust Company."
For Direct Rollovers, in which he plan assets flow directly from the former
trustee/custodian to Delaware Management Trust Company, please be sure to
complete the separate "Direct Rollover" form included with this package.
Checks representing Direct Rollover assets should be made payable to Delaware
Management Trust Company.
Send your completed and signed Application, along with your contribution and/or
Transfer of Assets or Direct Rollover instructions to:
Delaware Service Company, Inc.
Attn: Retirement Plans Department
1818 Market Street
Philadelphia, PA 19103-3682
Additional IRA Services
To establish an Automatic Investing Plan, where regularly scheduled
contributions are taken directly from your personal checking account and
invested into your Delaware Group IRA, call our offices at the telephone number
listed below. Your Shareholder Services Representative will explain this
valuable program of automatic investing and send you the appropriate sign-up
materials.
If you wish to begin taking systematic withdrawals from your account, you will
also need to complete a Retirement Plan Systematic Withdrawal Plan Form. This
service is available for Class A shares only. Just call the telephone number
listed below to request the form.
If you are 70 1/2 or older and need to take Required Distributions from your
account, please ask for an IRA Required Distribution Election Form. Shareholders
cannot roll over or transfer the minimum amount they are required to receive
during a distribution calendar year.
For Simplified Employee Pension/IRA and
Salary Reduction SEP Participants:
SEP/IRA and SARSEP Participants can also arrange to open a personal Delaware
Group IRA at the same time they establish their plan participant account. No
matter how many different Delaware Group IRAs you open, you only pay one $15
annual maintenance fee.
If you are an Employer Participant in the plan, be sure to complete the
appropriate Employer Adoption Agreement as well as the Participant IRA
Application.
If you have any questions or would like assistance
in completing the Individual Retirement Account Application, please call us at
800-523-1918. In Philadelphia, call 215-988-1241.
Again, welcome to the Delaware Group.
<PAGE>
DELAWARE
GROUP
======== Individual Retirement Account Application =======
1 __________________________________ || || ||-|| ||-|| || || ||
Information Name Social Security Number
About You __________________________________ _____/______/_____
Address Date of Birth
Please __________________________________ ( )_____________( )__________
print. City State Zip Phone: Business Home
===============================================================================
2
Type of IRA
Check one.
| | Personal IRA ($2,000 annual limit)
| | Spousal IRA ($2,250 overall limit for you and your non-working spouse with
no more than $2,000 in either account. Separate applications required.)
| | Rollover IRA (No dollar limit; complete Rollover Information section below
and on page 4 of this Application)
| | Transfer of Assets (No dollar limit; complete the Transfer of Assets Form on
page 7 of this Application)
| | SEP/IRA -- Simplified Employee Pension/IRA Plan ($30,000 overall limit).
Must be accompanied by a Delaware Group SEP Plan Establishment Document
completed by the Employer.
| | Self-Directed SEP/IRA -- Simplified Employee Pension/IRA Plan ($30,000
overall limit). Must be accompanied by IRS Form 5305-SEP.
| | SARSEP -- Salary Reduction SEP/IRA Plan ($8,994 salary deferral limit in
1993, indexed each year). Must be accompanied by a Delaware Group SARSEP
Plan Establishment Document completed by the Employer.
| | Self-Directed SARSEP -- Salary Reduction SEP/IRA Plan ($8,994 salary
deferral limit in 1993, indexed each year). Must be accompanied by IRS Form
5305A-SEP.
For SEP/IRA & SARSEP plans, please complete the following:
________________________________________________________________________________
Company Name
________________________________________________________________________________
Address of Employer
________________________________________________________________________________
City State Zip
| | | | - | | | | | | | | | | | | | |
Employer Tax I.D. Number
| | Check here if you are a new participant in an existing
SEP/IRA or SARSEP plan.
<TABLE>
<CAPTION>
====================================================================================================================================
(Employer Contribution) (Salary
IRA SEP/IRA Reduction
Current Prior Rollover/ Current Prior Contribution)
3 Year Year Transfer Year Year SARSEP
------------------- --------- ------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Your
Investment Initial Contribution $_____ $_____ $_____ $_____ $_____ $_____
Selections Delaware Group -- Equity Funds
| | Decatur Income || Class A
Minimum initial Fund || Class B _____% _____% _____% _____% _____% _____%
contribution: | | Decatur Total || Class A
$250. Minimum Return Fund || Class B _____% _____% _____% _____% _____% _____%
investment per | | DelCap Fund || Class A
fund: $25. || Class B _____% _____% _____% _____% _____% _____%
Remember to | | Trend Fund || Class A
check off your || Class B _____% _____% _____% _____% _____% _____%
fund(s) selection. | | Value Fund || Class A
|| Class B _____% _____% _____% _____% _____% _____%
Please do not | | International || Class A
use fractional Equity Fund || Class B _____% _____% _____% _____% _____% _____%
percentages, for | | Dividend || Class A
example 33 1/3, Growth Fund || Class B _____% _____% _____% _____% _____% _____%
and be sure | | Delaware Fund || Class A
percentages || Class B _____% _____% _____% _____% _____% _____%
total 100% Income Funds
| | Delchester Fund || Class A
Investing for || Class B _____% _____% _____% _____% _____% _____%
prior year can | | U.S. Govt. Fund || Class A
only be done || Class B _____% _____% _____% _____% _____% _____%
prior to the tax | | Treasury Reserves || Class A
filing deadline. Intermediate Fund || Class B _____% _____% _____% _____% _____% _____%
If no year is Money Market Funds
designated, | | Delaware || Class A
current year will Cash Reserve || Class B _____% _____% _____% _____% _____% _____%
be assumed. || Consultant Class
| | U.S. Govt. || Class A
Money Fund || Consultant Class_____% _____% _____% _____% _____% _____%
Other
| | __________ || Class A
|| Class B _____% _____% _____% _____% _____% _____%
| | __________ || Class A
|| Class B _____% _____% _____% _____% _____% _____%
TOTALS 100% 100% 100% 100% 100% 100%
</TABLE>
<PAGE>
================================================================================
4 Source of Your Contribution
| | Contribution by Check -- Total Dollar Amount of Initial Investment: $______
| | IRA to IRA Transfer of Assets -- Make sure you complete and sign the
attached Transfer of Assets Form on page 7.
| | Director Rollover -- Complete and sign the enclosed Direct Rollover Form.
| | Broker-Placed Phone Order
________________________________________________________________________________
Delaware Confirmation Number
________________________________________________________________________________
Order Date
________________________________________________________________________________
Number of Shares
________________________________________________________________________________
Name of Fund
| | Contributing from an Existing Delaware Group Account -- convert $__________
from my regular fund account #________________to this IRA account. If your
regular fund account is registered as a joint account, we require a
signature guarantee from the joint owner.
================================================================================
5 Rollover Information Complete all that apply. Includes Direct Rollovers from
Qualified plans or 403(b)s.
| | IRA Rollover -- I hereby elect to treat this contribution as a rollover
contribution. I understand that this is an irrevocable election. The source
of the rollover is from:
| | A Qualified Plan
| | A 403(b) Plan
| | Another IRA
| | A Qualified Plan or IRA or 403(b) by Beneficiary (spouse only)
| | Death Benefit IRA -- Surviving spouse does not elect to treat the death
benefit rollover as his or her own IRA
| | Rollover IRA -- Surviving Spouse does elect to treat the death benefit
rollover as his or her own IRA
| | Rollover after age 70 1/2 -- Pursuant to IRS Regulations, I hereby certify
that I am not rolling over any minimum amount required to be distributed to
me with respect to any applicable distribution calendar year. In order to
receive required minimum distributions in the future under your Delaware
Group IRA, please contact the Delaware Group and we will send you an IRA
Required Distribution Election Form.
================================================================================
6 Additional Services for Your Consideration
These optional services are available as special elections for your Delaware
Group IRA.
Consult the prospectus(es) of the fund(s) for more details on the terms of these
optional services.
If you have further questions, ask your financial adviser or call us at
800-523-1918. In Philadelphia call 215-988-1241.
| | Wealth Builder Option -- I authorize Delaware Group to transfer $__________
($100 or more) per month, through liquidation of shares in this fund, to one
or more other Delaware Group funds ($100 minimum per fund) under this IRA.
Note: For Class A accounts, Wealth Builder transactions must be directed to
another Class A account. For Class B accounts, Wealth Builder transactions
must be directed to another Class B account.
_______________________________________________________________________________
Name of Fund from Section 3
_______________________________________________________________________________
Name of Fund from Section 3
_______________________________________________________________________________
New Fund (new account will be established)
_______________________________________________________________________________
New Fund (new account will be established)
$_______________________________________________________________________________
Amount per month
$_______________________________________________________________________________
Amount per month
| | Dividend Maximizer -- Dividends and any capital gains are reinvested in the
same fund automatically unless otherwise indicated. I elect to have
dividends and any capital gains under this IRA invested in another IRA
account.
| | New Account -- Name of Fund ________________________________________________
| | Systematic Withdrawal Plan -- If you wish to begin receiving periodic
distributions (available for Class A accounts only) under the Terms and
Conditions of the IRA, please contact our office and we will send you a
Retirement Plan Systematic Withdrawal Plan Form. Please note, if you are age
70 1/2 or older, you should request an IRA Required Distribution Election
Form.
| | Combined Purchases Privilege -- This privilege allows the combining of
shares currently owned in other non-money market Delaware Group funds with
the dollar amount of this IRA Account to determine a reduced sales charge,
if applicable.
Name of Fund Account Number Number of Shares
_____________________ _________________________________________________
_____________________ _________________________________________________
| | Letter of Intention -- This option allows the aggregation of anticipated
purchases by an individual in non-money market Delaware Group funds during a
13-month period, along with any existing assets listed in the Combined
Purchase Privilege Section, to obtain a reduced sales charge. This option is
available for funds with front-end sales charges only, though Class B shares
can be used for purposes of filling Class A Letters of Intention. To learn
more, please see your Fund's current prospectus and sales charge breakpoint
schedule. I have read and agree to the terms of the prospectus(es) of the
fund(s) I have selected on this application, and wish to establish a Letter
Of Intent, although I am not obligated to do so, where my investments in
non-money market funds will aggregate or exceed:
| | $100,000 | | $250,000 | | $500,000 | | $1,000,000
I understand that if I do not satisfy the investment level selected above
that my account will be adjusted to reflect the applicable sales charge.
Note to SEP/IRA SARSEP Participants: A separate Letter Of Intent Form must be
completed by your employer, on behalf of all participants in the Plan, to obtain
a reduced sales charge.
<PAGE>
If this is not a Personal or Spousal IRA, please contact Your financial adviser
or Delaware Group before completing this section.
| | Automatic Investing Plan -- Please transfer $____ ($25 or more for A Shares,
$100 or more for B Shares) from my bank account each month to invest in
_________________________________________. Date of Transfer each month:
Fund Name
| | 1st | | 5th | | 10th | | 15th | | 20th | | 25th
________________________________________________________________________________
Bank Name Bank Account #
________________________________________________________________________________
Name(s) on Bank Account
While we cannot guarantee that your bank will accept this offer, we will ask for
its cooperation. If you discontinue this plan at any time, and your banking
registration has not changed, we can reinstate it immediately via written or
telephone request.
Attach a voided check or deposit slip to avoid delays in processing.
================================================================================
7 Agreement And Beneficiary Designation
Your signature is required.
You can change your Beneficiary Designation at any time by completing a Change
of Beneficiary Designation Form and returning it to Delaware Service Company,
Inc. 1818 Market St. Philadelphia, PA 19103-3682.
Contact Delaware Group for the appropriate Change of Beneficiary Form.
By signing below, I designate the following person(s) to receive any benefit
from my Individual Retirement Account which may become due upon or after my
death according to the terms and conditions of the Plan. I understand that this
Beneficiary Designation will remain in full force and effect unless and until I
revoke this designation by completing a Change of Beneficiary Designation Form
for the Delaware Group Individual Retirement Custodial Account at a later date
and returning it to the Custodian.
Pay to: Primary Beneficiary ___________________________%
_______________________________________________________________________________
Name
_______________________________________________________________________________
Address
_______________________________________________________________________________
City State Zip
____________________________________________________ ____/_____/____________
Relationship Date of Birth
| | | | | | - | | | | - | | | | | | | |
Social Security Number
If more than one Primary Beneficiary is selected and no percentage of plan
benefits is indicated, the assets will be divided equally between the Primary
Beneficiaries.
If no Beneficiary is designated, assets will be paid to your estate.
If the Custodian receives satisfactory proof that the Primary Beneficiary is
deceased, or if more than one Primary Beneficiary is selected and both are
deceased, the assets will be paid to the Contingent Beneficiary as indicated.
