<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-97889
File No. 811-4304
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
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Post-Effective Amendment No. 22 X
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AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 22
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DELAWARE GROUP GOVERNMENT FUND
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(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-1255
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Eric E. Miller, Esquire, 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: September 29, 1999
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It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
__X__ on September 29, 1999 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
If appropriate:
_____this post-effective amendment designates a new effective date
for a previously filed post-effective amendment
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 22 to Registration File No. 2-97889 includes
the following:
1. Facing Page
2. Contents Page
3. Part A - Prospectuses
4. Part B - Statement of Additional Information
5. Part C - Other Information
6. Signatures
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware American Government Bond Fund
(formerly U.S. Government Fund)
Class A o Class B o Class C
Prospectus
September 29, 1999
Current Income Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
2
<PAGE>
Table of contents
Fund profile page 1
Delaware American Government Bond Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimums
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
3
<PAGE>
Profile: Delaware American Government Bond Fund
What are the Fund's goals?
The Fund seeks 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. Although the Fund will strive to
achieve its investment goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in U.S. government securities including:
o U.S. Treasury bills, notes and bonds;
o other debt securities issued or unconditionally guaranteed by the U.S.
government or backed by the full faith and credit of the U.S.
government; and
o debt issued or guaranteed by U.S. government agencies or
instrumentalities, including debt obligations guaranteed by the
Government National Mortgage Association, also known as GNMA, Federal
Home Loan Mortgage Corporation (Freddie Mac) and Federal National
Mortgage Association (Fannie Mae) and other mortgage-backed securities.
We may also invest up to 20% of our net assets in high quality non-government
fixed-income securities.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by changes in bond prices, particularly as a result of changes
in interest rates. Mortgage-backed securities may experience increased
pre-payments on the underlying mortgages if interest rates decline, which may
require the Fund to reinvest in lower yielding securities. The Fund may also
experience portfolio turnover in excess of 100%, which could result in higher
transaction costs and tax liability for the Fund. For a more complete discussion
of risk, please turn to page ___.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with medium or long range goals.
o Investors looking for regular income from their investments.
o Investors looking for a bond investment to help balance their investments in
stocks or more aggressive securities.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors seeking long-term growth of capital.
4
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How has the Fund performed?
This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past ten calendar years, as well as the average annual returns of all shares for
the one-, five-and ten-year or lifetime periods, if applicable. The Fund's past
performance is not necessarily an indication of how it will perform in the
future.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN]
<TABLE>
<CAPTION>
Year-by-year total return (Class A)
- --------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------- ------------ -----------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11.41% 8.79% 15.14% 6.37% 7.79% -5.81% 13.71% 2.82% 8.45% 7.08%
- --------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------- ------------ -----------
</TABLE>
The Fund's Class A shares had a -2.45% year-to-date return as of June 30, 1999.
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 6.47% for the quarter ended June 30, 1989 and its lowest quarterly
return was -3.78% for the quarter ended March 31, 1994.
The maximum Class A sales charge of 4.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above or in the bar
chart. If this fee were included, the returns would be less than those shown.
The average annual returns in the table shown below do include the sales charge.
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/98
- ----------------- ---------------------- ---------------------- ------------------------ ---------------------------
CLASS A B C Lehman Brothers
(if redeemed)* (if redeemed)* Government Bond Index
(inception 8/1/85) (inception 5/2/94) (inception 11/29/95)
- ----------------- ---------------------- ---------------------- ------------------------ ---------------------------
<S> <C> <C> <C> <C>
1 year 1.96% 2.34% 5.34% 9.85%
- ----------------- ---------------------- ---------------------- ------------------------ ---------------------------
5 years 4.03% N/A N/A 7.18%
- ----------------- ---------------------- ---------------------- ------------------------ ---------------------------
10 years or 6.91% 5.43% 5.74% 9.17%
lifetime**
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</TABLE>
The table above shows the Fund's average annual returns over various time
periods compared to the performance of the Lehman Brothers Government Bond
Index. You should remember that unlike the Fund, the index is unmanaged and
doesn't reflect the costs of operating a mutual fund, such as the costs of
buying, selling and holding the securities.
* If redeemed at end of period shown. If shares were not redeemed, the
returns for Class B would be 6.34% and 5.76%, respectively, for the
one-year and lifetime periods. Returns for Class C would be 6.34% and
5.74%, respectively, for the one-year and lifetime periods.
** Lifetime returns are shown if the Fund or Class existed for less than ten
years. The Lehman Brothers Government Bond Index return shown is for ten
years. The Index returns for Class B and Class C lifetime periods were
8.79% and 7.65%, respectively. Maximum sales charges are included in the
Fund returns in the table.
5
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<TABLE>
<S> <C> <C> <C> <C>
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CLASS A B C
What are the Fund's fees and expenses? Maximum sales charge (load) imposed on
Sales charges are fees paid directly from your investments when purchases as a percentage of offering
you buy or sell shares of the Fund. price 4.75% none none
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Maximum contingent deferred sales
charge (load) as a percentage of
original purchase price or Redemption
price, whichever is lower none(1) 4%(2) 1%(3)
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Maximum sales charge (load) imposed on
reinvested dividends none none none
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Redemption fees none none none
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Annual fund operating expenses are deducted from the Fund's
assets. CLASS A B C
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Management fees(4) 0.55% 0.55% 0.55%
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Distribution and service (12b-1) fees 0.30%(5) 1.00% 1.00%
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Other expenses 0.37% 0.37% 0.37%
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Total operating expenses 1.22% 1.92% 1.92%
- ----------------------------------------------------------------- ---------------------------------------- ---------- -------- -----
- ---------------------------------------------- ------------------ ------------- ------------- ------------ ------------- -----------
This example is intended to help you CLASS(7) A B B C C
compare the cost of investing in the Fund to (if (if
the cost of investing in other mutual funds redeemed) redeemed)
with similar investment objectives. We show ------------------ ------------- ------------- ------------ ------------- -----------
the cumulative amount of Fund expenses on a 1 year $593 $195 $595 $195 $295
hypothetical investment of $10,000 with an ------------------ ------------- ------------- ------------ ------------- -----------
annual 5% return over the time shown. (6) 3 years $844 $603 $903 $603 $603
This is an example only, and does not ------------------ ------------- ------------- ------------ ------------- -----------
represent future expenses, which may be 5 years $1,113 $1,037 $1,237 $1,037 $1,037
greater or less than those shown here. ------------------ ------------- ------------- ------------ ------------- -----------
10 years $1,882 $2,061 $2,061 $2,243 $2,243
- ---------------------------------------------- ------------------ ------------- ------------- ------------ ------------- -----------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net
asset value. However, if you buy the shares through a financial adviser
who is paid a commission, a contingent deferred sales charge will apply
to certain redemptions. Additional Class A purchase options that
involve a contingent deferred sales charge may be permitted from time
to time and will be disclosed in the prospectus if they are available.
(2) If you redeem Class B shares during the first two years after you buy
them, you will pay a contingent deferred sales charge of 4%, which
declines to 3% during the third and fourth years, 2% during the fifth
year, 1% during the sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The management fee has been restated to reflect a new management fee
which became effective on April 1, 1999.
(5) The Board of Trustees adopted a formula for calculating 12b-1 plan
expenses for the Fund's Class A shares that went into effect on June 1,
1992. Under this formula, 12b-1 plan expenses will not be more than
0.30% or less than 0.10%.
(6) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods
we show.
(7) The Class B example reflects the conversion of Class B shares to Class
A Shares after approximately eight years. Information for the ninth and
tenth years reflects expenses of the Class A Shares.
6
<PAGE>
How we manage the Fund
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or
market sectors that we think are the best investments for the Fund. Following
are descriptions of how the portfolio manager pursues the Fund's investment
goals.
The Fund invests in a mix of fixed-income securities, primarily those that are
issued or guaranteed by the U.S. government. The Fund may also invest a portion
of its assets in high-quality non-government securities. Through careful
selection of bonds, we strive to provide high current income with emphasis on
stability of principal.
We typically invest a significant portion of the Fund's assets in
mortgage-related securities. When selecting mortgage securities for the
portfolio we carefully evaluate them based on their income potential, but we
generally also look for mortgages with characteristics that reduce the
likelihood of prepayment by the homeowner. Such characteristics might include
low remaining balances, interest rates that are lower than current rates, or
failure to prepay in a previous period of low interest rates.
The weighted average maturity of the Fund will typically be between 7 and 10
years. This is considered an intermediate range maturity. By keeping the average
maturity in this intermediate range, we aim to reduce the Fund's sensitivity to
changes in interest rates. When interest rates rise, prices of bonds and bond
funds generally decline and when interest rates decline, prices generally rise.
We believe intermediate-maturity bonds generally offer us attractive income
potential with lower price fluctuations than longer term bonds.
The Fund's investment objective - 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 - is
non-fundamental. This means that the Board of Trustees may change the objective
without obtaining shareholder approval. If the objective were changed, we would
notify shareholders before he change in the objective became effective.
7
<PAGE>
The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and also may provide capital appreciation.
<TABLE>
<CAPTION>
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Securities How we use them
- ------------------------------------------------------------ --------------------------------------------------------------
<S> <C>
Direct U.S. Treasury obligations: include Treasury bills, We may invest without limit in U.S. Treasury securities.
notes and bonds of varying maturities. U.S. Treasury
securities are backed by the "full faith and credit" of
the United States.
- ------------------------------------------------------------ --------------------------------------------------------------
Government agency obligations: securities issued or backed We may invest without limit in the debt securities of U.S.
by U.S. government agencies or government-sponsored government agencies or instrumentalities.
corporations such as the Federal Housing Authority or the
Export-Import Bank. These securities may or may not be
backed by the full faith and credit of the U.S. government.
- ------------------------------------------------------------ --------------------------------------------------------------
Mortgage-backed securities: Fixed-income securities that There is no limit on government-related mortgage-backed
represent pools of mortgages, with investors receiving securities or on fully collateralized privately issued
principal and interest payments as the underlying mortgage mortgage-backed securities.
loans are paid back. Many are issued and guaranteed
against default by the U.S. government or its agencies or We may invest up to 20% of net assets in mortgage-backed
instrumentalities, such as the Federal Home Loan Mortgage securities issued by private companies only if they are 100%
Corporation, Federal National Mortgage Association and the collateralized at the time of issuance by securities issued or
Government National Mortgage Association. Others are guaranteed by the U.S. government, its agencies or
issued by private financial institutions, and are fully instrumentalities. However, these securities must be rated in
collateralized by certificates issued or guaranteed by the one of the four highest categories by nationally recognized
U.S. government or its agencies or instrumentalities. statistical rating organization such as S&P or Moody's at the
time of purchase. The privately issued securities we invest in
are either CMOs or REMICs rated in the two highest grades by
an NRSRO at the time of purchase (see below).
- ------------------------------------------------------------ --------------------------------------------------------------
Collateralized mortgage obligations (CMOs): Privately See mortgage-backed securities above.
issued mortgage-backed bonds whose underlying value is the
mortgages that are grouped into different pools according
to their maturity.
- ------------------------------------------------------------ --------------------------------------------------------------
Real estate mortgage investment conduits (REMICs): See mortgage-backed securities above.
Privately issued mortgage-backed bonds whose underlying
value is a fixed pool of mortgages secured by an interest
in real property. Like CMOs, REMICs offer different pools.
- ------------------------------------------------------------ --------------------------------------------------------------
Asset-backed securities: Bonds or notes backed by accounts We invest only in asset-backed securities rated in the
receivables, including home equity, automobile or credit highest quality category by an NRSRO. In addition, our
loans. holdings of asset-backed securities combined with our
holdings of corporate bonds, certificates of deposit and
corporate commercial paper may not exceed 20% of the Fund's
net assets.
- ------------------------------------------------------------ --------------------------------------------------------------
Corporate bonds: Debt obligations issued by a corporation. We may invest in corporate bonds that are rated A or above by
an NRSRO. Our total holdings of non-government securities,
including corporate bonds and certificates of deposit, may not
exceed 20% of net assets.
- ------------------------------------------------------------ --------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------ --------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------------ --------------------------------------------------------------
<S> <C>
Certificates of deposit and obligations of both U.S. and We may invest in certificates of deposit from banks that
foreign banks: Interest paying debt instruments issued by have assets of at least one billion dollars. These
a bank. securities are subject to our 20% limit on non-government
securities.
- ------------------------------------------------------------ --------------------------------------------------------------
Corporate commercial paper: Short-term debt obligations We may invest in commercial paper that is rated P-1 by
with maturities ranging from two to 270 days, issued by Moody's and/or A-1 by S&P. These securities are subject to
companies. our 20% limit on non-government securities.
- ------------------------------------------------------------ --------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such Typically, we use repurchase agreements as a short-term
as the Fund, and seller of securities in which the seller investment for our cash position. In order to enter into
agrees to buy the securities back within a specified time these repurchase agreements, we must have collateral of at
at the same price the buyer paid for them, plus an amount least 102% of the repurchase price.
equal to an agreed upon interest rate. Repurchase
agreements are often viewed as equivalent to cash.
- ------------------------------------------------------------ --------------------------------------------------------------
Options and futures: Options represent a right to buy or At times when we anticipate adverse conditions, we may want
sell a security at an agreed upon price at a future date. to protect gains on securities without actually selling
The purchaser of an option may or may not choose to go them. We might use options or futures to neutralize the
through with the transaction. effect of any price declines, without selling a bond or
bonds, or as a hedge against changes in interest rates.
Futures contracts are agreements for the purchase or sale
of securities at a specified price, on a specified date. Use of these strategies can increase the operating costs of
Unlike an option, a futures contract must be executed the Fund and can lead to loss of principal.
unless it is sold before the settlement date.
Certain options and futures may be considered to be
derivative securities.
- ------------------------------------------------------------ --------------------------------------------------------------
Restricted securities: Privately placed securities whose We may invest in privately placed securities that are
resale is restricted under securities law. eligible for resale only among certain institutional buyers
without registration, including Rule 144A Securities.
Restricted securities that are determined to be illiquid may
not exceed the Fund's 10% limit on illiquid securities, which
is described below.
- ------------------------------------------------------------ --------------------------------------------------------------
Illiquid securities: Securities that do not have a ready We may invest up to 10% of total assets in illiquid
market, and cannot be easily sold within seven days at securities.
approximately the price that the Fund has valued them.
- ------------------------------------------------------------ --------------------------------------------------------------
</TABLE>
Please see the Statement of Additional Information for additional descriptions
on the securities listed in the table above.
Lending securities
The Fund may lend up to 25% of its assets to qualified brokers, dealers and
investors for their use in securities transactions.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. To the extent that it does so, the Fund may be unable
to meet its investment objective.
9
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Portfolio turnover
The Fund's annual portfolio turnover may exceed 100%. A turnover rate of 100%
would occur if the Fund sold and replaced securities valued at 100% of its net
assets within one year. High turnover can result in increased transaction costs
and tax liability for the Fund.
10
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The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. You should consider an investment in the Fund to
be a long-term investment that typically provides the best results when held for
a number of years. The following are the chief risks you assume when you invest
in Delaware American Government Bond Fund. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ------------------------------------------------------------------
Risks How we strive to manage them
<S> <C>
- ----------------------------------------------------------- ------------------------------------------------------------------
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on high
securities in a certain market -- like the stock or bond quality individual bonds that we believe can provide a steady
market -- will decline in value because of factors such stream of income regardless of interim fluctuations in the bond
as economic conditions, future expectations or investor market. We do buy and sell securities for short-term purposes.
confidence.
We may hold a substantial part of the Fund's assets in cash or
cash equivalents as a temporary, defensive strategy.
- ----------------------------------------------------------- ------------------------------------------------------------------
Interest rate risk is the risk that securities will Interest rate risk is the most significant risk for this Fund.
decrease in value if interest rates rise. The risk is In striving to manage this risk, we monitor economic conditions
greater for bonds with longer maturities than for those and the interest rate environment. We keep the average maturity
with shorter maturities. Also, if the Fund is required of the portfolio as short as is prudent, in keeping with our
to make swap payments based on variable interest rates, objective to provide high current income.
it will be required to make increased payments if interest
rates rise, which will not necessarily be offset by the
fixed-rate payments it is entitled to receive under the
swap agreement.
- ----------------------------------------------------------- ------------------------------------------------------------------
Credit risk The possibility that a bond's issuer (or an By focusing primarily on U.S. Treasury securities and other
entity that insures the bond) will be unable to make securities that are backed by the U.S. government, we minimize
timely payments of interest and principal. the possibility that any of the securities in our portfolio will
not pay interest or principal. U.S. government securities are
generally considered to be of the highest quality.
When selecting non-government securities, we focus on those
with high quality ratings and do careful credit analysis
before investing.
- ----------------------------------------------------------- ------------------------------------------------------------------
Liquidity risk is the possibility that securities cannot U.S. Treasuries and other U.S. government debt securities are
be readily sold within seven days at approximately the typically the most liquid securities available. Therefore,
price that the Fund has valued them. liquidity risk is not a significant risk for this Fund.
- ----------------------------------------------------------- ------------------------------------------------------------------
Prepayment risk is the risk that the principal on a bond Prepayment risk can be a significant risk to this Fund because
that the Fund owns will be prepaid prior to maturity at a we may invest a large percentage of our holdings in mortgage
time when interest rates are lower than what that bond securities. Homeowners or others who have mortgages are more
was paying. The Fund would then have to reinvest that likely to prepay them when interest rates are relatively low.
money at a lower interest rate. In order to manage this risk, when interest rates are low or
when we believe rates will be declining, we look for mortgage
securities that we believe are less likely to be prepaid, such
as those that have interest rates lower than current rates or
have low remaining loan balances.
- ----------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------- ------------------------------------------------------------------
Risks How we strive to manage them
<S> <C>
- ----------------------------------------------------------- ------------------------------------------------------------------
Futures and options risk is the possibility that the Fund We will use options and futures for defensive purposes, such as
may experience a significant loss if it employs an to protect gains in the portfolio without actually selling a
options or futures strategy related to a security or a security. We will not use futures and options for speculative
market index and that security or index moves in the reasons or in an effort to enhance return.
opposite direction from what the portfolio manager
anticipated. Futures and options also involve additional
expenses, which could reduce any benefit or increase
any loss to the Fund from using the strategy.
- ----------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
12
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust, which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For its services to the Fund, the manager was paid
0.58% of average daily net assets for the last fiscal year.
Portfolio managers
Paul A. Grillo has responsibility for making investment decisions for the Fund.
When making decisions for the Fund, Mr. Grillo regularly consults with H. Thomas
McMeekin.
H. Thomas McMeekin, Executive Vice President and Chief Investment Officer, Fixed
Income, joined Delaware Investments in 1999. He has over 24 years of investment
management experience which includes serving as President of Lincoln Investment
Management, Inc., an affiliate of Delaware Investments. Mr. McMeekin holds a BA
in Economics from the University of Rochester and an MBA in Finance and
Accounting from Cornell University. He also completed the Advanced Management
Program at Harvard Business School.
Paul A. Grillo, Vice President/Portfolio Manager of the Fund, holds a BA in
Business Management from North Carolina State University and an MBA in Finance
from Pace University. Prior to joining Delaware Investments in 1993, Mr. Grillo
served as mortgage strategist and trader at the Dreyfus Corporation. He also
served as a mortgage strategist and portfolio manager for the Chemical
Investment Group and as financial analyst at Chemical Bank. Mr. Grillo is a CFA
charterholder. Mr. Grillo has been managing the Fund since February 21, 1997.
13
<PAGE>
Who manages the Fund (continued)
Fund administration (Who's who?)
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
Board of Trustees
<TABLE>
<S> <C> <C>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
14
<PAGE>
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
15
<PAGE>
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class:
Class A
o Class A shares have an up-front sales charge of up to 4.75% that you pay
when you buy the shares. The offering price for Class A shares includes the
front-end sales charge.
o If you invest $100,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales charge
may be waived; please see the Statement of Additional Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than
0.30% of average daily net assets, which is lower than the 12b-1 fee for
Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.
Class A sales charges
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------- --------------------------------- --------------------------
Sales charge as % of Sales charge Dealer's commission as %
Amount of purchase offering price as % of offering price
of amount invested
<S> <C> <C> <C>
- --------------------------------------------- ------------------------- --------------------------------- --------------------------
Less than $100,000 4.75% 4.93% 4.00%
- --------------------------------------------- ------------------------- --------------------------------- --------------------------
$100,000 but under $250,000 3.75% 3.84% 3.00%
- --------------------------------------------- ------------------------- --------------------------------- --------------------------
$250,000 but under $500,000 2.50% 2.60% 2.00%
- --------------------------------------------- ------------------------- --------------------------------- --------------------------
$500,000 but under $1 million 2.00% 2.05% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year after your
purchase and 0.50% if you redeem them within the second year.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Sales charge Sales charge Dealer's commission as %
Amount of purchase as % of as % of of
offering price amount invested offering price
- -------------------------------------------- -------------------------- -------------------------------- ---------------------------
<S> <C> <C> <C>
$1 million up to $5 million none none 1.00%
- -------------------------------------------- -------------------------- -------------------------------- ---------------------------
Next $20 million
Up to $25 million none none 0.50%
- -------------------------------------------- -------------------------- -------------------------------- ---------------------------
Amount over $25 million none none 0.25%
- -------------------------------------------- -------------------------- -------------------------------- ---------------------------
</TABLE>
16
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge if you redeem your shares within six years after you
buy them.
o If you redeem Class B shares during the two years after you buy them, the
shares will be subject to a contingent deferred sales charge of 4%. The
contingent deferred sales charge is 3% during the third and fourth years,
2% during the fifth year, 1% during the sixth year, and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately eight years after you buy your Class B shares, they are
subject to annual 12b-1 fees no greater than 1% of average daily net
assets, of which 0.25% are service fees paid to the distributor, dealers or
others for providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and
any dividends paid on these shares are lower than dividends on Class A
shares.
o Approximately eight years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%.
