<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-97889
File No. 811-4304
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 21 X
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AND
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 21
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DELAWARE GROUP GOVERNMENT FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-1244
--------------
Richard J. Flannery, Esquire, 1818 Market Street, Philadelphia, PA 19103
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: September 29, 1999
------------------
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
__X__ on September 29, 1999 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>
Pursuant to Rule 414 under the Securities Act of 1933, Delaware Group Government
Fund, as successor issuer of Delaware Group Government Fund, Inc., is filing
this amendment to the registration statement of Delaware Group Government Fund,
Inc. and expressly adopts the registration statement of Delaware Group
Government Fund, Inc. as its own for all purposes of the Securities Act of 1933
and the Investment Company Act of 1940.
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 21 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
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.
1
<PAGE>
Table of contents
Fund profile page 1
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 manager
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
2
<PAGE>
Profile: American Government Bond Fund
What are the Fund's goals?
American Government Bond Fund seeks to provide 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.
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.
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. 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.
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.
o Investors who are looking for an income investment that can provide total
return opportunities through the automatic reinvestment of income
dividends.
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.
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.
3
<PAGE>
How has American Government Bond 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 periods. 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)
- --------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- --------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------- ------------ -----------
- --------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------- ------------ -----------
</TABLE>
The Fund's Class A shares had a 0.00% year-to-date return as of June 30, 1999.
During the periods illustrated in this bar chart, Class A's highest quarterly
return was 00.00% for the quarter ended _________ and its lowest quarterly
return was 00.00% for the quarter ended _________.
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. If this fee were
included, the returns would be less than those shown. The average annual returns
in the table shown on page __ do include the sales charge.
Average annual returns for periods ending 12/31/98
<TABLE>
<CAPTION>
- ------------------ ------------------------ ------------------------ ------------------------ --------------------------
CLASS A B (if redeemed)* C (if redeemed)* Lehman Brothers
(inception 8/1/85) (inception 5/2/94) (inception 11/29/95) Government/
Corporate Bond Index
- ------------------ ------------------------ ------------------------ ------------------------ --------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------ ------------------------ ------------------------ ------------------------ --------------------------
1 year
- ------------------ ------------------------ ------------------------ ------------------------ --------------------------
5 years
- ------------------ ------------------------ ------------------------ ------------------------ --------------------------
10 years or
lifetime**
- ------------------ ------------------------ ------------------------ ------------------------ --------------------------
</TABLE>
The Fund's returns are compared to the performance of the S&P 500 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 00.00% and 00.00%, respectively, for the
one-year and lifetime periods. Returns for Class C would be 00.00% and
00.00%, 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/Corporate Bond Index return shown is
for ten years. The Index returns for Class B and Class C lifetime periods
were 00.00% and 00.00%, respectively. Maximum sales charges are included in
the Fund returns in the table.
4
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------- ----------------------------------------- --------- ------- ------
<S> <C> <C> <C> <C>
What are the Fund's fees and expenses? CLASS A B C
Sales charges are fees paid directly from your investments when ----------------------------------------- --------- ------- ------
you buy or sell shares of the Fund. Maximum sales charge (load) imposed on
purchases as a percentage of offering
price 4.75% none none
----------------------------------------- --------- ------- ------
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)
----------------------------------------- --------- ------- ------
Maximum sales charge (load) imposed on
reinvested dividends none none none
----------------------------------------- --------- ------- ------
Redemption fees none none none
- ----------------------------------------------------------------- ----------------------------------------- --------- ------- ------
- ----------------------------------------------------------------- ----------------------------------------- --------- ------- ------
Annual fund operating expenses are deducted from the Fund's CLASS A B C
assets.
----------------------------------------- --------- ------- ------
Management fees(4) 0.00% 0.00% 0.00%
----------------------------------------- --------- ------- ------
Distribution and service (12b-1) fees(5) 0.00% 0.00% 0.00%
----------------------------------------- --------- ------- ------
Other expenses 0.00% 0.00% 0.00%
----------------------------------------- --------- ------- ------
Total operating expenses 0.00% 0.00% 0.00%
- ----------------------------------------------------------------- ----------------------------------------- --------- ------- ------
- ---------------------------------------------- ------------------ --------- -------------- ------------- -------------- ------------
This example is intended to help you compare CLASS(7) A B B C C
the cost of investing in the Fund to the (if (if
cost of investing in other mutual funds with redeemed) redeemed)
similar investment objectives. We show the ------------------ --------- -------------- ------------- -------------- ------------
cumulative amount of Fund expenses on a 1 year
hypothetical investment of $10,000 with an ------------------ --------- -------------- ------------- -------------- ------------
annual 5% return over the time shown. 6 This 3 years
is an example only, and does not represent ------------------ --------- -------------- ------------- -------------- ------------
future expenses, which may be greater or less 5 years
than those shown here. ------------------ --------- -------------- ------------- -------------- ------------
10 years
- ---------------------------------------------- ------------------ --------- -------------- ------------- -------------- ------------
</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 Delaware Balanced 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.
5
<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.
Investment strategy
We analyze economic and market conditions, seeking to identify the securities or
market sectors that we think are the best investments for a particular fund.
Following are descriptions of how the portfolio managers pursue 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 American Government Bond Fund will typically be
about 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.
6
<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 We may invest without limit in U.S. Treasury securities.
bills, 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 We may invest without limit in the debt securities of U.S. government
backed by U.S. government agencies or agencies or instrumentalities.
government-sponsored 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. governments.
- ------------------------------------------------------- ----------------------------------------------------------------------------
Mortgage-backed securities: Fixed-income securities There is no limit on government-related mortgage-backed securities or on
that represent pools of mortgages, with investors fully collateralized privately issued mortgage-backed
receiving principal and interest payments as the securities.
underlying mortgage loans are paid back. Many are
issued and guaranteed against default by the U.S. We may invest up to 20% of net assets in mortgage-backed securities issued
government or its agencies or instrumentalities, such by private companies only if they are 100% collateralized at the time of
as the Federal Home Loan Mortgage Corporation, Fannie issuance by securities issued or guaranteed by the U.S. government, its
Mae and the Government National Mortgage Association. agencies or instrumentalities. However, these securities must be rated at
Others are issued by private financial institutions, the time of purchase in one of the four highest categories by nationally
with some fully collateralized by certificates issued recognized statistical rating organization such as S&P or Moody's. The
or guaranteed by the U.S. government or its agencies or privately issued securities we invest in are either CMOs or REMICs rated at
instrumentalities. the time of purchase in the two highest grades by an NRSRO (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 We invest only in asset-backed securities rated in the highest quality
accounts receivables, including home equity, category by an NRSRO. In addition, our holdings of asset-backed securities
automobile or credit loans. 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 We may invest in corporate bonds that are rated A or above by an NRSRO. Our
corporation. total holdings of non-government securities, including corporate bonds, may
not exceed 20% of net assets.
- ------------------------------------------------------- ----------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------------------------
Securities How we use them
- ------------------------------------------------------- ----------------------------------------------------------------------------
<S> <C>
Certificates of deposit and obligations of both U.S. We may invest in certificates of deposit from banks that have assets of at
and foreign banks: Interest paying debt instruments least one billion dollars. These securities are subject to our 20% limit on
issued by a bank. non-government securities.
- ------------------------------------------------------- ----------------------------------------------------------------------------
Corporate commercial paper: Short-term debt We may invest in commercial paper that is rated P-1 by Moody's and/or A-1 by
obligations with maturities ranging from 2 to 270 S&P. These securities are subject to our 20% limit on non-government
days, issued by companies. securities.
- ------------------------------------------------------- ----------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, Typically, we use repurchase agreements as a short-term investment for our
such as the Fund, and seller of securities in which cash position. In order to enter into these repurchase agreements, we must
the seller agrees to buy the securities back within a have collateral of at least 100% of the repurchase price.
specified time at the same price the buyer paid for
them, plus an amount 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 At times when we anticipate adverse conditions, we may want to protect gains
or sell a security at an agreed upon price at a on securities without actually selling them. We might use options or futures
future date. The purchaser of an option may or may to neutralize the effect of any price declines, without selling a
bond or not choose to go through with the transaction. bonds or as a hedge against changes in interest rates.
Futures contracts are agreements for the purchase or Use of these strategies can increase the operating costs of the Fund and can
sale of securities at a specified price, on a lead to loss of principal.
specified date. Unlike 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 We may invest in privately placed securities that are eligible for resale
whose resale is restricted under securities law. only among certain institutional buyers without registration. These are
commonly known as 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 We may invest up to 10% of total assets in illiquid securities.
ready 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
8
<PAGE>
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.
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 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 We maintain a long-term investment approach and focus on high quality
majority of the securities in a certain individual bonds that we believe can provide a steady stream of income
market -- like the stock or bond market regardless of interim fluctuations in the bond market. We do buy and
- -- will decline in value because of sell securities for short-term purposes.
factors such as economic conditions,
future expectations or We may hold a substantial part of the Fund's assets in cash or cash
equivalents investor confidence. as a temporary, defensive strategy.
- ---------------------------------------- -----------------------------------------------------------------------------------
Interest rate risk is the risk that Interest rate risk is the most significant risk for this fund. In striving to
securities will decrease in value if manage this risk, we monitor economic conditions and the interest rate
interest rates rise. The risk is environment. We keep the average maturity of the portfolio as short as is
greater for bonds with longer prudent, in keeping with our objective to provide high current income.
maturities than for those with shorter
maturities.
- ---------------------------------------- -----------------------------------------------------------------------------------
Credit risk The possibility that a By focusing primarily on U.S. Treasury securities and other securities that are
bond's issuer (or an entity that backed by the U.S. government, we minimize the possibility that any of the
insures the bond) will be unable to securities in our portfolio will not pay interest or principal. U.S. government
make timely payments of interest and securities are generally considered to be of the highest quality.
principal.
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 U.S. Treasuries and other U.S. government debt securities are typically the most
securities cannot be readily sold liquid securities available. Therefore, liquidity risk is not a significant risk
within seven days at approximately the for this Fund.
price that the Fund has valued them.
- ---------------------------------------- -----------------------------------------------------------------------------------
Prepayment risk is the risk that the Prepayment risk can be a significant risk to this Fund because we may invest a
principal on a bond that the Fund owns large percentage of our holdings in mortgage securities issued by the Government
will be prepaid prior to maturity at a National Mortgage Association. Homeowners or others who have mortgages are more
time when interest rates are lower likely to prepay them when interest rates are relatively low. In order to manage
than what that bond was paying. The this risk, when interest rates are low or when we believe rates will be
Fund would then have to reinvest that declining, we look for mortgage securities that we believe are less likely to be
money at a lower interest rate. prepaid, such as those that have interest rates lower than current rates or have
low remaining loan balances.
- ---------------------------------------- -----------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------- -----------------------------------------------------------------------------------
Risks How we strive to manage them
- ---------------------------------------- -----------------------------------------------------------------------------------
<S> <C>
Futures and options risk is the We will use options and futures for defensive purposes, such as to protect gains
possibility that the Fund may in the portfolio without actually selling a security. We will not use futures and
experience a significant loss if it options for speculative reasons or in an effort to enhance return.
employs an options or futures strategy
related to a security or a market
index and that security or index moves
in the opposite direction from what
the 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>
10
<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
0.00% of average daily net assets for the last fiscal year.
Portfolio manager
Paul A. Grillo, Vice President/Portfolio Manager of the Fund, has had day-to-day
responsibilities for making investment decisions for the Fund since February 21,
1997. Mr. Grillo holds a BA in Business Management from North Carolina State
University and an MBA in Finance from Pace University. Mr. Grillo became
co-manager of the Fund in January 1999. 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.
11
<PAGE>
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
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
1818 Market Street Company, Inc.
Philadelphia, PA 19103 818 Market Street
Philadelphia, PA 19103
Financial advisers
Shareholders
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 or 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
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
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.
12
<PAGE>
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.
13
<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% 4.00%
- --------------------------------------------- ------------------------- --------------------------------- --------------------------
$100,000 but under $250,000 3.75% 3.00%
- --------------------------------------------- ------------------------- --------------------------------- --------------------------
$250,000 but under $500,000 2.50% 2.00%
- --------------------------------------------- ------------------------- --------------------------------- --------------------------
$500,000 but under $1,000,000 2.00% 1.60%
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- -------------------------------------------- -------------------------- -------------------------------- ---------------------------
Sales charge Sales charge Dealer's commission as %
Amount of purchase as % of as % of of
offering price amount invested offering price
- -------------------------------------------- -------------------------- -------------------------------- ---------------------------
$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>
14
<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 0.25%. 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 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.
15
<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
agree to invest a certain amount of Intent and Rights
in Delaware Investment Funds of Accumulation do
(except money market funds with not apply to the
no sales charge) over a 13-month purchase of Class B
period to qualify for reduced and C shares, you
front-end sales charges. can combine your
purchase of Class A
shares with your
purchase of B 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.
- --------------------------------------------- ------------------------------------- -------------- ---------------------------
Reinvestment of Redeemed Shares Up to 12 months after you redeem X Not available.
shares, you can reinvest the
proceeds without paying a
front-end sales charge.
- --------------------------------------------- ------------------------------------- -------------- ---------------------------
SIMPLE IRA, SEP IRA, SARSEP, Prototype These investment plans may X There is no reduction in
Profit Sharing, Pension, 401(k), SIMPLE qualify for reduced sales charges sales charge for Class B
401(k), 403(b)(7), and 457 Retirement by combining the purchases of all or Class C shares for
Plans members of the group. Members of group purchases by
these groups may also qualify to retirement plans.
purchase shares without a
front-end sales charge and a
waiver of any contingent deferred
sales charges.
- --------------------------------------------- ------------------------------------- -------------- ---------------------------
</TABLE>
16
<PAGE>
How to buy shares
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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.
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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.
17
<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 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.
18
<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 $50,000 or
more, 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.
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.
19
<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.
20
<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 similar 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.
21
<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 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.
22
<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 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 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
transactions 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.
23
<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.
24
<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
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 and
distributions-Distributions from net realized gain on investments."
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.
25
<PAGE>
[begin glossary runs along the bottom of the pages ]
How to use this 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.
26
<PAGE>
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
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.
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.
National Association of Securities Dealers (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).
27
<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.
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.
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.
28
<PAGE>
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.
[end glossary]
29
<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
reports, 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]
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: 811-4547
Fund Symbols
CUSIP NASDAQ
Class A 246094205 DEGGX
Class B 246094601 DEGBX
Class C 246094700 DEGCX
DELAWARE
INVESTMENTS
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Philadelphia * London
30
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Delaware American Government Bond 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.
1
<PAGE>
Table of contents
Fund profile page 1
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 manager
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
2
<PAGE>
Profile: American Government Bond Fund
What are the Fund's goals?
American Government Bond Fund seeks to provide 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.
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.
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. 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.
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.
o Investors who are looking for an income investment that can provide total
return opportunities through the automatic reinvestment of income dividends.
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.
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.
3
<PAGE>
How has American Government Bond 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 one, five, and ten years. 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 charges
that apply to Class A shares. However, for those periods, no adjustment has been
made to eliminate the impact of 12b-1 plan payments, and performance may have
been affected had such an adjustment been made. 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 (Institutional Class)
- -----------------------------------------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As of June 30, 1999, the Fund's Institutional Class shares had a year-to-date
return of 0.00%. During the ten years illustrated in this bar chart, the
Institutional Class' highest quarterly return was 0.00% for the quarter ended
___________ and its lowest quarterly return was 0.00% for the quarter ended
____________________.
Average annual returns for periods ending 12/31/98
- ----------------------------------------------------------------------------
Institutional Class Lehman Brothers
Government/Corporate
Bond Index
- ----------------------------------------------------------------------------
1 year 00.00% 00.00%
- ----------------------------------------------------------------------------
5 years 00.00% 00.00%
- ----------------------------------------------------------------------------
10 years 00.00% 00.00%
- ----------------------------------------------------------------------------
The table above shows the Fund's average annual returns compared to the
performance of the Lehman Brothers Government/Corporate Bond Index. You should
remember that unlike the Fund, the index is unmanaged and doesn't reflect the
actual costs of operating a mutual fund, such as the costs of buying, selling,
and holding securities.
4
<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 0.00%
- ----------------------------------------------------------------
Distribution and service (12b-1) fees none
- ----------------------------------------------------------------
Other expenses 0.00%
- ----------------------------------------------------------------
Total operating expenses 0.00%
- ----------------------------------------------------------------
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 $000
- -------------------
3 years $000
- -------------------
5 years $000
- -------------------
10 years $0,000
- -------------------
(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.
5
<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.
Investment strategy
We analyze economic and market conditions, seeking to identify the securities or
market sectors that we think are the best investments for a particular fund.
Following are descriptions of how the portfolio managers pursue 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 American Government Bond Fund will typically be
about 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.
6
<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 We may invest without limit in U.S. Treasury securities.
bills, 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 We may invest without limit in the debt securities of U.S. government
backed by U.S. government agencies or agencies or instrumentalities.
government-sponsored 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. governments.
- -----------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities: Fixed-income securities There is no limit on government-related mortgage-backed securities or on
that represent pools of mortgages, with investors fully collateralized privately issued mortgage-backed securities.
receiving principal and interest payments as the
underlying mortgage loans are paid back. Many are We may invest up to 20% of net assets in mortgage-backed securities issued
issued and guaranteed against default by the U.S. by private companies only if they are 100% collateralized at the time of
government or its agencies or instrumentalities, such issuance by securities issued or guaranteed by the U.S. government, its
as the Federal Home Loan Mortgage Corporation, Fannie agencies or instrumentalities. However, these securities must be rated at
Mae and the Government National Mortgage Association. the time of purchase in one of the four highest categories by nationally
Others are issued by private financial institutions, recognized statistical rating organization such as S&P or Moody's. The
with some fully collateralized by certificates issued privately issued securities we invest in are either CMOs or REMICs rated at
or guaranteed by the U.S. government or its agencies the time of purchase in the two highest grades by an NRSRO (see below).
or instrumentalities.
