0000950109-95-003457.txt : 19950829
0000950109-95-003457.hdr.sgml : 19950829
ACCESSION NUMBER: 0000950109-95-003457
CONFORMED SUBMISSION TYPE: 497
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 19950828
SROS: NONE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: DELAWARE GROUP LIMITED TERM GOVERNMENT FUNDS INC
CENTRAL INDEX KEY: 0000357059
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 236732199
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 497
SEC ACT: 1933 Act
SEC FILE NUMBER: 002-75526
FILM NUMBER: 95567882
BUSINESS ADDRESS:
STREET 1: ONE COMMERCE SQ
STREET 2: 2005 MARKET ST
CITY: PHILADELPHIA
STATE: PA
ZIP: 19103
BUSINESS PHONE: 2157512926
MAIL ADDRESS:
STREET 1: ONE COMMERCE SQ
STREET 2: 2005 MARKET ST
CITY: PHILADELPHIA
STATE: PA
ZIP: 19103
FORMER COMPANY:
FORMER CONFORMED NAME: DELAWARE GROUP TREASURY RESERVES INC
DATE OF NAME CHANGE: 19920703
FORMER COMPANY:
FORMER CONFORMED NAME: DELAWARE TREASURY RESERVES
DATE OF NAME CHANGE: 19880718
497
1
FORM 497
--------------------------------------------------------------------------------
The Delaware Group includes funds with a wide range of investment objectives.
Stock funds, income funds, tax-free funds, money market funds, global and
international funds and closed-end equity funds give investors the ability to
create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640, in Philadelphia call 215-988-1333.
Investment Manager
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
[PHOTO OF GEORGE WASHINGTON
National Distributor CROSSING THE DELAWARE
Delaware Distributors, L.P. RIVER APPEARS HERE]
1818 Market Street
Philadelphia, PA 19103
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
Legal Counsel
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
Independent Auditors
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
Custodian
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
--------------------------------------------------------------------------------
LIMITED-TERM
GOVERNMENT
FUND
------------
A Class
B Class
PROSPECTUS
AUGUST 29, 1995
DELAWARE
GROUP
========
LIMITED-TERM GOVERNMENT FUND PROSPECTUS
(FORMERLY TREASURY RESERVES INTERMEDIATE FUND) August 29, 1995
A CLASS SHARES/B CLASS SHARES
--------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640,
Philadelphia 215-988-1333
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918, Philadelphia 215-988-1241
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800-362-7500,
Philadelphia 215-988-1050
Delaware Group Limited-Term Government Funds, Inc. (formerly Delaware Group
Treasury Reserves, Inc.) (the "Fund") is a professionally-managed mutual fund of
the series type. This Prospectus describes the Limited-Term Government Fund A
Class ("Class A Shares") and the Limited-Term Government Fund B Class ("Class B
Shares") (such classes, which were formerly known as Treasury Reserves
Intermediate Fund A Class and Treasury Reserves Intermediate Fund B Class, will
be referred to individually as a "Class" and collectively as the "Classes") of
the Fund's Limited-Term Government Fund series (the "Series"). The Series'
objective is to seek a high, stable level of current income while attempting to
minimize fluctuations in principal and provide maximum liquidity. The Series
intends to achieve its objective by investing its assets in a diversified
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.
Class A Shares may be purchased at the public offering price, which is equal
to the next determined net asset value per share, plus a front-end sales charge,
and Class B Shares may be purchased at a price equal to the next determined net
asset value per share. The Class A Shares are subject to a maximum front-end
sales charge of 3.00% and annual 12b-1 Plan expenses. The Class B Shares are
subject to a contingent deferred sales charge ("CDSC") which may be imposed on
redemptions made within three years of purchase and 12b-1 Plan expenses which
are higher than those to which Class A Shares are subject and, except in the
case of certain purchases of Class B Shares acquired by exchange, are assessed
against the Class B Shares for no longer than approximately five years after
purchase. See Summary of Expenses, and Automatic Conversion of Class B Shares
under Buying Shares. These alternatives permit an investor to choose the method
of purchasing shares that is most beneficial given the amount of the purchase,
the length of time the investor expects to hold the shares and other
circumstances. See Buying Shares.
The minimum initial investment for each of the Classes is $1,000. Subsequent
investments must be at least $25 with respect to the Class A Shares and $100
with respect to the Class B Shares. Class B Shares are also subject to a maximum
purchase limitation of $250,000. The Fund will therefore reject any order for
purchase of more than $250,000 for Class B Shares. See Buying Shares and
Retirement Planning.
This Prospectus relates only to the Classes and sets forth information that
you should read and consider before you invest. Please retain it for future
reference. Part B of the registration statement, dated August 29, 1995, as it
may be amended from time to time, contains additional information about the
Series and has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling the
above numbers. The Fund's financial statements appear in its Annual Report,
which will accompany any response to requests for Part B.
The Series also offers the Limited-Term Government Fund Institutional Class.
That class is available only to certain enumerated institutions, has no front-
end or contingent deferred sales charge and is not subject to annual 12b-1 Plan
expenses. A prospectus for the Limited-Term Government Fund Institutional Class
can be obtained by writing to Delaware Distributors, L.P. at the above address
or by calling the above number.
TABLE OF CONTENTS
Cover Page............................................................... 1
Synopsis................................................................. 2
Summary of Expenses...................................................... 3
Financial Highlights..................................................... 4
Investment Objective and Policies
Suitability............................................................ 6
Investment Strategy.................................................... 6
The Delaware Difference--Plans and Services.............................. 10
Retirement Planning...................................................... 12
Buying Shares............................................................ 13
Redemption and Exchange.................................................. 21
Dividends and Distributions.............................................. 26
Taxes.................................................................... 27
Calculation of Offering Price and
Net Asset Value Per Share.............................................. 28
Management of the Fund................................................... 28
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
--------------------------------------------------------------------------------
1
SYNOPSIS
Capitalization
The Series offers three classes of shares: Class A Shares, Class B Shares and
the Limited-Term Government Fund Institutional Class. The Fund has an authorized
capitalization of three billion shares of capital stock with a par value of
$.001 per share, of which two billion shares have been allocated to the Series.
One billion four hundred million shares of such capital stock have been
allocated to these classes, as follows: one billion shares have been allocated
to the Class A Shares, two hundred million shares have been allocated to the
Class B Shares and two hundred million shares have been allocated to the
Limited-Term Government Fund Institutional Class. See Shares under Management of
the Fund.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment manager
for the Fund. The Manager or its affiliate, Delaware International Advisers
Ltd., also manages the other funds in the Delaware Group. Delaware Distributors,
L.P. (the "Distributor") is the national distributor for the Fund and for all of
the other mutual funds in the Delaware Group. Delaware Service Company, Inc.
(the "Transfer Agent") is the shareholder servicing, dividend disbursing and
transfer agent for the Fund and for all of the other mutual funds in the
Delaware Group. See Management of the Fund.
Sales Charge
The price of the Class A Shares includes a maximum front-end sales charge of
3.00% of the offering price, which is equivalent to 3.10% of the amount
invested, reduced on certain transactions of at least $100,000 but under
$1,000,000. For purchases of $1,000,000 or more, the front-end sales charge is
eliminated. Such shares are also subject to annual 12b-1 Plan expenses.
The price of the Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a CDSC of: (i) 2% if shares are redeemed within
two years of purchase; and (ii) 1% if shares are redeemed during the third 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
which are assessed against the Class B Shares for no longer than approximately
five years after purchase. See Buying Shares and Automatic Conversion of Class B
Shares thereunder; and Distribution (12b-1) and Service under Management of the
Fund.
Minimum Investment
The minimum initial investment for each of the Classes is $1,000 (see Part B
or contact your investment dealer for each Retirement Plan minimum) and
subsequent investments must be at least $25 for the Class A Shares and $100 for
the Class B Shares. Class B Shares are also subject to a maximum purchase
limitation of $250,000. See Buying Shares.
Investment Objective
The objective of the Series is to seek high, stable income by investing 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. See Investment Objective and Policies.
Open-End Investment Company
The Fund, which was organized as a Pennsylvania business trust in 1981 and
reorganized as a Maryland corporation in 1990, is an open-end management
investment company. The Series' portfolio of assets is diversified for purposes
of the Investment Company Act of 1940 (the "1940 Act"). See Shares under
Management of the Fund.
Investment Management Fees
The Manager furnishes investment management services to the Fund, subject to
the supervision and direction of the Board of Directors. Under the Investment
Management Agreement, the annual compensation paid to the Manager is equal to
1/2 of 1% of the average daily net assets, less a proportionate share of all
directors' fees paid to the unaffiliated directors by the Series. See Management
of the Fund.
Redemption and Exchange
The Class A Shares of the Series are redeemed or exchanged at the net asset
value calculated after receipt of the redemption or exchange request. Neither
the Series nor the Distributor assesses a charge for redemptions or exchanges of
the Class A Shares, except for certain redemptions of such shares purchased at
net asset value, which may be subject to a contingent deferred sales charge if
such purchase triggered the payment of a dealer's commission. The Class B Shares
of the Series are redeemed or exchanged at the net asset value calculated after
receipt of the redemption or exchange request, less, in the case of redemptions,
any applicable CDSC. Neither the Series nor the Distributor assesses any
additional charges for redemptions or exchanges of the Class B Shares. See
Redemption and Exchange.
2
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses applicable
to Class A and Class B Shares follows:
Class A Class B
Shareholder Transaction Expenses Shares Shares
---------------------------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................. 3.00% None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................. None None
Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption
proceeds, whichever is lower)....................................... None* 2%*
Redemption Fees....................................................... None** None**
Annual Operating Expenses Class A Class B
(as a percentage of average daily net assets) Shares Shares
---------------------------------------------------------------------------------------------------------
Management Fees....................................................... 0.50% 0.50%
12b-1 Plan Expenses (including service fees).......................... 0.15%/+/*** 1.00%/+/
Other Operating Expenses.............................................. 0.26% 0.26%/++/
----- -----
Total Operating Expenses.......................................... 0.91%*** 1.76%
===== =====
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Classes will bear directly or
indirectly. *With respect to the Class A Shares, purchases of $1 million or more
may be made at net asset value; however, if in connection with any such
purchase, certain dealer commissions are paid to financial advisers through whom
such purchases are effected, a contingent deferred sales charge of 1% will be
imposed in the event of certain redemptions within 12 months of purchase
("Limited CDSC"). The Class B Shares are subject to a CDSC of: (i) 2% if shares
are redeemed within the first two years of purchase; (ii) 1% if shares are
redeemed during the third year following purchase; and (iii) 0% thereafter. See
Contingent Deferred Sales Charge for Certain Purchases of Class A Shares Made at
Net Asset Value under Redemption and Exchange and Deferred Sales Charge
Alternative--Class B Shares under Buying Shares. **CoreStates Bank, N.A.
currently charges $7.50 per redemption for redemptions payable by wire. ***The
actual 12b-1 Plan expenses to be paid and, consequently, the "Total Operating
Expenses" of the Class A Shares, may be somewhat more (but the 12b-1 expenses
may be no more than .15%) or somewhat less (but the 12b-1 expenses may be no
less than .10%) because of the formula adopted by the Board of Directors for use
in calculating the 12b-1 Plan expenses beginning June 1, 1992. See Distribution
(12b-1) and Service. /+/Class A Shares and Class B Shares are subject to
separate 12b-1 Plans. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). See Distribution
(12b-1) and Service. /++/"Other Operating Expenses" for Class B Shares are
estimates based upon the actual expenses incurred by the Class A Shares for its
fiscal year ended December 31, 1994. Also, see Limited-Term Government Fund
Institutional Class for expense information about that class.
The following example illustrates the expenses that an investor would pay on a
$1,000 investment over various time periods, assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted in the table
above, the Fund charges no redemption fees with respect to the Class A Shares
and, if shares are redeemed within three years after purchase, the Fund charges
a CDSC with respect to the Class B Shares.
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
Class A Shares $39/1/ $58 $79 $139 Class B Shares $38 $65 $95/2/ $155/2/
An investor would pay the following expenses on the same $1,000 investment,
assuming no redemption at the end of the period:
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
Class A Shares $39 $58 $79 $139 Class B Shares $18 $55 $95/2/ $155/2/
/1/Under certain circumstances, a Limited CDSC, which has not been reflected in
this calculation, may be imposed in the event of certain redemptions within
12 months of purchase. See Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares Made at Net Asset Value under Redemption and
Exchange.
/2/At the end of no more than approximately five years after purchase, Class B
Shares will be automatically converted into Class A Shares. The example above
assumes conversion of Class B Shares at the end of year five. However, the
conversion may occur as late as three months after the fifth anniversary of
purchase, during which time the higher 12b-1 Plan fees payable by Class B
Shares will continue to be assessed. See Automatic Conversion of Class B
Shares under Buying Shares for a description of the automatic conversion
feature. Years six through ten reflect expenses of the Class A Shares. The
conversion will constitute a tax-free exchange for federal income tax
purposes. See Taxes.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
3
FINANCIAL HIGHLIGHTS
The following financial highlights from November 24, 1985 through December 31,
1994 for the Class A Shares and May 2, 1994 through December 31, 1994 for the
Class B Shares are derived from the financial statements of Delaware Group
Limited-Term Government Funds, Inc.-Limited-Term Government Fund series and have
been audited by Ernst & Young LLP, independent auditors. The data should be read
in conjunction with the financial statements, related notes and the report of
Ernst & Young LLP covering such financial information and highlights, all of
which are incorporated by reference into Part B. Further information about the
Series' performance is contained in its Annual Report to shareholders. A copy of
the Series' Annual Report (including the report of Ernst & Young LLP) may be
obtained from the Fund upon request at no charge.
--------------------------------------------------------------------------------
Class A Shares
--------------------------------------------------------------------------
Year Ended
12/31/94 12/31/93 12/31/92 12/31/91 12/31/90 12/28/89
Net Asset Value, Beginning of Period........... $9.840 $10.000 $10.190 $ 9.770 $9.720 $9.700
Income From Investment Operations
---------------------------------
Net Investment Income.......................... 0.667 0.681 0.740 0.799 0.814 0.843
Net Gains or Losses on Securities
(both realized and unrealized)................ (0.850) (0.160) (0.190) 0.420 0.050 0.020
------ ------ ------ ------- ------ ------
Total From Investment Operations............. (0.183) 0.521 0.550 1.219 0.864 0.863
------ ------ ------ ------- ------ ------
Less Distributions
------------------
Dividends (from net investment income)......... (0.667) (0.681) (0.740) (0.799) (0.814) (0.843)
Distributions (from capital gains)............. none none none none none none
Returns of Capital............................. none none none none none none
------ ------ ------ ------- ------ ------
Total Distributions.......................... (0.667) (0.681) (0.740) (0.799) (0.814) (0.843)
------ ------ ------ ------- ------ ------
Net Asset Value, End of Period................. $8.990 $ 9.840 $10.000 $10.190 $9.770 $9.720
====== ====== ====== ======= ====== ======
----------------------------------------------------------------------------------------------------------------------------
Total Return/2/................................ (1.88%) 5.31% 5.62%/2/ 13.04%/2/ 9.32% 9.28%
---------------
----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------
Net Assets, End of Period (000's omitted)...... $789,525 $1,126,031 $861,829 $144,129 $107,739 $107,637
Ratio of Expenses to Average Daily Net Assets.. 0.91% 0.88% 0.87%/3/ 0.90%/3/ 0.99% 0.97%
Ratio of Net Investment Income to Average
Daily Net Assets.............................. 7.10% 6.77% 7.03%/4/ 7.96%/4/ 8.41% 8.72%
Portfolio Turnover Rate........................ 148% 171% 77% 42% 175% 311%
----------------------------
Class A Shares
------------------------------------------------
Period
11/24/85/1/
Year Ended through
12/29/88 12/31/87 12/25/86 12/26/85
Net Asset Value, Beginning of Period........... $9.800 $9.980 $10.040 $10.000
Income From Investment Operations
---------------------------------
Net Investment Income.......................... 0.730 0.695 0.836 0.057
Net Gains or Losses on Securities
(both realized and unrealized)................ (0.100) (0.180) (0.060) 0.040
------ ------ ------- ------
Total From Investment Operations............. 0.630 0.515 0.776 0.097
------ ------ ------- ------
Less Distributions
------------------
Dividends (from net investment income)......... (0.730) (0.695) (0.836) (0.057)
Distributions (from capital gains)............. none none none none
Returns of Capital............................. none none none none
------ ------ ------- ------
Total Distributions.......................... (0.730) (0.695) (0.836) (0.057)
------ ------ ------- ------
Net Asset Value, End of Period................. $9.700 $9.800 $ 9.980 $10.040
====== ====== ======= ======
----------------------------------------------------------------------------------------------------
Total Return/2/................................ 6.63% 5.46% 7.89%/2/ /1/
---------------
----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------
Net Assets, End of Period (000's omitted)...... $132,859 $138,818 $182,727 $8,070
Ratio of Expenses to Average Daily Net Assets.. 0.90% 1.06% 1.02%/3/ /1/
Ratio of Net Investment Income to Average
Daily Net Assets.............................. 7.44% 6.86% 7.85%/4/ /1/
Portfolio Turnover Rate........................ 146% 304% 39% /1/
----------------------------
/1/November 24, 1985 was the date of the initial public offering of the Limited-
Term Government Fund A Class; this Class was formerly known as Treasury
Reserves Intermediate Fund A Class. See Shares for additional information.
The ratios of expenses and net investment income to average daily net assets,
total return and portfolio turnover have been omitted as management believes
that such ratios for this relatively short period are not meaningful.
/2/Does not reflect maximum front-end sales charge, currently, 3.00% nor the 1%
Limited CDSC that would apply in the event of certain redemptions within 12
months of purchase. See Contingent Deferred Sales Charge for Certain
Purchases of Class A Shares Made at Net Asset Value. Total return for 1986,
1991 and 1992 reflects the expense limitations referenced in Notes 3 and 4.
/3/Ratio of expenses to average daily net assets prior to expense limitation
was 0.90% for 1992, 0.99% for 1991 and 1.08% for 1986.
/4/Ratio of net investment income prior to expense limitation to average
daily net assets was 7.01% for 1992, 7.87% for 1991 and 7.79% for 1986.
4
FINANCIAL HIGHLIGHTS
(Continued)
--------------------------------------------------------------------------------
Class B Shares
--------------
Period
5/2/94/1/
through
12/31/94
Net Asset Value, Beginning of Period................................. $9.430
Income From Investment Operations
---------------------------------
Net Investment Income................................................ 0.399
Net Gains or Losses on Securities (both realized and unrealized)..... (0.440)
------
Total From Investment Operations................................... (0.041)
------
Less Distributions
------------------
Dividends (from net investment income)............................... (0.399)
Distributions (from capital gains)................................... none
Returns of Capital................................................... none
Total Distributions................................................ (0.399)
------
Net Asset Value, End of Period....................................... $8.990
======
-----------------------------------------------------------------------------------------------
Total Return......................................................... (0.44%)/1/2/
------------
-----------------------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------
Net Assets, End of Period (000's omitted)............................ $6,282
Ratio of Expenses to Average Daily Net Assets........................ 1.76%/1/
Ratio of Net Investment Income to Average Daily Net Assets........... 6.25%/1/
Portfolio Turnover Rate.............................................. 148%
------------------
/1/Date of initial public offering of Limited-Term Government Fund B Class; this
Class was formerly known as Treasury Reserves Intermediate Fund B Class. See
Shares for additional information. Ratios have been annualized but total
return has not been annualized.
/2/Total return does not reflect any applicable contingent deferred sales
charge.
5
INVESTMENT OBJECTIVE
AND POLICIES
The Series seeks to provide a high stable level of income, while attempting to
minimize fluctuations in principal and provide maximum liquidity. It seeks to do
this 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. The Series may
also invest up to 20% of its assets in corporate notes and bonds, certificates
of deposit and obligations of both U.S. and foreign banks, commercial paper and
certain asset-backed securities.
The Series is not a money market fund. A money market fund is designed for
stability of principal; consequently, the level of income fluctuates. The Series
is designed for greater stability of income at a relatively higher level;
consequently, the principal value will fluctuate over time.
The level of income will vary depending on interest rates and the portfolio.
However, since longer term rates are generally less volatile than short-term
rates, the level of income for the Series may be less volatile than, for
example, a money market fund.
Because the Series invests in longer term securities than a money market fund,
the value of shares will fluctuate. When interest rates rise, the share value
will tend to fall, and when interest rates fall, the share value will tend to
rise. See Investment Strategy.
SUITABILITY
The Series' objective of a high stable income stream is suited for longer term
investments, such as tax-deferred Retirement Plans (e.g., IRA, 401(k), Profit
Sharing, etc.), where the income stream can be left to compound on a tax-
deferred basis.
The Series' objective is also suitable for individuals who want a stable and
high income flow, the security associated with U.S. Government-backed
investments and the convenience and liquidity of mutual funds. Also, ownership
of Series shares reduces the bookkeeping and administrative inconveniences
connected with direct purchases of these instruments.
Investors should consider asset value fluctuation as well as yield in making
an investment decision. Therefore, the Series may not be suitable for investors
whose overriding objective is stability of principal. That is an objective of
the Delaware Group money market funds. Also, the Series is not designed for the
investor who is willing to assume the risks involved in maximizing the yield or
capital gain potential of a long-term bond portfolio. These are objectives of
other fixed income funds in the Delaware Group of funds that are generally
available through registered investment dealers.
INVESTMENT STRATEGY
The Series will attempt to provide you with yields higher than those available
in money market funds or bank money market accounts by extending its portfolio
maturities.
The yield curves, as shown in the chart below, reflect the additional return
that may be obtained by a moderate extension of maturities.
YIELD CURVE
Limited-Term
Government Fund
12/31/93 12/31/94
3 Month 3.075 5.682
6 Month 3.287 6.495
1 Year 3.578 7.162
2 Year 4.234 7.690
3 Year 4.514 7.778
5 Year 5.197 7.827
7 Year 5.339 7.827
10 Year 5.792 7.827
30 Year 6.346 7.876
The Series expects to have an average portfolio maturity in the shaded area
indicated above. The yields to maturity in the curves are for unmanaged Treasury
securities with various remaining maturities. The black line shows the yield
curve at December 31, 1993. The blue line represents the yield curve as of
December 31, 1994. The data was obtained from Federal Reserve Statistical
Release H.15 (519). These are not necessarily indicative of future performance
or yield curves. The yield curve changes over time and short rates may
occasionally be higher than intermediate rates.
6
Maturity Restrictions
The Series seeks to reduce the effects of interest rate volatility on
principal by limiting the average effective maturity (as that term is defined in
Part B) to no more than three to five years.
If in the judgment of the Manager rates are low, it will tend to shorten the
average effective maturity to three years or less. Conversely, if in its
judgment rates are high, it will tend to extend the average effective maturity
to five years or less. The Manager will increase the proportion of short-term
instruments when short-term yields are higher. The Manager also has the ability
to purchase individual securities with a remaining maturity of up to 15 years.
Quality Restrictions
The Series will invest primarily in securities issued or guaranteed by the
U.S. Government (e.g., Treasury Bills and Notes), its agencies (e.g., Federal
Housing Administration) or instrumentalities (e.g., Federal Home Loan Bank) or
government-sponsored corporations (e.g., Federal National Mortgage Association),
and repurchase agreements and publicly- and privately-issued mortgage-backed
securities collateralized by such securities. The Series may invest up to 20% of
its assets in: (1) corporate notes and bonds rated A or above; (2) certificates
of deposit and obligations of both U.S. and foreign banks if they have assets of
at least one billion dollars; (3) commercial paper rated P-1 by Moody's
Investors Service ("Moody's") and/or A-1 by Standard and Poor's Corporation
("S&P"); and (4) certain asset-backed securities rated Aaa by Moody's or AAA by
S&P.
The value of your shares will fluctuate in response to general interest rate
changes. When rates rise, the value of securities in the portfolio will
generally fall. Conversely, when rates fall, the value of securities in the
portfolio will generally rise.
Investment Techniques
To achieve its objective, the Series may use certain hedging techniques which
might not be conveniently available to individuals. These techniques will be
used at the Manager's discretion to protect the Series' principal value.
The Series may purchase put options, write secured put options, write covered
call options, purchase call options and enter into closing transactions.
A put option purchased by the Series gives it the right to sell one of its
securities for an agreed price up to an agreed date. The advantage is that the
Series can be protected should the market value of the security decline due to a
rise in interest rates. However, the Series must pay a premium for this right,
whether it exercises it or not. The Series will only purchase put options to the
extent that the premiums on all outstanding put options do not exceed 2% of the
Series' total assets.
A put option written by the Series obligates it to buy the security underlying
the option at the exercise price during the option period, and the purchaser of
the option has the right to sell the security to the Series. During the option
period, the Series, as writer of the put option, may be assigned an exercise
notice by the broker/dealer through whom the option was sold requiring the
Series to make payment of the exercise price against delivery of the underlying
security. This obligation terminates upon expiration of the put option or at
such earlier time at which the writer effects a closing purchase transaction.
The Series will only write put options on a secured basis. The advantage to the
Series of writing put options is that it receives premium income. The
disadvantage is that the Series may be required, when the put is exercised, to
purchase securities at higher prices than the current market price.
A covered call option written by the Series obligates it to sell one of its
securities for an agreed price up to an agreed date. The advantage is that the
Series receives premium income, which may offset the cost of purchasing put
options. However, the Series may lose the potential market appreciation of the
security if the Manager's judgment is wrong and interest rates fall.
When the Series purchases a call option, in return for a premium paid by the
Series to the writer of the option, the Series obtains the right to buy the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option, who receives the premium
upon writing the option, has the obligation, upon exercise of the option, to
deliver the underlying security against payment of the exercise price. The
advantage is that the Series may hedge against an increase in the price of
securities which it ultimately wishes to buy. However, the premium paid for the
call option plus any transaction costs will reduce the benefit, if any, realized
by the Series upon exercise of the option. The Series will only purchase call
options to the extent that premiums paid on all outstanding call options do not
exceed 2% of the Series' total assets.
7
Closing transactions essentially let the Series offset put options or call
options prior to exercise or expiration. If the Series cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
The Series may use both Exchange-traded and over-the-counter options. Certain
over-the-counter options may be illiquid. The Series will not invest more than
10% of its assets in illiquid securities.
The Series may invest in futures contracts and options on such futures
contracts subject to certain limitations.
Futures contracts are agreements for the purchase or sale for future delivery
of securities. When a futures contract is sold, the Series incurs a contractual
obligation to deliver the securities underlying the contract at a specified
price on a specified date during a specified future month. A purchase of a
futures contract means the acquisition of a contractual right to obtain delivery
to the Series of the securities called for by the contract at a specified price
during a specified future month. The Series will not enter into futures
contracts to the extent that more than 5% of the Series' assets are required as
futures contract margin deposits and will not engage in such transactions to the
extent that obligations relating to such transactions exceed 20% of the Series'
assets.
The Series may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.
The principal purpose of the purchase or sale of futures contracts for the
Series is to protect the Series against the adverse effects of fluctuations in
interest rates without actually buying or selling such securities. To the extent
that interest rates move in an unexpected direction, however, the Series may not
achieve the anticipated benefits of futures contracts or options on such futures
contracts or may realize a loss. To the extent that the Series purchases an
option on a futures contract and fails to exercise the option prior to the
exercise date, it will suffer a loss of the premium paid. Further, the possible
lack of a secondary market would prevent the Series from closing out its option
positions relating to futures.
The Series may invest in mortgage-backed securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. In addition, the Series
may invest up to 35% of 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 and REMICs issued by private entities are not government securities and
are not directly guaranteed by any government securities and are not directly
guaranteed by any government agency. They are secured by the underlying
collateral of the private issuer. The Series will invest in such private-backed
securities only if they are 100% collateralized at the time of issuance by
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. The Series currently invests in privately-issued CMOs and
REMICs only if they are rated at the time of purchase in the two highest grades
by a nationally-recognized rating agency. Certain of the CMOs in which the
Series may invest 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).
As noted and subject to the limitations set forth above, the Series may also
invest in securities which are backed by assets such as receivables on home
equity and credit card loans, and receivables regarding automobile, mobile home
and recreational vehicle loans, wholesale dealer floor plans and leases. All
such securities must be rated in the highest rating category by a reputable
credit rating agency (e.g., AAA by S&P or Aaa by Moody's). Such receivables are
securitized in either a pass-through or a pay-through structure. Pass-through
securities provide investors with an income stream consisting of both principal
and interest payments in respect of the receivables in the underlying pool. Pay-
through asset-backed securities are debt obligations issued usually by a special
purpose entity, which are collateralized by the various receivables and in which
the payments on the underlying receivables provide the funds to pay the debt
service on the debt obligations issued. The Series may invest in these and other
types of asset-backed securities that may be developed in the future. It is the
Series' current policy to limit asset-backed investments to those represented by
interests in credit card receivables, wholesale dealer floor plans, home equity
loans and automobile loans.
8
Due to the shorter maturity of the collateral backing such securities, there
is less of a risk of substantial prepayment than with mortgage-backed
securities. Such asset-backed securities do, however, involve certain risks not
associated with mortgage-backed securities, including the risk that security
interests cannot be adequately or in many cases, ever, established. In addition,
with respect to credit card receivables, a number of state and federal consumer
credit laws give debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the outstanding balance. In the case of automobile
receivables, there is a risk that the holders may not have either a proper or
first security interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance and technical
requirements under state laws. Therefore, recoveries on repossessed collateral
may not always be available to support payments on the securities. For further
discussion concerning the risks of investing in such asset-backed securities,
see Part B.
The Series may also use repurchase agreements which are at least 100%
collateralized by securities in which the Series can invest directly. Repurchase
agreements help the Series to invest cash on a temporary basis. Under a
repurchase agreement, the Series acquires ownership and possession of a
security, and the seller agrees to buy the security back at a specified time and
higher price. If the seller is unable to repurchase the security, the Series
could experience delays and losses in liquidating the securities. To minimize
this possibility, the Series considers the creditworthiness of banks and dealers
when entering into repurchase agreements.
Portfolio Loan Transactions
The Series may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
The major risk to which the Series would be exposed on a loan transaction is
the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Series will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
* * *
The Series may invest in restricted securities, including securities eligible
for resale without registration pursuant to Rule 144A ("Rule 144A Securities")
under the Securities Act of 1933. Rule 144A permits many privately placed and
legally restricted securities to be freely traded among certain institutional
buyers such as the Series. The Series may invest no more than 10% of the value
of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day functions of determining whether or not individual Rule
144A Securities are liquid for purposes of the Series' 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Series'
holdings of illiquid securities exceed the Series' 10% limit on investment in
such securities, the Manager will determine what action shall be taken to ensure
that the Series continues to adhere to such limitation.
* * *
Part B further clarifies the Series' investment policies as well as the
methods used to determine maturity. A brief discussion of those factors that
materially affected the Series' performance during its most recently completed
fiscal year appears in the Series' Annual Report.
9
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
(Philadelphia 215-988-1333)
Fund Information; Literature;
Price, Yield and Performance Figures
Shareholder Service Center
800-523-1918
(Philadelphia 215-988-1241)
Information on Existing Regular Investment
Accounts and Retirement Plan Accounts;
Wire Investments; Wire Liquidations;
Telephone Liquidations; Telephone Exchanges
Delaphone
800-362-FUND (800-362-3863)
Shareholder Services
During business hours, you can call the Fund's Shareholder Service Center. The
representatives can answer any of your questions about your account, the Series,
the various service features and other funds in the Delaware Group.
Performance Information
During business hours, you can call the Investor Information Center anytime to
get current yield information. Current yield and total return information may
also be included in advertisements and information given to shareholders. Yield
information is computed on an annual basis over a 30-day period.
Delaphone Service
Delaphone is an account inquiry service for investors with Touch-Tone/(R)/
phone service. It enables you to get information on your account faster than the
mailed statements and confirmations seven days a week, 24 hours a day.
Account Statements
A statement of account will be mailed each quarter summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of distributions. See
Dividend Reinvestment Plan below. You should examine statements and
confirmations immediately and promptly report any discrepancy by calling the
Shareholder Service Center.
Duplicate Confirmations
If your investment dealer is noted on your investment application, we will
send your dealer a duplicate confirmation. This makes it easier for your
investment dealer to help you manage your investments.
Tax Information
Each year, the Fund will mail you information on the tax status of your
dividends and distributions.
Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Also, you may be
permitted to invest your distributions in certain other funds in the Delaware
Group, subject to the exceptions noted below as well as the eligibility and
minimum purchase requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Series or other
Delaware Group funds may be effected without a front-end sales charge. Class B
Shares of the Series or other Delaware Group funds acquired through
reinvestments of distributions will not be subject to a contingent deferred
sales charge if those shares are later redeemed. See Automatic Conversion of
Class B Shares under Buying Shares for information concerning the automatic
conversion of Class B Shares acquired by reinvesting dividends.
Holders of Class A Shares of the Series may not reinvest their distributions
in the Class B Shares of any fund in the Delaware Group, including the Series.
Holders of Class B Shares of the Series may reinvest their distributions only in
the Class B Shares of the funds in the Delaware Group which offer that class of
shares (the "Class B Funds"). See Class B Funds under Buying Shares for a list
of the funds offering Class B Shares. For more information about reinvestments,
call the Shareholder Service Center.
10
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of their
shares into shares of the other funds in the Delaware Group, subject to the
exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus. Shareholders of Class B Shares
of the Series are permitted to exchange all or part of their Class B Shares only
into the corresponding class of shares of the Class B Funds, subject to the
minimum purchase and other requirements set forth in each fund's prospectus.
Exchanges are not permitted between Class A Shares and Class B Shares of any of
the funds of the Delaware Group.
Except as noted below, permissible exchanges can be made without payment of a
front-end sales charge or the imposition of a contingent deferred sales charge
at the time of the exchange, as applicable. Persons exchanging into the Class A
Shares from a fund in the Delaware Group offered without a front-end sales
charge may be required to pay the applicable front-end sales charge. See
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
See Redemption and Exchange for additional information on exchanges.
Wealth Builder Option
You may be permitted to elect to have amounts in your account automatically
invested in shares of other funds in the Delaware Group. Investments under this
feature are exchanges and are therefore subject to the same conditions and
limitations as other exchanges of Class A and Class B Shares. See Redemption and
Exchange.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature allows the
combining of Class A Shares and Class B shares of the Series that are currently
owned with the dollar amount of new purchases of Class A Shares for a reduced
front-end sales charge. Under the Combined Purchases Privilege, this includes
certain shares owned in certain other funds in the Delaware Group. See Buying
Shares.
Letter of Intention
With respect to Class A Shares, the Letter of Intention feature permits the
aggregation of purchases over a 13-month period to obtain a reduced front-end
sales charge. See Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits shareholders to reinvest proceeds
of Class A Shares redeemed, within one year from the redemption, without a
front-end sales charge. See Part B.
Financial Information about the Series
Each fiscal year, you will receive an audited annual report and an unaudited
semi-annual report. These reports provide detailed information about the Series'
investments and performance. The Fund's fiscal year ends on December 31.
The Delaware Digest
You will receive newsletters covering topics of interest about your investment
alternatives and services from Delaware Group.
11
RETIREMENT PLANNING
An investment in the Series may also be suitable for tax-deferred Retirement
Plans. Among the Retirement Plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans.
Retirement Plans may be subject to plan establishment fees, annual maintenance
fees and/or other administrative or Trustee fees. Fees are based on the number
of participants in the Plan as well as the services selected. Additional
information about fees is included in Retirement Plan materials. The minimum
initial investment in the Classes (as available) for each Plan is $250;
subsequent investments must be at least $25.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to Retirement Plan shareholders. Certain
Retirement Plans may qualify to purchase the Limited-Term Government Fund
Institutional Class. For additional information on any of the Plans and
Delaware's retirement services, call the Shareholder Service Center or see
Part B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored retirement
plan, may establish their own retirement program for investments in each of the
Classes. Contributions to an IRA may be tax-deductible and earnings are tax-
deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted, and in some cases eliminated, for individuals who
participate in certain employer-sponsored retirement plans and whose annual
income exceeds certain limits. Existing IRAs and future contributions up to the
IRA maximums, whether deductible or not, still earn on a tax-deferred basis.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a tax-
sheltered retirement program by making contributions on behalf of all eligible
employees. Each of the Classes is available for investment by a SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Offers employers with 25 or fewer eligible employees the ability to establish
a SEP/IRA that permits salary deferral contributions. An employer may also elect
to make additional contributions to this Plan. Class B Shares are not available
for purchase by such Plans.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of non-profit
organizations to enter into a deferred compensation arrangement for the purchase
of shares of each of the Classes.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other entities to
enter into a deferred compensation arrangement for the purchase of shares of
each of the Classes.
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a tax-
qualified plan which provides for the investment of contributions in Class A
Shares. Class B Shares are not available for purchase by such Plans.
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax-qualified plan based on salary deferral
contributions. An employer may elect to make profit sharing contributions and/or
matching contributions into the Plan. Class B Shares are not available for
purchase by such Plans.
12
BUYING SHARES
Purchase Amounts
The minimum initial purchase for each of the Classes is $1,000. Subsequent
purchases must be $25 or more with respect to the Class A Shares and $100 or
more with respect to the Class B Shares. Retirement Plans have other minimums.
Refer to Part B or call the Shareholder Service Center for more information on
these Plans. Class B Shares are also subject to a maximum purchase limitation of
$250,000.
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net asset
value per share, plus a sales charge which may be imposed, at the election of
the purchaser, at the time of the purchase with respect to Class A Shares
("front-end sales charge alternative") or on a contingent deferred basis with
respect to Class B Shares ("deferred sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge alternative
acquires Class A Shares. Although Class A Shares incur a sales charge when they
are purchased, generally they are not subject to any sales charge when they are
redeemed, but are subject to annual 12b-1 Plan expenses of up to a maximum of
.30% (currently, no more than .15% pursuant to Board action) of average daily
net assets of such shares. See Contingent Deferred Charges for Certain Purchases
of Class A Shares Made at Net Asset Value and Distribution (12b-1) and Service.
Certain purchases of Class A Shares qualify for reduced front-end sales charges.
See Front-End Sales Charge Alternative--Class A Shares, below.