Pay to: Primary Beneficiary ___________________________%
_______________________________________________________________________________
Name
_______________________________________________________________________________
Address
_______________________________________________________________________________
City State Zip
____________________________________________________ ____/_____/____________
Relationship Date of Birth
| | | | | | - | | | | - | | | | | | | |
Social Security Number
<PAGE>
Pay to: Contingent Beneficiary ___________________________%
_______________________________________________________________________________
Name
_______________________________________________________________________________
Address
_______________________________________________________________________________
City State Zip
____________________________________________________ ____/_____/____________
Relationship Date of Birth
| | | | | | - | | | | - | | | | | | | |
Social Security Number
If you are married and you do not designate your spouse as your sole Primary
Beneficiary, you should consult with an attorney as to whether applicable law
may require your spouse to sign a written consent to your designation or a
written declaration to give up community or marital property interests in your
IRA. The Custodian shall have no responsibility for determining whether your
Beneficiary Designation is valid under applicable law and shall have no
liability to any person for acting in accordance with your Beneficiary
Designation.
===============================================================================
By signing below, I hereby establish an Individual Retirement Account under
Section 408(a) of the Internal Revenue Code of 1986, as amended, ("the
Code") to provide for my retirement and for the support of my beneficiaries
after my death. I hereby acknowledge receipt of the Terms and Conditions and
Disclosure Statement for the Individual Retirement Account required under the
Income Tax Regulations under Section 408(i) of the Code and am in receipt of an
effective prospectus(es) for the Fund(s) I am investing in. I hereby appoint
Delaware Management Trust Company as Custodian and agree to pay the annual
maintenance fee, currently $15. (If this fee is not included or is not paid by
April 30th annually, it will be debited from your account each May.)
X ___________________________________________ _______________________________
Investor's Signature Date
===============================================================================
Please send your completed and signed application, along with your contribution,
to Delaware Service Company, Inc., Attn: Retirement Plan Department, 1818 Market
Street, Philadelphia, PA 19103-3682. Be sure to make your check payable to
Delaware Management Trust Company.
<PAGE>
================================================================================
Broker Information
To be completed by Investment Dealer.
________________________________________________________________________________
Name of Brokerage Firm
________________________________________________________________________________
Home Office Address
________________________________________________________________________________
Authorized Firm Signature
________________________________________________________________________________
Representative's Name/Number
________________________________________________________________________________
Branch Office Address
________________________________________________________________________________
Representative's Phone Number
================================================================================
Custodian Acceptance
For use by Custodian only.
/s/ Diane Anderson
________________________________________________________________________________
Authorized Officer of Delaware Management Trust Company
================================================================================
DELAWARE
GROUP
=======
The Delaware Group Of Funds
Delaware's family of funds enables investors to match their needs with a broad
range of investment objectives covering the risk-reward spectrum. The following
are available as investment vehicles for any Delaware Group retirement program.
| | Trend Fund
Seeks long-term capital appreciation by investing in securities issued by
small, growth-oriented companies exhibiting a strong potential for capital
appreciation.
| | DelCap Fund
Seeks long-term growth by investing in common stocks and securities
convertible into common stocks of mid-sized companies that have demonstrated
their ability to grow and demonstrate a potential for continued growth.
| | Value Fund
Seeks long-term growth by investing primarily in common stocks of small and
mid-size companies whose market values appear low relative to their
underlying value or potential value.
| | International Equity Fund
Seeks long-term growth without undue risk to principal by investing
primarily in a range of foreign equity securities that have potential for
capital appreciation and income.
| | Decatur Income Fund
Seeks highest possible current income by investing primarily in common
stocks of established companies with strong dividend histories that provide
the potential for income and capital appreciation without undue risk to
principal.
| | Decatur Total Return Fund
Seeks long-term total return by investing primarily in securities that
provide the potential for income and capital appreciation without undue risk
to principal.
| | Dividend Growth Fund
Seeks current income and capital appreciation by investing primarily in
income-producing common stocks. Focuses on common stocks believed to have
the potential for above-average dividend increases over time.
| | Delaware Fund
Seeks long-term growth through a balance of capital appreciation, income and
preservation of capital. Invests in common stock and investment grade bonds.
| | U.S. Government Fund
Seeks high current income consistent with safety of principal through
investment in securities issued by the U.S. government, its agencies or
instrumentalities.
| | Delchester Fund
Seeks high current income as is consistent with reasonable safety by
investing primarily in high-yielding, lower rated corporate bonds, U.S.
government securities and commercial paper issued by companies with the
ability to pay interest and repay principal.
| | Treasury Reserves Intermediate Fund
Seeks to provide a high, stable level of income with a high degree of
principal stability through investments in short- and intermediate-term
securities issued or guaranteed by the U.S. government, its agencies and
instrumentalities.
| | U.S. Government Money Fund
Seeks a high current income with a goal of maintaining a constant share
price by investing in short-term securities issued and/or guaranteed by the
U.S. government, its agencies and instrumentalities.
| | Delaware Cash Reserve
Seeks high current income with a goal of maintaining a constant share price
by investing in high-quality money market instruments with maturities of no
more than one year.
All funds, except U.S. Government Money Fund, currently offer Class A and B
shares. Please consult your financial adviser about which class is more
appropriate for you.
===============================================================================
The Delaware Group investor can seek total return through equity-oriented
investments, stability and current income through fixed-income investments, or
combine these styles to achieve the desired investment balance. As the
investor's needs or objectives change, the exchange privilege enables
investments to be transferred from one fund to another within the Delaware Group
without losing their tax-advantaged status.
<PAGE>
DELAWARE
GROUP
========
IRA Transfer of Assets Form
Use this form to transfer your IRA assets to a Delaware Group IRA. If you don't
have an existing Delaware Group IRA, please fill out an application. If you are
transferring IRA assets from more than one custodial account, please complete a
separate Transfer Form for each transfer. Please note, you must complete a
separate Transfer of Assets Form for each plan trustee/ custodian and/or for
each CD maturity date, if applicable. If you wish to make a direct rollover of
assets from a qualified plan or 403(b), please complete a Direct Rollover form.
================================================================================
Information About Your Delaware Group IRA
_______________________________________________________________________________
Individual's Name
_______________________________________________________________________________
Address
_______________________________________________________________________________
City State Zip
(__________)___________________________________________________________________
Telephone: Home
(__________)___________________________________________________________________
Business
| | | | | | - | | | | - | | | | | | | |
Social Security Number
Select One
| | 1. This is a transfer to a new Delaware Group IRA. My investment choices are
on page 3 of this IRA application.
| | 2. Invest the amount to be transferred into my existing Delaware Group IRA
as follows:
Fund:________ | | Class A | | Class B Percent:_____ Account#:
Fund:________ | | Class A | | Class B Percent:_____ Account#:
Fund:________ | | Class A | | Class B Percent:_____ Account#:
================================================================================
Information About Your IRA to Be Transferred
_______________________________________________________________________________
Name of Present Custodian
_______________________________________________________________________________
Address
_______________________________________________________________________________
City State Zip
___________________________________ (____________)_________________________
Contact Person Phone Number
IRA Account # _________________________________________________________________
Investment Fund # _____________________________________________________________
Investment Fund # _____________________________________________________________
For Certificates of Deposit:
_______________________________________________________________________________
Maturity Date
| | Please do not transfer until my CD matures.
| | Please roll over immediately. I am aware of the early withdrawal penalty.
Type of account you are transferring: | | Personal | | Rollover IRA (With
Qualified Plan or 403(b) assets) | | SEP or SARSEP Please note, you must
complete a separate Transfer of Assets Form for each plan trustee/custodian
and/or for each maturity date, if applicable. If you wish to make a direct
rollover of assets from a qualified plan of 403(b), please complete a Direct
Rollover form.
================================================================================
Your Authorization to Transfer
Your present Custodian may require additional documentation such as a
signature guarantee. Please check with them for their requirements.
<PAGE>
I have established an IRA with Delaware Management Trust Company as the
Custodian. Please roll over the amount listed below to them as successor
Custodian.
| | Complete -- Liquidate ALL of the above referenced account(s)
transfer IN CASH.
| | Partial -- Liquidate assets totaling $ ________________and transfer IN CASH.
| | Re-registration (Transfer in Kind) -- My IRA includes the Delaware Group
fund(s) listed below. Please re-register with Delaware Management Trust
Company as the Custodian. Send Delaware Group any outstanding Delaware Group
Fund certificates and proper documentation to re-register these shares.
Note, the Delaware Management Trust Company can accept only Delaware Group
funds for re-registration.
_____________________________________ _______________________________________
Fund Name Account Number
| | Transfer on or after age 70 1/2 -- Pursuant to IRS Regulations, I hereby
certify that this Transfer will not included any minimum amount required to
be distributed to me with respect to any applicable distribution calendar
year. In order to receive required minimum distributions in the future under
your Delaware Group IRA, please contact the Delaware Group and we will send
you an IRA Required Distribution Election Form.
SIGN HERE
X ____________________________________ _________________________
Your Signature - must be in ink Date
===============================================================================
Custodian Acceptance
For use by Custodian only.
Please be advised that the Delaware Management Trust Company is acting as
Custodian and is willing to accept the proceeds from the above referenced
Custodial Account.
Please make check payable to: Delaware Management Trust
Company, For the Benefit Of: (Participant), and mail to Delaware Management
Trust Company, Transfer of Assets Department, 1818 Market Street, Suite 1604,
Philadelphia, PA 19103-3682.
________________________________________________________ _________________
Authorized Officer of Delaware Management Trust Company Date
<PAGE>
DELAWARE
GROUP
========
IRA Transfer of Assets Form
Use this form to transfer your IRA assets to a Delaware Group IRA. If you don't
have an existing Delaware Group IRA, please fill out an application. If you are
transferring IRA assets from more than one custodial account, please complete a
separate Transfer Form for each transfer. Please note, you must complete a
separate Transfer of Assets Form for each plan trustee/ custodian and/or for
each CD maturity date, if applicable. If you wish to make a direct rollover of
assets from a qualified plan or 403(b), please complete a Direct Rollover form.
================================================================================
Information About Your Delaware Group IRA
_______________________________________________________________________________
Individual's Name
_______________________________________________________________________________
Address
_______________________________________________________________________________
City State Zip
(__________)___________________________________________________________________
Telephone: Home
(__________)___________________________________________________________________
Business
| | | | | | - | | | | - | | | | | | | |
Social Security Number
Select One
| | 1. This is a transfer to a new Delaware Group IRA. My investment choices
are on page 3 of this IRA application.
| | 2. Invest the amount to be transferred into my existing Delaware Group IRA
as follows:
Fund:________ | | Class A | | Class B Percent:_____ Account#:
Fund:________ | | Class A | | Class B Percent:_____ Account#:
Fund:________ | | Class A | | Class B Percent:_____ Account#:
================================================================================
Information About Your IRA to Be Transferred
_______________________________________________________________________________
Name of Present Custodian
_______________________________________________________________________________
Address
_______________________________________________________________________________
City State Zip
___________________________________ (____________)_________________________
Contact Person Phone Number
IRA Account # _________________________________________________________________
Investment Fund # _____________________________________________________________
Investment Fund # _____________________________________________________________
For Certificates of Deposit:
_______________________________________________________________________________
Maturity Date
| | Please do not transfer until my CD matures.
| | Please roll over immediately. I am aware of the early withdrawal penalty.
Type of account you are transferring: | | Personal | | Rollover IRA (With
Qualified Plan or 403(b) assets) | | SEP or SARSEP Please note, you must
complete a separate Transfer of Assets Form for each plan trustee/custodian
and/or for each maturity date, if applicable. If you wish to make a direct
rollover of assets from a qualified plan of 403(b), please complete a Direct
Rollover form.
================================================================================
Your Authorization to Transfer
Your present Custodian may require additional documentation such as a signature
guarantee. Please check with them for their requirements.
<PAGE>
I have established an IRA with Delaware Management Trust Company as the
Custodian. Please roll over the amount listed below to them as successor
Custodian.
| | Complete -- Liquidate ALL of the above referenced account(s)
transfer IN CASH.
| | Partial -- Liquidate assets totaling $________________ and transfer IN CASH.
| | Re-registration (Transfer in Kind) -- My IRA includes the Delaware Group
fund(s) listed below. Please re-register with Delaware Management Trust Company
as the Custodian. Send Delaware Group any outstanding Delaware Group Fund
certificates and proper documentation to re-register these shares. Note, the
Delaware Management Trust Company can accept only Delaware Group funds for
re-registration.
______________________________________ ________________________________________
Fund Name Account Number
| | Transfer on or after age 70 1/2 -- Pursuant to IRS Regulations, I hereby
certify that this Transfer will not included any minimum amount required to be
distributed to me with respect to any applicable distribution calendar year. In
order to receive required minimum distributions in the future under your
Delaware Group IRA, please contact the Delaware Group and we will send you an
IRA Required Distribution Election Form.
SIGN HERE
X ________________________________________ ____________________________
Your Signature - must be in ink Date
===============================================================================
Custodian Acceptance
For use by Custodian only.
Please be advised that the Delaware Management Trust Company is acting as
Custodian and is willing to accept the proceeds from the above referenced
Custodial Account.
Please make check payable to: Delaware Management Trust Company, For the Benefit
Of: (Participant), and mail to Delaware Management Trust Company, Transfer of
Assets Department, 1818 Market Street, Suite 1604, Philadelphia, PA 19103-3682.