- -----------------------------------------------------------------------------------------------------------------------------------
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 We invest only in asset-backed securities rated in the highest quality
accounts receivables, including home equity, category by an NRSRO. In addition, our holdings of asset-backed securities
automobile or credit loans. 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 We may invest in corporate bonds that are rated A or above by an NRSRO.
corporation. Our total holdings of non-government securities, including corporate
bonds, may not exceed 20% of net assets.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Securities How we use them
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Certificates of deposit and obligations of both U.S. We may invest in certificates of deposit from banks that have assets of at
and foreign banks: Interest paying debt instruments least one billion dollars. These securities are subject to our 20% limit on
issued by a bank. non-government securities.
- -----------------------------------------------------------------------------------------------------------------------------------
Corporate commercial paper: Short-term debt We may invest in commercial paper that is rated P-1 by Moody's and/or A-1 by
obligations with maturities ranging from 2 to 270 S&P. These securities are subject to our 20% limit on non-government
days, issued by companies. securities.
- -----------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer, Typically, we use repurchase agreements as a short-term investment for our
such as the Fund, and seller of securities in which cash position. In order to enter into these repurchase agreements, we must
the seller agrees to buy the securities back within a have collateral of at least 100% of the repurchase price.
specified time at the same price the buyer paid for
them, plus an amount 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 At times when we anticipate adverse conditions, we may want to protect gains
or sell a security at an agreed upon price at a on securities without actually selling them. We might use options or futures
future date. The purchaser of an option may or may to neutralize the effect of any price declines, without selling a bond or
not choose to go through with the transaction. bonds or as a hedge against changes in interest rates.
Futures contracts are agreements for the purchase or Use of these strategies can increase the operating costs of the Fund and can
sale of securities at a specified price, on a lead to loss of principal.
specified date. Unlike 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 We may invest in privately placed securities that are eligible for resale
whose resale is restricted under securities law. only among certain institutional buyers without registration. These are
commonly known as 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 We may invest up to 10% of total assets in illiquid securities.
ready 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.
8
<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 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 We maintain a long-term investment approach and focus on high quality individual
majority of the securities in a bonds that we believe can provide a steady stream of income regardless of interim
certain market -- like the stock or fluctuations in the bond market. We do buy and sell securities for short-term
bond market -- will decline in value purposes.
because of factors such as economic
conditions, future expectations or We may hold a substantial part of the Fund's assets in cash or cash equivalents
investor confidence. as a temporary, defensive strategy.
- -----------------------------------------------------------------------------------------------------------------------------------
Interest rate risk is the risk that Interest rate risk is the most significant risk for this fund. In striving to
securities will decrease in value if manage this risk, we monitor economic conditions and the interest rate
interest rates rise. The risk is environment. We keep the average maturity of the portfolio as short as is
greater for bonds with longer prudent, in keeping with our objective to provide high current income.
maturities than for those with shorter
maturities.
- -----------------------------------------------------------------------------------------------------------------------------------
Credit risk The possibility that a By focusing primarily on U.S. Treasury securities and other securities that are
bond's issuer (or an entity that backed by the U.S. government, we minimize the possibility that any of the
insures the bond) will be unable to securities in our portfolio will not pay interest or principal. U.S. government
make timely payments of interest and securities are generally considered to be of the highest quality.
principal.
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 U.S. Treasuries and other U.S. government debt securities are typically the most
securities cannot be readily sold liquid securities available. Therefore, liquidity risk is not a significant risk
within seven days at approximately the for this Fund.
price that the Fund has valued
them.
- -----------------------------------------------------------------------------------------------------------------------------------
Prepayment risk is the risk that the Prepayment risk can be a significant risk to this Fund because we may invest a
principal on a bond that the Fund owns large percentage of our holdings in mortgage securities issued by the Government
will be prepaid prior to maturity at a National Mortgage Association. Homeowners or others who have mortgages are more
time when interest rates are lower likely to prepay them when interest rates are relatively low. In order to manage
than what that bond was paying. The this risk, when interest rates are low or when we believe rates will be
Fund would then have to reinvest that declining, we look for mortgage securities that we believe are less likely to be
money at a lower interest rate. prepaid, such as those that have interest rates lower than current rates or have
low remaining loan balances.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Futures and options risk is the We will use options and futures for defensive purposes, such as to protect gains
possibility that the Fund may in the portfolio without actually selling a security. We will not use futures and
experience a significant loss if it options for speculative reasons or in an effort to enhance return.
employs an options or futures strategy
related to a security or a market
index and that security or index moves
in the opposite direction from what
the 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>
10
<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
0.00% of average daily net assets for the last fiscal year.
Portfolio manager
Paul A. Grillo, Vice President/Portfolio Manager of the Fund, has had day-to-day
responsibilities for making investment decisions for the Fund since February 21,
1997. Mr. Grillo holds a BA in Business Management from North Carolina State
University and an MBA in Finance from Pace University. Mr. Grillo became
co-manager of the Fund in January 1999. 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.
11
<PAGE>
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>
<S> <C> <C>
Board of Trustees
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
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 or 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
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
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.
12
<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
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
13
<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.
14
<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 a 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.
15
<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 $50,000 or
more, 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.
16
<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, a 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 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.
17
<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 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
transactions 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.
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.
18
<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
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 and
distributions-Distributions from net realized gain on investments."
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.
19
<PAGE>
[begin glossary runs along the bottom of the pages ]
How to use this 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.
20
<PAGE>
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.
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.
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.
National Association of Securities Dealers (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.
21
<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.
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.
[end glossary]
22
<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
reports, 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]
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: 811-4547
CUSIP NASDAQ
Fund Symbols ----- ------
Institutional Class 246094502 DUGIX
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
23
<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.
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TABLE OF CONTENTS
<TABLE>
<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
</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.
-3-
<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.
-5-
<PAGE>
The average life of pass-through pools varies with the maturities of
the underlying mortgage instruments. In addition, a pool's term may be shortened
by unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates vary widely, it is not possible to accurately predict the
average life of a particular pool. However, statistics indicate that the average
life of the type of mortgages backing the majority of GNMA Certificates is
approximately 12 years. For this reason, it is standard practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year. Pools of mortgages with other maturities or different
characteristics will have varying assumptions for average life. The assumed
average life of pools of mortgages having terms of less than 30 years is less
than 12 years, but typically not less than five years.
The coupon rate of interest of GNMA Certificates is lower than the
interest rate paid on the VA-guaranteed or FHA-insured mortgages underlying the
Certificates, but only by the amount of the fees paid to GNMA and the issuer.
Such fees in the aggregate usually amount to approximately 1/2 of 1%.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life 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).
-6-
<PAGE>
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.
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 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.
-7-
<PAGE>
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.
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.
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
-8-
<PAGE>
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.
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.
-9-
<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.
-10-
<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.
-11-
<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.
-12-
<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 ended 3 years ended 5 years ended 10 years Life of Fund
7/31/99 7/31/99 7/31/99 ended 7/31/99
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A
(at offer)
(Inception 8/16/85)
- -------------------------------------------------------------------------------------------------------------------
Class A
(at NAV)
(Inception 8/16/85)
- -------------------------------------------------------------------------------------------------------------------
Class B
(including CDSC)
(Inception 5/2/94)
- -------------------------------------------------------------------------------------------------------------------
Class B
(excluding CDSC)
(Inception 5/2/94)
- -------------------------------------------------------------------------------------------------------------------
Class C
(including CDSC)
(Inception 11/29/95)
- -------------------------------------------------------------------------------------------------------------------
Class C
(excluding CDSC)
(Inception 11/29/95)
- -------------------------------------------------------------------------------------------------------------------
Institutional Class
(Inception 6/1/92)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
-13-
<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 0.00%, 0.00%,
0.00% and 0.00%, 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
00.0 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.
-14-
<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.
-15-
<PAGE>
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
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.
-16-
<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
(at offer)
(Inception 8/16/85)
- ------------------------------------------------------------------------------------------------------------------------------
Class A
(at NAV)
(Inception 8/16/85)
- ------------------------------------------------------------------------------------------------------------------------------
Class B
(including CDSC)
(Inception 5/2/94)
- ------------------------------------------------------------------------------------------------------------------------------
Class B
(excluding CDSC)
(Inception 5/2/94)
- ------------------------------------------------------------------------------------------------------------------------------
Class C
(including CDSC)
(Inception 11/29/95)
- ------------------------------------------------------------------------------------------------------------------------------
Class C
(excluding CDSC)
(Inception 11/29/95)
- ------------------------------------------------------------------------------------------------------------------------------
Institutional Class
(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.
-17-
<PAGE>
Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. You also should consider your financial ability to
continue to purchase shares during periods of high fund share prices. Delaware
Investments offers three services -- Automatic Investing 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.
-18-
<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.
-19-
<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.
-20-
<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 the National Association of
Securities Dealers, 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 000%, respectively.
-21-
<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.
-22-
<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.
-23-
<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.
-24-
<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.
-25-
<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.
-26-
<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 $000,000, $000,000 and
$00,000, 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 $0 $0 $0
Annual/Semi-Annual Reports 0 0 0
Broker Trails 0 0 0
Broker Sales Charges 0 0 0
Dealer Service Expenses 0 0 0
Interest on Broker Sales Charges 0 0 0
Commissions to Wholesalers 0 0 0
Promotional-Broker Meetings 0 0 0
Promotional-Other 0 0 0
Prospectus Printing 0 0 0
Telephone 0 0 0
Wholesaler Expenses 0 0 0
Other 0 0 0
</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.
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<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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<PAGE>
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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<PAGE>
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 of the Fund (and of Institutional Class
holding shares which were acquired through an exchange from one of the other
mutual funds in Delaware Investments offered with a front-end sales charge) who
redeem such shares of the Fund have one year from the date of redemption to
reinvest all or part of their redemption proceeds in Class A Shares of the Fund
or in Class A Shares of any of the other funds in the Delaware Investments
family, subject to applicable eligibility and minimum purchase requirements, in
states where shares of such other funds may be sold, at net asset value without
the payment of a front-end sales charge. This privilege does not extend to Class
A Shares where the redemption of the shares triggered the payment of a Limited
CDSC. Persons investing redemption proceeds from direct investments in mutual
funds in the Delaware Investments family offered without a front-end sales
charge will be required to pay the applicable sales charge when purchasing Class
A Shares. The reinvestment privilege does not extend to a redemption of Class C
Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Fund's shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) in connection with the features described above.
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<PAGE>
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.
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.
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<PAGE>
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.
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.
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<PAGE>
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)
Decatur Income Fund, (2) Decatur Total Return Fund, (3) Small Cap Value Fund,
(4) Limited-Term Government Fund, (5) Trend Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) 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.
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Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital, and the share
balance may in time be depleted, particularly in a declining market.
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 CDSC for Class A Shares, Class B Shares and Class C Shares redeemed
via a Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or were
acquired through the reinvestment of distributions. The 12% annual limit will be
reset on the date that any Systematic Withdrawal Plan is modified (for example,
a change in the amount selected to be withdrawn or the frequency or date of
withdrawals), based on the balance in the account on that date. See Waiver of
Contingent Deferred Sales 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.
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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; and (viii) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying Class A Shares at Net Asset Value under Purchasing Shares).
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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 all registered owners of the account (in the case of accounts
established under the Uniform Gifts to Minors or Uniform Transfers to Minors
Acts or trust accounts, the waiver applies upon the death of all beneficial
owners) or a total and permanent disability (as defined in Section 72 of the
Code) of all registered owners occurring after the purchase of the shares being
redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from 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 all registered owners of the
account (in the case of accounts established under the Uniform Gifts to Minors
or Uniform Transfers to Minors Acts or trust accounts, the waiver applies upon
the death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.
* * *
In addition, the CDSC will be waived on Class 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.
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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.
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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 $000,000. The Fund had accumulated
capital losses at July 31, 1999 of $00,000,000, which may be carried forward and
applied against future capital gains. The capital loss carry forward expires as
follows: 2001 -- $1,622,896; 2002 -- $17,400,711; 2003 -- $9,205,797; 2004 --
$4,166,601; 2005 -- $2,371,574; and 2006 -- $259,155.
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%.
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<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.
-55-
<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 $47 billion in assets in
the various institutional or separately managed (approximately $00,000,000,000)
and investment company ($00,000,000,000) accounts.
The Investment Management Agreement for the Fund is dated September 29,
1999 and was approved by shareholders on ___________, 1999. 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 $000,000,000.
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 $000,000, 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.
-56-
<PAGE>
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.
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.
-57-
<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 August 31,
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 August 31, 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
its customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
Class C Shares MLPF&S for the sole benefit of
its customers
Attn: Fund Administration
4800 Deer Lake Drive East, 2nd Fl.
Jacksonville, FL 32246-6484
A.G. Peters & Son Inc.
Profit Sharing Trust DTD 12/1/84
1025 North Black Horse Pike
Runnemede, NJ 08078
Mildred K. Robinson
290 Mar Vista Drive
Vista, CA 92083-7642
A.G. Peters & Son Inc.
Cash Management Account
Attn: Diane L. Lansberry
1025 North Black Horse Pike
Runnemede, NJ 08078
</TABLE>
(1) Government Funds, Inc. believes that these shares are held of record for the
benefit of others.
-58-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Institutional Federated Life Insurance Co.
Separate Account A
Attn: Tom Koch
P.O. Box 328
Owatonna, MN 55060-0328
Amalgamated Bank of New York
Cust TWU-NYC Private Bus Lines
Pension Fund
Amivest Corp. Discretionary
Investment Manager
P.O. Box 370 Cooper Station
New York, NY 10276
Amalgamated Bank of New York
Cust Local 917 Pension Fund
Amivest Corp. Discretionary
Fund Manager
11-15 Union Square
New York, NY 10003
</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.
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.
-59-
<PAGE>
*Wayne A. Stork (61) 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.
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.
- ----------------------
* Trustee affiliated with Government Fund's investment manager and
considered an "interested person" as defined in the 1940 Act.
-60-
<PAGE>
*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.
- ----------------------
* Trustee affiliated with Government Fund's investment manager and
considered an "interested person" as defined in the 1940 Act.
-61-
<PAGE>
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.
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.
-62-
<PAGE>
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.
-63-
<PAGE>
John H. Durham (61) Trustee and/or Director of Government Fund and 18
other investment companies in the Delaware
Investments family Partner, Complete Care Services
120 Gibraltar Road, Horsham, PA 19044
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.
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.
-64-
<PAGE>
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.
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 the Board of
Communications Holdings, Inc. since 1996. From
February to September 1994, Mr. Madison served as
Vice Chairman--Office of the CEO of The Minnesota
Mutual Life Insurance Company and from 1988 to 1993,
he was President of U.S. WEST
Communications--Markets.
-65-
<PAGE>
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.
Jan L. Yeomans (50) 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.
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.
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.
-66-
<PAGE>
Michael P. Bishof (36) 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.
Paul Grillo (38) 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.
-67-
<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 Fund, Inc. Inc. Expenses Retirement(1) in Delaware
<S> <C> <C> <C> <C>
John Durham $000 None $31,180 $00,000
W. Thacher Longstreth(3) $0,000 None $38,500 $00,000
Ann R. Leven $0,000 None $38,500 $00,000
Walter P. Babich $0,000 None $38,500 $00,000
Anthony D. Knerr $0,000 None $38,500 $00,000
Thomas F. Madison $0,000 None $38,500 $00,000
Charles E. Peck $0,000 None $38,500 $00,000
Jan L. Yeomans(3) $000 None $38,000 $00,000
</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 director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,000 for serving as a director
or trustee 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 director or trustee
for 19 investment companies in Delaware Investments, plus $1,810 for each
Board Meeting attended. Ann R. Leven, Thomas F. Madison, and Anthony D.
Knerr serve on the Fund's audit committee; Ms. Leven is the chairperson.
Members of the audit committee currently receive additional annual
compensation of $5,000 from all investment companies, in the aggregate,
with the exception of the chairperson, who receives $6,000.
(3) W. Thacher Longstreth retired from the Board of Government Fund on
___________, 1999. Jan L. Yeomans joined the Board of Government Fund on
_____________,1999.
-68-
<PAGE>
GENERAL INFORMATION
Government Fund was originally organized as a Maryland corporation in
1985 and reorganized as a Delaware Business Trust on September ___, 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>
July 31, 1999 $ $ $
July 31, 1998 190,148 157,506 32,642
July 31, 1997 144,773 120,230 24,543
</TABLE>
-69-
<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:
- ----------------------------------------------------------------------
Fiscal Year Class A Class B Class C
- ----------------------------------------------------------------------
7/31/99 $ $ $
- ----------------------------------------------------------------------
7/31/98 1,015 73,001 519
- ----------------------------------------------------------------------
7/31/97 448 39,019 440
- ----------------------------------------------------------------------
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.
-70-
<PAGE>
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.
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 Assets and Liabilities, 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>
July 28, 1999 5:49PM
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.
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<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
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<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
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A CLASS
B CLASS
C CLASS
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INSTITUTIONAL CLASS
- ------------------------------
DELAWARE GROUP GOVERNMENT FUND
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PART B
STATEMENT OF
ADDITIONAL INFORMATION
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SEPTEMBER 29, 1998
Delaware(SM)
Investments
<PAGE>
PART C
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Other Information
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Item 23. Exhibits
(a) Agreement and Declaration of Trust.
(1) Agreement and Declaration of Trust (December 17, 1998) attached
as Exhibit.
(2) Certificate of Trust (December 17, 1998) attached as Exhibit.
(b) By-Laws. By-Laws (December 17, 1998) attached as Exhibit.
(c) Copies of All Instruments Defining the Rights of Holders.
(1) Agreement and Declaration of Trust. Articles III, V and VI of
Agreement and Declaration of Trust attached as Exhibit (a)(1).
(2) By-Laws. Article II of By-Laws attached as Exhibit (b).
(d) Investment Management Agreement.
(1) Form of Investment Management Agreement (September 1999)
between Delaware Management Company and the Registrant attached
as Exhibit.
(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.
(d) 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.
(a) 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.
(b) 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) Form of Shareholders Services 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.
(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. Attached as Exhibit.
(j) Consent and Report of Auditors. To be filed by Amendment.
(k-l) Inapplicable.
(m) Plans under Rule 12b-1.
(1) Form of 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) Form of 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) Form of 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. Attached as Exhibit.
<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant. None.
Item 25. Indemnification. Article VI of the By-Laws attached as Exhibit (b).