Class B Shares. An investor who elects the deferred sales charge alternative
acquires Class B Shares. Class B Shares do not incur a front-end sales charge
when they are purchased, but they are subject to a sales charge if they are
redeemed within three years of purchase and are subject to annual 12b-1 Plan
expenses of up to a maximum of 1% (.25% of which are service fees to be paid by
the Series to the Distributor, dealers or others for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of such
shares for no longer than approximately five years after purchase. Class B
Shares permit all of the investor's dollars to work from the time the investment
is made. The higher 12b-1 Plan expenses paid by Class B Shares will cause such
shares to have a higher expense ratio and to pay lower dividends than those
related to the Class A Shares. At the end of no more than approximately five
years after purchase, the Class B Shares are automatically converted into Class
A Shares. See Automatic Conversion of Class B Shares. Such conversion will
constitute a tax-free exchange for federal income tax purposes. See Taxes.
The alternative purchase arrangements permit investors in the Series to choose
the method of purchasing shares that is most beneficial given the amount of
their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur a front-end sales
charge by purchasing Class A Shares or to have the entire initial purchase price
invested in the Series with the investment thereafter being subject to a CDSC,
if shares are redeemed within three years of purchase, by purchasing Class B
Shares.
As an illustration, investors who qualify for significantly reduced front-end
sales charges on purchases of Class A Shares, as described below, might elect
the front-end sales charge alternative because similar sales charge reductions
are not available for purchases under the deferred sales charge alternative.
Moreover, shares acquired under the front-end sales charge alternative are
subject to annual 12b-1 Plan expenses of up to .30% (currently, no more than
.15%), whereas shares acquired under the deferred sales charge alternative are
subject to higher annual 12b-1 Plan expenses of 1% for no more than
approximately five years after purchase. See Automatic Conversion of Class B
Shares. However, because front-end sales charges are deducted at the time of
purchase, such investors would not have all their funds invested initially.
Certain other investors might determine it to be more advantageous to have all
their funds invested initially, although they would be subject to a CDSC for up
to three years after purchase as well as annual 12b-1 Plan expenses of 1% until
the shares are automatically converted into Class A Shares. The 12b-1 Plan
distribution expenses with respect to the Class B Shares will be offset to the
extent any return is realized on the additional funds initially invested under
the deferred sales charge alternative. However, there can be no assurance as to
the return, if any, that will be realized on such additional funds.
For the distribution and related services provided to, and the expenses borne
on behalf of, the Series, the Distributor and others will be paid, in the case
of the Class A Shares, from the proceeds of the front-end sales charge and 12b-1
Plan fees and, in the case of the Class B Shares, from the proceeds of the 12b-1
Plan fees and, if applicable, the CDSC incurred upon redemption within three
years of purchase. Sales personnel may receive different compensation for
selling Class A or Class B Shares. INVESTORS SHOULD UNDERSTAND THAT THE PURPOSE
AND FUNCTION OF THE 12B-1 PLAN AND THE CDSC WITH RESPECT TO THE CLASS B SHARES
ARE THE SAME AS THOSE OF THE 12B-1 PLAN AND THE FRONT-END SALES CHARGE WITH
RESPECT TO THE CLASS A SHARES IN THAT THE FEES AND CHARGES PROVIDE FOR THE
FINANCING OF THE DISTRIBUTION OF THE RESPECTIVE CLASSES. See 12B-1 Distribution
Plans--Class A and Class B Shares.
13
Dividends paid by the Series with respect to the Class A and Class B Shares,
to the extent any dividends are paid, will be calculated in the same manner at
the same time, on the same day and will be in the same amount, except that the
additional amount of 12b-1 Plan expenses relating to the Class B Shares will be
borne exclusively by such shares. See Calculation of Offering Price and Net
Asset Value Per Share. The shareholders of the Class A and Class B Shares each
have an exchange privilege by which they may exchange their Class A Shares or
Class B Shares for the Class A Shares or Class B Shares, respectively, of
certain other Delaware Group funds. See Exchange Privilege under The Delaware
Difference and Redemption and Exchange.
The NASD has adopted amendments to its Rules of Fair Practice relating to
investment company sales charges. The Fund and the Distributor intend to operate
in compliance with these rules with respect to both Class A and Class B Shares.
Front-End Sales Charge Alternative--Class A Shares
The Class A Shares may be purchased at the offering price which reflects a
maximum front-end sales charge of 3.00%. See Calculation of Offering Price and
Net Asset Value Per Share. Lower front-end sales charges apply for larger
purchases. See the table below. The Class A Shares represent a proportionate
interest in the Series' assets and are subject to annual 12b-1 Plan expenses.
See Distribution (12b-1) and Service under Management of the Fund.
Reduced Front-End Sales Charge
Purchases of $100,000 or more at the offering price carry a reduced front-end
sales charge as shown in the following table.
Limited-Term Government Fund A Class
Front-End Sales Dealer's
Charge as % of Concession**
Amount of Purchase Offering Amount as % of
Price Invested Offering Price
Less than $100,000 3.00% 3.10% 2.50%
$100,000 but under $250,000 2.50 2.56 2.00
$250,000 but under $500,000 2.00 2.04 1.60
$500,000 but under $1,000,000* 1.50 1.52 1.20
*There is no front-end sales charge on purchases of $1 million or more but,
under certain limited circumstances, a 1% Limited CDSC may apply with respect
to Class A Shares.
--------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous purchases and current
purchases. The reduced front-end sales charge will be granted upon confirmation
of the shareholder's holdings by the Fund. Such reduced front-end sales charges
are not retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow dealers up to the full front-end sales charge shown above. In
addition, certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional concession of up to .15% of
the offering price. Dealers who receive 90% or more of the sales charge may be
deemed to be underwriters under the Securities Act of 1933.
**Financial institutions or their affiliated brokers may receive an
agency transaction fee in the percentages set forth above.
--------------------------------------------------------------------------------
For initial purchases of Class A Shares of $1,000,000 or more made on or after
June 1, 1993, a dealer's commission may be paid by the Distributor to financial
advisers through whom such purchases are effected in accordance with the
following schedule:
Dealer's Commission
-------------------
Amount of Purchase (as a percentage of amount purchased)
------------------
Up to $3 million .60%
Next $2 million up to $5 million .40
Amount over $5 million .20
14
In determining a financial adviser's eligibility for the dealer's commission,
purchases of Class A Shares of other Delaware Group funds as to which a Limited
CDSC applies may be aggregated with those of the Class A Shares of the Series.
Financial advisers should contact the Distributor concerning the applicability
and calculation of the dealer's commission in the case of combined purchases.
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. The Distributor also should be consulted
concerning the availability of and program for these payments.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's commission
are subject to change or termination at any time by the Distributor in its
discretion.
Redemptions of Class A Shares purchased at net asset value may result in the
imposition of a Limited CDSC if the dealer's commission described above was paid
in connection with the purchase of those shares. See Contingent Deferred Sales
Charge for Certain Purchases of Class A Shares Made at Net Asset Value under
Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings in the Class A Shares with your holdings in the
Class B Shares of the Series and, except as noted below, shares of the other
funds in the Delaware Group, you can reduce the front-end sales charges of any
additional purchases of Class A Shares. Except for shares of Delaware Group
Premium Fund, Inc. beneficially owned in connection with ownership of variable
insurance products, shares of other funds which do not carry a front-end sales
charge or CDSC may not be included unless they were acquired through an exchange
from one of the other Delaware Group funds which carried a front-end sales
charge or CDSC.
This privilege permits you to combine your purchases and holdings with those
of your spouse, your children under 21 and any trust, fiduciary or retirement
account for the benefit of such family members.
It also permits you to use these combinations under a Letter of Intention.
This allows you to make purchases over a 13-month period and qualify the entire
purchase for a reduction in front-end sales charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases made
pursuant to a Right of Accumulation or under a Letter of Intention, may trigger
the payment of a dealer's commission and the applicability of a Limited CDSC.
Investors should consult their financial advisers or the Transfer Agent about
the operation of these features. See Reduced Front-End Sales Charges under
Buying Shares.
Buying at Net Asset Value
Class A Shares of the Series may be purchased at net asset value under the
Delaware Group Dividend Reinvestment Plan and, under certain circumstances, the
12-Month Reinvestment Privilege and the Exchange Privilege. (See The Delaware
Difference and Redemption and Exchange for additional information.)
Purchases of Class A Shares may be made at net asset value by current and
former officers, directors and employees and members of their immediate families
of the Manager, any affiliate, any of the funds in the Delaware Group, certain
of their agents and registered representatives and employees of authorized
investment dealers and by employee benefit plans for such entities. Individual
purchases include retirement accounts and must be for accounts in the name of
the individual or a qualifying family member. Purchases of Class A Shares may be
made by clients of registered representatives of an authorized investment dealer
at net asset value within six months of a change of the registered
representative's employment, if the purchase is funded by proceeds from an
investment where a front-end sales charge has been assessed and the redemption
of the investment did not result in the imposition of a contingent deferred
sales charge or other redemption charge. Purchases of Class A Shares also may be
made at net asset value by bank employees that provide services in connection
with agreements between the bank and unaffiliated brokers or dealers concerning
sales of Class A Shares. Also, officers, directors and key employees of
institutional clients of the Manager or any of its affiliates may purchase Class
A Shares at net asset value. Moreover, purchases may be effected at net asset
value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs.
15
Investments of Class A Shares made by plan level and/or participant retirement
accounts that are for the purpose of repaying a loan taken from such accounts,
will be made at net asset value. Loan repayments made to a Delaware Group
account in connection with loans originated from accounts previously maintained
by another investment firm will also be invested at net asset value.
The Series must be notified in advance that an investment qualifies for
purchase at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, Prototype Profit Sharing,
Pension and 401(k) Defined Contribution Plans) may also benefit from the reduced
front-end sales charges relating to the Class A Shares set forth in the table on
page 14, based on total plan assets. In addition, 403(b)(7) and 457 Retirement
Plan Accounts may also benefit from a reduced front-end sales charge on Class A
Shares based on the total amount invested by all participants in the plan by
satisfying the following criteria: (i) the employer for which the plan was
established has 250 or more eligible employees and the plan lists only one
broker of record, or (ii) the plan includes employer contributions and the plan
lists only one broker of record. If a company has more than one plan investing
in the Delaware Group of funds, then the total amount invested in all plans
would be used in determining the applicable front-end sales charge reduction.
Employees participating in such Group Investment Plans may also combine the
investments made in their plan account when determining the front-end sales
charge on purchases to non-retirement Delaware Group investment accounts.
For additional information on these Plans, including Plan forms, applications,
minimum investments and any applicable account maintenance fees, contact your
investment dealer or the Distributor.
For other Retirement Plans and special services, see Retirement Planning.
Deferred Sales Charge Alternative--Class B Shares
Class B Shares may be purchased at net asset value without the imposition of a
front-end sales charge. The Class B Shares are being sold without a front-end
sales charge so that the Series will invest the full amount of the investor's
purchase payment. The Distributor currently anticipates compensating dealers or
brokers for selling Class B Shares at the time of purchase from its own funds in
an amount equal to no more than 2% of the dollar amount purchased. As discussed
below, however, Class B Shares are subject to annual 12b-1 Plan expenses and, if
shares are redeemed within three years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for the distribution and related services provided to,
and the related expenses borne on behalf of, the Series for the benefit of the
Class B Shares in connection with the sale of the Class B Shares, including the
compensation paid to dealers or brokers for selling Class B Shares. Payments to
the Distributor and others under the 12b-1 Plan relating to the Class B Shares
may be in an amount equal to no more than 1%. The combination of the CDSC and
the proceeds of the 12b-1 Plan fees facilitates the ability of the Series to
sell the Class B Shares without a front-end sales charge being deducted at the
time of purchase.
Shareholders of the Class B Shares exercising the exchange privilege described
below will continue to be subject to the CDSC schedule of the Class B Shares
described in this Prospectus. Such schedule may be higher than the CDSC schedule
relating to the Class B Shares acquired as a result of the exchange. See
Redemption and Exchange.
Automatic Conversion of Class B Shares
Except for shares acquired through a reinvestment of dividends, Class B Shares
held for five years after purchase are eligible for automatic conversion into
Class A Shares. The Fund will effect conversions of Class B Shares into Class A
Shares only four times in any calendar year, on the last business day of the
second full week of March, June, September and December (each, a "Conversion
Date"). If the fifth 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 fifth 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 fifth anniversary falls on the day after a
Conversion Date, that shareholder will have to hold Class B Shares for as long
as an additional three months after the fifth anniversary after purchase before
the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through a reinvestment of dividends will
convert to the corresponding Class A Shares of that fund (or, in the case of
Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant Class)
pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute tax-free
exchanges for federal income tax purposes. See Taxes.
16
Contingent Deferred Sales Charge
Class B Shares redeemed within three years of purchase may be subject to a
CDSC at the rates set forth below, charged as a percentage of the dollar amount
subject thereto. 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 the 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 B Shares of the Series even if those shares are
later exchanged for Class B Shares of another Delaware Group fund and, 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 into which the
shares have been exchanged. Accordingly, no CDSC will be imposed on increases in
net asset value above the initial purchase price. In addition, no CDSC will be
assessed on redemption of shares received upon reinvestment of dividends or
capital gains distributions.
The following table sets forth the rates of the CSDC for the Class B Shares of
the Series:
Contingent Deferred
Sales Charge
(as a Percentage of
Year After Dollar Amount
Purchase Made Subject to Charge)
------------- -------------------
0-2 2%
3 1%
4 and thereafter None
During the fourth year after purchase and, thereafter, until converted
automatically into Class A Shares of the Series, the Class B Shares will
continue to be subject to annual 12b-1 Plan expenses of 1% of average daily net
assets representing those shares. See Automatic Conversion of Class B Shares
above. Investors are reminded that the Class A Shares into which the Class B
Shares will convert are subject to ongoing annual 12b-1 Plan expenses of up to a
maximum of .30% (currently, no more than .15%) of average daily net assets
representing such shares.
In determining whether a CDSC is applicable to a redemption, the calculation
will be determined in a manner that results in the lowest possible rate being
charged. Therefore, with respect to the Class B Shares, it will be assumed that
the redemption is first for shares held over three years or shares acquired
pursuant to reinvestment of dividends or distributions and then of shares held
longest during the three-year period. The charge will not be applied to dollar
amounts representing an increase in the net asset value since the time of
purchase. All investments made during a calendar month, regardless of when
during the month the investment occurred, will age one month on the last day of
that month and each subsequent month.
The CDSC is waived on redemptions of Class B Shares in connection with the
following redemptions: (i) redemptions effected pursuant to the Fund's right to
liquidate a shareholder's account if the aggregate net asset value of the shares
held in the account is less than the then-effective minimum account size; (ii)
returns of excess contributions to an IRA or 403(b)(7) Deferred Compensation
Plan; (iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, or 457 Deferred Compensation Plan; and (iv) distributions
from an IRA, 403(b)(7) Deferred Compensation Plan or 457 Deferred Compensation
Plan due to death or disability.
12b-1 Distribution Plans--Class A and Class B Shares
Pursuant to the distribution plans adopted by the Fund pursuant to Rule 12b-1
under the 1940 Act, the Series is permitted to pay the Distributor annual
distribution fees payable monthly up to a maximum of .30% (currently, no more
than .15%) of the average daily net assets of the Class A Shares and 1% of the
average daily net assets of the Class B Shares in order to compensate the
Distributor for providing distribution and related services and bearing certain
expenses of each Class. The Class B Shares' 12b-1 Plan is designed to permit an
investor to purchase Class B Shares through dealers or brokers without the
assessment of a front-end sales charge and at the same time permit the
Distributor to compensate dealers and brokers in connection with the sale of the
Class B Shares. In this regard, the purpose and function of the 12b-1 Plan and
the CDSC with respect to the Class B Shares are the same as those of the front-
end sales charge and 12b-1 Plan with respect to the Class A Shares in that the
fees and charges provide for the financing of the distribution of the respective
Classes. For more detailed discussion of the 12b-1 Plans relating to the Class A
and Class B Shares, see Distribution (12b-1) and Service.
17
Other Payments to Dealers--Class A and Class B Shares
In addition, from time to time at the discretion of the Distributor, all
registered broker/dealers whose aggregate sales of the Classes exceed certain
limits as set by the Distributor, may receive from the Distributor an additional
payment of up to .25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
In connection with the promotion of Delaware Group fund shares, the
Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, reimburse dealers for expenses incurred in connection
with preapproved seminars, conferences and advertising and may, from time to
time, pay or allow additional promotional incentives to dealers, which shall
include non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. In addition, as noted above, the Distributor may pay
dealers a commission in connection with net asset value purchases.
Class B Funds
The following funds currently offer Class B Shares: DMC Tax-Free Income Trust-
Pennsylvania, Delaware Group Delchester High-Yield Bond Fund, Inc., Delaware
Group Government Fund, Inc., Delaware Group Value Fund, Inc., Delaware Group
Cash Reserve, Inc., Tax-Free USA Fund, Tax-Free Insured Fund and Tax-Free USA
Intermediate Fund of Delaware Group Tax-Free Fund, Inc., Delaware Group DelCap
Fund, Inc., Delaware Fund and Devon Fund of Delaware Group Delaware Fund, Inc.,
Decatur Income Fund and Decatur Total Return Fund of Delaware Group Decatur
Fund, Inc., Delaware Group Trend Fund, Inc., International Equity Series, Global
Bond Series and Global Assets Series of Delaware Group Global & International
Funds, Inc. and the Series.
Limited-Term Government Fund Institutional Class
In addition to offering the Class A and Class B Shares, the Series also offers
the Limited-Term Government Fund Institutional Class of shares, which is
described in a separate prospectus relating to that class of shares. That class
may be purchased only by: (a) retirement plans introduced by persons not
associated with brokers or dealers that are primarily engaged in the retail
securities business and rollover individual retirement accounts from such plans;
(b) tax-exempt employee benefit plans of the Manager or its affiliates and
securities dealer firms with a selling agreement with the Distributor; (c)
institutional advisory accounts of the Manager or its affiliates and those
having client relationships with Delaware Investment Advisers, a division of the
Manager, or its affiliates and their corporate sponsors, as well as subsidiaries
and related employee benefit plans and rollover individual retirement accounts
from such institutional advisory accounts; (d) banks, trust companies and
similar financial institutions investing for their own account or for the
account of their trust customers for whom such financial institution is
exercising investment discretion in purchasing shares of the class; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services. Such
Limited-Term Government Fund Institutional Class shares generally are
distributed directly by the Distributor and do not have a front-end or
contingent deferred sales charge or a 12b-1 fee. Sales or service compensation
available in respect of such class, therefore, differs from that available in
respect of the Class A Shares and the Class B Shares. The 12b-1 Plan
distribution expenses borne by the Class A Shares and the Class B Shares, the
front-end sales charge and the Limited CDSC, if applicable, to which the Class A
Shares are subject, and the CDSC to which the Class B Shares are subject, may
affect the performance of these Classes. All three classes of the Series' shares
have a proportionate interest in the underlying portfolio of securities of the
Series. Total Operating Expenses incurred by the Limited-Term Government Fund
Institutional Class as a percentage of average daily net assets for the fiscal
year ended December 31, 1994 were 0.76%. See Part B for performance information
about Limited-Term Government Fund Institutional Class. To obtain a prospectus
which describes the Limited-Term Government Fund Institutional Class, contact
the Distributor.
18
Dividend Orders
Some shareholders want the dividends earned in one fund automatically invested
in another Delaware Group fund with a different investment objective. For more
information on the requirements of the other funds, see Dividend Reinvestment
Plan under The Delaware Difference or call the Shareholder Service Center.
HOW TO BUY SHARES
The Series makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer.
Investing through Your Investment Dealer
You can make a purchase of shares of the Classes through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application must be completed, signed and
sent with a check payable to Limited-Term Government Fund A Class or B Class,
depending upon which Class is being purchased, to P.O. Box 7977, Philadelphia,
PA 19101.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to Limited-Term Government Fund A Class or B Class, depending
upon which Class is being purchased. Your check should be identified with your
name(s) and account number. An investment slip (similar to a deposit slip) is
provided at the bottom of transaction confirmations and dividend statements that
you will receive from the Fund, and should be used when you are making
additional purchases. You can expedite processing by including an investment
slip with your check when making additional purchases. Your investment may be
delayed if you send additional purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by wire to
CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include your
name(s) and your account number for the series and class in which you are
investing).
1. Initial Purchases--Before you invest, telephone the Fund's Shareholder
Service Center to get an account number. If you do not call first, it may delay
processing your investment. In addition, you must promptly send your Investment
Application to Limited-Term Government Fund A Class or B Class, depending upon
which Class is being purchased, to P.O. Box 7977, Philadelphia, PA 19101.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the Fund's
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a Retirement Plan Account, call the
Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group, you
may write and authorize an exchange of part or all of your investment into
shares of the Series. If you wish to open an account by exchange, call the
Shareholder Service Center for more information.
Exchanges will not be permitted between Class A Shares and Class B Shares of
the Series or between the Class A Shares and Class B Shares of any other funds
in the Delaware Group. Class B Shares of any of the Class B Funds may be
exchanged for Class B Shares of the Series. Class B Shares of the Series
acquired by exchange will continue to carry the contingent deferred sales charge
and automatic conversion schedules of the fund from which the exchange is made.
Consequently, investors that purchase Class B Shares of the Series by exchange
may be subject to the higher 12b-1 Plan fees applicable to Class B Shares longer
than investors that purchase Class B Shares of the Series directly if the shares
exchanged for Series shares are of a Class B Fund having a longer conversion
feature than that of the Series. The holding period of the Class B Shares of the
Series will be added to that of the exchanged shares for purposes of determining
the time of the automatic conversion into Class A Shares of the Series.
19
Permissible exchanges into the Classes of the Series will be made without a
front-end sales charge imposed by the Series or, at the time of the exchange, a
contingent deferred sales charge imposed by the fund from which the exchange is
being made, except for exchanges into Class A Shares from funds not subject to a
front-end sales charge (unless such shares were acquired in an exchange from a
fund subject to such a charge or such shares were acquired through the
reinvestment of dividends).
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to use
the following services:
1. Direct Deposit
You may wish to have your employer or bank make regular investments directly
to your account for you (for example: payroll deduction, pay by phone, annuity
payments). The Series also accepts preauthorized recurring government and
private payments by Electronic Fund Transfer, which avoids mail time and check
clearing holds on payments such as social security, federal salaries, Railroad
Retirement benefits, etc.
2. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly investments
without writing or mailing checks. You may authorize the Fund to transfer a
designated amount monthly from your checking account to your Class account. Many
shareholders use this as an automatic savings plan for IRAs and other purposes.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
* * *
Should investments by these two methods be reclaimed or returned for some
reason, the Fund has the right to liquidate your shares to reimburse the
government or transmitting bank. If there are insufficient funds in your Class
account, you are obligated to reimburse the Series.
Purchase Price and Effective Date
The offering price and net asset value of the Class A and Class B Shares are
determined as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when such exchange is open.
The effective date of a purchase made through an investment dealer is the date
the order is received by the Series. The effective date of a direct purchase is
the day your wire, electronic transfer or check is received unless it is
received after the time the offering price of shares is determined, as noted
above. Those received after such time will be effective the next business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase or exchange. If a purchase
is cancelled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts of the Class A Shares and Class
B Shares that have remained below the minimum stated account balance for a
period of three or more consecutive months. Holders of such accounts may be
notified of their below minimum status and advised that they have until the end
of the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining low
balance accounts. No fees will be charged without proper notice and no
contingent deferred sales charge will apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to redeem
accounts that remain under $1,000 as a result of redemptions. An investor making
the minimum initial investment will 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.
20
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 tax-advantaged funds, equity funds or more aggressive
bond funds. Exchanges are subject to the requirements of each fund and all
exchanges of shares from one fund or class to another pursuant to this privilege
constitute taxable events. See Taxes. You may want to call us for more
information or consult your financial adviser or investment dealer to discuss
which funds in the Delaware Group will best meet your changing objectives, and
the consequences of any exchange transaction.
Your shares will be redeemed or exchanged based on the net asset value next
determined after we receive your request in good order subject, in the case of a
redemption, to any applicable CDSC or Limited CDSC. Redemption or exchange
requests received in good order after the time the offering price and net asset
value of shares are determined, as noted above, will be processed on the next
business day. See Purchase Price and Effective Date under Buying Shares. Except
as otherwise noted below, for a redemption request to be in "good order," you
must provide your Class account number, account registration and the total
number of shares or dollar amount of the transaction. If a holder of Class B
Shares submits a redemption request for a specific dollar amount, the Fund will
redeem that number of shares necessary to deduct the applicable CDSC and tender
to the shareholder the requested amount to the extent enough shares are then
held in the shareholder account. With regard to exchanges, you must also provide
the name of the fund you want to receive the proceeds. Exchange instructions and
redemption requests must be signed by the record owner(s) exactly as the shares
are registered. You may request a redemption or an exchange by calling the Fund
at 800-523-1918 (in Philadelphia, 215-988-1241). The Fund reserves the right to
reject exchange requests at any time. The Fund may suspend or terminate, or
amend the terms of, the exchange privilege upon 60 days' written notice to
shareholders.
The Fund will not honor check or wire redemptions for Class shares recently
purchased by check unless it is reasonably satisfied that the purchase check has
cleared, which may take up to 15 days from the purchase date. The Fund may honor
written redemption requests, but will not mail the proceeds until it is
reasonably satisfied the purchase check has cleared. You can avoid this
potential delay if you purchase shares by wiring Federal Funds. You may call the
Shareholder Service Center to determine if your funds are available for
redemption. 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.
Class A Shares may be exchanged for certain of the shares of the other funds
in the Delaware Group, including other Class A Shares, subject to the
eligibility and minimum purchase requirements set forth in each fund's
prospectus. All Delaware Group funds offer Class A Shares. Class A Shares may
not be exchanged for Class B Shares of the funds offering such shares. Class B
Shares of the Series may be exchanged only for the Class B Shares of any of the
Class B Funds. See Exchange Privilege under The Delaware Difference. In each
instance, permissible exchanges are subject to the minimum purchase and other
requirements set forth in each prospectus.
Permissible exchanges may be made at net asset value provided: (1) the
investment satisfies the eligibility and minimum purchase requirements set forth
in the prospectus of the fund being acquired; and (2) the shares of the fund
being acquired are in a state where that fund is registered.
There is no front-end sales charge or fee for exchanges made between shares of
funds which both carry a front-end sales charge. Any applicable front-end sales
charge will apply to exchanges from shares of funds not subject to a front-end
sales charge, except for transfers involving assets that were previously
invested in a fund with a front-end sales charge and/or transfers involving the
reinvestment of dividends.
21
Holders of the Class B Shares that exchange their shares ("outstanding Class B
Shares") for the Class B Shares of other Class B Funds ("new Class B Shares")
will not be subject to a CDSC that might otherwise be due upon redemption of the
outstanding Class B Shares. However, such shareholders will continue to be
subject to the CDSC and automatic conversion schedules of the outstanding Class
B Shares described in this Prospectus and any CDSC assessed upon redemption will
be charged by the Series. Such schedule may be higher than the CDSC schedule
relating to the new Class B Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the new
Class B Shares, the holding period for the outstanding Class B Shares is added
to the holding period of the new Class B Shares.
Different redemption and exchange methods are outlined below. Except for the
CDSC with respect to redemption of Class B Shares and the Limited CDSC with
respect to certain redemptions of Class A Shares purchased at net asset value,
there is no fee charged by the Fund or the Distributor for redeeming or
exchanging your shares, but such fees could be charged in the future. You may
also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders with respect to an account, including
selection of any of the features described below, shall continue in effect until
revoked or modified in writing and until such time as such written revocation or
modification has been received by the Fund or its agent.
All exchanges involve a purchase of shares of the fund into which the exchange
is made. As with any purchase, an investor should obtain and carefully read that
fund's prospectus before buying shares in an exchange. The prospectus contains
more complete information about the fund, including charges and expenses.
Checkwriting Feature
Purchasers of Class A Shares can request special checks by marking the box on
the Investment Application.
The checks must be drawn for $500 or more and, unless otherwise indicated on
the Investment Application or your checkwriting authorization form, must be
signed by all owners of the account.
Because the value of shares fluctuates, you cannot use checks to close your
account. The Checkwriting Feature is not available with respect to the Class B
Shares and for Retirement Plans, with respect to the Class A Shares. See Part B
for additional information.
Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your Class A or Class B Shares. The request must be signed
by all owners of the account or your investment dealer of record. For
redemptions of more than $50,000, or when the proceeds are not sent to the
shareholder(s) at the address of record, the Fund requires a signature by all
owners of the account and a signature guarantee for each owner. Each signature
guarantee must be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
The redemption request is effective at the net asset value next determined
after it is received in good order. Class B Shares may be subject to a CDSC and
Class A Shares may be subject to a Limited CDSC with respect to certain shares
purchased at net asset value. Payment is normally mailed the next business day,
but no later than seven days, after receipt of your request. If your Class A
Shares are in certificate form, the certificate must accompany your request and
also be in good order. The Fund only issues certificates for Class A Shares if a
shareholder submits a specific request. The Fund does not issue certificates for
Class B Shares.
Written Exchange
You can also write to the Fund (at 1818 Market Street, Philadelphia, PA 19103)
to request an exchange of any or all of your Class A or Class B Shares into
another mutual fund in the Delaware Group subject to the same conditions and
limitations as other exchanges noted above.
22
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 can only redeem
or exchange by written request and you must return your certificates.
The Telephone Redemption service enabling you to have redemption proceeds
mailed to your address of record and the Telephone Exchange service, both of
which are described below, are automatically provided unless you notify the Fund
in writing that you do not wish to have such service available with respect to
your account. The Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Fund by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Series shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem shares.
You or your investment dealer of record can have redemption proceeds of $50,000
or less mailed to you at your record address. Checks will be payable to the
shareholder(s) of record. Payment is normally mailed the next business day, but
no later than seven days, after receipt of the request. This service is only
available to individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your predesignated
bank account by wire or by check. You should authorize this service when you
open your account. If you change your predesignated bank account, the Fund
requires an Authorization Form with your signature guaranteed. For your
protection, your authorization must be on file. If you request a wire, your
funds will normally be sent the next business day. CoreStates Bank, N.A.'s fee
(currently $7.50) will be deducted from your redemption. If you ask for a check,
it will normally be mailed the next business day, but no later than seven days,
after receipt of your request to your predesignated bank account. Except for any
CDSC which may be applicable to the Class B Shares and the Limited CDSC which
may be applicable to purchases made at net asset value with respect to the Class
A Shares, there are no fees for this method, but the mail time may delay getting
funds into your bank account. Simply call the Fund's Shareholder Service Center
prior to the time the offering price and net asset value are determined, as
noted above.
If expedited payment by check or wire could adversely affect the Series, the
Fund may take up to seven days to pay.
23
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 authorize an exchange of shares
into a money market fund in the Delaware Group with just a phone call. Any such
exchange is subject to the same conditions and limitations as other exchanges
noted above.
This service is useful if you are anticipating a major expenditure and want to
move a portion of your investment into a fund where stability of principal is
paramount. The Delaware Group money market fund investment minimums apply.
Your Class A or Class B Shares can also be exchanged into other funds in the
Delaware Group under the same registration subject to the same conditions and
limitations as other exchanges noted above. As with the written exchange
service, telephone exchanges are subject to the requirements of each fund, as
described above. Telephone exchanges may be subject to limitations as to amounts
or frequency.
Systematic Withdrawal Plan
1. Regular Plans
This plan provides holders of the Class A Shares with a consistent monthly (or
quarterly) payment. This is particularly useful to shareholders living on fixed
incomes, since it provides them with a stable supplemental amount. With accounts
of at least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or
more. The Fund does not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your
Series account to your predesignated bank account through the Delaware Group's
MoneyLine service. Your funds will normally be credited to your bank account two
business days after the payment date. Except with respect to the Limited CDSC
which may be applicable to Class A Shares as noted below, there are no fees for
this method. You can initiate this service by completing an Authorization
Agreement. If the name and address on your bank account are not identical to the
name and address on your Series account, you must have your signature
guaranteed. Please call the Shareholder Service Center for additional
information.
2. Retirement Plans
For shareholders eligible under the applicable Retirement Plan to receive
benefits in periodic payments, the Series' Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals, depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required. The MoneyLine service described above is not available with
respect to Retirement Plans.
* * *
Shareholders should not purchase Class A Shares while participating in a
Systematic Withdrawal Plan. Also, redemptions of Class A Shares pursuant to a
Systematic Withdrawal Plan may be subject to a Limited CDSC if the original
purchase was made within the 12 months prior to the withdrawal at net asset
value and a dealer's commission has been paid on that purchase. See Contingent
Deferred Sales Charge for Certain Purchases of Class A Shares Made at Net Asset
Value. For more information on both of these plans, call the Shareholder Service
Center.
The Systematic Withdrawal Plan is not available with respect to the Class B
Shares.
Wealth Builder Option
Shareholders may elect to invest in other mutual funds in the Delaware Group
through our Wealth Builder Option. Under this automatic exchange program,
shareholders can authorize regular monthly investments (minimum of $100 per
fund) to be liquidated from their account and invested automatically into one or
more funds in the Delaware Group. Investments under this option are exchanges
and are therefore subject to the same conditions and limitations as other
exchanges of Class A and Class B Shares noted above.
Shareholders can also use the Wealth Builder Option to invest in the Series
through regular liquidations of shares in their accounts in other funds in the
Delaware Group subject to the same conditions and limitations as other exchanges
noted above. Shareholders can terminate their participation at any time by
written notice to the Fund. See Redemption and Exchange.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
24
Contingent Deferred Sales Charge for Certain Purchases of Class A Shares Made at
Net Asset Value
For purchases of Class A Shares, a Limited CDSC will be imposed by the Series
upon certain redemptions of Class A Shares (or shares into which such Class A
Shares are exchanged) made within 12 months of purchase, if such purchases were
made at net asset value and triggered the payment by the Distributor of the
dealer's commission described above. See Buying Shares.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of: (1) the net asset value at the time of purchase of the Class A
Shares being redeemed; or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A Shares
even if those shares are later exchanged for shares of another Delaware Group
fund and, in the event of an exchange of Class A Shares, the "net asset value of
such shares at the time of redemption" will be the net asset value of the shares
into which the Class A Shares have been exchanged.
Redemptions of such Class A Shares held for more than 12 months will not be
subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Fund assesses the Limited CDSC if such 12-month period is not
satisfied irrespective of whether the redemption triggering its payment is of
the Class A Shares of the Series or the Class A Shares into which the Class A
Shares of the Series have been exchanged.
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 when during the month the investment occurred,
will age one month on the last day of that month and each subsequent month.
The Limited CDSC will be waived in the following instances: (i) redemptions
effected pursuant to the Fund's right to liquidate a shareholder's account if
the aggregate net asset value of the shares held in the account is less than the
then-effective minimum account size; (ii) distributions to participants from a
retirement plan qualified under section 401(a) or 401(k) of the Internal Revenue
Code of 1986, as amended (the "Code"), or due to death of a participant in such
a plan; (iii) redemptions pursuant to the direction of a participant or
beneficiary of a retirement plan qualified under section 401(a) or 401(k) of the
Code with respect to that retirement plan; (iv) distributions from a section
403(b)(7) Plan or an IRA due to death, disability, or attainment of age 59 1/2;
(v) tax-free returns of excess contributions to an IRA; (vi) distributions by
other employee benefit plans to pay benefits; (vii) distributions described in
(ii), (iv), and (vi) above pursuant to a systematic withdrawal plan; and (viii)
redemptions by the classes of shareholders who are permitted to purchase shares
at net asset value, regardless of the size of the purchase (see Buying at Net
Asset Value).
25
DIVIDENDS AND DISTRIBUTIONS
The Fund declares a dividend to all shareholders of record of the Classes at
the time the offering price of shares is determined. See Purchase Price and
Effective Date under Buying Shares. Thus, when redeeming shares, dividends
continue to accrue up to and including the date of redemption.
Purchases of shares of each Class by wire begin earning dividends when
converted into Federal Funds and available for investment, normally the next
business day after receipt. Purchases by check earn dividends upon conversion to
Federal Funds, normally one business day after receipt.
Each class of the Series will share proportionately in the investment income
and expenses of the Series, except that: (i) the per share dividends and
distributions on the Class B Shares will be lower than the per share dividends
and distributions on the Class A Shares as a result of the higher expenses under
the 12b-1 Plan relating to the Class B Shares; and (ii) the per share dividends
and distributions on both the Class A Shares and the Class B Shares will be
lower than the per share dividends and distributions on the Limited-Term
Government Fund Institutional Class as such class will not incur any expenses
under the 12b-1 Plans. See Distribution (12b-1) and Service under Management of
the Fund.
The dividends are declared daily and paid monthly on the last business day of
each month. Payment by check of cash dividends will ordinarily be mailed within
three business days after the payable date. Short-term capital gains
distributions, if any, may be paid quarterly, but in the discretion of the
Fund's Board of Directors might be distributed less frequently. Long-term
capital gains, if any, will be distributed annually.
The Series can have two types of dividends: income and capital gains. Normally
both types are automatically reinvested in your account unless you elect
otherwise. Any check in payment of dividends or other distributions which cannot
be delivered by the Post Office or which remains uncashed for a period of more
than one year may be reinvested in the shareholder's account at the then-current
net asset value and the dividend option may be changed from cash to reinvest. If
you elect to have your dividends and distributions in cash and such dividends
and distributions are in an amount of $25 or more, you may elect the Delaware
Group's MoneyLine service to enable such payments to be transferred from your
Series account to your predesignated bank account. Your funds will normally be
credited to your bank account two business days after the payment date. There
are no fees for this method. See Systematic Withdrawal Plan for Class A Shares
under Redemption and Exchange for information regarding authorization of this
service. This service is not available with respect to Retirement Plans. (See
The Delaware Difference for more information on reinvestment options.)
For the fiscal year ended December 31, 1994, dividends totaling $0.667 and
$0.399 per share of the Class A Shares and Class B Shares, respectively, were
paid from net investment income.
26
TAXES
The Series has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue Code (the "Code").
As such, the Series will not be subject to federal income tax, or to any excise
tax, to the extent its earnings are distributed as provided in the Code.
The Series intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to you as ordinary income, whether
received in cash or in additional shares. No portion of the Series'
distributions will be eligible for the dividends-received deduction for
corporations.
Distributions paid by the Series from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Series. The Series does not seek to
realize any particular amount of capital gains during a year; rather, realized
gains are a byproduct of Series management activities. Consequently, capital
gains distributions may be expected to vary considerably from year to year.
Also, for those investors subject to tax, if purchases of shares in the Series
are made shortly before the record date for a dividend or capital gains
distribution, a portion of the investment will be returned as a taxable
distribution.
Dividends which are declared in October, November or December but which, for
operational reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by the Series and received
by the shareholder on December 31 of the calendar year in which they are
declared.