Conversion may occur as late as three months after the eighth anniversary
of purchase, during which time Class B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge of 1% if you redeem your shares within 12 months
after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee which may not be greater
than 1% of average daily net assets, of which 0.25% are service fees paid
to the distributor, dealers or others for providing services and
maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and
pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any
one time. The limitation on maximum purchases varies for retirement plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
17
<PAGE>
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- ---------------------------------- ---------------------------------------- --------------------------------------------------
Program How it works Share class
A B C
- ---------------------------------- ---------------------------------------- --------------- ----------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of Intent
agree to invest a certain amount and Rights of Accumulation do
in Delaware Investment Funds not apply to the purchase of
(except money market funds with no Class B and C shares, you can
sales charge) over a 13-month combine your purchase of Class A
period to qualify for reduced shares with your purchase of B
front-end sales charges. and C shares to fulfill your
Letter of Intent or qualify for
Rights of Accumulation.
- ---------------------------------- ---------------------------------------- ---------------
Rights of Accumulation You can combine your holdings or X
purchases of all funds in the Delaware
Investments family (except money market
funds with no sales charge) as well as the
holdings and purchases of your spouse and
children under 21 to qualify for reduced
front-end sales charges.
- ---------------------------------- ---------------------------------------- --------------- ----------------- -----------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- ---------------------------------------- --------------------------------------------------
Program How it works Share class
A B C
- ---------------------------------- ---------------------------------------- --------------- ----------------------------------
<S> <C> <C> <C>
Reinvestment of redeemed Up to 12 months after you redeem For Class For Class Not
shares shares, you can reinvest the A, you will B, your available.
proceeds with no additional sales not have to account
charge. pay an will be
additional credited
front-end with the
sales contingent
charge. deferred
sales charge
you previously
paid on the
amount you are
reinvesting.
Your schedule
for contingent
deferred sales
charges and
conversion to
Class A will
not start
over again;
it will pick
up from the
point at
which you
redeemed your
shares.
- ---------------------------------- ---------------------------------------- --------------- -----------------------------------
SIMPLE IRA, SEP IRA, SAR These investment plans may qualify X There is no reduction in sales
SEP, Prototype Profit for reduced sales charges by charges for Class B or Class C
Sharing, Pension, 401(k), combining the purchases of all shares for group purchases by
SIMPLE 401(k), 403(b)(7), members of the group. Members of retirement plans.
and 457 Retirement Plans these groups may also qualify to
purchase shares without a front-end sales
charge and a waiver of any contingent
deferred sales charges.
- ---------------------------------- ---------------------------------------- --------------- -----------------------------------
</TABLE>
19
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service, or through our web site, www.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.
Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. If you are buying shares in an IRA or Roth IRA, under the Uniform Gifts
to Minors Act or the Uniform Transfers to Minors Act; or through an Automatic
Investing Plan, the minimum purchase is $250, and you can make additional
investments of only $25. The minimum for an Education IRA is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Education IRAs.
20
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the Board of Trustees. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the Board of
Trustees.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
21
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, the First Union Bank fee (currently
$7.50) will be deducted from your proceeds. Bank information must be on file
before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawareinvestments.com. For more information about
how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A HAND HOLDING A PEN]
Through checkwriting
You may redeem shares by writing checks of $500 or more. Checks must be signed
by all owners of the account unless you indicate otherwise on your Investment
Application. The checkwriting feature is not available for retirement plans or
for Class B or Class C shares. Also, because dividends are declared daily, you
may not close your account by writing a check. When you write checks you are
subject to the regulations of First Union Bank and may be subject to a charge if
the check amount exceeds the value of your account.
22
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time), you will receive the net asset value as determined on the
business day we receive your request. We will deduct any applicable contingent
deferred sales charges. You may also have to pay taxes on the proceeds from your
sale of shares. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, the Fund may redeem your account
after 60 days' written notice to you.
23
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly investments
directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as social security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for the same class of shares
in other funds, your new shares will be subject to the same contingent deferred
sales charge as the shares you originally purchased. The holding period for the
CDSC will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You don't
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange.
24
<PAGE>
About your account (continued)
Special services (continued)
MoneyLine(SM) On Demand Service
Through our MoneyLine(SM) On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans, except
for purchases into IRAs. MoneyLine has a minimum transfer of $25 and a maximum
transfer of $50,000.
MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
Dividends, distributions and taxes
Dividends, if any, are declared daily and paid monthly. Capital gains, if any,
are paid twice a year. We automatically reinvest all dividends and any capital
gains, unless you tell us otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
Distributions declared in October, November or December but paid in January are
taxable as if they were paid in December.
25
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Fund invests. The
portfolio managers and investment professionals of the Fund consider Year 2000
compliance in the securities selection and investment process. However, there
can be no guarantee that, even with their due diligence efforts, they will be
able to predict the effect of Year 2000 on any company or the performance of its
securities.
Investments by fund of funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds. From time to time, the Fund may experience
large investments or redemptions due to allocations or rebalancings by
Foundation Funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management.
For example, the Fund may be required to sell securities or invest cash at times
when it would not otherwise do so. These transactions could also have tax
consequences if sales of securities result in gains, and could also increase
transaction costs or portfolio turnover. The manager will monitor transactions
by Foundation Funds and will attempt to minimize any adverse effects on the Fund
and Foundation Funds as a result of these transactions.
26
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------- -------------------------------------------------
Delaware American Government Bond Fund
A Class
Year Ended 7/31
- -------------------------------------------------------------------------------- -------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Net asset value, beginning of period $7.720 $7.760 $7.590 $7.860 $8.000
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Income (loss) from investment operations:
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Net investment income 0.474 0.528 0.544 0.588 0.656
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Net realized and unrealized gain (loss) on investments and futures contracts (0.420) (0.040) 0.170 (0.270) (0.140)
------- ------- ----- ------- -------
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Total from investment operations 0.054 0.488 0.714 0.318 0.516
----- ----- ----- ----- -----
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Less dividends:
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Dividends from net investment income (0.474) (0.528) (0.544) (0.588) (0.656)
------- ------- ------- ------- -------
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Total dividends (0.474) (0.528) (0.544) (0.588) (0.656)
------- ------- ------- ------- -------
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Net asset value, end of year $7.300 $7.720 $7.760 $7.590 $7.860
------ ------ ------ ------ ------
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Total return(1) 0.59% 6.50% 9.77% 4.09% 6.82%
===== ===== ===== ===== =====
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Ratios and supplemental data:
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Net assets, end of period (000 omitted) $114,027 $127,001 $138,844 $164,156 $206,083
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Ratio of expenses to average net assets 1.25% 1.20% 1.16% 1.20% 1.24%
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Ratio of net investment income to average net assets 6.16% 6.80% 7.13% 7.55% 8.40%
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
Portfolio turnover 142% 119% 63% 81% 70%
- -------------------------------------------------------------------------------- --------- --------- --------- --------- ---------
</TABLE>
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at
net asset value and does not reflect the impact of a sales charge.
27
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------- -------------------------------------------------------------
Delaware American Government Bond
Fund B Class
Year Ended 7/31
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
1999 1998 1997 1996 1995
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $7.720 $7.760 $7.590 $7.860 $8.000
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Income (loss) from investment operations:
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Net investment income 0.421 0.474 0.490 0.533 0.601
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Net realized and unrealized gain (loss) on investments
and futures contracts (0.421) (0.040) 0.170 (0.270) (0.140)
------- ------- ----- ------- -------
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Total from investment operations 0.000 0.434 0.660 0.263 0.461
----- ----- ----- ----- -----
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Less dividends:
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Dividends from net investment income (0.420) (0.474) (0.490) (0.533) (0.601)
------- ------- ------- ------- -------
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Total dividends (0.420) (0.474) (0.490) (0.533) (0.601)
------- ------- ------- ------- -------
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Net asset value, end of period $7.300 $7.720 $7.760 $7.590 $7.860
====== ====== ====== ====== ======
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Total return(1) (0.11%) 5.76% 9.01% 3.36% 6.08%
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Ratios and supplemental data:
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Net assets, end of period (000 omitted) $19,147 $13,642 $10,695 $9,754 $7,394
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Ratio of expenses to average net assets 1.95% 1.90% 1.86% 1.90% 1.94%
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Ratio of net investment income to average net assets 5.46% 6.10% 6.43% 6.85% 7.66%
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
Portfolio turnover 142% 119% 63% 81% 70%
- --------------------------------------------------------- ------------ ----------- ----------- ----------- ------------
</TABLE>
(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at
net asset value and does not reflect the impact of a sales charge.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------- ---------------------------------------- ------------
Delaware American Government Bond
Fund C Class Period
Year Ended 7/31 11/29/95(1)
- --------------------------------------------------------- ------------- ------------ ------------- through
1999 1998 1997 7/31/96
- --------------------------------------------------------- ------------- ------------ ------------- ------------
- --------------------------------------------------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $7.720 $7.760 $7.590 $7.950
- --------------------------------------------------------- ------------- ------------ ------------- ------------
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Income (loss) from investment operations:
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Net investment income 0.422 0.474 0.491 0.348
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Net realized and unrealized gain (loss) on investments
and futures contracts (0.422) (0.040) 0.170 (0.360)
------- ------- ----- -------
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Total from investment operations 0.000 0.434 0.661 (0.012)
----- ----- ----- -------
- --------------------------------------------------------- ------------- ------------ ------------- ------------
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Less dividends:
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Dividends from net investment income (0.420) (0.474) (0.491) (0.348)
------- ------- ------- -------
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Total dividends (0.420) (0.474) (0.491) (0.348)
------- ------- ------- -------
- --------------------------------------------------------- ------------- ------------ ------------- ------------
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Net asset value, end of period $7.300 $7.720 $7.760 $7.590
====== ====== ====== ======
- --------------------------------------------------------- ------------- ------------ ------------- ------------
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Total return(2) (0.11%) 5.76% 9.01% (0.17%)
- --------------------------------------------------------- ------------- ------------ ------------- ------------
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Ratios and supplemental data:
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Net assets, end of period (000 omitted) $4,077 $2,047 $1,308 $1,029
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Ratio of expenses to average net assets 1.95% 1.90% 1.86% 1.90%
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Ratio of net investment income to average net assets 5.46% 6.10% 6.43% 6.85%
- --------------------------------------------------------- ------------- ------------ ------------- ------------
Portfolio turnover 142% 119% 63% 81%
- --------------------------------------------------------- ------------- ------------ ------------- ------------
</TABLE>
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
28
<PAGE>
How to read the financial highlights
Net investment income
Net investment income includes dividend and interest income earned from the
Fund's investments; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments and futures contracts
A realized gain on investments occurs when we sell an investment at a profit,
while a realized loss on investments occurs when we sell an investment at a
loss. When an investment increases or decreases in value but we do not sell it,
we record an unrealized gain or loss. The amount of realized gain per share that
we pay to shareholders is listed under "Less dividends-Dividends from net
investment income."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
29
<PAGE>
How to use this glossary
The glossary includes definitions of investment terms used throughout the
prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. See also Nationally recognized statistical rating
organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Corporate bond
A debt security issued by a corporation. See Bond.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
30
<PAGE>
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bond.
Government securities
Securities issued by U.S. government or its agencies. They include Treasuries as
well as agency-backed securities such as Fannie Maes.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Lehman Brothers Government Bond Index
An index composed of The Treasury Bond Index (all public obligations of the U.S.
Treasury, excluding flower bonds and foreign-targeted issues) and the Agency
Bond Index (all publicly issued debt of U.S. government agencies and
quasi-federal corporations, and corporate debt guaranteed by the U.S.
government).
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service
(Moody's), Standard & Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and
Fitch Investor Services, Inc. (Fitch).
31
<PAGE>
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
32
<PAGE>
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Treasury bills
Securities issued by the U.S. Treasury with maturities of one year or less.
Treasury bonds
Securities issued by the U.S. Treasury with maturities of 10 years or longer.
Treasury notes
Securities issued by the U.S. Treasury with maturities of one to 10 years.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
33
<PAGE>
[back cover]
Delaware American Government Bond Fund
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual report to shareholders. In the Fund's shareholder report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during the report period. You
can find more detailed information about the Fund in the current Statement of
Additional Information, which we have filed electronically with the Securities
and Exchange Commission (SEC) and which is legally a part of this prospectus. If
you want a free copy of the Statement of Additional Information, the annual or
semi-annual report, or if you have any questions about investing in this Fund,
you can write to us at 1818 Market Street, Philadelphia, PA 19103-3682, or call
toll-free 800.523.1918. You may also obtain additional information about the
Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
- ---------------------------
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone
redemptions and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4304
Delaware American Government Bond Fund Symbols
CUSIP NASDAQ
----- ------
Class A 246094205 DEGGX
Class B 246094601 DEGBX
Class C 246094700 DEGCX
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
34
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware American Government Bond Fund
(formerly U.S. Government Fund)
Institutional Class
Prospectus
September 29, 1999
Current Income Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
2
<PAGE>
Table of contents
Fund profile page 1
Delaware American Government Bond Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Exchanges
Dividends, distributions and taxes
Certain management considerations
Financial highlights page
3
<PAGE>
Profile: Delaware American Government Bond Fund
What are the Fund's goals?
The Fund seeks 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. Although the Fund will strive to
achieve its investment goal, there is no assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in U.S. government securities including:
o U.S. Treasury bills, notes and bonds;
o other debt securities issued or unconditionally guaranteed by the U.S.
government or backed by the full faith and credit of the U.S. government;
and
o debt issued or guaranteed by U.S. government agencies or instrumentalities,
including debt obligations guaranteed by the Government National Mortgage
Association, also known as GNMA Federal Home Loan Mortgage Corporation
(Freddie Mac) and Federal National Mortgage Association (Fannie Mae) and
other mortgage-backed securities.
We may also invest up to 20% of our net assets in high quality non-government
fixed-income securities.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected by changes in bond prices, particularly as a result of changes
in interest rates. Mortgage-backed securities may experience increased
pre-payments on the underlying mortgages if interest rates decline, which may
require the Fund to reinvest in lower yielding securities. The Fund may also
experience portfolio turnover in excess of 100%, which could result in higher
transaction costs and tax liability for the Fund. For a more complete discussion
of risk, please turn to page ___.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with medium or long range goals.
o Investors looking for regular income from their investments.
o Investors looking for a bond investment to help balance their investments
in stocks or more aggressive securities.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
sometimes significantly, over the short term.
o Investors seeking long-term growth of capital.
4
<PAGE>
How has the Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Institutional Class shares have
varied over the past ten calendar years, as well as the average annual returns
of all shares for the one-, five-, and ten-year periods. The Institutional Class
commenced operations on June 1, 1992. Return information for the Institutional
Class for the periods prior to the time it commenced operations is calculated by
taking the performance of the Fund's Class A shares and eliminating all sales
and asset based charges that apply to Class A shares. The Fund's past
performance is not necessarily an indication of how it will perform in the
future.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN]
Year-by-year total return (Institutional Class)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
11.69% 9.05% 15.42% 6.67% 8.12% -5.53% 14.04% 3.12% 8.76% 7.40%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As of June 30, 1999, the Fund's Institutional Class shares had a year-to-date
return of -2.30%. During the ten years illustrated in this bar chart, the
Institutional Class' highest quarterly return was 8.68% for the quarter ended
June 30, 1989 and its lowest quarterly return was -3.71% for the quarter ended
March 31, 1994.
Average annual returns for periods ending 12/31/98
- --------------------------------------------------------------------------------
Institutional Class Lehman Brothers Government
Bond Index
- --------------------------------------------------------------------------------
1 year 7.40% 9.47%
- --------------------------------------------------------------------------------
5 years 5.35% 7.30%
- --------------------------------------------------------------------------------
10 years 7.72% 9.33%
- --------------------------------------------------------------------------------
The table above shows the Fund's average annual returns over various time
periods compared to the performance of the Lehman Brothers Government Bond
Index. You should remember that unlike the Fund, the index is unmanaged and
doesn't reflect the costs of operating a mutual fund, such as the costs of
buying, selling and holding the securities.
5
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
- --------------------------------------------------------------------------
Maximum sales charge (load) imposed on
Purchases as a percentage of offering price none
- --------------------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none
- --------------------------------------------------------------------------
Maximum sales charge (load) imposed on
Reinvested dividends none
- --------------------------------------------------------------------------
Redemption fees none
- --------------------------------------------------------------------------
Exchange Fees(1) none
- --------------------------------------------------------------------------
Annual fund operating expenses are deducted from the Fund's assets.
- --------------------------------------------------------------------------
Management fees 0.55%
- --------------------------------------------------------------------------
Distribution and service (12b-1) fees none
- --------------------------------------------------------------------------
Other expenses 0.37%
- --------------------------------------------------------------------------
Total operating expenses 0.92%
- --------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.2 This is an
example only, and does not represent future expenses, which may be greater or
less than those shown here.
- -----------------------------
1 year $94
- -----------------------------
3 years $293
- -----------------------------
5 years $509
- -----------------------------
10 years $1,131
- -----------------------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
6
<PAGE>
How we manage the Fund
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or
market sectors that we think are the best investments for the Fund. Following
are descriptions of how the portfolio manager pursues the Fund's investment
goals.
The Fund invests in a mix of fixed-income securities, primarily those that are
issued or guaranteed by the U.S. government. The Fund may also invest a portion
of its assets in high-quality non-government securities. Through careful
selection of bonds, we strive to provide high current income with emphasis on
stability of principal.
We typically invest a significant portion of the Fund's assets in
mortgage-related securities. When selecting mortgage securities for the
portfolio we carefully evaluate them based on their income potential, but we
generally also look for mortgages with characteristics that reduce the
likelihood of prepayment by the homeowner. Such characteristics might include
low remaining balances, interest rates that are lower than current rates, or
failure to prepay in a previous period of low interest rates.
The weighted average maturity of the Fund will typically be between 7 and 10
years. This is considered an intermediate range maturity. By keeping the average
maturity in this intermediate range, we aim to reduce the Fund's sensitivity to
changes in interest rates. When interest rates rise, prices of bonds and bond
funds generally decline and when interest rates decline, prices generally rise.
We believe intermediate-maturity bonds generally offer us attractive income
potential with lower price fluctuations than longer term bonds.
The Fund's investment objective - 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 - is
non-fundamental. This means that the Board of Trustees may change the objective
without obtaining shareholder approval. If the objective were changed, we would
notify shareholders before the change in the objective became effective.
7
<PAGE>
The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and also may provide capital appreciation.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Direct U.S. Treasury obligations: include Treasury bills, We may invest without limit in U.S. Treasury securities.
notes and bonds of varying maturities. U.S. Treasury
securities are backed by the "full faith and credit" of the
United States.
- ------------------------------------------------------------------------------------------------------------------------------------
Government agency obligations: securities issued or backed We may invest without limit in the debt securities of U.S.
by U.S. government agencies or government-sponsored government agencies or instrumentalities.
corporations such as the Federal Housing Authority or the
Export-Import Bank. These securities may or may not be
backed by the full faith and credit of the U.S. government.
- ------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities: Fixed-income securities that There is no limit on government-related mortgage-backed
represent pools of mortgages, with investors receiving securities or on fully collateralized privately issued
principal and interest payments as the underlying mortgage mortgage-backed securities.
loans are paid back. Many are issued and guaranteed
against default by the U.S. government or its agencies or We may invest up to 20% of net assets in mortgage-backed
instrumentalities, such as the Federal Home Loan Mortgage securities issued by private companies only if they are 100%
Corporation, Federal Home Mortgage Association and the collateralized at the time of issuance by securities issued or
Government National Mortgage Association. Others are guaranteed by the U.S. government, its agencies or
issued by private financial institutions, and are fully instrumentalities. However, these securities must be rated in
collateralized by certificates issued or guaranteed by the one of the four highest categories by nationally recognized
U.S. government or its agencies or instrumentalities. statistical rating organization such as S&P or Moody's at the
time of purchase. The privately issued securities we invest in
are either CMOs or REMICs rated in the two highest grades by
an NRSRO at the time of purchase (see below).
- ------------------------------------------------------------------------------------------------------------------------------------
Collateralized mortgage obligations (CMOs): Privately issued See mortgage-backed securities above.
mortgage-backed bonds whose underlying value is the
mortgages that are grouped into different pools according to
their maturity.
- ------------------------------------------------------------------------------------------------------------------------------------
Real estate mortgage investment conduits (REMICs): Privately See mortgage-backed securities above.
issued mortgage-backed bonds whose underlying value is a
fixed pool of mortgages secured by an interest in real
property. Like CMOs, REMICs offer different pools.
- ------------------------------------------------------------------------------------------------------------------------------------
Asset-backed securities: Bonds or notes backed by accounts We invest only in asset-backed securities rated in the
receivables, including home equity, automobile or credit highest quality category by an NRSRO. In addition, our
loans. holdings of asset-backed securities combined with our
holdings of corporate bonds, certificates of deposit and
corporate commercial paper may not exceed 20% of the Fund's
net assets.
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate bonds: Debt obligations issued by a corporation. We may invest in corporate bonds that are rated A or above
by an NRSRO. Our total holdings of non-government
securities, including corporate bonds and certificates of
deposit, may not exceed 20% of net assets.