_______________________________________________________ _____________________
Authorized Officer of Delaware Management Trust Company Date
<PAGE>
DELAWARE GROUP
| | Delaware Management Company, Inc.
Investment Manager
| | Delaware Distributors, L.P.
National Distributor
| | Delaware Service Company, Inc.
Shareholder Servicing, Dividend
Disbursing and Transfer Agent
| | Delaware Management Trust Company
Custodian
DELAWARE
GROUP
========
1818 Market Street
Philadelphia, PA 19103-3682
800-523-1918 Nationwide
215-988-1241 in Philadelphia
Use of this material with the public, either in written or oral form, can only
be made in conjunction with the prospectuses of the funds in the Delaware Group
being offered. The prospectus contains further information, including sales
charges and expenses.
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, they are not obligations
of or guaranteed by any bank and are not FDIC or government insured. In
addition, they involve risk, including possible loss of principal.
RL-102-10/94
<PAGE>
DELAWARE
GROUP
========
IRA Direct Rollover Form
Use this form to roll over the assets in your Qualified Plan or 403(b) plan to a
Delaware Group IRA. Please note, you must complete a separate IRA Direct
Rollover Form for each plan trustee/custodian and/or for each CD maturity date,
if applicable.
Information About Your Delaware Group IRA
________________________________________________________________________________
Name
________________________________________________________________________________
Address
________________________________________________________________________________
City State Zip
| | | | | | - | | | | - | | | | | | | |
Social Security Number
(__________)____________________________________________________________________
Phone: Home
(__________)____________________________________________________________________
Phone: Business
| | This is a rollover to a new Delaware Group IRA. My investment choices are
on page 3 of the enclosed IRA application.
| | Invest the amount to be rolled over into my existing Delaware Group IRA
as follows:
Fund Name: _________ Percent/Amt: _________ Account #: __________
Fund Name: _________ Percent/Amt: _________ Account #: __________
Fund Name: _________ Percent/Amt: _________ Account #: __________
================================================================================
Information About Your Qualified Plan or 403(b) to be Rolled Over
________________________________________________________________________________
Name of Employer
________________________________________________________________________________
Address
________________________________________________________________________________
City State Zip
____________________________________(________)__________________________________
Contact Person Phone Number
Account Number: ________________________________________________________________
Account Number: ________________________________________________________________
Account Number: ________________________________________________________________
Account Number: ________________________________________________________________
Type of account: | | Qualified Plan | | 403(b)
For Certificates of Deposit:
________________________________________________________________________________
Maturity Date
| | Please do not roll over until my CD matures.
| | Please roll over immediately. I am aware of the early withdrawal penalty.
Name of Financial Institution:
________________________________________________________________________________
<PAGE>
================================================================================
Your Authorization to Roll Over
Your present Custodian may require additional documentation such as a signature
guarantee. Please check with them for their requirements.
I have established an IRA with Delaware Management Trust Company as the
Custodian. Please roll over the amount listed below to them as IRA Custodian.
| | Partial -- Liquidate assets totaling $___________ and directly roll over
IN CASH.
| | Complete -- Liquidate ALL of the above referenced account(s) and directly
roll over IN CASH.
| | Check here if you are age 70 1/2 or older.
Pursuant to IRS Regulations, I hereby certify that I am not rolling over any
minimum amount required to be distributed to me with respect to any
applicable distribution calendar year. In order to receive required minimum
distributions in the future under your Delaware Group IRA, please contact
the Delaware Group and we will send you an IRA Required Distribution
Election Form.
X ______________________________ __________________
Your Signature - must be in ink Date
================================================================================
Custodian Acceptance
For use by Delaware Management Trust Company only.
Please be advised that the Delaware Management Trust Company, as Custodian, is
willing to accept the proceeds from the above-referenced plan as an IRA account
pursuant to Internal Revenue Code Section 408.
Please make check payable to: Delaware Management Trust Company, For the Benefit
Of: (Participant), Direct Rollover; and mail to Delaware Management Trust Co.,
1818 Market Street, Philadelphia, PA 19103-3682.
________________________________________________________ _______________
Authorized Officer of Delaware Management Trust Company Date
RL-102B - 10/93
<PAGE>
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
TABLE OF CONTENTS
Terms and Conditions
Article I. Contributions ....................... 2
Article II. Nonforfeitability .................. 2
Article III. Prohibited Investments ............ 2
Article IV. Required Distributions ............. 2
1. Required Beginning Date ................... 2
2. Changing Method of Payment ................ 2
3. Lifetime Distributions .................... 3
4. Death Distributions ....................... 3
5. Multiple individual Retirement Accounts ... 4
Article V. Reporting ........................... 4
Article VI. Amendment of Plan .................. 4
Article VII. The Custodian ..................... 4
1. Appointment of Agents ..................... 4
2. No Investment Responsibility .............. 4
3. Entire Contract ........................... 4
4. Delaware Service Company, Inc. ............ 5
5. Designation of Beneficiary ................ 5
6. Taxes and Expenses ........................ 5
7. Termination of Account .................... 5
8. Resignation or Removal of Custodian ....... 5
9. Custodian's Fees .......................... 5
10. Agreements with Investment Advisers ....... 5
11. Applicable Law ............................ 5
Disclosure Statement
Revocation ..................................... 6
Requirements of an Individual Retirement Account 6
Eligibility .................................... 6
Contributions .................................. 7
(A) Deductible Contributions .................. 7
(B) Non-deductible Contributions .............. 8
(C) Spousal IRA Contributions ................. 8
(D) Excess Contributions ...................... 8
(E) Rollover Contributions .................... 9
Distributions .................................. 10
(A) Normal Distributions ...................... 10
(B) Required Distributions .................... 10
(C) Distributions After Death ................. 10
Tax Treatment of Distributions ................. 11
(A) Income Tax ................................ 11
(B) Federal Income Tax Withholding ............ 11
(C) Early Withdrawal Tax ...................... 11
(D) Gift Tax .................................. 12
(E) Estate Tax ................................ 12
Borrowing/Prohibited Transactions .............. 12
Reporting to the IRS ........................... 12
(A) Form 5329 ................................. 12
(B) Form 8606 ................................. 12
IRS Approval ................................... 12
IRA Account Balance ............................ 12
Fees and Charges ............................... 13
(A) IRA Fees .................................. 13
(B) Mutual Fund Sales Charges ................. 13
(C) Redemption and Repurchase Charges ......... 13
(D) Further Details ........................... 13
Qualified Tax Advice ........................... 13
1
<PAGE>
DELAWARE MANAGEMENT COMPANY, INC.
Individual Retirement Custodial Account
The Delaware Management Company, Inc. Individual Retirement Custodial
Account (the "Plan"), including the Application which is a part thereof, is
established for the exclusive benefit of the individual ("Applicant") designated
in the Application, or his/her beneficiaries.
W I T N E S S E T H:
WHEREAS, the Applicant desires to provide for retirement and for the
support of his/her beneficiaries upon death; and
WHEREAS, to accomplish this purpose, the Applicant desires to establish an
individual Retirement Account (the "Account") as described in Section 408(a) of
the Internal Revenue Code of 1986, as amended, or any successor statute
(hereinafter referred to as "the Code").
NOW, THEREFORE, for the purposes aforesaid, the Account is established,
effective as of the date of the Application, as follows:
ARTICLE I. CONTRIBUTIONS
Except in the case of a rollover contribution described in Sections 402(c),
403(a)(4), 403(b)(8), 408(d)(3) of the Code, or an employer contribution to a
simplified employee pension plan as described in Section 408(k), the Custodian
will only accept cash and will not accept contributions on behalf of the
Applicant in excess of $2,000 for any taxable year. In no event shall the
Custodian accept a rollover of property other than shares of the Delaware Group
of Funds. Rollover contributions before January 1, 1993 include rollovers
described in Sections 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), or
408(d)(3).
ARTICLE II. NONFORFEITABILITY
The Applicant's interest in the balance in the Account is nonforfeitable.
ARTICLE III. PROHIBITED INVESTMENTS
1. No part of the Account shall be invested in life insurance contracts; nor may
assets of the Account be commingled with other property except in a common trust
fund or common investment fund (within the meaning of Section 408(a)(5) Code).
2. No part of the Account shall be invested incollectibles as defined in
Section 408(m) of the Code.
ARTICLE IV. REQUIRED DISTRIBUTIONS
1. Required Beginning Date. The Applicant's interest in the Account will be
distributed to him/her upon his/her providing Delaware Service Company, Inc.
with instructions as to the method of distribution. The entire interest of the
Applicant in the Account must be or commence to be distributed no later than the
first day of April following the calendar year in which the Applicant attains
age 70 1/2 (the "Required Beginning Date"). Not later than the Required
Beginning Date, the Applicant may elect to have the balance in the Account
distributed:
(a) In a lump sum;
(b) In monthly, quarterly or annual payments or over a period certain not
extending beyond the life expectancy of such Applicant or the joint life
and last survivor expectancy of the Applicant and his/her designated
beneficiary.
2. Changing Method of Payment. Even though distributions may have commenced
pursuant to 1(b) above, the Applicant may receive a distribution of the balance
in the Account in a lump sum or receive distributions under another method of
payment available in 1(b), by providing written notice to Delaware Service
Company, Inc. The Applicant may change the method of payment in 1(b) once a
year, provided: (i) written notice is given to Delaware Service Company, Inc. no
later than December 15 preceding the year in which the method of payment will be
changed and (ii) that distributions are made in accordance with the requirements
of Section 408(a)(6) of the Code and the regulations thereunder.
2
<PAGE>
3. Lifetime Distributions. If the Applicant is living on his/her Required
Beginning Date, the following distribution provisions shall apply:
(a) Required Minimum Distributions. If the Applicant's entire interest in the
account is to be distributed in a manner other than a lump sum, then the
amount to be distributed each year, commencing with the Required Beginning
Date and each year thereafter, must be at least equal to the quotient
obtained by dividing the Applicant's entire interest in the Account on the
December 31 of the preceding year by the applicable life expectancy.
(b) Minimum Distributions before 1989. For calendar years beginning before
January 1, 1989, if the Applicant's spouse is not the designated
beneficiary, the method of distribution selected must ensure that at least
50% of the present value of the amount available for distribution is paid
within the life expectancy of the Applicant.
(c) Minimum Distributions after 1988. For calendar years beginning after
December 31, 1988, the amount to be distributed each year, beginning with
the first calendar year for which distributions are required and then for
each succeeding calendar year, shall not be less than the quotient obtained
by dividing the balance in the Account as of the preceding December 31 by
the lesser of (1) the applicable life expectancy or (2) if the Applicant's
spouse is not the designated beneficiary, the applicable divisor determined
from the table set forth in Q & A-4 of Section 1.401 (a)(9)-2 of the
Proposed Income Tax Regulations. Distributions after the death of the
Applicant shall be calculated using the applicable life expectancy as the
relevant divisor without regard to Section 1401 (a)(9)-2 of the proposed
regulations.
(d) Computation of Life Expectancy. Life expectancy is computed by use of the
expected return multiples in Tables V and VI of Section 1.72-9 of the
Income Tax Regulations. Unless otherwise elected by the Applicant by the
time distributions are required to begin, life expectancies shall not be
recalculated annually. Such election shall be irrevocable as to the
Applicant and will apply to all subsequent years. The life expectancy of a
non-spouse beneficiary may not be recalculated; rather, life expectancy
shall be calculated using the attained age of the beneficiary during the
calendar year in which distributions are required to begin pursuant to this
Section 3, and payments for subsequent years shall be calculated based on
such life expectancy reduced by one for each calendar year which has
elapsed since the calendar year life expectancy was first calculated.
4. Death Distributions. If the Applicant dies before the entire interest is
distributed, the following distribution provisions shall apply:
(a) Distributions beginning before death. If the Applicant dies after
distribution of his/her interest in the Account has begun, the remaining
portion of such interest will continue to be distributed at least as
rapidly as under the method of distribution being used prior to the
Applicant's death. However, if the designated beneficiary is the
Applicant's surviving spouse, the spouse may elect to treat the Account as
his/her own individual retirement account. This election will be deemed to
have been made if such surviving spouse makes a regular contribution to the
Account, makes a rollover to or from the Account, or fails to elect any of
the provisions in paragraph (b) below. Distributions under this Section 4
are considered to have begun if the distributions are made on account of
the individual reaching his or her required beginning date. If the
individual receives distributions prior to the required beginning date and
the individual dies, distributions will not be considered to begin.
(b) Distributions beginning after death. If the Applicant dies before the
distribution of his/her interest in the Account begins, the Applicant's
entire interest will be distributed by December 31 of the calendar year
containing the fifth anniversary of the applicant's death unless the
applicant elects or, if the Applicant has not so elected, the designated
beneficiary or beneficiaries elect that the entire interest be distributed
in accordance with one of the following three provisions:
(i) The Applicant's entire interest will be distributed over a period
certain not greater than the life expectancy of the Applicant's
designated beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which the
Applicant died. The designated beneficiary may elect at any time to
receive greater payments.