The sale of shares of the Series is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two series or portfolios of a mutual fund). Any loss
incurred on sale or exchange of a Series' shares held for six months or less
will be treated as a long-term capital loss to the extent of capital gain
dividends received with respect to such shares. All or a portion of the sales
charge incurred in purchasing Series shares will be excluded from the federal
tax basis of any of such shares sold or exchanged within ninety (90) days of
their purchase (for purposes of determining gain or loss upon sale of such
shares) if the sale proceeds are reinvested in the Series or in another fund in
the Delaware Group of funds and a sales charge that would otherwise apply to the
reinvestment is reduced or eliminated. Any portion of such sales charge excluded
from the tax basis of the shares sold will be added to the tax basis of the
shares acquired in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the end of
no longer than approximately five years after purchase will be tax-free for
federal tax purposes. Shareholders should consult their own tax advisers
regarding specific questions as to federal, state, local or foreign taxes. See
Automatic Conversion of Class B Shares under Buying Shares.
In addition to federal taxes, shareholders may be subject to state and local
taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government securities may be exempt from
state personal income taxes. Shares of the Series are exempt from Pennsylvania
county personal property taxes.
Each year, the Fund will mail you information on the tax status of the Series'
dividends and distributions. Shareholders will also receive each year
information as to the portion of dividend income, if any, that is derived from
U.S. Government securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Series.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Account Registration Form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in the
Series.
See Accounting and Tax Issues in Part B for additional information on tax
matters relating to the Series and its shareholders.
27
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
Class A Shares are purchased at the offering price and Class B Shares are
purchased at the net asset value ("NAV") per share. The offering price of the
Class A Shares consists of the NAV per share next computed after the order is
received, plus any applicable front-end sales charges. The offering price and
NAV are computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when such exchange is open.
The NAV per share is computed by adding the value of all securities and other
assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are valued
at their fair value as determined in good faith and in a method approved by the
Fund's Board of Directors.
Each of the Series' three classes will bear, pro-rata, all of the common
expenses of the Series. The net asset values of all outstanding shares of each
class of the Series will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Series represented by the
value of shares of that class. All income earned and expenses incurred by the
Series will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Series represented by the value of shares
of such classes, except the Limited-Term Government Fund Institutional Class
will not incur any of the expenses under the Series' 12b-1 Plans and the Class A
and Class B Shares alone will bear the 12b-1 Plan expenses payable under their
respective Plans. Due to the specific distribution expenses and other costs that
will be allocable to each class, the dividends paid to each class of the Series
may vary. However, the NAV per share of each class is expected to be equivalent.
MANAGEMENT OF THE FUND
Directors
The business and affairs of the Fund are managed under the direction of its
Board of Directors. Part B contains additional information regarding the
directors and officers.
Investment Manager
The Manager furnishes investment management services to the Series.
The Manager and its predecessors have been managing the funds in the Delaware
Group since 1938. On December 31, 1994, the Manager and its affiliate, Delaware
International Advisers Ltd., were supervising in the aggregate more than $24
billion in assets in the various institutional (approximately $15,456,416,000)
and investment company (approximately $9,253,901,000) accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a wholly-
owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. As a result of the merger, DMH became a wholly-owned subsidiary and
the Manager became an indirect, wholly-owned subsidiary of Lincoln National and
both are now subject to the ultimate control of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management. In connection with the merger, a
new Investment Management Agreement between the Fund on behalf of the Series and
the Manager was executed following shareholder approval.
The Manager manages the Series' portfolio, makes investment decisions and
implements them. The Manager also administers the Fund's affairs and pays the
salaries of all the directors, officers and employees of the Fund who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee of 1/2 of 1% of the average daily net assets of the Series, less a
proportionate share of all directors' fees paid to the unaffiliated directors by
the Series. Investment management fees paid by the Series were 0.50% of average
daily net assets for the fiscal year ended December 31, 1994.
28
Roger A. Early has assumed primary responsibility for making day-to-day
investment decisions for the Series as of July 18, 1994. Mr. Early has an
undergraduate degree in economics from the University of Pennsylvania's Wharton
School and an MBA in finance and accounting from the University of Pittsburgh.
He is also a CPA and a CFA. Prior to joining the Delaware Group, Mr. Early was a
portfolio manager for Federated Investment Counseling's fixed income group, with
over $1 billion in assets.
In making investment decisions for the Series, Mr. Early consults regularly
with Paul E. Suckow and Gary A. Reed. Mr. Suckow is the Chief Investment Officer
for fixed income. A Chartered Financial Analyst, he is a graduate of Bradley
University with an MBA from Western Illinois University. Mr. Suckow was a fixed
income portfolio manager at the Delaware Group from 1981 to 1985. He returned to
the Delaware Group in 1993 after eight years with Oppenheimer Management
Corporation. Mr. Reed, also a Chartered Financial Analyst, is a graduate of the
University of Chicago with an MA from Columbia University. He joined the
Delaware Group in 1989 as a vice president for fixed income.
Portfolio Trading Practices
Portfolio trades are generally made on a net basis without brokerage
commissions. However, the price may include a mark-up or mark-down. Banks,
brokers or dealers are selected by the Manager to execute the Series' portfolio
transactions.
Although the Series trades principally to seek a high level of income and
stability of principal and not for profits, the portfolio turnover may be high,
particularly if interest rates are volatile. The degree of portfolio activity
may affect brokerage costs of the Series and taxes payable by shareholders.
During the fiscal years ended December 31, 1993 and 1994, the Series' portfolio
turnover rates were 171% and 148%, respectively. See Portfolio Turnover under
Trading Practices and Brokerage in Part B.
The Manager uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, the Manager may consider a
broker/dealer's sales of Series shares in placing portfolio orders and may place
orders with broker/dealers that have agreed to defray certain Series expenses
such as custodian fees.
Performance Information
From time to time, the Series may quote yield or total return performance of
the Classes in advertising and other types of literature.
The current yield for a Class will be calculated by dividing the annualized
net investment income earned by that Class during a recent 30-day period by the
maximum offering price per share on the last day of the period. The yield
formula provides for semi-annual compounding which assumes that net investment
income is earned and reinvested at a constant rate and annualized at the end of
a six-month period.
Total return will be based on a hypothetical $1,000 investment, reflecting the
reinvestment of all distributions at net asset value and: (i) in the case of
Class A Shares, the impact of the maximum front-end sales charge at the
beginning of each specified period; and (ii) in the case of Class B Shares, the
deduction of any applicable CDSC at the end of the relevant period. Each
presentation will include the average annual total return for a one-year period
and five- and ten-year periods, as relevant. The Series may also advertise
aggregate and average total return information concerning a Class over
additional periods of time. In addition, the Series may present total return
information that does not reflect the deduction of the maximum front-end sales
charge or any applicable CDSC. In this case, such total return information would
be more favorable than total return information which includes deductions of the
maximum front-end sales charge or any applicable CDSC.
Yield and net asset value fluctuate and are not guaranteed. Past performance
is not an indication of future results.
29
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
the Series under a Distribution Agreement dated April 3, 1995.
The Fund has adopted a distribution plan under Rule 12b-1 for the Class A
Shares and a separate distribution plan under Rule 12b-1 for the Class B Shares
(the "Plans"). The Plans permit the Series to pay the Distributor from the
assets of the respective Classes a monthly fee for its services and expenses in
distributing and promoting sales of shares. These expenses include, among other
things, preparing and distributing advertisements, sales literature, and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified periods of time,
and paying distribution and maintenance fees to brokers, dealers and others. In
connection with the promotion of Class A and Class B Shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, and reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising. The Distributor may pay or
allow additional promotional incentives to dealers as part of preapproved sales
contests and/or to dealers who provide extra training and information concerning
each Class and increase sales of each Class. In addition, the Series may make
payments from the assets of the respective Class directly to others, such as
banks, who aid in the distribution of Class shares or provide services in
respect of a Class, pursuant to agreements with the Series.
The 12b-1 Plan expenses relating to the Class B Shares are also used to pay
the Distributor for advancing the commission costs to dealers with respect to
the initial sale of such shares.
The aggregate fees paid by the Series from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed .30% of the
Class A Shares' average daily net assets in any year, and 1% (.25% of which are
service fees to be paid by the Series to the Distributor, dealers and others,
for providing personal service and/or maintaining shareholder accounts) of the
Class B Shares' average daily net assets in any year. The Class A and Class B
Shares will not incur any distribution expenses beyond these limits, which may
not be increased without shareholder approval. The Distributor may, however,
incur additional expenses and make additional payments to dealers from its own
resources to promote the distribution of shares of the Classes.
On May 21, 1987, the Board of Directors set the fee for the Class A Shares,
pursuant to its Plan, at .15% of average daily net assets. This fee was
effective until May 31, 1992. Effective June 1, 1992, the Board of Directors has
determined that the annual fee payable on a monthly basis, under the Plan will
be equal to the sum of: (i) the amount obtained by multiplying .10% by the
average daily net assets represented by the Class A Shares which were originally
purchased prior to June 1, 1992 in the Investors 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 the shareholders of the
Investors Series I class), and (ii) the amount obtained by multiplying .15% by
the average daily net assets represented by all other Class A Shares. While this
is the method to be used to calculate the 12b-1 expenses to be paid by the Class
A Shares under its Plan, the fee is a Class A Shares' expense so that all
shareholders of the Class A Shares, regardless of whether they originally
purchased or received shares in the Investors 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 beginning June 1, 1992,
such Plan permits a full .30% on all Class A Shares' assets to be paid at any
time following appropriate Board approval. See Shares.
The Series' Plans do not apply to the Limited-Term Government Fund
Institutional Class of shares. Those shares are not included in calculating the
Plans' fees, and the Plans are not used to assist in the distribution and
marketing of Limited-Term Government Fund Institutional Class shares.
While payments pursuant to the Plans may not exceed .30% annually with respect
to the Class A Shares and 1% annually with respect to the Class B Shares, the
Plans do not limit fees to amounts actually expended by the Distributor. It is
therefore possible that the Distributor may realize a profit in any particular
year. However, the Distributor currently expects that its distribution expenses
will likely equal or exceed payments to it under the Plans. The monthly fees
paid to the Distributor are subject to the review and approval of the Fund's
unaffiliated directors who may reduce the fees or terminate the Plans at any
time.
The staff of the Securities and Exchange Commission ("SEC") has proposed
amendments to Rule 12b-1 and other related regulations that could impact Rule
12b-1 Distribution Plans. The Fund intends to amend the Plans, if necessary, to
comply with any new rules or regulations the SEC may adopt with respect to Rule
12b-1.
30
The Transfer Agent, Delaware Service Company, Inc., serves as the shareholder
servicing, dividend disbursing and transfer agent for the Series under an
Agreement dated December 20, 1990. The directors annually review service fees
paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
Expenses
The Series is responsible for all of its own expenses other than those borne
by the Manager under the Investment Management Agreement and those borne by the
Distributor under the Distribution Agreement. The Class A Shares' ratio of
expenses to average daily net assets for the fiscal year ended December 31, 1994
was 0.91%. Based on expenses incurred by the Class A Shares during its fiscal
year ended December 31, 1994, the expenses of the Class B Shares are expected to
be 1.76% for the fiscal year ending December 31, 1995. The ratio of each Class
reflects the impact of its respective 12b-1 Plan.
Shares
The Limited-Term Government Fund series is the second series of Delaware Group
Limited-Term Government Funds, Inc., which is an open-end management investment
company, commonly known as a mutual fund. The Series' portfolio of assets is
diversified for purposes of the 1940 Act. The Fund was organized as a
Pennsylvania business trust in 1981 and was reorganized as a Maryland
corporation in 1990. The authorized capitalization of the Fund consists of three
billion shares of common stock, of which two billion shares have been allocated
to the Limited-Term Government Fund series. One billion shares have been
allocated to the Class A Shares and two hundred million shares each have been
allocated to the Class B Shares and the Limited-Term Government Fund
Institutional Class shares.
All Fund shares have noncumulative voting rights which means that the holders
of more than 50% of the Fund's shares voting for the election of directors can
elect 100% of the directors if they choose to do so. Under Maryland law, the
Fund is not required, and does not intend, to hold annual meetings of
shareholders unless, under certain circumstances, it is required to do so under
the 1940 Act. Shareholders of 10% or more of the Fund's shares may request that
a special meeting be called to consider the removal of a director.
Series' shares have a $.001 par value per share, equal voting rights, except
as noted below, and are equal in all other respects. Shares of the Series will
have a priority over shares of any other series of the Fund in the assets and
income of the Series and will vote separately on any matter that affects only
the Limited-Term Government Fund series.
The Series also offers the Limited-Term Government Fund Institutional Class of
shares as well as Class A and Class B Shares. Shares of each class represent
proportionate interests in the assets of the Series and have the same voting and
other rights and preferences as the other classes of shares of the Series,
except that shares of the Limited-Term Government Fund Institutional Class may
not vote on matters affecting the Distribution Plans under Rule 12b-1 relating
to the Class A and Class B Shares. Similarly, the shareholders of the Class A
Shares may not vote on matters affecting the Series' Plan under Rule 12b-1
relating to the Class B Shares, and the shareholders of the Class B Shares may
not vote on matters affecting the Series' Plan under Rule 12b-1 relating to the
Class A Shares. However, the Class B Shares may vote on any proposal to increase
materially the fees to be paid by the Series under the Rule 12b-1 Plan relating
to the Class A Shares.
Until May 31, 1992, the Fund offered two retail classes of shares, Investors
Series I and Investors Series II (now Class A Shares). Investors Series I class
offered shares with a front-end sales charge, but without the imposition of a
Rule 12b-1 fee. Effective June 1, 1992, following shareholder approval of a plan
of recapitalization on May 15, 1992, shareholders of the Investors Series I
class had their shares converted into shares of the Investors 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 Investors Series was
changed to Treasury Reserves Intermediate Series and the name Investors Series
II class was changed to Treasury Reserves Intermediate Fund class. On May 2,
1994, Treasury Reserves Intermediate Fund class became known as Treasury
Reserves Intermediate Fund A Class. Effective as of the close of business on
August 28, 1995, the name Delaware Group Treasury Reserves, Inc. was changed to
Delaware Group Limited-Term Government Funds, Inc. and the name Treasury
Reserves Intermediate Series was changed to Limited-Term Government Fund. At the
same time, the names of Treasury Reserves Intermediate Fund A Class, Treasury
Reserves Intermediate Fund B Class and Treasury Reserves Intermediate Fund
Institutional Class were changed to, respectively, Limited-Term Government Fund
A Class, Limited-Term Government Fund B Class and Limited-Term Government Fund
Institutional Class.
31
Limited-Term
Government
Fund
-------------
Institutional
PROSPECTUS
AUGUST 29, 1995
DELAWARE
GROUP
For more information contact Delaware Group at 800-828-5052.
Investment Manager
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
[PHOTO OF GEORGE WASHINGTON
National Distributor CROSSING THE DELAWARE
Delaware Distributors, L.P. RIVER APPEARS HERE]
1818 Market Street
Philadelphia, PA 19103
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
Legal Counsel
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
Independent Auditors
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
Custodian
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
P-047[--] RRD895
Printed in the U.S.A.
LIMITED-TERM GOVERNMENT FUND PROSPECTUS
(FORMERLY TREASURY RESERVES INTERMEDIATE FUND) August 29, 1995
INSTITUTIONAL
--------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about the Limited-Term Government Fund Institutional Class
call Delaware Group at 800-828-5052.
Delaware Group Limited-Term Government Funds, Inc. (formerly Delaware Group
Treasury Reserves, Inc.) (the "Fund") is a professionally-managed mutual fund of
the series type. This Prospectus describes the Limited-Term Government Fund
Institutional Class (which class was formerly known as the Treasury Reserves
Intermediate Fund Institutional Class and will be referred to herein as the
"Class") of shares of the Fund's Limited-Term Government Fund series (the
"Series"). The Series offers shares of the Class for purchase only by certain
enumerated institutions at net asset value, without the imposition of a front-
end or contingent deferred sales charge and without a 12b-1 charge. See Buying
Shares.
The Series' objective is to seek a high, stable level of current income while
attempting to minimize fluctuations in principal and provide maximum liquidity.
The Series intends to achieve its objective by investing its assets in a
diversified 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.
This Prospectus relates only to the Class and sets forth information that you
should read and consider before you invest. Please retain it for future
reference. Part B of the registration statement, dated August 29, 1995, as it
may be amended from time to time, contains additional information about the
Series and has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling the
above number. The Fund's financial statements appear in its Annual Report, which
will accompany any response to requests for Part B.
The Series also offers the Limited-Term Government Fund A Class and the
Limited-Term Government Fund B Class. Shares of the Limited-Term Government Fund
A Class carry a front-end sales charge and are subject to ongoing distribution
expenses. Shares of the Limited-Term Government Fund B Class are subject to
ongoing distribution expenses and a contingent deferred sales charge upon
redemption. A prospectus for these classes can be obtained by writing to
Delaware Distributors, L.P. at the above address or by calling the above number.
TABLE OF CONTENTS
Cover Page................................................................. 1
Synopsis................................................................... 2
Summary of Expenses........................................................ 3
Financial Highlights....................................................... 4
Investment Objective and Policies
Suitability.............................................................. 5
Investment Strategy...................................................... 5
Buying Shares.............................................................. 8
Redemption and Exchange.................................................... 10
Dividends and Distributions................................................ 12
Taxes...................................................................... 13
Calculation of Net Asset Value Per Share................................... 14
Management of the Fund..................................................... 14
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
--------------------------------------------------------------------------------
1
SYNOPSIS
Capitalization
The Limited-Term Government Fund series offers the Limited-Term Government
Fund Institutional Class, the Limited-Term Government Fund A Class and the
Limited-Term Government Fund B Class. The Fund has an authorized capitalization
of three billion shares of capital stock with a par value of $.001 per share, of
which two billion shares have been allocated to the Limited-Term Government Fund
series. One billion four hundred million shares of such capital stock have been
allocated to these classes as follows: two hundred million shares have been
allocated to Limited-Term Government Fund Institutional Class, one billion
shares have been allocated to Limited-Term Government Fund A Class and two
hundred million shares have been allocated to Limited-Term Government Fund B
Class. See Shares under Management of the Fund.
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment manager
for the Fund. The Manager or its affiliate, Delaware International Advisers
Ltd., also manages the other funds in the Delaware Group. Delaware Distributors,
L.P. (the "Distributor") is the national distributor for the Fund and for all of
the other mutual funds in the Delaware Group. Delaware Service Company, Inc.
(the "Transfer Agent") is the shareholder servicing, dividend disbursing and
transfer agent for the Fund and for all of the other mutual funds in the
Delaware Group. See Management of the Fund.
Purchase Price
Shares of the Class offered by this Prospectus are available at net asset
value, without a front-end or contingent deferred sales charge and are not
subject to distribution fees under a Rule 12b-1 distribution plan. See Buying
Shares.
Investment Objective
The objective of the Series is to seek high, stable income by investing 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. See Investment Objective and Policies.
Open-End Investment Company
The Fund, which was organized as a Pennsylvania business trust in 1981 and
reorganized as a Maryland corporation in 1990, is an open-end management
investment company. The Series' portfolio of assets is diversified for purposes
of the Investment Company Act of 1940 (the "1940 Act"). See Shares under
Management of the Fund.
Investment Management Fees
The Manager furnishes investment management services to the Fund, subject to
the supervision and direction of the Board of Directors. Under the Investment
Management Agreement, the annual compensation paid to the Manager is equal to
1/2 of 1% of the average daily net assets, less a proportionate share of all
directors' fees paid to the unaffiliated directors by the Series. See Management
of the Fund.
Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
2
SUMMARY OF EXPENSES
Shareholder Transaction Expenses
--------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).................................. None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).................................. None
Redemption Fees........................................................ None*
Exchange Fees.......................................................... None**
Annual Operating Expenses
(as a percentage of average daily net assets)
--------------------------------------------------------------------------------
Management Fees........................................................ 0.50%
12b-1 Fees............................................................. None
Other Operating Expenses............................................... 0.26%
-----
Total Operating Expenses............................................ 0.76%
=====
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Class will bear directly or
indirectly. *CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire. **Exchanges are subject to the requirements of each
fund and a front-end sales charge may apply. See Limited-Term Government Fund A
Class and Limited-Term Government Fund B Class for expense information about
those classes.
The following example illustrates the expenses that an investor would pay on a
$1,000 investment over various time periods, assuming (1) a 5% annual rate of
return and (2) redemption at the end of each time period. As noted in the table
above, the Fund charges no redemption fees.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$8 $24 $42 $94
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
3
FINANCIAL HIGHLIGHTS
The following financial highlights from September 2, 1987 through December 31,
1994 are derived from the financial statements of Delaware Group Limited-Term
Government Funds, Inc.-Limited-Term Government Fund series and have been audited
by Ernst & Young LLP, independent auditors. The data should be read in
conjunction with the financial statements, related notes, and the report of
Ernst & Young LLP covering such financial information and highlights, all of
which are incorporated by reference into Part B. Further information about the
Series' performance is contained in its Annual Report to shareholders. A copy of
the Series' Annual Report (including the report of Ernst & Young LLP) may be
obtained from the Fund upon request at no charge.
--------------------------------------------------------------------------------
Year Ended
12/31/94 12/31/93 12/31/92/1/3/ 12/31/91/1/
Net Asset Value, Beginning of Period............. $9.840 $10.000 $10.190 $ 9.770
Income From Investment Operations
---------------------------------
Net Investment Income............................ 0.681 0.696 0.754 0.816
Net Gains or Losses on Securities
(both realized and unrealized)................. (0.850) (0.160) (0.190) 0.420
------ ------- ------- -------
Total From Investment Operations............... (0.169) 0.536 0.564 1.236
------ ------- ------- -------
Less Distributions
------------------
Dividends (from net investment income)........... (0.681) (0.696) (0.754) (0.816)
Distributions (from capital gains)............... none none none none
Returns of Capital............................... none none none none
------ ------- ------- -------
Total Distributions............................ (0.681) (0.696) (0.754) (0.816)
------ ------- ------- -------
Net Asset Value, End of Period................... $8.990 $ 9.840 $10.000 $10.190
====== ======= ======= =======
------------------------------------------------------------------------------------------------------------------------------------
Total Return..................................... (1.74%) 5.44% 5.77%/4/ 13.21%/4/
------------
------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------
Net Assets, End of Period (000's omitted)........ $37,238 $47,700 $52,403 $146,598
Ratio of Expenses to Average Daily Net Assets.... 0.76% 0.74% 0.75%/5/ 0.75%/5/
Ratio of Net Investment Income to Average
Daily Net Assets............................... 7.25% 6.91% 7.58%/6/ 8.11%/6/
Portfolio Turnover Rate.......................... 148% 171% 77% 42%
Period
9/2/87/1/2/
Year Ended through
12/31/90/1/ 12/28/89/1/ 12/29/88/1/ 12/31/87
Net Asset Value, Beginning of Period............. $9.720 $9.700 $9.800 $9.770
Income From Investment Operations
---------------------------------
Net Investment Income............................ 0.828 0.857 0.744 0.192
Net Gains or Losses on Securities
(both realized and unrealized)................. 0.050 0.020 (0.100) 0.030
------ ------ ------ ------
Total From Investment Operations............... 0.878 0.877 0.644 0.222
------ ------ ------ ------
Less Distributions
------------------
Dividends (from net investment income)........... (0.828) (0.857) (0.744) (0.192)
Distributions (from capital gains)............... none none none none
Returns of Capital............................... none none none none
------ ------ ------ ------
Total Distributions............................ (0.828) (0.857) (0.744) (0.192)
------ ------ ------ ------
Net Asset Value, End of Period................... $9.770 $9.720 $9.700 $9.800
====== ====== ====== ======
------------------------------------------------------------------------------------------------------------------------------------
Total Return..................................... 9.48% 9.44% 6.78% 5.61%
------------
------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
------------------------
Net Assets, End of Period (000's omitted)........ $12,811 $3,933 $5,740 $10,599
Ratio of Expenses to Average Daily Net Assets.... 0.84% 0.82% 0.75% /2/
Ratio of Net Investment Income to Average
Daily Net Assets............................... 8.56% 8.87% 7.59% /2/
Portfolio Turnover Rate.......................... 175% 311% 146% /2/
------------
/1/The financial highlights for the period prior to June 1, 1992 (the date
Limited-Term Government Fund Institutional Class was first offered for public
sale) are derived from data of the Investors Series I class, which like the
Limited-Term Government Fund Institutional Class, was not subject to
Rule 12b-1 distribution expenses. Shares of Investors Series I class were
converted into shares of Investors Series II class on June 1, 1992 pursuant
to a Plan of Recapitalization approved by shareholders of the Investors
Series I class. See Shares for additional information.
/2/September 2, 1987 was the date of the initial public offering of Investors
Series I class (see Note 1); the ratios of expenses and net investment income
to average daily net assets and portfolio turnover have been omitted as
management believes that such ratios for this relatively short of a time
period are not meaningful.
/3/The per share data and ratios for the Investors Series I class and the
Limited-Term Government Fund Institutional Class (formerly known as Treasury
Reserves Intermediate Fund Institutional Class) have been combined for 1992.
For the five months ended May 31, 1992, the Investors Series I class'
operating expenses and net investment income per share were $.031 and $.325,
respectively. For the seven months ended December 31, 1992, the Limited-Term
Government Fund Institutional Class' operating expenses and net investment
income per share were $.045 and $.429, respectively. All net investment
income was distributed to shareholders.
/4/Total return for 1991 and 1992 reflect the expense limitations referenced in
Notes 5 and 6.
/5/Ratio of expenses to average daily net assets prior to expense limitation was
0.78% for 1992 and 0.84% for 1991. See Note 1.
/6/Ratio of net investment income to average daily net assets prior to expense
limitation was 7.54% for 1992 and 8.02% for 1991. See Note 1.
4
INVESTMENT OBJECTIVE
AND POLICIES
The Series seeks to provide a high stable level of income, while attempting to
minimize fluctuations in principal and provide maximum liquidity. It seeks to do
this 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. The Series may
also invest up to 20% of its assets in corporate notes and bonds, certificates
of deposit and obligations of both U.S. and foreign banks, commercial paper and
certain asset-backed securities.
The Series is not a money market fund. A money market fund is designed for
stability of principal; consequently, the level of income fluctuates. The Series
is designed for greater stability of income at a relatively higher level;
consequently, the principal value will fluctuate over time.
The level of income will vary depending on interest rates and the portfolio.
However, since longer term rates are generally less volatile than short-term
rates, the level of income for the Series may be less volatile than, for
example, a money market fund.
Because the Series invests in longer term securities than a money market fund,
the value of shares will fluctuate. When interest rates rise, the share value
will tend to fall, and when interest rates fall, the share value will tend to
rise. (See Investment Strategy.)
SUITABILITY
The Series' objective of a high stable income stream is suited for longer term
investments, such as tax-deferred Retirement Plans, where the income stream can
be left to compound on a tax-deferred basis.
The Series' objective is also suitable for investors who want a stable and
high income flow, the security associated with U.S. Government-backed
investments and the convenience and liquidity of mutual funds. Also, ownership
of Series shares reduces the bookkeeping and administrative inconveniences
connected with direct purchases of these instruments.
Investors should consider asset value fluctuation as well as yield in making
an investment decision. Therefore, the Series may not be suitable for investors
whose overriding objective is stability of principal. That is an objective of
the Delaware Group money market funds. Also, the Series is not designed for the
investor who is willing to assume the risks involved in maximizing the yield or
capital gain potential of a long-term bond portfolio. These are objectives of
other fixed income funds in the Delaware Group of funds that are generally
available through registered investment dealers.
INVESTMENT STRATEGY
The Series will attempt to provide you with yields higher than those available
in money market funds or bank money market accounts by extending its portfolio
maturities.
The yield curves, as shown in the chart below, reflect the additional return
that may be obtained by a moderate extension of maturities.
YIELD CURVE
Limited-Term
Government Fund
12/31/93 12/31/94
3 Month 3.075 5.682
6 Month 3.287 6.495
1 Year 3.578 7.162
2 Year 4.234 7.690
3 Year 4.514 7.778
5 Year 5.197 7.827
7 Year 5.339 7.827
10 Year 5.792 7.827
30 Year 6.346 7.876
The Series expects to have an average portfolio maturity in the shaded area
indicated above. The yields to maturity in the curves are for unmanaged Treasury
securities with various remaining maturities. The black line shows the yield
curve at December 31, 1993. The blue line represents the yield curve as of
December 31, 1994. The data was obtained from Federal Reserve Statistical
Release H.15 (519). These are not necessarily indicative of future performance
or yield curves. The yield curve changes over time and short rates may
occasionally be higher than intermediate rates.
5
MATURITY RESTRICTIONS
The Series seeks to reduce the effects of interest rate volatility on
principal by limiting the average effective maturity (as that term is defined in
Part B) to no more than three to five years.
If in the judgment of the Manager rates are low, it will tend to shorten the
average effective maturity to three years or less. Conversely, if in its
judgment rates are high, it will tend to extend the average effective maturity
to five years or less. The Manager will increase the proportion of short-term
instruments when short-term yields are higher. The Manager also has the ability
to purchase individual securities with a remaining maturity of up to 15 years.
QUALITY RESTRICTIONS
The Series will invest primarily in securities issued or guaranteed by the
U.S. Government (e.g., Treasury Bills and Notes), its agencies (e.g., Federal
Housing Administration) or instrumentalities (e.g., Federal Home Loan Bank) or
Government-sponsored corporations (e.g., Federal National Mortgage Association),
and repurchase agreements and publicly- and privately-issued mortgage-backed
securities collateralized by such securities. The Series may invest up to 20% of
its assets in: (1) corporate notes and bonds rated A or above; (2) certificates
of deposit and obligations of both U.S. and foreign banks if they have assets of
at least one billion dollars; (3) commercial paper rated P-1 by Moody's
Investors Service ("Moody's") and/or A-1 by Standard and Poor's Corporation
("S&P"); and (4) certain asset-backed securities rated Aaa by Moody's or AAA by
S&P.
The value of shares will fluctuate in response to general interest rate
changes. When rates rise, the value of securities in the portfolio will
generally fall. Conversely, when rates fall, the value of securities in the
portfolio will generally rise.
INVESTMENT TECHNIQUES
To achieve its objective, the Series may use certain hedging techniques which
might not be conveniently available to individuals. These techniques will be
used at the Manager's discretion to protect the Series' principal value.
The Series may purchase put options, write secured put options, write covered
call options, purchase call options and enter into closing transactions.
A put option purchased by the Series gives it the right to sell one of its
securities for an agreed price up to an agreed date. The advantage is that the
Series can be protected should the market value of the security decline due to a
rise in interest rates. However, the Series must pay a premium for this right,
whether it exercises it or not. The Series will only purchase put options to the
extent that the premiums on all outstanding put options do not exceed 2% of the
Series' total assets.
A put option written by the Series obligates it to buy the security underlying
the option at the exercise price during the option period, and the purchaser of
the option has the right to sell the security to the Series. During the option
period, the Series, as writer of the put option, may be assigned an exercise
notice by the broker/dealer through whom the option was sold requiring the
Series to make payment of the exercise price against delivery of the underlying
security. This obligation terminates upon expiration of the put option or at
such earlier time at which the writer effects a closing purchase transaction.
The Series will only write put options on a secured basis. The advantage to the
Series of writing put options is that it receives premium income. The
disadvantage is that the Series may be required, when the put is exercised, to
purchase securities at higher prices than the current market price.
A covered call option written by the Series obligates it to sell one of its
securities for an agreed price up to an agreed date. The advantage is that the
Series receives premium income, which may offset the cost of purchasing put
options. However, the Series may lose the potential market appreciation of the
security if the Manager's judgment is wrong and interest rates fall.
When the Series purchases a call option, in return for a premium paid by the
Series to the writer of the option, the Series obtains the right to buy the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option, who receives the premium
upon writing the option, has the obligation, upon exercise of the option, to
deliver the underlying security against payment of the exercise price. The
advantage is that the Series may hedge against an increase in the price of
securities which it ultimately wishes to buy. However, the premium paid for the
call option plus any transaction costs will reduce the benefit, if any, realized
by the Series upon exercise of the option. The Series will only purchase call
options to the extent that premiums paid on all outstanding call options do not
exceed 2% of the Series' total assets.
Closing transactions essentially let the Series offset put options or call
options prior to exercise or expiration. If the Series cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
The Series may use both Exchange-traded and over-the-counter options. Certain
over-the-counter options may be illiquid. The Series will not invest more than
10% of its assets in illiquid securities.
The Series may invest in futures contracts and options on such futures
contracts subject to certain limitations.
6
Futures contracts are agreements for the purchase or sale for future delivery
of securities. When a futures contract is sold, the Series incurs a contractual
obligation to deliver the securities underlying the contract at a specified
price on a specified date during a specified future month. A purchase of a
futures contract means the acquisition of a contractual right to obtain delivery
to the Series of the securities called for by the contract at a specified price
during a specified future month. The Series will not enter into futures
contracts to the extent that more than 5% of the Series' assets are required as
futures contract margin deposits and will not engage in such transactions to the
extent that obligations relating to such transactions exceed 20% of the Series'
assets.
The Series may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.
The principal purpose of the purchase or sale of futures contracts for the
Series is to protect the Series against the adverse effects of fluctuations in
interest rates without actually buying or selling such securities. To the extent
that interest rates move in an unexpected direction, however, the Series may not
achieve the anticipated benefits of futures contracts or options on such futures
contracts or may realize a loss. To the extent that the Series purchases an
option on a futures contract and fails to exercise the option prior to the
exercise date, it will suffer a loss of the premium paid. Further, the possible
lack of a secondary market would prevent the Series from closing out its option
positions relating to futures.
The Series may invest in mortgage-backed securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. In addition, the Series
may invest up to 35% of 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 and REMICs issued by private entities are not Government securities and
are not directly guaranteed by any Government securities and are not directly
guaranteed by any Government agency. They are secured by the underlying
collateral of the private issuer. The Series will invest in such private-backed
securities only if they are 100% collateralized at the time of issuance by
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. The Series currently invests in privately-issued CMOs and
REMICs only if they are rated at the time of purchase in the two highest grades
by a nationally-recognized rating agency. Certain of the CMOs in which the
Series may invest 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).
As noted and subject to the limitations set forth above, the Series may also
invest in securities which are backed by assets such as receivables on home
equity and credit card loans, and receivables regarding automobile, mobile home
and recreational vehicle loans, wholesale dealer floor plans and leases. All
such securities must be rated in the highest rating category by a reputable
credit rating agency (e.g., AAA by S&P or Aaa by Moody's). Such receivables are
securitized in either a pass-through or a pay-through structure. Pass-through
securities provide investors with an income stream consisting of both principal
and interest payments in respect of the receivables in the underlying pool. Pay-
through asset-backed securities are debt obligations issued usually by a special
purpose entity, which are collateralized by the various receivables and in which
the payments on the underlying receivables provide the funds to pay the debt
service on the debt obligations issued. The Series may invest in these and other
types of asset-backed securities that may be developed in the future. It is the
Series' current policy to limit asset-backed investments to those represented by
interests in credit card receivables, wholesale dealer floor plans, home equity
loans and automobile loans.
7
Due to the shorter maturity of the collateral backing such securities, there
is less of a risk of substantial prepayment than with mortgage-backed
securities. Such asset-backed securities do, however, involve certain risks not
associated with mortgage-backed securities, including the risk that security
interests cannot be adequately or in many cases, ever, established. In addition,
with respect to credit card receivables, a number of state and federal consumer
credit laws give debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the outstanding balance. In the case of automobile
receivables, there is a risk that the holders may not have either a proper or
first security interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance and technical
requirements under state laws. Therefore, recoveries on repossessed collateral
may not always be available to support payments on the securities. For further
discussion concerning the risks of investing in such asset-backed securities,
see Part B.
The Series may also use repurchase agreements which are at least 100%
collateralized by securities in which the Series can invest directly. Repurchase
agreements help the Series to invest cash on a temporary basis. Under a
repurchase agreement, the Series acquires ownership and possession of a
security, and the seller agrees to buy the security back at a specified time and
higher price. If the seller is unable to repurchase the security, the Series
could experience delays and losses in liquidating the securities. To minimize
this possibility, the Series considers the creditworthiness of banks and dealers
when entering into repurchase agreements.
PORTFOLIO LOAN TRANSACTIONS
The Series may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
The major risk to which the Series would be exposed on a loan transaction is
the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, the Series will only enter into loan arrangements
after a review of all pertinent facts by the Manager, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
* * *
The Series may invest in restricted securities, including securities eligible
for resale without registration pursuant to Rule 144A ("Rule 144A Securities")
under the Securities Act of 1933. Rule 144A permits many privately placed and
legally restricted securities to be freely traded among certain institutional
buyers such as the Series. The Series may invest no more than 10% of the value
of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day functions of determining whether or not individual Rule
144A Securities are liquid for purposes of the Series' 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously
determined to be liquid is no longer liquid and, as a result, the Series'
holdings of illiquid securities exceed the Series' 10% limit on investment in
such securities, the Manager will determine what action shall be taken to ensure
that the Series continues to adhere to such limitation.
* * *
Part B further clarifies the Series' investment policies as well as the
methods used to determine maturity. A brief discussion of those factors that
materially affected the Series' performance during its most recently completed
fiscal year appears in the Series' Annual Report.
BUYING SHARES
The Distributor serves as the national distributor for the Fund. Shares of the
Class may be purchased directly by contacting the Fund or its agent or through
authorized investment dealers. All purchases of shares of the Class are at net
asset value. There is no front-end or contingent deferred sales charge.
INVESTMENT INSTRUCTIONS GIVEN ON BEHALF OF PARTICIPANTS IN AN EMPLOYER-
SPONSORED RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH DIRECTIONS PROVIDED BY THE
EMPLOYER. EMPLOYEES CONSIDERING PURCHASING SHARES OF THE CLASS AS PART OF THEIR
RETIREMENT PROGRAM SHOULD CONTACT THEIR EMPLOYER FOR DETAILS.
8
Shares of the Class are available for purchase only by (a) retirement plans
introduced by persons not associated with brokers or dealers that are primarily
engaged in the retail securities business and rollover individual retirement
accounts from such plans; (b) tax-exempt employee benefit plans of the Manager
or its affiliates and securities dealer firms with a selling agreement with the
Distributor; (c) institutional advisory accounts of the Manager or its
affiliates and those having client relationships with Delaware Investment
Advisers, a division of the Manager, or its affiliates and their corporate
sponsors, as well as subsidiaries and related employee benefit plans and
rollover individual retirement accounts from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the Class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
LIMITED-TERM GOVERNMENT FUND A CLASS AND
LIMITED-TERM GOVERNMENT FUND B CLASS
In addition to offering the Limited-Term Government Fund Institutional Class
of shares, the Series also offers the Limited-Term Government Fund A Class and
Limited-Term Government Fund B Class, which are described in a separate
prospectus relating only to those classes. Shares of Limited-Term Government
Fund A Class and Limited-Term Government Fund B Class may be purchased through
authorized investment dealers or directly by contacting the Fund or its agent.