- ------------------------------------------------------------------------------------------------------------------------------------
Certificates of deposit and obligations of both U.S. and We may invest in certificates of deposit from banks that
foreign banks: Interest paying debt instruments issued by a have assets of at least one billion dollars. These
bank. securities are subject to our 20% limit on non-government
securities.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate commercial paper: Short-term debt obligations with We may invest in commercial paper that is rated P-1 by Moody's and/or
maturities ranging from two to 270 days, issued by A-1 by S&P. These securities are subject to our 20% limit on
companies. non-government securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, such as Typically, we use repurchase agreements as a short-term investment
the Fund, and seller of securities in which the seller for our cash position. In order to enter into these repurchase
agrees to buy the securities back within a specified time at agreements, we must have collateral of at least 102% of the
the same price the buyer paid for them, plus an amount equal repurchase price.
to an agreed upon interest rate. Repurchase agreements are
often viewed as equivalent to cash.
- ------------------------------------------------------------------------------------------------------------------------------------
Options and futures: Options represent a right to buy or At times when we anticipate adverse conditions, we may want
sell a security at an agreed upon price at a future date. to protect gains on securities without actually selling
The purchaser of an option may or may not choose to go them. We might use options or futures to neutralize the
through with the transaction. effect of any price declines, without selling a bond or
bonds, or as a hedge against changes in interest rates.
Futures contracts are agreements for the purchase or sale of Use of these strategies can increase the operating costs of the Fund
securities at a specified price, on a specified date. Unlike and can lead to loss of principal.
an option, a futures contract must be executed unless it is
sold before the settlement date.
Certain options and futures may be considered to be
derivative securities.
- ------------------------------------------------------------------------------------------------------------------------------------
Restricted securities: Privately placed securities whose We may invest in privately placed securities that are eligible for
resale is restricted under securities law. resale only among certain institutional buyers without registration
including Rule 144A Securities. Restricted securities that are
determined to be illiquid may not exceed the Fund's 10% limit on
illiquid securities, which is described below.
- ------------------------------------------------------------------------------------------------------------------------------------
Illiquid securities: Securities that do not have a ready We may invest up to 10% of total assets in illiquid securities.
market, and cannot be easily sold within seven days at
approximately the price that the Fund has valued them.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please see the Statement of Additional Information for additional descriptions
on the securities listed in the table above.
Lending securities
The Fund may lend up to 25% of its assets to qualified brokers, dealers and
investors for their use in securities transactions.
Borrowing from banks
The Fund may borrow money as a temporary measure for extraordinary purposes or
to facilitate redemptions. To the extent that it does so, the Fund may be unable
to meet its investment objective.
Portfolio turnover
The Fund's annual portfolio turnover may exceed 100%. A turnover rate of 100%
would occur if the Fund sold and replaced securities valued at 100% of its net
assets within one year. High turnover can result in increased transaction costs
and tax liability for the Fund.
9
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. You should consider an investment in the Fund to
be a long-term investment that typically provides the best results when held for
a number of years. The following are the chief risks you assume when you invest
in the Delaware American Government Bond Fund. Please see the Statement of
Additional Information for further discussion of these risks and the other risks
not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on high quality
securities in a certain market -- like the stock or bond individual bonds that we believe can provide a steady stream of
market -- will decline in value because of factors such as income regardless of interim fluctuations in the bond market. We do
economic conditions, future expectations or investor buy and sell securities for short-term purposes.
confidence.
We may hold a substantial part of the Fund's assets in cash or cash
equivalents as a temporary, defensive strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that securities will decrease Interest rate risk is the most significant risk for this Fund. In
in value if interest rates rise. The risk is greater for striving to manage this risk, we monitor economic conditions and the
bonds with longer maturities than for those with shorter interest rate environment. We keep the average maturity of the
maturities. Also, if the Fund is required to make swap portfolio as short as is prudent, in keeping with our objective to
payments based on variable interest rates, it will be provide high current income.
required to make increased payments if interest rates rise,
which will not necessarily be offset by the fixed-rate
payments it is entitled to receive under the swap agreement.
- ------------------------------------------------------------------------------------------------------------------------------------
Credit risk The possibility that a bond's issuer (or an By focusing primarily on U.S. Treasury securities and other
entity that insures the bond) will be unable to make timely securities that are backed by the U.S. government, we minimize the
payments of interest and principal. possibility that any of the securities in our portfolio will not pay
interest or principal. U.S. government securities are generally
considered to be of the highest quality.
When selecting non-government securities and swap counter-parties, we
focus on those with high quality ratings and do careful credit
analysis before investing.
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidity risk is the possibility that securities cannot be U.S. Treasuries and other U.S. government debt securities are
readily sold within seven days at approximately the price typically the most liquid securities available. Therefore, liquidity
that the Fund has valued them. risk is not a significant risk for this Fund.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Prepayment risk is the risk that the principal on a bond Prepayment risk can be a significant risk to this Fund because we may
that the Fund owns will be prepaid prior to maturity at a invest a large percentage of our holdings in mortgage securities.
time when interest rates are lower than what that bond was Homeowners or others who have mortgages are more likely to prepay
paying. The Fund would then have to reinvest that money at a them when interest rates are relatively low. In order to manage this
lower interest rate. risk, when interest rates are low or when we believe rates will be
declining, we look for mortgage securities that we believe are less
likely to be prepaid, such as those that have interest rates lower
than current rates or have low remaining loan balances.
- ------------------------------------------------------------------------------------------------------------------------------------
Futures and options risk is the possibility that the Fund We will use options and futures for defensive purposes, such as to
may experience a significant loss if it employs an options protect gains in the portfolio without actually selling a security.
or futures strategy related to a security or a market index We will not use futures and options for speculative reasons or in an
and that security or index moves in the opposite direction effort to enhance return.
from what the portfolio manager anticipated. Futures and
options also involve additional expenses, which could reduce
any benefit or increase any loss to the Fund from using the
strategy.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust, which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For its services to the Fund, the manager was paid
0.58% of average daily net assets for the last fiscal year.
Portfolio managers
Paul A. Grillo has responsibility for making investment decisions for the Fund.
When making decisions for the Fund, Mr. Grillo regularly consults with H. Thomas
McMeekin.
H. Thomas McMeekin, Executive Vice President and Chief Investment Officer, Fixed
Income, joined Delaware Investments in 1999. He has over 24 years of investment
management experience which includes serving as President of Lincoln Investment
Management, Inc., an affiliate of Delaware Investments. Mr. McMeekin holds a BA
in Economics from the University of Rochester and an MBA in Finance and
Accounting from Cornell University. He also completed the Advanced Management
Program at Harvard Business School.
Paul A. Grillo, Vice President/Portfolio Manager of the Fund, holds a BA in
Business Management from North Carolina State University and an MBA in Finance
from Pace University. Prior to joining Delaware Investments in 1993, Mr. Grillo
served as mortgage strategist and trader at the Dreyfus Corporation. He also
served as a mortgage strategist and portfolio manager for the Chemical
Investment Group and as financial analyst at Chemical Bank. Mr. Grillo is a CFA
charterholder. Mr. Grillo has been managing the Fund since February 21, 1997.
12
<PAGE>
Who manages the Fund (continued)
Fund administration (Who's who?)
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS FUNDS]
<TABLE>
<CAPTION>
Board of Trustees
<S> <C>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
818 Market Street 818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Shareholders
</TABLE>
Board of Trustees A mutual fund is governed by a Board of Trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the Board of Trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
13
<PAGE>
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
14
<PAGE>
About your account
Investing in the Funds
Institutional Class shares are available for purchase only by the following:
o 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;
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor;
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts;
o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom such
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee; and
o 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.
15
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800-510-4015 so we can assign you an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800-510-4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
16
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. We reserve the right to reject any purchase
order.
We determine the funds net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the Board of Trustees. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at fair market value using a method approved by the Board of
Trustees.
17
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF A HAND HOLDING A PEN]
Through checkwriting
You may redeem shares by writing checks of $500 or more. Checks must be signed
by all owners of the account unless you indicate otherwise on your Investment
Application. The checkwriting feature is not available for retirement plans.
Also, because dividends are declared daily, you may not close your account by
writing a check. When you write checks you are subject to the regulations of
First Union Bank and may be subject to a charge if the check amount exceeds the
value of your account.
18
<PAGE>
About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares, you
will receive the net asset value as determined on the business day we receive
your request. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
Account minimums
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends, if any, are declared daily and paid monthly. Capital gains, if any,
are paid twice a year. We automatically reinvest all dividends and any capital
gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
Distributions declared in October, November or December but paid in January are
taxable as if they were paid in December.
19
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The Year 2000 Problem may also
adversely affect the issuers of securities in which the Fund invests. The
portfolio managers and investment professionals of the Fund consider Year 2000
issues in the securities selection and investment process. However, there can be
no guarantee that, even with their due diligence efforts, they will be able to
predict the affect of Year 2000 on any company or the performance of its
securities.
Investments by fund of funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds. From time to time, the Fund may experience
large investments or redemptions due to allocations or rebalancings by
Foundation Funds. While it is impossible to predict the overall impact of these
transactions over time, there could be adverse effects on portfolio management.
For example, the Fund may be required to sell securities or invest cash at times
when it would not otherwise do so. These transactions could also have tax
consequences if sales of securities result in gains, and could also increase
transaction costs or portfolio turnover. The manager will monitor transactions
by Foundation Funds and will attempt to minimize any adverse effects on the Fund
and Foundation Funds as a result of these transactions.
20
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware American Government Bond Fund
Institutional Class
Year Ended 7/31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $7.720 $7.760 $7.590 7.860 $8.000
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.495 0.550 0.567 0.611 0.679
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and futures contracts (0.418) (0.040) 0.170 (0.270) (0.140)
------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.077 0.510 0.737 0.341 0.539
------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Less dividends:
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.497) (0.550) (0.567) (0.611) (0.679)
------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
Total dividends (0.497) (0.550) (0.567) (0.611) (0.679)
------ ------ ------ ------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.300 $7.720 $7.760 $7.590 $7.860
====== ====== ====== ====== ======
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total return(1) 0.89% 6.80% 10.10% 4.39% 7.14%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data:
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) 30,883 $17,865 $12,053 $10,780 $8,316
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.95% 0.90% 0.86% 0.90% 0.94%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets 6.46% 7.10% 7.43% 7.85% 8.66%
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 142% 119% 63% 81% 70%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value.
21
<PAGE>
How to read the financial highlights
Net investment income
Net investment income includes dividend and interest income earned from the
Fund's securities; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments and futures contracts
A realized gain on investments occurs when we sell an investment at a profit,
while a realized loss on investments occurs when we sell an investment at a
loss. When an investment increases or decreases in value but we do not sell it,
we record an unrealized gain or loss. The amount of realized gain per share that
we pay to shareholders is listed under "Less dividends-Dividends from net
investment income."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, and assume the shareholder has
reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
22
<PAGE>
How to use this glossary
The glossary includes definitions of investment terms used throughout the
prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. See also Nationally recognized statistical rating
organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Corporate bond
A debt security issued by a corporation. See Bond.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
23
<PAGE>
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bond.
Government securities
Securities issued by U.S. government or its agencies. They include Treasuries as
well as agency-backed securities such as Fannie Maes.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Lehman Brothers Government Bond Index
An index composed of The Treasury Bond Index (all public obligations of the U.S.
Treasury, excluding flower bonds and foreign-targeted issues) and the Agency
Bond Index (all publicly issued debt of U.S. government agencies and
quasi-federal corporations, and corporate debt guaranteed by the U.S.
government).
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
NASD Regulation, Inc. (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service
(Moody's), Standard & Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and
Fitch Investor Services, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
24
<PAGE>
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Treasury bills
Securities issued by the U.S. Treasury with maturities of one year or less.
Treasury bonds
Securities issued by the U.S. Treasury with maturities of 10 years or longer.
Treasury notes
Securities issued by the U.S. Treasury with maturities of one to 10 years.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
25
<PAGE>
[back cover]
Delaware American Government Bond Fund
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual report to shareholders. In the Fund's shareholder report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during the report period. You
can find more detailed information about the Fund's in the current Statement of
Additional Information, which we have filed electronically with the Securities
and Exchange Commission (SEC) and which is legally a part of this prospectus. If
you want a free copy of the Statement of Additional Information, the annual or
semi-annual report, or if you have any questions about investing in this Fund,
you can write to us at 1818 Market Street, Philadelphia, PA 19103-3682, or call
toll-free 800.523.1918. You may also obtain additional information about the
Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawareinvestments.com
E-mail
[email protected]
Client Service Representative
800.510.4015
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-4304
Delaware American Government Bond Fund Symbols
CUSIP NASDAQ
----- ------
Institutional Class 246094502 DUGIX
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
26
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
September 29, 1999
DELAWARE GROUP GOVERNMENT FUND
DELAWARE AMERICAN GOVERNMENT BOND FUND
1818 Market Street
Philadelphia, PA 19103
For more information about the Institutional Class: 800-510-4015
For Prospectus, Performance and Information on Existing Accounts of
Class A Shares, Class B Shares and Class C Shares: Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500
Delaware Group Government Fund ("Government Fund") is a
professionally-managed mutual fund of the series type which currently offers one
series of shares: Delaware American Government Bond Fund (the "Fund"). The Fund
offers Class A Shares, Class B Shares and Class C Shares (together referred to
as the "Fund Classes"). The Fund also offers an Institutional Class (the
"Institutional Class"). All references to "shares" in this Part B refer to all
Classes of shares of Government Fund, except where noted.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectus for
the Fund Classes dated September 29, 1999 and the current Prospectus for the
Institutional Class dated September 29, 1999, as they may be amended from time
to time. Part B should be read in conjunction with the respective Class'
Prospectus. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into each Class' Prospectus. A prospectus relating to
the Fund Classes and a prospectus relating to the Institutional Class may be
obtained by writing or calling your investment dealer or by contacting the
Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"), at
the above address or by calling the above phone numbers. The Fund's financial
statements, the notes relating thereto, the financial highlights and the report
of independent auditors are incorporated by reference from the Annual Report
into this Part B. The Annual Report will accompany any request for Part B. The
Annual Report can be obtained, without charge, by calling 800-523-1918.
<TABLE>
<CAPTION>
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TABLE OF CONTENTS
<S> <C>
Cover Page Redemption and Exchange
Investment Policies Dividends and Realized Securities Profits Distributions
Accounting and Tax Issues Taxes
Performance Information Investment Management Agreement
Trading Practices and Brokerage Officers and Trustees
Purchasing Shares Exchange Privilege
Investment Plans General Information
Determining Offering Price and Net
Asset Value Financial Statements
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</TABLE>
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<PAGE>
INVESTMENT POLICIES
Investment Restrictions--Government Fund has adopted the following
restrictions for the Fund which cannot be changed without approval by the
holders of a "majority" of the Fund's 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 Fund may not:
1. Make investments that will result in the concentration (as that term
may be defined in the 1940 Act, any rule or other thereunder, or U.S. Securities
and Exchange Commission ("SEC") staff interpretation thereof) of its investments
in the securities of issuers primarily engaged in the same industry, provided
that this restriction does not limit the Fund from investing in obligations
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
or in certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Fund may
engage in transactions involving the acquisition, disposition or resale of its
portfolio securities, under circumstances where it may be considered to be an
underwriter under the Securities Act of 1933.
4. Purchase or sell real estate, unless acquired as a result of
ownership of securities or other instruments and provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result
of ownership of securities or other instruments and provided that this
restriction does not prevent the Fund from engaging in transactions involving
futures contracts and options thereon or investing in securities that are
secured by physical commodities.
6. Make loans, provided that this restriction does not prevent the Fund
from purchasing debt obligations, entering into repurchase agreements, loaning
its assets to broker/dealers or institutional investors and investing in loans,
including assignments and participation interests.
In addition to the fundamental policies and investment restrictions
described above, and the various general investment policies described in the
prospectus, each Series will be subject to the following investment
restrictions, which are considered non-fundamental and may be changed by the
Board of Trustees without shareholder approval.
1. The Fund is permitted to invest in other investment companies,
including open-end, closed-end or unregistered investment companies, either
within the percentage limits set forth in the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, or without regard to percentage
limits in connection with a merger, reorganization, consolidation or other
similar transaction. However, the Fund may not operate as a "fund of funds"
which invests primarily in the shares of other investment companies as permitted
by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as
investments by such a "fund of funds."
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<PAGE>
2. The Fund may not invest more than 15% of its net assets in
securities which it cannot sell or dispose of in the ordinary course of business
within seven days at approximately the value at which the Fund has valued the
investment.
The following are additional non-fundamental investment restrictions:
The Fund may 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").
Government 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 Fund 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 Fund's investment
objective and policies are considered loans and except that the Fund may loan up
to 25% of its assets to qualified broker/dealers or institutional investors for
their use relating to short sales or other security transactions.
4. Purchase or sell real estate but this shall not prevent the Fund
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.
6. Engage in the underwriting of securities of other issuers, except
that in connection with the disposition of a security, the Fund 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.
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<PAGE>
8. Write, purchase or sell options, puts, calls or combinations
thereof, except that the Fund 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 Fund's 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 Fund's total assets and only if the Fund owns the security
covered by the put option at the time of purchase. The Fund 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
Fund may enter into futures contracts to the extent that not more than 5% of the
Fund's 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 Fund's 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, trustees or security holders is a director or officer of Government
Fund or of its investment manager if or so long as the trustees and officers of
Government Fund 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 Fund's 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 Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing exceeds 5% of the value of the Fund's net assets, asset coverage of at
least 300% is required. In the event that such asset coverage shall at any time
fall below 300%, the Fund shall, within three days thereafter (not including
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 Fund will
not pledge more than 10% of its net assets. The Fund will not issue senior
securities as defined in the 1940 Act, except for notes to banks. No investment
securities will be purchased while the Fund has an outstanding borrowing.
Although not a fundamental investment restriction, the Fund currently
does not invest its assets in real estate limited partnerships.
Corporate Debt--The Fund 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.
-4-
<PAGE>
Excerpts from Standard & Poor's Ratings Group's ("S&P") 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 Fund 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 S&P are the highest
investment grade category.
Bank Obligations--The Fund 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 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 Fund to a greater risk of loss. The Fund will only buy short-term
instruments in nations where risks are minimal. The Fund 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 Fund.
GNMA Securities --The Fund 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 are made to the registered holders of GNMA
Certificates. The GNMA Certificates in which the Fund 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.
-5-
<PAGE>
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 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--In addition to mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
the Fund 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 payments may have a material adverse effect on the Fund's yield to
maturity. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating categories.
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<PAGE>
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 Fund's 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 Fund 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 Fund 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 Fund may invest a portion of its assets in
asset-backed securities which are backed by assets such as receivables on home
equity and credit loans, receivables regarding automobile, mobile home and
recreational vehicle loans, wholesale dealer floor plans (i.e. receivables on
loans to car dealers for cars used in their showrooms) and leases or other loans
or financial receivables currently available or which may be developed in the
future. 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 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 or the concentration of collateral in a particular
geographic area. 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. Due to the shorter maturity of the collateral backing such
securities, there tends to be less of a risk of substantial prepayment than with
mortgage-backed securities but the risk of such a prepayment does exist. 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, and other risks which may be
peculiar to particular classes of collateral. For example, 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.
-7-
<PAGE>
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 (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 Fund 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 Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of 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 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 trustees 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 trustees to vote the proxy.
The major risk to which the Fund would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, under the supervision of
the Board of Trustees, 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>
Concentration
In applying the Fund's policy on concentration; (i) utility companies
will be divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (ii)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance, and diversified
finance will each be considered a separate industry; and (iii) asset backed
securities will be classified according to the underlying assets securing such
securities.
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<PAGE>
ACCOUNTING AND TAX ISSUES
The following supplements the information supplied in the Classes'
Prospectuses under Taxes.
When the Fund writes a call or a put option, an amount equal to the
premium received by it is included in the Fund's 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 Fund has written either expires on
its stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund 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 Fund has written is exercised, the Fund 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 Fund has written is exercised, the amount of the premium originally
received will reduce the cost of the security which the Fund purchases upon
exercise of the option.
The premium paid by the Fund for the purchase of a put option is
included in the section of the Fund's 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 Fund has purchased expires on the
stipulated expiration date, the Fund 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 Fund
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 Fund 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 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 (the "Code") includes special rules
applicable to regulated futures contracts and non-equity related listed options
which the Fund may write, and listed options which the Fund 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 Fund 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 Fund 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.
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<PAGE>
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 noted below in Other Tax
Requirements.
The requirement that not more than 30% of the Fund's gross income be
derived from gains from the sale or other disposition of securities held for
less than three months (see Other Tax Requirements below) may restrict the Fund
in its ability to write covered call 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 Fund may be required
to defer the closing out of a contract beyond the time when it might otherwise
be advantageous to do so. The Fund 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.
Other Tax Requirements
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code and it satisfies other
requirements relating to the sources of its income and diversification of its
assets.
In order to qualify as a regulated investment company for federal
income tax purposes, the Fund must meet certain specific requirements,
including:
(i) The Fund must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of the Fund's total assets,
and, with respect to 50% of the Fund's total assets, no investment (other than
cash and cash items, U.S. government securities and securities of other
regulated investment companies) can exceed 5% of the Fund's total assets;
(ii) The Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) The Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years, and
(iv) The Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by the Fund for less than three months ("short-short income").
The Taxpayer Relief Act of 1997 (the "1997 Act") repealed the 30% short-short
income test for tax years of regulated investment companies beginning after
August 5, 1997; however, this rule may have continuing effect in some states for
purposes of classifying the Fund as a regulated investment company.
-11-
<PAGE>
The Code requires the Fund to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the 12 month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to the Fund)
to shareholders by December 31 of each year in order to avoid federal excise
taxes. The Fund intends as a matter of policy to declare and pay sufficient
dividends in December or January (which are treated by shareholders as received
in December) but does not guarantee and can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains or when
the offsetting position is sold.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Fund must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. The Fund will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.
-12-
<PAGE>
PERFORMANCE INFORMATION
From time to time, the Fund may state each Class' total return in
advertisements and other types of literature. Any statement of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over the most recent one-, five-
and ten-year (or life of fund, if applicable) periods, as relevant. The Fund may
also advertise aggregate and average total return information of each Class over
additional periods of time.