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 Group (Delaware Group Equity Funds I, Inc., Delaware Investments family
(Delaware Group Equity Funds I, Inc., Delaware Group Equity Funds II, Inc.,
Delaware Group Equity Funds III, Inc., Delaware Group Equity Funds IV, Inc.,
Delaware Group Equity Funds V, Inc., Delaware Group Government Fund, Inc.,
Delaware Group Income Funds, Inc., Delaware Group Limited-Term Government Funds,
Inc., Delaware Group Tax-Free Fund, Inc., Delaware Group State Tax-Free Income
Trust, Delaware Group Tax-Free Money Fund, Inc., Delaware Group Premium Fund,
Inc., Delaware Group Global & International Funds, Inc., Delaware Pooled Trust,
Inc., Delaware Group Adviser Funds, Inc., Delaware Group 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 Investment Trust II, Voyageur Mutual Funds,
Inc., Voyageur Mutual Funds II, Inc., Voyageur Mutual Funds III, Inc., Voyageur
Arizona Municipal Income Fund, Inc., Voyageur Colorado Insured Municipal Income
Fund, Inc., Voyageur Florida Insured Municipal Income Fund, Voyageur Minnesota
Municipal Fund, Inc., Voyageur Minnesota Municipal Fund II, Inc. and Voyageur
Minnesota Municipal Fund III, Inc.). In addition, certain 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>
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Name and Positions and Offices with Delaware Management Company and its affiliates
Principal Business and other Positions and Offices Held
Address*
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<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
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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.
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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Name and Positions and Offices with Delaware Management Company and its affiliates
Principal Business and other Positions and Offices Held
Address*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
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
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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
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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.
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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.
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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.
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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.
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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)
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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Name and Positions and Offices with Delaware Management Company and its affiliates
Principal Business and other Positions and Offices Held
Address*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
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
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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.
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
</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>
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(1) 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(2) 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.
- ------------------------------------------------------------------------------------------------------------------------------------
</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 E. Beister Vice President/Trading Operations of Delaware Management Company (a series of Delaware Management
Business Trust)
- ------------------------------------------------------------------------------------------------------------------------------------
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(3) 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.
- ------------------------------------------------------------------------------------------------------------------------------------
</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>
James P. Dokas(4) 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.
- ------------------------------------------------------------------------------------------------------------------------------------
Joel A. Ettinger(5) 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.
- ------------------------------------------------------------------------------------------------------------------------------------
</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>
John A. Heffern(6) 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(7) 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)
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
</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>
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. Vice President/Senior Portfolio Manager of Delaware Management Company (a series of Delaware
McCullagh, Jr(8) 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.
- ------------------------------------------------------------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------------------------------------------------------------
</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 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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
(1) VICE PRESIDENT, Morgan Stanley Asset Management prior to March 1997.
(2) SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
(3) INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
(4) DIRECTOR OF TRUST INVESTMENTS, Bell Atlantic Corporation prior to February 1997.
(5) TAX PRINCIPAL, Ernst & Young LLP prior to April 1998.
(6) SENIOR VICE PRESIDENT, EQUITY RESEARCH, NatWest Securities Corporation prior to March 1997.
(7) SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May 1997.
(8) SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset Management LLC prior to May 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 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
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- ------------------------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions and Offices with Positions and Offices with
Address* Underwriter Registrant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
(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.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
(d) Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
this City of Philadelphia, Commonwealth of Pennsylvania on this 20th day of
July, 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/ July 20, 1999
- ---------------------------------- Chief Operating Officer/Chief Financial
David K. Downes Officer (Principal Executive Officer,
Principal Financial Officer and Principal
Accounting Officer) and Trustee
/s/Wayne A. Stork Trustee July 20, 1999
- ----------------------------------
Wayne A. Stork
/s/John H. Durham Trustee July 20, 1999
- ----------------------------------
John H. Durham
/s/ Anthony D. Knerr Trustee July 20, 1999
- ----------------------------------
Anthony D. Knerr
/s/ Ann R. Leven Trustee July 20, 1999
- ----------------------------------
Ann R. Leven
/s/Thomas F. Madison Trustee July 20, 1999
- ----------------------------------
Thomas F. Madison
/s/Charles E. Peck Trustee July 20, 1999
- ----------------------------------
Charles E. Peck
/s/Walter P. Babich Trustee July 20, 1999
- ----------------------------------
Walter P. Babich
/s/Jan L. Yeomans Trustee July 20, 1999
- ----------------------------------
Jan L. Yeomans
</TABLE>
*By /s/Wayne A. Stork
--------------------
Wayne A. Stork
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.A1 Agreement and Declaration of Trust
EX-99.A2 Certificate of Trust
EX-99.B By-Laws
EX-99.D1 Form of Investment Management Agreement (September 1999) between
Delaware Management Company and the Registrant
EX-99.I Opinion of Counsel
EX-99.O Powers of Attorney
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
of
DELAWARE GROUP GOVERNMENT FUND
a Delaware Business Trust
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. Name and Definitions...............................................1
Section 1. Name...........................................................1
Section 2. Registered Agent and Registered Office; Principal Place of
Business.......................................................2
(a) Registered Agent and Registered Office.....................2
(b) Principal Place of Business................................2
Section 3. Definitions....................................................2
(a) "1940 Act".................................................2
(b) "Affiliate"................................................2
(c) "Board of Trustees"........................................2
(d) "By-Laws"..................................................2
(e) "Certificate of Trust".....................................2
(f) "Code".....................................................2
(g) "Commission"...............................................2
(h) "DBTA".....................................................3
(i) "Declaration of Trust".....................................3
(j) "General Liabilities"......................................3
(k) "Interested Person"........................................3
(l) "Investment Adviser" or "Adviser"..........................3
(m) "National Financial Emergency".............................3
(n) "Person"...................................................3
(o) "Principal Underwriter"....................................3
(p) "Series"...................................................3
(q) "Shares"...................................................3
(r) "Shareholder"..............................................3
(s) "Trust"....................................................4
(t) "Trust Property"...........................................4
(u) "Trustee" or "Trustees"....................................4
ARTICLE II. Purpose of Trust..................................................4
ARTICLE III. Shares...........................................................8
Section 1. Division of Beneficial Interest................................8
Section 2. Ownership of Shares............................................9
Section 3. Investments in the Trust.......................................9
Section 4. Status of Shares and Limitation of Personal Liability.........10
<PAGE>
Section 5. Power of Board of Trustees to Change Provisions Relating
to Shares.....................................................10
Section 6. Establishment and Designation of Series.......................11
(a) Assets Held with Respect to a Particular Series...........11
(b) Liabilities Held with Respect to a Particular Series......12
(c) Dividends, Distributions, Redemptions and Repurchases.....13
(d) Voting....................................................13
(e) Equality..................................................13
(f) Fractions.................................................14
(g) Exchange Privilege........................................14
(h) Combination of Series.....................................14
(i) Elimination of Series.....................................14
Section 7. Indemnification of Shareholders...............................14
ARTICLE IV....................................................................15
The Board of Trustees.........................................................15
Section 1. Number, Election and Tenure...................................15
Section 2. Effect of Death, Resignation, Removal, etc. of a Trustee......15
Section 3. Powers........................................................16
Section 4. Payment of Expenses by the Trust..............................17
Section 5. Payment of Expenses by Shareholders...........................18
Section 6. Ownership of Trust Property...................................18
Section 7. Service Contracts.............................................18
ARTICLE V. Shareholders' Voting Powers and Meetings..........................20
Section 1. Voting Powers.................................................20
Section 2. Meetings......................................................20
Section 3. Quorum and Required Vote......................................21
Section 4. Shareholder Action by Written Consent without a Meeting.......21
Section 5. Record Dates..................................................21
Section 6. Additional Provisions.........................................22
ARTICLE VI. Net Asset Value, Distributions and Redemptions...................22
Section 1. Determination of Net Asset Value, Net Income and
Distributions.................................................22
Section 2. Redemptions at the Option of a Shareholder....................23
Section 3. Redemptions at the Option of the Trust........................24
<PAGE>
ARTICLE VII. Compensation and Limitation of Liability of Officers
and Trustees..............................................................24
Section 1. Compensation..................................................24
Section 2. Indemnification and Limitation of Liability...................25
Section 3. Officers and Trustees' Good Faith Action, Expert Advice,
No Bond or Surety.............................................25
Section 4. Insurance.....................................................26
ARTICLE VIII. Miscellaneous..................................................26
Section 1. Liability of Third Persons Dealing with Trustees..............26
Section 2. Dissolution of Trust or Series................................26
Section 3. Merger and Consolidation; Conversion..........................27
(a) Merger and Consolidation..................................27
(b) Conversion................................................27
Section 4. Reorganization................................................28
Section 5. Amendments....................................................29
Section 6. Filing of Copies, References, Headings........................29
Section 7. Applicable Law................................................29
Section 8. Provisions in Conflict with Law or Regulations................30
Section 9. Business Trust Only...........................................30
Section 10. Use of the Names "Delaware Group" and "Delaware
Investments"..................................................30
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
DELAWARE GROUP GOVERNMENT FUND
AGREEMENT AND DECLARATION OF TRUST made as of this 17th day of
December, 1998, by the Trustees hereunder, and by the holders of shares of
beneficial interest to be issued hereunder as hereinafter provided. This
Declaration of Trust shall be effective upon the filing of the Certificate of
Trust in the office of the Secretary of State of the State of Delaware.
W I T N E S S E T H:
WHEREAS this Trust has been formed to carry on the business of an
investment company; and
WHEREAS this Trust is authorized to issue its shares of beneficial
interest in separate Series, and to issue classes of Shares of any Series or
divide Shares of any Series into two or more classes, all in accordance with the
provisions hereinafter set forth; and
WHEREAS the Trustees have agreed to manage all property coming into
their hands as trustees of a Delaware business trust in accordance with the
provisions of the Delaware Business Trust Act (12 Del. C. ss.3801, et seq.), as
from time to time amended and including any successor statute of similar import
(the "DBTA"), and the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all
cash, securities and other assets which they may from time to time acquire in
any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the holders from time to
time of shares of beneficial interest in this Trust and the Series created
hereunder as hereinafter set forth.
ARTICLE I.
Name and Definitions
Section 1. Name. This trust shall be known as "Delaware Group
Government Fund" and the Trustees shall conduct the business of the Trust under
that name, or any other name as they may from time to time determine.
<PAGE>
Section 2. Registered Agent and Registered Office; Principal Place of
Business.
(a) Registered Agent and Registered Office. The name of the registered
agent of the Trust and the address of the registered office of the Trust are as
set forth on the Certificate of Trust.
(b) Principal Place of Business. The principal place of business of the
Trust is One Commerce Square, Philadelphia, Pennsylvania, 19103 or such other
location within or outside of the State of Delaware as the Board of Trustees may
determine from time to time.
Section 3. Definitions. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) "1940 Act" shall mean the Investment Company Act of 1940 and the
rules and regulations thereunder, all as adopted or amended from time to time;
(b) "Affiliate" shall have the meaning given to it in Section 2(a)(3)
of the 1940 Act when used with reference to a specified Person.
(c) "Board of Trustees" shall mean the governing body of the Trust,
which is comprised of the Trustees of the Trust;
(d) "By-Laws" shall mean the By-Laws of the Trust, as amended from time
to time in accordance with Article X of the By-Laws, and incorporated herein by
reference;
(e) "Certificate of Trust" shall mean the certificate of trust filed
with the Office of the Secretary of State of the State of Delaware as required
under the DBTA to form the Trust;
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder;
(g) "Commission" shall have the meaning given it in Section 2(a)(7) of
the 1940 Act;
2
<PAGE>
(h) "DBTA" shall mean the Delaware Business Trust Act, (12 Del. C.
ss.3801, et seq.), as amended from time to time;
(i) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust, as amended or restated from time to time;
(j) "General Liabilities" shall have the meaning given it in Article
III, Section 6(b) of this Declaration Trust;
(k) "Interested Person" shall have the meaning given it in Section
2(a)(19) of the 1940 Act;
(l) "Investment Adviser" or "Adviser" shall mean a party furnishing
services to the Trust pursuant to any contract described in Article IV, Section
7(a) hereof;
(m) "National Financial Emergency" shall mean the whole or any part of
any period set forth in Section 22(e) of the 1940 Act. The Board of Trustees
may, in its discretion, declare that the suspension relating to a national
financial emergency shall terminate, as the case may be, on the first business
day on which the New York Stock Exchange shall have reopened or the period
specified in Section 22(e) of the 1940 Act shall have expired (as to which, in
the absence of an official ruling by the Commission, the determination of the
Board of Trustees shall be conclusive);
(n) "Person" shall include a natural person, partnership, limited
partnership, trust, estate, association, corporation, custodian, nominee or any
other individual or entity in its own or any representative capacity;
(o) "Principal Underwriter" shall have the meaning given to it in
Section 2(a)(29) of the 1940 Act;
(p) "Series" shall refer to each Series of Shares established and
designated under or in accordance with the provisions of Article III and shall
mean an entity such as that described in Section 18(f)(2) of the 1940 Act, and
subject to Rule 18f-2 thereunder;
(q) "Shares" shall mean the outstanding shares of beneficial interest
into which the beneficial interest in the Trust shall be divided from time to
time, and shall include fractional and whole shares;
(r) "Shareholder" shall mean a record owner of Shares;
3
<PAGE>
(s) "Trust" shall refer to the Delaware business trust established by
this Declaration of Trust, as amended from time to time;
(t) "Trust Property" shall mean any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or one or more of any Series, including, without limitation, the rights
referenced in Article VIII, Section 2 hereof;
(u) "Trustee" or "Trustees" shall refer to each signatory to this
Declaration of Trust as a trustee, so long as such signatory continues in office
in accordance with the terms hereof, and all other Persons who may, from time to
time, be duly elected or appointed, qualified and serving on the Board of
Trustees in accordance with the provisions hereof. Reference herein to a Trustee
or the Trustees shall refer to such Person or Persons in their capacity as
trustees hereunder.
ARTICLE II.
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of a registered management investment company registered under the 1940
Act through one or more Series investing primarily in securities and, in
addition to any authority given by law, to exercise all of the powers and to do
any and all of the things as fully and to the same extent as any private
corporation organized for profit under the general corporation law of the State
of Delaware, now or hereafter in force, including, without limitation, the
following powers:
(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
pledge, sell, assign, mortgage, transfer, exchange, distribute, write options
on, lend or otherwise deal in or dispose of contracts for the future acquisition
or delivery of fixed income or other securities, and securities or property of
every nature and kind, including, without limitation, all types of bonds,
debentures, stocks, preferred stocks, negotiable or non-negotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or indebtedness,
commercial paper, repurchase agreements, bankers' acceptances, and other
securities of any kind, issued, created, guaranteed, or sponsored by any and all
Persons, including, without limitation, states, territories, and possessions of
the United States and the District of Columbia and any political subdivision,
agency, or instrumentality thereof, any foreign government or any political
subdivision of the U.S. Government or any foreign government, or any
international instrumentality, or by any bank or savings institution, or by any
4
<PAGE>
corporation or organization organized under the laws of the United States or of
any state, territory, or possession thereof, or by any corporation or
organization organized under any foreign law, or in "when issued" contracts for
any such securities, to change the investments of the assets of the Trust;
(b) To exercise any and all rights, powers and privileges with
reference to or incident to ownership or interest, use and enjoyment of any of
such securities and other instruments or property of every kind and description,
including, but without limitation, the right, power and privilege to own, vote,
hold, purchase, sell, negotiate, assign, exchange, lend, transfer, mortgage,
hypothecate, lease, pledge or write options with respect to or otherwise deal
with, dispose of, use, exercise or enjoy any rights, title, interest, powers or
privileges under or with reference to any of such securities and other
instruments or property, the right to consent and otherwise act with respect
thereto, with power to designate one or more Persons, to exercise any of said
rights, powers, and privileges in respect of any of said instruments, and to do
any and all acts and things for the preservation, protection, improvement and
enhancement in value of any of such securities and other instruments or
property;
(c) To sell, exchange, lend, pledge, mortgage, hypothecate, lease or
write options with respect to or otherwise deal in any property rights relating
to any or all of the assets of the Trust or any Series, subject to any
requirements of the 1940 Act;
(d) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(e) To exercise powers and right of subscription or otherwise which in
any manner arise out of ownership of securities;
(f) To hold any security or property in a form not indicating that it
is trust property, whether in bearer, unregistered or other negotiable form, or
in its own name or in the name of a custodian or subcustodian or a nominee or
nominees or otherwise or to authorize the custodian or a subcustodian or a
nominee or nominees to deposit the same in a securities depository, subject in
each case to proper safeguards according to the usual practice of investment
companies or any rules or regulations applicable thereto;
(g) To consent to, or participate in, any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
5
<PAGE>
(h) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;
(i) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to
claims for taxes;
(j) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust Property such
insurance as the Trustees may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, Investment Advisers, Principal Underwriters, or
independent contractors of the Trust, individually against all claims and
liabilities of every nature arising by reason of holding Shares, holding, being
or having held any such office or position, or by reason of any action alleged
to have been taken or omitted by any such Person as Trustee, officer, employee,
agent, Investment Adviser, Principal Underwriter, or independent contractor, to
the fullest extent permitted by this Declaration of Trust, the Bylaws and by
applicable law; and
(m) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust.
6
<PAGE>
(n) To purchase or otherwise acquire, own, hold, sell, negotiate,
exchange, assign, transfer, mortgage, pledge or otherwise deal with, dispose of,
use, exercise or enjoy, property of all kinds.
(o) To buy, sell, mortgage, encumber, hold, own, exchange, rent or
otherwise acquire and dispose of, and to develop, improve, manage, subdivide,
and generally to deal and trade in real property, improved and unimproved, and
wheresoever situated; and to build, erect, construct, alter and maintain
buildings, structures, and other improvements on real property.
(p) To borrow or raise moneys for any of the purposes of the Trust, and
to mortgage or pledge the whole or any part of the property and franchises of
the Trust, real, personal, and mixed, tangible or intangible, and wheresoever
situated.
(q) To enter into, make and perform contracts and undertakings of every
kind for any lawful purpose, without limit as to amount.