The Limited-Term Government Fund A Class carries a front-end sales charge and
has annual 12b-1 expenses equal to a maximum of .30%. The maximum front-end
sales charge as a percentage of the offering price is 3.00% (3.10% as a
percentage of the amount invested) and is reduced on certain transactions of
$100,000 or more. The Limited-Term Government Fund B Class has no front-end
sales charge, but is subject to annual 12b-1 expenses equal to a maximum of 1%.
Shares of Limited-Term Government Fund B Class and certain shares of the
Limited-Term Government Fund A Class may be subject to a contingent deferred
sales charge upon redemption. The 12b-1 Plan distribution expenses borne by the
Limited-Term Government Fund A Class and the Limited-Term Government Fund B
Class, the front-end sales charge and the limited contingent deferred sales
charge, if applicable, to which the Limited-Term Government Fund A Class is
subject and the contingent deferred sales charge to which the Limited-Term
Government Fund B Class is subject may affect the performance of those classes.
Sales or service compensation available in respect of such classes, therefore,
differs from that available in respect of the Class. All three classes of shares
of the Series have a proportionate interest in the underlying portfolio of
securities of the Series. Total Operating Expenses incurred by the Limited-Term
Government Fund A Class as a percentage of average daily net assets for the
fiscal year ended December 31, 1994 were 0.91%, including 12b-1 expenses. Based
on expenses incurred by the Limited-Term Government Fund A Class during its
fiscal year ended December 31, 1994, the expenses of the Limited-Term Government
Fund B Class are expected to be 1.76%, including 12b-1 expenses, for the fiscal
year ending December 31, 1995. See Part B for performance information about the
Limited-Term Government Fund A Class and the Limited-Term Government Fund B
Class. To obtain a prospectus relating to such classes, contact the Distributor.
HOW TO BUY SHARES
The Series makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
INVESTING DIRECTLY BY MAIL
1. Initial Purchases--An Investment Application must be completed, signed and
sent with a check payable to Limited-Term Government Fund Institutional Class,
to P.O. Box 7977, Philadelphia, PA 19101.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to Limited-Term Government Fund Institutional Class. Your check
should be identified with your name(s) and account number.
INVESTING DIRECTLY BY WIRE
You may purchase shares by requesting your bank to transmit funds by wire to
CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include your
name(s) and your account number for the Series and class in which you are
investing).
1. Initial Purchases--Before you invest, telephone the Fund's Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application to Limited-Term Government Fund Institutional Class,
to P.O. Box 7977, Philadelphia, PA 19101.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your wire.
9
INVESTING BY EXCHANGE
If you have an investment in another mutual fund in the Delaware Group and you
qualify to purchase shares of the Class, you may write and authorize an exchange
of part or all of your investment into the Class. However, shares of Limited-
Term Government Fund B Class and the Class B Shares of the other funds in the
Delaware Group offering such a class of shares may not be exchanged into the
Class. If you wish to open an account by exchange, call your Client Services
Representative at 800-828-5052 for more information.
INVESTING THROUGH YOUR INVESTMENT DEALER
You can make a purchase of Class shares through most investment dealers who,
as part of the service they provide, must transmit orders promptly. They may
charge for this service.
PURCHASE PRICE AND EFFECTIVE DATE
The purchase price (net asset value) is determined as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when such exchange is open.
The effective date of a purchase made through an investment dealer is the date
the order is received by the Series. The effective date of a direct purchase is
the day your wire, electronic transfer or check is received unless it is
received after the time the share price is determined, as noted above. Those
received after such time will be effective the next business day.
THE CONDITIONS OF YOUR PURCHASE
The Fund reserves the right to reject any purchase or exchange. If a purchase
is cancelled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to redeem
accounts that remain under $1,000 as a result of redemptions.
REDEMPTION AND EXCHANGE
REDEMPTION AND EXCHANGE REQUESTS MADE ON BEHALF OF PARTICIPANTS IN AN
EMPLOYER-SPONSORED RETIREMENT PLAN ARE MADE IN ACCORDANCE WITH DIRECTIONS
PROVIDED BY THE EMPLOYER. EMPLOYEES SHOULD THEREFORE CONTACT THEIR EMPLOYER FOR
DETAILS.
Your shares will be redeemed or exchanged based on the net asset value next
determined after we receive your request in good order. Redemption and exchange
requests received in good order after the time the net asset value of shares is
determined, as noted above, will be processed on the next business day. See
Purchase Price and Effective Date under Buying Shares. Except as otherwise noted
below, for a redemption request to be in "good order," you must provide your
Class account number, account registration, and the total number of shares or
dollar amount of the transaction. With regard to exchanges, you must also
provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Fund at 800-828-5052.
The Fund will not honor check or wire redemptions for Class shares recently
purchased by check unless it is reasonably satisfied that the purchase check has
cleared, which may take up to 15 days from the purchase date. The Fund may honor
written redemption requests, but will not mail the proceeds until it is
reasonably satisfied the purchase check has cleared. You can avoid this
potential delay if you purchase shares by wiring Federal Funds. The Fund
reserves the right to reject a written or telephone redemption request or delay
payment of redemption proceeds if there has been a recent change to the
shareholder's address of record.
Shares of the Class may be exchanged into any other Delaware Group mutual fund
provided: (1) the investment satisfies the eligibility and other requirements
set forth in the prospectus of the fund being acquired, including the payment of
any applicable front-end sales charge; and (2) the shares of the fund being
acquired are in a state where that fund is registered. If exchanges are made
into other shares that are eligible for purchase only by those permitted to
purchase shares of the Class, such exchange will be exchanged at net asset
value. Shares of the Class may not be exchanged into the Class B Shares of the
funds in the Delaware Group. The Fund reserves the right to reject exchange
requests at any time. The Fund may suspend or terminate, or amend the terms of,
the exchange privilege upon 60 days' written notice to shareholders.
10
Different redemption and exchange methods are outlined below. There is no fee
charged by the Fund or the Distributor for redeeming or exchanging your shares.
You may also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders with respect to an account, including
selection of any of the features described below, shall continue in effect until
revoked or modified in writing and until such time as such written revocation or
modification has been received by the Fund or its agent.
All exchanges involve a purchase of shares of the fund into which the exchange
is made. As with any purchase, an investor should obtain and carefully read that
fund's prospectus before buying shares in an exchange. The prospectus contains
more complete information about the fund, including charges and expenses.
CHECKWRITING FEATURE
YOU CAN REQUEST SPECIAL CHECKS BY MARKING THE BOX ON THE INVESTMENT
APPLICATION.
The checks must be drawn for $500 or more and, unless otherwise indicated on
the Investment Application or your checkwriting authorization form, must be
signed by all owners of the account.
Because the value of shares fluctuates, you cannot use checks to close your
account. The Checkwriting Feature is not available for Retirement Plans. See
Part B for additional information.
WRITTEN REDEMPTION AND EXCHANGE
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103 to
redeem some or all of your Class shares or to request an exchange of any or all
of your shares into another mutual fund in the Delaware Group, subject to the
same conditions and limitations as other exchanges noted above. The request must
be signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent to the
shareholder(s) at the address of record, the Fund requires a signature by all
owners of the account and may require a signature guarantee. Each signature
guarantee must be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
The redemption request is effective at the net asset value next determined
after it is received in good order. Payment is normally mailed the next business
day, but no later than seven days, after receipt of your request. The Fund does
not issue certificates for shares unless you submit a specific request. If your
shares are in certificate form, the certificate must accompany your request and
also be in good order.
Shareholders also may submit their written request for redemption or exchange
by facsimile transmission at the following number: 215-972-8864.
TELEPHONE REDEMPTION AND EXCHANGE
To get the added convenience of the telephone redemption and exchange methods,
you must have the Transfer Agent hold your shares (without charge) for you. If
you choose to have your shares in certificate form, you can only redeem or
exchange by written request and you must return your certificates.
The Telephone Redemption service enabling redemption proceeds to be mailed to
the account address of record and the Telephone Exchange service, both of which
are described below, are automatically provided unless you notify the Fund in
writing that you do not wish to have such service available with respect to your
account. The Fund reserves the right to modify, terminate or suspend these
procedures upon 60 days' written notice to shareholders. It may be difficult to
reach the Fund by telephone during periods when market or economic conditions
lead to an unusually large volume of telephone requests.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Class shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
11
TELEPHONE REDEMPTION--CHECK TO YOUR ADDRESS OF RECORD
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record. Payment is normally mailed the next business day,
but no later than seven days, after receipt of the request.
TELEPHONE REDEMPTION--PROCEEDS TO YOUR BANK
Redemption proceeds of $1,000 or more can be transferred to your predesignated
bank account by wire or by check. You should authorize this service when you
open your account. If you change your predesignated bank account, the Fund
requires a written authorization and may require that you have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day, but no later than seven days, after receipt of your request to your
predesignated bank account. There are no fees for this method, but the mail time
may delay getting funds into your bank account. Simply call your Client Services
Representative prior to the time the net asset value is determined, as noted
above.
TELEPHONE EXCHANGE
You or your investment dealer of record can exchange shares into any fund in
the Delaware Group under the same registration. As with the written exchange
service, telephone exchanges are subject to the same conditions and limitations
as other exchanges noted above. Telephone exchanges may be subject to
limitations as to amounts or frequency.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares a dividend to all shareholders of record of the Class at the
time the net asset value per share is determined. See Purchase Price and
Effective Date under Buying Shares. Thus, when redeeming shares, dividends
continue to accrue up to and including the date of redemption.
Purchases of Class shares by wire begin earning dividends when converted into
Federal Funds and available for investment, normally the next business day after
receipt. Purchases by check earn dividends upon conversion to Federal Funds,
normally one business day after receipt.
Each class of the Series will share proportionately in the investment income
and expenses of the Series, except that the Class will not incur any
distribution fee under the Series' 12b-1 Plans which apply to the Limited-Term
Government Fund A Class and the Limited-Term Government Fund B Class.
The dividends are declared daily and paid monthly on the last business day of
each month. Dividends and distributions, if any, will be automatically
reinvested in a shareholder's account at net asset value unless the shareholder
elects otherwise. Payment by check of cash dividends will ordinarily be mailed
within three business days after the payable date. Short-term capital gains
distributions, if any, may be paid quarterly, but in the discretion of the
Fund's Board of Directors might be distributed less frequently. Long-term
capital gains, if any, will be distributed annually.
The Series can have two types of dividends: income and capital gains. Both
types of dividends, if any, are automatically reinvested in your account at net
asset value.
For the fiscal year ended December 31, 1994, dividends totaling $0.681 per
share of the Class were paid from net investment income.
12
TAXES
The Series has qualified, and intends to continue to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue Code (the "Code").
As such, the Series will not be subject to federal income tax, or to any excise
tax, to the extent its earnings are distributed as provided in the Code.
The Series intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to you as ordinary income, even
though received in additional shares. No portion of the Series' distributions
will be eligible for the dividends-received deduction for corporations.
Distributions paid by the Series from long-term capital gains, received in
additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Series. The Series does not seek to realize any
particular amount of capital gains during a year; rather, realized gains are a
byproduct of Series management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Series are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
Dividends which are declared in October, November or December but which, for
operational reasons, may not be paid to the shareholder until the following
January, will be treated for tax purposes as if paid by the Series and received
by the shareholder on December 31 of the calendar year in which they are
declared.
The sale of shares of the Series is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two portfolios or series of a mutual fund). Any loss
incurred on sale or exchange of the Series' shares which had been held for six
months or less will be treated as a long-term capital loss to the extent of
capital gain dividends received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state and local
taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government securities may be exempt from
state personal income taxes. Shares of the Series are exempt from Pennsylvania
county personal property taxes.
Each year, the Fund will mail you information on the tax status of the Series'
dividends and distributions. Shareholders will also receive each year
information as to the portion of dividend income, if any, that is derived from
U.S. Government securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Series.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Account Registration Form your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in the
Series.
See Accounting and Tax Issues in Part B for additional information on tax
matters relating to the Series and its shareholders.
13
CALCULATION OF NET ASSET VALUE PER SHARE
The purchase and redemption price of the Class is the net asset value ("NAV")
per share of the Class next computed after the order is received. The NAV is
computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when such exchange is open.
The NAV per share is computed by adding the value of all securities and other
assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are valued
at their fair value as determined in good faith and in a method approved by the
Fund's Board of Directors.
Each of the Series' three classes will bear, pro-rata, all of the common
expenses of the Series. The net asset values of all outstanding shares of each
class of the Series will be computed on a pro-rata basis for each outstanding
share based on the proportionate participation in the Series represented by the
value of shares of that class. All income earned and expenses incurred by the
Series will be borne on a pro-rata basis by each outstanding share of a class,
based on each class' percentage in the Series represented by the value of shares
of such classes, except that the Class will not incur any of the expenses under
the Series' 12b-1 Plans and Limited-Term Government Fund A and B Classes alone
will bear the 12b-1 Plan fees payable under their respective Plans. Due to the
specific distribution expenses and other costs that will be allocable to each
class, the dividends paid to each class of the Series may vary. However, the NAV
per share of each class is expected to be equivalent.
MANAGEMENT OF THE FUND
DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors. Part B contains additional information regarding the
directors and officers.
INVESTMENT MANAGER
The Manager furnishes investment management services to the Series.
The Manager and its predecessors have been managing the funds in the Delaware
Group since 1938. On December 31, 1994, the Manager and its affiliate, Delaware
International Advisers Ltd., were supervising in the aggregate more than $24
billion in assets in the various institutional (approximately $15,456,416,000)
and investment company (approximately $9,253,901,000) accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a wholly-
owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. As a result of the merger, DMH became a wholly-owned subsidiary and
the Manager became an indirect, wholly-owned subsidiary of Lincoln National and
both are now subject to the ultimate control of Lincoln National. Lincoln
National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management. In connection with the merger, a
new Investment Management Agreement between the Fund on behalf of the Series and
the Manager was executed following shareholder approval.
14
The Manager manages the Series' portfolio, makes investment decisions and
implements them. The Manager also administers the Fund's affairs and pays the
salaries of all the directors, officers and employees of the Fund who are
affiliated with the Manager. For these services, the Manager is paid an annual
fee of 1/2 of 1% of the average daily net assets of the Series, less a
proportionate share of all directors' fees paid to the unaffiliated directors by
the Series. Investment management fees paid by the Series were 0.50% of average
daily net assets for the fiscal year ended December 31, 1994.
Roger A. Early has assumed primary responsibility for making day-to-day
investment decisions for the Series as of July 18, 1994. Mr. Early has an
undergraduate degree in economics from the University of Pennsylvania's Wharton
School and an MBA in finance and accounting from the University of Pittsburgh.
He is also a CPA and a CFA. Prior to joining the Delaware Group, Mr. Early was a
portfolio manager for Federated Investment Counseling's fixed income group, with
over $1 billion in assets.
In making investment decisions for the Series, Mr. Early consults regularly
with Paul E. Suckow and Gary A. Reed. Mr. Suckow is the Chief Investment Officer
for fixed income. A Chartered Financial Analyst, he is a graduate of Bradley
University with an MBA from Western Illinois University. Mr. Suckow was a fixed
income portfolio manager at the Delaware Group from 1981 to 1985. He returned to
the Delaware Group in 1993 after eight years with Oppenheimer Management
Corporation. Mr. Reed, also a Chartered Financial Analyst, is a graduate of the
University of Chicago with an MA from Columbia University. He joined the
Delaware Group in 1989 as a vice president for fixed income.
PORTFOLIO TRADING PRACTICES
Portfolio trades are generally made on a net basis without brokerage
commissions. However, the price may include a mark-up or mark-down. Banks,
brokers or dealers are selected by the Manager to execute the Series' portfolio
transactions.
Although the Series trades principally to seek a high level of income and
stability of principal and not for profits, the portfolio turnover may be high,
particularly if interest rates are volatile. The degree of portfolio activity
may affect brokerage costs of the Series and taxes payable by shareholders.
During the fiscal years ended December 31, 1993 and 1994, the Series' portfolio
turnover rates were 171% and 148%, respectively. See Portfolio Turnover under
Trading Practices and Brokerage in Part B.
The Manager uses its best efforts to obtain the best available price and most
favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, the Manager may consider a
broker/dealer's sales of Series shares in placing portfolio orders and may place
orders with broker/dealers that have agreed to defray certain Series expenses
such as custodian fees.
15
PERFORMANCE INFORMATION
From time to time, the Series may quote yield or total return performance of
the Class in advertising and other types of literature.
The current yield for the Class will be calculated by dividing the annualized
net investment income earned by the Class during a recent 30-day period by the
net asset value per share on the last day of the period. The yield formula
provides for semi-annual compounding which assumes that net investment income is
earned and reinvested at a constant rate and annualized at the end of a six-
month period.
Total return will be based on a hypothetical $1,000 investment, reflecting the
reinvestment of all distributions at net asset value. Each presentation will
include the average annual total return for one-, five- and ten-year (or life of
fund, if applicable) periods. The Series may also advertise aggregate and
average total return information concerning the Class over additional periods of
time.
Yield and net asset value fluctuate and are not guaranteed. Past performance
is not an indication of future results.
STATEMENTS AND CONFIRMATIONS
You will receive quarterly statements of your account as well as confirmations
of all investments and redemptions. You should examine statements and
confirmations immediately and promptly report any discrepancy by calling your
Client Services Representative.
FINANCIAL INFORMATION ABOUT THE SERIES
Each fiscal year, you will receive an audited annual report and an unaudited
semi-annual report. These reports provide detailed information about the Fund's
investments and performance. The Fund's fiscal year ends on December 31.
DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
the Series under a Distribution Agreement dated April 3, 1995. The Distributor
bears all of the costs of promotion and distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the shareholder
servicing, dividend disbursing and transfer agent for the Series under an
Agreement dated December 20, 1990. The directors annually review service fees
paid to the Transfer Agent. Certain recordkeeping and other shareholder services
that otherwise would be performed by the Transfer Agent may be performed by
certain other entities and the Transfer Agent may elect to enter into an
agreement to pay such other entities for those services. In addition,
participant account maintenance fees may be assessed for certain recordkeeping
services provided as part of retirement plan and administration service
packages. These fees are based on the number of participants in the plan and the
various services selected by the employer. Fees will be quoted upon request and
are subject to change.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
EXPENSES
The Series is responsible for all of its own expenses other than those borne
by the Manager under the Investment Management Agreement and those borne by the
Distributor under the Distribution Agreement. The ratio of expenses to average
daily net assets for the Class was 0.76% for the fiscal year ended December 31,
1994.
16
SHARES
The Limited-Term Government Fund series is the second series of Delaware Group
Limited-Term Government Funds, Inc., which is an open-end management investment
company, commonly known as a mutual fund. The Series' portfolio of assets is
diversified for purposes of the 1940 Act. The Fund was organized as a
Pennsylvania business trust in 1981 and was reorganized as a Maryland
corporation in 1990. The authorized capitalization of the Fund consists of three
billion shares of common stock, of which two billion shares have been allocated
to the Limited-Term Government Fund series.
Series' shares have a $.001 par value per share, equal voting rights, except
as noted below, and are equal in all other respects. Shares of the Series will
have a priority over shares of any other series of the Fund in the assets and
income of the Series and will vote separately on any matter that affects only
the Limited-Term Government Fund series.
All Fund shares have noncumulative voting rights which means that the holders
of more than 50% of the Fund's shares voting for the election of directors can
elect 100% of the directors if they choose to do so. Under Maryland law, the
Fund is not required, and does not intend, to hold annual meetings of
shareholders unless, under certain circumstances, it is required to do so under
the 1940 Act. Shareholders of 10% or more of the Fund's shares may request that
a special meeting be called to consider the removal of a director.
The Series also offers the Limited-Term Government Fund A Class and the
Limited-Term Government Fund B Class of shares which represent a proportionate
interest in the assets of the Series and have the same voting and other rights
and preferences as the Class, except that shares of the Class may not vote on
matters affecting the Series' Distribution Plans under Rule 12b-1 relating to
the Limited-Term Government Fund A Class and the Limited-Term Government Fund B
Class. Two hundred million shares each have been allocated to the Limited-Term
Government Institutional Class and the Limited-Term Government Fund B Class and
one billion shares have been allocated to the Limited-Term Government Fund A
Class.
Until May 31, 1992, the Series offered two retail classes of shares, Investors
Series II class (now the Limited-Term Government Fund A Class) and the Investors
Series I class. Shares of Investors Series I class were offered with a sales
charge, but without the imposition of a Rule 12b-1 fee. Effective June 1, 1992,
following shareholder approval of a plan of recapitalization on May 15, 1992,
shareholders of the Investors Series I class had their shares converted into
shares of the Investors 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 Investors Series was changed to Treasury Reserves
Intermediate Series and the name Investors Series II class was changed to
Treasury Reserves Intermediate Fund class. On May 2, 1994, Treasury Reserves
Intermediate Fund (Institutional) class became known as Treasury Reserves
Intermediate Fund Institutional Class and Treasury Reserves Intermediate Fund
class became known as Treasury Reserves Intermediate Fund A Class. Effective as
of the close of business on August 28, 1995, the name Delaware Group Treasury
Reserves, Inc. was changed to Delaware Group Limited-Term Government Funds, Inc.
and the name Treasury Reserves Intermediate Series was changed to Limited-Term
Government Fund. At the same time, the names of Treasury Reserves Intermediate
Fund Institutional Class, Treasury Reserves Intermediate Fund A Class and
Treasury Reserves Intermediate Fund B Class were changed to, respectively,
Limited-Term Government Fund Institutional Class, Limited-Term Government Fund A
Class and Limited-Term Government Fund B Class.
17
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
The Delaware Group includes funds with a wide range of investment objectives.
Stock funds, income funds, tax-free funds, money market funds, global and
international funds and closed-end equity funds give investors the ability to
create a portfolio that fits their personal financial goals. For more
information, shareholders of the Fund Classes should contact their financial
adviser or call Delaware Group at 800-523-4640, in Philadelphia call 215-988-
1333 and shareholders of the Institutional Class should contact Delaware Group
at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
--------------------------------------------------------------------------------
LIMITED-TERM
--------------------------------------------------------------------------------
GOVERNMENT FUND
--------------------------------------------------------------------------------
(FORMERLY TREASURY RESERVES INTERMEDIATE FUND)
--------------------------------------------------------------------------------
A CLASS
--------------------------------------------------------------------------------
B CLASS
--------------------------------------------------------------------------------
INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
CLASSES OF LIMITED-TERM
--------------------------------------------------------------------------------
GOVERNMENT FUND
--------------------------------------------------------------------------------
(FORMERLY TREASURY RESERVES INTERMEDIATE SERIES)
--------------------------------------------------------------------------------
DELAWARE GROUP LIMITED-TERM
--------------------------------------------------------------------------------
GOVERNMENT FUNDS, INC.
--------------------------------------------------------------------------------
(FORMERLY DELAWARE GROUP TREASURY RESERVES, INC.)
--------------------------------------------------------------------------------
PART B
Statement of
Additional Information
--------------------------------------------------------------------------------
AUGUST 29, 1995
DELAWARE
GROUP
========
--------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
AUGUST 29, 1995
--------------------------------------------------------------------------------
DELAWARE GROUP
--------------------------------------------------------------------------------
LIMITED-TERM
--------------------------------------------------------------------------------
GOVERNMENT FUNDS, INC.
--------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
--------------------------------------------------------------------------------
For more information about the Limited-Term
Government Fund Institutional Class:
800-828-5052
For Prospectus and Performance of the
Limited-Term Government Fund A Class and the
Limited-Term Government Fund B Class:
Nationwide 800-523-4640
Philadelphia 215-988-1333
Information on Existing Accounts of the
Limited-Term Government Fund A Class and the
Limited-Term Government Fund B Class:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Philadelphia 215-988-1241
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Philadelphia 215-988-1050
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Cover Page 1
--------------------------------------------------------------------------------
Investment Objective and Policies 2
--------------------------------------------------------------------------------
Accounting and Tax Issues 7
--------------------------------------------------------------------------------
Performance Information 7
--------------------------------------------------------------------------------
Trading Practices and Brokerage 11
--------------------------------------------------------------------------------
Purchasing Shares 12
--------------------------------------------------------------------------------
Investment Plans 18
--------------------------------------------------------------------------------
Determining Offering Price and
Net Asset Value 20
--------------------------------------------------------------------------------
Redemption and Repurchase 21
--------------------------------------------------------------------------------
Income Dividends and Realized Securities
Profits Distributions 24
--------------------------------------------------------------------------------
Investment Management Agreement 25
--------------------------------------------------------------------------------
Officers and Directors 26
--------------------------------------------------------------------------------
Exchange Privilege 29
--------------------------------------------------------------------------------
General Information 31
--------------------------------------------------------------------------------
Appendix A--IRA Information 33
--------------------------------------------------------------------------------
Financial Statements 37
--------------------------------------------------------------------------------
Delaware Group Limited-Term Government Funds, Inc. (the "Fund") is a
professionally-managed mutual fund currently offering two Series: the Limited-
Term Government Fund and the U.S. Government Money Series. This Statement of
Additional Information ("Part B" of the Fund's registration statement) describes
the Limited-Term Government Fund series (the "Series") only, except where noted.
The Limited-Term Government Fund offers three classes (individually a "Class"
and collectively, the "Classes") of shares--Limited-Term Government Fund A
Class ("Class A Shares"), Limited-Term Government Fund B Class ("Class B
Shares") (together the "Fund Classes") and the Limited-Term Government Fund
Institutional Class (the "Institutional Class"). Effective as of close of
business on August 28, 1995, the name Delaware Group Treasury Reserves, Inc. was
changed to Delaware Group Limited-Term Government Funds, Inc. and the name
Treasury Reserves Intermediate Series was changed to Limited-Term Government
Fund. At the same time, the names of Treasury Reserves Intermediate Fund A
Class, Treasury Reserves Intermediate Fund B Class and Treasury Reserves
Intermediate Fund Institutional Class were changed to Limited-Term Government
Fund A Class, Limited-Term Government Fund B Class and Limited-Term Government
Fund Institutional Class, respectively.
Class B Shares and Institutional Class shares of the Series may be purchased
at a price equal to the next determined net asset value per share. Class A
Shares of the Series may be purchased at the public offering price, which is
equal to the next determined net asset value per share, plus a front-end sales
charge. The Class A Shares are subject to a maximum front-end sales charge of
3.00% and annual 12b-1 Plan expenses. The Class B Shares are subject to a
contingent deferred sales charge ("CDSC") which may be imposed on redemptions
made within three years of purchase and 12b-1 Plan expenses which are higher
than those to which Class A Shares are subject and are assessed against the
Class B Shares for no longer than approximately five years after purchase. See
Automatic Conversion of Class B Shares in the Fund Classes' Prospectus. All
references to "shares" in this Part B refer to all Classes of shares of the
Series, except where noted.
This Part B supplements the information contained in the current Prospectuses
for the Fund Classes and the Institutional Class dated August 29, 1995, as may
be amended from time to time. It should be read in conjunction with the
respective Class' Prospectus. Part B is not itself a prospectus but is, in its
entirety, incorporated by reference into each Class' Prospectus. 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"), 1818 Market Street, Philadelphia, PA 19103.
1
INVESTMENT OBJECTIVE
AND POLICIES
The Series will invest in securities for income earnings rather than
trading for profit. The Series will not vary portfolio investments, except
to:
1. eliminate unsafe investments and investments not consistent with the
preservation of the capital or the tax status of the investments of the
Series;
2. honor redemption orders, meet anticipated redemption requirements, and
negate gains from discount purchases;
3. reinvest the earnings from securities in like securities; or
4. defray normal administrative expenses.
Investment Restrictions
The Fund has adopted the following restrictions for the Series which, along
with its investment objective, cannot be changed without approval by the
holders of a "majority" of the Series' outstanding shares, which is a vote by
the holders of the lesser of a) 67% or more of the voting securities of the
Series 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 Series' outstanding voting securities. The
percentage limitations contained in the restrictions and policies set forth
herein apply at the time of purchase of securities.
The Limited-Term Government Fund series shall not:
1. Invest more than 5% of the market or other fair value of its assets in
the securities of any one issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities).
2. Invest in securities of other investment companies except as part of a
merger, consolidation or other acquisition, and except to the extent that an
issuer of mortgage-backed securities may be deemed to be an investment
company, provided that any such investment in securities of an issuer of a
mortgage-backed security which is deemed to be an investment company will be
subject to the limits set forth in Section 12(d)(1)(A) of the Investment
Company Act of 1940 (the "1940 Act"), as amended.
The Series has been advised by the staff of the Securities and Exchange
Commission (the "Commission") that it is the staff's position that, under the
1940 Act, the Series may invest (a) no more than 10% of its assets in the
aggregate in certain CMOs and REMICs which are deemed to be investment companies
under the 1940 Act and issue their securities pursuant to an exemptive order
from the Commission, and (b) no more than 5% of its assets in any single issue
of such CMOs or REMICs.
3. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements) in accordance with the Series' investment
objective and policies are considered loans and except that the Series may
loan up to 25% of its assets to qualified broker/dealers or institutional
investors for their use relating to short sales or other security
transactions.
4. Purchase or sell real estate but this shall not prevent the Series from
investing in securities secured by real estate or interests therein.
5. Purchase more than 10% of the outstanding voting or nonvoting 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 Series may be deemed to
be an "underwriter" as that term is defined in the Securities Act of 1933.
7. Make any investment which would cause more than 25% of the market or
other fair value of its total assets to be invested in the securities of
issuers all of which conduct their principal business activities in the same
industry. This restriction does not apply to obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.
8. Write, purchase or sell options, puts, calls or combinations thereof,
except that the Series may: (a) write covered call options with respect to any
part or all of its portfolio securities; (b) purchase call options to the extent
that the premiums paid on all outstanding call options do not exceed 2% of the
Series' total assets; (c) write secured put options; (d) purchase put options to
the extent that the premiums on all outstanding put options do not exceed 2% of
the Series' total assets and only if the Series owns the security covered by the
put option at the time of purchase. The Series may sell put options or call
options previously purchased or enter into closing transactions with respect to
such options.
9. Enter into futures contracts or options thereon, except that the Series
may enter into futures contracts to the extent that not more than 5% of the
Series' assets are required as futures contract margin deposits and only to
the extent that obligations under such contracts or transactions represent
not more than 20% of the Series' assets.
10. Purchase securities on margin or make short sales of securities.
11. Invest in warrants or rights except where acquired in units or attached
to other securities.
12. Purchase or retain the securities of any issuer any of whose officers,
directors or security holders is a director or officer of the Fund or of its
investment manager if or so long as the directors and officers of the 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 Series' total assets in repurchase
agreements maturing in more than seven days and 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 Series has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing exceeds 5% of the value of the Series' net assets, asset coverage
of at least 300% is required. In the event that such asset coverage shall at
any time fall below 300%, the Series shall, within
2
three days thereafter (not including Sunday or holidays) or such longer period
as the Commission may prescribe by rules and regulations, reduce the amount of
its borrowings to such an extent that the asset coverage of such borrowings
shall be at least 300%. The Series will not pledge more than 10% of its net
assets. The Series will not issue senior securities as defined in the 1940 Act,
except for notes to banks. Securities will not be purchased while the Series has
an outstanding borrowing.
Although not a fundamental investment restriction, the Series currently
does not invest its assets in real estate limited partnerships.
Average Effective Maturity
The Series limits its average effective dollar weighted portfolio maturity
to no more than three to five years. However, many of the securities in which
the Series invests will have remaining maturities in excess of five years.
Some of the securities in the Series' portfolio may have periodic interest
rate adjustments based upon an index such as the 91-day Treasury Bill rate.
This periodic interest rate adjustment tends to lessen the volatility of the
security's price. With respect to securities with an interest rate adjust-
ment period of one year or less, the Series will, when determining average
weighted maturity, treat such a security's maturity as the amount of time
remaining until the next interest rate adjustment.
Instruments such as GNMA, FNMA, FHLMC securities and similar securities backed
by amortizing loans generally have shorter effective maturities than their
stated maturities. This is due to changes in amortization caused by demographic
and economic forces such as interest rate movements. These effective maturities
are calculated based upon historical payment patterns. For purposes of
determining the Series' average effective maturity, the maturities of such
securities will be calculated based upon the issuing agency's payment factors
using industry-accepted valuation models.
Mortgage-Backed Securities--In addition to mortgage-backed securities
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
the Series may also invest up to 35% of its assets in securities issued by
certain private, nongovernment corporations, such as financial institutions, if
the securities are fully collateralized at the time of issuance by securities or
certificates issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Two principal types of mortgage-backed securities are
collateralized mortgage obligations (CMOs) and real estate mortgage investment
conduits (REMICs).
CMOs are debt securities issued by U.S. Government agencies or by financial
institutions and other mortgage lenders and collateralized by a pool of
mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in
sequence as the underlying mortgages are repaid. Prepayment may shorten the
stated maturity of the obligation and can result in a loss of premium, if any
has been paid. Certain of these securities may have variable or floating
interest rates and others may be stripped (securities which provide only the
principal or interest feature of the underlying security).
Stripped mortgage securities are usually structured with two classes that
receive different proportions of the interest and principal distributions on
a pool of mortgage assets. A common type of stripped mortgage security will
have one class receiving some of the interest and most of the principal from
the mortgage assets, while the other class will receive most of the interest
and the remainder of the principal. In the most extreme case, one class will
receive all of the interest (the "interest-only" class), while the other
class will receive all of the principal (the "principal-only" class). The
yield to maturity on an interest-only class is extremely sensitive not only
to changes in prevailing interest rates but also to the rate of principal
payments (including prepayments) on the related underlying mortgage assets,
and a rapid rate of principal payments may have a material adverse effect on
the Series' yield to maturity. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, the Series may fail to
fully recoup its initial investment in these securities even if the
securities are rated in the highest rating categories.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a
result, established trading markets have not yet been fully developed and,
accordingly, these securities are generally illiquid and to such extent,
together with any other illiquid investments, will not exceed 10% of the
Series' net assets.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities and certain REMICs also may be stripped.
CMOs and REMICs issued by private entities are not government securities
and are not directly guaranteed by any government agency. They are secured by
the underlying collateral of the private issuer. The Series will invest in
such private-backed securities only if they are 100% collateralized at the
time of issuance by securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. The Series currently invests in privately-
issued CMOs and REMICs only if they are rated at the time of purchase in the
two highest grades by a nationally-recognized rating agency.
Asset-Backed Securities--The Series may invest a portion of its assets in
asset-backed securities. The rate of principal payment on asset-backed
securities generally depends on the rate of principal payments received on
the underlying assets. Such rate of payments may be affected by economic and
various other factors such as changes in interest rates. Therefore, the yield
may be difficult to predict and actual yield to maturity may be more or less
than the anticipated yield to maturity. The credit quality of most
asset-backed securities depends primarily on the credit quality of the assets
underlying such securities, how well the entities issuing the securities are
insulated from the credit risk of the originator or affiliated entities, and
the amount of credit support provided to the securities.
3
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 Series will not pay any additional fees for such credit support, although
the existence of credit support may increase the price of a security.
Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one
or more classes subordinate to other classes as to the payment of principal
thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from
a portion of the payments on the underlying assets, are held in reserve
against future losses) and "over-collateralization" (where the scheduled
payments on, or the principal amount of, the underlying assets exceeds that
required to make payments of the securities and pay any servicing or other
fees). The degree of credit support provided for each issue is generally
based on historical information respecting the level of credit information
respecting the level of credit risk associated with the underlying assets.
Delinquencies or losses in excess of those anticipated could adversely affect
the return on an investment in such issue.
Options--The Series may purchase call options, write call options on a
covered basis, write secured put options and purchase put options on a
covered basis only, and will not engage in option writing strategies for
speculative purposes.
The Series may invest in options that are either Exchange listed or traded
over-the-counter. Certain over-the-counter options may be illiquid. Thus, it
may not be possible to close option positions and this may have an adverse
impact on the Series' ability to effectively hedge its securities. The Series
will not, however, invest more than 10% of its assets in illiquid securities.
A. Covered Call Writing--The Series may write covered call options from
time to time on such portion of its portfolio, without limit, as Delaware
Management Company, Inc. (the "Manager") determines is appropriate in seeking
to obtain the Series' investment objective. A call option gives the purchaser
of such option the right to buy, and the writer, in this case the Series, has
the obligation to sell the underlying security at the exercise price during
the option period. The advantage to the Series of writing covered calls is
that the Series receives a premium which is additional income. However, if
the security rises in value, the Series may not fully participate in the
market appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker/dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of
the exercise price. This obligation is terminated upon the expiration of the
option period or at such earlier time in which the writer effects a closing
purchase transaction. A closing purchase transaction cannot be effected with
respect to an option once the option writer has received an exercise notice
for such option.
With respect to options on actual portfolio securities owned by the Series,
the Series may enter into closing purchase transactions. A closing purchase
transaction is one in which the Series, when obligated as a writer of an
option, terminates its obligation by purchasing an option of the same series
as the option previously written.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Series to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Series may realize a
net gain or loss from a closing purchase transaction depending upon whether
the net amount of the original premium received on the call option is more or
less than the cost of effecting the closing purchase transaction. Any loss
incurred in a closing purchase transaction may be partially or entirely
offset by the premium received from a sale of a different call option on the
same underlying security. Such a loss may also be wholly or partially offset
by unrealized appreciation in the market value of the underlying security.
Conversely, a gain resulting from a closing purchase transaction could be
offset in whole or in part by a decline in the market value of the underlying
security.
If a call option expires unexercised, the Series will realize a short-term
capital gain in the amount of the premium on the option less the commission
paid. Such a gain, however, may be offset by depreciation in the market value
of the underlying security during the option period. If a call option is
exercised, the Series will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the
underlying security and the proceeds of the sale of the security plus the
amount of the premium on the option less the commission paid.
The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.
The Series will write call options only on a covered basis, which means
that the Series will own the underlying security subject to a call option at
all times during the option period. Unless a closing purchase transaction is
effected, the Series would be required to continue to hold a security which
it might otherwise wish to sell or deliver a security it would want to hold.
Options written by the
4
Series will normally have expiration dates between one and nine months from the
date written. The exercise price of a call option may be below, equal to or
above the current market value of the underlying security at the time the option
is written.