In presenting performance information for Class A Shares, the Limited
CDSC, applicable to only certain redemptions of those shares, will not be
deducted from any 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 a CDSC in this Performance Information section will
apply to Class B Shares or Class C Shares.
Total return performance for each Class will be computed by adding all
reinvested income and realized securities profits distributions plus the change
in net asset value during a specific period and dividing by the offering price
at the beginning of the period. It will not reflect any income taxes payable by
shareholders on the reinvested distributions included in the calculation.
Because securities prices fluctuate, past performance should not be considered
as a representative of the results which may be realized from an investment in
the Fund in the future.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000
from which, in the case of only Class A Shares,
the maximum front-end sales charge, 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.
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 Fund may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.
-13-
<PAGE>
The performance of each Class, as shown below, is the average annual
total return quotations through July 31, 1999, computed as described above. The
average annual total return for Class A Shares at offer reflects the maximum
front-end sales charge of 4.75% paid on the purchase of shares. The average
annual total return for Class A Shares at net asset value (NAV) does not reflect
any front-end sales charge. 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 average annual total return for Class B Shares and Class C Shares
including deferred sales charge reflects the deduction of the applicable CDSC
that would be paid if the shares were redeemed at July 31, 1999. The average
annual total return for Class B Shares and Class C Shares excluding deferred
sales charge assumes the shares were not redeemed at July 31, 1999 and therefore
does not reflect the deduction of a CDSC.
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1 year 3 years 5 years 10 years Life of Fund
ended ended ended 7/31/99 ended
7/31/99 7/31/99 7/31/99
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A -4.25% 3.84% 4.48% 5.73% 6.49%
(at offer)
(Inception 8/16/85)
- --------------------------------------------------------------------------------------------------------------
Class A 0.59% 5.55% 5.51% 6.25% 6.86%
(at NAV)
(Inception 8/16/85)
- --------------------------------------------------------------------------------------------------------------
Class B -3.90% 3.93% 4.47% N/A 4.31%
(including CDSC)
(Inception 5/2/94)
- --------------------------------------------------------------------------------------------------------------
Class B -0.11% 4.82% 4.77% N/A 4.45%
(excluding CDSC)
(Inception 5/2/94)
- --------------------------------------------------------------------------------------------------------------
Class C -1.06% 4.82% N/A N/A 3.87%
(including CDSC)
(Inception 11/29/95)
- --------------------------------------------------------------------------------------------------------------
Class C -0.11% 4.82% N/A N/A 3.87%
(excluding CDSC)
(Inception 11/29/95)
- --------------------------------------------------------------------------------------------------------------
Institutional Class 0.89% 5.86% 5.82% 6.55% 7.10%
(Inception 6/1/92)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
As stated in the Classes' Prospectuses, the Fund may also quote each
Class' current yield in advertisements and investor communications.
The yield computation is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the resulting figure,
according to the following formula:
a--b 6
YIELD = 2[(-------- + 1) -- 1]
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends;
d = the maximum offering price per share on the last day
of the period.
The above formula will be used in calculating quotations of yield for
each Class, based on specific 30-day periods identified in advertising by the
Fund. The yields of the Class A Shares, Class B Shares, Class C Shares and the
Institutional Class as of July 31, 1999 using this formula were 5.34%, 4.89%,
4.89% and 5.91%, 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.
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 Fund in the future.
Investors should note that the income earned and dividends paid by the
Fund will vary with the fluctuation of interest rates and performance of the
portfolio. The net asset value of the Fund may change. Unlike money market
funds, the Fund invests in longer-term securities that fluctuate in value and do
so in a manner inversely correlated with changing interest rates. The Fund's net
asset value will tend to rise when interest rates fall. Conversely, the Fund's
net asset value will tend to fall as interest rates rise. Normally, fluctuations
in interest rates have a greater effect on the prices of longer-term bonds. The
value of the securities held in the Fund will vary from day to day and investors
should consider the volatility of the Fund's net asset value as well as its
yield before making a decision to invest.
The Fund's average weighted portfolio maturity at July 31, 1999 was 8
years.
From time to time, the Fund may also quote actual total return and/or
yield performance for its Classes in advertising and other types of literature.
This information may be compared to that of other mutual funds with similar
investment objectives and to stock, bond and other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of the Fund (or Fund Class) may be compared to data prepared by
Lipper Analytical Services, Inc., Morningstar, Inc. or to the performance of
unmanaged indices compiled or maintained by statistical research firms such as
Lehman Brothers or Salomon Brothers, Inc.
-15-
<PAGE>
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the Fund's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The total
return performance reported for these indices will reflect the reinvestment of
all distributions on a quarterly basis and market price fluctuations. The
indices do not take into account any sales charge or other fees. A direct
investment in an unmanaged index is not possible.
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well as
unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations. In addition, the performance of multiple
indices compiled and maintained by these firms may be combined to create a
blended performance result for comparative purposes. Generally, the indices
selected will be representative of the types of securities in which the Fund may
invest and the assumptions that were used in calculating the blended performance
will be described.
Comparative information on the Consumer Price Index may also be
included in advertisements or other literature. The Consumer Price Index, as
prepared by the U.S. Bureau of Labor Statistics, is the most commonly used
measure of inflation. It indicates the cost fluctuations of a representative
group of consumer goods. It does not represent a return from an investment.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. The Fund may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Fund. The Fund may also compare performance to that of other compilations
or indices that may be developed and made available in the future.
The Fund may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of the Fund (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments), economic and political conditions, the
relationship between sectors of the economy and the economy as a whole, the
effects of inflation and historical performance of various asset classes,
including but not limited to, stocks, bonds and Treasury bills. From time to
time advertisements, sales literature, communications to shareholders or other
materials may summarize the substance of information contained in shareholder
reports (including the investment composition of the Fund), as well as the views
as to current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to the Fund. In addition, selected indices may be
used to illustrate historic performance of selected asset classes. The Fund may
also include in advertisements, sales literature, communications to shareholders
or other materials, charts, graphs or drawings which illustrate the potential
risks and rewards of investment in various investment vehicles, including but
-16-
<PAGE>
not limited to, stocks, bonds, treasury bills and shares of the Fund. In
addition, advertisements, sales literature, communications to shareholders or
other materials may include a discussion of certain attributes or benefits to be
derived by an investment in the Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning (such as information on Roth IRAs and
Education IRAs) and investment alternative to certificates of deposit and other
financial instruments. Such sales literature, communications to shareholders or
other materials may include symbols, headlines or other material which highlight
or summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of the Fund and may illustrate
how to find the listings of the Fund in newspapers and periodicals. Materials
may also include discussions of other Funds, products, and services.
The Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Fund may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. The Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to the Fund may include information
regarding the background and experience of its portfolio managers.
The following table is an example, for purposes of illustration only,
of cumulative total return performance for each Class of the Fund through July
31, 1999. For these purposes, the calculations assume the reinvestment of any
realized securities profits distributions and income dividends paid during the
indicated periods, but does not reflect any income taxes payable by shareholders
on the reinvested distributions. The performance of Class A Shares reflects the
maximum front-end sales charge paid on the purchases of shares but may also be
shown without reflecting the impact of any front-end sales charge. Pursuant to
applicable regulation, total return shown for the Institutional Class of the
Fund for the periods prior to the commencement of operations of such
Institutional Class is calculated by taking the performance of the respective
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 by the Class A Shares, and performance for the Institutional
Class would have been affected had such an adjustment been made. The performance
of Class B Shares and Class C Shares is calculated both with the applicable CDSC
included and excluded. Past performance is no guarantee of future results.
Performance shown for short periods of time may not be representative of longer
term results.
-17-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
3 months 6 months 9 months 1 year 3 years 5 years 10 years Life of
ended ended ended ended ended ended ended Fund
7/31/99 7/31/99 7/31/99 7/31/99 7/31/99 7/31/99 7/31/99
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A -6.91% -7.94% -7.35% -4.25% 11.98% 24.52% 74.62% 140.51%
(at offer)
(Inception 8/16/85)
- -----------------------------------------------------------------------------------------------------------------------------
Class A -2.25% -3.33% -2.75% 0.59% 17.59% 30.75% 83.39% 152.63%
(at NAV)
(Inception 8/16/85)
- -----------------------------------------------------------------------------------------------------------------------------
Class B -6.27% -7.41% -6.98% -3.90% 12.27% 25.44% N/A 24.79%
(including CDSC)
(Inception 5/2/94)
- -----------------------------------------------------------------------------------------------------------------------------
Class B -2.43% -3.67% -3.26% -0.11% 15.16% 26.26% N/A 25.68%
(excluding CDSC)
(Inception 5/2/94)
- -----------------------------------------------------------------------------------------------------------------------------
Class C -3.39% -4.60% -4.19% -1.06% 15.16% N/A N/A 14.97%
(including CDSC)
(Inception 11/29/95)
- -----------------------------------------------------------------------------------------------------------------------------
Class C -2.43% -3.67% -3.26% -0.11% 15.16% N/A N/A 14.97%
(excluding CDSC)
(Inception 11/29/95)
- -----------------------------------------------------------------------------------------------------------------------------
Institutional Class -2.18% -3.19% -2.54% 0.89% 18.63% 32.68% 88.64% 160.49%
(Inception 6/1/92)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Investments family, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible personal financial planning. One typical way of addressing these
issues is to compare an individual's goals and the length of time the individual
has to attain these goals to his or her risk threshold. In addition, the
Distributor will provide information that discusses the Manager's overriding
investment philosophy and how that philosophy impacts the Fund's, and other
Delaware Investments funds', investment disciplines employed in seeking the
objectives of the Fund and other funds in the Delaware Investments family. 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.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
-18-
<PAGE>
Investments offers three services -- Automatic Investing Program, Direct Deposit
Program and the Wealth Builder Option -- that can help to keep your regular
investment program on track. See Investing by Electronic Fund Transfer - Direct
Deposit Purchase Plan, Automatic Investing Plan and Wealth Builder Option under
Investment Plans for a complete description of these services, including
restrictions or limitations.
-19-
<PAGE>
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 20
Month 4 $100 $10.00 10
--------------------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of any stock or bond fund in the Delaware
Investments family. Dollar-cost averaging can be appropriate for investments in
shares of funds that tend to fluctuate in value. Please obtain the prospectus of
any fund in the Delaware Investments family in which you plan to invest through
a dollar-cost averaging program. The prospectus contains additional information,
including charges and expenses. Please read it carefully before you invest or
send money.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding. The Fund may include illustrations showing the power
of compounding in advertisements and other types of literature.
-20-
<PAGE>
TRADING PRACTICES AND BROKERAGE
Government 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 execution. Best
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 the Manager's trading department as to rates paid
and charged for similar transactions throughout the securities industry.
During the past three fiscal years, 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, 1999, there were no portfolio
transactions of the Fund resulting in brokerage commissions directed to brokers
for brokerage and research services.
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
Investments family. Subject to best execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds
receiving the pricing service.
-21-
<PAGE>
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 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 Government
Fund's Board of Trustees that the advantages of combined orders outweigh the
possible disadvantages of separate transactions.
Consistent with the Conduct Rules of NASD Regulation, Inc. (the
"NASD"), and subject to seeking best execution, the Fund may place orders with
broker/dealers that have agreed to defray certain expenses of the funds in the
Delaware Investments family of funds, such as custodian fees, and may, at the
request of the Distributor, give consideration to sales of shares of such funds
as a factor in the selection of brokers and dealers to execute Fund portfolio
transactions.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish the
Fund's objective in relation to anticipated movements in the general level of
interest rates. The Fund 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 Fund, such a turnover always
being incidental to transactions undertaken with a view to achieving the Fund's
investment objective.
The Fund 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 Fund writes a large number of call options which are subsequently
exercised. To the extent the Fund realizes gains on securities held for less
than six months, such gains are taxable to the shareholder or to the Fund at
ordinary income tax rates. This would result in higher than normal brokerage
commissions. The portfolio turnover rate of the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the particular
fiscal year by the monthly average of the value of the portfolio securities
owned by the Fund during the particular fiscal year, exclusive of securities
whose maturities at the time of acquisition are one year or less. The turnover
rate may also be affected by cash requirements from redemptions and repurchases
of Fund shares.
During the fiscal years ended July 31, 1998 and 1999, the portfolio
turnover rates for the Fund were 118% and 142%, respectively.
-22-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's 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 Government Fund
or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases generally must be at
least $100. The initial and subsequent investment minimums for Class A Shares
will be waived for purchases by officers, trustees and employees of any fund in
the Delaware Investments family, the Manager or any of the Manager's affiliates
if the purchases are made pursuant to a payroll deduction program. Shares
purchased pursuant to the Uniform Gifts to Minors Act or Uniform Transfers to
Minors Act and shares purchased in connection with an Automatic Investing Plan
are subject to a minimum initial purchase of $250 and a minimum subsequent
purchase of $25. Accounts opened under the Asset Planner service are subject to
a minimum initial investment of $2,000 per Asset Planner strategy selected.
There are no minimum purchase requirements for the Institutional Class, but
certain eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Government Fund will reject any purchase order
for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more in Class A
Shares and that Class A Shares are subject to lower annual 12b-1 Plan expenses
than Class B Shares and Class C Shares and generally are not subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Government Fund reserves the right to reject any order for the purchase of its
shares if in the opinion of management such rejection is in the Fund's best
interest. 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 Investments family.
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, as a result of
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
-23-
<PAGE>
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
The NASD has adopted amendments to its Conduct Rules, as amended,
relating to investment company sales charges. Government 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 table in the Fund Classes' Prospectus.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which are higher than those to which
Class A Shares are subject and are assessed against Class B Shares for
approximately eight years after purchase. See Automatic Conversion of Class B
Shares, below.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Plans Under Rule 12b-1 for the Fund Classes under
Purchasing Shares, and Determining Offering Price and Net Asset Value in this
Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in the Fund's assets and will receive
a proportionate interest in the Fund's income, before application, as to Class
A, Class B and Class C Shares, of any expenses under the Fund's 12b-1 Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares or in the case of any retirement plan
account including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Government Fund for any certificate issued. A shareholder may be subject to
fees for replacement of a lost or stolen certificate, under certain conditions,
including the cost of obtaining a bond covering the lost or stolen certificate.
Please contact the Fund for further information. Investors who hold certificates
representing any of their shares may only redeem those shares by written
request. The investor's certificate(s) must accompany such request.
-24-
<PAGE>
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and Class C Shares permit investors to choose the method of purchasing shares
that is most suitable for their needs given the amount of their purchase, the
length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and incur a
front-end sales charge and annual 12b-1 Plan expenses of up to a maximum of
0.30% 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 Fund 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 12 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% (0.25% of
which are service fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder accounts) of average
daily net assets of 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
0.30% of average daily net assets of such shares. Unlike Class B Shares, Class C
Shares do not convert to another Class.
The higher 12b-1 Plan expenses on Class B Shares and Class C Shares
will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A Shares, Class B Shares and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the CDSCs
applicable to Class B Shares and Class C Shares are the same as those of the
12b-1 Plan and the front-end sales charge applicable to Class A Shares in that
such fees and charges are used to finance the distribution of the respective
Classes. See Plans Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except that the additional amount of 12b-1
Plan expenses relating to Class B Shares and Class C Shares will be borne
exclusively by such shares. See Determining Offering Price and Net Asset Value.
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 table in the Fund Classes'
Prospectus, 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.
-25-
<PAGE>
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.
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an additional
commission of up to 0.15% of the offering price 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
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectus, 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.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies (see Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) may be aggregated with those of the Class A Shares of
the Fund. Financial advisers also may be eligible for a dealer's commission in
connection with certain purchases made under a Letter of Intention or pursuant
to an investor's Right of Accumulation. Financial advisers should contact the
Distributor concerning the applicability and calculation of the dealer's
commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within six years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of the Fund, even if those shares are later exchanged for shares of
another Delaware Investments fund. In the event of an exchange of the shares,
the "net asset value of such shares at the time of redemption" will be the net
asset value of the shares that were acquired in the exchange. See Waiver of
Contingent Deferred Sales Charge--Class B Shares and Class C Shares under
Redemption and Exchange for the Fund Classes for a list of the instances in
which the CDSC is waived.
During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the same
Fund. See Automatic Conversion of Class B Shares below. Such conversion will
constitute a tax-free exchange for federal income tax purposes. See Taxes.
Investors are reminded that the Class A Shares into which Class B Shares will
convert are subject to ongoing annual 12b-1 Plan expenses of up to a maximum of
0.30% of average daily net assets of such shares.
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<PAGE>
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
dealers or brokers for selling Class B Shares at the time of purchase from its
own assets in an amount equal to no more than 4% of the dollar amount purchased.
In addition, from time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may pay additional compensation to dealers or brokers for selling
Class B Shares at the time of purchase. As discussed below, however, Class B
Shares are subject to annual 12b-1 Plan expenses and, if redeemed within six
years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for the Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares
described in this Part B, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the 18th day or next
business day 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 of purchase before the
shares will automatically convert into Class A Shares.
Class B Shares of the Fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of the Fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of the Fund not acquired through dividend
reinvestment.
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<PAGE>
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently compensates
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, Class C Shares are subject to annual 12b-1 Plan expenses
and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Government Fund has adopted
a separate plan for each of the Class A Shares, Class B Shares and Class C
Shares of Government Fund (the "Plans"). Each Plan permits Government Fund 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 shares of the Institutional Class. Shareholders of the
Institutional Class may not vote on matters affecting the Plans.
The Plans permit the Fund, pursuant to the Distribution Agreement, to
pay out of the assets of the Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Fund 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 Fund under the Plans, and
Government Fund's Distribution Agreement, is on an annual basis up to 0.30% of
the Class A Shares' average daily net assets for the year, and up to 1% (0.25%
of which are service fees to be paid to the Distributor, dealers and others for
providing personal service and/or maintaining shareholder accounts) of each of
the Class B Shares' and Class C Shares' average daily net assets for the year.
Government Fund's Board of Trustees 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.
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<PAGE>
On July 21, 1988, the Board of Trustees set the fee for the Class A
Shares, pursuant to the Plan relating to that Class, at 0.25% of average daily
net assets. This fee was effective until May 31, 1992. Effective June 1, 1992,
the Board of Trustees 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 0.10% 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 0.30% 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 0.30% on all Class A
Shares' assets to be paid at any time following appropriate Board approval.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A, Class B and Class C Shares would be borne by such persons without any
reimbursement from such Fund Classes. Subject to seeking best execution,
Government Fund may, from time to time, buy or sell portfolio securities from or
to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreement have been approved by the
Board of Trustees of Government Fund, including a majority of the trustees who
are not "interested persons" (as defined in the 1940 Act) of Government 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 must be
approved annually by the Board of Trustees in the same manner as specified
above.
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<PAGE>
Each year, the trustees must determine whether continuation of the
Plans is in the best interest of the shareholders of, respectively, Class A
Shares, Class B Shares 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 may be terminated at any time
without penalty by a majority of those trustees 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
trustees 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 securities of Class B. Also,
any other material amendment to the Plans must be approved by a majority vote of
the trustees including a majority of the noninterested trustees of Government
Fund having no interest in the Plans. In addition, in order for the Plans to
remain effective, the selection and nomination of trustees who are not
"interested persons" of Government Fund must be effected by the trustees 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 Trustees
for their review.
For the fiscal year ended July 31, 1999, payments from the Class A
Shares, Class B Shares and Class C Shares amounted to $395,538, $204,702 and
$36,016, respectively. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Advertising $147 --- ---
Annual/Semi-Annual Reports 15,557 --- ---
Broker Trails 308,038 --- $11,004
Broker Sales Charges --- $51,098 21,245
Dealer Service Expenses --- 77,005 1,500
Interest on Broker Sales Charges --- 66,204 2,267
Commissions to Wholesalers 38,863 10,395 ---
Promotional-Broker Meetings 721 --- ---
Promotional-Other 21,481 --- ---
Prospectus Printing 7,629 --- ---
Telephone --- --- ---
Wholesaler Expenses 3,102 --- ---
Other --- --- ---
</TABLE>
Government 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.
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 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family 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. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
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<PAGE>
Special Purchase Features -- Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, trustees and employees of Government Fund,
any other fund in the Delaware Investments family, the Manager, or any of the
Manager's current affiliates and those that may in the future be created, legal
counsel to the funds and registered representatives and employees of
broker/dealers who have entered into Dealer's Agreements with the Distributor
may purchase Class A Shares and any such class of shares of any of the funds in
the Delaware Investments family, including any fund that may be created, at the
net asset value per share. Family members (regardless of age) of such persons at
their direction, and any employee benefit plan established by any of the
foregoing funds, corporations, counsel or broker/dealers may also purchase Class
A Shares at net asset value. Class A Shares may also be purchased at net asset
value by current and former officers, trustees and employees (and members of
their families) of the Dougherty Financial Group LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, trustees 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 Government Fund may reasonably require to establish
eligibility for purchase at net asset value.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional Class
of the Fund; any group retirement plan (excluding defined benefit pension
plans), or such plans of the same employer, for which plan participant records
are maintained on the Retirement Financial Services, Inc. ("RFS") proprietary
record keeping system that (i) has in excess of $500,000 of plan assets invested
in Class A Shares of funds in the Delaware Investments family and any stable
value product available through the Delaware Investments family, or (ii) is
sponsored by an employer that has at any point after May 1, 1997 had more than
100 employees while such plan has held Class A Shares of a fund in the Delaware
Investments family and such employer has properly represented to RFS in writing
that it has the requisite number of employees and has received written
confirmation back from RFS.
-31-
<PAGE>
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Investments fund account in connection with loans originated from accounts
previously maintained by another investment firm will also be invested at net
asset value.