(r) To issue, purchase, sell and transfer, reacquire, hold, trade and
deal in Shares, bonds, debentures and other securities, instruments or other
property of the Trust, from time to time, to such extent as the Board of
Trustees shall, consistent with the provisions of this Declaration of Trust,
determine; and to repurchase, re-acquire and redeem, from time to time, its
Shares or, if any, its bonds, debentures and other securities.
The Trust shall not be limited to investing in obligations maturing
before the possible dissolution of the Trust or one or more of its Series. The
Trust shall not in any way be bound or limited by any present or future law or
custom in regard to investment by fiduciaries. Neither the Trust nor the
Trustees shall be required to obtain any court order to deal with any assets of
the Trust or take any other action hereunder.
The foregoing clauses shall each be construed as purposes, objects and
powers, and it is hereby expressly provided that the foregoing enumeration of
specific purposes, objects and powers shall not be held to limit or restrict in
any manner the powers of the Trust, and that they are in furtherance of, and in
addition to, and not in limitation of, the general powers conferred upon the
Trust by the DBTA and the other laws of the State of Delaware or otherwise; nor
shall the enumeration of one thing be deemed to exclude another, although it be
of like nature, not expressed.
7
<PAGE>
ARTICLE III.
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into Shares, all without par value. The
number of Shares authorized hereunder is unlimited. The Board of Trustees may
authorize the division of Shares into separate and distinct Series and the
division of any Series into separate classes of Shares. The different Series and
classes shall be established and designated, and the variations in the relative
rights and preferences as between the different Series and classes shall be
fixed and determined by the Board of Trustees without the requirement of
Shareholder approval. If no separate Series or classes shall be established, the
Shares shall have the rights and preferences provided for herein and in Article
III, Section 6 hereof to the extent relevant and not otherwise provided for
herein, and all references to Series and classes shall be construed (as the
context may require) to refer to the Trust. The fact that a Series shall have
initially been established and designated without any specific establishment or
designation of classes (i.e., that all Shares of such Series are initially of a
single class) shall not limit the authority of the Board of Trustees to
establish and designate separate classes of said Series. The fact that a Series
shall have more than one established and designated class, shall not limit the
authority of the Board of Trustees to establish and designate additional classes
of said Series, or to establish and designate separate classes of the previously
established and designated classes.
The Board of Trustees shall have the power to issue Shares of the
Trust, or any Series or class thereof, from time to time for such consideration
(but not less than the net asset value thereof) and in such form as may be fixed
from time to time pursuant to the direction of the Board of Trustees.
The Board of Trustees may hold as treasury shares, reissue for such
consideration and on such terms as they may determine, or cancel, at their
discretion from time to time, any Shares of any Series reacquired by the Trust.
The Board of Trustees may classify or reclassify any unissued Shares or any
Shares previously issued and reacquired of any Series or class into one or more
Series or classes that may be established and designated from time to time.
Notwithstanding the foregoing, the Trust and any Series thereof may acquire,
hold, sell and otherwise deal in, for purposes of investment or otherwise, the
Shares of any other Series of the Trust or Shares of the Trust, and such Shares
shall not be deemed treasury shares or cancelled.
8
<PAGE>
Subject to the provisions of Section 6 of this Article III, each Share
shall have voting rights as provided in Article V hereof, and the Shareholders
of any Series shall be entitled to receive dividends and distributions, when, if
and as declared with respect thereto in the manner provided in Article IV,
Section 3 hereof. No Share shall have any priority or preference over any other
Share of the same Series or class with respect to dividends or distributions
paid in the ordinary course of business or distributions upon dissolution of the
Trust or of such Series or class made pursuant to Article VIII, Section 2
hereof. All dividends and distributions shall be made ratably among all
Shareholders of a particular class of Series from the Trust Property held with
respect to such Series according to the number of Shares of such class of such
Series held of record by such Shareholders on the record date for any dividend
or distribution. Shareholders shall have no preemptive or other right to
subscribe to new or additional Shares or other securities issued by the Trust or
any Series. The Trustees may from time to time divide or combine the Shares of
any particular Series into a greater or lesser number of Shares of that Series.
Such division or combination may not materially change the proportionate
beneficial interests of the Shares of that Series in the Trust Property held
with respect to that Series or materially affect the rights of Shares of any
other Series.
Any Trustee, officer or other agent of the Trust, and any organization
in which any such Person is interested, may acquire, own, hold and dispose of
Shares of the Trust to the same extent as if such Person were not a Trustee,
officer or other agent of the Trust; and the Trust may issue and sell or cause
to be issued and sold and may purchase Shares from any such Person or any such
organization subject only to the general limitations, restrictions or other
provisions applicable to the sale or purchase of such Shares generally.
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust kept by the Trust or by a transfer or similar
agent for the Trust, which books shall be maintained separately for the Shares
of each Series and class thereof that has been established and designated. No
certificates certifying the ownership of Shares shall be issued except as the
Board of Trustees may otherwise determine from time to time. The Board of
Trustees may make such rules not inconsistent with the provisions of the 1940
Act as they consider appropriate for the issuance of Share certificates, the
transfer of Shares of each Series or class and similar matters. The record books
of the Trust as kept by the Trust or any transfer or similar agent, as the case
may be, shall be conclusive as to who are the Shareholders of each Series or
class thereof and as to the number of Shares of each Series or class thereof
held from time to time by each such Shareholder.
9
<PAGE>
Section 3. Investments in the Trust. Investments may be accepted by the
Trust from such Persons, at such times, on such terms, and for such
consideration as the Board of Trustees may, from time to time, authorize. Each
investment shall be credited to the individual Shareholder's account in the form
of full and fractional Shares of the Trust, in such Series or class as the
purchaser may select, at the net asset value per Share next determined for such
Series or class after receipt of the investment; provided, however, that the
Principal Underwriter may, in its sole discretion, impose a sales charge upon
investments in the Trust.
Section 4. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving to Shareholders only the
rights provided in this Declaration of Trust and under applicable law. Every
Shareholder by virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms hereof and to have become a party
hereto. The death of a Shareholder during the existence of the Trust shall not
operate to dissolve the Trust or any Series, nor entitle the representative of
any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees or any Series, but entitles such
representative only to the rights of said deceased Shareholder under this
Declaration of Trust. Ownership of Shares shall not entitle the Shareholder to
any title in or to the whole or any part of the Trust Property or right to call
for a partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders as partners. Neither the Trust
nor the Trustees, nor any officer, employee or agent of the Trust, shall have
any power to bind personally any Shareholder, nor, except as specifically
provided herein, to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at any
time personally agree to pay. All Shares when issued on the terms determined by
the Board of Trustees, shall be fully paid and nonassessable. As provided in the
DBTA, Shareholders of the Trust shall be entitled to the same limitation of
personal liability extended to stockholders of a private corporation organized
for profit under the general corporation law of the State of Delaware.
Section 5. Power of Board of Trustees to Change Provisions Relating to
Shares. Notwithstanding any other provisions of this Declaration of Trust and
without limiting the power of the Board of Trustees to amend this Declaration of
Trust or the Certificate of Trust as provided elsewhere herein, the Board of
Trustees shall have the power to amend this Declaration of Trust, or the
Certificate of Trust, at any time and from time to time, in such manner as the
Board of Trustees may determine in its sole discretion, without the need for
Shareholder action, so as to add to, delete, replace or otherwise modify any
provisions relating to the Shares contained in this Declaration of Trust,
provided that before adopting any such amendment without Shareholder approval,
the Board of Trustees shall determine that it is consistent with the fair and
equitable treatment of all Shareholders and that Shareholder approval is not
10
<PAGE>
otherwise required by the 1940 Act or other applicable law. If Shares have been
issued, Shareholder approval shall be required to adopt any amendments to this
Declaration of Trust which would adversely affect to a material degree the
rights and preferences of the Shares of any Series or class already issued;
provided, however, that in the event that the Board of Trustees determines that
the Trust shall no longer be operated as an investment company in accordance
with the provisions of the 1940 Act, the Board of Trustees may adopt such
amendments to this Declaration of Trust to delete those terms the Board of
Trustees identifies as being required by the 1940 Act.
Subject to the foregoing Paragraph, the Board of Trustees may amend the
Declaration of Trust to amend any of the provisions set forth in paragraphs (a)
through (i) of Section 6 of this Article III.
The Board of Trustees shall have the power, in its discretion, to make
such elections as to the tax status of the Trust as may be permitted or required
under the Code as presently in effect or as amended, without the vote of any
Shareholder.
Section 6. Establishment and Designation of Series. The establishment
and designation of any Series or class of Shares shall be effective upon the
resolution by a majority of the then Board of Trustees, adopting a resolution
which sets forth such establishment and designation and the relative rights and
preferences of such Series or class. Each such resolution shall be incorporated
herein by reference upon adoption.
Each Series shall be separate and distinct from any other Series and
shall maintain separate and distinct records on the books of the Trust, and the
assets and liabilities belonging to any such Series shall be held and accounted
for separately from the assets and liabilities of the Trust or any other Series.
Shares of each Series or class established pursuant to this Section 6,
unless otherwise provided in the resolution establishing such Series, shall have
the following relative rights and preferences:
(a) Assets Held with Respect to a Particular Series. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof from whatever source
derived, including, without limitation, any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably be held with respect to that Series for all purposes, subject only
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to the rights of creditors with respect to that Series, and shall be so recorded
upon the books of account of the Trust. Such consideration, assets, income,
earnings, profits and proceeds thereof, from whatever source derived, including,
without limitation, any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
held with respect to" that Series. In the event that there are any assets,
income, earnings, profits and proceeds thereof, funds or payments which are not
readily identifiable as assets held with respect to any particular Series
(collectively "General Assets"), the Board of Trustees shall allocate such
General Assets to, between or among any one or more of the Series in such manner
and on such basis as the Board of Trustees, in its sole discretion, deems fair
and equitable, and any General Asset so allocated to a particular Series shall
be held with respect to that Series. Each such allocation by the Board of
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes.
(b) Liabilities Held with Respect to a Particular Series. The assets of
the Trust held with respect to each particular Series shall be charged against
the liabilities of the Trust held with respect to that Series and all expenses,
costs, charges and reserves attributable to that Series, and any liabilities,
expenses, costs, charges and reserves of the Trust which are not readily
identifiable as being held with respect to any particular Series (collectively
"General Liabilities") shall be allocated and charged by the Board of Trustees
to and among any one or more of the Series in such manner and on such basis as
the Board of Trustees in its sole discretion deems fair and equitable. The
liabilities, expenses, costs, charges, and reserves so charged to a Series are
herein referred to as "liabilities held with respect to" that Series. Each
allocation of liabilities, expenses, costs, charges and reserves by the Board of
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes. All Persons who have extended credit which has been allocated to a
particular Series, or who have a claim or contract which has been allocated to
any particular Series, shall look, and shall be required by contract to look
exclusively, to the assets of that particular Series for payment of such credit,
claim, or contract. In the absence of an express contractual agreement so
limiting the claims of such creditors, claimants and contract providers, each
creditor, claimant and contract provider will be deemed nevertheless to have
impliedly agreed to such limitation unless an express provision to the contrary
has been incorporated in the written contract or other document establishing the
claimant relationship.
Subject to the right of the Board of Trustees in its discretion to
allocate General Liabilities as provided herein, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to a particular Series, whether such Series is now authorized and
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existing pursuant to this Declaration of Trust or is hereafter authorized and
existing pursuant to this Declaration of Trust, shall be enforceable against the
assets held with respect to that Series only, and not against the assets of any
other Series or the Trust generally and none of the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing with
respect to the Trust generally or any other Series thereof shall be enforceable
against the assets held with respect to such Series. Notice of this limitation
on liabilities between and among Series shall be set forth in the Certificate of
Trust of the Trust (whether originally or by amendment) as filed or to be filed
in the Office of the Secretary of State of the State of Delaware pursuant to the
DBTA, and upon the giving of such notice in the Certificate of Trust, the
statutory provisions of Section 3804 of the DBTA relating to limitations on
liabilities between and among Series (and the statutory effect under Section
3804 of setting forth such notice in the Certificate of Trust) shall become
applicable to the Trust and each Series.
(c) Dividends, Distributions, Redemptions and Repurchases.
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article VI, no dividend or distribution including, without
limitation, any distribution paid upon dissolution of the Trust or of any Series
with respect to, nor any redemption or repurchase of, the Shares of any Series
or class shall be effected by the Trust other than from the assets held with
respect to such Series, nor, except as specifically provided in Section 7 of
this Article III, shall any Shareholder of any particular Series otherwise have
any right or claim against the assets held with respect to any other Series or
the Trust generally except to the extent that such Shareholder has such a right
or claim hereunder as a Shareholder of such other Series. The Board of Trustees
shall have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) Voting. All Shares of the Trust entitled to vote on a matter shall
vote on the matter, separately by Series and, if applicable, by class, subject
to: (1) where the 1940 Act requires all Shares of the Trust to be voted in the
aggregate without differentiation between the separate Series or classes, then
all of the Trust's Shares shall vote in the aggregate; and (2) if any matter
affects only the interests of some but not all Series or classes, then only the
Shareholders of such affected Series or classes shall be entitled to vote on the
matter.
(e) Equality. All Shares of each particular Series shall represent an
equal proportionate undivided beneficial interest in the assets held with
respect to that Series (subject to the liabilities held with respect to that
Series and such rights and preferences as may have been established and
designated with respect to classes of Shares within such Series), and each Share
of any particular Series shall be equal to each other Share of that Series
(subject to the rights and preferences with respect to separate classes of such
Series).
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(f) Fractions. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole Share of that Series,
including rights with respect to voting, receipt of dividends and distributions,
redemption of Shares and dissolution of the Trust or that Series.
(g) Exchange Privilege. The Board of Trustees shall have the authority
to provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series in accordance with
such requirements and procedures as may be established by the Board of Trustees,
and in accordance with the 1940 Act and the rules and regulations thereunder.
(h) Combination of Series. The Board of Trustees shall have the
authority, without the approval of the Shareholders of any Series unless
otherwise required by applicable law, to combine the assets and liabilities held
with respect to any two or more Series into assets and liabilities held with
respect to a single Series.
(i) Elimination of Series. At any time that there are no Shares
outstanding of any particular Series or class previously established and
designated, the Board of Trustees may by resolution of a majority of the then
Board of Trustees abolish that Series or class and rescind the establishment and
designation thereof.
Section 7. Indemnification of Shareholders. If any Shareholder or
former Shareholder shall be exposed to liability by reason of a claim or demand
relating solely to his or her being or having been a Shareholder of the Trust
(or by having been a Shareholder of a particular Series), and not because of
such Person's acts or omissions, the Shareholder or former Shareholder (or, in
the case of a natural person, his or her heirs, executors, administrators, or
other legal representatives or, in the case of a corporation or other entity,
its corporate or other general successor) shall be entitled to be held harmless
from and indemnified out of the assets of the Trust or out of the assets of the
applicable Series (as the case may be) against all loss and expense arising from
such claim or demand; provided, however, there shall be no liability or
obligation of the Trust (or any particular Series) arising hereunder to
reimburse any Shareholder for taxes paid by reason of such Shareholder's
ownership of any Shares.
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ARTICLE IV.
The Board of Trustees
Section 1. Number, Election and Tenure. The number of Trustees
constituting the Board of Trustees may be fixed from time to time by a written
instrument signed, or by resolution approved at a duly constituted meeting, by a
majority of the Board of Trustees, provided, however, that the number of
Trustees shall in no event be less than one (1) nor more than fifteen (15). The
Board of Trustees, by action of a majority of the then Trustees at a duly
constituted meeting, may fill vacancies in the Board of Trustees or remove any
Trustee with or without cause. The Shareholders may elect Trustees, including
filling any vacancies in the Board of Trustees, at any meeting of Shareholders
called by the Board of Trustees for that purpose. A meeting of Shareholders for
the purpose of electing one or more Trustees may be called by the Board of
Trustees or, to the extent provided by the 1940 Act and the rules and
regulations thereunder, by the Shareholders. Shareholders shall have the power
to remove a Trustee only to the extent provided by the 1940 Act and the rules
and regulations thereunder.
Each Trustee shall serve during the continued lifetime of the Trust
until he or she dies, resigns, is declared bankrupt or incompetent by a court of
appropriate jurisdiction, or is removed, or, if sooner than any of such events,
until the next meeting of Shareholders called for the purpose of electing
Trustees and until the election and qualification of his or her successor. Any
Trustee may resign at any time by written instrument signed by him or her and
delivered to any officer of the Trust or to a meeting of the Board of Trustees.
Such resignation shall be effective upon receipt unless specified to be
effective at some later time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following any such event
or any right to damages on account of such events or any actions taken in
connection therewith following his or her resignation or removal.
Section 2. Effect of Death, Resignation, Removal, etc. of a Trustee.
The death, declination, resignation, retirement, removal, declaration as
bankrupt or incapacity of one or more Trustees, or of all of them, shall not
operate to dissolve the Trust or any Series or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust. Whenever a vacancy
in the Board of Trustees shall occur, until such vacancy is filled as provided
in this Article IV, Section 1, the Trustee(s) in office, regardless of the
number, shall have all the powers granted to the Board of Trustees and shall
discharge all the duties imposed upon the Board of Trustees by this Declaration
of Trust. In the event of the death, declination, resignation, retirement,
removal, declaration as bankrupt or incapacity of all of the then Trustees, the
Trust's Investment Adviser(s) is (are) empowered to appoint new Trustees subject
to the provisions of Section 16(a) of the 1940 Act.