(ii) If the designated beneficiary of the Applicant is the Applicant's
surviving spouse, payments may be made to the surviving spouse over
his/her life expectancy commencing on any date prior to the later of (1)
the December 31 of the calendar year immediately following the calendar
year in which the Applicant died and (2) the December 31
3
<PAGE>
of the calendar year in which the Applicant would have attained age
70 1/2. The surviving spouse may accelerate these payments at any time
(i.e., increase the frequency or amount of such payments).
(iii) If the designated beneficiary is the Applicant's surviving spouse, the
spouse may elect to treat the Account as his/her own individual
retirement account. This election will be deemed to have been made if
the surviving spouse makes a regular contribution to the Account, makes
a rollover to or from the Account, or fails to elect any of the above
two provisions.
(c) Computation of Life Expectancy. Life expectancy is computed by use of the
expected return multiples in Tables V and VI of Section 1.72-9 of the
Income Tax Regulations. For purposes of distributions beginning after the
Applicant's death, unless otherwise elected by the surviving spouse by the
time distributions are required to begin, life expectancy shall not be
recalculated annually. Such election shall be irrevocable as to the
surviving spouse and shall apply to all subsequent years. In the case of
any other designated beneficiary, life expectancy shall be calculated using
the attained age of the beneficiary during the calendar year in which
distributions are required to begin in accordance with this Section 4, and
payments for any subsequent calendar year shall be calculated based on such
life expectancy reduced by one for each calendar year which has elapsed
since the calendar year life expectancy was first calculated.
5. Multiple individual Retirement Accounts. An individual may satisfy the
minimum distribution requirements described above by receiving a distribution
from one IRA that is equal to the amount required to satisfy the minimum
distribution requirements for two or more IRAs. For this purpose, the owner
of two or more IRAs may use the "alternative method" described in Notice
88-38, 1988-1 C.B. 524, to satisfy the minimum distribution requirements
described above.
ARTICLE V. REPORTING
1. The Applicant agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under Section 408(i) of the Code
and related regulations.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Applicant as prescribed by the Internal Revenue Service. The Custodian shall
furnish the Applicant with an annual calendar year report concerning the value
of the Account.
ARTICLE VI. AMENDMENT OF PLAN
Delaware Management Company, Inc. may amend this Plan from time to time to
comply with the applicable provisions of the Code and related regulations and
to make any other changes determined by Delaware Management Company, Inc. to
be necessary and desirable.
ARTICLE VII. THE CUSTODIAN
1. Appointment of Agents. The Custodian appoints Delaware Service Company, Inc.
as its agent to receive the Applicant's contributions under this Plan. Delaware
Service Company, Inc., as the Custodian's agent, will deliver the Applicant's
contributions to the Custodian to be invested as provided in the Application.
The Custodian may also appoint one or more broker-dealers as its agent(s),
pursuant to a legally binding agency agreement with such broker-dealer(s), for
purposes of receiving the Applicant's contributions hereunder and receiving
contributions made on behalf of the Applicant pursuant to a simplified employee
pension plan (including a salary reduction SEP).
2. No Investment Responsibility. The Custodian shall have no investment
responsibility or discretion with respect to this Account. The Custodian shall
vote the regulated investment company shares held therein as directed by the
Applicant. If the Applicant does not provide voting instructions to the
Custodian, the Custodian shall vote Account shares in direct proportion to those
voting instructions, on an issue by issue basis, received by the Custodian from
other Individual Retirement Account shareholders of the fund.
3. Entire Contract. This Plan and Application constitute the entire contract
between Applicant and Custodian and, except as provided herein, no
representative of Delaware Management Company, Inc., Delaware Service Company,
Inc., Delaware Distributors, Inc., the Delaware Group of Funds nor any
broker-dealer shall be deemed to be a representative of or acting on
behalf of Custodian, nor shall any such representative have any
4
<PAGE>
authority to make representations or to bind the Custodian beyond the terms of
this document. The Custodian, Delaware Management Company, Inc., Delaware
Service Company, Inc., Delaware Distributors, Inc., the Delaware Group of Funds
and their affiliates shall not be responsible for any liability arising out of
this Plan and Application except such liability as is occasioned by their own
negligence or wilful misconduct. The Custodian and Delaware Service Company,
Inc. shall not be responsible for any action or omission taken in accordance
with any notice, request, instruction, certificate, beneficiary designation or
other instrument reasonably believed by Custodian or Delaware Service Company,
Inc. to be genuine.
4. Delaware Service Company, Inc. The Custodian may employ Delaware Service
Company, Inc. to carry out certain of the Custodian's administrative
functions hereunder in accordance with an agreement between Custodian and
Delaware Service Company, Inc.
5. Designation of Beneficiary. The Applicant shall have the right, by written
notice to Delaware Service Company, Inc., to designate or to change a
beneficiary to receive any benefit to which the Applicant may be entitled in the
event of death prior to the complete distribution of such benefits. If no such
designation is in effect upon the Applicant's death, the beneficiary shall be
the Applicant's estate. The Custodian and Delaware Service Company, Inc. shall
have no responsibility to determine whether any person or persons other than the
Applicant's designated beneficiary may be entitled, under applicable law, to
receive amounts from the Account on account of the death of the Applicant and
shall have no liability to any person for acting in accordance with Applicant's
beneficiary designation.
6. Taxes and Expenses. Any income taxes or other taxes of any kind whatsoever
that may be levied or assessed upon or in respect to the Account, any transfer
taxes incurred in connection with the investment and reinvestment of the assets
of the Account, other administrative expenses incurred by the Custodian in the
performance of its duties, including fees for legal services rendered to the
Custodian, and the compensation to the Custodian shall be paid from the assets
of the Account, unless paid by the Applicant.
7. Termination of Account. This Account shall terminate upon the complete
distribution of the Account to the Applicant or his/her beneficiaries or to
successor individual retirement accounts or annuities.
8. Resignation or Removal of Custodian. The Custodian may resign at any time
upon ninety (90) days notice in writing to the Applicant and to Delaware
Management Company, Inc. or may be removed by Delaware Management Company,
Inc. at any time upon ninety (90) days notice in writing to the Custodian.
Upon such resignation or removal, Delaware Management Company, Inc. will
appoint a successor Custodian. If within sixty (60) days after the
Custodian's resignation or removal, Delaware Management Company, Inc. has not
appointed a successor Custodian which has accepted such appointment, the
Custodian may appoint such successor itself.
9. Custodian's Fees. The Custodian's fees shall be as published or amended
from time to time.
10. Agreements with Investment Advisers. The Custodian, in its discretion, may
enter into an agreement with an investment adviser, registered under the
Investment Adviser's Act of 1940, for the purpose of redeeming investment
company shares held hereunder to pay for market timer services rendered by the
adviser with respect to the Applicant's Account.
11. Applicable Law. This Plan shall be construed under the laws of the
Commonwealth of Pennsylvania, without giving effect to conflict of laws
principles, and shall become effective only upon execution by Custodian at its
offices in Philadelphia, Pennsylvania. The Custodian shall not be called upon to
take any action outside the Commonwealth of Pennsylvania.
5
<PAGE>
DISCLOSURE STATEMENT
REVOCATION
You are entitled to revoke your individual retirement account ("IRA"), for
any reason and without penalty, by mailing or delivering written notice of
revocation to Delaware Service Company, Inc. within seven days after your
receipt of the IRA Disclosure Statement or within seven days after you establish
your IRA; however, if your IRA is established more than seven days after receipt
of the IRA Disclosure Statement, you may not revoke your IRA. If you wish to
revoke your IRA, mail or deliver your written notice to Delaware Service Co.,
Inc., Retirement Plans Department, 1818 Market Street, Philadelphia, PA 19103.
If mailed, the revocation notice will be considered mailed on the date of
postmark (or if sent by certified or registered mail, the date of certification
or registration) if it is deposited in the mail in the United States in an
envelope or other appropriate wrapper, first class postage prepaid, properly
addressed. While oral revocations are not accepted, you may contact us at (800)
523-1918 (In Philadelphia call 988-1241) if you have any questions with respect
to this procedure. If you should choose to revoke your IRA, the entire amount of
your contribution will be refunded without adjustment for administrative
expenses or any other amount.
REQUIREMENTS OF AN INDIVIDUAL
RETIREMENT ACCOUNT
An Individual Retirement Account investing contributions in any of the Funds
in the Delaware Group is a Custodial Account created in the United States for
the exclusive benefit of an individual or his/her beneficiaries. The written
instrument creating the Custodial Account must satisfy the following
requirements:
1. Except in the case of a rollover contribution (explained below),
contributions must be in cash and may not exceed $2,000, or $2,250 if a
spousal IRA, for any taxable year;
2. The Custodian must be a bank or other person approved by the Secretary of
the Treasury;
3. No part of the IRA funds may be invested in life insurance contracts;
4. The interest of an individual in the IRA must be nonforfeitable;
5. The assets of the IRA may not be commingled with other property except in
a common trust fund or common investment fund; and
6. The entire interest of an individual must be distributed in accordance with
certain rules (explained below under "Distributions").
ELIGIBILITY
You are eligible to establish and contribute to an IRA for any year in which
you work and receive compensation for such work, provided that you have not
attained age 70 1/2 in the year in question. If eligible, both a husband and
wife may each have their own separate IRA. If either spouse is ineligible to
establish an IRA, because the spouse has no "compensation," the other spouse may
be permitted to establish a Spousal IRA.
"Compensation" includes wages, salaries, professional fees, and other
amounts received for personal services, including such items as commissions paid
to salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips and bonuses. Compensation also includes
earned income of a self-employed person and any amount includable in an
individual's income as alimony or separate maintenance payments. Compensation
does not include amounts derived from or received as earnings or profits from
property, such as interest, dividends and rent, or any amount not includable in
gross income.
If you satisfy certain requirements, you may also establish an IRA for the
purpose of transferring retirement savings distributed from another individual
retirement account, individual retirement annuity, tax-sheltered annuity or
qualified retirement plan maintained by your employer.
You may have an IRA whether or not you are a participant in any other
retirement plan. However, if you or your spouse are an active participant in
another retirement plan, the amount of your annual contribution which is tax
deductible may be reduced (explained below under "Contributions").
6
<PAGE>
CONTRIBUTIONS
(A) Deductible Contributions
You may make an annual contribution to your IRA up to a maximum of $2,000(1)
or 100% of your compensation, whichever is less. If neither you nor your spouse
is an "active participant" in an employer maintained retirement plan at any time
during the year, the entire amount of your contribution (within the above
limits) will be tax deductible.
As explained below, if either you or your spouse is an active participant in
an employer maintained retirement plan, but you have adjusted gross income (AGI)
below the "applicable dollar amount," your entire contribution will still be tax
deductible. However, if either you or your spouse is an active participant and
your AGI is above the applicable dollar amount, the amount of your contribution
which is tax deductible will be reduced or eliminated as illustrated by the
chart below:
Tax Deductible Contributions:
Who Qualifies:
If you are not an active participant in
an employer-sponsored retirement plan:
100% deductible at any income level
If you are an active participant in
an employer-sponsored retirement plan:
Adjusted Gross Income Contribution
Married Single Deductibility
--------------- --------------- ---------------
below $40,000 below $25,000 Full
$40,000-$50,000 $25,000-$35,000 Partial
over $50,000 over $35,000 No
In order to be deductible for a taxable year, annual contributions must be
made not later than the due date (without regard to extensions) of your tax
return for the year for which the deduction is claimed.
Definition of Active Participant
You are an "active participant" for a year if you are "covered" by any of the
following retirement plans:
1. A qualified plan described in Section 401(a) of the Internal Revenue Code
(hereinafter the "Code");
2. An annuity plan described in Section 403(a) of the Code;
- ------------
(1) An additional $250 may be contributed to a Spousal IRA for a total of $2,250
for a working and non-working spouse.
3. A plan established for its employees by the United States, by a state or
local government or by an agency or instrumentality thereof (other than an
eligible deferred compensation plan as defined in Section 457(b) of the Code);
4. An annuity contract or custodial account described in Section 403(b) of
the Code;
5. A simplified employee pension (SEP) and salary reduction SEP described in
Section 408(k) of the Code;
6. A trust described in Section 501(c)(18) of the code.
You are considered "covered" by a retirement plan for a year if your employer
or union has a retirement plan of a type described above under which money is
added to your account or you are eligible to earn retirement credits. You are an
active participant for a year even if you are not yet vested in your retirement
benefit. Also, if you make required contributions or voluntary employee
contributions to a retirement plan, you are an active participant. In certain
plans, you may be an active participant even if you were only with the employer
for part of the year. Your active participant status should be indicated on your
Form W-2.
You are not considered an active participant if you are covered by a plan
only because of your service as (1) an Armed Forces Reservist, for less than
ninety (90) days of active service; or (2) a volunteer fire fighter covered for
fire fighting service by a government plan. Of course, if you are covered under
any other plan, these exceptions do not apply.
If you would like specific advice as to whether you are an active participant
in a retirement plan, you should consult with your attorney or a qualified tax
adviser.