B. Purchasing Call Options--The Series may purchase call options to the
extent that premiums paid by the Series do not aggregate more than 2% of the
Series' total assets. The advantage of purchasing call options is that the
Series may alter portfolio characteristics, and modify portfolio maturities
without incurring the cost associated with portfolio transactions.
The Series may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same Series as the option previously purchased. The
Series will realize a profit from a closing sale transaction if the price
received on the transaction is more than the premium paid to purchase the
original call option; the Series will realize a loss from a closing sale
transaction if the price received on the transaction is less than the premium
paid to purchase the original call option.
Although the Series will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance
that a liquid secondary market on an Exchange will exist for any particular
option, or at any particular time, and for some options no secondary market
on a Exchange may exist. In such event, it may not be possible to effect
closing transactions in particular options, with the results that the Series
would have to exercise its options in order to realize any profit and would
incur brokerage commissions upon the exercise of such options and upon the
subsequent disposition of the underlying securities acquired through the
exercise of such options. Further, unless the price of the underlying
security changes sufficiently, a call option purchased by the Series may
expire without any value to the Series.
C. Purchasing Put Options--The Series may invest up to 2% of its total
assets in the purchase of put options. The Series will, at all times during
which it holds a put option, own the security covered by such option.
The Series intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise
price less the premium paid for the option ("protective puts"). The ability
to purchase put options will allow the Series to protect an unrealized gain
in an appreciated security in its portfolio without actually selling the
security. If the security does not drop in value, the Series will lose the
value of the premium paid. The Series may sell a put option which it has
previously purchased prior to the sale of the securities underlying such
option. Such sales will result in a net gain or loss depending on whether the
amount received on the sale is more or less than the premium and other
transaction costs paid on the put option which is sold.
The Series may sell a put option purchased on individual portfolio
securities. Additionally, the Series may enter into closing sale
transactions. A closing sale transaction is one in which the Series, when it
is the holder of an outstanding option, liquidates its position by selling an
option of the same series as the option previously purchased.
D. Writing Put Options--The Series may also write put options on a secured
basis which means that the Series will maintain in a segregated account with
its custodian, cash or U.S. Government securities in an amount not less than
the exercise price of the option at all times during the option period. The
amount of cash or U.S. Government securities held in the segregated account
will be adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by the Series. Secured put options
will generally be written in circumstances where the Manager wishes to purchase
the underlying security for the Series' portfolio at a price lower than the
current market price of the security. In such event, the Series would write a
secured put option at an exercise price which, reduced by the premium received
on the option, reflects the lower price it is willing to pay.
Following the writing of a put option, the Series may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Series may not, however, effect
such a closing transaction after it has been notified of the exercise of the
option.
Futures--Futures contracts are agreements for the purchase or sale for
future delivery of securities. While futures contracts provide for the
delivery of securities, deliveries usually do not occur. Contracts are
generally terminated by entering into an offsetting transaction. When the
Series enters into a futures transaction, it must deliver to the futures
commission merchant selected by the Series an amount referred to as "initial
margin." This amount is maintained by the futures commission merchant in an
account at the Series' custodian bank. Thereafter, a "variation margin" may
be paid by the Series to, or drawn by the Series from, such account in
accordance with controls set for such account, depending upon changes in the
price of the underlying securities subject to the futures contract.
The Series may enter into such futures contracts to protect against the
adverse effects of fluctuations in interest rates without actually buying or
selling such securities. Similarly, when it is expected that interest rates
may decline, futures contracts may be purchased to hedge in anticipation of
subsequent purchases of government securities at higher prices.
With respect to options on futures contracts, when the Series is not fully
invested, it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The writing of a
call option on a futures contract constitutes a partial hedge against
declining prices of the securities which are deliverable upon exercise of the
futures contract. If the futures price at the expiration of the option is
below the exercise price, the Series will retain the full amount of the
option premium which provides a partial hedge against any decline that may
have occurred in the portfolio holdings. The writing of a put option on a
futures contract constitutes a partial hedge against increasing prices of the
securities which are
5
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Series will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of government securities which the Series
intends to purchase.
If a put or call option the Series has written is exercised, the Series
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between the value of its
portfolio securities and changes in the value of its futures positions, the
Series' losses from existing options on futures may, to some extent, be
reduced or increased by changes in the value of portfolio securities. The
Series will purchase a put option on a futures contract to hedge the Series'
portfolio against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Series may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize a loss. For example, if the
Series is hedged against the possibility of an increase in interest rates
which would adversely affect the price of government securities held in its
portfolio and interest rates decrease instead, the Series will lose part or
all of the benefit of the increased value of its government securities which
it has because it will have offsetting losses in its futures position. In
addition, in such situations, if the Series had insufficient cash, it may be
required to sell government securities from its portfolio to meet daily
variation margin requirements. Such sales of government securities may, but
will not necessarily, be at increased prices which reflect the rising market.
The Series may be required to sell securities at a time when it may be
disadvantageous to do so.
Further, with respect to options on futures contracts, the Series may seek
to close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price
and expiration date. The ability to establish and close out positions on
options will be subject to the maintenance of a liquid secondary market,
which cannot be assured.
Corporate Debt--The Series may invest in corporate notes and bonds rated A
or above. Excerpts from Moody's Investors Service, Inc. ("Moody's")
description of those categories of bond ratings: Aaa--judged to be the best
quality. They carry the smallest degree of investment risk; Aa--judged to be
of high quality by all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations.
Excerpts from Standard & Poor's Corporation'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 Series may invest in short-term promissory notes issued
by corporations which at the time of purchase are rated P-1 and/or A-1.
Commercial paper ratings P-1 by Moody's and A-1 by S&P are the highest
investment grade category.
Bank Obligations--The Series may invest in certificates of deposit,
bankers' acceptances and other short-term obligations of U.S. commercial
banks and their overseas branches and foreign banks of comparable quality,
provided each such bank combined with its branches has total assets of at
least one billion dollars. Any obligations of foreign banks shall be
denominated in U.S. dollars. Obligations of foreign banks and obligations of
overseas branches of U.S. banks are subject to somewhat different regulations
and risks than those of U.S. domestic banks. In particular, a foreign country
could impose exchange controls which might delay the release of proceeds from
that country. Such deposits are not covered by the Federal Deposit Insurance
Corporation. Because of conflicting laws and regulations, an issuing bank
could maintain that liability for an investment is solely that of the
overseas branch which could expose the Series to a greater risk of loss. The
Series will only buy short-term instruments in nations where these risks are
minimal. The Series will consider these factors along with other appropriate
factors in making an investment decision to acquire such obligations and will
only acquire those which, in the opinion of management, are of an investment
quality comparable to other debt securities bought by the Series.
Portfolio Loan Transactions
The Series may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of 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 Series; 3) the Fund must be able to
terminate the loan after notice, at any time; 4) the Series 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 Series may pay reasonable custodian fees in
connection with the loan; and 6) the voting rights on the lent securities may
pass to the borrower; however, if the directors of the Fund know that a
material event will occur affecting an investment loan, they must either
terminate the loan in order to vote the proxy or enter into an alternative
arrangement with the borrower to enable the directors to vote the proxy.
The major risk to which the Series would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of
the security goes up. Therefore, the Series will only enter into loan
arrangements after a review of all pertinent facts by the Manager,
6
under the supervision of the Board of Directors, including the creditworthiness
of the borrowing broker, dealer or institution and then only if the
consideration to be received from such loans would justify the risk.
Creditworthiness will be monitored on an ongoing basis by the Manager.
ACCOUNTING AND TAX ISSUES
The following supplements the information in the Classes' Prospectuses
under the heading Taxes.
When the Series writes a call option, an amount equal to the premium
received by it is included in the Series' 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.
The current market value of a written option is the last sale price on the
principal Exchange on which such option is traded or, in the absence of a
sale, the mean between the last bid and asked prices. If an option which the
Series has written expires on its stipulated expiration date, or if the
Series enters into a closing purchase transaction, the Series realizes a gain
(or loss if the cost of the closing transaction exceeds the premium received
when the option was sold) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. Any such gain or loss is a short-term capital gain or loss for
federal income tax purposes. If a call option which the Series has written is
exercised, the Series realizes a capital gain or loss (long-term or
short-term, depending on the holding period of the underlying security) from
the sale of the underlying security, and the proceeds from such sale are
increased by the premium originally received.
The premium paid by the Series for the purchase of a put option is recorded in
the section of the Series' assets and liabilities as an investment and
subsequently adjusted daily to the current market value of the option. For
example, if the current market value of the option exceeds the premium paid, the
excess would be unrealized appreciation and, conversely, if the premium exceeds
the current market value, such excess would be unrealized depreciation. If a put
option which the Series has purchased expires on the stipulated expiration date,
the Series realizes a long- or short-term capital loss for federal income tax
purposes in the amount of the cost of the option. If the Series sells the put
option, it realizes a long- or short-term capital gain or loss, depending on
whether the proceeds from the sale are greater or less than the cost of the
option. If the Series exercises a put option, it realizes a capital gain or loss
(long-term or short-term, depending on the holding period of the underlying
security) from the sale of the underlying security and the 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 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.
Regulated futures contracts held by the Series at the end of each fiscal
year will be required to be "marked to market" for federal income tax
purposes. Any unrealized gain or loss on futures contracts will therefore be
recognized and deemed to consist of 60% long-term capital gain or loss and
40% short-term capital gain or loss. Therefore, adjustments are made to the
tax basis in the futures contract to reflect the gain or loss recognized at
year end.
The Series has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. The
Series must meet several requirements to maintain its status as a regulated
investment company. Among these requirements is that not more than 30% of the
Series' gross income be derived from gains from the sale or other disposition
of securities held for less than three months. This requirement may restrict
the Series 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 Series may be required to defer the closing out of a contract
beyond the time when it might otherwise be advantageous to do so. The Series
may also be restricted in the sale of purchased put options and the purchase
of put options for the purpose of hedging underlying securities because of
the application of the short sale holding period rules with respect to such
underlying securities.
PERFORMANCE INFORMATION
From time to time, the Fund may state total return for each Class in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on the
average annual compounded rate of return for that Class over, as relevant,
the most recent one-, five- and ten-year (or life of fund, if applicable)
periods. The Fund may also advertise aggregate and average compounded return
information of each Class over additional periods of time.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used
for the actual computations:
7
P(1+T)(to the nth power) = ERV
Where: P = a hypothetical initial purchase order
of $1,000 from which the maximum
front-end sales charge with respect to
Class A Shares, 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.
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 the Class A Shares and that
all distributions are reinvested at net asset value, and, with respect to the
Class B Shares, includes the CDSC that would be applicable upon complete
redemption of such shares. In addition, the Series may present total return
information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
The performance of the Class A Shares and the Institutional Class, as shown
below, is the average annual total return quotations for the one-, three- and
five-year periods ended December 31, 1994 and for the life of these Classes,
computed as described above. The average annual total return for the Class A
Shares at offer reflects the maximum front-end sales charges paid on the
purchase of shares. The average annual total return for Class A Shares at net
asset value (NAV) does not reflect the payment of the maximum front-end sales
charge of 3.00%. Securities prices fluctuated during the periods covered and
past results should not be considered as representative of future
performance. Pursuant to applicable regulation, total return shown for the
Institutional Class for the periods prior to the commencement of operations
of such Class is calculated by taking the performance of the Class A Shares
and adjusting it to reflect the elimination of all front-end 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.
Average Annual Total Return*
Class A Class A Institu-
Shares Shares tional
(at Offer) (at NAV) Class**
1 year ended 12/31/94 (4.78%) (1.88%) (1.74%)
3 years ended 12/31/94 1.90% 2.96% 3.11%
5 years ended 12/31/94 5.52% 6.17% 6.32%
Period 11/24/85*** to 12/31/94 6.35% 6.70% 6.82%
* The Manager elected to waive voluntarily the portion of its annual
compensation under its Investment Management Agreement with the Fund to
limit operating expenses to 1.00% from the date of the initial public
offering through July 31, 1986 and of each class to .75% (exclusive of 12b-1
payments with respect to the Class A Shares) from February 25, 1991 until
December 30, 1992. In the absence of such voluntary waivers, performance
would have been affected negatively.
** Date of initial public offering was June 1, 1992.
*** Date of initial public offering of Class A Shares.
The performance of the Class B Shares, as shown below, is the aggregate total
return quotation for the period May 2, 1994 (date of initial public offering)
through December 31, 1994. The aggregate total return for Class B Shares
(including deferred sales charge) reflects the deduction of the applicable CDSC
that would be paid if the shares were redeemed at December 31, 1994. The
aggregate total return for Class B Shares (excluding deferred sales charge)
assumes the shares were not redeemed at December 31, 1994 and therefore does not
reflect the deduction of a CDSC.
Aggregate Total Return
Class B Shares Class B Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
Period 5/2/94* through 12/31/94 (2.35%) (0.44%)
* Date of initial public offering of Class B Shares; total return for this
short of a time period may not be representative of longer-term results.
As stated in the Prospectuses, the Series may also quote the current yield
for each Class 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
8
the period and annualizing the resulting figure, according to the following
formula:
a-b
---
YIELD = 2[( cd +1)(to the sixth power) -1]
Where: a = dividends and interest earned during the
period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends;
d = the maximum offering price per share on
the last day of the period.
The above formula will be used in calculating quotations of yield of each
Class, based on specified 30-day periods identified in advertising by the
Fund. The yields as of December 31, 1994 using this formula were 6.91%, 6.23%
and 7.28% for the Class A Shares, the Class B Shares and the Institutional
Class, respectively. Yield assumes the maximum front-end sales charge, if
any, and does not reflect the deduction of any contingent deferred sales
charge. Actual yield may be affected by variations in front-end 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 Series in the future.
Investors should note that the income earned and dividends paid by the
Series will vary with the fluctuation of interest rates and performance of
the portfolio. The net asset value of the fund may change. Unlike money
market funds, the Series invests in longer-term securities that fluctuate in
value and do so in a manner inversely correlated with changing interest
rates. The Series' net asset value will tend to rise when interest rates
fall. Conversely, the Series' net asset value will tend to fall as interest
rates rise. Normally, fluctuations in interest rates have a greater effect on
the prices of longer-term bonds. The value of the securities held in the
Series will vary from day to day and investors should consider the volatility
of the Series' net asset value as well as its yield before making a decision
to invest.
On December 31, 1994, the average effective weighted average portfolio
maturity was 4.65 years for the Series.
From time to time, the Series may also quote actual total return and/or
yield performance for each Class in advertising and other types of literature
compared to indices or averages of alternative financial products available
to prospective investors. For example, the performance comparisons may
include the average return of various bank instruments, some of which may
carry certain return guarantees offered by leading banks and thrifts as
monitored by Bank Rate Monitor, and those of corporate bond and government
security price indices of various durations prepared by Lehman Brothers and
Salomon Brothers, Inc. These indices are not managed for any investment goal.
Comparative information on the Consumer Price Index may also be included.
The Consumer Price Index, as prepared by the U.S. Bureau of Labor Statistics,
is the most commonly used measure of inflation. It indicates the cost
fluctuations of a representative group of consumer goods. It does not
represent a return from investment.
Total return performance of each Class will reflect the appreciation or
depreciation of principal, reinvestment of income and any capital gains
distributions paid during any indicated period, and the impact of the maximum
front-end sales charge or contingent deferred sales charge, if any, paid on
the illustrated investment amount, annualized. The results will not reflect
any income taxes, if applicable, payable by shareholders on the reinvested
distributions included in the calculations. As securities prices fluctuate,
an illustration of past performance should not be considered as representative
of future results.
Statistical and performance information and various indices compiled and
maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual
fund perform-ance to comparable Series activity and performance and in
illustrating general financial planning principles. From time to time, certain
mutual fund performance ranking information, calculated and provided by these
organizations, may also be used in the promotion of sales in the Series. Any
indices used are not managed for any investment goal.
CDA Investment Technologies, Lipper Analytical Services, Inc. and Morningstar,
Inc. are performance evaluation services that maintain statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds.
Ibbotson Associates, Inc. is a consulting firm that provides a variety of
historical data including total return, capital appreciation and income on the
stock market as well as other investment asset classes, and inflation. With
their permission, this information will be used primarily for comparative
purposes and to illustrate general financial planning principles.
Interactive Data Corporation is a statistical access service that maintains a
database of various international industry indicators, such as historical and
current price/earning information, individual equity and fixed income price
and return information.
Salomon Brothers and Lehman Brothers are statistical research firms that
maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well
as unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations.
Current interest rate and yield information on government debt obligations
of various durations, as reported weekly by the Federal Reserve (Bulletin H.15),
may also be used. As well, current rate information on municipal debt
obligations of various durations, as reported daily by the Bond Buyer, may also
be used. The Bond Buyer is published daily and is an industry-accepted source
for current municipal bond market information.
The performance of each Class, as shown below, reflects maximum sales
charges, if any, paid on the purchase or
9
redemption of shares, as applicable, but not any income taxes payable by
shareholders on the reinvested distributions included in the calculations. The
net asset value of a Class fluctuates so shares, when redeemed, may be worth
more or less than the original investment, and a Class' results should not be
considered as representative of future performance.
The following table is an example, for purposes of illustration only, of
cumulative total return performance for the Class A Shares and the Institutional
Class for the three-, six- and nine-month periods ended December 31, 1994, for
the one-, three- and five-year periods ended December 31, 1994 and for the life
of these Classes. Cumulative total return for the Class B Shares for the three-
and six-month periods ended December 31, 1994 and for the life of the Class is
also provided below. For these purposes, the calculations assume the
reinvestment of any realized securities profits distributions and income
dividends paid during the indicated periods. 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 the 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.
Cumulative Total Return
Class A Shares/1/ Institutional
(at Offer) Class/1/2/
3 months ended 12/31/94 (3.08%) (0.08%)
6 months ended 12/31/94 (2.33%) 0.80%
9 months ended 12/31/94 (3.47%) (0.32%)
1 year ended 12/31/94 (4.78%) (1.74%)
3 years ended 12/31/94 5.82% 9.61%
5 years ended 12/31/94 30.84% 35.88%
11/24/85/3/ through 12/31/94 75.12% 82.35%
Class B Class B
Shares Shares
(Including (Excluding
Deferred Deferred
Sales Sales
Charge) Charge)
3 months ended 12/31/94 (2.29%) (0.33%)
6 months ended 12/31/94 (1.65%) 0.29%
Period 5/2/94/4/ through 12/31/94 (2.35%) (0.44%)
/1/The Manager elected to waive voluntarily the portion of its annual
compensation under its Investment Management Agreement with the Fund to limit
operating expenses to 1.00% from the date of the initial public offering
through July 31, 1986 and of each class to .75% (exclusive of 12b-1 payments
with respect to the Class A Shares) from February 25, 1991 until December 30,
1992. In the absence of such voluntary waivers, performance would have been
affected negatively.
/2/Date of initial public offering was June 1, 1992.
/3/Date of initial public offering of Class A Shares.
/4/Date of initial public offering of Class B Shares; total return for this
short of a time period may not be representative of longer-term results.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
personal financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's overriding investment
philosophy and how that philosophy impacts the Series', and other Delaware Group
funds', investment disciplines employed in seeking their objectives. The
Distributor may also from time to time cite general or specific information
about the institutional clients of the Manager, including the number of such
clients serviced by the Manager.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Series shares,
your investment is given yet another opportunity to grow. It's called the Power
of Compounding and the following chart illustrates just how powerful it can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000 investment
compounded monthly for 10 years:
7% Rate of Return 8% Rate of Return 9% Rate of Return
12-'85 $10,723 $10,830 $10,938
12-'86 $11,498 $11,729 $11,964
12-'87 $12,330 $12,702 $13,086
12-'88 $13,221 $13,757 $14,314
12-'89 $14,177 $14,898 $15,657
12-'90 $15,201 $16,135 $17,126
12-'91 $16,300 $17,474 $18,732
12-'92 $17,479 $18,924 $20,489
12-'93 $18,743 $20,495 $22,411
12-'94 $20,098 $22,196 $24,514
These figures are calculated assuming a fixed constant investment return and
assume no fluctuation in the value of principal. These figures do not reflect
payment of applicable taxes, are not intended to be a projection of investment
results and do not reflect the actual performance results of any of the Classes.
10
TRADING PRACTICES AND BROKERAGE
Portfolio transactions are executed by the Manager on behalf of the Series in
accordance with the standards described below.
Brokers, dealers and banks are selected to execute transactions for the
purchase or sale of portfolio securities on the basis of the Manager's judgment
of their professional capability to provide the service. The primary
consideration is to have brokers, dealers or banks execute transactions at best
price and execution. Best price and execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. Trades are generally made on a net basis where
securities are either bought or sold directly from or to a broker, dealer or
bank. In these instances, there is no direct commission charged, but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission. When a commission is paid, the Fund pays reasonably competitive
brokerage commission rates based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, the Fund pays a minimal share
transaction cost when the transaction presents no difficulty.
The Manager may allocate out of all commission business generated by all of
the funds and accounts under its management, brokerage business to brokers or
dealers who provide brokerage and research services. These services include
advice, either directly or through publications or writings, as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities;
furnishing of analyses and reports concerning issuers, securities or industries;
providing information on economic factors and trends; assisting in determining
portfolio strategy; providing computer software and hardware used in security
analyses; and providing portfolio performance evaluation and technical market
analyses. Such services are used by the Manager in connection with its
investment decision-making 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.
As provided in the Securities Exchange Act of 1934 and the 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 Series 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 Series and to other funds in the
Delaware Group. Subject to best price and execution, commissions allocated to
brokers providing such pricing services may or may not be generated by the funds
receiving the pricing service.
The Manager may place a combined order for two or more accounts or funds
engaged in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and the Board of
Directors that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Manager may place orders with broker/dealers that have agreed to
defray certain Series expenses such as custodian fees, and may, at the request
of the Distributor, give consideration to sales of shares of the Series as a
factor in the selection of brokers and dealers to execute portfolio
transactions.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish the Series'
objective in relation to anticipated movements in the general level of interest
rates, and not for the purpose of realizing capital gains, although capital
gains may be realized on certain portfolio transactions. For example, capital
gains may be realized when a security is sold (i) so that, provided capital is
preserved or enhanced, another security can be purchased to obtain a higher
yield, (ii) to take advantage of what the Manager believes to be a
11
temporary disparity in the normal yield relationship between the two securities
to increase income or improve the quality of the portfolio, (iii) to purchase a
security which the Manager believes is of higher quality than its rating or
current market value would indicate, or (iv) when the Manager anticipates a
decline in value due to market risk or credit risk. The Series is free to
dispose of portfolio securities at any time, subject to complying with the
Internal Revenue Code and the 1940 Act, when changes in circumstances or
conditions make such a move desirable in light of the investment objective. The
Series will not attempt to achieve or be limited to a predetermined rate of
portfolio turnover, such a turnover always being incidental to transactions
undertaken with a view to achieving the Series' investment objective.
Although the Series trades principally to seek a high level of income and
stability of principal and not for profits, the portfolio turnover may be high,
particularly if interest rates are volatile. The portfolio turnover rate of the
Series is calculated by dividing the lesser of purchases or sales of portfolio
securities for the particular fiscal year by the monthly average of the value of
the portfolio securities owned by the Series during the particular fiscal year,
exclusive of securities whose maturities at the time of acquisition are one year
or less.
During the past two fiscal years ended December 31, 1993 and 1994, the Series'
portfolio turnover rates were 171% and 148%, respectively.
PURCHASING SHARES
The Distributor serves as the national distributor for the Series' three
classes of shares--the Class A Shares, the Class B Shares and the Institutional
Class, and has agreed to use its best efforts to sell shares of the Series. See
the Prospectuses for additional information on how to invest. Shares of the
Series are offered on a continuous basis, and may be purchased through
authorized investment dealers or directly by contacting the Fund or its agent.
The minimum initial purchase for each of the Classes is $1,000. The minimum
initial investment with respect to the Class A Shares will be waived for
purchases by officers, directors and employees of any Delaware Group fund, the
Manager or any of the Manager's affiliates if the purchases are made pursuant to
a payroll deduction program. Subsequent purchases must be at least $25 with
respect to the Class A Shares and $100 with respect to the Class B Shares. The
minimum subsequent investment with respect to the Class A Shares will be waived
for purchases by officers, directors and employees of any Delaware Group fund,
the Manager or any of the Manager's affiliates if the purchases are made
pursuant to a payroll deduction program. Class B Shares are also subject to a
maximum purchase limitation of $250,000. The Fund will therefore reject any
order for purchase of more than $250,000 of Class B Shares. (See Investment
Plans for minimums applicable to each of the Fund's master Retirement Plans.)
There are no minimum purchase requirements for the Institutional Class, but
certain eligibility requirements must be satisfied. Selling dealers have the
responsibility of transmitting orders promptly. The Fund reserves the right to
reject any order for the purchase of the Series' shares if in the opinion of
management such rejection is in the Series' best interest.
Certificates representing shares purchased are not ordinarily issued unless a
shareholder submits a specific request. Certificates are not issued in the case
of the Class B Shares. However, purchases not involving the issuance of
certificates are confirmed to the investor and credited to the shareholder's
account on the books maintained by Delaware Service Company, Inc. (the "Transfer
Agent"). The investor will have the same rights of ownership with respect to
such shares as if certificates had been issued. An investor that is permitted to
obtain a certificate may receive a certificate representing shares purchased by
sending a letter to the Transfer Agent requesting the certificate. No charge is
made for any certificate issued. Investors who hold certificates representing
any of their shares may only redeem those shares by written request. The
investor's certificate(s) must accompany such request.
The NASD has adopted amendments to its Rules of Fair Practice relating to
investment company sales charges. The Fund and the Distributor intend to operate
in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a maximum
front-end sales charge of 3.00%; however, lower front-end sales charges apply
for larger purchases. See the following table. Class A Shares are also subject
to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a CDSC of:
(i) 2% if shares are redeemed within two years of purchase; and (ii) 1% if
shares are redeemed during the third year following purchase. Class B Shares are
also subject to 12b-1 Plan expenses which are higher than those to which Class A
Shares are subject and are assessed against the Class B Shares for no longer
than approximately five years after purchase. See Automatic Conversion of Class
B Shares in the Fund Classes' Prospectus, and Determining Offering Price and Net
Asset Value and Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Institutional Class shares are purchased at the net asset value per share
without the imposition of a front-end or contingent deferred sales charge or
12b-1 Plan expenses. Institutional Class shares, Class A Shares and Class B
Shares represent a proportionate interest in the Series' assets and will receive
a proportionate interest in the Series' income, before application, as to the
Class A and Class B Shares, of any expenses under the Series' 12b-1 Plans.
Alternative Purchase Arrangements
The alternative purchase arrangements of the Class A Shares and the Class B
Shares permit investors to choose the method of purchasing shares that is most
beneficial given the amount of their purchase, the length of time they expect to
hold their shares and other relevant circumstances. Investors should determine
whether, under their particular circumstances, it is more advantageous to
12
purchase the Class A Shares and incur a front-end sales charge and annual 12b-1
Plan expenses of up to a maximum of .30% (currently, no more than .15% pursuant
to Board action) of the average daily net assets of the Class A Shares or to
purchase the Class B Shares and have the entire initial purchase price invested
in the Series with the investment thereafter subject to a CDSC if shares are
redeemed within three years of purchase and annual 12b-1 Plan expenses of 1%
(.25% of which are service fees to be paid by the Series to the Distributor,
dealers or others for providing personal service and/or maintaining shareholder
accounts) of the average daily net assets of the Class B Shares for no longer
than approximately five years after purchase.
Class A Shares
Purchases of $100,000 or more of the Class A Shares at the offering price
currently carry reduced front-end sales charges as shown in the accompanying
table, and may include a series of purchases over a 13-month period under a
Letter of Intention signed by the purchaser. See Special Purchase Features--
Class A Shares for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
Limited-Term Government Fund A Class
--------------------------------------------------------------------------------
Front-End Sales Charge Dealer's
as % of Concession**
Amount of Purchase Offering Amount as % of
Price Invested Offering Price
--------------------------------------------------------------------------------
Less than $100,000 3.00% 3.10% 2.50%
$100,000 but under $250,000 2.50 2.56 2.00
$250,000 but under $500,000 2.00 2.04 1.60
$500,000 but under $1,000,000* 1.50 1.52 1.20
*There is no front-end sales charge on purchases of $1 million or more but,
under certain limited circumstances, a 1% contingent deferred sales charge may
apply. The contingent deferred sales charge ("Limited CDSC") that may be
applicable to purchases of Class A Shares arises only in the case of certain
net asset value purchases which have triggered the payment of a dealer's
commission.
--------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for the
reduced front-end sales charge on the basis of previous purchases and current
purchases. The reduced front-end sales charge will be granted upon confirmation
of the shareholder's holdings by the Fund. Such reduced front-end sales charges
are not retroactive.
From time to time, upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow dealers up to the full front-end sales charge shown above. Dealers
who receive 90% or more of the sales charge may be deemed to be underwriters
under the Securities Act of 1933.
**Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
--------------------------------------------------------------------------------
Certain dealers who enter into an agreement to provide extra training and
information on Delaware Group products and services and to increase sales of
Delaware Group funds may receive an additional concession of up to .15% of the
offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional concession will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
Dealer's Commission--Class A Shares
For initial purchases of Class A Shares of $1,000,000 or more made on or after
June 1, 1993, a dealer's commission may be paid by the Distributor to financial
advisers through whom such purchases are effected in accordance with the
following schedule:
Dealer's Commission
-------------------
Amount of Purchase (as a percentage of
------------------ amount purchased)
Up to $3 million .60%
Next $2 million up to $5 million .40
Amount over $5 million .20
In determining a financial adviser's eligibility for the dealer's commission,
purchases of Class A Shares of other Delaware Group funds as to which a Limited
CDSC applies (see Redemption and Repurchase) may be aggregated with those of the
Class A Shares of the Series. Financial advisers should contact the Distributor
concerning the applicability and calculation of the dealer's commission in the
case of combined purchases. 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. The Distributor
also should be consulted concerning the availability of and program for these
payments.
An exchange from other Delaware Group funds will not qualify for payment of
the dealer's commission, unless such exchange is from a Delaware Group fund with
assets as to which a dealer's commission or similar payment has not been
previously paid. The schedule and program for payment of the dealer's commission
are subject to change or termination at any time by the Distributor in its
discretion.
Class B Shares
Class B Shares are purchased without the imposition of a front-end sales
charge at the time of purchase. Class B Shares redeemed within three years of
purchase may be subject to a CDSC at the rates set forth below, charged as a
percentage of the dollar amount subject thereto. 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 the shares at the time of
redemption. Accordingly, no CDSC will be imposed on increases in net asset value
above the initial purchase price. In addition, no CDSC will be assessed on
redemption of shares received upon reinvestment of dividends or capital gains.
See the Prospectus for the Fund Classes under Buying Shares--Contingent Deferred
Sales Charge for a list of the instances in which the CDSC is waived.
13
The following table sets forth the rates of the CDSC for the Class B Shares of
the Series:
Contingent Deferred
Sales Charge
(as a Percentage of
Year After Dollar Amount
Purchase Made Subject to Charge)
------------- -------------------
0-2 2%
3 1%
4 and thereafter None
During the fourth year after purchase and, thereafter, until converted
automatically into Class A Shares of the Series, the Class B Shares will
continue to be subject to annual 12b-1 Plan expenses of 1% of average daily net
assets representing such shares. At the end of no longer than approximately five
years after purchase, the investor's Class B Shares will be automatically
converted into Class A Shares of the Series. See Automatic Conversion of Class B
Shares in the Fund Classes' Prospectus. Such conversion will constitute a tax-
free exchange for federal income tax purposes. See Taxes in the Prospectus for
the Fund Classes.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a separate
plan for each of the Class A Shares and the Class B Shares of the Series (the
"Plans"). The Plan relating to the Class A Shares permits the Series to pay for
certain distribution, promotional and related expenses involved in the marketing
of only the Class A Shares. Similarly, the Plan relating to the Class B Shares
permits the Series to pay for certain distribution, promotional and related
expenses involved in the marketing of only the Class B Shares. 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 the Institutional Class shares. Shareholders of
the Institutional Class may not vote on matters affecting the Plans.
The Plans permit the Series, pursuant to the Distribution Agreement, to pay
out of the assets of the Class A Shares and Class B Shares monthly fees to the
Distributor for its services and expenses in distributing and promoting sales of
the 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 12b-1 Plan expenses relating to
the Class B Shares are also used to pay the Distributor for advancing the
commission costs to dealers with respect to the initial sale of such shares.
In addition, the Series may make payments out of the assets of the Class A
Shares and the Class B Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of the Fund Classes or provide
services to such classes.
The maximum aggregate fee payable by the Series under the Plans, and the
Series' Distribution Agreement, is on an annual basis .30% of the Class A
Shares' average daily net assets for the year, and 1% (.25% of which are service
fees to be paid to the Distributor, dealers and others for providing personal
service and/or maintaining shareholder accounts) of the Class B Shares' average
daily net assets for the year. The Fund's Board of Directors may reduce these
amounts at any time. The Distributor has agreed to waive these distribution fees
to the extent such fees for any day exceeds the net investment income realized
by the Fund Classes for such day.
On May 21, 1987, the Board of Directors set the fee for the Class A Shares,
pursuant to its Plan, at .15% of average daily net assets. This fee was
effective until May 31, 1992. Effective June 1, 1992, the Board of Directors has
determined that the annual fee, payable on a monthly basis, under the Plan, will
be equal to the sum of: (i) the amount obtained by multiplying .10% by the
average daily net assets represented by the Class A Shares which were originally
purchased prior to June 1, 1992 in the Investors 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 Investors
Series I class), and (ii) the amount obtained by multiplying .15% 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,
the fee is a Class expense so that all shareholders regardless of whether they
originally purchased or received shares in the Investors 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
beginning June 1, 1992, the Plan permits a full .30% on all assets of the Class
A Shares 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 the Class A and
Class B Shares would be borne by such persons without any reimbursement from
such classes. Subject to seeking best price and execution, the Series may, from
time to time, buy or sell portfolio securities from or to firms which receive
payments under the Plans.
From time to time, the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans, the Distribution Agreement and the form of services agreement
relating thereto have all been approved by the Board of Directors of the Fund,
including a majority of the directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the Plans or any related agreements, by vote cast in
person at a meeting duly called for the purpose of voting on the Plans and such
Agreements.
14
Continuation of the Plans, the Distribution Agreement and the form of services
agreement must be approved annually by the Board of Directors in the same manner
as specified above.
Each year, the directors must determine whether continuation of the Plans is
in the best interest of shareholders of, respectively, the Class A Shares and
the Class B Shares and that there is a reasonable likelihood of the Plan
relating to a Fund Class providing a benefit to that Class. The Plans, the
Distribution Agreement and the services agreement with any broker/dealers or
others relating to a Fund Class may be terminated at any time without penalty by
a majority of those directors who are not "interested persons" or by a majority
vote of the outstanding voting securities of the relevant Fund Class. Any
amendment materially increasing the percentage payable under the Plans must
likewise be approved by a majority vote of the outstanding voting securities of
the relevant Fund Class, as well as by a majority vote of those directors who
are not "interested persons." Also, any other material amendment to the Plans
must be approved by a majority vote of the directors, including a majority of
the noninterested directors of the Fund having no interest in the Plans. In
addition, in order for the Plans to remain effective, the selection and
nomination of directors who are not "interested persons" of the Fund must be
effected by the directors who themselves are not "interested persons" and who
have no direct or indirect financial interest in the Plans. Persons authorized
to make payments under the Plans must provide written reports at least quarterly
to the Board of Directors for their review.
For the fiscal year ended December 31, 1994, payments from the Class A Shares
pursuant to its Plan amounted to $1,389,563 and such payments were used for the
following purposes: Advertising--$1,890; Annual and Semi-Annual Reports--
$18,255; Broker Trails--$1,279,416; Commission to Wholesalers--$64,436; Dealer
Service Expenses--$8,454; Promotional-Other--$5,873; and Promotional-Broker
Meetings--$11,239. For the Period May 2, 1994 (date of initial public offering)
through December 31, 1994, payments from the Class B Shares pursuant to its Plan
amounted to $21,445 and such payments were used for the following purposes:
Broker Sales Charges--$11,428; Broker Trails--$3,185; Commission to
Wholesalers--$3,249; and Interest on Broker Sales Charges--$3,583.
Other Payments to Dealers--Class A and Class B Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Fund Classes exceed certain limits
as set by the Distributor, may receive from the Distributor an additional
payment of up to .25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
In connection with the sale of Delaware Group fund shares, the Distributor
may, at its own expense, pay to participate in or reimburse dealers with whom it
has a selling agreement for expenses incurred in connection with seminars and
conferences sponsored by such dealers and may pay or allow additional
promotional incentives, which shall include non-cash concessions, such as
certain luxury merchandise or a trip to or attendance at a business or
investment seminar at a luxury resort, in the form of sales contests to dealers
who sell shares of the funds. Such seminars and conferences and the terms of
such sales contests must be preapproved by the Distributor. Payment may be up to
100% of the expenses incurred or awards made in connection with seminars,
conferences or contests relating to the promotion of fund shares. The
Distributor may also pay a portion of the expense of preapproved dealer
advertisements promoting the sale of Delaware Group fund shares.
Special Purchase Features--Class A Shares
Buying at Net Asset Value
The Class A Shares may be purchased without a front-end sales charge under the
Dividend Reinvestment Plan and, under certain circumstances, the 12-Month
Reinvestment Privilege and the Exchange Privilege.
Current and former officers, directors and employees of the Fund, any other
fund in the Delaware Group, the Manager or any of the Manager's affiliates that
may in the future be created, legal counsel to the funds and registered
representatives and employees of broker/dealers who have entered into Dealer's
Agreements with the Distributor may purchase Class A Shares and any such class
of shares of any of the funds in the Delaware Group, including any fund that may
be created, at the net asset value per share. Spouses, parents, brothers,
sisters and children (regardless of age) of such persons at their direction, and
any employee benefit plan established by any of the foregoing funds,
corporations, counsel or broker/dealers may also purchase shares at net asset
value. Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within six
months of a change of the registered representative's employment, if the
purchase is funded by proceeds from an investment where a front-end sales charge
has been assessed and the redemption of the investment did not result in the
imposition of a contingent deferred sales charge or other redemption charges.
Purchase of Class A Shares also may be made at net asset value by bank employees
that provide services in connection with agreements between the bank and
unaffiliated brokers or dealers concerning sales of Class A Shares. Also,
officers, directors and key employees of institutional clients of the Manager,
or any of its affiliates, may purchase Class A Shares at net asset value.