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Section 3. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Board of Trustees, and
such Board of Trustees shall have all powers necessary or convenient to carry
out that responsibility, including, without limitation, the power to engage in
securities or other transactions of all kinds on behalf of the Trust. The Board
of Trustees shall have full power and authority to do any and all acts and to
make and execute any and all contracts and instruments that it may consider
necessary or appropriate in connection with the administration of the Trust. The
Trustees shall not be bound or limited by present or future laws or customs with
regard to investment by trustees or fiduciaries, but shall have full authority
and absolute power and control over the assets of the Trust and the business of
the Trust to the same extent as if the Trustees were the sole owners of the
assets of the Trust and the business in their own right, including such
authority, power and control to do all acts and things as they, in their sole
discretion, shall deem proper to accomplish the purposes of this Trust. Without
limiting the foregoing, the Trustees may: (1) adopt, amend and repeal By-Laws
not inconsistent with this Declaration of Trust providing for the regulation and
management of the affairs of the Trust; (2) fill vacancies in or remove from
their number in accordance with this Declaration of Trust or the By-Laws, and
may elect and remove such officers and appoint and terminate such agents as they
consider appropriate; (3) appoint from their own number and establish and
terminate one or more committees consisting of two or more Trustees which may
exercise the powers and authority of the Board of Trustees to the extent that
the Board of Trustees determine; (4) employ one or more custodians of the Trust
Property and may authorize such custodians to employ subcustodians and to
deposit all or any part of such Trust Property in a system or systems for the
central handling of securities or with a Federal Reserve Bank; (5) retain a
transfer agent, dividend disbursing agent, a shareholder servicing agent or
administrative services agent, or all of them; (6) provide for the issuance and
distribution of Shares by the Trust directly or through one or more Principal
Underwriters or otherwise; (7) retain one or more Investment Adviser(s); (8)
redeem, repurchase and transfer Shares pursuant to applicable law; (9) set
record dates for the determination of Shareholders with respect to various
matters, in the manner provided in Article V, Section 5 of this Declaration of
Trust; (10) declare and pay dividends and distributions to Shareholders from the
Trust Property; (11) establish from time to time, in accordance with the
provisions of Article III, Section 6 hereof, any Series or class of Shares, each
such Series to operate as a separate and distinct investment medium and with
separately defined investment objectives and policies and distinct investment
purposes; and (12) in general delegate such authority as they consider desirable
to any officer of the Trust, to any committee of the Board of Trustees and to
any agent or employee of the Trust or to any such custodian, transfer, dividend
disbursing or shareholder servicing agent, Principal Underwriter or Investment
Adviser. Any determination as to what is in the best interests of the Trust made
by the Board of Trustees in good faith shall be conclusive.
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In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified herein or required by law, any action by the Board of
Trustees shall be deemed effective if approved or taken by a majority of the
Trustees then in office.
Any action required or permitted to be taken by the Board of Trustees,
or a committee thereof, may be taken without a meeting if a majority of the
members of the Board of Trustees, or committee thereof, as the case may be,
shall individually or collectively consent in writing to that action. Such
action by written consent shall have the same force and effect as a majority
vote of the Board of Trustees, or committee thereof, as the case may be. Such
written consent or consents shall be filed with the minutes of the proceedings
of the Board of Trustees, or committee thereof, as the case may be.
The Trustees shall devote to the affairs of the Trust such time as may
be necessary for the proper performance of their duties hereunder, but neither
the Trustees nor the officers, directors, shareholders or partners of the
Trustees, shall be expected to devote their full time to the performance of such
duties. The Trustees, or any Affiliate shareholder, officer, director, partner
or employee thereof, or any Person owning a legal or beneficial interest
therein, may engage in or possess an interest in any other business or venture
of any nature and description, independently or with or for the account of
others.
Section 4. Payment of Expenses by the Trust. The Board of Trustees is
authorized to pay or cause to be paid out of the principal or income of the
Trust or any particular Series or class, or partly out of the principal and
partly out of the income of the Trust or any particular Series or class, and to
charge or allocate the same to, between or among such one or more of the Series
or classes that may be established or designated pursuant to Article III,
Section 6, as it deems fair, all expenses, fees, charges, taxes and liabilities
incurred by or arising in connection with the maintenance or operation of the
Trust or a particular Series or class, or in connection with the management
thereof, including, but not limited to, the Trustees' compensation and such
expenses, fees, charges, taxes and liabilities for the services of the Trust's
officers, employees, Investment Adviser, Principal Underwriter, auditors,
counsel, custodian, sub-custodian (if any), transfer agent, dividend disbursing
agent, shareholder servicing agent, and such other agents or independent
contractors and such other expenses, fees, charges, taxes and liabilities as the
Board of Trustees may deem necessary or proper to incur.
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Section 5. Payment of Expenses by Shareholders. The Board of Trustees
shall have the power, as frequently as it may determine, to cause each
Shareholder of the Trust, or each Shareholder of any particular Series, to pay
directly, in advance or arrears, for charges of the Trust's custodian or
transfer, dividend disbursing, shareholder servicing or similar agent, an amount
fixed from time to time by the Board of Trustees, by setting off such charges
due from such Shareholder from declared but unpaid dividends or distributions
owed such Shareholder and/or by reducing the number of Shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such charges due from such Shareholder.
Section 6. Ownership of Trust Property. Legal title to all of the Trust
Property shall at all times be considered to be vested in the Trust, except that
the Board of Trustees shall have the power to cause legal title to any Trust
Property to be held by or in the name of any Person as nominee, on such terms as
the Board of Trustees may determine, in accordance with applicable law.
Section 7. Service Contracts.
(a) Subject to such requirements and restrictions as may be set forth
in the By-Laws and/or the 1940 Act, the Board of Trustees may, at any time and
from time to time, contract for exclusive or nonexclusive advisory, management
and/or administrative services for the Trust or for any Series with any
corporation, trust, association or other organization, including any Affiliate;
and any such contract may contain such other terms as the Board of Trustees may
determine, including without limitation, authority for the Investment Adviser or
administrator to determine from time to time without prior consultation with the
Board of Trustees what securities and other instruments or property shall be
purchased or otherwise acquired, owned, held, invested or reinvested in, sold,
exchanged, transferred, mortgaged, pledged, assigned, negotiated, or otherwise
dealt with or disposed of, and what portion, if any, of the Trust Property shall
be held uninvested and to make changes in the Trust's or a particular Series'
investments, or such other activities as may specifically be delegated to such
party.
(b) The Board of Trustees may also, at any time and from time to time,
contract with any corporation, trust, association or other organization,
including any Affiliate, appointing it or them as the exclusive or nonexclusive
distributor or Principal Underwriter for the Shares of the Trust or one or more
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of the Series or classes thereof or for other securities to be issued by the
Trust, or appointing it or them to act as the custodian, transfer agent,
dividend disbursing agent and/or shareholder servicing agent for the Trust or
one or more of the Series or classes thereof.
(c) The Board of Trustees is further empowered, at any time and from
time to time, to contract with any Persons to provide such other services to the
Trust or one or more of its Series, as the Board of Trustees determines to be in
the best interests of the Trust or one or more of its Series.
(d) The fact that:
(i) any of the Shareholders, Trustees, employees or
officers of the Trust is a shareholder, director, officer,
partner, trustee, employee, manager, Adviser, Principal
Underwriter, distributor, or Affiliate or agent of or for any
corporation, trust, association, or other organization, or for
any parent or Affiliate of any organization with which an
Adviser's, management or administration contract, or Principal
Underwriter's or distributor's contract, or custodian,
transfer, dividend disbursing, shareholder servicing or other
type of service contract may have been or may hereafter be
made, or that any such organization, or any parent or
Affiliate thereof, is a Shareholder or has an interest in the
Trust, or that
(ii) any corporation, trust, association or other
organization with which an Adviser's, management or
administration contract or Principal Underwriter's or
distributor's contract, or custodian, transfer, dividend
disbursing, shareholder servicing or other type of service
contract may have been or may hereafter be made also has an
Adviser's, management or administration contract, or Principal
Underwriter's or distributor's contract, or custodian,
transfer, dividend disbursing, shareholder servicing or other
service contract with one or more other corporations, trusts,
associations, or other organizations, or has other business or
interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee, employee or officer of the Trust from voting upon or
executing the same, or create any liability or accountability to the Trust or
its Shareholders, provided that the establishment of and performance under each
such contract is permissible under the provisions of the 1940 Act.
(e) Every contract referred to in this Section 7 shall comply with such
requirements and restrictions as may be set forth in the By-Laws, the 1940 Act
or stipulated by resolution of the Board of Trustees; and any such contract may
contain such other terms as the Board of Trustees may determine.
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ARTICLE V.
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the provisions of Article III,
Section 6(d), the Shareholders shall have power to vote only (i) for the
election of Trustees, including the filling of any vacancies in the Board of
Trustees, as provided in Article IV, Section 1; (ii) with respect to such
additional matters relating to the Trust as may be required by this Declaration
of Trust, the By-Laws, the 1940 Act or any registration statement of the Trust
filed with the Commission; and (iii) on such other matters as the Board of
Trustees may consider necessary or desirable. The Shareholder of record (as of
the record date established pursuant to Section 5 of this Article V) of each
Share shall be entitled to one vote for each full Share, and a fractional vote
for each fractional Share. Shareholders shall not be entitled to cumulative
voting in the election of Trustees or on any other matter. Shares may be voted
in person or by proxy.
Section 2. Meetings. Meetings of the Shareholders may be called by the
Board of Trustees for the purpose of electing Trustees as provided in Article
IV, Section 1 and for such other purposes as may be prescribed by law, by this
Declaration of Trust or by the By-Laws. Meetings of the Shareholders may also be
called by the Board of Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Board of Trustees to be necessary or
desirable.
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Section 3. Quorum and Required Vote. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust,
thirty-three and one-third percent (33-1/3%) of the Shares present in person or
represented by proxy and entitled to vote at a Shareholders' meeting shall
constitute a quorum at such meeting. When a separate vote by one or more Series
or classes is required, thirty-three and one-third percent (33-1/3%) of the
Shares of each such Series or class present in person or represented by proxy
and entitled to vote shall constitute a quorum at a Shareholders' meeting of
such Series or class. Subject to the provisions of Article III, Section 6(d),
Article VIII, Section 4 and any other provision of this Declaration of Trust,
the By-Laws or applicable law which requires a different vote: (1) in all
matters other than the election of Trustees, the affirmative vote of the
majority of votes cast at a Shareholders' meeting at which a quorum is present
shall be the act of the Shareholders; (2) Trustees shall be elected by a
plurality of the votes cast at a Shareholders' meeting at which a quorum is
present.
Section 4. Shareholder Action by Written Consent without a Meeting. Any
action which may be taken at any meeting of Shareholders may be taken without a
meeting and without prior notice if a consent in writing setting forth the
action so taken is signed by the holders of Shares having not less than the
minimum number of votes that would be necessary to authorize or take that action
at a meeting at which all Shares entitled to vote on that action were present
and voted. All such consents shall be filed with the secretary of the Trust and
shall be maintained in the Trust's records. Any Shareholder giving a written
consent or the Shareholder's proxy holders or a transferee of the Shares or a
personal representative of the Shareholder or its respective proxy-holder may
revoke the consent by a writing received by the secretary of the Trust before
written consents of the number of Shares required to authorize the proposed
action have been filed with the secretary.
If the consents of all Shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
Shareholders shall not have been received, the secretary shall give prompt
notice of the action taken without a meeting to such Shareholders. This notice
shall be given in the manner specified in the By-Laws.
Section 5. Record Dates. For purposes of determining the Shareholders
entitled to notice of any meeting or to vote or entitled to give consent to
action without a meeting, the Board of Trustees may fix in advance a record date
which shall not be more than one hundred eighty (180) days nor less than seven
(7) days before the date of any such meeting.
If the Board of Trustees does not so fix a record date:
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(a) The record date for determining Shareholders entitled to notice of
or to vote at a meeting of Shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day which is five (5) business
days next preceding to the day on which the meeting is held.
(b) The record date for determining Shareholders entitled to give
consent to action in writing without a meeting, (i) when no prior action by the
Board of Trustees has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the Board of Trustees has been
taken, shall be at the close of business on the day on which the Board of
Trustees adopts the resolution taking such prior action or the seventy-fifth
(75th) day before the date of such other action, whichever is later.
For the purpose of determining the Shareholders of any Series or class
who are entitled to receive payment of any dividend or of any other
distribution, the Board of Trustees may from time to time fix a date, which
shall be before the date for the payment of such dividend or such other
distribution, as the record date for determining the Shareholders of such Series
or class having the right to receive such dividend or distribution. Nothing in
this Section shall be construed as precluding the Board of Trustees from setting
different record dates for different Series or classes.
Section 6. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes, meetings and related matters.
ARTICLE VI.
Net Asset Value, Distributions and Redemptions
Section 1. Determination of Net Asset Value, Net Income and
Distributions. Subject to Article III, Section 6 hereof, the Board of Trustees
shall have the power to fix an initial offering price for the Shares of any
Series or class thereof which shall yield to such Series or class not less than
the net asset value thereof, at which price the Shares of such Series or class
shall be offered initially for sale, and to determine from time to time
thereafter the offering price which shall yield to such Series or class not less
than the net asset value thereof from sales of the Shares of such Series or
class; provided, however, that no Shares of a Series or class thereof shall be
issued or sold for consideration which shall yield to such Series or class less
than the net asset value of the Shares of such Series or class next determined
after the receipt of the order (or at such other times set by the Board of
Trustees), except in the case of Shares of such Series or class issued in
payment of a dividend properly declared and payable.
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Subject to Article III, Section 6 hereof, the Board of Trustees, in
their absolute discretion, may prescribe and shall set forth in the By-laws or
in a duly adopted vote of the Board of Trustees such bases and time for
determining the per Share or net asset value of the Shares of any Series or net
income attributable to the Shares of any Series, or the declaration and payment
of dividends and distributions on the Shares of any Series, as they may deem
necessary or desirable.
Section 2. Redemptions at the Option of a Shareholder. Unless otherwise
provided in the prospectus of the Trust relating to the Shares, as such
prospectus may be amended from time to time ("Prospectus"):
(a) The Trust shall purchase such Shares as are offered by any
Shareholder for redemption, upon the presentation of a proper instrument of
transfer together with a request directed to the Trust or a Person designated by
the Trust that the Trust purchase such Shares or in accordance with such other
procedures for redemption as the Board of Trustees may from time to time
authorize; and the Trust will pay therefor the net asset value thereof, in
accordance with the By-Laws and applicable law. Payment for said Shares shall be
made by the Trust to the Shareholder within seven days after the date on which
the request is received in proper form. The obligation set forth in this Section
2 is subject to the provision that in the event that any time the New York Stock
Exchange (the "Exchange") is closed for other than weekends or holidays, or if
permitted by the Rules of the Commission during periods when trading on the
Exchange is restricted or during any National Financial Emergency which makes it
impracticable for the Trust to dispose of the investments of the applicable
Series or to determine fairly the value of the net assets held with respect to
such Series or during any other period permitted by order of the Commission for
the protection of investors, such obligations may be suspended or postponed by
the Board of Trustees. If certificates have been issued to a Shareholder, any
such request by such Shareholder must be accompanied by surrender of any
outstanding certificate or certificates for such Shares in form for transfer,
together with such proof of the authenticity of signatures as may reasonably be
required on such Shares and accompanied by proper stock transfer stamps, if
applicable.
(b) Payments for Shares so redeemed by the Trust shall be made in cash,
except payment for such Shares may, at the option of the Board of Trustees, or
such officer or officers as it may duly authorize in its complete discretion, be
made in kind or partially in cash and partially in kind. In case of any payment
in kind, the Board of Trustees, or its delegate, shall have absolute discretion
23
<PAGE>
as to what security or securities of the Trust shall be distributed in kind and
the amount of the same; and the securities shall be valued for purposes of
distribution at the value at which they were appraised in computing the then
current net asset value of the Shares, provided that any Shareholder who cannot
legally acquire securities so distributed in kind by reason of the prohibitions
of the 1940 Act or the provisions of the Employee Retirement Income Security Act
("ERISA") shall receive cash. Shareholders shall bear the expenses of in-kind
transactions, including, but not limited to, transfer agency fees, custodian
fees and costs of disposition of such securities.
(c) Payment for Shares so redeemed by the Trust shall be made by the
Trust as provided above within seven days after the date on which the redemption
request is received in good order; provided, however, that if payment shall be
made other than exclusively in cash, any securities to be delivered as part of
such payment shall be delivered as promptly as any necessary transfers of such
securities on the books of the several corporations whose securities are to be
delivered practicably can be made, which may not necessarily occur within such
seven day period. Moreover, redemptions may be suspended in the event of a
National Financial Emergency. In no case shall the Trust be liable for any delay
of any corporation or other Person in transferring securities selected for
delivery as all or part of any payment in kind.
(d) The right of Shareholders to receive dividends or other
distributions on Shares may be set forth in a Plan adopted by the Board of
Trustees and amended from time to time pursuant to Rule 18f-3 of the 1940 Act.
The right of any Shareholder of the Trust to receive dividends or other
distributions on Shares redeemed and all other rights of such Shareholder with
respect to the Shares so redeemed by the Trust, except the right of such
Shareholder to receive payment for such Shares, shall cease at the time as of
which the purchase price of such Shares shall have been fixed, as provided
above.
Section 3. Redemptions at the Option of the Trust. The Board of
Trustees may, from time to time, without the vote or consent of the
Shareholders, and subject to the 1940 Act, redeem Shares or authorize the
closing of any Shareholder account, subject to such conditions as may be
established by the Board of Trustees.
ARTICLE VII.
Compensation and Limitation of Liability of
Officers and Trustees
24
<PAGE>
Section 1. Compensation. Except as set forth in the last sentence of
this Section 1, the Board of Trustees may, from time to time, fix a reasonable
amount of compensation to be paid by the Trust to the Trustees and officers of
the Trust. Nothing herein shall in any way prevent the employment of any Trustee
for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Indemnification and Limitation of Liability.
(a) To the fullest extent that limitations on the liability of Trustees
and officers are permitted by the DBTA, the officers and Trustees shall not be
responsible or liable in any event for any act or omission of: any agent or
employee of the Trust; any Investment Adviser or Principal Underwriter of the
Trust; or with respect to each Trustee and officer, the act or omission of any
other Trustee or officer, respectively. The Trust, out of the Trust Property,
shall indemnify and hold harmless each and every officer and Trustee from and
against any and all claims and demands whatsoever arising out of or related to
such officer's or Trustee's performance of his or her duties as an officer or
Trustee of the Trust. This limitation on liability applies to events occurring
at the time a Person serves as a Trustee or officer of the Trust whether or not
such Person is a Trustee or officer at the time of any proceeding in which
liability is asserted. Nothing herein contained shall indemnify, hold harmless
or protect any officer or Trustee from or against any liability to the Trust or
any Shareholder to which such Person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Person's office.