AGI Threshold Level
If you or your spouse are an active participant, you must calculate your
adjusted gross income (AGI) for the year (if you and your spouse file a joint
tax return, you must use your combined AGI) to determine whether your IRA
contribution will be deductible. The instructions to your tax return will show
you how to calculate your AGI for this purpose. If you are at or below a certain
AGI level, called the "Threshold Level," you are treated as if you were not an
active participant and can make a deductible contribution under the same rules
as a person who is not an active participant.
If you are single, your AGI Threshold Level is $25,000. If you are married
and file a joint tax return, the Threshold Level is $40,000. If you are married
but file a separate tax return, the Threshold Level is $0. If you and your
spouse file separate tax returns and you live apart at all times during the
year, both you and your spouse will be treated as single in determining the
deductibility of your IRA contributions and your spouse's IRA contributions.
7
<PAGE>
Calculation of Deduction Limit
If your AGI is less than $10,000 above your Threshold Level, you will still
be able to make a deductible contribution, but it will be limited in amount. The
amount by which your AGI exceeds your Threshold Level (AGI minus Threshold
Level) is called your Excess AGI. The maximum allowable deduction is $2,000 (or
a total of $2,250 for a Spousal IRA). You may calculate your deduction limit by
using the following formula:
$10,000 -- Excess AGI x Maximum Allowable = Deduction
- ---------------------
$10,000 Deduction Limit
You must round up the result to the next highest $10 level. For example, if
the result is $1,525, you must round it up to $1,530. If the final result is
below $200 but above $0, your deduction limit is $200. Your deduction limit
cannot, in any event, exceed 100% of your compensation.
The following examples illustrate the above formula.
Example One: Bob, a single individual, is an active participant in his
employer's retirement plan and has AGI of $28,000. Bob has contributed $2,000 to
his IRA for the current year. Bob will calculate the deductible portion of his
IRA contribution as follows:
1. Bob must first determine the amount of his Excess AGI. His Excess AGI is
equal to his AGI minus his Threshold Level. Because Bob is a single
individual his Threshold Level is $25,000. Thus, his Excess AGI is $3,000
($28,000 -- $25,000).
2. Bob will now determine his deduction limit as follows:
$10,000 -- $3,000 x $2,000 = $1,400
----------------
$10,000
Example Two: Jack and Jane are a married couple who file a joint income tax
return and have a combined AGI of $45,000. Jack is not covered by his employer's
retirement plan. Jane is an active participant in her employer's retirement
plan. Jack and Jane have each contributed $2,000 to their separate IRAs. Jack
and Jane will calculate the deductible portion of their contributions as
follows:
1. Jack and Jane must first determine the amount of their Excess AGI. Since they
are a married couple filing a joint return their Threshold Level is $40,000.
Thus, their Excess AGI is $5,000 ($45,000 -- $40,000).
2. Jack and Jane will each determine their individual deduction limit as
follows:
$10,000 -- $5,000 x $2,000 = $1,000
----------------
$10,000
(B) Non-deductible Contributions
Even if your deduction limit is less than $2,000 ($2,250 for a Spousal IRA),
you may still contribute to your IRA up to the lesser of 100% of your
compensation or $2,000 ($2,250 for a Spousal IRA). The amount of your
contribution which is not deductible will be treated as a non-deductible
contribution to your IRA. You may also choose to treat a contribution as
non-deductible even if you could have deducted part or all of the contribution.
Interest or other earnings on your contribution, whether from deductible or non-
deductible contributions, will not be taxed until distributed to you from the
IRA.
You may make your $2,000 contribution at any time during the year, if your
compensation for the year will be at least $2,000, without having to designate
at such time how much of your contribution will be deductible. When you complete
your tax return, you must then determine how much of your contribution is
deductible. If you determine that all or a portion of your contribution is
non-deductible, you must report such amount to the Internal Revenue Service on
your tax return for the year.
(C) Spousal IRA Contributions
If you and your spouse file a joint income tax return and your spouse either
has no compensation for the taxable year or elects to be treated as having no
compensation for the taxable year, you may establish an IRA for the benefit of
your spouse. If you make contributions on behalf of yourself and your spouse for
a given tax year, the aggregate amount of the contributions to both your IRA and
your spouse's IRA may not exceed the lesser of $2,250 or the amount of your
compensation for such year. The contribution does not have to be split equally
between the IRAs belonging to you and your spouse. However, the total
contributions to either of your IRAs may not exceed $2,000.
You are not permitted to make contributions to your IRA in the year in which
you attain age 70 1/2 and subsequent years; however, you may continue to deduct
contributions to your non-working spouse's IRA until the year in which your
spouse reaches age 70 1/2.
(D) Excess Contributions
If you make a contribution to your IRA in excess of the deductible and
non-deductible limits, whichever is applicable, such amount is an "excess
contribution." A non-deductible 6% excise tax is imposed upon the excess
contribution for the year in which it is made and also for each following year
until it is eliminated. However, the amount of the tax for any year cannot
exceed 6% of the value of your IRA as of the close of the tax year.
You may avoid the imposition of such 6% tax if you withdraw any excess
contributions from your IRA before the due date for filing your federal
8
<PAGE>
tax return (not including extensions) for the year for which the excess
contribution is made. The earnings attributable to the excess contribution also
must be withdrawn by that date and must be included in your gross income in the
year for which the excess contribution was made. A timely withdrawal of the
excess contributions will permit you to avoid not only the 6% excise tax but
also the 10% penalty tax on premature distributions.
A withdrawal of an excess contribution after the tax return filing date will
avoid the 10% penalty tax on premature distributions, provided that the total
contribution for the year did not exceed $2,250 and no deduction was allowed for
the excess contribution.
As an alternative to withdrawing such excess contribution, you may eliminate
the excess by reducing your future annual contributions below the maximum
allowable amount. However, you will continue to be subject to the 6% excise tax
for each year until the excess contribution is completely eliminated.
(E) Rollover Contributions
A rollover contribution must consist of cash or other assets distributed from
one retirement program and "rolled over" tax free to another. There are two
types of rollover contributions to an IRA. The first type involves the
distribution of cash or other assets from one IRA which is "rolled over" to
another IRA. For this purpose, the term "IRA" includes individual retirement
accounts and individual retirement annuities. The second type involves the
distribution of cash or other assets from a tax-sheltered annuity or custodial
account or from a qualified retirement plan which is "rolled over" to an IRA. A
rollover contribution is neither includable in your income nor deductible.
Unlike annual contributions, rollover contributions are not subject to the
annual $2,000 limitation (or $2,250 in the case of the Spousal IRA) or 100% of
compensation limitation. A rollover contribution may not include any minimum
amounts required to be distributed to you during the calendar year in which you
attain age 70 1/2 or during any subsequent year. A rollover contribution must be
in cash or in shares of the Delaware Group of Funds.
IRA to IRA
If you receive a distribution from another individual retirement account or
individual retirement annuity, you may redeposit all or part of the amount you
receive into your IRA. You must roll over such amount within the sixty (60)-day
period following your receipt of the distribution in order for such amount to
qualify for rollover treatment and in order for such amount to avoid being
treated as a taxable distribution. Amounts not rolled over may also be subject
to the 10% penalty tax on premature distributions. A surviving spouse
beneficiary of an IRA may roll over a distribution from the IRA to the spouse's
own IRA; a non-spouse beneficiary is not eligible to roll over such a
distribution.
A rollover from each separate individual retirement account or individual
retirement annuity is allowed only once a year. The one-year period begins on
the date that you receive the distribution and not on the date it is rolled over
into another IRA. A rollover from one IRA to another should not be confused with
a direct transfer of your IRA assets from one IRA custodian or trustee to
another IRA custodian or trustee. A transfer from one IRA custodian to another
is not considered a rollover and, consequently, is not affected by the
once-a-year limitation on rollovers.
Qualified Retirement Plan to IRA
You may also be eligible for tax-free rollover treatment when you receive a
distribution from your employer's qualified retirement plan or from a
tax-sheltered annuity or custodial account.
In order to qualify for tax-free rollover treatment, a distribution from a
qualified retirement plan must constitute an "eligible rollover distribution."
Any distribution from an employer-sponsored tax-qualified retirement plan or
tax-sheltered annuity or custodial account will qualify as an eligible rollover
distribution unless it is one of the following:
(i) A distribution which is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the employee or the lives (or joint life expectancies) of
the employee and the employee's designated beneficiary, or for a specified
period of 10 years or more.
(ii) The portion of a distribution representing the minimum annual distribution
required after an employee attains age 70 1/2 or dies.
(iii) The non-taxable portion of a distribution representing after-tax
contributions to the plan.
(iv) Certain corrective distributions of elective deferrals, after-tax
contributions and matching contributions.
(v) A distribution to a non-spouse beneficiary of a deceased participant.
(vi) A distribution pursuant to a qualified domestic relations order to an
alternate payee who is neither the participant's spouse or former spouse.
(vii) A distribution to a surviving spouse to the extent the distribution is
subject to the Death Benefit Exclusion under Code section 101(b).
9
<PAGE>
If an eligible rollover distribution is paid to you, it wiII be subject to
mandatory 20% federal income tax withholding. You cannot elect to waive this
withholding tax, even if you intend to take advantage of tax-free rollover
treatment. If cash is available from some other source equal to the amount
withheld and you transfer that amount plus the net amount of the distribution to
your IRA within sixty (60) days after the distribution, no portion of the
eligible rollover distribution will be taxable to you. You may be entitled to a
full refund of the 20% withheld, depending upon your tax situation for the year.
If you roll over only the amount of the distribution actually received by you
and do not roll over an amount equal to the 20% withheld, you will be taxed on
the 20% withheld, and may be subject to a 10% additional tax on premature
distributions if you are younger than age 59 1/2.
However, the 20% withholding can be avoided by making a "direct rollover" to
your IRA. A direct rollover is a direct payment by the distributing
tax-qualified retirement plan or tax-sheltered annuity or custodial account to
your IRA rather than to you. If your eligible rollover distribution is at least
$200, your employer's plan must give you the option to make a direct rollover of
your eligible rollover distribution to an IRA.
The eligible rollover distribution rules also apply to distributions to a
surviving spouse who is a beneficiary of a deceased participant. These rules
also apply to distributions to a spouse or former spouse who is an alternate
payee with respect to a participant's benefits under a qualified domestic
relations order.
DISTRIBUTIONS
The IRA distribution rules are similar to the rules for distributions from
qualified retirement plans, in accordance with proposed regulations issued by
the Secretary of the Treasury. As of the date of issuance of this Disclosure
Statement, the regulations have not been finalized. Accordingly, the description
below of the distribution rules will be subject to modification upon issuance of
final regulations.
(A) Normal Distributions
Your IRA is intended to provide a source of income to you upon your
retirement on or after age 59 1/2 or if you become disabled. Distributions other
than amounts rolled over into another IRA or qualified plan are taxed as
ordinary income in the year received by you. With certain exceptions,
distributions which occur prior to age 59 1/2 will be subject to a 10%
additional tax on premature distributions (explained below).
(B) Required Distributions
While distributions from your IRA may commence any time, such distributions
must commence on or before the first day of April of the year following the year
in which you attain age 70 1/2 (known as the "Required Beginning Date").
Distributions must be paid to you in accordance with one of the following
methods:
(i) A single lump sum payment; or
(ii) In monthly, quarterly or annual payments over a period certain not
extending beyond your life expectancy or the joint and last survivor
expectancy of you and your designated beneficiary.
Even though distributions may have commenced in the method explained in
option (ii) above, you may receive a distribution of the balance in your IRA at
any time. Distributions may be received in a single payment or in installment
payments (but distributions which will be rolled over must exclude any minimum
amount required to be distributed during that calendar year).
If you elect to have your IRA distributed in other than a single payment, the
amount to be distributed each year, beginning with the first calendar year for
which distributions are required and for each succeeding year, must be at
least equal to the amount determined by dividing the entire amount of your IRA
as of the preceding December 31 by your life expectancy or by the joint and last
survivor life expectancies of you and your designated beneficiary. If your
designated benficiary is not your spouse and is more than 10 years younger than
you, your beneficiary will be treated as if he/she were only 10 years younger
than you for purposes of determining the joint life expectancy of you and your
beneficiary. In order to enforce such minimum distribution requirements, a 50%
tax is imposed on the amount, if any, by which the minimum required distribution
exceeds the actual amount distributed. If the failure to make the minimum
distribution is due to a reasonable error and steps are taken to remedy such
error, the 50% tax may be waived by the Internal Revenue Service.
If you have more than one IRA, you can satisfy the minimum distribution
requirements by taking from one IRA the amount required to satisfy the
requirement for all other IRAs.
(C) Distributions After Death
At the time that you establish your IRA, you have the right to select a
beneficiary who will be entitled to receive the balance in your IRA if you
should die prior to the complete distribution of your IRA. You have the right,
prior to the complete distribution of your IRA, to change your designation of
beneficiary. If you fail to properly designate a beneficiary, your estate will
be treated as your designated beneficiary.