Government Fund must be notified in advance that the trade qualifies for
purchase at net asset value.
Allied Plans
Class A Shares are available for purchase by participants in certain
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 Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares. See Combined
Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments fund shares to which a
sales charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on which a
sales charge was already paid or through the reinvestment of dividends. See
Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated. See Class A Shares.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
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Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Government Fund which provides for the holding in escrow by the
Transfer Agent, of 5% of the total amount of Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A Letter
of Intention may be dated to include shares purchased up to 90 days prior to the
date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of the Fund and of any class of
any of the other mutual funds in Delaware Investments (except shares of any
Delaware Investments 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 Investments 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.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in Delaware Investments 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 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 Fund and other Delaware Investments 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 Class A Shares, Class B Shares and/or Class C
Shares of the Fund, as well as shares of any other class of any of the other
Delaware Investments funds (except shares of any Delaware Investments 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 Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of Delaware Investment Advisers, the Manager's affiliate, or any of the
Manager's other affiliates in a stable value account may be combined with other
Delaware Investments fund holdings.
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The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the Fund, as
well as shares of any other class of any of the other Delaware Investments funds
which offer such classes (except shares of any Delaware Investments 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 Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). If, for example, any such purchaser has
previously purchased and still holds Class A Shares and/or shares of any other
of the classes described in the previous sentence with a value of $40,000 and
subsequently purchases $60,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $60,000 purchase would currently be 3.75%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer to
the table of sales charges for Class A Shares to determine the applicability of
the Right of Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares and Class B Shares of the Fund (and of the
Institutional Class holding shares which were acquired through an exchange from
one of the other mutual funds in the Delaware Investments family offered with a
front-end sales charge) who redeem such shares have one year from the date of
redemption to reinvest all or part of their redemption proceeds in the same
Class of the Fund or in the same Class of any of the other funds in the Delaware
Investments family. In the case of Class A Shares, the reinvestment will not be
assessed a front-end sales charge and in the case of Class B Shares, the amount
of the CDSC previously charged on the redemption will be reimbursed by the
Distributor. The reinvestment will be subject to applicable eligibility and
minimum purchase requirements and must be in states where shares of such other
funds may be sold. This reinvestment privilege does not extend to Class A Shares
where the redemption of the shares triggered the payment of a Limited CDSC.
Persons investing redemption proceeds from direct investments in mutual funds in
the Delaware Investments family, offered without a front-end sales charge will
be required to pay the applicable sales charge when purchasing Class A Shares.
The reinvestment privilege does not extend to a redemption of 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. In the case of
Class B Shares, the time that the previous investment was held will be included
in determining any applicable CDSC due upon redemptions as well as the automatic
conversion into Class A Shares.
A redemption and reinvestment of Class B Shares could have income tax
consequences. Shareholders will receive from the Distributor the amount of the
CDSC paid at the time of redemption as part of the reinvested shares, which may
be treated as a capital gain to the shareholder for tax purposes. 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 the fund's
shares. Consequently, an investor should obtain and read carefully the
prospectus for the fund in which the investment is intended to be made before
investing or sending money.
The prospectus contains more complete information about the fund,
including charges and expenses.
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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 Class A Limited CDSC in connection with the features
described above.
Group Investment Plans
Group Investment Plans which 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, based on total plan assets. If a company has
more than one plan investing in the Delaware Investments family of funds, then
the total amount invested in all plans would be used in determining the
applicable front-end sales charge reduction upon each purchase, both initial and
subsequent, upon notification to the Fund 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 Investments investment
accounts if they so notify the Fund in which they are investing in connection
with each purchase. See Retirement Plans for the Fund Classes under Investment
Plans for information about Retirement Plans.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from the Fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
Institutional Class
The Institutional Class of the Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager or its affiliates and securities dealer firms with
a selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, an affiliate of the Manager, or its other
affiliates and their corporate sponsors, as well as subsidiaries and related
employee benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar financial
institution investing for its own account or for the account of its trust
customers for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the investment is
part of a program that requires payment of the financial institution of a Rule
12b-1 Plan fee; and (e) registered investment advisers investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
Shares of the Institutional 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 respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional Class
are reinvested in the accounts of the holders of such shares (based on the net
asset value in effect on the reinvestment date). A confirmation of each dividend
payment from net investment income and of distributions from realized securities
profits, if any, will be mailed to shareholders in the first quarter of the
fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Class in which shares are being purchased. Such purchases, which must meet the
minimum subsequent purchase requirements set forth in the Prospectuses and this
Part B, are made for Class A Shares at the public offering price, and for Class
B Shares, Class C Shares and Institutional Class 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 Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, including
the Fund, 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
the Fund in which the investor does not then have an account will be treated
like all other initial purchases of the Fund's shares. Consequently, an investor
should obtain and read carefully the prospectus for the fund in which the
investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of the Fund,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends from Class B Shares
may only be directed to other Class B Shares and dividends from Class C Shares
may only be directed to other Class C Shares.
Capital gains and/or dividend distributions for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
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Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of the Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase requirements set
forth in the Fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
Holders of Class A Shares of the Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Investments
family, including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of the Fund or of any other fund in
the Delaware Investments family. Holders of Class B Shares of the Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C Shares
of the Fund are permitted to exchange all or part of their Class C Shares only
into Class C Shares of other Delaware Investments funds. Class B Shares of the
Fund and Class C Shares of the Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of the Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of the Fund.
Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Fund will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Fund to
accept for investment in Class A Shares, Class B Shares 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 Shares, Class B
Shares and Class C Shares may make automatic investments by authorizing, in
advance, monthly payments directly from their checking account for deposit into
their Fund account. This type of investment will be handled in either of the
following ways. (1) If the shareholder's bank is a member of the National
Automated Clearing House Association ("NACHA"), the amount of the investment
will be electronically deducted from his or her account by Electronic Fund
Transfer ("EFT"). The shareholder's checking account will reflect a debit each
month at a specified date although no check is required to initiate the
transaction. (2) If the shareholder's bank is not a member of NACHA, deductions
will be made by preauthorized checks, known as Depository Transfer Checks.
Should the shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
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Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to the Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
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 Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. The Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact Government Fund for proper
instructions.
MoneyLine(SM) On Demand
You or your investment dealer may request purchases of Fund shares by
phone using MoneyLine(SM) On Demand. When you authorize the Fund to accept such
requests from you or your investment dealer, funds will be withdrawn from (for
share purchases) your predesignated bank account. Your request will be processed
the same day if you call prior to 4 p.m., Eastern time. There is a $25 minimum
and $50,000 maximum limit for MoneyLine(SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Fund does not charge a fee
for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. If in connection with the election of
the Wealth Builder Option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select. All
investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in the
Fund Classes' Prospectus. 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.
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Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation in Wealth Builder at
any time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Class.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial adviser or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisers or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial adviser,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange. Also see
Buying Class A Shares at Net Asset Value. The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of the Fund and of other funds in the
Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
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Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Retirement Plans for the Fund Classes
An investment in the Fund may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement Account
("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange for a list of the instances in
which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase
limitation of $250,000 for retirement plans. Purchases of Class C Shares must be
in an amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts, for
which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25, regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide services
to such Plans.
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
shares. See 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, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
pension plans. Contributions may be invested only in Class A Shares and Class C
Shares.
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Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year; however, participation
may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it
is made from a qualified retirement plan, a 403(b) plan or another IRA and does
not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the employee and
his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10
or more years;
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(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
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Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA
for employees or members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC upon
redemption of Class B Shares and Class C Shares, see Contingent Deferred Sales
Charge - Class B Shares and Class C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes are available for investment by a
SEP/IRA.
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Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares and Class C Shares or certain other
funds in the Delaware Investments family. Purchases under the Plan may be
combined for purposes of computing the reduced front-end sales charge applicable
to Class A Shares as set forth in the table the Prospectus for the Fund Classes.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectus for
the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of the Fund. Although investors may use their
own plan, there is available a Delaware Investments 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. Purchases under the Plan may be combined
for purposes of computing the reduced front-end sales charge applicable to Class
A Shares as set forth in the table in the Prospectus for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
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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 after receipt of the order by the Fund, its agent or certain
other authorized persons. 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 Government Fund, its agent or certain
other authorized persons. See Distribution and Service under Investment
Management Agreement. Selling dealers are responsible for 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 days on which the following holidays are observed: New Year's
Day, Martin Luther King, Jr.'s Birthday, 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 Fund's 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 Fund's 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 Trustees of
the Fund.
Each Class of the Fund will bear, pro-rata, all of the common expenses of
the Fund. The net asset values of all outstanding shares of each Class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that Class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except that the 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 EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, tax-advantaged funds, bond
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into the Fund
that has the checkwriting feature. Exchanges are subject to the requirements of
the Fund and all exchanges of shares constitute taxable events. Further, in
order for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. See the Prospectus. A shareholder submitting
a redemption request may indicate that he or she wishes to receive redemption
proceeds of a specific dollar amount. In the case of such a request, and in the
case of certain redemptions from retirement plan accounts, the Fund will redeem
the number of shares necessary to deduct the applicable CDSC in the case of
Class B Shares and Class C Shares, and, if applicable, the Limited CDSC in the
case of Class A Shares and tender to the shareholder the requested amount,
assuming the shareholder holds enough shares in his or her account for the
redemption to be processed in this manner. Otherwise, the amount tendered to the
shareholder upon redemption will be reduced by the amount of the applicable CDSC
or Limited CDSC. Redemption proceeds will be distributed promptly, as described
below, but not later than seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. The Fund
may suspend, terminate, or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
In addition to redemption of Fund shares, 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, its agent, or
certain authorized persons, subject to 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 days at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
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Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by the Fund or certain other authorized persons (see Distribution
and Service under Investment Management Agreement); provided, however, that each
commitment to mail or wire redemption proceeds by a certain time, as described
below, is modified by the qualifications described in the next paragraph.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the purchase check has cleared, which may take
up to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. 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.
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 shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by the Fund of securities owned by it is not reasonably
practical, or it is not reasonably practical for the Fund fairly to value its
assets, or in the event that the SEC 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 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, Government
Fund has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to
which the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of such Fund during any 90-day period for
any one shareholder.
The value of the Fund's investments is subject to changing market
prices. Thus, a shareholder reselling shares to the Fund may sustain either a
gain or loss, depending upon the price paid and the price received for such
shares.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value, below.
Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed within
two years of purchase; (ii) 3% if shares are redeemed during the third or fourth
year following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Purchasing Shares. Except for
the applicable CDSC or Limited CDSC and, with respect to the expedited payment
by wire described below for which, in the case of the Fund Classes, there is
currently a $7.50 bank wiring cost, neither the Fund nor the Distributor charges
a fee for redemptions or repurchases, but such fees could be charged at any time
in the future.
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Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Investments (in
each case, "New Shares") in a permitted exchange, will not be subject to a CDSC
that might otherwise be due upon redemption of the Original Shares. However,
such shareholders will continue to be subject to the CDSC and, in the case of
Class B Shares, the automatic conversion schedule of the Original Shares as
described in this Part B and any CDSC assessed upon redemption will be charged
by the fund from which the Original Shares were exchanged. In an exchange of
Class B Shares from the Fund, the Fund's CDSC schedule may be higher than the
CDSC schedule relating to the New Shares acquired as a result of the exchange.
For purposes of computing the CDSC that may be payable upon a disposition of the
New Shares, the period of time that an investor held the Original Shares is
added to the period of time that an investor held the New Shares. With respect
to Class B Shares, the automatic conversion schedule of the Original Shares may
be longer than that of the New Shares. Consequently, an investment in New Shares
by exchange may subject an investor to the higher 12b-1 fees applicable to Class
B Shares of the Fund for a longer period of time than if the investment in New
Shares were made directly.
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. A signature guarantee can be obtained from a
commercial bank, a trust company or a member of a Securities Transfer
Association Medallion Program ("STAMP"). 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 after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
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 Delaware Investments, subject to the same conditions and limitations as
other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
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 which you have your account
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.
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Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, 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, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by the
Fund Classes are generally tape recorded, and a written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone. By exchanging shares by telephone, you are acknowledging prior
receipt of a prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day. 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. First Union National Bank's fee
(currently $7.50) will be deducted from Fund Class redemption proceeds. If you
ask for a check, it will normally be mailed the next business day after receipt
of your redemption request to your predesignated bank account. There are no
separate fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call the Shareholder Service Center prior
to the time the offering price and net asset value are determined, as noted
above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of the Fund, as described above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
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MoneyLine(SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine(SM) On Demand. When you authorize the Fund to accept such
requests from you or your investment dealer, funds will be deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine(SM) On Demand transactions. See
MoneyLine(SM) On Demand under Investment Plans.
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
Investments 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 Investments funds: (1)
Delaware Decatur Equity Income Fund, (2) Delaware Growth and Income Fund, (3)
Delaware Small Cap Value Fund, (4) Delaware Limited-Term Government Fund, (5)
Delaware Trend Fund, (6) Delaware Cash Reserve Fund, (7) Delaware Delchester
Fund and (8) Delaware Tax-Free Pennsylvania Fund. No other Delaware Investments
funds are available for timed exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Investments funds not listed above may not be
reinvested back into that Timing Account. The Fund reserves the right to apply
these same restrictions to the account(s) of any person whose transactions seem
to follow a time 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.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares 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 is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. 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.
-50-
<PAGE>
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.
Shareholders should not purchase additional shares while participating in a
Systematic Withdrawal Plan.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in the Fund managed by the
Manager must be terminated before a Systematic Withdrawal Plan with respect to
such shares can take effect, except if the shareholder is a participant in one
of our retirement plans or is investing in Delaware Investments funds which do
not carry a sales charge. Redemptions of Class A Shares pursuant to a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the purchase was made at net
asset value and a dealer's commission has been paid on that purchase. The
applicable Limited CDSC for Class A Shares and CDSC for Class B and C Shares
redeemed via a Systematic Withdrawal Plan will be waived if the annual amount
withdrawn in each year is less than 12% of the account balance on the date that
the Plan is established. If the annual amount withdrawn in any year exceeds 12%
of the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subjected to the applicable
contingent deferred sales charge, including an assessment for previously
redeemed amounts under the Plan. Whether a waiver of the contingent deferred
sales charge is available or not, the first shares to be redeemed for each
Systematic Withdrawal Plan payment will be those not subject to a contingent
deferred sales charge because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. See Waiver of
Contingent Deferred Sales Charges, below.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible 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.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine(SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. The Fund does not charge
a fee for any this service; however, your bank may charge a fee. This service is
not available for retirement plans.
-51-
<PAGE>
The Systematic Withdrawal Plan is not available for the Institutional
Class. Shareholders should consult with their financial advisers to determine
whether a Systematic Withdrawal Plan would be suitable for them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000 or more made on or after July 1, 1998, a
Limited CDSC will be imposed on certain redemptions of Class A Shares (or shares
into which such Class A Shares are exchanged) according to the following
schedule: (1) 1.00% if shares are redeemed during the first year after the
purchase; and (2) 0.50% if such shares are redeemed during the second year after
the purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed
on an amount equal to the lesser of : (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than two years will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the two-year
holding period. The Limited CDSC is assessed if such two year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
Waivers of Contingent Deferred Sales Charges
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from 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) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; (viii) distributions form an account if the redemption results
from a death of a registered owner, or a registered joint owner, 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 disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed; and (ix) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying Class A Shares at Net Asset Value under Purchasing Shares).
-52-
<PAGE>
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from 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, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of a registered owner, or a registered joint owner, of the account (in the
case of accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the death of
all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase of
the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from 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, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70
1/2, and IRA distributions qualifying under Section 72(t) of the Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of a registered owner, or a
registered joint owner, of the account (in the case of accounts established
under the Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust
accounts, the waiver applies upon the death of all beneficial owners) or a total
and permanent disability (as defined in Section 72 of the Code) of all
registered owners occurring after the purchase of the shares being redeemed.
* * *
In addition, the CDSC will be waived on Class A Shares, 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.
-53-
<PAGE>
DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
In determining daily dividends, the amount of net investment income for
the Fund 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 the Exchange is
open, and shall include investment income accrued by the Fund, less the
estimated expenses of the Fund 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 Fund shares by wire begin earning dividends when converted
into Federal Funds and available for investment, normally the next business day
after receipt. However, if 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 the Fund will share proportionately in the investment
income and expenses of the Fund, 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 same Class at the net asset
value in effect on the first business day after month end which provides the
effect of compounding dividends, unless, in the case of shareholders in the Fund
Classes, 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 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 Fund may deduct
from a shareholder's account the Fund's effort to locate a shareholder if a
shareholder's mail is returned by the United States Post Office or the Fund is
otherwise unable to locate the shareholder or verify the shareholder's mailing
address. These costs may include a percentage of the account when a search
company charges a percentage fee in exchange for their location services.
Any distributions from net realized securities profits will be made twice
a year. The first payment would be made during the first quarter of the next
fiscal year. The second payment would be made near the end of the calendar year
to comply with certain requirements of the 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 shareholders of the Fund
Classes elect to receive them in cash. The Fund will mail a quarterly statement
showing the dividends paid and all the transactions made during the previous
period.
-54-
<PAGE>
TAXES
The Fund 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 "Code"). As such, the Fund 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 Fund 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 Fund 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
described below. 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 Fund's realized securities profits to the
extent of the Fund's capital losses carried forward. For the fiscal year ended
July 31, 1999, the Fund had a capital loss of $4,062,003. The Fund had
accumulated capital losses at July 31, 1999 of $38,548,629, which may be carried
forward and applied against future capital gains. The capital loss carry forward
expires as follows: 2001 -- $1,341,943; 2002 -- $17,400,711; 2003 -- $9,205,797;
2004 -- $4,166,601; 2005 -- $2,371,574; and 2007 -- $4,062,003.
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 Fund 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 Fund.
Under the Taxpayer Relief Act of 1997, as revised by the Internal
Revenue Service Act of 1998 (the "1998 Act") and the Omnibus Consolidated and
Emergency Supplemental Appropriations Act, the Fund is required to track its
sales of portfolio securities and to report its capital gain distributions to
you according to the following categories of holding periods:
"Mid-term capital gains" or "28 percent rate gain": securities sold by the
Fund after July 28, 1997 that were held more than one year but not more
than 18 months. These gains will be taxable to individual investors at a
maximum rate of 28%. This category of gains applied only to gains and
distributions in 1997.
"1997 Act long-term capital gains" or "20 percent rate gain": securities
sold between May 7, 1997 and July 28, 1997 that were held for more than 12
months, and securities sold by the Fund after July 28, 1997 that were held
for more than 18 months. As revised by the 1998 Act, this rate applies to
securities held for more than 12 months and sold in tax years beginning
after December 1, 1997. These gains will be taxable to individual
investors at a maximum rate of 20% for investors in the 28% or higher
federal income tax brackets, and at a maximum rate of 10% for investors in
the 15% federal income tax bracket. The Omnibus Consolidated and Emergency
Supplemental Appropriations Act passed in October of 1998 included
technical corrections to the 1998 Act. The effect of this correction is
that essentially all capital gain distributions paid to shareholders
during 1998 will be taxed at a maximum rate of 20%.
-55-
<PAGE>
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
five-year gains are net gains on securities held for more than 5 years
which are sold after December 31, 2000. For individual who are subject to
tax at higher rate brackets, qualified five-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than five years. Taxpayers subject to tax at a higher rate brackets
may also make an election for shares held on January 1, 2001 to recognize
gain on their shares in order to qualify such shares as qualified
five-year property. These gains will be taxable to individual investors at
a maximum rate of 18% for investors in the 28% or higher federal income
tax brackets, and at a maximum rate of 8% for investors in the 15% federal
income tax bracket when sold after the five-year holding period.
Shareholders will be notified annually by Government Fund as to the
federal income tax status of dividends and distributions paid by the Fund.
See also Other Tax Requirements under Accounting and Tax Issues.
-56-
<PAGE>
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 Government Fund's Board of Trustees.
The Manager and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On July 31, 1999 the Manager and its
affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $46 billion in assets in
the various institutional or separately managed (approximately $27,865,360,000)
and investment company ($19,110,740,000) accounts.
The Investment Management Agreement for the Fund is dated September 29,
1999 and was approved by the initial shareholder on that date. 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 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 trustees of Government 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 trustees of Government Fund or by the
Manager. The Agreement will terminate automatically in the event of its
assignment.
The Investment Management Agreement provides that the Fund shall pay the
Manager an annual management fee as a percentage of average daily net assets
equal to:
----------------------------------------------
0.55% on the first $500 million
0.50% on the next $500 million
0.45% on the next $1,500 million
0.425% on assets in excess of $2,500 million
----------------------------------------------
On July 31, 1999, the total net assets of the Fund were $168,134,846.
Under the general supervision of the Board of Trustees, the Manager makes all
investment decisions which are implemented by the Fund. The Manager pays the
salaries of all trustees, officers and employees who are affiliated with both
the Manager and Government Fund. The investment management fees paid by the Fund
for the fiscal years ended July 31, 1997, 1998 and 1999 were $1,023,062,
$991,089 and $1,053,858, respectively.
Except for those expenses borne by the Manager under the Investment
Management Agreement and the Distributor under the Distribution Agreement, the
Fund 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 shareholders.
Distribution and Service
The Distributor, Delaware Distributors, L.P., located at 1818 Market
Street, Philadelphia, PA 19103, serves as the national distributor of Fund
shares under a Distribution Agreement dated September 29, 1999. The Distributor
is an affiliate of the Manager and bears all of the costs of promotion and
distribution, except for payments by the Fund on behalf of Class A Shares, Class
B Shares and Class C Shares under their respective 12b-1 Plans. The Distributor
is an indirect, wholly owned subsidiary of Delaware Management Holdings, Inc.