(b) Every note, bond, contract, instrument, certificate or undertaking
and every other act or document whatsoever issued, executed or done by or on
behalf of the Trust, the officers or the Trustees or any of them in connection
with the Trust shall be conclusively deemed to have been issued, executed or
done only in such Person's capacity as Trustee and/or as officer, and such
Trustee or officer, as applicable, shall not be personally liable therefore,
except as described in the last sentence of the first paragraph of this Section
2 of this Article VII.
Section 3. Officers and Trustees' Good Faith Action, Expert Advice, No
Bond or Surety. The exercise by the Trustees of their powers and discretions
hereunder shall be binding upon everyone interested. An officer or Trustee shall
be liable to the Trust and to any Shareholder solely for such officer's or
Trustee's own willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office of such officer or
Trustee, and for nothing else, and shall not be liable for errors of judgment or
mistakes of fact or law. The officers and Trustees may obtain the advice of
counsel or other experts with respect to the meaning and operation of this
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Declaration of Trust and their duties as officers or Trustees. No such officer
or Trustee shall be liable for any act or omission in accordance with such
advice and no inference concerning liability shall arise from a failure to
follow such advice. The officers and Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
Section 4. Insurance. To the fullest extent permitted by applicable
law, the officers and Trustees shall be entitled and have the authority to
purchase with Trust Property, insurance for liability and for all expenses
reasonably incurred or paid or expected to be paid by a Trustee or officer in
connection with any claim, action, suit or proceeding in which such Person
becomes involved by virtue of such Person's capacity or former capacity with the
Trust, whether or not the Trust would have the power to indemnify such Person
against such liability under the provisions of this Article.
ARTICLE VIII.
Miscellaneous
Section 1. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any actions made or to be made by the Trustees.
Section 2. Dissolution of Trust or Series. Unless dissolved as provided
herein, the Trust shall have perpetual existence. The Trust may be dissolved at
any time by vote of a majority of the Shares of the Trust entitled to vote or by
the Board of Trustees by written notice to the Shareholders. Any Series may be
dissolved at any time by vote of a majority of the Shares of that Series or by
the Board of Trustees by written notice to the Shareholders of that Series.
Upon dissolution of the Trust (or a particular Series, as the case may
be), the Trustees shall (in accordance with ss. 3808 of the DBTA) pay or make
reasonable provision to pay all claims and obligations of each Series (or the
particular Series, as the case may be), including all contingent, conditional or
unmatured claims and obligations known to the Trust, and all claims and
obligations which are known to the Trust but for which the identity of the
claimant is unknown. If there are sufficient assets held with respect to each
Series of the Trust (or the particular Series, as the case may be), such claims
and obligations shall be paid in full and any such provisions for payment shall
be made in full. If there are insufficient assets held with respect to each
Series of the Trust (or the particular Series, as the case may be), such claims
and obligations shall be paid or provided for according to their priority and,
among claims and obligations of equal priority, ratably to the extent of assets
26
<PAGE>
available therefor. Any remaining assets (including without limitation, cash,
securities or any combination thereof) held with respect to each Series of the
Trust (or the particular Series, as the case may be) shall be distributed to the
Shareholders of such Series, ratably according to the number of Shares of such
Series held by the several Shareholders on the record date for such dissolution
distribution.
Section 3. Merger and Consolidation; Conversion.
(a) Merger and Consolidation. Pursuant to an agreement of merger or
consolidation, the Trust, or any one or more Series, may, by act of a majority
of the Board of Trustees, merge or consolidate with or into one or more business
trusts or other business entities formed or organized or existing under the laws
of the State of Delaware or any other state or the United States or any foreign
country or other foreign jurisdiction. Any such merger or consolidation shall
not require the vote of the Shareholders affected thereby, unless such vote is
required by the 1940 Act, or unless such merger or consolidation would result in
an amendment of this Declaration of Trust which would otherwise require the
approval of such Shareholders. In accordance with Section 3815(f) of the DBTA,
an agreement of merger or consolidation may effect any amendment to this
Declaration of Trust or the By-Laws or effect the adoption of a new declaration
of trust or by-laws of the Trust if the Trust is the surviving or resulting
business trust. Upon completion of the merger or consolidation, the Trustees
shall file a certificate of merger or consolidation in accordance with Section
3810 of the DBTA.
(b) Conversion. A majority of the Board of Trustees may, without the
vote or consent of the Shareholders, cause (i) the Trust to convert to a
common-law trust, a general partnership, limited partnership or a limited
liability company organized, formed or created under the laws of the State of
Delaware as permitted pursuant to Section 3821 of the DBTA; (ii) the Shares of
the Trust or any Series to be converted into beneficial interests in another
business trust (or series thereof) created pursuant to this Section 3 of this
Article VIII, or (iii) the Shares to be exchanged under or pursuant to any state
or federal statute to the extent permitted by law; provided, however, that if
required by the 1940 Act, no such statutory conversion, Share conversion or
Share exchange shall be effective unless the terms of such transaction shall
first have been approved at a meeting called for that purpose by the "vote of a
majority of the outstanding voting securities," as such phrase is defined in the
1940 Act, of the Trust or Series, as applicable; provided, further, that in all
respects not governed by statute or applicable law, the Board of Trustees shall
have the power to prescribe the procedure necessary or appropriate to accomplish
a sale of assets, merger or consolidation including the power to create one or
more separate business trusts to which all or any part of the assets,
liabilities, profits or losses of the Trust may be transferred and to provide
for the conversion of Shares of the Trust or any Series into beneficial
interests in such separate business trust or trusts (or series thereof).
27
<PAGE>
Section 4. Reorganization.
A majority of the Board of Trustees may cause the Trust to sell, convey
and transfer all or substantially all of the assets of the Trust, or all or
substantially all of the assets associated with any one or more Series, to
another trust, business trust, partnership, limited partnership, limited
liability company, association or corporation organized under the laws of any
state, or to one or more separate series thereof, or to the Trust to be held as
assets associated with one or more other Series of the Trust, in exchange for
cash, shares or other securities (including, without limitation, in the case of
a transfer to another Series of the Trust, Shares of such other Series) with
such transfer either (a) being made subject to, or with the assumption by the
transferee of, the liabilities associated with each Series the assets of which
are so transferred, or (b) not being made subject to, or not with the assumption
of, such liabilities; provided, however, that, if required by the 1940 Act, no
assets associated with any particular Series shall be so sold, conveyed or
transferred unless the terms of such transaction shall first have been approved
at a meeting called for that purpose by the "vote of a majority of the
outstanding voting securities," as such phrase is defined in the 1940 Act, of
that Series. Following such sale, conveyance and transfer, the Board of Trustees
shall distribute such cash, shares or other securities (giving due effect to the
assets and liabilities associated with and any other differences among the
various Series the assets associated with which have so been sold, conveyed and
transferred) ratably among the Shareholders of the Series the assets associated
with which have been so sold, conveyed and transferred (giving due effect to the
differences among the various classes within each such Series); and if all of
the assets of the Trust have been so sold, conveyed and transferred, the Trust
shall be dissolved.
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Section 5. Amendments.
Subject to the provisions of the second paragraph of this Section 5 of
this Article VIII, this Declaration of Trust may be restated and/or amended at
any time by an instrument in writing signed by a majority of the then Board of
Trustees and, if required, by approval of such amendment by Shareholders in
accordance with Article V, Section 3 hereof. Any such restatement and/or
amendment hereto shall be effective immediately upon execution and approval or
upon such future date and time as may be stated therein. The Certificate of
Trust of the Trust may be restated and/or amended by a similar procedure, and
any such restatement and/or amendment shall be effective immediately upon filing
with the Office of the Secretary of State of the State of Delaware or upon such
future date as may be stated therein.
Notwithstanding the above, the Board of Trustees expressly reserves the
right to amend or repeal any provisions contained in this Declaration of Trust
or the Certificate of Trust, in accordance with the provisions of Section 5 of
Article III hereof, and all rights, contractual and otherwise, conferred upon
Shareholders are granted subject to such reservation. The Board of Trustees
further expressly reserves the right to amend or repeal any provision of the
By-Laws pursuant to Article X of the By-Laws.
Section 6. Filing of Copies, References, Headings. The original or a
copy of this Declaration of Trust and of each restatement and/or amendment
hereto shall be kept at the principal executive office of the Trust where it may
be inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any such
restatements and/or amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as if it were the
original, may rely on a copy certified by an officer of the Trust to be a copy
of this instrument or of any such restatements and/or amendments. In this
Declaration of Trust and in any such restatements and/or amendments, references
to this instrument, and all expressions of similar effect to "herein," "hereof"
and "hereunder," shall be deemed to refer to this instrument as amended or
affected by any such restatements and/or amendments. Headings are placed herein
for convenience of reference only and shall not be taken as a part hereof or
control or affect the meaning, construction or effect of this instrument.
Whenever the singular number is used herein, the same shall include the plural;
and the neuter, masculine and feminine genders shall include each other, as
applicable. This instrument may be executed in any number of counterparts, each
of which shall be deemed an original.
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Section 7. Applicable Law. This Declaration of Trust is created under
and is to be governed by and construed and administered according to the laws of
the State of Delaware and the applicable provisions of the 1940 Act and the
Code. The Trust shall be a Delaware business trust pursuant to the DBTA, and
without limiting the provisions hereof, the Trust may exercise all powers which
are ordinarily exercised by such a business trust.
Section 8. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration of Trust are severable, and if
the Board of Trustees shall determine, with the advice of counsel, that any of
such provisions is in conflict with the 1940 Act, the Code, the DBTA, or with
other applicable laws and regulations, the conflicting provision shall be deemed
not to have constituted a part of this Declaration of Trust from the time when
such provisions became inconsistent with such laws or regulations; provided,
however, that such determination shall not affect any of the remaining
provisions of this Declaration of Trust or render invalid or improper any action
taken or omitted prior to such determination.
(b) If any provision of this Declaration of Trust shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration of Trust in any jurisdiction.
Section 9. Business Trust Only. It is the intention of the Trustees to
create a business trust pursuant to the DBTA, and thereby to create the
relationship of trustee and beneficial owners within the meaning of the DBTA
between the Trustees and each Shareholder. It is not the intention of the
Trustees to create a general or limited partnership, limited liability company,
joint stock association, corporation, bailment, or any form of legal
relationship other than a business trust pursuant to the DBTA. Nothing in this
Declaration of Trust shall be construed to make the Shareholders, either by
themselves or with the Trustees, partners or members of a joint stock
association.
Section 10. Use of the Names "Delaware Group" and "Delaware
Investments". The Trust expressly agrees and acknowledges that the names
"Delaware Group" and "Delaware Investments" are the sole property of Delaware
Management Holdings, Inc. ("DMH"), and, with respect to such names, that similar
names are used by funds in the investment business which are affiliated with
DMH. DMH has consented to the use by the Trust of the identifying words
"Delaware Group" and "Delaware Investments" and has granted to the Trust a
nonexclusive license to use the names "Delaware Group" and "Delaware
Investments" as part of the name of the Trust and the name of any Series of
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Shares. The Trust further expressly agrees and acknowledges that the
non-exclusive license granted herein may be terminated by DMH if the Trust
ceases to use an Affiliate of DMH as Investment Adviser or Delaware
Distributors, L.P. ("DDLP") as Principal Underwriter (or to use other Affiliates
or successors of DMH and DDLP for such purposes). In such event, the
non-exclusive license granted herein may be revoked by DMH and the Trust shall
cease using the names "Delaware Group" and "Delaware Investments" as part of its
name or the name of any Series of Shares, unless otherwise consented to by DMH
or any successor to its interests in such names.
The Trust further understands and agrees that so long as DMH and/or its
advisory Affiliates shall continue to serve as the Trust's Investment Adviser,
other mutual funds as may be sponsored or advised by DMH or its Affiliates shall
have the right permanently to adopt and to use the words "Delaware" in their
names and in the names of any Series or class of Shares of such funds.
IN WITNESS WHEREOF, the Trustees named below do hereby make and enter
into this Declaration of Trust as of the 17th day of December, 1998.
By: /s/ Wayne A. Stork By: /s/ Jeffrey J. Nick
------------------------------ ------------------------------
Wayne A. Stork Jeffrey J. Nick
Trustee Trustee
By: /s/ Walter P. Babich By: /s/ John H. Durham
------------------------------ ------------------------------
Walter P. Babich John H. Durham
Trustee Trustee
By: /s/ Anthony D. Knerr By: /s/ Ann R. Leven
------------------------------ ------------------------------
Anthony D. Knerr Ann R. Leven
Trustee Trustee
By: /s/ W. Thacher Longstreth By: /s/ Thomas F. Madison
------------------------------ ------------------------------
W. Thacher Longstreth Thomas F. Madison
Trustee Trustee
By: /s/ Charles E. Peck
------------------------------
Charles E. Peck
Trustee
31
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CERTIFICATE OF TRUST OF
Delaware Group Government Fund
This Certificate of Trust of Delaware Group Government Fund, a
business trust (the "Trust"), executed by the undersigned trustees, and filed
under and in accordance with the provisions of the Delaware Business Trust Act
(12 Del. C. ss. 3801 et seq.) (the "Act"), sets forth the following:
FIRST: The name of the business trust formed hereby is Delaware Group
Government Fund.
SECOND: The address of the registered office of the Trust in the State
of Delaware is at 1209 Orange Street, Wilmington, Delaware 19801 and
the name and address of the registered agent for service of process on
the Trust in the State of Delaware is The Corporation Trust Company,
1209 Orange Street, Wilmington, Delaware 19801.
THIRD: The Trust formed hereby is or will become an investment
company registered under the Investment Company Act of 1940, as
amended (15 U.S.C. ss.ss.80a-1 et seq.).
FOURTH: Pursuant to Section 3804 of the Act, the debts, liabilities,
obligations and expenses incurred, contracted for or otherwise existing
with respect to a particular series, whether such series is now
authorized and existing pursuant to the governing instrument of the
Trust or is hereafter authorized and existing pursuant to said
governing instrument, shall be enforceable against the assets
associated with such series only, and not against the assets of the
Trust generally or any other series thereof, and, except as otherwise
provided in the governing instrument of the Trust, none of the debts,
liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to the Trust generally or any other
series thereof shall be enforceable against the assets of such series.
In witness whereof, the undersigned, being all of the trustees of
Delaware Group Government Fund, have duly executed this Certificate of Trust as
of the 17th day of December, 1998.
By: /s/ Wayne A. Stork By: /s/ Jeffrey J. Nick
------------------------------ ------------------------------
Wayne A. Stork Jeffrey J. Nick
Trustee Trustee
By: /s/ Walter P. Babich By: /s/ John H. Durham
------------------------------ ------------------------------
Walter P. Babich John H. Durham
Trustee Trustee
By: /s/ Anthony D. Knerr By: /s/ Ann R. Leven
------------------------------ ------------------------------
Anthony D. Knerr Ann R. Leven
Trustee Trustee
By: /s/ W. Thacher Longstreth By: /s/ Thomas F. Madison
------------------------------ ------------------------------
W. Thacher Longstreth Thomas F. Madison
Trustee Trustee
By: /s/ Charles E. Peck
------------------------------
Charles E. Peck
Trustee
<PAGE>
BY-LAWS
OF
Delaware Group Government fund
A Delaware Business Trust
ARTICLE I
OFFICES
-------
Section 1. PRINCIPAL OFFICE. The principal executive office of Delaware
Group Government Fund (the "Trust") shall be One Commerce Square, Philadelphia,
Pennsylvania, 19103. The board of trustees (the "Board of Trustees") may, from
time to time, change the location of the principal executive office of the Trust
to any place within or outside the State of Delaware.
Section 2. OTHER OFFICES. The Board of Trustees may at any time
establish branch or subordinate offices at any place or places where the Trust
intends to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside the State of Delaware designated by the Board of
Trustees. In the absence of any such designation by the Board of Trustees,
shareholders' meetings shall be held at the principal executive office of the
Trust. For purposes of these By-Laws, the term "shareholder" shall mean a record
owner of shares of the Trust.
Section 2. CALL OF MEETING. A meeting of the shareholders may be called
at any time by the Board of Trustees or by the chairperson of the board or by
the president. If the Trust is required under the Investment Company Act of
1940, as amended (the "1940 Act"), to hold a shareholders' meeting to elect
trustees, the meeting shall be deemed an "annual meeting" for that year for
purposes of the 1940 Act.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than seven (7) nor more than ninety-three (93) days
before the date of the meeting. The notice shall specify (i) the place, date and
hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which trustees are to be elected also
shall include the name of any nominee or nominees whom at the time of the notice
are intended to be presented for election. Except with respect to
<PAGE>
adjournments as provided herein, no business shall be transacted at such meeting
other than that specified in the notice.
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail,
courier or telegraphic, facsimile, electronic mail or other written
communication, charges prepaid, addressed to the shareholder at the address of
that shareholder appearing on the books of the Trust or its transfer agent or
given by the shareholder to the Trust for the purpose of notice. If no such
address appears on the Trust's books or is given, notice shall be deemed to have
been given if sent to that shareholder by first-class mail, courier, or
telegraphic, facsimile, electronic mail or other written communication to the
Trust's principal executive office. Notice shall be deemed to have been given at
the time when delivered personally or deposited in the mail, with a courier or
sent by telegram, facsimile, electronic mail or other means of written
communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust marked
to indicate that the notice to the shareholder cannot be delivered at that
address, all future notices or reports shall be deemed to have been duly given
without further mailing, or substantial equivalent thereof, if such notices
shall be available to the shareholder on written demand of the shareholder at
the principal executive office of the Trust for a period of one year from the
date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the Trust giving the notice and shall be filed and
maintained in the records of the Trust. Such affidavit shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholders' meeting,
whether or not a quorum is present, may be adjourned from time to time (and at
any time during the course of the meeting) by a majority of the votes cast by
those shareholders present in person or by proxy, or by the chairperson of the
meeting. Any adjournment may be with respect to one or more proposals, but not
necessarily all proposals, to be voted or acted upon at such meeting and any
adjournment will not delay or otherwise affect the effectiveness and validity of
a vote or other action taken at a shareholders' meeting prior to adjournment.