10
<PAGE>
If you should die after the distribution of your IRA has commenced, the
remaining portion of your IRA will continue to be distributed at least as
rapidly as under the method of distribution being used prior to your death. If
you should die before the distribution of your IRA has commenced, the entire
interest in your IRA must be distributed in accordance with one of the following
provisions:
(i) The entire balance of your IRA is distributed by the December 31 of the
year containing the fifth anniversary of your death;
(ii) If the balance of your IRA is payable to a designated beneficiary, such
amount may be distributed in substantially equal periodic installments
over the life expectancy of the beneficiary commencing no later than the
December 31 of the year after your death;
(iii) If the designated beneficiary is your surviving spouse, your spouse may
elect to receive periodic payments over his/her life expectancy,
commencing at any date prior to the later of (1) the December 31 of the
year following your death or (2) the December 31 of the year in which you
would have attained age 70 1/2;
(iv) If the designated beneficiary is your surviving spouse, your spouse may
elect to treat your IRA as his/her own IRA and receive distributions under
the general distribution rules discussed above.
TAX TREATMENT OF DISTRIBUTIONS
(A) Income Tax
As a general rule, distributions from your IRA are taxable to you as ordinary
income. However, if non-deductible contributions have been made to your IRA,
the portion of your IRA distribution consisting of non-deductible contributions
will not be taxed again when received by you. If you make any non-deductible IRA
contributions, each distribution from your IRA will consist of a non-taxable
portion (return of non-deductible contributions) and a taxable portion (return
of deductible contributions, if any, and earnings). Thus, you may not take a
distribution which is entirely tax-free. The following formula is used to
determine the non-taxable portion of your distributions for a tax year:
Non-deductible Non-taxable
Contributions x Total Distribution = Distributions
---------------------- (for the year) (for the year)
Year-end IRA Balance
In determining your year-end IRA balance, you add back all distributions
taken during the year.
The following example illustrates how you will determine the non-taxable
portion of your distributions for a taxable year.
Example: Mary has made the following contributions to her IRA:
YEAR DEDUCTIBLE NON-DEDUCTIBLE
1985 $2,000 $0
1986 $2,000 $0
1987 $2,000 $0
1988 $1,000 $1,000
1989 $0 $2,000
------ ------
$7,000 $3,000
During 1990, Mary receives a $1,000 distribution from her IRA. On December
31, 1990 the total value of Mary's IRA is $11,000. The non-taxable portion of
the distribution she received during 1990 is determined as follows:
$3,000 x $1,000 = $250
--------------
11,000 + 1,000
To determine your year end balance you treat all of your IRAs as a single
IRA. This includes all regular IRAs, as well as simplified employee pension
(SEP) IRAs, salary reduction SEPs, and rollover IRAs.
A single lump sum distribution from your IRA is not entitled to special
10-year averaging, five-year averaging or capital gains treatment.
(B) Federal Income Tax Withholding
Distributions from your IRA are subject to Federal income tax withholding
unless the recipient elects in writing that no taxes be withheld. If the total
account balance or a portion of the account balance is distributed, then the
withheld amount will equal 10% of the distribution. If the distribution is part
of a series of periodic payments, the withheld amount will be calculated as if
the distribution were wages, and Form W-4P must be completed.
(C) Early Withdrawal Tax
In general, distributions from your IRA which occur prior to age 59 1/2 will
be subject to adverse tax consequences. Not only will such distributions be
fully taxable to you as ordinary income (subject to the formula described above
for determining the non-taxable portion of your distribution), such
distributions will also be subject to a 10% additional premature distribution
tax.
In addition to the exceptions for rollovers and the return of excess
contributions discussed above, distributions on account of your death or
disability will be exempt from the 10% additional tax. You are considered
11
<PAGE>
disabled if you are unable to engage in any substantial gainful activity because
of a medically determinable physical or mental impairment which can be expected
to result in death or to be of long, continued and indefinite duration. In
addition, distributions before age 59 1/2 are not subject to the 10% tax if made
in the form of substantially equal periodic payments and are made for your life
(or life expectancy) or the joint lives (or joint life expectancies) of you and
your designated beneficiary.
A transfer of amounts held in your IRA to your spouse's or former spouse's
IRA pursuant to a divorce or separation instrument will not be taxable as
ordinary income or subject to the 10% additional tax.
(D) Gift Tax
Your designation of a beneficiary for your IRA will not be treated as a gift
and will not subject you to Federal gift taxes.
(E) Estate Tax
Any amounts remaining in your IRA after your death will be included in your
gross estate and may be subject to Federal estate tax.
BORROWING/PROHIBITED TRANSACTIONS
You may not use the IRA or any portion of the IRA as security for a loan. If
you do, the portion pledged as security will be treated as distributed to you,
and will thus be includable in your taxable income for that year. Certain other
transactions (called "prohibited transactions" in the Code) may also result in
the disqualification of your IRA and the inclusion in income of the fair market
value of the IRA. Neither you, nor your beneficiary, may engage in any of the
following prohibited transactions with the IRA:
(a) a sale, exchange, or leasing of any property;
(b) lending of money or other extension of credit;
(c) furnishing of goods, services or facilities;
(d) the transfer or use of income or assets of the IRA by you or your
beneficiary.
If such transactions are engaged in, your IRA will be disqualified and will
lose its tax-exempt status. Under such circumstances, your IRA will be
considered to have been distributed to you and will be subject to the income and
additional taxes discussed above.
REPORTING TO THE IRS
(A) FORM 5329
If a transaction has occurred upon which a special penalty tax is imposed,
such as an excess contribution, a premature distribution or a failure to make a
timely distribution, you are required to file Form 5329 with your income tax
return for the year of the transaction. Form 5329 need not be filed if the only
activity for the year is the making of contributions or the distribution of
permissible benefits.
(B) FORM 8606
You are required to file Form 8606 if you make a non-deductible IRA
contribution.
IRS APPROVAL
The Delaware Group Prototype IRA has previously been approved by the Internal
Revenue Service as to its written form. Since that time, it has been amended to
conform to changes in the law and has been resubmitted to the Internal Revenue
Service for approval. At the time this Disclosure Statement was prepared, the
Internal Revenue Service had not reviewed the amendments.
Please be aware that the Internal Revenue Service's approval is a
determination only as to the form of the IRA and does not represent a
determination as to the merits of your particular IRA.
IRA ACCOUNT BALANCE
Each of the mutual fund shares held in your IRA has an equal interest in the
assets, net investment income and capital gains of the mutual fund selected. The
value of the shares is dependent upon, among other things, the market values of
the securities in the mutual fund's investment portfolio, which are subject to
fluctuation; therefore, growth in the value of your IRA cannot be projected or
guaranteed. Dividends from net investment income and any capital gains
distributions paid by the mutual fund selected will be reinvested in fund shares
at the net asset value thereof as of the respective ex-dividend dates, and such
additional shares will be credited to your IRA.
12
<PAGE>
FEES AND CHARGES
(A) IRA Fees
In general, there is an annual maintenance fee (currently $15 per year) for
your IRA. If an investor owns more than one Delaware Group IRA or opens a
Delaware Group IRA and invests in multiple funds within the Delaware Group,
however, only one fee per Social Security number will be charged. IRA fees are
deducted from the IRA during May of each year, unless paid directly by the
shareholder to the Custodian prior to May of each calendar year. The IRA fees
are subject to change.
(B) Mutual Fund Sales Charges
A sales charge will be made against your investment except for Delaware Group
Cash Reserve and Delaware Group U.S. Government Money Fund. For investments
under $1 million, sales charge rates range from a maximum of 8.50% to 1.5% of
the offering price of the fund shares. Depending on the Delaware Group fund
selected, the maximum rate applicable to an initial $1,000 contribution would be
8.50%, 5.75%, 4.75% or 3.00%. The maximum rate is applicable to subsequent
contributions of $1,000 until the value of the fund shares meets or exceeds a
level that qualifies the shareholder to receive a reduced sales charge. An
account value of $10,000 reduces the sales charge for funds at the maximum 8.50%
level to 7.75%. The sales charge for funds with a maximum of 5.75% is reduced to
4.75% when the account reaches $100,000.
The sales charge for funds with a maximum of 4.75% is reduced to 3.75% when
the account reaches $100,000. The sales charge for funds with a maximum of 3.00%
is reduced to 2.50% when the account reaches $100,000. Further sales charge
reductions at lower rates are applicable on larger purchases and on purchases
under the fund's Right of Accumulation and Letter of Intention. Group purchases
that meet our minimum standard may be subject to a different sales charge.
Reduced sales charges also apply to the combination of shares of any of the
funds in the Delaware Group (except Delaware Group Cash Reserve and Delaware
Group U.S. Government Money Fund, unless they were acquired through an exchange
or unless the inclusion of such shares brings your total account balance to $1
million) held by you and those held in your IRA.
(C) Redemption and Repurchase Charges
Neither the fund nor the national distributor makes a charge for redemptions
or repurchases.
(D) Further Details
Please refer to the prospectus of the fund or funds selected as your
investment for further details, including current charges and expenses.
QUALIFIED TAX ADVICE
The above is only a general description of taxation of IRAs. Because of the
unfavorable tax consequences which could result from the improper establishment
or use of an IRA, you may wish to consult with an attorney or qualified tax
adviser. Neither Delaware Management Company, Inc., Delaware Service Co., Inc.,
the Delaware Group of Funds nor the Custodian assumes any liability for tax
consequences to investors or beneficiaries arising from IRAs.
13
<PAGE>
DELAWARE
GROUP
========
IRA
(PHOTO OF LARGE KEY)
|| PLAN DOCUMENT
|| TERMS AND CONDITIONS
|| DISCLOSURE STATEMENT
||=========================
THE DELAWARE ORGANIZATION
| | Delaware Management Company, Inc.
Investment Manager
| | Delaware Distributors, L.P.
National Distributor
| | Delaware Service Company, Inc.
Shareholder Servicing, Dividend
Disbursing and Transfer Agent
| | Delaware Management Trust Company
Custodian
RETIREMENT
1818 Market Street PLANNING (LOGO)
Philadelphia, PA 19103-3682 IS THE KEY
800-523-4640
In Philadelphia 215-988-1333
RL-101-150M-12/93-U
Printed in the U.S.A.
<PAGE>
CLAIMS PROCEDURE
The Employer shall establish a claims procedure in accordance with the
requirements of the Employee Retirement Income Security Act of 1974, as amended,
if applicable, for the presentation of claims under the terms of the SEP
Document. A claim is a request for a plan benefit, including participation and
contributions, by an Employee or Beneficiary. The Employer shall make all
determinations as to the eligibility of any Employee for plan participation or
Employer contribution. In the event the claim is denied, the Employer shall
provide written notice of its determination to the Employee or Beneficiary
within ninety (90) days after receipt of the claim unless special circumstances
require an extension of time for processing the claim. If such an extension of
time for processing is required, written notice of the extension shall be
furnished to the claimant prior to the termination of the initial 90-day
period. The written notice will be set forth in a manner that may be understood
by the claimant and shall include:
1) The reason for the denial.
2) Specific reference to pertinent plan provisions on which the denial is
based.
3) Additional information necessary for the claimant to perfect the claim and
why the information is necessary.
4) Information about the procedures for submitting the denied claim for
review.
RL-210-1/93-5M-U
[FORM OF 12b-1 PLAN FOR CLASS A SHARES]
12b-1 Plan
Class A
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule l2b-l under the Investment Company Act of l940 (the "Act") by [FUND
NAME] (the "Fund")[, now for the [SERIES NAME] (the "Series")] on behalf of the
_____________ class [now doing business as the _____________ A Class]
(hereinafter referred to as the "Class"), which Fund[, Series] and Class may do
business under these or such other names as the Board of [Directors/Trustees] of
the Fund may designate from time to time. The Plan has been approved by a
majority of the Board of [Directors/Trustees], including a majority of the
[Directors/Trustees] 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/Trustees]"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
by the [Directors/Trustees] 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 Class and its shareholders.
If the Plan has not yet been approved by a majority of the outstanding voting
securities as required in the Act, the Plan will be presented to the public
shareholders at the next regular annual or special meeting.
<PAGE>
The Fund is a [corporation/common law trust] organized under the laws
of the [State of Maryland/Commonwealth of Pennsylvania], 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./Delaware International Advisers Ltd.] serves as the [Fund's/Series']
investment adviser and manager pursuant to an Investment Management Agreement.
Delaware Service Company, Inc. serves as the [Fund's/Series'] shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the [Fund's/Series'] shares, including shares of the Class pursuant to the
Distribution Agreement between the Distributor and the [Fund/Series]
("Distribution Agreement").
The Plan provides that:
l. The Fund shall pay to the Distributor a monthly fee not to exceed
0.3% (3/10 of l%) per annum of the [Fund's/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/Trustees] 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 [Fund/Series] services in the
[Fund's/Series'] marketing of shares of the Class.
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.