Moreover, purchases may be effected at net asset value for the benefit of the
clients of brokers, dealers and registered investment advisers affiliated with a
broker or dealer, if such broker, dealer or investment adviser has entered into
an agreement with the Distributor providing specifically for the purchase of
Class A Shares in connection with special investment products, such as wrap
accounts or similar fee based programs. Such purchasers
15
are required to sign a letter stating that the purchase is for investment only
and that the securities may not be resold except to the issuer. Such purchasers
may also be required to sign or deliver such other documents as the Fund may
reasonably require to establish eligibility for purchase at net asset value. The
Fund must be notified in advance that the trade qualifies for purchase at net
asset value.
Investments in Class A Shares made by plan level and/or participant retirement
accounts that are for the purpose of repaying a loan taken from such accounts
will be made at net asset value. Loan repayments made to a Delaware Group
account in connection with loans originated from accounts previously maintained
by another investment firm will also be invested at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to the Class
A Shares are also applicable to the aggregate amount of purchases made by any
such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or the Fund, which provides for
the holding in escrow by the Transfer Agent of 5%, of the total amount of 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 the Class A Shares
purchased at the reduced rate and the front-end sales charge otherwise
applicable to the total shares purchased. If such payment is not made within 20
days following the expiration of the 13-month period, the Transfer Agent will
surrender an appropriate number of the escrowed shares for redemption in order
to realize the difference. Such purchasers may include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
of the Series and of any class of any of the other mutual funds in the Delaware
Group (except shares of any Delaware Group fund which do not carry a front-end
sales charge or contingent deferred sales charge, 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
shares which do) previously purchased and still held as of the date of their
Letter of Intention toward the completion of such Letter. For purposes of
satisfying an investor's obligation under a Letter of Intention, Class B Shares
of the Series and the corresponding class of shares of other Delaware Group
funds which offer such shares may be aggregated with the Class A Shares of the
Series and the corresponding class of shares of the other Delaware Group funds.
Employers offering a Delaware Group Retirement Plan may also complete a Letter
of Intention to obtain a reduced front-end sales charge on investments of the
Class A Shares made by the Plan. The aggregate investment level of the Letter of
Intention will be determined and accepted by the Transfer Agent at the point of
Plan establishment. The level and any reduction in front-end sales charge will
be based on actual Plan participation and the projected investments in Delaware
Group funds that are offered with a front-end sales charge or contingent
deferred sales charge 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 or contingent deferred sales charge of any class. Class B Shares of the
Series and other Delaware Group funds which offer a corresponding class 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 the Class A Shares, purchasers may combine
the total amount of any combination of the Fund Classes of the Series as well as
any other class of any of the other Delaware Group funds (except shares of any
Delaware Group fund which do not carry a front-end sales charge or contingent
deferred sales charge, 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 shares which do).
The privilege also extends to all purchases made at one time by an individual;
or an individual, his or her spouse and their children under the age 21; or a
trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge with
respect to the Class A Shares, purchasers may also combine any subsequent
purchases of the Fund Classes of the Series as well as any other class of any of
the other Delaware Group funds which offer such classes (except shares of any
Delaware Group fund which do not carry a front-end sales charge or contingent
deferred sales charge, other than shares of Delaware Group Premium Fund, Inc.
beneficially owned in connection with the ownership of variable insurance
products, unless they were
16
acquired through an exchange from shares which do). 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 the Class A Shares, the charge applicable to the $60,000 purchase
would currently be 2.50%. 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
Shareholders of the Class A Shares (and of the Institutional Class holding
shares which were acquired through an exchange of one of the other mutual funds
in the Delaware Group offered with a front-end sales charge) who redeem such
shares of the Series have one year from the date of redemption to reinvest all
or part of their redemption proceeds in Class A Shares of the Series or in Class
A Shares of any of the other funds in the Delaware Group, subject to applicable
eligibility and minimum purchase requirements, in states where shares of such
other funds may be sold, at net asset value without the payment of a front-end
sales charge. This privilege does not extend to Class A Shares where the
redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware Group offered without a front-end sales charge will be required to pay
the applicable sales charge when purchasing Class A Shares. The reinvestment
privilege does not extend to redemption of Class B Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any amount
necessary to purchase a full share). The reinvestment will be made at the net
asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is proposed to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer Agent, which
also serves as the Fund's shareholder servicing agent, about the applicability
of the Limited CDSC (see Contingent Deferred Sales Charge for Certain Purchases
of Class A Shares Made at Net Asset Value under Redemption and Exchange in the
Fund Classes' Prospectus) in connection with the features described above.
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 set forth in the table on page 13, based on
total plan assets. If a company has more than one plan investing in the Delaware
Group of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction. Employees
participating in such Group Investment Plans may also combine the investments
made in their plan account when determining the applicable front-end sales
charge on purchases to non-retirement Delaware Group investment accounts.
For other Retirement Plans and special services, see Retirement Plans for the
Fund Classes under Investment Plans.
Limited-Term Government Fund Institutional Class
The Institutional Class is available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager or its affiliates and those having client relationships with Delaware
Investment Advisers, a division of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement account from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.
Shares of the Institutional Class are available for purchase at net asset
value, without the imposition of a front-end or contingent deferred sales charge
and are not subject to Rule 12b-1 expenses.
17
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 account of the holders of such shares (based on the net
asset value of the Series in effect on the reinvestment date). Confirmations of
any distributions from realized securities profits will be mailed to
shareholders in the first quarter of each fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and add
full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the Fund for
$25 or more with respect to the Class A Shares and $100 or more with respect to
the Class B Shares; no minimum applies to the Institutional Class. Such
purchases are made for the Class A Shares at the public offering price, and for
the Institutional Class and the Class B Shares at the net asset value, at the
end of the day of receipt. A reinvestment plan may be terminated at any time.
This plan does not assure a profit nor protect against depreciation in a
declining market.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum purchase requirements and the
limitations set forth below, shareholders of the Class A Shares and the Class B
Shares may automatically reinvest dividends and/or distributions from the Series
in any of the other mutual funds in the Delaware Group, including the Series, in
states where their shares may be sold. Such investments will be made at the net
asset value per share at the close of business on the reinvestment date without
any front-end sales charge or service fee. The shareholder must notify the
Transfer Agent in writing and must have established an account in the fund into
which the dividends and/or distributions are to be invested. Any reinvestment
directed to a fund in which the investor does not then have an account, will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is proposed to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses. See also Dividend Reinvestment Plan in the Prospectus for the Fund
Classes.
Subject to the following limitations, dividends and/or distributions from
other funds in the Delaware Group may be invested in shares of the Series at net
asset value, provided an account has been established. Dividends from the Class
A Shares may not be directed to the Class B Shares of another fund in the
Delaware Group. Dividends from the Class B Shares may only be directed to the
Class B Shares of another fund in the Delaware Group that offers such a class of
shares. See Class B Funds in the Fund Classes' Prospectus for the funds in the
Delaware Group that are eligible for investment by holders of Series shares.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors of the Class A Shares and the Class B
Shares may arrange for the Series to accept for investment, through an agent
bank, preauthorized government or private recurring payments by Electronic Fund
Transfer. 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 the Class A Shares and Class B
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into the Class. This
type of investment will be handled in either of the two ways noted below. (1) If
the shareholder's bank is a member of the National Automated Clearing House
Association ("NACHA"), the amount of the investment will be electronically
deducted from his or her account by Electronic Fund Transfer ("EFT"). The
shareholder's checking account will reflect a debit each month at a specified
date although no check is required to initiate the transaction. (2) If the
shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
* * *
Investments under the Direct Deposit Purchase Plan and the Automatic Investing
Plan must be for $25 or more with respect to the Class A Shares and $100 or more
with respect to the Class B Shares. An investor wishing to take advantage of
either option should contact the Shareholder Service Center at 800-523-1918 (in
Philadelphia, 215-988-1241) for the necessary authorization forms and
information. These services can be discontinued by the shareholder at any time
without penalty by giving written notice.
Payments to the Series from the federal government or its agencies on behalf
of a shareholder may be credited to the shareholder's account after such
payments should have
18
been terminated by reason of death or otherwise. Any such payments are subject
to reclamation by the federal government or its agencies. Similarly, under
certain circumstances, investments from private sources may be subject to
reclamation by the transmitting bank. In the event of a reclamation, the Fund
may liquidate sufficient shares from a shareholder's account to reimburse the
government or the private source. In the event there are insufficient shares in
the shareholder's account, the shareholder is expected to reimburse the Series.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer, to make
investments directly to their Series accounts. The 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 the Fund for proper
instructions.
Retirement Plans for the Fund Classes
An investment in the Series may be suitable for tax-deferred Retirement Plans.
Among the Retirement Plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 403(b)(7) Deferred Compensation Plans and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares. See the
Prospectus for the Fund Classes under Buying Shares--Contingent Deferred Sales
Charge for a list of the instances in which the CDSC is waived.
The minimum initial investment for each of the Retirement Plans described
below is $250; subsequent investments must be at least $25. Retirement Plans may
be subject to plan establishment fees, annual maintenance fees and/or other
administrative or Trustee fees. Fees are based on the number of participants in
the Plan as well as the services selected. Additional information about fees is
included in Retirement Plan materials. 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. Fees are subject to
change.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to Retirement Plan shareholders. Certain
Retirement Plans may qualify to purchase shares of the Institutional Class. See
Limited-Term Government Fund Institutional Class above. For additional
information on any of the Plans and Delaware's retirement services, call the
Shareholder Service Center telephone number.
With respect to the annual maintenance fees per account referred to above,
"account" shall mean any account or group of accounts within a Plan type
identified by a common tax identification number between or among them.
Shareholders are responsible for notifying the Fund when more than one account
is maintained under a single tax identification number.
It is advisable for an investor considering any one of the Retirement Plans
described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these Plans, contact your investment dealer or the Distributor.
Taxable distributions from the Retirement Plans described below may be subject
to withholding.
Please contact your investment dealer or the Distributor for the special
application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals, partnerships and
corporations which replace the former Keogh and corporate retirement plans.
These Plans contain profit sharing or money purchase pension plan provisions.
Contributions may be invested only in Class A Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an Individual
Retirement Account ("IRA") by making contributions which may be tax-deductible,
even if the individual is already participating in an employer-sponsored
retirement plan. Even if contributions are not deductible for tax purposes, as
indicated below, earnings will be tax-deferred. In addition, an individual may
make contributions on behalf of a spouse who has no compensation for the year or
elects to be treated as having no compensation for the year. Investments in each
of the Fund Classes are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an employer-
sponsored retirement plan. Even if a taxpayer (or his or her spouse) is covered
by an employer-sponsored retirement plan, the full deduction is still available
if the taxpayer's adjusted gross income is below $25,000 ($40,000 for taxpayers
filing joint returns). A partial deduction is allowed for married couples with
incomes between $40,000 and $50,000, and for single individuals with incomes
between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
19
A company or association may establish a Group IRA for employees or members
who want to purchase shares of the Series. Purchases of $1 million or more of
the Class A Shares qualify for purchase at net asset value but may, under
certain circumstances, be subject to a Limited CDSC. See Purchasing Shares
concerning reduced front-end sales charges applicable to Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in order to
avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See Class B Shares under Alternative Purchase Arrangements
concerning the applicability of a CDSC upon redemption.
See Appendix A for additional IRA information.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a tax-
sheltered retirement program by making contributions on behalf of all eligible
employees. Each of the Fund Classes is available for investment by a SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan which
permits employer contributions and salary deferral contributions in Class A
Shares only.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Internal Revenue Code of 1986 (the "Code") permits
employers to establish qualified plans based on salary deferral contributions.
Plan documents are available to enable employers to establish a plan. An
employer may also elect to make profit sharing contributions and/or matching
contributions with investments in only Class A Shares or certain other funds in
the Delaware Group. Purchases under the Plan may be combined for purposes of
computing the reduced front-end sales charge applicable to Class A Shares as
set forth in the table on page 13.
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 either of the
Fund Classes in conjunction with such an arrangement. Applicable front-end sales
charges with respect to Class A Shares for such purchases are set forth in the
table on page 13.
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 either of the Fund Classes. Although investors may use
their own plan, there is available a Delaware Group 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain further information. Applicable front-end sales charges for
such purchases of Class A Shares are set forth in the table on page 13.
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering price next
calculated by the Series after receipt of the order by the Fund or its agent.
Orders for purchases of Class B Shares and the Institutional Class are effected
at the net asset value per share next calculated by the Series after receipt of
the order by the Fund or its agent. Selling dealers have the responsibility of
transmitting orders promptly.
The offering price for the Class A Shares consists of the net asset value per
share plus any applicable front-end sales charges. Offering price and net asset
value are computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when such exchange is open.
The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except for New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the
New York Stock Exchange is closed, the Fund will generally be closed, pricing
calculations will not be made and purchase and redemption orders will not be
processed.
An example showing how to calculate the net asset value per share and, in the
case of the Class A Shares, the offering price per share, is included in the
Series' financial statements which are incorporated by reference into this
Part B.
20
The Series' net asset value per share is computed by adding the value of all
securities and other assets in the portfolio of the Series, deducting any
liabilities and dividing by the number of shares outstanding. Expenses and
income are accrued daily. 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 the last reported bid and asked prices. Short-term investments having
remaining maturities of 60 days or less are valued at amortized cost. All other
securities and assets, including non-Exchange-traded options, are valued at fair
value as determined in good faith by the Board of Directors of the Fund.
Each Class of the Series will bear, pro-rata, all of the common expenses of
the Series. The net asset values of all outstanding shares of each Class of the
Series will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Series represented by the value of shares
of that Class. All income earned and expenses incurred by the Series will be
borne on a pro-rata basis by each outstanding share of a Class, based on each
Class' percentage in the Series represented by the value of shares of such
Classes, except that the Institutional Class will not incur any of the expenses
under the Series' 12b-1 Plans and shares of the Fund Classes alone will bear the
12b-1 Plan fees payable under their respective Plans. Due to the specific
distribution expenses and other costs that would be allocable to each Class, the
dividends paid to each Class of the Series may vary. However, the net asset
value per share of each Class is expected to be equivalent.
REDEMPTION AND REPURCHASE
Any shareholder may require the Fund to redeem Series shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund, 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. The Fund does not issue
certificates for the Class A Shares or the Institutional Class shares, unless a
shareholder specifically requests them. The Fund does not issue certificates for
Class B Shares. If stock certificates have been issued for shares being
redeemed, they must accompany the written request. For redemptions of $50,000 or
less paid to the shareholder at the address of record, the Fund requires a
request signed by all owners of the shares or the investment dealer of record,
but does not require signature guarantees. When the redemption is for more than
$50,000, or if payment is made to someone else or to another address, signatures
of all record owners are required and a signature guarantee may be required.
Each signature guarantee must be supplied by an eligible guarantor institution.
The Fund reserves the right to reject a signature guarantee supplied by an
eligible institution based on its creditworthiness. The Fund may request further
documentation from corporations, retirement plans, executors, administrators,
trustees or guardians.
In addition to redemption of Series shares by the Fund, the Distributor,
acting as agent of the Fund, offers to repurchase Series shares from
broker/dealers acting on behalf of shareholders. The redemption or repurchase
price, which may be more or less than the shareholder's cost, is the net asset
value per share next determined after receipt of the request in good order by
the Fund or its agent, less any applicable contingent deferred sales charge.
This is computed and effective at the time the offering price and net asset
value are determined. See Determining Offering Price and Net Asset Value. The
Fund and the Distributor end their business day at 5 p.m., Eastern time. This
offer is discretionary and may be completely withdrawn without further notice by
the Distributor.
Orders for the repurchase of Series shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (less any applicable contingent deferred
sales charge), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
Certain redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge for
Certain Purchases of Class A Shares Made at Net Asset Value under Redemption and
Exchange in the Series' Prospectus for the Fund Classes. Redemptions of Class B
Shares made within three years of purchase are subject to a CDSC of 2% during
the first two years of purchase and 1% during the third year of purchase. See
Contingent Deferred Sales Charge under Buying Shares in the Series' Prospectus
for the Fund Classes. Except for such contingent deferred sales charges and,
with respect to the expedited payment by wire described below, for which there
is currently a $7.50 bank wiring cost, neither the Fund nor the Distributor
charges a fee for redemptions or repurchases, but such fees could be charged at
any time in the future.
Payment for shares redeemed will ordinarily be mailed the next business day,
but in no case later than seven days, after receipt of a redemption request in
good order.
If a shareholder redeems an entire account, all dividends accrued to the time
of withdrawal will be paid by a separate check at the end of that particular
monthly dividend period.
If a shareholder who recently purchased shares by check seeks to redeem all or
a portion of those shares in a written request, the Fund will honor the
redemption request but will not mail the proceeds until it is reasonably
satisfied of the collection of the investment check. Redemption requests by wire
or the Checkwriting Feature in this case will not be honored. This hold period
against a recent purchase may be up to but not in excess of 15 days,
21
depending upon the origin of the investment check. This potential delay can be
avoided by making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the Series' shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Series or to the Distributor.
In case of a suspension of the determination of the net asset value because
the New York Stock Exchange is closed for other than weekends or holidays, or
trading thereon is restricted or an emergency exists as a result of which
disposal by the Series of securities owned by it is not reasonably practical, or
it is not reasonably practical for the Series fairly to value its assets, or in
the event that the Commission has provided for such suspension for the
protection of shareholders, the Series 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 in
kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, the Fund has
elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the
Fund is obligated to redeem Series shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Series during any 90-day period for
any one shareholder.
The value of the Series' investments is subject to changing market prices.
Thus, a shareholder reselling shares to the Series may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.
Small Accounts
Due to the relatively higher costs of maintaining small accounts, the Fund
reserves the right to redeem shares in any Series account at the then-current
net asset value if the total investment in the Series has a value of less than
$1,000 as a result of redemptions. As a consequence, an investor who makes only
the minimum investment in a Class will be subject to involuntary redemption if
any portion of the investment is redeemed. Before the Fund redeems such shares
and sends the proceeds to the shareholder, the shareholder will be notified in
writing that the value of the Series shares in the account is less than $1,000
and will be allowed 60 days from that date of notice to make an additional
investment to meet the required minimum of $1,000. Any redemption in an inactive
account established with a minimum investment may trigger mandatory redemption.
No contingent deferred sales charge will apply to the redemptions described in
this paragraph of the Class A and the Class B Shares.
Checkwriting Feature
Shareholders of the Class A Shares and the Institutional Class holding shares
for which certificates have not been issued may request on the investment
application that they be provided with special forms of checks which may be
issued to redeem their shares by drawing on the Delaware Group Limited-Term
Government Funds, Inc.-Limited-Term Government Fund account with CoreStates
Bank, N.A. Normally, it takes two weeks from the date the shareholder's initial
purchase check clears to receive the ten-check book. The use of any form of
check other than the Series' check will not be permitted unless approved by the
Fund. The Checkwriting Feature is not available with respect to the Class B
Shares or for Retirement Plans.
(1) Redemption checks must be made payable in an amount of $500 or more.
(2) Checks must be signed by the shareholder(s) of record or, in the case of
an organization, by the authorized person(s). If registration is in more than
one name, unless otherwise indicated on the investment application or your
checkwriting authorization form, these checks must be signed by all owners
before the Fund will honor them. Through this procedure the shareholder will
continue to be entitled to distributions paid on these shares up to the time the
check is presented for payment.
(3) If a shareholder who recently purchased shares by check seeks to redeem
all or a portion of those shares through the Checkwriting Feature, the Fund will
not honor the redemption request unless it is reasonably satisfied of the
collection of the investment check. A hold period against a recent purchase may
be up to but not in excess of 15 days, depending upon the origin of the
investment check.
(4) If the amount of the check is greater than the value of the shares held in
the shareholder's account, the check will be returned and the shareholder may be
subject to extra charges.
(5) Checks may not be used to close accounts.
The Fund reserves the right to revoke the Checkwriting Feature of shareholders
who overdraw their accounts or if, in the opinion of management, such revocation
is in the Series' best interest.
Shareholders will be subject to CoreStates Bank, N.A.'s rules and regulations
governing similar accounts. This service may be terminated or suspended at any
time by CoreStates Bank, N.A., the Fund or the Transfer Agent. The Fund and the
Transfer Agent will not be responsible for the inadvertent processing of post-
dated checks or checks more than six months old.
Stop-Payment Requests--Investors may request a stop payment on checks by
providing the Fund with a written authorization to do so. Oral requests will be
accepted provided that the Fund promptly receives a written authorization.
22
Such requests will remain in effect for six months unless renewed or
cancelled. The Fund will use its best efforts to effect stop-payment
instructions, but does not promise or guarantee that such instructions will be
effective. Shareholders requesting stop payment will be charged a $5 service fee
per check for each six-month period which will be deducted from their accounts.
* * *
The Fund has available certain special redemption privileges, as described
below. The Fund reserves the right to suspend or terminate these expedited
payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders of the Fund Classes or their investment dealers of record wishing
to redeem any amount of Series shares of $50,000 or less for which certificates
have not been issued may call the Fund at 800-523-1918 (in Philadelphia,
215-988-1241) or, in the case of shareholders of the Institutional Class, their
Client Services Representative at 800-828-5052 prior to the time the offering
price and net asset value are determined, as noted above, and have the proceeds
mailed to them at the record address. Checks payable to the shareholder(s) of
record will normally be mailed the next business day, but no later than seven
days, after the receipt of the redemption request. This option is only available
to individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check by calling the Fund, as described
above. An authorization form must have been completed by the shareholder and
filed with the Fund before the request is received. Payment will be made by wire
or check to the bank account designated on the authorization form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank account
designated on the authorization form. Redemption proceeds will normally be wired
on the next business day following receipt of the redemption request. There is a
$7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A. which will
be deducted from the withdrawal proceeds each time the shareholder requests a
redemption. If the proceeds are wired to the shareholder's account at a bank
which is not a member of the Federal Reserve System, there could be a delay in
the crediting of the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account designated
on the authorization form. Redemption proceeds will normally be mailed the next
business day, but no later than seven days, from the date of the telephone
request. This procedure will take longer than the Payment by Wire option (1
above) because of the extra time necessary for the mailing and clearing of the
check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and the
account number it will be necessary to send a written request to the Fund and a
signature guarantee may be required. Each signature guarantee must be supplied
by an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the telephone
redemption procedure, payment will be made only to the bank account designated
on the authorization form. The Fund will not honor telephone redemptions for
Series shares recently purchased by check unless it is reasonably satisfied that
the purchase check has cleared.
If expedited payment under these procedures could adversely affect the Series,
the Fund may take up to seven days to pay the shareholder.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Series shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
Systematic Withdrawal Plan
Shareholders of the Class A Shares who own or purchase $5,000 or more of
shares at the offering price for which certificates have not been issued may
establish a Systematic Withdrawal Plan for monthly withdrawals of $25 or more,
or quarterly withdrawals of $75 or more, although the Fund does not recommend
any specific amount of withdrawal. This $5,000 minimum does not apply for the
Fund's prototype Retirement Plans. Shares purchased with the initial investment
and through reinvestment of cash dividends and realized securities profits
distributions will be credited to the shareholder's account and sufficient full
and fractional shares will be redeemed at the net asset value calculated on the
third business day preceding the mailing date.
Checks are dated the 15th of the month (unless such date falls on a holiday or
a Sunday) and are normally mailed within two business days. Both ordinary income
dividends and realized securities profits distributions will be automatically
reinvested in additional shares of the Class at net asset value. This plan is
not recommended for all investors and should be started only after careful
consideration of its operation and effect upon the investor's savings and
investment program. To the extent that withdrawal payments from the plan exceed
any dividends and/or realized securities profits distributions paid on shares
held under the plan, the withdrawal payments will represent a return of capital
and the share balance may in time be depleted, particularly in a declining
market.
The sale of shares for withdrawal payments constitutes a taxable event and a
shareholder may incur a capital gain or loss for federal income tax purposes.
This gain or loss may
23
be long-term or short-term depending on the holding period for the specific
shares liquidated. Premature withdrawals from Retirement Plans may have adverse
tax consequences.
Withdrawals under this plan by the holders of Class A Shares or any similar
plan of any other investment company charging a front-end sales charge made
concurrently with the purchases of the Class A Shares of this or the shares of
any other investment company will ordinarily be disadvantageous to the
shareholder because of the payment of duplicative sales charges. Shareholders
should not purchase Class A Shares while participating in a Systematic
Withdrawal Plan and a periodic investment program in a fund managed by the
Manager must be terminated before a Systematic Withdrawal Plan can take effect,
except if the shareholder is a participant in one of our Retirement Plans or is
investing in funds of the Delaware Group which do not carry a sales charge.
Also, redemptions 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.
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.
The Systematic Withdrawal Plan is not available with respect to the Class B
Shares or the Institutional Class.
Wealth Builder Option
Shareholders of the Fund Classes may elect to invest in one or more of the
other mutual funds in the Delaware Group through our Wealth Builder Option.
Under this automatic exchange program, shareholders can authorize regular
monthly investments (minimum of $100 per fund) to be liquidated from their
account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Fund Classes'
Prospectus. See Wealth Builder Option and Redemption and Exchange in the
Prospectus for the Fund Classes.
The investment will be made on the 20th day of each month (or, if the fund
selected is not open that day, the next business day) at the public offering
price or net asset value, as applicable, of the fund selected on the date of
investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure profits
or protect against losses in a declining market. The price of the fund into
which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges.
Shareholders can also use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Group, subject to the conditions and limitations described
in the Fund Classes' Prospectus. Shareholders can terminate their participation
at any time by written notice to the Fund.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Class.
INCOME DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
It is the present policy of the Fund to declare dividends from net investment
income of the Series on a daily basis. Dividends are declared at the time the
offering price and net asset value are determined (see Determining Offering
Price and Net Asset Value) each day the Fund is open and are paid monthly on the
last business day of each month. Checks are normally mailed within three
business days of that date. Any check in payment of dividends or other
distributions which cannot be delivered by the Post Office or which remains
uncashed for a period of more than one year may be reinvested in the
shareholder's account at the then-current net asset value and the dividend
option may be changed from cash to reinvest. The Series may deduct from a
shareholder's account the costs of the Series' effort to locate a shareholder if
a shareholder's mail is returned by the Post Office or the Series is otherwise
unable to locate the shareholder or verify the shareholder's mailing address.
These costs may include a percentage of the account when a search company
charges a percentage fee in exchange for their location services. Net investment
income earned on days when the Fund is not open will be declared as a dividend
on the next business day. Purchases of Series shares by wire begin earning
dividends when converted into Federal Funds and available for investment,
normally the next business day after receipt. Purchases by check earn dividends
upon conversion to Federal Funds, normally one business day after receipt.
Each class of the Series will share proportionately in the investment income
and expenses of the Series, except that the Class A Shares and the Class B
Shares alone will incur distribution fees under their respective 12b-1 Plans
described on page 14.
Dividends and realized securities profits distributions are automatically
reinvested in additional shares of the Series at the net asset value in effect
on the payable date, and credited to the shareholder's account, unless an
election to
24
receive distributions in cash has been made by the shareholder. 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.
The Fund anticipates distributing to its shareholders substantially all of the
Series' net investment income. Any net short-term capital gains after deducting
any net long-term capital losses (including carryforwards) would be distributed
quarterly but, in the discretion of the Fund's Board of Directors, might be
distributed less frequently. Distributions of net long-term gains, if any,
realized on sales of investments will be distributed annually during the quarter
following the close of the fiscal year.
During the fiscal year ended December 31, 1994, dividends totaling $0.667,
$0.399 and $0.681 per share of the Class A Shares, the Class B Shares and the
Institutional Class, respectively, were paid from net investment income.
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103, furnishes
investment management services to the Series, subject to the supervision and
direction of the Fund's Board of Directors.
The Manager and its predecessors have been managing the funds in the Delaware
Group since 1938. The aggregate assets of these funds on December 31, 1994 were
approximately $9,253,901,000. Investment advisory services are also provided to
institutional accounts with assets on December 31, 1994 of approximately
$15,456,416,000.
The Investment Management Agreement for the Series is dated April 3, 1995 and
was approved by shareholders on March 29, 1995.
The Agreement has an initial term of two years and may be further renewed only
so long as such renewal and continuance are specifically approved at least
annually by the Board of Directors or by vote of a majority of the outstanding
voting securities of the Series, and only if the terms and renewal thereof have
been approved by the vote of a majority of the directors of the Fund who are not
parties thereto or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. The Agreement is
terminable without penalty on 60 days' notice by the directors of the Fund or by
the Manager. The Agreement will terminate automatically in the event of its
assignment.
The Investment Management Agreement provides that the Series shall pay the
Manager a management fee payable monthly and computed on the net asset value of
the Series as of each day at the annual rate of 1/2 of 1%, less all directors'
fees paid to the unaffiliated directors of the Series. The Manager elected
voluntarily to waive the portion, if any, of its annual compensation necessary
to limit the annual operating expenses of the Class A Shares and the
Institutional Class to .75% (in the case of the Class A Shares, before accrual
of 12b-1 fees) during the period from February 25, 1991 to December 31, 1992.
For the Institutional Class, the waiver was in place from June 1, 1992, the date
of the initial public offering for those shares. On December 31, 1994, the
Series' total net assets were $833,045,284. Investment management fees earned
for the fiscal year ended December 31, 1992 amounted to $2,587,198, of which
$2,436,147 was paid after consideration of the waiver described above.
Investment management fees paid by the Series for the fiscal years ended
December 31, 1993 and 1994 amounted to $5,455,430 and $5,023,989, respectively.
Under the general supervision of the Board of Directors, the Manager manages
the Series' portfolio in accordance with the Series' stated investment objective
and policy and makes and implements all investment decisions on behalf of the
Series. The Manager pays the salaries of all directors, officers and employees
of the Fund who are affiliated with the Manager. The Series pays all of its
other expenses, including its proportionate share of rent and certain other
administrative expenses.
The ratio of expenses to average daily net assets for the Class A Shares for
the fiscal year ended December 31, 1994 was 0.91%. The ratio of expenses to
average daily net assets for the Institutional Class for the fiscal year ended
December 31, 1994 was 0.76%. Based on expenses incurred by the Class A Shares
during its fiscal year ended December 31, 1994, the expenses of the Class B
Shares are expected to be 1.76% for the fiscal year ending December 31, 1995.
The ratios for the Class A Shares and the Class B Shares reflect the impact of
their respective 12b-1 Plans.
By California regulation, the Manager is required to waive certain fees and
reimburse the Series for certain expenses to the extent that the Series' annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed 2 1/2% of its first $30 million of average daily
net assets, 2% of the next $70 million of average daily net assets and 1 1/2% of
any additional average daily net assets. For the fiscal year ended December 31,
1994, no such reimbursement was necessary or paid.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor under a Distribution
Agreement dated April 3, 1995 for the Class A Shares, the Institutional Class
and for the Class B Shares. The Distributor is an affiliate of the Manager and
bears all of the costs of promotion and distribution, except for payments by the
Class A Shares and Class B Shares of the Series under their 12b-1 Plans. Prior
to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as the national
distributor of the Series' shares. On that date, Delaware Distributors, L.P., a
newly formed limited partnership, succeeded to the
25
business of DDI. All officers and employees of DDI became officers and employees
of Delaware Distributors, L.P. DDI is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly-owned subsidiaries of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate of the
Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as the
Series' shareholder servicing, dividend disbursing and transfer agent pursuant
to a Shareholders Services Agreement dated December 20, 1990. The Transfer Agent
is also an indirect, wholly-owned subsidiary of Delaware Management Holdings,
Inc.
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors.
Certain officers and directors of the Fund hold identical positions in each of
the other funds in the Delaware Group. On January 31, 1995, the Series' officers
and directors, as a group, owned less than 1% of the Series' outstanding shares.
As of January 31, 1995, the Fund believes Merrill Lynch, Pierce, Fenner &
Smith Inc., Mutual Fund Operations, P.O. Box 41621, Jacksonville, FL 32203 held
of record 9,144,539 shares (10.59%) of the outstanding shares of the Class A
Shares. These shares are believed to be beneficially owned by others.
The Fund believes the following shareholders held 5% or more of the
outstanding shares of the Institutional Class as of January 31, 1995: PWH
Savings, 1410 North Westshore Blvd., Tampa, FL 32203--1,941,902 shares (46.68%);
Merrill Lynch Trust Company, Trust Qualified Retirement Plans--265 Davidson
Ave., 3rd Fl., Somerset, NJ 08873--596,461 shares (14.34%); National Westminster
Bank of NJ, FBO ITO Pension Plan, D/A Account 50-5029-18, 10 Exchange Place,
Exchange Place Center, 2nd Fl., Jersey City, NJ 07302--313,880 shares (7.55%);
and Delaware Management Company Employee Profit Sharing Trust, 1818 Market
Street, Philadelphia, PA 19103--263,142 shares (6.33%). Shares held by Delaware
Management Company Employee Profit Sharing Trust are known to be beneficially
owned by others.
As of the same date, Merrill Lynch, Pierce, Fenner & Smith Inc., Mutual Fund
Operations, Attention: Book Entry, 4800 Deer Lake Drive East, 3rd Fl.,
Jacksonville, FL 32246 held of record 41,348 shares (5.62%) of the outstanding
shares of the Class B Shares. These shares are believed to be beneficially owned
by others.
DMH Corp., Delaware Management Company, Inc., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware International Holdings Ltd., Founders Holdings, Inc.,
Delaware International Advisers Ltd. and Delaware Investment Counselors, Inc.
are direct or indirect, wholly-owned subsidiaries of Delaware Management
Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a wholly-
owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. In connection with the merger, a new Investment Management Agreement
between the Fund on behalf of the Series and the Manager was executed following
shareholder approval. As a result of the merger, DMH became a wholly-owned
subsidiary and the Manager became an indirect, wholly-owned subsidiary of
Lincoln National and both are now subject to the ultimate control of Lincoln
National. Lincoln National, with headquarters in Fort Wayne, Indiana, is a
diversified organization with operations in many aspects of the financial
services industry, including insurance and investment management.
Directors and principal officers of the Fund are noted below along with their
ages and their business experience for the past five years. Unless otherwise
noted, the address of each officer and director is One Commerce Square,
Philadelphia, PA 19103.
*Wayne A. Stork (58)
Chairman, Director and/or Trustee of the Fund, each of the other 16 funds in
the Delaware Group and Delaware Investment Counselors, Inc.
Chairman, Chief Executive Officer, Chief Investment Officer and Director of
Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware Management
Holdings, Inc., DMH Corp., Delaware International Advisers Ltd., Delaware
International Holdings Ltd. and Founders Holdings, Inc.
Director of Delaware Distributors, Inc. and Delaware Service Company, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
---------------
*Director affiliated with the investment manager of the Fund and considered
an "interested person" as defined in the Investment Company Act of 1940.
26
Brian F. Wruble (52)
President and Chief Executive Officer of the Fund and 15 other funds in the
Delaware Group (which excludes Delaware Pooled Trust, Inc.).
Director of Delaware International Advisers Ltd. and Delaware Investment
Counselors, Inc.
President, Chief Operating Officer and Director of Delaware Management
Holdings, Inc., DMH Corp. and Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware Service Company,
Inc.
Chairman and Director of Delaware Distributors, Inc.
Chairman of Delaware Distributors, L.P.
President of Founders Holdings, Inc.
President and Chief Operating Officer of Delaware International Holdings Ltd.
From 1992 to 1995, Mr. Wruble was a director of the Fund and a director
and/or trustee of each of the other funds in the Delaware Group. Before
joining the Delaware Group in 1992, Mr. Wruble was Chairman, President and
Chief Executive Officer of Equitable Capital Management Corporation from
July 1985 through April 1992 and was Executive Vice President of Equitable
Life Assurance Society of the United States from September 1984 through
April 1992 and Chief Investment Officer from April 1991 through April 1992.
Mr. Wruble has previously held executive positions with Smith Barney,
Harris Upham, and H.C. Wainwright & Co.
Winthrop S. Jessup (49)
Executive Vice President of the Fund, 15 other funds in the Delaware Group
(which excludes Delaware Pooled Trust, Inc.) and Delaware Management
Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Investment Counselors, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc., Delaware International Holdings Ltd. and Founders Holdings,
Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Management Trust Company, Delaware Service Company, Inc.
and Delaware International Advisers Ltd.
During the past five years, Mr. Jessup has served in various executive
capacities at different times within the Delaware organization.
Richard G. Unruh, Jr. (55)
Executive Vice President of the Fund and each of the other 16 funds in the
Delaware Group.
Executive Vice President and Director of Delaware Management Company, Inc.
Senior Vice President of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
Walter P. Babich (67)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988
to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (56)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Consultant, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was also
a lecturer in English at the University. In addition, Mr. Knerr was
Chairman of The Publishing Group, Inc., New York, from 1988 to 1990. Mr.
Knerr founded The Publishing Group, Inc. in 1988.
Ann R. Leven (54)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1994, she was
Adjunct Professor of Columbia Business School.
W. Thacher Longstreth (74)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
1617 John F. Kennedy Boulevard, Philadelphia, PA 19103.
Vice Chairman, Packquisition Corp., a financial printing, commercial printing
and information processing firm.
Philadelphia City Councilman.
President, MLW, Associates.
Director, Tasty Baking Company.
Director, Healthcare Services Group.
27
Charles E. Peck (69)
Director and/or Trustee of the Fund and each of the other 16 funds in the
Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.
David K. Downes (55)
Senior Vice President/Chief Administrative Officer/Chief Financial Officer of
the Fund, each of the other 16 funds in the Delaware Group and Delaware
Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer/Treasurer of Delaware Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and Director of DMH
Corp.
Senior Vice President/Chief Administrative Officer/Chief Financial Officer
and Director of Delaware Service Company, Inc.
Senior Vice President/Chief Administrative Officer and Director of Delaware
Distributors, Inc.
Senior Vice President/Chief Administrative Officer of Delaware Distributors,
L.P.
Chief Financial Officer and Director of Delaware International Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware
Investment Counselors, Inc.
Senior Vice President and Director of Founders Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer of Equitable
Capital Management Corporation, New York, from December 1985 through August
1992, Executive Vice President from December 1985 through March 1992, and
Vice Chairman from March 1992 through August 1992.
George M. Chamberlain, Jr. (48)
Senior Vice President and Secretary of the Fund, each of the other 16 funds
in the Delaware Group, Delaware Management Holdings, Inc., Delaware
Distributors, L.P. and Delaware Investment Counselors, Inc.
Executive Vice President, Secretary and Director of Delaware Management Trust
Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc. and Delaware Service
Company, Inc.
Corporate Vice President, Secretary and Director of Founders Holdings, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various capacities
at different times within the Delaware organization.