When any shareholders' meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
2
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adjournment is for more than one hundred eighty (180) days from the record date
set for the original meeting, in which case the Board of Trustees shall set a
new record date. If notice of any such adjourned meeting is required pursuant to
the preceding sentence, it shall be given to each shareholder of record entitled
to vote at the adjourned meeting in accordance with the provisions of Sections 3
and 4 of this Article II. At any adjourned meeting, the Trust may transact any
business which might have been transacted at the original meeting.
Section 6. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of the
Declaration of Trust, as in effect at such time. The shareholders' vote may be
by voice vote or by ballot, provided, however, that any election for trustees
must be by ballot if demanded by any shareholder before the voting has begun. On
any matter other than elections of trustees, any shareholder may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, but if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
the total shares that the shareholder is entitled to vote on such proposal.
Abstentions and broker non-votes will be included for purposes of
determining whether a quorum is present at a shareholders' meeting. Abstentions
and broker non-votes will be treated as votes present at a shareholders'
meeting, but will not be treated as votes cast. Abstentions and broker
non-votes, therefore, will have no effect on proposals which require a plurality
or majority of votes cast for approval, but will have the same effect as a vote
"against" on proposals requiring a majority of outstanding voting securities for
approval.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of a meeting of shareholders, however called and noticed and
wherever held, shall be valid as though transacted at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy.
Attendance by a person at a meeting shall also constitute a waiver of notice
with respect to that person of that meeting, except when the person objects at
the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened and except that such attendance is
not a waiver of any right to object to the consideration of matters not included
in the notice of the meeting if that objection is expressly made at the
beginning of the meeting. Whenever notice of a meeting is required to be given
to a shareholder under the Declaration of Trust or these By-Laws, a written
waiver thereof, executed before or after the meeting by such shareholder or his
or her attorney thereunto authorized and filed with the records of the meeting,
shall be deemed equivalent to such notice.
3
<PAGE>
Section 8. PROXIES. Every shareholder entitled to vote for trustees or
on any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the shareholder and filed
with the secretary of the Trust. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the shareholder executing it by a written notice delivered to the
Trust prior to the exercise of the proxy or by the shareholder's execution of a
subsequent proxy or attendance and vote in person at the meeting; or (ii)
written notice of the death or incapacity of the shareholder is received by the
Trust before the proxy's vote is counted; provided, however, that no proxy shall
be valid after the expiration of eleven (11) months from the date of the proxy
unless otherwise provided in the proxy. The revocability of a proxy that states
on its face that it is irrevocable shall be governed by the provisions of the
General Corporation Law of the State of Delaware.
With respect to any shareholders' meeting, the Board of Trustees may
act to permit the Trust to accept proxies by any electronic, telephonic,
computerized, telecommunications or other reasonable alternative to the
execution of a written instrument authorizing the proxy to act, provided the
shareholder's authorization is received within eleven (11) months before the
meeting. A proxy with respect to shares held in the name of two or more Persons
shall be valid if executed by any one of them unless at or prior to exercise of
the proxy the Trust receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on behalf of a shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest with the challenger.
Section 9. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Trustees may appoint any person other than nominees for office to
act as inspector of election at the meeting or its adjournment. If no inspector
of election is so appointed, the chairperson of the meeting may, and on the
request of any shareholder or a shareholder's proxy shall, appoint an inspector
of election at the meeting. If any person appointed as inspector fails to appear
or fails or refuses to act, the chairperson of the meeting may, and on the
request of any shareholder or a shareholder's proxy shall, appoint a person to
fill the vacancy.
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The inspector shall:
(a) determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III
TRUSTEES
Section 1. POWERS. Subject to the applicable provisions of the
Declaration of Trust and these By-Laws relating to action required to be
approved by the shareholders, the business and affairs of the Trust shall be
managed and all powers shall be exercised by or under the direction of the Board
of Trustees.
Section 2. NUMBER OF TRUSTEES. The number of trustees constituting the
Board of Trustees shall be determined as set forth in the Declaration of Trust.
Section 3. VACANCIES. Vacancies in the Board of Trustees may be filled
by a majority of the remaining trustees, though less than a quorum, or by a sole
remaining trustee, unless the Board of Trustees calls a meeting of shareholders
for the purpose of filling such vacancies. Notwithstanding the above, whenever
and for so long as the Trust is a participant in or otherwise has in effect a
plan under which the Trust may be deemed to bear expenses of distributing its
shares as that practice is described in Rule 12b- 1 under the 1940 Act, then the
selection and nomination of the trustees who are not "interested persons" of the
Trust (as that term is defined in the 1940 Act) shall be, and is, committed to
the discretion of such disinterested trustees.
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Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of
the Board of Trustees may be held at any place within or outside the State of
Delaware that has been designated from time to time by resolution of the Board
of Trustees. In the absence of such a designation, regular meetings shall be
held at the principal executive office of the Trust. Any meeting, regular or
special, may be held by conference telephone or similar communication equipment,
so long as all trustees participating in the meeting can hear one another, and
all such trustees shall be deemed to be present in person at the meeting.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of Trustees
shall be held without call at such time as shall from time to time be fixed by
the Board of Trustees. Such regular meetings may be held without notice.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of Trustees
for any purpose or purposes may be called at any time by the chairperson of the
board or the president or any vice president or the secretary or any two (2)
trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each trustee or sent by first-class mail, courier
or telegram, charges prepaid, or by facsimile or electronic mail, addressed to
each trustee at that trustee's address as it is shown on the records of the
Trust. In case the notice is mailed, it shall be deposited in the United States
mail at least seven (7) days before the time of the holding of the meeting. In
case the notice is delivered personally, by telephone, by courier, to the
telegraph company, or by express mail, facsimile, electronic mail or similar
service, it shall be delivered at least forty-eight (48) hours before the time
of the holding of the meeting. Any oral notice given personally or by telephone
may be communicated either to the trustee or to a person at the office of the
trustee who the person giving the notice has reason to believe will promptly
communicate it to the trustee. The notice need not specify the purpose of the
meeting or the place if the meeting is to be held at the principal executive
office of the Trust.
Section 7. QUORUM. A majority of the authorized number of trustees
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Trustees, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
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trustees if any action taken is approved by at least a majority of the required
quorum for that meeting.
Section 8. WAIVER OF NOTICE. Notice of any meeting need not be given to
any trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any trustee who attends the meeting without protesting
before or at its commencement about the lack of notice to that trustee.
Section 9. ADJOURNMENT. A majority of the trustees present, whether or
not constituting a quorum, may adjourn any matter at any meeting to another time
and place.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than seven (7) days, in which case notice of the time and place shall
be given before the time of the adjourned meeting to the trustees who were
present at the time of the adjournment.
Section 11. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Trustees. This Section 11 shall not be construed to preclude any
trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.
Section 12. TRUSTEE EMERITUS. Upon retirement of a trustee, the Board
of Trustees may elect him or her to the position of Trustee Emeritus. Said
Trustee Emeritus shall serve for one year and may be reelected by the Board of
Trustees from year to year thereafter. Said Trustee Emeritus shall not vote at
meetings of trustees and shall not be held responsible for actions of the Board
of Trustees but shall receive fees paid to trustees for serving as such.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may, by
resolution adopted by a majority of the authorized number of trustees, designate
one or more committees, each consisting of two (2) or more trustees, to serve at
the pleasure of the Board of Trustees. The Board of Trustees may designate one
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or more trustees as alternate members of any committee who may replace any
absent member at any meeting of the committee. Any committee to the extent
provided in the resolution of the Board of Trustees, shall have the authority of
the Board of Trustees, except with respect to:
(a) the approval of any action which under the Declaration of Trust or
applicable law also requires shareholders' approval or requires approval by a
majority of the entire Board of Trustees or certain members of said Board of
Trustees;
(b) the filling of vacancies on the Board of Trustees or in any
committee;
(c) the fixing of compensation of the trustees for serving on the Board
of Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of the
By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board of Trustees
which by its express terms is not so amendable or repealable; or
(f) the appointment of any other committees of the Board of Trustees or
the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
any committee shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Board of Trustees and its members, except that the time of regular meetings of
any committee may be determined either by resolution of the Board of Trustees or
by resolution of the committee. Special meetings of any committee may also be
called by resolution of the Board of Trustees, and notice of special meetings of
any committee shall also be given to all alternate members who shall have the
right to attend all meetings of the committee. The Board of Trustees may adopt
rules for the government of any committee not inconsistent with the provisions
of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be a chairperson
of the board, a president and chief executive officer, a secretary, and a
treasurer. The Trust may also have, at the discretion of the Board of Trustees,
one or more vice presidents, one or more assistant vice presidents, one or more
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assistant secretaries, one or more assistant treasurers, and such other officers
as may be appointed in accordance with the provisions of Section 3 of this
Article V. Any number of offices may be held by the same person, except the
offices of president and vice president.
Section 2. ELECTION OF OFFICERS. The officers of the Trust shall be
chosen by the Board of Trustees, and each shall serve at the pleasure of the
Board of Trustees, subject to the rights, if any, of an officer under any
contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Trustees may appoint and
may empower the president to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Board of Trustees may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Board of Trustees at any regular
or special meeting of the Board of Trustees, or by an officer upon whom such
power of removal may be conferred by the Board of Trustees.
Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
Section 6. CHAIRPERSON OF THE BOARD. The chairperson of the board
shall, if present, preside at meetings of the Board of Trustees and exercise and
perform such other powers and duties as may be from time to time assigned to the
chairperson by the Board of Trustees or prescribed by the By-Laws. The
chairperson of the board shall be a member ex officio of all standing
committees. In the absence, resignation, disability or death of the president,
the chairperson shall exercise all the powers and perform all the duties of the
president until his or her return, or until such disability shall be removed or
until a new president shall have been elected.
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Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Trustees to the chairperson of the board, the
president shall be the chief executive officer of the Trust and shall, subject
to the control of the Board of Trustees, have general supervision, direction and
control of the business and the officers of the Trust. In the absence of the
chairperson of the board, he shall preside at all meetings of the shareholders
and at all meetings of the Board of Trustees. He shall have the general powers
and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Trustees or these By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Trustees or if not ranked, a vice president designated by the Board of
Trustees, shall perform all the duties of the president and when so acting shall
have all powers of and be subject to all the restrictions upon the president.
The vice presidents shall have such other powers and perform such other duties
as from time to time may be prescribed for them respectively by the Board of
Trustees or by these By-Laws and the president or the chairperson of the board.
Section 9. SECRETARY. The secretary shall keep or cause to be kept at
the principal executive office of the Trust or such other place as the Board of
Trustees may direct a book of minutes of all meetings and actions of trustees,
committees of trustees and shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at trustees' meetings or committee meetings, the
number of shares present or represented at shareholders' meetings, and the
proceedings.
The secretary shall cause to be kept at the principal executive office
of the Trust or at the office of the Trust's transfer agent or registrar, as
determined by resolution of the Board of Trustees, a share register or a
duplicate share register showing the names of all shareholders and their
addresses, the number, series and classes of shares held by each, the number and
date of certificates issued for the same and the number and date of cancellation
of every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings of
the shareholders and of the Board of Trustees required by these By-Laws or by
applicable law to be given and shall have such other powers and perform such
other duties as may be prescribed by the Board of Trustees or by these By-Laws.
Section 10. TREASURER. The treasurer shall keep and maintain or cause
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to be kept and maintained adequate and correct books and records of accounts of
the properties and business transactions of the Trust, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses, capital, retained
earnings and shares. The books of account shall at all reasonable times be open
to inspection by any trustee.
The treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositories as may be designated by
the Board of Trustees. He shall disburse the funds of the Trust as may be
ordered by the Board of Trustees, shall render to the president and trustees,
whenever they request it, an account of all of his transactions and of the
financial condition of the Trust and shall have other powers and perform such
other duties as may be prescribed by the Board of Trustees or these By-Laws.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a trustee, officer, employee or
other agent of this Trust or is or was serving at the request of the Trust as a
trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorneys' fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. The Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the Trust) by reason of
the fact that such person is or was an agent of the Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding if such person acted in good faith and in a
manner that such person reasonably believed to be in the best interests of the
Trust and in the case of a criminal proceeding, had no reasonable cause to
believe the conduct of such person was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction or plea of nolo contendere
or its equivalent shall not of itself create a presumption that the person did
not act in good faith or in a manner which the person reasonably believed to be
in the best interests of the Trust or that the person had reasonable cause to
believe that the person's conduct was unlawful.
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Section 3. ACTIONS BY TRUST. The Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of the Trust to procure a judgment in its
favor by reason of the fact that the person is or was an agent of the Trust,
against expenses actually and reasonably incurred by that person in connection
with the defense or settlement of that action if that person acted in good
faith, in a manner that person believed to be in the best interests of the Trust
and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision
to the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with the Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person
shall have been adjudged to be liable in the performance of that person's duty
to the Trust, unless and only to the extent that the court in which that action
was brought shall determine upon application that in view of all the
circumstances of the case, that person was not liable by reason of the disabling
conduct set forth in the preceding paragraph and is fairly and reasonably
entitled to indemnity for the expenses which the court shall determine; or
(b) In respect of any claim, issue, or matter as to which that person
shall have been adjudged to be liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from an action
taken in the person's official capacity; or
(c) Of amounts paid in settling or otherwise disposing of a threatened
or pending action, with or without court approval, or of expenses incurred in
defending a threatened or pending action which is settled or otherwise disposed
of without court approval, unless the required approval set forth in Section 6
of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
the Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the
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proceeding was brought, the agent shall be indemnified against expenses actually
and reasonably incurred by the agent in connection therewith, provided that the
Board of Trustees, including a majority who are disinterested, non-party
trustees, also determines that based upon a review of the facts, the agent was
not liable by reason of the disabling conduct referred to in Section 4 of this
Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by the Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of trustees who are not
parties to the proceeding and are not "interested persons" of the Trust (as
defined in the 1940 Act); or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCEMENT OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the Trust before the final disposition of the
proceeding on receipt of an undertaking by or on behalf of the agent to repay
the amount of the advance unless it shall be determined ultimately that the
agent is entitled to be indemnified as authorized in this Article, provided the
agent provides a security for his undertaking, or a majority of a quorum of the
disinterested, non-party trustees, or an independent legal counsel in a written
opinion, determine that based on a review of readily available facts, there is
reason to believe that said agent ultimately will be found entitled to
indemnification.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than trustees
and officers of the Trust or any subsidiary thereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6, in any circumstances
where it appears:
(a) That it would be inconsistent with a provision of the Declaration
of Trust, a resolution of the shareholders, or an agreement which prohibits or
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otherwise limits indemnification which was in effect at the time of accrual of
the alleged cause of action asserted in the proceeding in which the expenses
were incurred or other amounts were paid; or
(b) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees to purchase such insurance, the Trust shall purchase and
maintain insurance on behalf of any agent of the Trust against any liability
asserted against or incurred by the agent in such capacity or arising out of the
agent's status as such, but only to the extent that the Trust would have the
power to indemnify the agent against that liability under the provisions of this
Article.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of the Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The Trust
shall keep at its principal executive office or at the office of its transfer
agent or registrar a record of its shareholders, providing the names and
addresses of all shareholders and the number, series and classes of shares held
by each shareholder.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep
at its principal executive office the original or a copy of these By-Laws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting
books and records and minutes of proceedings of the shareholders and the Board
of Trustees and any committee or committees of the Board of Trustees shall be
kept at such place or places designated by the Board of Trustees or in the
absence of such designation, at the principal executive office of
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the Trust. The minutes shall be kept in written form and the accounting books
and records shall be kept either in written form or in any other form capable of
being converted into written form. The minutes and accounting books and records
shall be open to inspection upon the written demand of any shareholder or holder
of a voting trust certificate at any reasonable time during usual business hours
for a purpose reasonably related to the holder's interests as a shareholder or
as the holder of a voting trust certificate. The inspection may be made in
person or by an agent or attorney and shall include the right to copy and make
extracts.
Section 4. INSPECTION BY TRUSTEES. Every trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.
ARTICLE VIII
DIVIDENDS
Section 1. DECLARATION OF DIVIDENDS. Dividends upon the shares of
beneficial interest of the Trust may, subject to the provisions of the
Declaration of Trust, if any, be declared by the Board of Trustees at any
regular or special meeting, pursuant to applicable law. Dividends may be paid in
cash, in property, or in shares of the Trust.
Section 2. RESERVES. Before payment of any dividend there may be set
aside out of any funds of the Trust available for dividends such sum or sums as
the Board of Trustees may, from time to time, in its absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Trust, or for such other
purpose as the Board of Trustees shall deem to be in the best interests of the
Trust, and the Board of Trustees may abolish any such reserve in the manner in
which it was created.
ARTICLE IX
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed by such person or persons and in such manner as from time to time shall
be determined by resolution of the Board of Trustees.
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Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
Trustees, except as otherwise provided in these By-Laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Trust and this authority may be
general or confined to specific instances; and unless so authorized or ratified
by the Board of Trustees or within the agency power of an officer, no officer,
agent, or employee shall have any power or authority to bind the Trust by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon his request when such shares are fully paid. All certificates
shall be signed in the name of the Trust by the chairperson of the board or the
president or vice president and by the treasurer or an assistant treasurer or
the secretary or any assistant secretary, certifying the number of shares and
the series and class of shares owned by the shareholders. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
on a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the Trust with
the same effect as if such person were an officer, transfer agent or registrar
at the date of issue. Notwithstanding the foregoing, the Trust may adopt and use
a system of issuance, recordation and transfer of its shares by electronic or
other means.
Section 4. LOST CERTIFICATES. Except as provided in this Section 4, no
new certificates for shares shall be issued to replace an old certificate unless
the latter is surrendered to the Trust and cancelled at the same time. The Board
of Trustees may in case any share certificate or certificate for any other
security is lost, stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the Board of Trustees may require,
including a provision for indemnification of the Trust secured by a bond or
other adequate security sufficient to protect the Trust against any claim that
may be made against it, including any expense or liability on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST.
The chairperson of the board, the president or any vice president or any other
person authorized by resolution of the Board of Trustees or by any of the
foregoing designated officers, is authorized to vote or represent on behalf of
the Trust any and all shares of any corporation, partnership, trust, or other
entity, foreign or domestic, standing in the name of the Trust. The authority
granted may be exercised in person or by a proxy duly executed by such
designated person.