<PAGE>
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/Trustees] 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/Trustees] 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, which time shall not
be before the first annual or special meeting of the public shareholders at
which the Plan is or was approved by the vote of a majority of the outstanding
voting securities as required in the Act (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/Trustees] of the Fund, and
of the non-interested [Directors/Trustees], 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/Trustees] 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 thereof without approval by
the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested [Directors/Trustees] in the manner described in paragraph 5
above.
<PAGE>
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested [Directors/Trustees] shall be committed to the
discretion of such non-interested [Directors/Trustees].
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.
November 29, 1995
[FORM OF 12b-1 PLAN FOR CLASS B SHARES]
12b-1 Plan
Class B
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by [FUND
NAME] (the "Fund") [,for the [SERIES NAME] (the "Series")] on behalf of the
_______________________ B Class (the "Class"), which Fund[, Series] and Class
may do business under these or such other names as the Board of
[Directors/Trustees] of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of [Directors/Trustees], including a
majority of the [Directors/Trustees] 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/Trustees]"), cast in person at a meeting called for the purpose of
voting on such Plan. Such approval by the [Directors/Trustees] 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 Class and its shareholders. The Plan has been approved by a vote of
the holders of a majority of the outstanding voting securities of the Class, as
defined in the Act.
The Fund is a [corporation/common law trust] organized under the laws
of the [State of Maryland/Commonwealth of Pennsylvania], 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./Delaware International Advisers Ltd.] serves as the [Fund's/Series']
investment adviser and manager pursuant to an Investment Management Agreement.
Delaware Service Company, Inc. serves as the [Fund's/Series'] shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the [Fund's/Series'] shares, including shares of the Class, pursuant to the
Distribution Agreement between the Distributor and the [Fund/Series]
("Distribution Agreement").
<PAGE>
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 [Fund's/Series'] average daily net
assets represented by shares of the Class as may be determined by the Fund's
Board of [Directors/Trustees] 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
[Fund's/Series'] average daily net assets represented by shares of the Class, as
a service fee pursuant to dealer or servicing agreements.
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/Trustees] 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.
<PAGE>
4. The officers of the Fund shall furnish to the Board of
[Directors/Trustees] 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/Trustees] of the
Fund, and of the non-interested [Directors/Trustees], 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/Trustees] 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 thereof without approval by
the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested [Directors/Trustees] 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/Trustees] shall be committed to the
discretion of such non-interested [Directors/Trustees].
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.
November 29, 1995
<PAGE>
[FORM OF 12b-1 PLAN
C CLASS SHARES]
DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by the Fund
(the "Fund"), on behalf of the Fund's C Class (the "Class"). 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, 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 Fund and its
shareholders. The Plan has been approved by a vote of the holders of a majority
of the outstanding voting securities of the Class, as defined in the Act.
The Fund is a [corporation/business trust] organized under the laws of
the [State of Maryland/Commonwealth of Pennsylvania], 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.
("DMC") or Delaware International Advisers Ltd. ("Delaware International"), an
<PAGE>
affiliate of DMC,] serves as the Fund's investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company, Inc. serves as
the Fund's shareholder servicing, dividend disbursing and transfer agent.
Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and
national distributor for the Fund's shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and the Fund
("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 Fund's 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
Fund's average daily net assets represented by shares of the Class, as a service
fee pursuant to dealer or servicing agreements.
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
<PAGE>
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 Fund.
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, and the Directors shall review, on a quarterly basis, a written report
of the amounts expended under the Plan and the purposes for which such
expenditures were made.
<PAGE>
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 Directors who are not interested persons of the Fund and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan ("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 thereof 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)(3), 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "affiliated person,"
<PAGE>
"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.
November 29, 1995
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- --------------------------------------------------------
AVERAGE ANNUAL COMPOUNDED RATE OF RETURN:
n
P(1+T)=ERV
ONE
YEAR
- ----------
1
$1000(1-T)=$1,068.24
T= 6.82%
THREE
YEARS
- ----------
3
$1000(1-T)=$1,120.41
T= 3.86%
FIVE
YEARS
- ----------
5
$1000(1-T)=$1,398.58
T= 6.94%
LIFE OF
FUND
- ----------
9.95890411
$1000(1-T)=$2,064.04
T= 7.55%
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Initial Investment $1,000.00
Beginning OFFER $ 8.19
Initial Shares 122.100
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------------
1995 122.100 $0.163 2.537 124.637
- ----------------------------------------------------------------
Ending Shares 124.637
Ending NAV $ 7.86
----------
Investment Return $ 979.65
Total Return Performance
- -----------------
Investment Return $ 979.65
Less Initial investment $1,000.00
----------
($20.35) / $1,000.00 x 100
Total Return: -2.04%
</TABLE>
<PAGE>
DELEWARE GROUP US GOVERNMENT FUND A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $8.06
Initial Shares 124.069
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 124.069 $0.329 5.289 129.358
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S>
Ending Shares <C>
Ending NAV 129.358
$7.86
Investment Return ----------
$1,016.75
Total Return Performance
- -----------------
Investment Return
Less Initial Investment $1,016.75
$1,000.00
----------
$16.75 / $1,000.00 x 100
Total Return:
</TABLE> 1.68%
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $8.17
Initial Shares 122.399
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 122.399 $0.493 7.960 130.359
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 130.359
Ending NAV x $ 7.86
------------
Investment Return $1,024.62
Total Return Performance
Investment Return $1,024.62
Less Initial Investment $1,000.00
------------
$ 24.62 / $1,000.00 x 100
Total Return: 2.46%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND A
TOTAL RETURN PERFORMANCE
ONE YEAR
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Initial Investment $1,000.00
Beginning OFFER $ 8.40
Initial Shares 119.048
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------------
1995 119.048 $0.656 10.388 129.436
- ----------------------------------------------------------------
Ending Shares 129.436
Ending NAV x $ 7.86
------------
Investment Return $1,017.37
Total Return Performance
- -----------------
Investment Return $1,017.37
Less Initial Investment $1,000.00
------------
$ 17.37 / $1,000.00 x 100
Total Return: 1.74%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND A
TOTAL RETURN PERFORMANCE
THREE YEARS
- -----------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $ 9.47
Initial Shares 105.597
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993 105.597 $0.763 9.313 114.910
- -------------------------------------------------------------------------
1994 114.910 $0.714 9.967 124.877
- -------------------------------------------------------------------------
1995 124.877 $0.656 10.898 135.775
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 135.775
Ending NAV x $ 7.86
-----------
Investment Return $1,067.19
Total Return Performance
- -----------------
Investment Return $1,067.19
Less Initial Investment $1,000.00
-----------
$ 67.19 / $1,000.00 x 100
Total Return: 6.72%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND A
TOTAL RETURN PERFORMANCE
FIVE YEARS
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $ 9.02
Initial Shares 110.865
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1991 110.865 $0.753 10.073 120.938
- ----------------------------------------------------------------------
1992 120.938 $0.769 10.852 131.790
- ----------------------------------------------------------------------
1993 131.790 $0.763 11.623 143.413
- ----------------------------------------------------------------------
1994 143.413 $0.714 12.441 155.854
- ----------------------------------------------------------------------
1995 155.854 $0.656 13.600 169.454
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 169.454
Ending NAV x $7.86
-------------
Investment Return $1,331.91
_________________
Investment Return $1,331.91
Less Initial Investment $1,000.00
-------------
$331.91 / $1,000.00 x 100
Total Return: 33.19%
</TABLE>
- -------------------------------------------------------------------------------
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
Initial Investment $1,000.00
Beginning OFFER $ 9.80
Initial Shares 102.041
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------
1986 102.041 $0.919 10.538 112.579
- ----------------------------------------------------------------
1987 112.579 $0.946 12.237 124.816
- ----------------------------------------------------------------
1988 124.816 $0.818 12.207 137.023
- ----------------------------------------------------------------
1989 137.023 $0.772 12.856 149.879
- ----------------------------------------------------------------
1990 149.879 $0.749 13.685 163.564
- ----------------------------------------------------------------
1991 163.564 $0.753 14.864 178.428
- ----------------------------------------------------------------
1992 178.428 $0.769 16.011 194.439
- ----------------------------------------------------------------
1993 194.439 $0.763 17.150 211.589
- ----------------------------------------------------------------
1994 211.589 $0.714 18.352 229.941
- ----------------------------------------------------------------
1995 229.941 $0.656 20.065 250.006
- ----------------------------------------------------------------
Ending Shares 250.006
Ending NAV $ 7.86
------------
Investment Return $1,965.05
Total Return Performance
- -----------------
Investment Return $1,965.05
Less Initial Investment $1,000.00
------------
$ 965.05 / $1,000.00x100
Total Return: 96.51%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND INSTITUTIONAL
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- ------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- ----------
1
$1000(1 - T) = $1,071.36
T = 7.14%
THREE
YEARS
- ----------
3
$1000(1 - T) = $1,130.53
T = 4.17%
FIVE
YEARS
- ----------
5
$1000(1 - T) =$1,418.29
T = 7.24%
LIFE OF
FUND
- ----------
9.95890411
$1000(1 - T) = $2,103.41
T = 7.75%
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
THREE MONTHS
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Initial Investment $1,000.00
Beginning OFFER $ 7.80
Initial Shares 128.205
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------
1995 128.205 $0.169 2.761 130.966
- -------------------------------------------------------------------
Ending Shares 130.966
Ending NAV $ 7.86
------------
Investment Return $1,029.39
Total Return Performance
- ------------------
Investment Return $1,029.39
Less Initial Investment $1,000.00
------------
$ 29.39 / $1,000.00 x 100
Total Return: 2.94%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNEMENT FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
SIX MONTHS
- -----------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $ 7.68
Initial Shares 130.208
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 130.208 $0.340 5.748 135.956
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 135.956
Ending NAV $ 7.86
----------
Investment Return $1,068.61
Total Return Performance
- -----------------
Investemnt Return $1,068.61
Less Initial Inverstment $1,000.00
-----------
$ 68.61 / $ 1,000.00 x 100
Total Return 6.86%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
NINE MONTHS
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Initial Investment $1,000.00
Beginning OFFER $ 7.78
Initial Shares 128.535
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------
1995 128.535 $0.510 8.659 137.194
- --------------------------------------------------------------------
Ending Shares 137.194
Ending NAV $ 7.86
----------
Investment Return $1,078.34
Total Return Performance
- -----------------
Investment Return $1,078.34
Less Initial Investment $1,000.00
----------
$ 78.34 / $1,000.00 x 100
Total Return 7.83%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
ONE YEAR
- ------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $ 1,000.00
Beginning OFFER $ 8.00
Initial Shares 125.000
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 125.000 $0.679 11.305 136.305
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Ending Shares 136.305
Ending NAV x $7.86
-----------
Investment Return $1,071.36
Total Return Performance
- -----------------
Investment Return $1,071.36
Less Initial Investment $1,000.00
-----------
$ 71.36 / $1,000.00 x 100
Total Return: 7.14%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
THREE YEARS
- ----------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $ 9.02
Initial Shares 110.865
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------
1993 110.865 $0.791 11.038 121.903
- ------------------------------------------------------------------------
1994 121.903 $0.739 9.087 130.990
- ------------------------------------------------------------------------
1995 130.990 $0.679 12.843 143.833
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 143.833
Ending NAV x $ 7.86
-------------
Investment Return $1,130.53
Total Return Performance
- -----------------
Investment Return $1,130.53
Less Initial Investment $1,000.00
-------------
$ 130.53 / $1,000.00 x 100
Total Return: 13.05%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
FIVE YEARS
- -------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $ 8.59
Initial Shares 116.414
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
1991 116.414 $0.774 10.892 127.306
- -------------------------------------------------------------------
1992 127.306 $0.792 11.778 139.084
- -------------------------------------------------------------------
1993 139.084 $0.791 12.737 151.821