Paul E. Suckow (48)
Senior Vice President/Chief Investment Officer, Fixed Income of the Fund,
each of the other 16 funds in the Delaware Group, Delaware Management
Holdings, Inc. and Delaware Management Company, Inc.
Senior Vice President and Director of Founders Holdings, Inc.
Director of Founders CBO Corporation.
Before returning to the Delaware Group in 1993, Mr. Suckow was Executive Vice
President and Director of Fixed Income for Oppenheimer Management
Corporation, New York, NY from 1985 to 1992. Prior to that, Mr. Suckow was
a fixed income portfolio manager for the Delaware Group.
Roger A. Early (41)
Vice President/Senior Portfolio Manager of the Fund, of nine other income
funds in the Delaware Group and of Delaware Management Company, Inc.
Before joining the Delaware Group in 1994, Mr. Early was Senior Vice
President/Portfolio Manager for Federated Investors, Pittsburgh, PA from
1984 to 1994.
28
Joseph H. Hastings (45)
Vice President/Corporate Controller of the Fund, each of the other 16 funds
in the Delaware Group, Delaware Management Holdings, Inc., DMH Corp.,
Delaware Management Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware Investment
Counselors, Inc. and Founders Holdings, Inc.
Executive Vice President/Treasurer/Chief Financial Officer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief Financial
Officer for Prudential Residential Services, L.P., New York, NY from 1989
to 1992. Prior to that, Mr. Hastings served as Controller and Treasurer for
Fine Homes International, L.P., Stamford, CT from 1987 to 1989.
Michael P. Bishof (33)
Vice President/Treasurer of the Fund, each of the other 16 funds in the
Delaware Group, Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Founders
Holdings, Inc. and Founders CBO Corporation.
Prior to joining the Delaware Group in 1995, Mr. Bishof was a Vice President
for Bankers Trust, New York, NY from 1994 to 1995, a Vice President for CS
First Boston Investment Management, New York, NY from 1993 to 1994 and an
Assistant Vice President for Equitable Capital Management Corporation, New
York, NY from 1987 to 1993.
The following is a compensation table listing for each director entitled to
receive compensation, the aggregate compensation received from the Fund and the
total compensation received from all Delaware Group funds for the fiscal year
ended December 31, 1994 and an estimate of annual benefits to be received upon
retirement under the Delaware Group Retirement Plan for Directors/Trustees as of
December 31, 1994.
Pension or
Retirement Estimated Total
Benefits Annual Compensation
Aggregate Accrued Benefits from all 17
Compensation as Part of Upon Delaware
Name from Fund Fund Expenses Retirement* Group Funds
W. Thacher Longstreth $1,648.08 None $18,100 $37,132.69
Ann R. Leven $2,004.30 None $18,100 $45,268.64
Walter P. Babich $1,964.66 None $18,100 $44,268.65
Anthony D. Knerr $1,970.00 None $18,100 $44,268.72
Charles E. Peck $1,648.08 None $18,100 $37,132.69
*Under the terms of the Delaware Group Retirement Plan for Directors/Trustees,
each disinterested director who, at the time of his or her retirement from the
Board, has attained the age of 70 and served on the Board for at least five
continuous years, is entitled to receive payments from each fund in the
Delaware Group for a period equal to the lesser of the number of years that
such person served as a director or the remainder of such person's life. The
amount of such payments will be equal, on an annual basis, to the amount of the
annual retainer that is paid to directors of each fund at the time of such
person's retirement. If an eligible director retired as of December 31, 1994,
he or she would be entitled to annual payments totaling $18,100, in the
aggregate, from all of the funds in the Delaware Group, based on the number of
funds in the Delaware Group as of that date.
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Group are set forth in
the relevant prospectuses for such classes. The following supplements that
information. The Fund reserves the right to reject exchange requests at any
time. The Fund may modify, terminate or suspend the exchange privilege upon 60
days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the exchange
is made. As with any purchase, an investor should obtain and carefully read that
fund's prospectus before buying shares in an exchange. The prospectus contains
more complete information about the fund, including charges and expenses. A
shareholder requesting an exchange will be sent a current prospectus and
29
an authorization form for any of the other mutual funds in the Delaware Group.
Exchange instructions must be signed by the record owner(s) exactly as the
shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund or series and
the purchase of another. The sale may involve either a capital gain or loss to
the shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between funds
in the Delaware Group on behalf of their clients by telephone or other expedited
means. This service may be discontinued or revised at any time by the Transfer
Agent. Such exchange requests may be rejected if it is determined that a
particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued or
their investment dealers of record may exchange shares by telephone for shares
in other mutual funds in the Delaware Group. This service is automatically
provided unless the Fund receives written notice from the shareholder to the
contrary.
Shareholders or their investment dealers of record may contact the Transfer
Agent at 800-523-1918 (in Philadelphia, 215-988-1241) or, in the case of
shareholders of the Institutional Class, their Client Services Representative at
800-828-5052 to effect an exchange. The shareholder's current Series account
number must be identified, as well as the registration of the account, the share
or dollar amount to be exchanged and the fund into which the exchange is to be
made. Requests received on any day after the time the offering price and net
asset value are determined will be processed the following day. See Determining
Offering Price and Net Asset Value. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
sales charges, eligibility and investment minimums, must be met. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent or, as
relevant, your Client Services Representative.) Certain funds are not available
for Retirement Plans.
The telephone exchange privilege is intended as a convenience to shareholders
and is not intended to be a vehicle to speculate on short-term swings in the
securities market through frequent transactions in and out of the funds in the
Delaware Group. Telephone exchanges may be subject to limitations as to amounts
or frequency. The Transfer Agent and the Fund reserve the right to record
exchange instructions received by telephone and to reject exchange requests at
any time in the future.
As described in the Series' Prospectuses, neither the Fund nor the Transfer
Agent is responsible for any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Series shares which are
reasonably believed to be genuine.
Following is a summary of the investment objectives of the other Delaware
Group funds:
Delaware Fund seeks long-term growth by a balance of capital appreciation,
income and preservation of capital. It uses a dividend-oriented valuation
strategy to select securities issued by established companies that are believed
to demonstrate potential for income and capital growth. Devon Fund seeks current
income and capital appreciation by investing primarily in income-producing
common stocks, with a focus on common stocks the Manager believes have the
potential for above average dividend increases over time.
Trend Fund seeks long-term growth by investing in common stocks issued by
emerging growth companies exhibiting strong capital appreciation potential.
Value Fund seeks capital appreciation by investing primarily in common stocks
whose market values appear low relative to their underlying value or future
potential.
DelCap Fund seeks long-term capital growth by investing in common stocks and
securities convertible into common stocks of companies that have a demonstrated
history of growth and have the potential to support continued growth.
Decatur Income Fund seeks the highest possible current income by investing
primarily in common stocks that provide the potential for income and capital
appreciation without undue risk to principal. Decatur Total Return Fund seeks
long-term growth by investing primarily in securities that provide the potential
for income and capital appreciation without undue risk to principal.
Delchester Fund seeks as high a current income as possible by investing
principally in corporate bonds, and also in U.S. Government securities and
commercial paper.
U.S. Government Fund seeks high current income by investing primarily in long-
term debt obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities.
U.S. Government Money Fund seeks maximum current income with preservation of
principal and maintenance of liquidity by investing only in short-term
securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, and repurchase agreements
collateralized by such securities, while maintaining a stable net asset value.
Delaware Cash Reserve seeks the highest level of income consistent with the
preservation of capital and liquidity through investments in short-term money
market instruments, while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income tax by
investing in municipal bonds of geographically-diverse issuers. Tax-Free Insured
Fund invests in these same types of securities but with an emphasis on municipal
bonds protected by insurance guaranteeing principal and interest are paid when
due. Tax-Free USA Intermediate Fund seeks a high level of current interest
income exempt from federal income tax, consistent with the preservation of
capital by investing primarily in municipal bonds.
30
Tax-Free Money Fund seeks high current income, exempt from federal income tax,
by investing in short-term municipal obligations, while maintaining a stable net
asset value.
Tax-Free Pennsylvania Fund seeks a high level of current interest income
exempt from federal and, to the extent possible, certain Pennsylvania state and
local taxes, consistent with the preservation of capital.
International Equity Fund seeks to achieve long-term growth without undue risk
to principal by investing primarily in international securities that provide the
potential for capital appreciation and income. Global Bond Fund seeks to achieve
current income consistent with the preservation of principal by investing
primarily in global fixed income securities that may also provide the potential
for capital appreciation. Global Assets Fund seeks to achieve long-term total
return by investing in global securities which will provide higher current
income than a portfolio comprised exclusively of equity securities, along with
the potential for capital growth.
Delaware Group Premium Fund offers nine series available exclusively as
funding vehicles for certain insurance company separate accounts. Equity/Income
Series seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. High Yield Series seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. Government
securities and commercial paper. Capital Reserves Series seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a diversified portfolio of short- and intermediate-term securities. Money
Market Series seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. Growth Series seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. Multiple Strategy Series seeks a balance of capital appreci-
ation, income and preservation of capital. It uses a dividend-oriented valuation
strategy to select securities issued by established companies that are believed
to demonstrate potential for income and capital growth. International Equity
Series seeks long-term growth without undue risk to principal by investing
primarily in equity securities of foreign issuers that provide the potential for
capital appreciation and income. Value Series seeks capital appreciation by
investing in small- to mid-cap common stocks whose market 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. Emerging Growth
Series seeks long-term capital appreciation by investing primarily in small-cap
common stocks and convertible securities of emerging and other growth-oriented
companies. These securities will have been judged to be responsive to changes in
the market place and to have fundamental characteristics to support growth.
Income is not an objective.
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus from the Distributor. Read it carefully
before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the information
contained in each Fund's prospectus(es).
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager or its
affiliate, Delaware International Advisers Ltd., also manages the other funds in
the Delaware Group. The Manager, through a separate division, also manages
private investment accounts. While investment decisions of the Series are made
independently from those of the other funds and accounts, they may make
investment decisions at the same time.
Access persons and advisory persons of the Delaware Group of funds, as those
terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide services to
the Manager, Delaware International Advisers Ltd. or their affiliates, are
permitted to engage in personal securities transactions subject to the
exceptions set forth in Rule 17j-1 and the following general restrictions and
procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance was received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for the Fund and for the other
mutual funds in the Delaware Group. As previously described, prior to January 3,
1995, DDI served as the national distributor for the Fund.
For the fiscal years ended December 31, 1993 and 1994, in its capacity as the
Fund's national distributor, DDI received Limited CDSC payments in the amounts
of $7,980.34 and $118,233.80 with respect to the Class A Shares.
For the period May 2, 1994 (date of initial public offering) through December
31, 1994, DDI also received CDSC payments in the amount of $2,817 with respect
to the Class B Shares.
31
Effective as of January 3, 1995, all such payments described above have been
paid to Delaware Distributors, L.P.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the other
mutual funds in the Delaware Group. The Transfer Agent is paid a fee by the
Series for providing these services consisting of an annual per account charge
of $11.00 plus transaction charges for particular services according to a
schedule. Compensation is fixed each year and approved by the Board of
Directors, including a majority of the disinterested directors.
The Manager and its affiliates own the name "Delaware Group." Under certain
circumstances, including the termination of the Fund's advisory relationship
with the Manager or its distribution relationship with the Distributor, the
Manager and its affiliates could cause the Fund to delete the words "Delaware
Group" from the Fund's name.
Morgan Guaranty Trust Company of New York ("Morgan"), 60 Wall Street, New
York, NY 10260, is custodian of the Fund's securities and cash. As custodian for
the Fund, Morgan maintains a separate account or accounts for the Fund;
receives, holds and releases portfolio securities on account of the Fund;
receives and disburses money on behalf of the Fund; and collects and receives
income and other payments and distributions on account of the Fund's portfolio
securities.
The legality of the issuance of the shares offered hereby, pursuant to
registration under the Investment Company Act Rule 24f-2, has been passed upon
for the Fund by Messrs. Stradley, Ronon, Stevens & Young, Philadelphia,
Pennsylvania.
Capitalization
As a result of a ten-to-one stock split of the U.S. Government Money Series
shares, effective January 1, 1991 the authorized capital of the Fund consists of
three billion shares of $.001 par value common stock, of which two billion
shares constitutes the Limited-Term Government Fund series and one billion
shares constitutes the U.S. Government Money Series. Of the two billion shares
allocated to the Limited-Term Government Fund series, one billion shares have
been allocated to the Class A Shares and two hundred million shares each have
been allocated to the Class B Shares and the Institutional Class. Identifiable
expenses to each Series will be paid by that Series. General expenses of all
Series will be allocated on a pro-rata basis according to asset size. Where
matters must be submitted to a vote of shareholders, the holders of a majority
of shares of each Series affected must vote affirmatively for that class to be
affected. The Class A Shares and Class B Shares represent a proportionate
interest in the assets of the Series and have the same voting and other rights
and preferences as the Institutional Class of shares, except that shares of the
Institutional Class may not vote on matters affecting the Series' Distribution
Plans under Rule 12b-1. Similarly, the shareholders of the Class A Shares may
not vote on matters affecting the Series' Plan under Rule 12b-1 relating to the
Class B Shares, and the shareholders of the Class B Shares may not vote on
matters affecting the Series' Plan under Rule 12b-1 relating to the Class A
Shares. However, the Class B Shares may vote on any proposal to increase
materially the fees to be paid by the Series under the Rule 12b-1 Plan relating
to the Class A Shares.
Until May 31, 1992, the Series offered shares of two retail classes of shares,
Investors Series II class (now the Limited-Term Government Fund A Class) and the
Investors Series I class. Shares of Investors Series I class were offered with a
sales charge, but without the imposition of a Rule 12b-1 fee. Effective June 1,
1992, following share-holder approval of a plan of recapitalization on May 15,
1992, shareholders of the Investors Series I class had their shares converted
into shares of the Investors 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 Investors Series was changed to Treasury Reserves
Intermediate Series and the name Investors Series II class was changed to
Treasury Reserves Intermediate Fund class. Treasury Reserves Intermediate Fund
(Institutional) class was first offered on June 1, 1992 and beginning May 2,
1994 it became known as Treasury Reserves Intermediate Fund Institutional Class.
On May 2, 1994, the Treasury Reserves Intermediate Fund class became known as
the Treasury Reserves Intermediate Fund A Class. Effective as of close of
business on August 28, 1995, the name Delaware Group Treasury Reserves, Inc. was
changed to Delaware Group Limited-Term Government Funds, Inc. and the name
Treasury Reserves Intermediate Series was changed to Limited-Term Government
Fund. At the same time, the names of Treasury Reserves Intermediate Fund A
Class, Treasury Reserves Intermediate Fund B Class and Treasury Reserves
Intermediate Fund Institutional Class were changed to Limited-Term Government
Fund A Class, Limited-Term Government Fund B Class, and Limited-Term Government
Fund Institutional Class, respectively.
All shares have equal voting rights, no preemptive rights, are fully
transferable and, when issued, are fully paid. All shares of a Series
participate equally in dividends, and upon liquidation would share equally.
Noncumulative Voting
These shares have noncumulative voting rights which means that the holders of
more than 50% of the shares of the Fund voting for the election of directors can
elect all the directors if they choose to do so, and, in such event, the holders
of the remaining shares will not be able to elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
32
APPENDIX A--IRA INFORMATION
The Tax Reform Act of 1986 restructured, and in some cases eliminated, the tax
deductibility of IRA contributions. Under the Act, the full deduction for IRAs
($2,000 for each working spouse and $2,250 for one-income couples) was retained
for all taxpayers who are not covered by an employer-sponsored retirement plan.
Even if a taxpayer (or his or her spouse) is covered by an employer-sponsored
retirement plan, the full deduction is still available if the taxpayer's
adjusted gross income is below $25,000 ($40,000 for taxpayers filing joint
returns). A partial deduction is allowed for married couples with incomes
between $40,000 and $50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for contributions to
IRAs by taxpayers whose adjusted gross income before IRA deductions exceeds
$50,000 ($35,000 for singles) and who are active participants in an employer-
sponsored retirement plan. Taxpayers who were not allowed deductions on IRA
contributions still can make nondeductible IRA contributions of as much as
$2,000 for each working spouse ($2,250 for one-income couples), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
As illustrated in the following tables, maintaining an Individual Retirement
Account remains a valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with its
tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity--a way to have
money grow faster due to tax-deferred compounding.
33
Even if your IRA contribution is no longer deductible, the benefits of saving
on a tax-deferred basis can be substantial. The following tables illustrate the
benefits of tax-deferred versus taxable compounding. Each reflects a constant 7%
rate of return, compounded annually, with the reinvestment of all proceeds. The
tables do not take into account any fees. Of course, earnings accumulated in
your IRA will be subject to tax upon withdrawal. If you choose a mutual fund
with a fluctuating net asset value, like the Limited-Term Government Fund
series, your bottom line at retirement could be lower--it could also be much
higher.
$2,000 Invested Annually Assuming a 7% Annualized Return
15% Tax Bracket Single -- $0 - $22,750
--------------- Joint -- $0 - $38,000
How Much You
End of Cumulative How Much You Have With Full IRA
Year Investment Amount Have Without IRA Deduction
-----------------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,801 $ 2,140
-----------------------------------------------------------------------------------------------------------
5 10,000 10,143 12,307
-----------------------------------------------------------------------------------------------------------
10 20,000 23,685 29,567
-----------------------------------------------------------------------------------------------------------
15 30,000 41,764 53,776
-----------------------------------------------------------------------------------------------------------
20 40,000 65,901 87,730
-----------------------------------------------------------------------------------------------------------
25 50,000 98,126 135,353
-----------------------------------------------------------------------------------------------------------
30 60,000 141,149 202,146
-----------------------------------------------------------------------------------------------------------
35 70,000 198,587 295,827
-----------------------------------------------------------------------------------------------------------
40 80,000 275,271 427,219
-----------------------------------------------------------------------------------------------------------
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 5.95% (7% less
15%)]
28% Tax Bracket Single -- $22,751 - $55,100
--------------- Joint -- $38,001 - $91,850
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
-----------------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,513 $ 1,541 $ 2,140
-----------------------------------------------------------------------------------------------------------
5 10,000 8,365 8,861 12,307
-----------------------------------------------------------------------------------------------------------
10 20,000 19,061 21,288 29,567
-----------------------------------------------------------------------------------------------------------
15 30,000 32,738 38,719 53,776
-----------------------------------------------------------------------------------------------------------
20 40,000 50,227 63,166 87,730
-----------------------------------------------------------------------------------------------------------
25 50,000 72,590 97,454 135,353
-----------------------------------------------------------------------------------------------------------
30 60,000 101,187 145,545 202,146
-----------------------------------------------------------------------------------------------------------
35 70,000 137,754 212,995 295,827
-----------------------------------------------------------------------------------------------------------
40 80,000 184,512 307,598 427,219
-----------------------------------------------------------------------------------------------------------
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 5.04% (7% less
28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning 7%]
31% Tax Bracket Single -- $55,101 - $115,000
--------------- Joint -- $91,851 - $140,000
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
-----------------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,447 $ 1,477 $ 2,140
-----------------------------------------------------------------------------------------------------------
5 10,000 7,967 8,492 12,307
-----------------------------------------------------------------------------------------------------------
10 20,000 18,052 20,401 29,567
-----------------------------------------------------------------------------------------------------------
15 30,000 30,820 37,106 53,776
-----------------------------------------------------------------------------------------------------------
20 40,000 46,985 60,534 87,730
-----------------------------------------------------------------------------------------------------------
25 50,000 67,448 93,394 135,353
-----------------------------------------------------------------------------------------------------------
30 60,000 93,355 139,481 202,146
-----------------------------------------------------------------------------------------------------------
35 70,000 126,152 204,121 295,827
-----------------------------------------------------------------------------------------------------------
40 80,000 167,673 294,781 427,219
-----------------------------------------------------------------------------------------------------------
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 4.83% (7% less
31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning 7%]
36% Tax Bracket* Single -- $115,001 - $250,000
---------------- Joint -- $140,001 - $250,000
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
-----------------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,337 $ 1,370 $ 2,140
-----------------------------------------------------------------------------------------------------------
5 10,000 7,313 7,876 12,307
-----------------------------------------------------------------------------------------------------------
10 20,000 16,418 18,923 29,567
-----------------------------------------------------------------------------------------------------------
15 30,000 27,754 34,417 53,776
-----------------------------------------------------------------------------------------------------------
20 40,000 41,867 56,147 87,730
-----------------------------------------------------------------------------------------------------------
25 50,000 59,437 86,626 135,353
-----------------------------------------------------------------------------------------------------------
30 60,000 81,312 129,373 202,146
-----------------------------------------------------------------------------------------------------------
35 70,000 108,545 189,329 295,827
-----------------------------------------------------------------------------------------------------------
40 80,000 142,451 273,420 427,219
-----------------------------------------------------------------------------------------------------------
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 4.48%
(7% less 36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning 7%]
39.6% Tax Bracket* Single -- over $250,000
----------------- Joint -- over $250,000
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
-----------------------------------------------------------------------------------------------------------
1 $ 2,000 $ 1,259 $ 1,293 $ 2,140
-----------------------------------------------------------------------------------------------------------
5 10,000 6,851 7,433 12,307
-----------------------------------------------------------------------------------------------------------
10 20,000 15,277 17,859 29,567
-----------------------------------------------------------------------------------------------------------
15 30,000 25,643 32,481 53,776
-----------------------------------------------------------------------------------------------------------
20 40,000 38,392 52,989 87,730
-----------------------------------------------------------------------------------------------------------
25 50,000 54,075 81,753 135,353
-----------------------------------------------------------------------------------------------------------
30 60,000 73,366 122,096 202,146
-----------------------------------------------------------------------------------------------------------
35 70,000 97,094 178,679 295,827
-----------------------------------------------------------------------------------------------------------
40 80,000 126,281 258,040 427,219
-----------------------------------------------------------------------------------------------------------
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 4.23%
(7% less 39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%) earning 7%]
$2,000 SINGLE INVESTMENT AT A RETURN OF 7% COMPOUNDED MONTHLY
TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
---------------------------------------------------------------------------------------------------------------------------
10 $ 3,050 $ 3,128 $ 3,239 $ 3,307 $ 3,621 $ 4,019
---------------------------------------------------------------------------------------------------------------------------
15 3,767 3,911 4,121 4,253 4,872 5,698
---------------------------------------------------------------------------------------------------------------------------
20 4,652 4,891 5,245 5,469 6,555 8,077
---------------------------------------------------------------------------------------------------------------------------
30 7,094 7,650 8,493 9,043 11,867 16,233
---------------------------------------------------------------------------------------------------------------------------
40 10,820 11,963 13,753 14,953 21,483 32,623
---------------------------------------------------------------------------------------------------------------------------
$2,000 INVESTED ANNUALLY AT A RETURN OF 7% COMPOUNDED MONTHLY
TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
---------------------------------------------------------------------------------------------------------------------------
10 $ 25,411 $ 25,788 $ 26,322 $ 26,649 $ 28,125 $ 29,953
---------------------------------------------------------------------------------------------------------------------------
15 42,752 43,708 45,079 45,927 49,833 54,851
---------------------------------------------------------------------------------------------------------------------------
20 64,166 66,117 68,947 70,716 79,042 90,148
---------------------------------------------------------------------------------------------------------------------------
30 123,271 129,187 137,973 143,581 171,220 211,120
---------------------------------------------------------------------------------------------------------------------------
40 213,412 227,820 249,750 264,078 338,096 454,233
---------------------------------------------------------------------------------------------------------------------------
*For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains) applies to certain
high-income taxpayers. It is computed by applying a 39.6% rate to taxable
income in excess of $250,000. The above tables do not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.
35
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing $2,000
each January--the earliest opportunity--compared to contributing on April 15th
of the following year--the latest, for each tax year.
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can make a
big difference when you retire. A constant 8% versus 10% return, compounded
monthly, illustrates the point. This chart is based on a yearly investment of
$2,000 on January 1. After 30 years the difference can mean as much as 50% more!
8% Return 10% Return
10 Years $ 31,291 $ 35,062
20 Years 98,846 126,005
30 Years 244,692 361,887
The statistical exhibits above are for illustration purposes only and do not
reflect the actual performance for the Limited-Term Government Fund series
either in the past or in the future.
36
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for the Fund and, in its
capacity as such, audits the financial statements contained in the Series'
Annual Report. The Delaware Group Limited-Term Government Funds, Inc.--Limited-
Term Government Fund's Statement of Net Assets, Statement of Operations,
Statement of Changes in Net Assets and Notes to Financial Statements, as well as
the report of Ernst & Young LLP, independent auditors, for the fiscal year ended
December 31, 1994 are included in the Series' Annual Report to shareholders. The
financial statements, the notes relating thereto and the report of Ernst & Young
LLP listed above are incorporated by reference from the Annual Report into this
Part B.
37
AUGUST 29, 1995
U.S. GOVERNMENT MONEY FUND A CLASS
U.S. GOVERNMENT MONEY FUND CONSULTANT CLASS
Supplement To Prospectuses Dated February 28, 1995
Effective as of the close of business on August 28, 1995, the name of
Delaware Group Treasury Reserves, Inc. was changed to Delaware Group
Limited-Term Government Funds, Inc. (the "Fund"). The name of the U.S.
Government Money Series (the "Series") has remained unchanged.
The following supplements the section of the prospectuses entitled The
Conditions of Your Purchase under Buying Shares:
Effective July 1, 1995, the Fund reserved the right, following shareholder
notification, to charge a service fee on non-retirement accounts of the Series
that have remained below the minimum stated account balance for a period of
three or more consecutive months. Holders of such accounts may be notified of
their below minimum status and advised that they have until the end of the
current calendar quarter to raise their balance to the stated minimum. If the
account has not reached the minimum balance requirement by that time, the Fund
will charge a $9 fee for that quarter and each subsequent calendar quarter until
the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining low
balance accounts. No fees will be charged without proper notice and no
contingent deferred sales charge will apply to such assessments.
The following revises the section of the prospectuses entitled Management
of the Fund:
On March 29, 1995, shareholders of the Series approved a new Investment
Management Agreement with Delaware Management Company, Inc. ("DMC"), an indirect
wholly-owned subsidiary of Delaware Management Holdings, Inc. ("DMH"). The
approval of a new Investment Management Agreement was subject to the completion
of the merger (the "Merger") between DMH and a wholly-owned subsidiary of
Lincoln National Corporation ("Lincoln National") which occurred on April 3,
1995. Accordingly, the previous Investment Management Agreement terminated and
the new Investment Management Agreement became effective on that date.
As a result of the Merger, DMC and its two affiliates, Delaware Service
Company, Inc., the Fund's shareholder servicing, dividend disbursing and
transfer agent and Delaware Distributors, L.P., the Fund's national distributor,
became indirect wholly-owned subsidiaries 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.
Under the new Investment Management Agreement, DMC will be paid at the same
annual fee rates and on the same terms as it was under the previous Investment
Management Agreement. In addition, the investment approach and operation of the
Series will remain substantially unchanged.
PS-05[--]UG8/95
AUGUST 29, 1995
U.S. GOVERNMENT MONEY FUND A CLASS
U.S. GOVERNMENT MONEY FUND CONSULTANT CLASS
Supplement To Statement of Additional Information
Dated February 28, 1995
Effective as of the close of business on August 28, 1995, the name of
Delaware Group Treasury Reserves, Inc. was changed to Delaware Group
Limited-Term Government Funds, Inc. (the "Fund"). The name of the U.S.
Government Money Series (the "Series") has remained unchanged.
The following supplements the information in the Statement of Additional
Information under the heading Purchasing Shares:
The minimum initial and subsequent investments with respect to the U. S.
Government Money Fund A Class will be waived for purchases by officers,
directors and employees of any Delaware Group fund, Delaware Management Company,
Inc. ("DMC"), or any of DMC's affiliates if the purchases are made pursuant to a
payroll deduction program.
The following revises the sections entitled Investment Management Agreement
and Officers and Directors:
On April 3, 1995, a merger between Delaware Management Holdings, Inc.
("DMH") and a wholly-owned subsidiary of Lincoln National Corporation ("Lincoln
National") was completed. As a result of the merger, DMH became a wholly-owned
subsidiary and DMC became an indirect wholly-owned subsidiary of Lincoln
National and each is now subject to the ultimate control of Lincoln National.
In connection with the merger, a new Investment Management Agreement between the
Fund on behalf of the Series and DMC was executed following shareholder
approval. 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.
SAI-05PS[--]UG8/95
--------------------------------------------------------------------------------
U.S. GOVERNMENT
--------------------------------------------------------------------------------
MONEY FUND
--------------------------------------------------------------------------------
A CLASS
--------------------------------------------------------------------------------
U.S. GOVERNMENT
--------------------------------------------------------------------------------
MONEY FUND
--------------------------------------------------------------------------------
CONSULTANT CLASS
--------------------------------------------------------------------------------
CLASSES OF U.S. GOVERNMENT
--------------------------------------------------------------------------------
MONEY SERIES
--------------------------------------------------------------------------------
DELAWARE GROUP
--------------------------------------------------------------------------------
TREASURY RESERVES, INC.
--------------------------------------------------------------------------------
PART B
Statement of
Additional Information
--------------------------------------------------------------------------------
FEBRUARY 28, 1995
DELAWARE
GROUP
--------
The Delaware Group includes 22 different funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds and
closed-end equity funds give investors the ability to create a portfolio that
fits their personal financial goals. For more information contact your financial
adviser or call the Delaware Group at 800-523-4640, in Philadelphia
215-988-1333.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
--------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1995
--------------------------------------------------------------------------------
DELAWARE GROUP
--------------------------------------------------------------------------------
TREASURY RESERVES, INC.
--------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
--------------------------------------------------------------------------------
For Prospectus and Performance:
Nationwide 800-523-4640
Philadelphia 215-988-1333
Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Philadelphia 215-988-1241
Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Philadelphia 215-988-1050
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
Cover Page................................................................. 1
--------------------------------------------------------------------------------
Investment Objective and Policy............................................ 2
--------------------------------------------------------------------------------
Performance Information.................................................... 3
--------------------------------------------------------------------------------
Trading Practices.......................................................... 6
--------------------------------------------------------------------------------
Purchasing Shares.......................................................... 7
--------------------------------------------------------------------------------
Retirement Plans........................................................... 10
--------------------------------------------------------------------------------
Offering Price............................................................. 12
--------------------------------------------------------------------------------
Redemption................................................................. 12
--------------------------------------------------------------------------------
Dividends and Realized Securities
Profits Distributions.................................................... 15
--------------------------------------------------------------------------------
Taxes...................................................................... 16
--------------------------------------------------------------------------------
Investment Management Agreement............................................ 16
--------------------------------------------------------------------------------
Officers and Directors..................................................... 17
--------------------------------------------------------------------------------
Exchange Privilege......................................................... 21
--------------------------------------------------------------------------------
General Information........................................................ 22
--------------------------------------------------------------------------------
Appendix A--IRA Information................................................ 24
--------------------------------------------------------------------------------
Financial Statements....................................................... 28
--------------------------------------------------------------------------------
Delaware Group Treasury Reserves, Inc. (the "Fund") offers two Series of
portfolios: U.S. Government Money Series (the "Series") and Treasury Reserves
Intermediate Series. The Series currently offers two classes of shares--the U.S.
Government Money Fund A Class and the U.S. Government Money Fund Consultant
Class. This Statement of Additional Information ("Part B" of the Fund's
registration statement) describes both classes of the Series, except where
noted.
This Part B supplements the information contained in the current Prospectus of
each class dated February 28, 1995, as may be amended from time to time. It
should be read in conjunction with the respective class' Prospectus. This Part B
is not itself a prospectus but is, in its entirety, incorporated by reference
into each class' Prospectus. A Prospectus for each class may be obtained by
writing or calling your investment dealer or by contacting the Fund's national
distributor, Delaware Distributors, L.P. (the "Distributor"), 1818 Market
Street, Philadelphia, PA 19103.
1
INVESTMENT OBJECTIVE
AND POLICY
The objective of the Series is to obtain maximum current income consistent
with preservation of principal and maintenance of liquidity. There is no
assurance that this objective can be achieved. This objective is a matter of
fundamental policy and may not be changed without approval by the holders of a
majority of the outstanding voting securities of the Series, which is the lesser
of more than 50% of the outstanding voting securities or 67% of the voting
securities present at a shareholder meeting if 50% or more of the voting
securities are present in person or represented by proxy. See also General
Information.
The Series intends to achieve its objective by investing only in short-term
securities issued or guaranteed as to principal and interest by the U.S.
government, its agencies or instrumentalities, and repurchase agreements secured
by such permitted investments. All securities purchased by the Series mature
within 13 months from the date of purchase, although repurchase agreements may
be collateralized by securities maturing in more than 13 months.
Direct obligations issued by the U.S. Treasury include bills, notes and bonds
which differ from each other only in interest rates, maturities and dates of
issuance. These issues, plus some federal agency obligations, are guaranteed by
the full faith and credit of the U.S. government. Examples include Federal
Housing Administration, Farmers Home Administration, Government National
Mortgage Association and Export-Import Bank of the United States. Other federal
agency obligations only have the guarantee of the agency. Examples include
Federal Home Loan Banks, Federal Land Banks, Federal Home Loan Mortgage
Corporation, The Tennessee Valley Authority and the International Bank for
Reconstruction and Development. Although obligations of agencies and
instrumentalities are not direct obligations of the U.S. Treasury, payment of
the interest and principal on such obligations is generally backed directly or
indirectly by the U.S. government. This support can range from the backing of
the full faith and credit of the United States, to U.S. Treasury guarantees, or
to the backing solely of the issuing agency or instrumentality itself.
The Series may invest up to 10% of its assets, together with any illiquid
investments, in fully-insured deposits maturing in 60 days or less from members
of the FDIC. While the Series is permitted under certain circumstances to borrow
money, it does not normally do so.
The Series maintains its net asset value at $1.00 per share by valuing its
securities on an amortized cost basis. See Offering Price. The Series maintains
a dollar weighted average portfolio maturity of not more than 90 days and does
not purchase any issue having a remaining maturity of more than 13 months. In
addition, the Series limits its investments, including repurchase agreements, to
those instruments which the Board of Directors determines present minimal credit
risks and which are of high quality and which are otherwise in accordance with
the maturity, quality and diversification conditions with which taxable money
market funds must comply. In the event of a marked increase in current interest
rates or of a national credit crisis, principal values could be adversely
affected. While the Series will make every effort to maintain a fixed net asset
value of $1.00 per share, there can be no assurance that this objective will be
achieved.
The Series will invest in securities for income earnings rather than trading
for profit. The Series will not vary portfolio investments, except to:
(1) eliminate unsafe investments and investments not consistent with the
preservation of the capital or the tax status of the investments of the
Series;
(2) honor redemption orders, meet anticipated redemption requirements and
negate gains from discount purchases;
(3) reinvest the earnings from securities in like securities;
(4) defray normal administrative expenses; or
(5) maintain a constant net asset value per unit pursuant to, and in
compliance with, an order or rule of the United States Securities and Exchange
Commission.
While the Series intends to hold its investments until maturity when they will
be redeemable at their full principal value plus accrued interest, attempts may
be made from time to time to increase its yield by trading to take advantage of
market variations. Also, redemptions may cause sales of portfolio investments
prior to maturity or at times when such sales might otherwise not be desirable.
The Series' right to borrow to facilitate redemptions may reduce but does not
guarantee a reduction in the need for such sales. The Series will not purchase
new securities while any borrowings are outstanding. See Dividends and Realized
Securities Profits Distributions and Taxes for effect of any capital gains
distributions.
A shareholder's rate of return will vary with the general interest rate levels
applicable to the instruments in which the Series invests. The rate of return
and the net asset value will be affected by such other factors as sales of
portfolio securities prior to maturity and the Series' operating expenses.
Repurchase Agreements
The Series may also invest in repurchase agreements sold by banks or brokers
secured by the foregoing securities. A repurchase agreement is an instrument
under which securities are purchased from a bank or securities dealer with an
agreement by the seller to repurchase the securities. Under a repurchase
agreement, the purchaser acquires ownership of the security but the seller
agrees, at the time of sale, to repurchase it at a mutually agreed-upon time and
price. The Series will take custody of the collateral under repurchase
agreements. Repurchase agreements may be construed to be collateralized loans by
the purchaser to the seller secured by the securities transferred. The resale
price is in excess of the purchase price and reflects an agreed-upon market rate
unrelated to the coupon rate or maturity of the purchased security. Such
transactions afford an opportunity for the Series to invest temporarily
2
available cash on a short-term basis. The Series' risk is limited to the
seller's ability to buy the security back at the agreed-upon sum at the agreed-
upon time, since the repurchase agreement is secured by the underlying
government obligation. Should such an issuer default, Delaware Management
Company, Inc. (the "Manager") believes that, barring extraordinary
circumstances, the Series will be entitled to sell the underlying securities or
otherwise receive adequate protection for its interest in such securities,
although there could be a delay in recovery. The Series considers the
creditworthiness of the bank or dealer from whom it purchases repurchase
agreements. The Series will monitor such transactions to assure that the value
of the underlying securities subject to repurchase agreements is at least equal
to the repurchase price. The underlying securities will be limited to those
described above.
Investment Restrictions
The Fund has adopted the following restrictions and fundamental policies for
the Series, which cannot be changed without approval by the holders of a
majority of the outstanding voting securities of the Series, as described above.
The Series may not under any circumstances:
1. Invest in issues other than those described under Investment Objective and
Policy above.
2. 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 Series has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and, to the extent that such
borrowing exceeds 5% of the value of the Series' net assets, asset coverage of
at least 300% is required. In the event that such asset coverage shall at any
time fall below 300%, the Series shall, within three days thereafter (not
including Sunday or holidays) or such longer period as the Securities and
Exchange Commission may prescribe by rules and regulations, reduce the amount of
its borrowings to such an extent that the asset coverage of such borrowings
shall be at least 300%. The Series will not pledge more than 10% of its net
assets. The Series will not issue senior securities as defined in the
Investment Company Act of 1940, except for notes to banks. Any outstanding
borrowing shall be repaid before additional securities are purchased.
3. Sell securities short or purchase securities on margin.
4. Write or purchase put or call options.
5. Underwrite the securities of other issuers.
6. Purchase or sell commodities or commodity contracts.
7. Purchase or sell real estate, but this shall not prevent the Series from
investing in securities secured by real estate or interests therein.
8. Make loans to other persons except by the purchase of obligations in which
the Series is authorized to invest and to enter into repurchase agreements. Not
more than 10% of the Series' total assets will be invested in repurchase
agreements maturing in more than seven days and in other illiquid assets.