-57-
<PAGE>
The Transfer Agent, Delaware Service Company, Inc., another affiliate of
the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as the
Fund's shareholder servicing, dividend disbursing and transfer agent pursuant to
a Shareholders Services Agreement dated September 29, 1999. The Transfer Agent
also provides accounting services to the Fund pursuant to the terms of a
separate Fund Accounting Agreement. The Transfer Agent is also an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Fund. For purposes of pricing, the Fund
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
-58-
<PAGE>
OFFICERS AND TRUSTEES
The business and affairs of Government Fund are managed under the
direction of its Board of Trustees.
Certain officers and trustees of Government Fund hold identical positions
in each of the other funds in the Delaware Investments family. On July 30, 1999,
Government Fund's officers and trustees owned less than 1% of the outstanding
shares of the Class A Shares, Class B Shares, Class C Shares and the
Institutional Class.
As of July 30, 1999, management believes the following accounts held 5%
or more of the outstanding shares of a Class:
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Class B Shares MLPF&S for the sole benefit of 577,672.550 21.95%
its customers
Attn: Fund Administration SEC #97D25
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
Class C Shares MLPF&S for the sole benefit of 131,224.760 23.73%
its customers
Attn: Fund Administration SEC #97H03
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
Institutional Federated Life Insurance Co. 1,238,437.740 29.27%
Class Separate Account A
Attn: Debbie Miller
P.O. Box 328
Owatonna, MN 55060-0328
Chase Manhattan Bank C/F 1,010,498.690 23.88%
Delaware Group Foundation Fund
Income Portfolio
Attn: Marisol Gordon
Global Investment Services
3 Metrotech Center 8th Floor
Brooklyn, NY 11201-3800
Chase Manhattan Bank C/F 720,652.080 17.03%
Delaware Group Foundation Fund
Balanced Portfolio
Attn: Marisol Gordon
Global Investment Services
3 Metrotech Center 8th Floor
Brooklyn, NY 11201-3800
</TABLE>
-59-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Institutional Amalgamated Bank of New York 509,524.980 12.04%
Class Cust TWU-NYC Private Bus Lines
Pension Fund
Amivest Corp. Discretionary
Investment Manager
P.O. Box 370 Cooper Station
New York, NY 10276
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Management Company, Inc., Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Distributors, L.P., Delaware Distributors,
Inc., Delaware Service Company, Inc., Delaware Management Trust Company,
Delaware International Holdings Ltd., Founders Holdings, Inc., Delaware
International Advisers Ltd., Delaware Capital Management, Inc. and Retirement
Financial Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between
DMH and a wholly owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. DMH and the Manager are now indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.
-60-
<PAGE>
Trustees and principal officers of Government 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.
<TABLE>
<CAPTION>
<S> <C>
*Wayne A. Stork (62) Chairman, Trustee and/or Director of Government Fund and the other 32 investment
companies In the Delaware Investments family
Chairman and Director of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
Prior to January 1, 1999, Mr. Stork was Director of Delaware Capital Management,
Inc.; Chairman, President and Chief Executive Officer and Director/Trustee of DMH
Corp., Delaware Distributors, Inc. and Founders Holdings, Inc.; Chairman,
President, Chief Executive Officer, Chief Investment Officer and Director/Trustee
of Delaware Management Company, Inc. and Delaware Management Business Trust;
Chairman, President, Chief Executive Officer and Chief Investment Officer of
Delaware Management Company (a series of Delaware Management Business Trust);
Chairman, Chief Executive Officer and Chief Investment Officer of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Chairman
and Chief Executive Officer of Delaware International Advisers Ltd.; Chairman,
Chief Executive Officer and Director of Delaware International Holdings Ltd.;
Chief Executive Officer of Delaware Management Holdings, Inc.; President and
Chief Executive Officer of Delvoy, Inc.; Chairman of Delaware Distributors, L.P.;
Director of Delaware Service Company, Inc. and Retirement Financial Services,
Inc.
In addition, during the five years prior to January 1, 1999, Mr. Stork has served
in various executive capacities at different times within the Delaware
organization.
</TABLE>
- ----------------------
* Trustee affiliated with Government Fund's investment manager and considered
an "interested person" as defined in the 1940 Act.
-61-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
*David K. Downes (59) President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and Trustee and/or Director of Government Fund and the other 32
investment companies in the Delaware Investments family
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a series of Delaware Management
Business Trust)
President, Chief Executive Officer and Director of Delaware Capital Management,
Inc.
Chairman, President, Chief Executive Officer and Director of Delaware Service
Company, Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware International Holdings Ltd.
Chairman and Director of Delaware Management Trust Company and Retirement
Financial Services, Inc.
Executive Vice President, Chief Operating Officer, Chief Financial Officer of
Delaware Management Holdings, Inc., Founders CBO Corporation, Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware
Distributors, L.P.
Executive Vice President, Chief Financial Officer, Chief Administrative Officer
and Trustee of Delaware Management Business Trust
Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Director of DMH Corp., Delaware Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive capacities
at different times within the Delaware organization.
</TABLE>
- ----------------------
* Trustee affiliated with Government Fund's investment manager and considered
an "interested person" as defined in the 1940 Act.
-62-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Richard G. Unruh, Jr. (59) Executive Vice President/Chief Investment Officer of Government Fund, the other
32 investment companies in the Delaware Investments family, Delaware Management
Holdings, Inc., Delaware Management Company (a series of Delaware Management
Business Trust) and Delaware Capital Management, Inc.
Chief Executive Officer/Chief Investment Officer, DIA Equity of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Executive Vice President and Director/Trustee of Delaware Management Company,
Inc. and Delaware Management Business Trust
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive capacities
at different times within the Delaware organization.
H. Thomas McMeekin (46) Executive Vice President and Chief Investment Officer, Fixed Income of Government
Fund and each of the other 32 investment companies in the Delaware Investments family.
Director of Delaware Management Holdings, Inc. and Founders CBO Corporation.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Management Business Trust, Delaware Management
Company (a series of Delaware Management Business Trust) and Delaware Capital Management,
Inc.
President and Director of Lincoln Investment Management, Inc.
Mr. McMeekin joined Delaware Investments in 1999. He has been employed in various
executive capacities by Lincoln National Corporation from 1994 to present.
Richard J. Flannery (41) Executive Vice President and General Counsel of Government Fund, the other 32
investment companies in the Delaware Investments family, Delaware Management
Holdings, Inc., Delaware Distributors, L.P., Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and Founders CBO Corporation.
Executive Vice President/General Counsel and Director of Delaware International
Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Service Company, Inc., Delaware Capital
Management, Inc., Retirement Financial Services, Inc., Delaware Distributors,
Inc. and Delaware Management Business Trust.
Executive Vice President and Trustee of Delaware Management Business Trust.
Director of Delaware International Advisers Ltd.
Director of HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various executive
capacities at different times within the Delaware organization.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Walter P. Babich (71) Trustee and/or Director of Government Fund and the other 32 investment companies
in the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988 to
1991, he was a partner of I&L Investors.
John H. Durham (62) Trustee and/or Director of Government Fund and 18 other investment companies in
the Delaware Investments family
Private Investor
P.O. Box 819, Gwynedd Valley, PA 19437
Mr. Durham served as Chairman of the Board of each fund in the Delaware
Investments family from 1986 to 1991; President of each fund from 1977 to 1990;
and Chief Executive Officer of each fund from 1984 to 1990. Prior to 1992, with
respect to Delaware Management Holdings, Inc., Delaware Management Company,
Delaware Distributors, Inc. and Delaware Service Company, Inc., Mr. Durham served
as a director and in various executive capacities at different times. He was also a
Partner with Complete Care Services from 1995 to 1999.
Anthony D. Knerr (60) Trustee and/or Director of Government Fund and the other 32 investment companies
in the Delaware Investments family
500 Fifth Avenue, New York, NY 10110
Founder and Managing Director, Anthony Knerr & Associates
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and Treasurer
of Columbia University, New York. From 1987 to 1989, he was also a lecturer in
English at the University. In addition, Mr. Knerr was Chairman of The Publishing
Group, Inc., New York, from 1988 to 1990. Mr. Knerr founded The Publishing Group,
Inc. in 1988.
Ann R. Leven (58) Trustee and/or Director of Government Fund and the other 32 investment companies
in the Delaware Investments family
785 Park Avenue, New York, NY 10021
Treasurer, National Gallery of Art
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1992, she was Adjunct
Professor of Columbia Business School.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Thomas F. Madison (63) Trustee and/or Director of Government Fund and the other 32 investment companies
in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
Mr. Madison has also been Chairman of AetherWorks, Inc. since September 1999 and Director
since 1992. From 1996-1999, Mr. Madison was Chairman of the Board of Communications
Holdings, Inc., from February to September 1994, he served as Vice Chairman--Office of
the CEO of The Minnesota Mutual Life Insurance Company and from 1988 to 1993, he was
President of U.S. WEST Communications--Markets.
Charles E. Peck (73) Trustee and/or Director of Government Fund and the other 32 investment companies
in the Delaware Investments family
P.O. Box 1102, Columbia, MD 21044
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.
Janet L. Yeomans (51) Trustee and/or Director of Government Fund and the other 32 investment companies
in the Delaware Investments family
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
President, 3M Investment Management Corporation
From 1987-1994, Ms. Yeomans was Director of Benefit Funds and Financial Markets
for the 3M Corporation; Manager of Benefit Fund Investments for the 3M
Corporation, 1985-1987; Manager of Pension Funds for the 3M Corporation,
1983-1985; Consultant -- Investment Technology Group of Chase Econometrics,
1982-1983; Consultant for Data Resources, 1980-1982; Programmer for the Federal
Reserve Bank of Chicago, 1970-1974.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Joseph H. Hastings (49) Senior Vice President/Corporate Controller of Government Fund and the other 32
investment companies in the Delaware Investments family
Senior Vice President/Corporate Controller and Treasurer of Delaware Management
Holdings, Inc., DMH Corp., Delaware Management Company, Inc., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Capital Management, Inc., Delaware International Holdings Ltd., Delvoy, Inc.,
Retirement Financial Services, Inc., Founders Holdings, Inc. and Delaware
Management Business Trust
Executive Vice President/Chief Financial Officer/Treasurer of Delaware Management
Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
During the past five years, Mr. Hastings has served in various executive
capacities at different times within the Delaware organization.
Michael P. Bishof (37) Senior Vice President/Treasurer of Government Fund and the other 32 investment
companies in the Delaware Investments family
Senior Vice President/Investment Accounting of Delaware Service Company, Inc. and
Delaware Capital Management, Inc.
Senior Vice President and Treasurer/ Investment Accounting of Delaware
Distributors, L.P. , Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Investment Advisers (a series of Delaware Management
Business Trust) Delaware International Holdings, Inc. and Founders Holdings, Inc.
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice President for
Bankers Trust, New York, NY from 1994 to 1995, a Vice President for CS First
Boston Investment Management, New York, NY from 1993 to 1994 and an Assistant
Vice President for Equitable Capital Management Corporation, New York, NY from
1987 to 1993.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Paul Grillo (40) Vice President/Portfolio Manager of Government Fund and the other 32 investment
companies in the Delaware Investments family, Delaware Management Company (a
series of Delaware Management Business Trust) and Delaware Investment Advisers (a
series of Delaware Management Business Trust).
Before joining Delaware Investments in 1993, Mr. Grillo served as a mortgage
strategist and trader at Dreyfus Corporation. He also served as a mortgage
strategist and portfolio manager for the Chemical Investment Group and as a
financial analyst at the Chemical Bank.
</TABLE>
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<PAGE>
The following is a compensation table listing for each trustee entitled
to receive compensation, the aggregate compensation received from Government
Fund and the total compensation received from all investment companies in the
Delaware Investments family for which he or she serves as a director for the
fiscal year ended July 31, 1999 and an estimate of annual benefits to be
received upon retirement under the Delaware Investments Retirement Plan for
Directors/Trustees as of July 31, 1999. Only the independent trustees of
Government Fund receive compensation from the Fund.
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Estimated Compensation
Aggregate Accrued Annual from all
Compensation as Part of Benefits Investment
from Government Government Fund, Upon Companies
Name (3) Fund Expenses Retirement(1) in Delaware
Investments(2)
<S> <C> <C> <C> <C>
John H. Durham $971 None $32,180 $50,015
Ann R. Leven $1,127 None $38,000 $66,209
Walter P. Babich $1,001 None $38,000 $59,983
Anthony D. Knerr $1,117 None $38,000 $65,210
Thomas F. Madison $1,126 None $38,000 $66,043
Charles E. Peck $1,087 None $38,000 $62,292
Janet L. Yeomans(4) $508 None $38,000 $25,238
</TABLE>
(1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time of
his or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each investment company in the Delaware Investments family for
which he or she serves as a director or trustee for a period equal to the
lesser of the number of years that such person served as a director or
trustee or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer that
is paid to directors/trustees of each investment company at the time of such
person's retirement. If an eligible director/trustee retired as of July 31,
1999, he or she would be entitled to annual payments totaling the amount
noted above, in the aggregate, from all of the investment companies in the
Delaware Investments family for which he or she served as director or
trustee, based on the number of investment companies in the Delaware
Investments family as of that date.
(2) Each independent trustee/director (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a
trustee/director for all 33 investment companies in Delaware Investments,
plus $3,145 for each Board Meeting attended. John H. Durham currently
receives a total annual retainer fee of $31,180 for serving as a
trustee/director for 19 investment companies in Delaware Investments, plus
$1,810 for each Board Meeting attended. Ann R. Leven, Charles E. Peck,
Anthony D. Knerr and Thomas F. Madison serve on the Fund's audit committee;
Ms. Leven is the chairperson. Members of the audit committee currently
receive additional annual compensation of $5,000 from all investment
companies, in the aggregate, with the exception of the chairperson, who
receives $6,000.
(3) W. Thacher Longstreth served as an independent trustee of Government Fund
during its last fiscal year for the period August 1, 1998 through March 17,
1999, the date on which he retired. For this period, Mr. Longstreth received
$781 from Government Fund and $50,780 for all investment companies in the
Delaware Investments family.
(4) Janet L. Yeomans joined the Boards of all investment companies in the
Delaware Investments family in March 1999 for some funds and in April 1999
for other funds.
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<PAGE>
GENERAL INFORMATION
Government Fund was originally organized as a Maryland corporation in
1985 and reorganized as a Delaware Business Trust on September 29, 1999. It is
an open-end management investment company. The Fund's portfolio of assets is
diversified as defined by the 1940 Act.
The Manager is the investment manager of the Fund. The Manager also
provides investment management services to certain of the other funds in the
Delaware Investments family. An affiliate of the Manager also manages private
investment accounts. While investment decisions of the Fund are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Fund.
Delaware or Delaware International also manages the investment options
for Delaware-Lincoln Choice Plus and Delaware Medallion(SM) III Variable
Annuities. Choice Plus is issued and distributed by Lincoln National Life
Insurance Company. choice Plus offers a variety of different investment styles
managed by leading money managers. Medallion is issued by Allmerica Financial
Life Insurance and Annuity Company (First Allmerica Financial Life Insurance
Company in New York and Hawaii). Delaware Medallion offers various investment
series ranging from domestic equity funds, international equity and bond funds
and domestic fixed income funds. Each investment series available through Choice
Plus and Medallion utilizes an investment strategy and discipline the same as or
similar to one of the Delaware Investments mutual funds available outside the
annuity. See Delaware Group Premium Fund, Inc., in Appendix A.
Access persons and advisory persons of the funds in the Delaware
Investments family, as those terms are defined in SEC Rule 17j-1 under the 1940
Act, who provide services to the Manager, Delaware International Advisers Ltd.
or their affiliates, are permitted to engage in personal securities transactions
subject to the exceptions set forth in Rule 17j-1 and the following general
restrictions and procedures: (1) certain blackout periods apply to personal
securities transactions of those persons; (2) transactions must receive advance
clearance and must be completed on the same day as the clearance is received;
(3) certain persons are prohibited from investing in initial public offerings of
securities and other restrictions apply to investments in private placements of
securities; (4) opening positions may only be closed-out at a profit after a
60-day holding period has elapsed; and (5) the Compliance Officer must be
informed periodically of all securities transactions and duplicate copies of
brokerage confirmations and account statements must be supplied to the
Compliance Officer.
The Distributor acts as national distributor for the Fund and for the
other mutual funds in the Delaware Investments family. The Distributor 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 Amounts Net
of Underwriting Reallowed Commission
Fiscal Year Ended Commission to Dealers to the Distributor
----------------- ---------- ---------- ------------------
<S> <C> <C> <C> <C>
July 31, 1999 $319,791 $279,614 $40,177
July 31, 1998 190,148 157,506 32,642
July 31, 1997 144,773 120,230 24,543
</TABLE>
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<PAGE>
The Distributor received Limited CDSC payments with respect to Class A
Shares and CDSC payments with respect to Class B and C Shares as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Fiscal Year Class A Class B Class C
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7/31/99 $0 $98,328 $5,999
- --------------------------------------------------------------------------------------------------------------------------
7/31/98 1,015 73,001 519
- --------------------------------------------------------------------------------------------------------------------------
7/31/97 448 39,019 440
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 Investments family. 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 Trustees,
including a majority of the unaffiliated trustees. The Transfer Agent also
provides accounting services to the Fund. Those services include performing all
functions related to calculating the Fund's net asset value and providing all
financial reporting services, regulatory compliance testing and other related
accounting services. For its services, the Transfer Agent is paid a fee based on
total assets of all funds in the Delaware Investments family for which it
provides such accounting services. Such fee is equal to 0.25% multiplied by the
total amount of assets in the complex for which the Transfer Agent furnishes
accounting services, where such aggregate complex assets are $10 billion or
less, and 0.20% of assets if such aggregate complex assets exceed $10 billion.
The fees are charged to each fund, including the Fund, on an aggregate pro-rata
basis. The asset-based fee payable to the Transfer Agent is subject to a minimum
fee calculated by determining the total number of investment portfolios and
associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Government Fund's advisory
relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Government Fund to
delete the words "Delaware Group" from Government Fund's name.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245, is custodian of the Fund's securities and cash. As custodian for the
Fund, Chase 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.
Capitalization
Government Fund has a present authorized capitalization of five hundred
million shares of capital stock with a $.01 par value per share. The Board of
Trustees 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.
Each Class represents a proportionate interest in the assets of the
Fund, and each has 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 any proposal
to increase materially the fees to be paid by the Fund 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.
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<PAGE>
Shares do not have 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
Fund shares have noncumulative voting rights which means that the
holders of more than 50% of the shares of Government Fund voting for the
election of trustees can elect all the trustees if they choose to do so, and, in
such event, the holders of the remaining shares will not be able to elect any
trustees.
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.
-71-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group
Government Fund - Delaware American Government Bond Fund and, in its capacity as
such, audits the financial statements contained in the Fund's Annual Report. The
Fund's Statement of Net Assets, Statement of Operations, Statements of Changes
in Net Assets, Financial Highlights and Notes to Financial Statements, as well
as the report of Ernst & Young LLP, independent auditors, for the fiscal year
ended July 31, 1999, are included in the Fund's Annual Report to shareholders.
The financial statements and financial highlights, 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.
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<PAGE>
APPENDIX A--INVESTMENT OBJECTIVES OF THE FUNDS IN THE DELAWARE INVESTMENTS
FAMILY
Following is a summary of the investment objectives of the funds in the
Delaware Investments family:
Delaware Balanced 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. Delaware 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.
Delaware Trend Fund seeks long-term growth by investing in common
stocks issued by emerging growth companies exhibiting strong capital
appreciation potential.
Delaware Small Cap Value Fund seeks capital appreciation by investing
primarily in common stocks whose market values appear low relative to their
underlying value or future potential.
Delaware 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.
Delaware Decatur Equity 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. Delaware Growth
and Income Fund seeks long-term growth by investing primarily in securities that
provide the potential for income and capital appreciation without undue risk to
principal. Delaware Blue Chip Fund seeks to achieve long-term capital
appreciation. Current income is a secondary objective. It seeks to achieve these
objectives by investing primarily in equity securities and any securities that
are convertible into equity securities. Delaware Social Awareness Fund seeks to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to large-sized companies
expected to grow over time that meet the Fund's "Social Criteria" strategy.
Delaware Delchester Fund seeks as high a current income as possible by
investing principally in high yield, high risk corporate bonds, and also in U.S.
government securities and commercial paper. Delaware Strategic Income Fund seeks
to provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities. Delaware High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
Delaware Corporate Bond Fund seeks to provide investors with total return by
investing primarily in corporate bonds. Delaware Extended Duration Bond Fund
seeks to provide investors with total return by investing primarily in corporate
bonds.
Delaware 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.
Delaware American Government Bond Fund seeks high current income by
investing primarily in long-term debt obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
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<PAGE>
Delaware Cash Reserve Fund 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.
Delaware REIT Fund seeks to achieve maximum long-term total return with
capital appreciation as a secondary objective. It seeks to achieve its
objectives by investing in securities of companies primarily engaged in the real
estate industry.
Delaware Tax-Free USA Fund seeks high current income exempt from
federal income tax by investing in municipal bonds of geographically-diverse
issuers. Delaware 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. Delaware 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.
Delaware 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.
Delaware Tax-Free New Jersey Fund seeks a high level of current
interest income exempt from federal income tax and New Jersey state and local
taxes, consistent with preservation of capital. Delaware Tax-Free Ohio Fund
seeks a high level of current interest income exempt from federal income tax and
Ohio state and local taxes, consistent with preservation of capital. Delaware
Tax-Free Pennsylvania Fund seeks a high level of current interest income exempt
from federal income tax and Pennsylvania state and local taxes, consistent with
the preservation of capital.
Delaware Foundation Funds are "fund of funds" which invest in other
funds in the Delaware Investments family (referred to as "Underlying Funds").