- -------------------------------------------------------------------
1994 151.821 $0.739 13.654 165.475
- -------------------------------------------------------------------
1995 165.475 $0.679 14.969 180.444
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 180.444
Ending NAV x $ 7.86
-----------
Investment Return $1,418.29
- -----------------
Investment Return $1,418.29
Less Initial Investment $1,000.00
-----------
$ 418.29 / $1,000.00x100
Total Return: 41.83%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $ 9.33
Initial Shares 107.181
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1986 107.181 $0.919 12.364 118.252
- --------------------------------------------------------------------------------
1987 118.252 $0.946 12.364 131.105
- --------------------------------------------------------------------------------
1988 131.105 $0.817 12.364 143.927
- --------------------------------------------------------------------------------
1989 143.927 $0.791 12.364 157.822
- --------------------------------------------------------------------------------
1990 157.822 $0.771 12.364 172.655
- --------------------------------------------------------------------------------
1991 172.655 $0.774 12.364 188.807
- --------------------------------------------------------------------------------
1992 188.807 $0.792 12.364 206.273
- --------------------------------------------------------------------------------
1993 206.273 $0.791 12.364 225.163
- --------------------------------------------------------------------------------
1994 225.163 $0.739 12.364 245.411
- --------------------------------------------------------------------------------
1995 245.411 $0.679 12.364 267.610
- --------------------------------------------------------------------------------
Ending Shares 267.610
Ending NAV $ 7.86
---------
Investment Return $2,103.41
Total Return Performance
- --------------------------
Investment Return $2,103.41
Less Initial Investment $1,000.00
---------
$1,103.41 / $1,000.00 x 100
Total Return: 110.34%
</TABLE>
8
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND B
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $ 7.80
Initial Shares 128.205
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------- --------- ---------- ---------- ----------------
1995 128.205 $0.149 2.433 130.638
- -------------------------- --------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Ending Shares 130.638
Ending NAV x $ 7.86
----------
Investment Return $1,026.81
Total Return Performance
- --------------------------
Investment Return $1,026.81
Less Initial Investment $1,000.00
----------
$ 26.81 / $1,000.00 x 100
Total Return: 2.68%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERMENT FUNB B
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDED CDSC)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Initial Investment $1,000.00
Beginning OFFER $ 7.80
Initial Shares 128.205
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 128.205 $0.149 2.433 130.638
- --------------------------------------------------------------------------------
Ending Shares 130.638
Ending NAV x $ 7.86
---------
$1,026.81
Less CDSC $ 40.00
---------
Investment Return $ 986.81
Total Return Performance
- ------------------
Investment Return $ 986.81
Less Intial Investment $1,000.00
---------
($13.19) /$1,000.00x100
Total Return -1.32%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERMENT FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- -----------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $ 7.68
Initial Shares 130.208
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 130.208 $0.301 5.081 135.289
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 135.289
Ending NAV $ 7.86
-----------
Investment Return $1,063.37
Total Return Performance
- -----------------
Investment Return $1,063.37
Less Initial Investment $1,000.00
-----------
$ 63.37 / $1,000.00 x 100
Total Return: 6.34%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERMENT FUND B
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $ 7.68
Initial Shares 130.208
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividend Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 130.208 $0.301 5.081 135.289
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 135.289
Ending NAV x $ 7.86
----------
$1,063.37
Less CDSC $ 40.00
----------
Investment Return $1,023.37
Total Return Performance
- -----------------
Investment Return $1,023.37
Less Initial Investment $1,000.00
----------
$ 23.37 / $1,000.00 x 100
Total Return: 2.34%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- ------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $ 7.78
Initial Shares 128.535
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 128.535 $0.452 7.645 136.180
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 136.180
Ending NAV $ 7.86
----------
Investment Return $1,070.37
Total Return Performance
- --------------------------
Investment Return $1,070.37
Less Initial Investment $1,000.00
----------
$ 70.37 / $1,000.00 x 100
Total Return 7.04%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND B
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- ---------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $ 7.78
Initial Shares 128.535
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 128.535 $0.452 7.645 136.180
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 136.180
Ending NAV $ 7.86
----------
$1,070.37
Less CDSC $ 40.00
----------
Investment Return $1,030.37
Total Return Performance
- -----------------
Investment Return $1,030.37
Less Initial Investment $1,000.00
----------
$ 30.37 / $1,000.00 x 100
Total Return 3.04%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Initial Investment $1,000.00
Beginning OFFER $ 8.00
Initial Shares 125.00
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------------------------------
1995 125.000 $0.601 9.960 134.960
- ---------------------------------------------------------------------------------
Ending Shares 138.960
Ending NAV $ 7.86
---------
Investment Return $1,060.79
Total Return Performance
- ------------------
Investment Return $1,060.79
Less Initial Investment $1,000.00
---------
$ 60.79 / $1,000.00 x 100
Total Return 6.08%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DELAWARE GROUP US GOVERNMENT FUND B
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Initial Investment $1,000.00
Beginning OFFER $ 8.00
Initial Shares 125.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 125.000 $0.601 9.960 134.960
- --------------------------------------------------------------------------------
Ending Shares 134.960
Ending NAV x $7.86
---------
$1,060.79
Less CDSC $ 39.30
---------
Investment Return $1,021.49
Total Return Performance
- ------------------
Investment Return $1,021.49
Less Initial Investment $1,000.00
---------
$ 21.49 / $1,000.00 x 100
Total Return: 2.15%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (EXCLUDING CDSC)
- ---------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Initial Investment $1,000.00
Beginning OFFER $ 8.19
Initial Shares 122.100
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Periods Shares Shares
- ---------------------------------------------------------------------
1994 122.100 $0.151 2.324 124.424
- ---------------------------------------------------------------------
1995 124.424 $0.601 9.913 134.337
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 134.337
Ending NAV $ 7.86
----------
Investment Return $1,055.89
Total Return Performance
- -----------------
Investment Return $1,055.89
Less Initial Investment $1,000.00
----------
$ 55.89 / $1,000.00 x 100
Total Return: 5.59%
</TABLE>
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND B
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- ----------------------------------------------------------
AVERAGE ANNUAL COMPOUNDED RATE OF RETURN:
n
P(1 + T) = ERV
ONE
YEAR
- ----------
1
$1000(1 - T) = $1,021.49
T = 2.15%
LIFE OF
FUND
- ----------
1.24931507
$1000(1 - T) = $1,017.50
T = 1.40%
<PAGE>
DELAWARE GROUP US GOVERNMENT FUND B
TOTAL RETURN PERFORMANCE
LIFE OF FUND (INCLUDING CDSC)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Initial Investment $1,000.00
Beginning OFFER $ 8.19
Initial Shares 122.100
</TABLE>
<TABLE>
<CAPTION>
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 122.100 $0.151 2.324 124.424
- -----------------------------------------------------------------------
1995 124.424 $0.601 9.913 134.337
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Ending Shares 134.337
Ending NAV $ 7.86
----------
$1,055.89
Less CDSC $ 38.39
----------
Investment Return $1,017.50
Total Return Performance
- -----------------
Investment Return $1,017.50
Less Initial Investment $1,000.00
----------
$ 17.50 / $1,000.00 x 100
Total Return: 1.75%
</TABLE>
<PAGE>
Delaware U.S. Government Fund Institutional
Yeild Quotation for the Month Ended July 31, 1995
<TABLE>
<S> <C>
Interest Earned $ 53,615.03
Expenses Accrued $ 6,721.81
Net Income $ 46,893.22
Average Shares Outstanding 1,064,669.90
Maximum Offering Price
July 31,1995 $ 7.86
Yeild 6.82%
U.S. Government Fund Institutional
Yeild; 2[(53,615-6,722+1)6-1]=6.82%
[(1,064,670x7.86)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Delaware U.S. Government Fund B
Yeild Quotation for the Month Ended July 31, 1995
<S> <C>
Interest Earned $ 46,576.85
Expenses Accrued $ 12,055.21
Net Income $ 34,521.64
Average Shares Outstanding 924,907.908
Maximum Offering Price
July 31, 1995 $ 7.86
Yeild 5.77%
U.S. Government Fund B Yeild: 2[(46,577-12,055 +1)6-1]= 5.77%
--------------
[(924,908x7.86)
</TABLE>
<PAGE>
Delaware U.S. Government Fund A
Yeild Quotation for the Month Ended July 31, 1995
<TABLE>
<S> <C>
Interest Earned $ 1,324,350.67
Expenses Accrued $ 218,267.45
Net Income $ 1,106,083.22
Average Shares Outstanding 26,298,524.224
Maximum Offering Price
July 31, 1995 $ 8.25
Yeild 6.20%
U.S. Government Fund A Yeild: 2 [(1,324,351-218,267 + 1) 6-1]=6.20%
-----------------
[(26,298,524x8.25)]
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000769220
<NAME> DELAWARE GROUP GOVERNMENT FUND, INC.
<SERIES>
<NUMBER> 011
<NAME> GOVERNMENT INCOME SERIES - A CLASS FDS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 216,671,384
<INVESTMENTS-AT-VALUE> 217,233,105
<RECEIVABLES> 8,336,635
<ASSETS-OTHER> 34,432
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 225,604,172
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,811,599
<TOTAL-LIABILITIES> 3,811,599
<SENIOR-EQUITY> 282,141
<PAID-IN-CAPITAL-COMMON> 260,719,146
<SHARES-COMMON-STOCK> 26,215,651
<SHARES-COMMON-PRIOR> 27,831,024
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (39,770,435)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 561,721
<NET-ASSETS> 206,082,496
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21,777,248
<OTHER-INCOME> 0
<EXPENSES-NET> 2,813,513
<NET-INVESTMENT-INCOME> 18,963,735
<REALIZED-GAINS-CURRENT> (10,373,225)
<APPREC-INCREASE-CURRENT> 6,214,405
<NET-CHANGE-FROM-OPS> 14,804,915
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17,686,022
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,028,169
<NUMBER-OF-SHARES-REDEEMED> 6,923,016
<SHARES-REINVESTED> 1,279,474
<NET-CHANGE-IN-ASSETS> (16,993,297)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (30,708,166)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,355,290
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,813,513
<AVERAGE-NET-ASSETS> 210,555,112
<PER-SHARE-NAV-BEGIN> 8.000
<PER-SHARE-NII> 0.656
<PER-SHARE-GAIN-APPREC> (0.140)
<PER-SHARE-DIVIDEND> (0.656)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.860
<EXPENSE-RATIO> 1.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000769220
<NAME> DELAWARE GROUP GOVERNMENT FUND, INC.
<SERIES>
<NUMBER> 012
<NAME> GOVERNMENT INCOME SERIES - B CLASS FDS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 216,671,384
<INVESTMENTS-AT-VALUE> 217,233,105
<RECEIVABLES> 8,336,635
<ASSETS-OTHER> 34,432
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 225,604,172
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,811,599
<TOTAL-LIABILITIES> 3,811,599
<SENIOR-EQUITY> 282,141
<PAID-IN-CAPITAL-COMMON> 260,719,146
<SHARES-COMMON-STOCK> 940,568
<SHARES-COMMON-PRIOR> 277,006
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (39,770,435)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 561,721
<NET-ASSETS> 7,393,850
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21,777,248
<OTHER-INCOME> 0
<EXPENSES-NET> 2,813,513
<NET-INVESTMENT-INCOME> 18,963,735
<REALIZED-GAINS-CURRENT> (10,373,225)
<APPREC-INCREASE-CURRENT> 6,214,405
<NET-CHANGE-FROM-OPS> 14,804,915
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 376,635
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 767,507
<NUMBER-OF-SHARES-REDEEMED> 129,422
<SHARES-REINVESTED> 25,477
<NET-CHANGE-IN-ASSETS> (16,993,297)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (30,708,166)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,355,290
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,813,513
<AVERAGE-NET-ASSETS> 4,954,848
<PER-SHARE-NAV-BEGIN> 8.000
<PER-SHARE-NII> 0.601
<PER-SHARE-GAIN-APPREC> (0.140)
<PER-SHARE-DIVIDEND> (0.601)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.860
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000769220
<NAME> DELAWARE GROUP GOVERNMENT FUND, INC.
<SERIES>
<NUMBER> 013
<NAME> GOVERNMENT INCOME SERIES - INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 216,671,384
<INVESTMENTS-AT-VALUE> 217,233,105
<RECEIVABLES> 8,336,635
<ASSETS-OTHER> 34,432
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 225,604,172
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,811,599
<TOTAL-LIABILITIES> 3,811,599
<SENIOR-EQUITY> 282,141
<PAID-IN-CAPITAL-COMMON> 260,719,146
<SHARES-COMMON-STOCK> 1,057,903
<SHARES-COMMON-PRIOR> 1,752,696
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (39,770,435)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 561,721
<NET-ASSETS> 8,316,227
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 21,777,248
<OTHER-INCOME> 0
<EXPENSES-NET> 2,813,513
<NET-INVESTMENT-INCOME> 18,963,735
<REALIZED-GAINS-CURRENT> (10,373,225)
<APPREC-INCREASE-CURRENT> 6,214,405
<NET-CHANGE-FROM-OPS> 14,804,915
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 901,078
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 290,401
<NUMBER-OF-SHARES-REDEEMED> 1,100,347
<SHARES-REINVESTED> 115,153
<NET-CHANGE-IN-ASSETS> (16,993,297)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (30,708,166)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,355,290
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,813,513
<AVERAGE-NET-ASSETS> 10,404,915
<PER-SHARE-NAV-BEGIN> 8.000
<PER-SHARE-NII> 0.679
<PER-SHARE-GAIN-APPREC> (0.140)
<PER-SHARE-DIVIDEND> (0.679)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.860
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
EX-99.B19 DIRECTORS' POWER OF ATTORNEY
POWER OF ATTORNEY
Each of the undersigned, a member of the Board of Directors of DELAWARE
GROUP GOVERNMENT FUND, INC., hereby constitutes and appoints Wayne A. Stork,
W. Thacher Longstreth 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 20th day of April, 1995.
/s/Walter P. Babich /s/W. Thacher Longstreth
- ------------------------- ------------------------
Walter P. Babich W. Thacher Longstreth
/s/Anthony D. Knerr /s/Charles E. Peck
- ----------------------- ------------------------
Anthony D. Knerr Charles E. Peck
/s/Ann R. Leven /s/Wayne A. Stork
- ------------------------- ------------------------
Ann R. Leven Wayne A. Stork