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Section 6. TRANSFER OF SHARES. Shares of the Trust shall be
transferable only on the record books of the Trust by the Person in whose name
such Shares are registered, or by his or her duly authorized attorney or
representative. In all cases of transfer by an attorney-in-fact, the original
power of attorney, or an official copy thereof duly certified, shall be
deposited and remain with the Trust, its transfer agent or other duly authorized
agent. In case of transfers by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Trust, its
transfer agent or other duly authorized agent. No transfer shall be made unless
and until the certificate issued to the transferor, if any, shall be delivered
to the Trust, its transfer agent or other duly authorized agent, properly
endorsed.
Section 7. HOLDERS OF RECORD. The Trust shall be entitled to treat the
holder of record of any share or shares as the owner thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not the Trust
shall have express or other notice thereof.
Section 8. FISCAL YEAR. The fiscal year of the Trust and each series
thereof shall end on the last day of July each year. The fiscal year of the
Trust or any series thereof may be refixed or changed from time to time by
resolution of the Board of Trustees. The fiscal year of the Trust shall be the
taxable year of each series of the Trust.
ARTICLE X
AMENDMENTS
Section 1. AMENDMENT. These By-laws may be restated and/or amended at
any time, without the approval of the shareholders, by an instrument in writing
signed by, or a resolution of, a majority of the then Board of Trustees.
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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between DELAWARE GROUP GOVERNMENT FUND, a
Delaware business trust (the "Trust") severally on behalf of each series of
shares of beneficial interest of the Trust that is listed on Exhibit A to this
Agreement, as that Exhibit may be amended from time to time (each such series of
shares is hereinafter referred to as a "Fund" and, together with other series of
shares listed on such Exhibit, the "Funds"), and DELAWARE MANAGEMENT COMPANY, a
series of Delaware Management Business Trust, a Delaware business trust (the
"Investment Manager").
W I T N E S S E T H:
WHEREAS, the Trust has been organized and operates as an investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act") ;
WHEREAS, each Fund engages in the business of investing and reinvesting
its assets in securities; and
WHEREAS, the Investment Manager is registered under the Investment
Advisers Act of 1940 as an investment adviser and engages in the business of
providing investment management services; and
WHEREAS, the Trust, severally on behalf of each Fund, and the
Investment Manager desire to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Trust hereby employs the Investment Manager to manage the
investment and reinvestment of each Fund's assets and to administer the Trust's
affairs, subject to the direction of the Trust's Board of Trustees and officers
for the period and on the terms hereinafter set forth. The Investment Manager
hereby accepts such employment and agrees during such period to render the
services and assume the obligations herein set forth for the compensation herein
provided. The Investment Manager shall for all purposes herein be deemed to be
an independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Trust in any way, or
in any way be deemed an agent of the Trust. The Investment Manager shall
regularly make decisions as to what securities and other instruments to purchase
and sell on behalf of each Fund and shall effect the purchase and sale of such
investments in furtherance of each Fund's objectives and policies and shall
furnish the Board of Trustees of the Trust with such information and reports
regarding each Fund's investments as the Investment Manager deems appropriate or
as the Trustees of the Trust may reasonably request.
2. The Trust shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto, including, but not
in limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of shares,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' and Trustees' meetings; miscellaneous office expenses; brokerage
commissions; custodian fees; legal and accounting fees; taxes; and federal and
state registration fees. Directors, trustees, officers and employees of the
Investment Manager may be directors, trustees, officers and employees of any of
the investment companies within the Delaware Investments family (including the
Trust). Directors, trustees, officers and employees of the Investment Manager
who are directors, trustees, officers and/or employees of these investment
companies shall not receive any compensation from such companies for acting in
such dual capacity.
<PAGE>
In the conduct of the respective businesses of the parties hereto and
in the performance of this Agreement, the Trust and Investment Manager may share
facilities common to each, which may include legal and accounting personnel,
with appropriate proration of expenses between them.
3. (a) Subject to the primary objective of obtaining the best
execution, the Investment Manager will place orders for the purchase and sale of
portfolio securities and other instruments with such broker/dealers selected who
provide statistical, factual and financial information and services to the
Trust, to the Investment Manager, to any sub-adviser (as defined in Paragraph 5
hereof, a "Sub-Adviser") or to any other fund for which the Investment Manager
or any Sub-Adviser provides investment advisory services and/or with
broker/dealers who sell shares of the Trust or who sell shares of any other
investment company (or series thereof) for which the Investment Manager or any
Sub-Adviser provides investment advisory services. Broker/dealers who sell
shares of any investment companies or series thereof for which the Investment
Manager or Sub-Adviser provide investment advisory services shall only receive
orders for the purchase or sale of portfolio securities to the extent that the
placing of such orders is in compliance with the Rules of the Securities and
Exchange Commission and NASD Regulation, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above
and subject to such policies and procedures as may be adopted by the Board of
Trustees and officers of the Trust, the Investment Manager may cause a Fund to
pay a member of an exchange, broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
member of an exchange, broker or dealer would have charged for effecting that
transaction, in such instances where the Investment Manager has determined in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such member, broker or
dealer, viewed in terms of either that particular transaction or the Investment
Manager's overall responsibilities with respect to the Trust on behalf of the
Funds and to other investment companies (or series thereof) and other advisory
accounts for which the Investment Manager or any Sub-Adviser exercises
investment discretion.
4. As compensation for the services to be rendered to a particular Fund
by the Investment Manager under the provisions of this Agreement, that Fund
shall pay monthly to the Investment Manager exclusively from that Fund's assets,
a fee based on the average daily net assets of that Fund during the month. Such
fee shall be calculated in accordance with the fee schedule applicable to that
Fund as set forth in Exhibit A hereto, which Exhibit may be amended from time to
time as provided in Paragraphs 10(b) and (c) of this Agreement.
If this Agreement is terminated prior to the end of any calendar month
with respect to a particular Fund, the management fee for such Fund shall be
prorated for the portion of any month in which this Agreement is in effect with
respect to such Fund according to the proportion which the number of calendar
days during which the Agreement is in effect bears to the number of calendar
days in the month, and shall be payable within 10 calendar days after the date
of termination.
5. The Investment Manager may, at its expense, select and contract with
one or more investment advisers registered under the Investment Advisers Act of
1940 ("Sub-Advisers") to perform some or all of the services for a Fund for
which it is responsible under this Agreement. The Investment Manager will
compensate any Sub-Adviser for its services to the Fund. The Investment Manager
may terminate the services of any Sub-Adviser at any time in its sole
discretion, and shall at such time assume the responsibilities of such
Sub-Adviser unless and until a successor Sub-Adviser is selected and the
requisite approval of the Fund's shareholders is obtained. The Investment
Manager will continue to have responsibility for all advisory services furnished
by any Sub-Adviser.
-2-
<PAGE>
6. The services to be rendered by the Investment Manager to the Trust
on behalf of each Fund under the provisions of this Agreement are not to be
deemed to be exclusive, and the Investment Manager shall be free to render
similar or different services to others so long as its ability to render the
services provided for in this Agreement shall not be impaired thereby.
7. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Trust or to any other investment company, corporation, association, firm or
individual.
8. It is understood and agreed that so long as the Investment Manager
and/or its advisory affiliates shall continue to serve as the investment adviser
to any of the Trust's Funds, other investment companies as may be sponsored or
advised by the Investment Manager or its affiliates shall have the right
permanently to adopt and to use the words "Delaware," "Delaware Investments" or
"Delaware Group" in their names and in the names of any series or class of
shares of such funds.
9. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of its duties as the Investment
Manager to the Trust on behalf of any Fund, the Investment Manager shall not be
subject to liability to the Trust or to any Fund or to any shareholder of the
Trust for any action or omission in the course of, or connected with, rendering
services hereunder or for any losses that may be sustained in the purchase,
holding or sale of any security, or otherwise.
10. (a) This Agreement shall be executed and become effective as of the
date written below, and shall become effective with respect to a particular Fund
as of the effective date set forth in Exhibit A for that Fund, only if approved
by the vote of a majority of the outstanding voting securities of that Fund. It
shall continue in effect for an initial period of two years for each Fund and
may be renewed thereafter only so long as such renewal and continuance is
specifically approved at least annually by the Board of Trustees or by the vote
of a majority of the outstanding voting securities of that Fund and only if the
terms and the renewal hereof have been approved by the vote of a majority of the
Trustees of the Trust who are not parties hereto or interested persons of any
such party ("Independent Trustees"), cast in person at a meeting called for the
purpose of voting on such approval.
(b) Except as provided in Paragraph 10(c) below, no amendment
to this Agreement (or to Exhibit A hereto) shall be effective with respect to
any Fund unless approved by: (i) a majority of the Trustees of the Trust,
including a majority of Independent Trustees; and (ii) a majority of the
outstanding voting securities of the particular Fund. Any such amendment that
pertains to a Fund will not change, or otherwise affect the applicability of,
this Agreement with respect to other Funds.
(c) The Agreement (and Exhibit A hereto) may be amended with
respect to a Fund without the approval of a majority of the outstanding voting
securities of that Fund if the amendment relates solely to a management fee
reduction or other change that is permitted or not prohibited under federal law,
rule, regulation or SEC staff interpretation thereof to be made without
shareholder approval. This Agreement may be amended from time to time to add or
remove one or more Funds, or to reflect changes in management fees, by an
amendment to Exhibit A hereto executed by the Trust and the Investment Manager.
Any such amendment that pertains to a Fund will not change, or otherwise affect
the applicability of, this Agreement with respect to other Funds.
-3-
<PAGE>
(d) This Agreement may be terminated as to any Fund by the
Trust at any time, without the payment of a penalty, on sixty days' written
notice to the Investment Manager of the Trust's intention to do so, pursuant to
action by the Board of Trustees of the Trust or pursuant to the vote of a
majority of the outstanding voting securities of the affected Fund. The
Investment Manager may terminate this Agreement at any time, without the payment
of a penalty, on sixty days' written notice to the Fund of its intention to do
so. Upon termination of this Agreement, the obligations of all the parties
hereunder shall cease and terminate as of the date of such termination, except
for any obligation to respond for a breach of this Agreement committed prior to
such termination, and except for the obligation of the Trust on behalf of a Fund
to pay to the Investment Manager the fee provided in Paragraph 4 hereof,
prorated to the date of termination. This Agreement shall automatically
terminate in the event of its assignment.
11. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
12. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities"; "interested persons"; and "assignment"
shall have the meaning defined in the 1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized officers and duly attested as of
the _____ day of __________________, _________.
DELAWARE MANAGEMENT COMPANY, DELAWARE GROUP
a series of Delaware Management GOVERNMENT FUND
Business Trust on behalf of The Fund
By:__________________________________ By:__________________________________
Name:________________________________ Name:________________________________
Title:_______________________________ Title:_______________________________
Attest:______________________________ Attest:______________________________
Name:________________________________ Name:________________________________
Title:_______________________________ Title:_______________________________
-4-
<PAGE>
EXHIBIT A
THIS EXHIBIT to the Investment Management Agreement between DELAWARE
GROUP GOVERNMENT FUND and DELAWARE MANAGEMENT COMPANY, a series of Delaware
Management Business Trust, entered into as of the _____________ day of
________________, ______________________ (the "Agreement") lists the Funds for
which the Investment Manager provides investment management services pursuant to
this Agreement, along with the management fee rate schedule for each Fund and
the date on which the Agreement became effective for each Fund.
Management Fee Schedule
(as a percentage of
average daily net assets)
Fund Name Effective Date Annual Rate
- --------- -------------- -----------
Delaware American 0.55% on first $500 million
Government Bond Fund 0.50% on next $500 million
0.45% on next $1,500 million
0.425% on assets in excess of
$2,500 million
-5-
<PAGE>
Law Office
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
(215) 564-8000
Direct Dial: (215) 564-8115
July 28, 1999
Delaware Group Government Fund
1818 Market Street
Philadelphia, PA 19103
Re: Legal Opinion-Securities Act of 1933
------------------------------------
Ladies and Gentlemen:
We have examined the Agreement and Declaration of Trust, (the
"Agreement"), of Delaware Group Government Fund (the "Fund"), a series business
trust organized under Delaware law, the By-Laws of the Fund, and its proposed
form of Share Certificates (if any), and the various pertinent corporate
proceedings we deem material. We have also examined the Notification of
Registration and the Registration Statements filed under the Investment Company
Act of 1940 as amended, (the "Investment Company Act") and the Securities Act of
1933 as amended, (the "Securities Act"), all as amended to date, as well as
other items we deem material to this opinion.
The Fund is authorized by the Agreement to issue an unlimited
number of shares with no par value and, like its predecessor, has authorized
shares of the Government Income Series series of shares. The Agreement also
empowers the Board to designate any additional series or classes and allocate
shares to such series or classes.
The Fund has filed with the U.S. Securities and Exchange
Commission, a registration statement under the Securities Act, which
registration statement is deemed to register an indefinite number of shares of
the Fund pursuant to the provisions of Section 24(f) of the Investment Company
Act. You have further advised us that the Fund, and/or its predecessor, has
filed, and each year hereafter will timely file, a Notice pursuant to Rule 24f-2
under the Investment Company Act perfecting the registration of the shares sold
by the Fund during each fiscal year during which such registration of an
indefinite number of shares remains in effect.
You have also informed us that the shares of the Fund's
predecessor, have been, and will continue to be sold and the shares of the Fund
will be sold in accordance with the Fund's usual method of distributing its
registered shares, under which prospectuses are made available for delivery to
offerees and purchasers of such shares in accordance with Section 5(b) of the
Securities Act.
<PAGE>
Delaware Group Government Fund
July 28, 1999
Page 2
Based upon the foregoing information and examination, so long
as the Fund remains a valid and subsisting entity under the laws of its state of
organization, and the registration of an indefinite number of shares of the Fund
remains effective, the authorized shares of the Fund when issued for the
consideration set by the Board of Trustees pursuant to the Agreement, and
subject to compliance with Rule 24f-2, will be legally outstanding, fully-paid,
and non-assessable shares, and the holders of such shares will have all the
rights provided for with respect to such holding by the Agreement and the laws
of the State of Delaware.
We hereby consent to the use of this opinion, in lieu of any
other, as an exhibit to the Registration Statement of the Fund, along with any
amendments thereto, covering the registration of the shares of the Fund under
the Securities Act and the applications, registration statements or notice
filings, and amendments thereto, filed in accordance with the securities laws of
the several states in which shares of the Fund are offered, and we further
consent to reference in the registration statement of the Fund to the fact that
this opinion concerning the legality of the issue has been rendered by us.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
BY: /s/ Bruce G. Leto
---------------------------------
Bruce G. Leto
<PAGE>
POWER OF ATTORNEY
Each of the undersigned, a member of the Boards of Directors/Trustees
of the Delaware Investments Funds listed on Exhibit A to this Power of Attorney,
hereby constitutes and appoints on behalf of each of the Funds listed on Exhibit
A, David K. Downes, Wayne A. Stork and Walter P. Babich and any one of them
acting singly, his or her true and lawful attorneys-in-fact, in his or her name,
place, and stead, to execute and cause to be filed with the Securities and
Exchange Commission and other federal or state government agency or body, such
registration statements, and any and all amendments thereto as any of such
designees may deem to be appropriate under the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and all other
applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
this 16th day of July, 1999.
/s/ Walter P. Babich /s/ Thomas F. Madison
- -------------------- ---------------------
Walter P. Babich Thomas F. Madison
/s/ David K.Downes /s/ Charles E. Peck
- -------------------- ---------------------
David K. Downes Charles E. Peck
/s/ Anthony D. Knerr /s/ Wayne A. Stork
- -------------------- ---------------------
Anthony D. Knerr Wayne A. Stork
/s/ Ann R. Leven /s/ Jan L. Yeomans
- -------------------- ---------------------
Ann R. Leven Jan L. Yeomans
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE INVESTMENTS FUNDS
DELAWARE GROUP EQUITY FUNDS I
DELAWARE GROUP EQUITY FUNDS II
DELAWARE GROUP EQUITY FUNDS III
DELAWARE GROUP EQUITY FUNDS IV
DELAWARE GROUP EQUITY FUNDS V
DELAWARE GROUP INCOME FUNDS
DELAWARE GROUP GOVERNMENT FUND
DELAWARE GROUP CASH RESERVE
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
DELAWARE GROUP TAX-FREE FUND
DELAWARE GROUP TAX-FREE MONEY FUND
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS
DELAWARE GROUP ADVISER FUNDS
DELAWARE POOLED TRUST
DELAWARE GROUP PREMIUM FUND
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
VOYAGEUR FUNDS
VOYAGEUR INSURED FUNDS
VOYAGEUR INTERMEDIATE TAX FREE FUNDS
VOYAGEUR INVESTMENT TRUST
VOYAGEUR MUTUAL FUNDS
VOYAGEUR MUTUAL FUNDS II
VOYAGEUR MUTUAL FUNDS III
VOYAGEUR TAX FREE FUNDS
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
<PAGE>
POWER OF ATTORNEY
The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Investments Funds listed on Exhibit A to this Power of Attorney, hereby
constitutes and appoints on behalf of each of the Funds listed on Exhibit A,
David K. Downes, Wayne A. Stork and Walter P. Babich and any one of them acting
singly, his true and lawful attorneys-in-fact, in his name, place, and stead, to
execute and cause to be filed with the Securities and Exchange Commission and
other federal or state government agency or body, such registration statements,
and any and all amendments thereto as any of such designees may deem to be
appropriate under the Securities Act of 1933, as amended, the Investment Company
Act of 1940, as amended, and all other applicable federal and state securities
laws.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
this 16th day of July, 1999.
/s/ John H. Durham
- ------------------
John H. Durham
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I
DELAWARE GROUP EQUITY FUNDS II
DELAWARE GROUP EQUITY FUNDS III
DELAWARE GROUP EQUITY FUNDS IV
DELAWARE GROUP EQUITY FUNDS V
DELAWARE GROUP INCOME FUNDS
DELAWARE GROUP GOVERNMENT FUND
DELAWARE GROUP CASH RESERVE
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
DELAWARE GROUP TAX-FREE FUND
DELAWARE GROUP TAX-FREE MONEY FUND
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS
DELAWARE GROUP ADVISER FUNDS
DELAWARE POOLED TRUST
DELAWARE GROUP PREMIUM FUND
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