Delaware Foundation Funds Income Portfolio seeks a combination of current income
and preservation of capital with capital appreciation by investing primarily in
a mix of fixed income and domestic equity securities, including fixed income and
domestic equity Underlying Funds. Delaware Foundation Funds Balanced Portfolio
seeks capital appreciation with current income as a secondary objective by
investing primarily in domestic equity and fixed income securities, including
domestic equity and fixed income Underlying Funds. Delaware Foundation Funds
Growth Portfolio seeks long term capital growth by investing primarily in equity
securities, including equity Underlying Funds, and, to a lesser extent, in fixed
income securities, including fixed-income Underlying Funds.
Delaware 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.
Delaware 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.
Delaware Global Equity Fund seeks to achieve long-term total return by investing
in global securities that provide the potential for capital appreciation and
income. Delaware Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities of issuers located or operating in
emerging countries.
Delaware U.S. Growth Fund seeks to maximize capital appreciation by
investing in companies of all sizes which have low dividend yields, strong
balance sheets and high expected earnings growth rates relative to their
industry. Delaware Overseas Equity Fund seeks to maximize total return (capital
appreciation and income), principally through investments in an internationally
diversified portfolio of equity securities. Delaware New Pacific Fund seeks
long-term capital appreciation by investing primarily in companies which are
domiciled in or have their principal business activities in the Pacific Basin.
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<PAGE>
Delaware Group Premium Fund, Inc. offers 17 funds available exclusively
as funding vehicles for certain insurance company separate accounts. Growth and
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. Delchester Series seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves Series seeks a high
stable level of current income while minimizing fluctuations in principal by
investing in a diversified portfolio of short- and intermediate-term securities.
Cash Reserve Series seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term money
market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware Balanced Series seeks a balance of
capital appreciation, income and preservation of capital. It uses a
dividend-oriented valuation strategy to select securities issued by established
companies that are believed to demonstrate potential for income and capital
growth. International Equity Series seeks long-term growth without undue risk to
principal by investing primarily in equity securities of foreign issuers that
provide the potential for capital appreciation and income. Small Cap Value
Series seeks capital appreciation by investing primarily in small-cap common
stocks whose market values appear low relative to their underlying value or
future earnings and growth potential. Emphasis will also be placed on securities
of companies that may be temporarily out of favor or whose value is not yet
recognized by the market. Trend Series seeks long-term capital appreciation by
investing primarily in small-cap common stocks and convertible securities of
emerging and other growth-oriented companies. These securities will have been
judged to be responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective. Global Bond
Series seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may also
provide the potential for capital appreciation. Strategic Income Series seeks
high current income and total return by using a multi-sector investment
approach, investing primarily in three sectors of the fixed-income securities
markets: high-yield, higher risk securities; investment grade fixed-income
securities; and foreign government and other foreign fixed-income securities.
Devon Series seeks current income and capital appreciation by investing
primarily in income-producing common stocks, with a focus on common stocks that
the investment manager believes have the potential for above-average dividend
increases over time. Emerging Markets Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of issuers located or
operating in emerging countries. Convertible Securities Series seeks a high
level of total return on its assets through a combination of capital
appreciation and current income by investing primarily in convertible
securities. Social Awareness Series seeks to achieve long-term capital
appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth.
Delaware US Government Securities Fund seeks to provide a high level of
current income consistent with the prudent investment risk by investing in U.S.
Treasury bills, notes, bonds, and other obligations issued or unconditionally
guaranteed by the full faith and credit of the U.S. Treasury, and repurchase
agreements fully secured by such obligations.
Delaware Tax-Free Arizona Insured Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware Minnesota Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Minnesota personal income tax, consistent with the preservation of
capital.
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<PAGE>
Delaware Tax-Free Minnesota Intermediate Fund seeks to provide a high
level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware Tax-Free California Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the California personal
income tax, consistent with the preservation of capital. Delaware Tax-Free
Florida Insured Fund seeks to provide a high level of current income exempt from
federal income tax, consistent with the preservation of capital. The Fund will
seek to select investments that will enable its shares to be exempt from the
Florida intangible personal property tax. Delaware Tax-Free Florida Fund seeks
to provide a high level of current income exempt from federal income tax,
consistent with the preservation of capital. The Fund will seek to select
investments that will enable its shares to be exempt from the Florida intangible
personal property tax. Delaware Tax-Free Kansas Fund seeks to provide a high
level of current income exempt from federal income tax, the Kansas personal
income tax and the Kansas intangible personal property tax, consistent with the
preservation of capital. Delaware Tax-Free Missouri Insured Fund seeks to
provide a high level of current income exempt from federal income tax and the
Missouri personal income tax, consistent with the preservation of capital.
Delaware Tax-Free New Mexico Fund seeks to provide a high level of current
income exempt from federal income tax and the New Mexico personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Oregon Insured
Fund seeks to provide a high level of current income exempt from federal income
tax and the Oregon personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Arizona Fund seeks to provide a high level of current
income exempt from federal income tax and the Arizona personal income tax,
consistent with the preservation of capital. Delaware Tax-Free California Fund
seeks to provide a high level of current income exempt from federal income tax
and the California personal income tax, consistent with the preservation of
capital. Delaware Tax-Free Iowa Fund seeks to provide a high level of current
income exempt from federal income tax and the Iowa personal income tax,
consistent with the preservation of capital. Delaware Tax-Free Idaho Fund seeks
to provide a high level of current income exempt from federal income tax and the
Idaho personal income tax, consistent with the preservation of capital. Delaware
Minnesota High Yield Municipal Bond Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax primarily through investment in medium and lower grade municipal
obligations. Delaware National High Yield Municipal Fund seeks to provide a high
level of income exempt from federal income tax, primarily through investment in
medium and lower grade municipal obligations. Delaware Tax-Free New York Fund
seeks to provide a high level of current income exempt from federal income tax
and the personal income tax of the state of New York and the city of New York,
consistent with the preservation of capital. Delaware Tax-Free Wisconsin Fund
seeks to provide a high level of current income exempt from federal income tax
and the Wisconsin personal income tax, consistent with the preservation of
capital.
Delaware Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Delaware Tax-Free Minnesota Fund seeks to provide a high level of
current income exempt from federal income tax and the Minnesota personal income
tax, consistent with the preservation of capital. Delaware Tax-Free North Dakota
Fund seeks to provide a high level of current income exempt from federal income
tax and the North Dakota personal income tax, consistent with the preservation
of capital.
-76-
<PAGE>
Delaware Aggressive Growth Fund seeks long-term capital appreciation,
which the Fund attempts to achieve by investing primarily in equity securities
believed to have the potential for high earnings growth. Although the Fund, in
seeking its objective, may receive current income from dividends and interest,
income is only an incidental consideration in the selection of the Fund's
investments. Delaware Growth Stock Fund has an objective of long-term capital
appreciation. The Fund seeks to achieve its objective from equity securities
diversified among individual companies and industries. Delaware Tax-Efficient
Equity Fund seeks to obtain for taxable investors a high total return on an
after-tax basis. The Fund will attempt to achieve this objective by seeking to
provide a high long-term after-tax total return through managing its portfolio
in a manner that will defer the realization of accrued capital gains and
minimize dividend income.
For more complete information about any of the funds in the Delaware
Investments family, 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
-77-
<PAGE>
Delaware Investments includes funds with a wide range
of investment objectives. Stock funds, income funds,
national and state-specific tax-exempt funds, money
market funds, global and international funds and
closed-end equity funds give investors the ability to
create a portfolio that fits their personal financial
goals. For more information, shareholders of the Fund
Classes should contact their financial adviser or
call Delaware Investments at 800-523-1918, and
shareholders of the Institutional Class should
contact Delaware Investments at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
<PAGE>
- ------------------------------------------------------------
DELAWARE AMERICAN GOVERNMENT BOND FUND
- ------------------------------------------------------------
A CLASS
B CLASS
C CLASS
INSTITUTIONAL CLASS
- ------------------------------------------------------------
DELAWARE GROUP GOVERNMENT FUND
- ------------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ------------------------------------------------------------
SEPTEMBER 29, 1999
Delaware(SM)
Investments
<PAGE>
PART C
Other Information
Item 23. Exhibits
(a) Agreement and Declaration of Trust.
(1) Agreement and Declaration of Trust (December 17,
1998) incorporated into this filing by reference to
Post-Effective Amendment No. 21 filed July 29, 1999.
(2) Certificate of Trust (December 17, 1998) incorporated
into this filing by reference to Post-Effective
Amendment No. 21 filed July 29, 1999.
(b) By-Laws. By-Laws (December 17, 1998) incorporated into this
filing by reference to Post-Effective Amendment No. 21 filed
July 29, 1999.
(c) Copies of All Instruments Defining the Rights of Holders.
(1) Agreement and Declaration of Trust. Articles III, IV,
V and VI of Agreement and Declaration of Trust
incorporated into this filing by reference to
Post-Effective Amendment No. 21 filed July 29, 1999.
(2) By-Laws. Article II of By-Laws incorporated into this
filing by reference to Post-Effective Amendment No.
21 filed July 29, 1999.
(d) Investment Management Agreement.
(1) Form of Investment Management Agreement (September
1999) between Delaware Management Company and the
Registrant incorporated into this filing by reference
to Post-Effective Amendment No. 21 filed July 29,
1999.
(e) (1) Distribution Agreement.
(i) Form of Distribution Agreement (September 1999)
incorporated into this filing by reference to
Post-Effective Amendment No. 17 filed November 20,
1995.
(ii) Form of Amendment No. 1 to Distribution Agreement
(September 1999) incorporated into this filing by
reference to Post-Effective Amendment No. 17 filed
November 20, 1995.
(2) Administration and Service Agreement. Form of
Administration and Service Agreement (as amended
November 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 17 filed
November 20, 1995.
(3) Dealer's Agreement. Dealer's Agreement (as amended
November 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 17 filed
November 20, 1995.
(4) Mutual Fund Agreement for the Delaware Group of Funds
(as amended November 1995) (Module) incorporated into
this filing by reference to Post-Effective Amendment
No. 18 filed September 27, 1996.
(f) Inapplicable.
<PAGE>
(g) Custodian Agreement.
(1) Form of Custodian Agreement (September 1999) between
the Registrant and The Chase Manhattan Bank
incorporated into this filing by reference to
Post-Effective Amendment No. 20 filed September 29,
1998.
(2) Form of Securities Lending Agreement (September 1999)
between the Registrant and The Chase Manhattan Bank
incorporated into this filing by reference to
Post-Effective Amendment No. 20 filed September 29,
1998.
(h) Other Material Contracts.
(1) Shareholders Services Agreement (September 29, 1999)
between Delaware Service Company, Inc. and the
Registrant incorporated into this filing by reference
to Post-Effective Amendment No. 18 filed September
27, 1996.
(2) Form of Delaware Group of Funds Fund Accounting
Agreement (September 1999) between Delaware Service
Company, Inc. and the Registrant incorporated into
this filing by reference to Post-Effective Amendment
No. 18 filed September 27, 1996 and Post-Effective
Amendment No. 20 filed September 29, 1998.
(i) Opinion of Counsel. Incorporated into this filing by reference
to Post-Effective Amendment No. 21 filed July 29, 1999.
(j) Consent and Report of Auditors. Attached as Exhibit.
(k-l) Inapplicable.
(m) Plans under Rule 12b-1.
(1) Plan under Rule 12b-1 for Class A (September 1999)
incorporated into this filing by reference to
Post-Effective Amendment No. 17 filed November 20,
1995.
(2) Plan under Rule 12b-1 for Class B (September 1999)
incorporated into this filing by reference to
Post-Effective Amendment No. 17 filed November 20,
1995.
(3) Plan under Rule 12b-1 for Class C (September 1999)
incorporated into this filing by reference to
Post-Effective Amendment No. 17 filed November 20,
1995.
(n) Inapplicable.
(o) Other: Powers of Attorney. incorporated into this filing by
reference to Post-Effective Amendment No. 21 filed July 29,
1999.
Item 24. Persons Controlled by or under Common Control with Registrant. None.
Item 25. Indemnification. Article VI of the By-Laws incorporated into this
filing by reference to Post-Effective Amendment No. 21 filed
July 29, 1999.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser.
Delaware Management Company, a series of Delaware Management Business
Trust, (the "Manager") serves as investment manager to the Registrant and also
serves as investment manager or sub-adviser to certain of the other funds in the
Delaware Investments family (Delaware Group Equity Funds I, Inc., Delaware Group
Equity Funds II, Inc., Delaware Group Equity Funds III, Delaware Group Equity
Funds IV, Inc., Delaware Group Equity Funds V, Inc., Delaware Group Income
Funds, Delaware Group Limited-Term Government Funds, Inc., Delaware Group Cash
Reserve, Inc., Delaware Group Tax-Free Fund, Inc., Delaware Group State Tax-Free
Income Trust, Delaware Group Tax-Free Money Fund, Delaware Group Premium Fund,
Inc., Delaware Group Global & International Funds, Inc., Delaware Pooled Trust,
Inc., Delaware Group Adviser Funds, Inc., Delaware Group Dividend and Income
Fund, Inc., Delaware Group Global Dividend and Income Fund, Inc., Delaware Group
Foundation Funds, Inc., Voyageur Intermediate Tax-Free Funds, Inc., Voyageur
Tax-Free Funds, Inc., Voyageur Funds, Inc., Voyageur Insured Funds, Inc.,
Voyageur Investment Trust, Voyageur Mutual Funds, Inc., Voyageur Mutual Funds
II, Inc., Voyageur Mutual Funds III, Inc., Voyageur Arizona Municipal Income
Fund, Inc., Voyageur Colorado Insured Municipal Income Fund, Inc., Voyageur
Florida Insured Municipal Income Fund, Voyageur Minnesota Municipal Fund, Inc.,
Voyageur Minnesota Municipal Fund II, Inc. and Voyageur Minnesota Municipal Fund
III, Inc.). In addition, certain officers of the Manager also serve as
directors/trustees of the other funds in the Delaware Investments family, and
certain officers are also officers of these other funds. A company indirectly
owned by the Manager's indirect parent company acts as principal underwriter to
the mutual funds in the Delaware Investments family (see Item 29 below) and
another such company acts as the shareholder services, dividend disbursing,
accounting servicing and transfer agent for all of the mutual funds in the
Delaware Investments family.
<PAGE>
The following persons serving as directors or officers of the Manager
have held the following positions during the past two years:
<TABLE>
<CAPTION>
====================================================================================================================================
Name and Positions and Offices with Delaware Management Company and its affiliates
Principal Business and other Positions and Offices Held
Address*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
David K. Downes President of Delaware Management Company (a series of Delaware Management Business Trust); Executive
Vice President, Chief Operating Officer and Chief Financial Officer of Delaware Management Holdings,
Inc.; Executive Vice President, Chief Operating Officer, Chief Financial Officer and Director of DMH
Corp.; Executive Vice President, Chief Operating Officer, Chief Financial Officer and Director of
Delvoy, Inc.; President and Director of Delaware Management Company, Inc.; Executive Vice President,
Chief Operating Officer, Chief Financial Officer and Trustee of Delaware Management Business Trust;
Executive Vice President, Chief Operating Officer and Chief Financial Officer of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Chairman, President, Chief Executive Officer
and Director of Delaware Service Company, Inc.; President, Chief Executive Officer and Director of
Delaware Capital Management, Inc.; Chairman and Director of Retirement Financial Services, Inc.;
Chairman and Director of Delaware Management Trust Company; Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Director of Delaware Distributors, Inc.; Executive Vice President,
Chief Operating Officer and Chief Financial Officer of Delaware Distributors, L.P.; President, Chief
Operating Officer, Chief Financial Officer and Director of Delaware International Holdings Ltd.;
Director of Delaware International Advisers Ltd.; Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Founders Holdings, Inc.; Executive Vice President, Chief
Operating Officer and Chief Financial Officer of Founders CBO Corporation; President, Chief Executive
Officer, Chief Operating Officer, Chief Financial Officer and Director/Trustee of each fund in the
Delaware Investments family.
Chief Executive Officer and Director of Forewarn, Inc. since 1993, 8 Clayton Place, Newtown Square, PA
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Flannery Executive Vice President and General Counsel of Delaware Management Company (a series of Delaware
Management Business Trust); Executive Vice President and General Counsel of Delaware Management
Holdings, Inc.; Executive Vice President, General Counsel and Director of DMH Corp.; Executive Vice
President, General Counsel and Director of Delvoy, Inc.; Executive Vice President, General Counsel and
Director of Delaware Management Company, Inc.; Executive Vice President, General Counsel and Trustee of
Delaware Management Business Trust; Executive Vice President and General Counsel of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Executive Vice President, General Counsel and
Director of Delaware Service Company, Inc.; Executive Vice President, General Counsel and Director of
Delaware Capital Management, Inc.; Executive Vice President, General Counsel and Director of Retirement
Financial Services, Inc.; Executive Vice President, General Counsel and Director of Delaware Management
Trust Company; Executive Vice President, General Counsel and Director of Delaware Distributors, Inc.;
Executive Vice President and General Counsel of Delaware Distributors, L.P.; Executive Vice President,
General Counsel and Director of Delaware International Holdings Ltd.; Director of Delaware International
Advisers Ltd.; Executive Vice President, General Counsel and Director of Founders Holdings, Inc.;
Executive Vice President and General Counsel of Founders CBO Corporation; Executive Vice President and
General Counsel of each fund in the Delaware Investments family.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton, PA; Director and Member of
Executive Committee of Stonewall Links, Inc. since 1991, Bulltown Rd., Elverton, PA
- ------------------------------------------------------------------------------------------------------------------------------------
Richard G. Unruh Executive Vice President, Chief Investment Officer/ DMC Equity of Delaware Management Company (a series
of Delaware Management Business Trust); Executive Vice President of Delaware Management Holdings, Inc.;
Executive Vice President and Trustee of Delaware Management Business Trust; Chief Executive Office,
Chief Investment Officer/DIA Equity of Delaware Investment Advisers (a series of Delaware Management
Business Trust; Executive Vice President of Delaware Capital Management, Inc.; Director of Delaware
Investment Advisers Ltd.; Executive Vice President, Chief Investment Officer/Equity of each fund in the
Delaware Investments family.
Board of Directors, Chairman of Finance Committee, Keystone Insurance Company since 1989, 2040 Market
Street, Philadelphia, PA; Board of Directors, Chairman of Finance Committee, AAA Mid Atlantic, Inc.
since 1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Metron, Inc. since 1995, 11911
Freedom Drive, Reston, VA
- ------------------------------------------------------------------------------------------------------------------------------------
H. Thomas McMeekin(1) Executive Vice President of Delaware Management Business Trust; Executive Vice President of Delaware
Management Company (a series of Delaware Management Business Trust); Executive Vice President of
Delaware Capital Management, Inc.; Executive Vice President and Director of Founders Holdings, Inc.;
Director of Delaware Management Holdings, Inc., Director of Founders CBO Corporation; Executive Vice
President and Chief Investment Officer, Fixed Income of each Fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Positions and Offices with Delaware Management Company and its affiliates
Principal Business and other Positions and Offices Held
Address*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company (a series of Delaware Management
Business Trust; Senior Vice President/Operations of Delaware Service Company, Inc.; Senior Vice
President/Operations of Retirement Financial Services, Inc.; Senior Vice President/Operations of
Delaware Management Trust Company.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President, Treasurer/Investment Accounting of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President, Treasurer/Investment Accounting of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Senior Vice President/Investment
Accounting of Delaware Service Company, Inc.; Senior Vice President/Investment Accounting of Delaware
Capital Management, Inc.; Senior Vice President, Treasurer/Investment Accounting of Delaware
Distributors, L.P.; Senior Vice President, Manager of Investment Accounting of Delaware International
Holdings Ltd.; Senior Vice President, Treasurer/Investment Accounting of Founders Holdings, Inc.; Senior
Vice President and Assistant Treasurer of Founders CBO Corporation; Senior Vice President and Treasurer
of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company (a series of Delaware
Management Business Trust); Senior Vice President/Head of Equity Trading of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Senior Vice President/Head of Equity Trading of
Delaware Capital Management, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Trustee of Delaware Management Business Trust; Senior Vice President/Senior
Portfolio Manager of Delaware Investment Advisers (a series of Delaware Management Business Trust);
Senior Vice President/Senior Portfolio Manager of Delaware Capital Mangement, Inc.; Senior Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Susan L. Hanson Senior Vice President/Global Marketing and Client Services of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President/Global Marketing and Client Services of
Delaware Investment Advisers (a series of Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/Corporate Controller of Delaware Management Company (a series of
Delaware Management Business Trust); Senior Vice President/Treasurer/Corporate Controller of Delaware
Management Holdings, Inc.; Senior Vice President/Treasurer/Corporate Controller of DMH Corp; Senior Vice
President/Treasurer/Corporate Controller of Delvoy, Inc.; Senior Vice President/Treasurer/Corporate
Controller of Delaware Management Company, Inc.; Senior Vice President/Treasurer/Corporate Controller of
Delaware Management Business Trust; Senior Vice President/Treasurer/Corporate Controller of Delaware
Service Company, Inc.; Senior Vice President/Treasurer/Corporate Controller of Delaware Capital
Management, Inc.; Senior Vice President/Treasurer/Corporate Controller of Retirement Financial Services,
Inc.; Executive Vice President/Corporate Controller/Treasurer of Delaware Management Trust Company;
Senior Vice President/Treasurer/Corporate Controller of Delaware Distributors, L.P.; Senior Vice
President/Treasurer/Corporate Controller of Delaware International Holdings; Senior Vice
President/Treasurer/Corporate Controller of Founders Holdings, Inc.; Senior Vice President/ Assistant
Treasurer Founders CBO Corporation; Senior Vice President/Corporate Controller of each fund in the
Delaware Investments family
- ------------------------------------------------------------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company (a series of Delaware Management
Business Trust); Senior Vice President/Human Resources of Delaware Management Holdings, Inc.; Senior
Vice President/Human Resources of DMH Corp.; Senior Vice President/Human Resources of Delvoy, Inc.;
Senior Vice President/Human Resources of Delaware Management Company, Inc.; Senior Vice President/Human
Resources of Delaware Management Business Trust; Senior Vice President/Human Resources of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Senior Vice President/Human
Resources of Delaware Service Company, Inc.; Senior Vice President/Human Resources of Delaware Capital
Management, Inc.; Senior Vice President/Human Resources of Delaware Retirement Financial Services, Inc.;
Senior Vice President/Human Resources of Delaware Management Trust Company; Senior Vice President/Human
Resources of Delaware Distributors, Inc.; Senior Vice President/Human Resources of Delaware
Distributors, L.P.; Senior Vice President/Human Resources of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Positions and Offices with Delaware Management Company and its affiliates
Principal Business and other Positions and Offices Held
Address*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richelle S. Maestro Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President, Assistant Secretary and Deputy
General Counsel of Delaware Management Holdings, Inc.; Senior Vice President, Assistant Secretary and
Deputy General Counsel of DMH Corp.; Senior Vice President, Assistant Secretary and Deputy General
Counsel of Delvoy, Inc.; Senior Vice President, Assistant Secretary and Deputy General Counsel of
Delaware Management Company, Inc.; Senior Vice President, Assistant Secretary and Deputy General Counsel
of Delaware Management Business Trust; Senior Vice President, Assistant Secretary and Deputy General
Counsel of Delaware Investment Advisers (a series of Delaware Management Business Trust); Senior Vice
President, Assistant Secretary and Deputy General Counsel of Delaware Service Company, Inc.; Senior Vice
President, Assistant Secretary and Deputy General Counsel of Delaware Capital Management, Inc.; Senior
Vice President, Assistant Secretary and Deputy General Counsel of Retirement Financial Services, Inc.;
Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware Distributors, Inc.;
Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware Distributors, L.P.;
Senior Vice President, Secretary and Deputy General Counsel of Delaware International Holdings Ltd.;
Senior Vice President, Assistant Secretary and Deputy General Counsel of Founders Holdings, Inc.;
Secretary of Founders CBO Corporation; Senior Vice President, Assistant Secretary and Deputy General
Counsel of each fund in the Delaware Investments family.
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane, Philadelphia, PA.
- ------------------------------------------------------------------------------------------------------------------------------------
Eric E. Miller Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware Management Company (a
series of Delaware Management Business Trust); Senior Vice President, Assistant Secretary and Deputy
General Counsel of Delaware Management Holdings, Inc.; Senior Vice President, Assistant Secretary and
Deputy General Counsel of DMH Corp.; Senior Vice President, Assistant Secretary and Deputy General
Counsel of Delvoy, Inc.; Senior Vice President, Assistant Secretary and Deputy General Counsel of
Delaware Management Company, Inc.; Senior Vice President, Assistant Secretary and Deputy General Counsel
of Delaware Management Business Trust; Senior Vice President, Assistant Secretary and Deputy General
Counsel of Delaware Investment Advisers (a series of Delaware Management Business Trust); Senior Vice
President, Assistant Secretary and Deputy General Counsel of Delaware Service Company, Inc.; Senior Vice
President, Assistant Secretary and Deputy General Counsel of Delaware Capital Management, Inc.; Senior
Vice President, Assistant Secretary and Deputy General Counsel of Retirement Financial Services, Inc.;
Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware Distributors, Inc.;
Senior Vice President, Assistant Secretary and Deputy General Counsel of Delaware Distributors, L.P.;
Senior Vice President, Assistant Secretary and Deputy General Counsel of Founders Holdings, Inc.; Senior
Vice President, Secretary and Deputy General Counsel of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
James L. Shields Senior Vice President, Chief Information Officer of Delaware Management Company (a series of Delaware
Management Business Trust); Senior Vice President, Chief Information Officer of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Senior Vice President, Chief Information
Officer of Delaware Service Company, Inc.; Senior Vice President, Chief Information Officer of Delaware
Capital Management Company, Inc.; Senior Vice President, Chief Information Officer of Retirement
Financial Services, Inc.; Senior Vice President, Chief Information Officer of Delaware Distributors,
L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher S. Adams Vice President/Business Manager, Equity of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Business Manager, Equity of Delaware Investment Advisers (a series of
Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
Robert L. Arnold Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of Delaware Capital Management, Inc., Vice
President/Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Marshall T. Bassett Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher S. Beck Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
Trustee of New Castle County Pension Board since October 1992, Wilmington DE.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard E. Beister Vice President/Trading Operations of Delaware Management Company (a series of Delaware Management
Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Positions and Offices with Delaware Management Company and its affiliates
Principal Business and other Positions and Offices Held
Address*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Lisa O. Brinkley Vice President/Compliance Director of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Compliance Director of Delaware Management Holdings, Inc.; Vice
President/Compliance Director of DMH Corp.; Vice President/Compliance Director of Delvoy, Inc.; Vice
President/Compliance Director of Delaware Management Company, Inc.; Vice President/Compliance Director
of Delaware Management Business Trust; Vice President/Compliance Director of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Vice President/Compliance Director of
Delaware Service Company, Inc.; Vice President/Compliance Director of Delaware Capital Management, Inc.;
Vice President/Compliance Director of Retirement Financial Services, Inc.; Vice President/Compliance
Director/Assistant Secretary of Delaware Management Business Trust; Vice President/Compliance Director
of Delaware Distributors, Inc.; Vice President/Compliance Director of Delaware Distributors, L.P.; Vice
President/Compliance Director of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
MaryEllen M. Carrozza Vice President/Client Services of Delaware Management Company (a series of Delaware Management Business
Trust); Vice President/Client Services of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Vice President/Client Services of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen R. Cianci Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Mitchell L. Conery Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy G. Connors Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Delaware Capital
Management, Inc.; Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Nancy M. Crouse Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
George E. Deming Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
James P. Dokas Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/ Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Dugan Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Positions and Offices with Delaware Management Company and its affiliates
Principal Business and other Positions and Offices Held
Address*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Joel A. Ettinger(2) Vice President/Taxation of Delaware Management Company (a series of Delaware Management Business Trust);
Vice President/Taxation of Delaware Management Holdings, Inc.; Vice President/Taxation of DMH Corp.;
Vice President/Taxation of Delvoy, Inc.; Vice President/Taxation of Delaware Management Company, Inc.;
Vice President/Taxation of Delaware Management Business Trust; Vice President/Taxation of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice President/Taxation of
Delaware Service Company, Inc.; Vice President/Taxation of Delaware Capital Management, Inc.; Vice
President/Taxation of Retirement Financial Services, Inc.; Vice President/Taxation of Delaware
Distributors, Inc.; Vice President/Taxation of Delaware Distributors, L.P.; Vice President/Taxation of
Founders Holdings, Inc.; Vice President/Taxation of Founders CBO Corporation; Vice President/Taxation of
each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Gerald S. Frey Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
James A. Furgele Vice President/Investment Accounting of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Investment Accounting of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Investment Accounting of Delaware Service Company,
Inc.; Vice President/Investment Accounting of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Stuart M. George Vice President/Equity Trading of Delaware Management Company (a series of Delaware Management Business
Trust); Vice President/Equity Trading of Delaware Investment Advisers (a series of Delaware Management
Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Brian T. Hannon Vice President of Delaware Management Company (a series of Delaware Management Business Trust); Vice
President of Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President/Senior Portfolio Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Heffern Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Elizabeth H. Howell Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey Hynoski Vice President/Analyst of Delaware Management Company (a series of Delaware Management Business
Trust); Vice President/Analyst of Delaware Investment Advisers (a series of Delaware Management Business
Trust); Vice President/Analyst of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Karina J. Ivstan Vice President/Strategic Planning of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Strategic Planning of Delaware Management Holdings, Inc.; Vice
President/Strategic Planning of Delaware Management Business Trust; Senior Vice President, Assistant
Secretary and Deputy General Counsel of Delaware Investment Advisers (a series of Delaware Management
Business Trust); Vice President/Strategic Planning of Delaware Service Company, Inc.; Vice
President/Strategic Planning of Delaware Capital Management, Inc.; Vice President/Strategic Planning of
Retirement Financial Services, Inc.; Vice President/Strategic Planning of Delaware Management Trust
Company; Vice President/Strategic of Delaware Distributors, L.P.; Vice President/Strategic Planning of
each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Audrey E. Kohart Vice President/Assistant Controller/Corporate Accounting of Delaware Management Company (a series of
Delaware Management Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Positions and Offices with Delaware Management Company and its affiliates
Principal Business and other Positions and Offices Held
Address*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Steven T. Lampe Vice President/Research Analyst of Delaware Management Company (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust); Vice President/Portfolio Manager of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Philip Y. Lin Vice President, Assistant Secretary and Associate General Counsel of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President, Assistant Secretary and Associate General
Counsel of Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President, Assistant Secretary and Associate General Counsel of Delaware Service Company, Inc.; Vice
President, Assistant Secretary and Associate General Counsel of Delaware Capital Management, Inc.; Vice
President, Assistant Secretary and Associate General Counsel of Retirement Financial Services, Inc.;
Vice President, Assistant Secretary and Associate General Counsel of Delaware Management Trust Company;
Vice President, Assistant Secretary and Associate General Counsel of Delaware Distributors, L.P.; Vice
President, Assistant Secretary and Associate General Counsel of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael D. Mabry Vice President, Assistant Secretary and Associate General Counsel of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President, Assistant Secretary and Associate General
Counsel of Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President, Assistant Secretary and Associate General Counsel of Delaware Service Company, Inc.; Vice
President, Assistant Secretary and Associate General Counsel of Delaware Capital Management, Inc.; Vice
President, Assistant Secretary and Associate General Counsel of Retirement Financial Services, Inc.;
Vice President, Assistant Secretary and Associate General Counsel of Delaware Distributors, L.P.; Vice
President, Assistant Secretary and Associate General Counsel of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Founders Holdings, Inc.,
President and Director of Founders CBO Corporation; Vice President/Senior Portfolio Manager of each fund
in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew M. McCullagh, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Francis X Morris Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of Founders Holdings, Inc.,
Treasurer, Assistant Secretary and Director of Founders CBO Corporation; Vice President/Senior Portfolio
Manager of each fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert A Norton, Jr. Vice President/Research Analyst of Delaware Management Company (a series of Delaware Management Business
Trust); Vice President/Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
David P. O'Connor Vice President, Assistant Secretary and Associate General Counsel of Delaware Management Company (a
series of Delaware Management Business Trust); Vice President, Assistant Secretary and Associate General
Counsel of Delaware Investment Advisers (a series of Delaware Management Business Trust); Vice
President, Assistant Secretary and Associate General Counsel of Delaware Service Company, Inc.; Vice
President, Assistant Secretary and Associate General Counsel of Delaware Capital Management, Inc.; Vice
President, Assistant Secretary and Associate General Counsel of Retirement Financial Services, Inc.;
Vice President, Assistant Secretary and Associate General Counsel of Delaware Distributors, L.P.; Vice
President, Assistant Secretary and Associate General Counsel of each fund in the Delaware Investments
family.
- ------------------------------------------------------------------------------------------------------------------------------------
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Senior Portfolio Manager of each fund in the
Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Positions and Offices with Delaware Management Company and its affiliates
Principal Business and other Positions and Offices Held
Address*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard Salus Vice President/Assistant Controller of Delaware Management Company (a series of Delaware Management
Business Trust); Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series of
Delaware Management Business Trust); Vice President/Assistant Controller of Delaware Management Trust
Company; Vice President/Assistant Controller of Delaware International Holdings Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard D. Siedel Vice President/Assistant Controller/Manager Payroll of Delaware Management Company (a series of Delaware
Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
Alan R. Stuart Vice President/Trading of Delaware Management Company (a series of Delaware Management Business Trust);
Vice President/Trading of Delaware Investment Advisers (a series of Delaware Management Business Trust).
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and Administration Services of Delaware Management Company (a series of
Delaware Management Business Trust); Vice President/Facilities and Administration Services of Delaware
Investment Advisers (a series of Delaware Management Business Trust); Vice President/Facilities and
Administration Services of Delaware Service Company, Inc.; Vice President/Facilities and Administration
Services of Delaware Distributors, L.P.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas J. Trottman Vice President/Senior Corporate Bond Analyst of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Senior Corporate Bond Analyst of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Senior Corporate Bond Analyst of each
fund in the Delaware Investments family.
- ------------------------------------------------------------------------------------------------------------------------------------
Lori P. Wachs Vice President/Assistant Portfolio Manager of Delaware Management Company (a series of Delaware
Management Business Trust); Vice President/Assistant Portfolio Manager of Delaware Investment Advisers
(a series of Delaware Management Business Trust); Vice President/Assistant Portfolio Manager of each
fund in the Delaware Investments family.
====================================================================================================================================
</TABLE>
- -------------------
* Business Address is 1818 Market Street, Philadelphia, PA 19103.
(1) PRESIDENT AND DIRECTOR, Lincoln Investment Management, Inc. 1987 to present.
(2) TAX PRINCIPAL, Ernst & Young LLP prior to April 1998.
Item 27. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter
for all the mutual funds in the Delaware Investments family.
(b) Information with respect to each director, officer or partner
of principal underwriter:
<TABLE>
<CAPTION>
====================================================================================================================================
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Investment Advisers Limited Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Capital Management, Inc. Limited Partner None
- ------------------------------------------------------------------------------------------------------------------------------------
Bruce D. Barton President and Chief Executive Officer None
- ------------------------------------------------------------------------------------------------------------------------------------
David K. Downes Executive Vice President/Chief Operating President/Chief Executive Officer/Chief
Officer/Chief Financial Officer Operating Officer/Chief Financial
Officer/Director/Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Flannery Executive Vice President/General Counsel Executive Vice President/General Counsel
- ------------------------------------------------------------------------------------------------------------------------------------
Diane M. Anderson Senior Vice President/Retirement None
Operations
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael P. Bishof Senior Vice President/Treasurer/Investment Senior Vice President/Treasurer
Accounting
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel J. Brooks III Senior Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Terrence P. Cunningham Senior Vice President/National Sales None
Director, Financial Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen J. Deangelis Senior Vice President/National Sales, None
Managed Account Services
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph H. Hastings Senior Vice President/Treasurer/Corporate Senior Vice President/Corporate Controller
Controller
- ------------------------------------------------------------------------------------------------------------------------------------
Joanne O. Hutcheson Senior Vice President/Human Resources Senior Vice President/Human Resources
- ------------------------------------------------------------------------------------------------------------------------------------
Bradley L. Kolstoe Senior Vice President/Western Division None
Sales, IPI Channel
- ------------------------------------------------------------------------------------------------------------------------------------
Richelle S. Maestro Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Mac Macaulliffe Senior Vice President/Divisional Sales None
Manager
- ------------------------------------------------------------------------------------------------------------------------------------
J Chris Meyer Senior Vice President/Director, Product None
Management
- ------------------------------------------------------------------------------------------------------------------------------------
Eric E. Miller Senior Vice President/Deputy General Senior Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen C. Nell Senior Vice President/National Retirement None
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
Henry W. Orvin Senior Vice President/Eastern Division None
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher H. Price Senior Vice President/Channel Manager None
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas E. Sawyer Senior Vice President/Director, National None
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
James L. Shields Senior Vice President/Chief Information None
Officer
- ------------------------------------------------------------------------------------------------------------------------------------
Richard P. Allen Vice President/Wholesaler, Midwest None
- ------------------------------------------------------------------------------------------------------------------------------------
David P. Anderson, Jr. Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey H. Arcy Vice President/Wholesaler, South East None
Region
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick A. Bearss Vice President/Wholesaler - Midwest None
- ------------------------------------------------------------------------------------------------------------------------------------
Gabriella Bercze Vice President/Wholesaler, Financial None
Institution
- ------------------------------------------------------------------------------------------------------------------------------------
Denise D. Bradley Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Larry Bridwell Vice President/Financial Institutions None
Wholesaler
- ------------------------------------------------------------------------------------------------------------------------------------
Lisa O. Brinkley Vice President/Compliance Director Vice President/Compliance Director
- ------------------------------------------------------------------------------------------------------------------------------------
Terrance L. Bussard Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Daniel H. Carlson Vice President/Marketing Services None
- ------------------------------------------------------------------------------------------------------------------------------------
Larry Carr Vice President/VA Sales Manager None
- ------------------------------------------------------------------------------------------------------------------------------------
William S. Carroll Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew Coldren Vice President/National Accounts None
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick A Connelly Vice President/RIA Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
Jessie V. Emery Vice President/Marketing Communications None
- ------------------------------------------------------------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
- ------------------------------------------------------------------------------------------------------------------------------------
Susan T. Friestedt Vice President/Retirement Services None
- ------------------------------------------------------------------------------------------------------------------------------------
Douglan R. Glennon Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Darryl S. Grayson Vice President/Director, Internal Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
Rhonda J. Guido Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald A. Haimowitz Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Edward J. Hecker Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Herron Vice President/VA Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Dinah J. Huntoon Vice President/Product Manager, Equities None
- ------------------------------------------------------------------------------------------------------------------------------------
Karina J. Istvan Vice President/Strategic Planning None
- ------------------------------------------------------------------------------------------------------------------------------------
Chirstopher L. Johnston Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Jordan Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Carolyn Kelly Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Richard M. Koerner Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Ellen M. Krott Vice President/Marketing None
- ------------------------------------------------------------------------------------------------------------------------------------
John Leboeuf Vice President/VA Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
SooHee Lee Vice President/Fixed Income & None
International Product Management
- ------------------------------------------------------------------------------------------------------------------------------------
Philip Y. Lin Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
John R. Logan Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Michael D. Mabry Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Thoedore T. Malone Vice President/IPI Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Debbie Marler Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Gregory J. McMillan Vice President/National Accounts None
- ------------------------------------------------------------------------------------------------------------------------------------
Nathan W. Medin Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Scott L. Metzger Vice President/Business Development None
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Roger J. Miller Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Christopher W. Moore Vice President/VA Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew F. Morris Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick L. Murphy Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Scott E. Naughton Vice President/IPI Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Julie Nusbaum Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Julie A. Nye Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel J. O'Brien Vice President/Insurance Products None
- ------------------------------------------------------------------------------------------------------------------------------------
David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph T. Owczarek Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Otis S. Page Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Mark A. Pletts Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Philip G. Rickards Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Laura E. Roman Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Rovert A. Rosso Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Linda D. Shulz Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Gordan E. Searles Vice President/Client Services None
- ------------------------------------------------------------------------------------------------------------------------------------
James R. Searles Vice President/VA Sales Manager None
- ------------------------------------------------------------------------------------------------------------------------------------
Catherine A. Seklecki Vice President/Retirement Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
John C. Shalloe Vice President/Wrap Fee Wholesaler, None
Western Region
- ------------------------------------------------------------------------------------------------------------------------------------
Edward B. Sheridan Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Robert E. Stansbury Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities and None
Administration Services
- ------------------------------------------------------------------------------------------------------------------------------------
Julia R. Vander-Els Vice President/Retirement Plan None
Communications
- ------------------------------------------------------------------------------------------------------------------------------------
Wayne W. Wagner Vice President/Wholesaler None
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Wells Vice President/Marketing Technology None
- ------------------------------------------------------------------------------------------------------------------------------------
Courtney S. West Vice President/Institutional Sales None
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew J. Wittaker Vice President/Wholesaler, Financial None
Institutions
- ------------------------------------------------------------------------------------------------------------------------------------
Theordore V. Wood Vice President/Technical Systems Officer None
====================================================================================================================================
</TABLE>
<PAGE>
- -------------------
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Inapplicable.
Item 28. 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 29. Management Services. None.
Item 30. Undertakings. Inapplicable.
<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 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, Commonwealth of Pennsylvania on this
13th day of September, 1999.
DELAWARE GROUP GOVERNMENT FUND
By /s/David K. Downes
------------------
David K. Downes
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------------------- ------------------------------------------ ----------------------------------------
<S> <C> <C>
/s/ David K. Downes President/Chief Executive Officer September 13, 1999
- --------------------------------------- Chief Operating Officer/Chief Financial
David K. Downes Officer and Trustee (Principal Executive
Officer and Principal Accounting Officer)
/s/ Wayne A. Stork Trustee September 13, 1999
- ---------------------------------------
Wayne A. Stork
/s/ John H. Durham Trustee September 13, 1999
- ---------------------------------------
John H. Durham
/s/ Anthony D. Knerr Trustee September 13, 1999
- ---------------------------------------
Anthony D. Knerr
/s/ Ann R. Leven Trustee September 13, 1999
- ---------------------------------------
Ann R. Leven
/s/ Thomas F. Madison Trustee September 13, 1999
- ---------------------------------------
Thomas F. Madison
/s/ Charles E. Peck Trustee September 13, 1999
- ---------------------------------------
Charles E. Peck
/s/ Walter P. Babich Trustee September 13, 1999
- ---------------------------------------
Walter P. Babichth
/s/ Jan L. Yeomans Trustee September 13, 1999
- ---------------------------------------
Jan L. Yeomans
</TABLE>
*By /s/ David K. Downes
-------------------
David K. Downes
as Attorney-in-Fact for
each of the persons indicated
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
EX-99.J Consent and Report of Auditors
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 22 to the Registration Statement (Form N-1A) (No.
2-97889) of Delaware Group Government Fund, Inc. of our report dated September
6, 1999, included in the 1999 Annual Report to shareholders.
/s/Ernst & Young LLP
---------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
September 27, 1999
<PAGE>
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 (the "Fund") as of July 31,
1999, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods indicated therein.
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 and financial highlights. Our procedures included confirmation of
securities owned as of July 31, 1999, 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,
1999, 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 its financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
---------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
September 6, 1999