9. Invest for purposes of exercising control.
10. Invest in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation or acquisition of assets.
11. Invest in direct interests in oil, gas or other mineral exploration or
development programs.
Although not a fundamental investment restriction, the Series currently does
not invest its assets in real estate limited partnerships.
PERFORMANCE INFORMATION
For the seven-day period ended December 31, 1994, the annualized current yield
of the U.S. Government Money Fund A Class and the U.S. Government Money Fund
Consultant Class was 4.36% for each class and the compounded effective yield was
4.45% for each class. These yields will fluctuate daily as income earned
fluctuates. On that date the weighted average portfolio maturity was 27 days for
both classes. The current yield of the U.S. Government Money Fund A Class is
expected to be slightly higher than that of the U.S. Government Money Fund
Consultant Class during any period that the distribution fee under the Series'
12b-1 Plan for the U.S. Government Money Fund Consultant Class is being paid.
The Board of Directors of the Fund suspended 12b-1 Plan payments from the U.S.
Government Money Fund Consultant Class to the Distributor effective June 1,
1990. Such payments may be reinstituted in the future with prior approval of the
Board of Directors.
Shareholders and prospective investors will be interested in learning from
time to time the current and the effective compounded yield of a class of
shares. As explained under Dividends and Realized Securities Profits
Distributions, dividends are declared daily from net investment income. In order
to determine the current return of the Series' classes of shares, yield is
calculated as follows:
The calculation begins with the value of a hypothetical account of one share
at the beginning of a seven-day period; this is compared with the value of that
same account at the end of the same period (including shares purchased for the
account with dividends earned during the period). The net change in the account
value is generally the net income earned per share during the period, which
consists of accrued interest income plus or minus amortized purchase discount or
premium, less all accrued expenses (excluding expenses reimbursed by the
investment manager) but does not include realized gains or losses or unrealized
appreciation or depreciation.
The current yield of the Series represents the net change in this hypothetical
account annualized over 365 days. In addition, a shareholder may achieve a
compounding effect through reinvestment of dividends which is reflected in the
effective yield shown below.
The following is an example, for purpose of illustration only, of the current
and effective yield calculations for the seven-day period ended
December 31, 1994:
3
U.S.
U.S. Government
Government Money Fund
Money Fund Consultant
A Class Class
Value of a hypothetical account
with one share at the beginning
of the period............................. $1.00000000 $1.00000000
Value of the same account at the
end of the period......................... $1.00083579 $1.00083579
=========== ===========
Net change in account value................. .00083579* .00083579*
Base period return = net change
in account value / beginning
account value............................. .00083579 .00083579
Current yield
[base period return X
(365 / 7)]................................ 4.36%** 4.36%**
===== =====
Effective yield
365/7 ................ 4.45%*** 4.45%***
(1 + base period) - 1 ===== =====
Weighted average life to maturity of the portfolio on December 31, 1994
was 27 days.
*This represents the net income per share for the seven calendar days ended
December 31, 1994.
**This represents the average of annualized net investment income per share
for the seven calendar days ended December 31, 1994.
***This represents the current yield for the seven calendar days ended
December 31, 1994 compounded daily.
The following table, for purposes of illustration only, reflects the average
annual total return performance of each class for one-, three-, five- and ten-
year periods ending December 31, 1994, and for the life of the Series,
calculated as an average annual compounded rate of return for the period
indicated. For this purpose, the calculations assume the reinvestment of all
dividend distributions paid during the indicated periods. Interest rates
fluctuated during the period covered by the table and the Series' results should
not be considered as representative of future performance. Total return for the
U.S. Government Money Fund Consultant Class for the periods prior to the
commencement of operations of such class is based on the performance of the
U.S. Government Money Fund A Class. For periods prior to the commencement of
operations of the U.S. Government Money Fund Consultant Class, the total return
does not reflect the 12b-1 payments applicable to such class during the period
March 29, 1988 through June 1, 1990. If such payments were reflected in the
calculations, performance would have been affected.
The Series' average annual total compounded rate of return 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:
P(1+T)to the nth power = ERV
Where: P = a hypothetical initial purchase order
of $1,000;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical
$1,000 purchase at the end of the period.
Average Annual Total Return
U.S.
U.S. Government
Government Money Fund
Money Fund Consultant
A Class Class*
1 year ended
12/31/94 2.93% 2.93%
3 years ended
12/31/94 2.69% 2.69%
5 years ended
12/31/94 4.13% 4.11%
10 years ended
12/31/94 5.35% 5.30%
9/17/81** through
12/31/94 6.18% 6.17%
*Commenced operations on March 29, 1988.
**Date of initial public offering of U.S. Government Money Fund.
From time to time, the Series may also quote yield information of the classes
with the sample average rates paid on bank money market deposit accounts. The
bank money market deposit averages are the stated rates of 100 large banks and
thrifts in the top five standard metropolitan statistical areas as determined by
the Bank Rate Monitor. The Series' figures for a class will be the annualized
yields representing an average of that class' after-expense per share earnings
divided by cost per share for each day of the fiscal month, or period, noted.
Yield fluctuates depending on portfolio type, quality, maturity and operating
expenses. Principal is not insured and the results shown should not be
considered as representative of the yield which may be realized from an
investment made in the Series at any time in the future.
As well, the Series may quote actual yield and total return performance of
each class in advertising and other types of literature compared to indices or
averages of alternative financial products available to prospective investors.
For example, the performance comparisons may include the average return of
various bank instruments, some of which may carry certain return guarantees
offered by leading banks and thrifts, as monitored by the Bank Rate Monitor, and
those of corporate and government security
4
price indices of various durations prepared by Lehman Brothers and Salomon
Brothers, Inc. These indices are not managed for any investment goal.
Statistical and performance information and various indices compiled and
maintained by organizations such as the following may also be used in preparing
exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Series activity and performance. From time to time,
certain mutual fund performance ranking information, calculated and provided by
these organizations, may also be used in the promotion of sales in the Series.
Any indices used are not managed for any investment goal.
CDA Investment Technologies, Lipper Analytical Services, Inc. and IBC/Donoghue
are performance evaluation services that maintain statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds.
Interactive Data Corporation is a statistical access service that maintains a
database of various international industry indicators, such as historical and
current price/earning information, individual equity and fixed income price
and return information.
Salomon Brothers and Lehman Brothers are statistical research firms that
maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well
as unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations.
Current interest rate and yield information on government debt obligations of
various durations, as reported weekly by the Federal Reserve (Bulletin H.15),
may also be used. Also, current rate information on municipal debt obligations
of various durations, as reported daily by the Bond Buyer, may also be used. The
Bond Buyer is published daily and is an industry-accepted source for current
municipal bond market information.
Comparative information on the Consumer Price Index may also be included. The
Consumer Price Index, as prepared by the U.S. Bureau of Labor Statistics, is the
most commonly used measure of inflation. It indicates the cost fluctuations of a
representative group of consumer goods. It does not represent a return on
investment.
Total return performance of each class will reflect the reinvestment of all
dividends and any capital gains, if any, during the indicated period. Shares of
the Series are sold without a sales charge. The results will not reflect any
income taxes payable by shareholders on the reinvested distributions included in
the calculations. An illustration of past Series performance should not be
considered as representative of future results.
The following table is an example, for purposes of illustration only, of
cumulative total return performance for each class for the three-, six- and
nine-month periods ended December 31, 1994, for the one-, three-, five- and ten-
year periods ended December 31, 1994 and for the life of the Series. Total
return for the U.S. Government Money Fund Consultant Class for the periods prior
to commencement of such class is based on the performance of the U.S. Government
Money Fund A Class. For periods prior to the commencement of operations of the
U.S. Government Money Fund Consultant Class, the total return calculation does
not reflect the 12b-1 payments that were applicable to such class during the
periods March 29, 1988 through June 1, 1990. If such payments were reflected in
the calculations, performance would have been affected.
Cumulative Total Return
U.S. U.S.
Government Government
Money Fund Money Fund
A Class Consultant Class*
3 months ended
12/31/94 0.99% 0.99%
6 months ended
12/31/94 1.80% 1.80%
9 months ended
12/31/94 2.42% 2.42%
1 year ended
12/31/94 2.93% 2.93%
3 years ended
12/31/94 8.29% 8.29%
5 years ended
12/31/94 22.43% 22.29%
10 years ended
12/31/94 68.46% 67.55%
9/17/81** through
12/31/94 114.30% 113.82%
*Commenced operations on March 29, 1988.
**Date of initial public offering of U.S. Government Money Fund.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
personal financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the overriding investment philosophy of
the Manager and how that philosophy impacts the Fund's, and other Delaware Group
funds', investment disciplines employed in meeting their objectives. The
Distributor may also from time to time cite general or specific information
about the institutional clients of the Manager, including the number of such
clients serviced by the Manager.
5
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Series shares,
your investment is given yet another opportunity to grow. It's called the Power
of Compounding and the following chart illustrates just how powerful it can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000 investment
compounded monthly for 10 years:
4% Rate of Return 6% Rate of Return 8% Rate of Return
----------------- ----------------- -----------------
12-'85 $10,407 $10,617 $10,830
12-'86 $10,831 $11,272 $11,729
12-'87 $11,273 $11,967 $12,702
12-'88 $11,732 $12,705 $13,757
12-'89 $12,210 $13,488 $14,898
12-'90 $12,707 $14,320 $16,135
12-'91 $13,225 $15,203 $17,474
12-'92 $13,764 $16,141 $18,924
12-'93 $14,325 $17,137 $20,495
12-'94 $14,908 $18,194 $22,196
These figures are calculated assuming a fixed constant investment return and
assume no fluctuation in the value of principal. These figures do not reflect
payment of applicable taxes, are not intended to be a projection of investment
results and do not reflect the actual performance results of either of the
classes.
The Prospectuses and this Part B may be in use for a full year and,
accordingly, it can be expected that yields will fluctuate substantially from
the example shown above.
The yield quoted at any time represents the amount being earned on a current
basis and is a function of the types of instruments in the Series' portfolio,
their quality and length of maturity and the Series' operating expenses. The
length of maturity for the portfolio is the average dollar weighted maturity of
the portfolio. This means that the portfolio has an average maturity of a stated
number of days for its issues. The calculation is weighted by the relative value
of the investment.
The yield will fluctuate daily as the income earned on the investments of the
Series fluctuates. Accordingly, there is no assurance that the yield quoted on
any given occasion will remain in effect for any period of time. It should also
be emphasized that the Series is an open-end management investment company and
that there is no guarantee that the net asset value or any stated rate of return
will remain constant. A shareholder's investment in the Series is not insured.
Investors comparing results of the Series with investment results and yields
from other sources such as banks or savings and loan associations should
understand these distinctions. Historical and comparative yield information may,
from time to time, be presented by the Series. Although the Series determines
the yield on the basis of a seven-calendar-day period, it may from time to time
use a different time span.
Other funds of the money market type may calculate their yield on a different
basis and the yield quoted by the Series could vary upward or downward if
another method of calculation or base period were used. Shareholders and
prospective investors who wish to learn the current yield of the Series may call
toll free, nationwide 800-523-4640 (in Philadelphia, 215-988-1333).
TRADING PRACTICES
Portfolio transactions are executed by the Manager on behalf of the Series in
accordance with the standards described below.
Brokers, dealers and banks are selected to execute transactions for the
purchase or sale of portfolio securities on the basis of the Manager's judgment
of their professional capability to provide the service. The primary
consideration is to have brokers, dealers or banks execute transactions at best
price and execution. Best price and execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. The Fund pays reasonably competitive brokerage
commission rates based upon the professional knowledge of its trading department
as to rates paid and charged for similar transactions throughout the securities
industry. In some instances, the Fund pays a minimal share transaction cost when
the transaction presents no difficulty. Trades are generally made on a net basis
where securities are either bought or sold directly from or to a broker, dealer
or bank. 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.
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.
As provided in the Securities Exchange Act of 1934 and the Investment
Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide
6
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
Series 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 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 Series and to other funds in the
Delaware Group. Subject to best price and execution, commissions allocated to
brokers providing such pricing services may or may not be generated by the funds
receiving the pricing service.
The Manager may place a combined order for two or more accounts or funds
engaged in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and the Board of
Directors that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Portfolio trading will be undertaken principally to accomplish the Series'
objective, and not for the purpose of realizing capital gains, although capital
gains may be realized on certain portfolio transactions. For example, capital
gains may be realized when a security is sold (i) so that, provided capital is
preserved or enhanced, another security can be purchased to obtain a higher
yield, (ii) to take advantage of what the Manager believes to be a temporary
disparity in the normal yield relationship between the two securities to
increase income or improve the quality of the portfolio, (iii) to purchase a
security which the Manager believes is of higher quality than its rating or
current market value would indicate, or (iv) when the Manager anticipates a
decline in value due to market risk or credit risk. Since portfolio assets will
consist of short-term instruments, replacement of portfolio securities will
occur frequently. However, since the Manager expects usually to transact
purchases and sales of portfolio securities on a net basis, it is not
anticipated that the Series will pay any significant brokerage commissions. The
Series is free to dispose of portfolio securities at any time, subject to
complying with the Internal Revenue Code and the Investment Company Act of 1940,
when changes in circumstances or conditions make such a move desirable in light
of the investment objective.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Manager may place orders with broker/dealers that have agreed to
defray certain Series expenses such as custodian fees, and may, at the request
of the Distributor, give consideration to sales of shares of the Series as a
factor in the selection of brokers and dealers to execute Series portfolio
transactions.
PURCHASING SHARES
The Distributor serves as the national distributor for the Series' shares, and
has agreed to use its best efforts to sell shares of the Series.
Shares of the U.S. Government Money Fund Consultant Class are offered through
brokers, financial institutions and other entities which have a dealer agreement
with the Fund's Distributor or a service agreement with the Fund. In some
states, banks and/or other institutions effecting transactions in U.S.
Government Money Fund Consultant Class shares may be required to register as
dealers pursuant to state laws. U.S. Government Money Fund A Class shares may
also be purchased directly by contacting the Fund or its agent. The minimum
initial investment is $1,000 and all subsequent investments must be at least
$25. (See Retirement Plans for minimums applicable to each of the Fund's master
Retirement Plans.)
Shares of the Series are offered on a continuous basis, and are sold without a
front-end or contingent deferred sales charge at the net asset value next
determined after the receipt and effectiveness of a purchase order, as described
below. See the Prospectuses for information on how to invest. The 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 Series' best interest.
Certificates representing shares purchased are not ordinarily issued unless a
shareholder submits a specific request. However, such purchases 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
7
rights of ownership with respect to such shares as if certificates had been
issued. An investor may receive a certificate representing shares purchased by
sending a letter to the Transfer Agent requesting the certificate. No charge is
made for any certificate issued. Investors who hold certificates representing
their shares may only redeem these shares by written requests. The investor's
certificate(s) must accompany such request.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Series to accept
for investment, through an agent bank, preauthorized government or private
recurring payments by Electronic Fund Transfer. 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--The Automatic Investing Plan enables shareholders to
make regular monthly investments without writing checks. Shareholders may
authorize the Series, in advance, to make arrangements for their bank to
withdraw a designated amount monthly directly from their checking account for
deposit into the Series. This type of investment will be handled in either of
the two ways noted below. (1) If the shareholder's bank is a member of the
National Automated Clearing House Association ("NACHA"), the amount of the
investment will be electronically deducted from the shareholder's 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, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
* * *
Investments under the Direct Deposit Purchase Plan and the Automatic Investing
Plan must be for $25 or more. Investors wishing to take advantage of either
option should contact the Shareholder Service Center at 800-523-1918 (in
Philadelphia, 215-988-1241) for the necessary authorization forms and
information. These services can be discontinued by the shareholder at any time
without penalty by giving written notice.
Payments to the Series from the federal government or its agencies on behalf
of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
the Series may liquidate sufficient shares from a shareholder's account to
reimburse the government or the private source. In the event there are
insufficient shares in the shareholder's account, the shareholder is expected to
reimburse the Series.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer, to make
investments directly to their Series account. 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 the Fund for proper
instructions.
When Orders are Effective
Transactions in money market instruments in which the Series invests normally
require same day settlement in Federal Funds. The Series intends at all times to
be as fully invested as possible in order to maximize its earnings. Thus,
purchase orders will be executed at the net asset value next determined after
their receipt by the Series only if the Series has received payment in Federal
Funds by wire. Dividends begin to accrue on the next business day. Thus,
investments effective the day before a weekend or holiday will not accrue
earnings for that period but will earn dividends on the next business day. If,
however, the Series is given prior notice of Federal Funds wire and an
acceptable written guarantee of timely receipt from an investor satisfying the
Series' credit policies, the purchase will start earning dividends on the date
the wire is received. If remitted in other than the foregoing manner, such as by
money order or personal check, purchase orders will be executed as of the close
of regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when such exchange is open, on the day on which the payment is
converted into Federal Funds and is available for investment, normally one
business day after receipt of payment. Conversion into Federal Funds may be
delayed when the Series receives (1) a check drawn on a non-member bank of the
Federal Reserve, (2) a check drawn on a foreign bank, (3) a check payable in a
foreign currency, or (4) a check requiring special handling. With respect to
investments made other than by wire, the investor becomes a shareholder after
declaration of the dividend on the day on which the order is effective.
Information on how to procure a negotiable bank draft or to transmit Federal
Funds by wire is available at any national bank or any state bank which is a
member of the Federal Reserve System. Any commercial bank can transmit Federal
Funds by wire. The bank may charge the shareholder for these services.
8
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 amount
credited by the check plus any dividends earned thereon.
Plan Under Rule 12b-1 for the U.S. Government Money Fund Consultant Class
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund has
adopted a plan (the "Plan") for the U.S. Government Money Fund Consultant Class
which permits that class to pay for certain distribution and promotional
expenses related to marketing its shares.
The Plan does not apply to the Series' U.S. Government Money Fund A Class of
shares. Those shares are not included in calculating the Plan's fees, and the
Plan is not used to assist in the distribution and marketing of U.S. Government
Money Fund A Class shares. Shareholders of the U.S. Government Money Fund A
Class may not vote on matters affecting the Plan.
The Plan permits the U.S. Government Money Fund Consultant Class, pursuant to
the Distribution Agreement, to pay from the assets of the U.S. Government Money
Fund Consultant Class, a monthly fee to the Distributor for its services and
expenses in distributing and promoting sales of the shares of such class. These
expenses include 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 Dealer's Agreements with the Distributor or
service agreements with the Fund. Registered representatives of brokers, dealers
or other entities, who have sold a specified level of Delaware Group funds
having a 12b-1 Plan, were, prior to June 1, 1990, paid a .25% continuing trail
fee by the Distributor from 12b-1 payments relating to the U.S. Government Money
Fund Consultant Class for assets maintained in that class. As noted below,
payment of these fees has been suspended but may be reinstituted in the future
with prior approval of the Board of Directors.
In addition, the Series may make payments from the assets of the U.S.
Government Money Fund Consultant Class directly to other unaffiliated parties,
such as banks, who either aid in the distribution of shares of such class or
provide services to that class.
The maximum aggregate fee payable on behalf of the U.S. Government Money Fund
Consultant Class under the Plan and the agreements relating to distribution is,
on an annual basis, .30% of its average daily net assets for the year. The
Fund's directors may reduce these amounts at any time. The Fund's directors
suspended 12b-1 Plan payments from the assets of U.S. Government Money Fund
Consultant Class to the Distributor effective June 1, 1990. Prior to that time,
the Board of Directors had set the fee for U.S. Government Money Fund Consultant
Class at .25% of average daily net assets and the Distributor had agreed to
waive this distribution fee to the extent such fee for any day exceeded the net
investment income realized by that class for such day. Payments under the Plan
may be reinstituted in the future with prior approval of the Board of Directors.
All of the distribution expenses incurred by the Distributor and others, such as
broker/dealers, in excess of the amount paid on behalf of the U.S. Government
Money Fund Consultant Class will be borne by such persons without any
reimbursement from that class. Subject to seeking best price and execution, the
Fund may, from time to time, buy or sell portfolio securities from or to firms
which receive payments on behalf of the U.S. Government Money Fund Consultant
Class under the Plan.
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 Plan, the Distribution Agreement and the form of Dealer's Agreement have
all been approved by the Board of Directors of the Fund, including a majority of
the directors who are not "interested persons" (as defined in the Investment
Company Act of 1940) of the Fund and who have no direct or indirect financial
interest in the Plan or any related agreements, by vote cast in person at a
meeting duly called for the purpose of voting on the Plan and such Agreements.
Continuation of the Plan, the Distribution Agreement and the form of Dealer's
Agreement must be approved annually by the Board of Directors in the same manner
as specified above.
Each year, the directors must determine whether continuation of the Plan is in
the best interest of shareholders of the U.S. Government Money Fund Consultant
Class and that there is a reasonable likelihood of its providing a benefit to
them. The Plan, the Distribution Agreement and the form of the Dealer's
Agreement with any broker/dealers may be terminated at any time without penalty
by a majority of those directors who are not "interested persons" or by a
majority vote of the outstanding voting securities of the U.S. Government Money
Fund Consultant Class. Any amendment materially increasing the maximum
percentage payable under the Plan must likewise be approved by a majority vote
of the outstanding voting securities of the U.S. Government Money Fund
Consultant Class, as well as by a majority vote of those directors who are not
"interested persons." Also, any other material amendment to the Plan must be
approved by a majority vote of the directors including a majority of the
noninterested directors of the Fund having no interest in the Plan. In addition,
in order for the Plan to remain effective, the selection and nomination of
directors who are not "interested persons" of the Fund must be effected by the
directors who themselves are not "interested persons" and who have no direct or
indirect financial interest in the Plan. Persons authorized to make payments
under the Plan must provide written reports at least quarterly to the Board of
Directors for their review.
For the fiscal year ended December 31, 1994, there were no payments from the
U.S. Government Money Fund Consultant Class pursuant to the Plan.
9
The NASD has adopted amendments to its Rules of Fair Practice relating to
investment company sales charges. The Fund and the Distributor intend to operate
in compliance with these rules.
Reinvestment Privilege
Shareholders who have acquired Series shares through an exchange of one of the
other mutual funds in the Delaware Group offered with a sales charge and who
have redeemed such shares of the Series have one year from the date of
redemption to reinvest all or part of their redemption proceeds in shares of any
of the other funds in the Delaware Group, subject to eligibility and minimum
purchase requirements, in states where their shares may be sold, at net asset
value without payment of a sales charge. Any such reinvestment cannot exceed the
redemption proceeds (plus any amount necessary to purchase a full share). The
reinvestment will be made at the net asset value next determined after receipt
of remittance. A redemption and reinvestment could have income tax
consequences. It is recommended that a tax adviser be consulted with respect to
such transactions. Any reinvestment directed to a fund in which the investor
does not then have an account will be treated like all other initial purchases
of a fund's shares. Consequently, an investor should obtain and read carefully
the prospectus for the fund in which the investment is proposed to be made
before investing or sending money. The prospectus contains more complete
information about the fund, including charges and expenses.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum purchase requirements,
shareholders may automatically reinvest dividends and/or distributions from the
Series into certain of the other mutual funds in the Delaware Group. Such
investments will be at net asset value at the close of business on the payable
date without any front-end sales charge or exchange fee. The shareholder must
notify the Transfer Agent in writing and must have established an account in the
fund into which the dividends and/or distributions are to be invested. Any
reinvestment directed to a fund in which the investor does not then have an
account will be treated like all other initial purchases of a fund's shares.
Consequently, an investor should obtain and read carefully the prospectus for
the fund in which the investment is proposed to be made before investing or
sending money. The prospectus contains more complete information about the fund,
including charges and expenses.
Dividends from the shares of each class may be reinvested in shares of any
other mutual fund in the Delaware Group, other than Class B Shares of funds in
the Delaware Group that offer such class of shares.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
Account Statements
A Statement of Account will be mailed quarterly summarizing all transactions
during that period and will include the regular dividend information. Accounts
in which there has been activity will receive a monthly statement confirming
transactions for that period.
RETIREMENT PLANS
The minimum initial investment for each of the Retirement Plans described
below is $250; subsequent investments must be at least $25. Many of the
Retirement Plans described below are subject to one-time fees, as well as annual
maintenance fees. Prototype Profit Sharing and Money Purchase Pension Plans are
each subject to a one-time fee of $200 per plan, or $300 for paired plans. No
such fee is charged for owner-only plans. All Prototype Profit Sharing and Money
Purchase Pension Plans are subject to an annual maintenance fee of $30 per
participant account. Each of the other Retirement Plans described below (other
than 401(k) Defined Contribution Plans) is subject to a $15 annual maintenance
fee for each participant's account, regardless of the number of funds selected,
even in years when no contributions are made. Annual maintenance fees for 401(k)
Defined Contribution Plans are based on the number of participants in the Plan
and the services selected by the employer. 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. Fees are subject to change.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to Retirement Plan shareholders. For
additional information on any of the Plans and Delaware's retirement services,
call the Shareholder Service Center telephone number.
With respect to the annual maintenance fees per account referred to above,
"account" shall mean any account or group of accounts within a Plan type
identified by a common tax identification number between or among them.
Shareholders are responsible for notifying the Fund when more than one account
is maintained under a single tax identification 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.
10
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals, partnerships and
corporations which replace the former Keogh and corporate retirement plans.
These Plans contain profit sharing or money purchase pension plan provisions.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an Individual
Retirement Account ("IRA") by making contributions which may be tax-deductible,
even if the individual is already participating in an employer-sponsored
retirement plan. Even if contributions are not deductible for tax purposes, as
indicated below, earnings will be tax-deferred. In addition, an individual may
make contributions on behalf of a spouse who has no compensation for the year or
elects to be treated as having no compensation for the year.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an employer-
sponsored retirement plan. Even if a taxpayer (or his or her spouse) is covered
by an employer-sponsored retirement plan, the full deduction is still available
if the taxpayer's adjusted gross income is below $25,000 ($40,000 for taxpayers
filing joint returns). A partial deduction is allowed for married couples with
incomes between $40,000 and $50,000, and for single individuals with incomes
between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
A company or association may establish a Group IRA for employees or members
who want to purchase shares of the Series.
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 Manage-ment 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 the excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution.
See Appendix A for additional IRA information.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a tax-
sheltered retirement program by making contributions on behalf of all eligible
employees.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan which
permits employer contributions and salary deferral contributions in shares of
the Series.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Internal Revenue Code of 1986 (the "Code") permits
employers to establish qualified plans based on salary deferral contributions.
Plan documents are available to enable employers to establish a plan. An
employer may also elect to make profit sharing contributions and/or matching
contributions with investments in the Series or certain other funds in the
Delaware Group.
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 the
Series in conjunction with such an arrangement.
Distributions from the account may be made upon death, disability, separation
from service, attainment of age 59 1/2 and certain other limited circumstances.
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 Series. Although investors may use their own plan,
there is available a Delaware Group 457 Deferred Compensation Plan. Interested
investors should contact the Distributor or their investment dealers to obtain
further information.
11
OFFERING PRICE
The offering price of shares is the net asset value per share next to be
determined after an order is received and becomes effective. There is no sales
charge.
The purchase will be effected at the net asset value next computed after the
receipt of Federal Funds provided they are received by the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when such exchange is open. The New York Stock Exchange is scheduled to be
open Monday through Friday throughout the year except for New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. When the New York Stock Exchange is closed, the Fund
will generally be closed, pricing calculations will not be made and purchase and
redemption orders will not be processed.
An example showing how to calculate the net asset value per share is included
in the Series' financial statements which are incorporated by reference into
this Part B.
The investor becomes a shareholder at the close of and after declaration of
the dividend on the day on which the order is effective. See Purchasing Shares.
Dividends begin to accrue on the next business day. In the event of changes in
Securities and Exchange Commission requirements or the Fund's change in time of
closing, the Fund reserves the right to price at a different time, to price more
often than once daily or to make the offering price effective at a different
time.
The Series' net asset value per share is computed by adding the value of all
securities and other assets in the portfolio of the Series, deducting any
liabilities of the Series and dividing by the number of Series shares
outstanding. Expenses and fees are accrued daily. The Series' total net assets
are determined by valuing the portfolio securities at amortized cost.
The Board of Directors has adopted certain procedures to monitor and stabilize
the Series' price per share. Calculations are made each day to compare part of
the Series' value with the market value of instruments of similar character. At
regular intervals all issues in the portfolio are valued at market value.
Securities maturing in more than 60 days are valued more frequently by obtaining
market quotations from market makers. The portfolio will also be valued by
market makers at such other times as is felt appropriate. In the event that a
deviation of more than 1/2 of 1% exists between the Series' $1.00 per share
offering and redemption prices and the net asset value calculated by reference
to market quotations, or if there is any other deviation which the Board of
Directors believes would result in a material dilution to shareholders or
purchasers, the Board of Directors will promptly consider what action, if any,
should be initiated, such as changing the price to more or less than $1.00 per
share.
REDEMPTION
Any shareholder may require the Fund to redeem Series shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund, 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. If stock certificates have been
issued for shares being redeemed, they must accompany the written request. For
redemptions of $50,000 or less paid to the shareholder at the address of record,
the Fund requires a request signed by all owners of the shares or the investment
dealer of record, but does not require signature guarantees. When the redemption
is for more than $50,000 or if payment is made to someone else or to another
address, signatures of all record owners and a signature guarantee are required.
Each signature guarantee must be supplied by an eligible guarantor institution.
The Fund reserves the right to reject a signature guarantee supplied by an
eligible institution based on its creditworthiness. The Fund may request further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians. The redemption price is the net asset value next
calculated after receipt of the redemption request in good order. See Offering
Price for time of calculation of net asset value.
Payment for shares redeemed will ordinarily be mailed the next business day,
but in no case later than seven days, after receipt of a redemption request in
good order. If a shareholder 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. Except with respect to the expedited payment
by wire, for which there is currently a $7.50 bank wiring cost, there is no fee
charged for redemptions, but such fees could be charged at any time in the
future.
In case of a suspension of the determination of the net asset value because
the New York Stock Exchange is closed for other than weekends or holidays, or
trading thereon is restricted or an emergency exists as a result of which
disposal by the Series of securities owned by it is not reasonably practical or
it is not reasonably practical for the Series fairly to value its assets, or in
the event that the Securities and Exchange Commission has provided for such
suspension for the protection of shareholders, the Fund may postpone payment or
suspend the right of redemption. In such case, the shareholder may withdraw a
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.
See Account Statements under Purchasing Shares for information relating to the
mailing of confirmations of redemptions.
12
If a shareholder who recently purchased shares by check seeks to redeem all or
a portion of those shares in a written request, the Fund will honor the
redemption request but will not mail the proceeds until it is reasonably
satisfied of the collection of the investment check. Redemption requests by wire
or the Checkwriting Feature in this case will not be honored. The hold period
against a recent purchase may be up to but not in excess of 15 days, depending
upon the origin of the investment check. Dividends will continue to be earned
until the redemption is processed. This potential delay can be avoided by making
investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the Series' shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Series or to the Distributor.
While the Fund reserves the right to redeem accounts at the then-current net
asset value if as a result of redemption or transfer the total investment has a
value of less than $1,000, before it does so, the shareholder will be notified
in writing that the value of the shares in the account is less than $1,000 and
will be allowed 60 days from the date of notice to make an additional investment
to meet the required minimum of $1,000. If no such action is taken by the
shareholder, the proceeds will be sent to the shareholder. Any redemption in an
inactive account established with a minimum investment may trigger mandatory
redemption.
Expedited Telephone Redemptions
The Fund has available certain redemption privileges, as described below. The
Fund reserves the right to suspend or terminate the expedited payment procedures
upon 60 days' written notice to shareholders.
Shareholders or their investment dealers of record wishing to redeem any
amount of shares of $50,000 or less for which certificates have not been issued
may call the Fund at 800-523-1918 (in Philadelphia, 215-988-1241) prior to the
time the offering price (net asset value) is determined, as noted above, and
have the proceeds mailed to them at the record address. Checks payable to the
shareholder(s) of record will normally be mailed the next business day, but no
more than seven days, after receipt of the redemption request. This option is
only available to individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check by calling the Fund, as described
above. An authorization form must have been completed by the shareholder and
filed with the Fund before the request is received. Payment will be made by wire
or check to the bank account designated on the authorization form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank account
designated on the authorization form. Redemption proceeds will normally be wired
on the next business day following receipt of the redemption request. There is a
$7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A. which will
be deducted from the withdrawal proceeds each time the shareholder requests a
redemption. If the proceeds are wired to the shareholder's account at a bank
which is not a member of the Federal Reserve System, there could be a delay in
the crediting of the funds to the shareholder's bank account.
2. Payment by Check: Request that a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and the
account number it will be necessary to send a written request to the Fund with a
signature guarantee. Each signature guarantee must be supplied by an eligible
guarantor institution. The Fund reserves the right to reject a signature
guarantee supplied by an eligible institution based on its creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the telephone
redemption procedure, payment will be made only to the bank account designated
on the authorization form.
If expedited payment under these procedures could adversely affect the Series,
the Fund may take up to seven days to pay the shareholder.
Neither the Fund nor the Transfer Agent is responsible for any shareholder
loss incurred in acting upon written or telephone instructions for redemption or
exchange of Series shares which are reasonably believed to be genuine. With
respect to such telephone transactions, the Fund will follow reasonable
procedures to confirm that instructions communicated by telephone are genuine
(including verification of a form of personal identification) as, if it does
not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received from
shareholders are generally tape recorded, and a written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone.
Checkwriting Feature
Shareholders holding shares for which certificates have not been issued may
request on the investment application that they be provided with special forms
of checks which may be issued to redeem their shares by drawing on the Delaware
Group Treasury Reserves, Inc.--U.S. Government Money Series' account with
CoreStates Bank, N.A. Normally, it takes two weeks from the date the
shareholder's initial purchase check clears to receive the first order of
checks. The use of any form of check other than the Series' check will not be
permitted unless approved by the Fund.
(1) These redemption checks must be made payable in an amount of $500 or more.
13
(2) Checks must be signed by the shareholder(s) of record or, in the case of
an organization, by the authorized person(s). If registration is in more than
one name, unless otherwise indicated on the investment application or your
checkwriting authorization form, these checks must be signed by all owners
before the Fund will honor them. Shareholders using redemption checks will
continue to be entitled to distributions paid on those shares up to the time
such checks are presented for payment.
(3) If a shareholder who recently purchased shares by check seeks to redeem
all or a portion of those shares through the Checkwriting Feature, the Fund will
not honor the redemption request unless it is reasonably satisfied of the
collection of the investment check. The hold period against a recent purchase
may be up to but not in excess of 15 days, depending upon the origin of the
investment check.
(4) If the amount of the check is greater than the value of the shares held in
the shareholder's account, the check will be returned and the shareholder may be
subject to extra charges.
(5) Checks may not be used to close accounts.
The Fund reserves the right to revoke the Checkwriting Feature of shareholders
who overdraw their accounts or if, in the opinion of management, such revocation
is in the Series' best interest.
Shareholders will be subject to CoreStates Bank, N.A.'s rules and regulations
governing similar accounts. There is a one-time $5 charge by the Fund to
shareholders for this service. This service may be terminated or suspended at
any time by CoreStates Bank, N.A., the Fund or the Transfer Agent. The Fund and
the Transfer Agent will not be responsible for the inadvertent processing of
post-dated checks or checks more than six months old.
Stop-Payment Requests--Investors may request a stop payment on checks by
providing the Fund with a written authorization to do so. Oral requests will be
accepted provided that the Fund promptly receives a written authorization. Such
requests will remain in effect for six months unless renewed or cancelled. The
Fund will use its best efforts to effect stop-payment instructions, but does not
promise or guarantee that such instructions will be effective. Shareholders
requesting stop payment will be charged a $5 service fee per check for each six-
month period which will be deducted from their accounts.
Return of Checks--Checks used in redeeming shares from a shareholder's account
will be accumulated and returned semi-annually. Shareholders needing a copy of a
redemption check before the regular mailing should contact the Transfer Agent
nationwide 800-523-1918 (in Philadelphia, 215-988-1241).
Systematic Withdrawal Plan
Shareholders who own or purchase $5,000 or more of shares 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 Series does not recommend any specific amount of withdrawal. This
$5,000 minimum does not apply for the Series' prototype Retirement Plans. Shares
purchased with the initial investment and through reinvestment of cash dividends
and realized securities profits distributions will be credited to the
shareholder's account, and sufficient full and fractional shares will be
redeemed at the net asset value calculated on the third business day preceding
the mailing date.
Checks are dated the 20th of the month (unless such date falls on a holiday or
a Sunday) and mailed on or about the 19th of every month. Both ordinary income
dividends and realized securities profits distributions will be automatically
reinvested in additional shares at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital and the share balance
may in time be depleted, particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event and a
shareholder may incur a capital gain or loss for federal income tax purposes,
although the Series expects to maintain a fixed net asset value. If there were a
gain or loss, it would 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.
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.
Wealth Builder Option
Shareholders may elect to invest in one or more of the other mutual funds in
the Delaware Group through our Wealth Builder Option. Under this automatic
exchange program, shareholders can authorize regular monthly investments
(minimum of $100 per fund) to be liquidated from their account and invested
automatically into other mutual funds in the Delaware Group, subject to the same
conditions and limitations set forth in each fund's prospectus. See Wealth
Builder Option and Redemption and Exchange in the Prospectuses.
The investment will be made on the 20th day of each month (or, if the fund
selected is not open that day, the next business day) at the applicable public
offering price of the fund selected on the date of investment. No investment
will be made in any month in which the value of the shareholder's account is
less than the amount specified for investment.
14
Periodic investment through the Wealth Builder Option does not insure profits
or protect against losses in a declining market. The price of the fund into
which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges.
Shareholders can also use the Wealth Builder Option to invest in the Series
through regular liquidations of shares in their accounts in other mutual funds
in the Delaware Group, subject to the same conditions and limitations set forth
in the Prospectuses. Shareholders can terminate their participation at any time
by written notice to the Fund.
This option is not available to participants in the following plans: SAR/SEP,
SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k) Defined
Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457 Deferred
Compensation Plans.
DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
The Fund declares a dividend of the Series' net investment income on a daily
basis to shareholders of record of each class of Series shares at the time of
the previous calculation of the Series' net asset value each day that the Fund
is open for business. The amount of net investment income will be determined at
the time the offering price and net asset value are determined, and shall
include investment income accrued, less the estimated expenses of the Series
incurred since the last determination of net asset value. Gross investment
income consists principally of interest accrued and, where applicable, net pro-
rata amortization of premiums and discounts since the last determination. The
dividend declared, as noted above, will be deducted immediately before the net
asset value calculation is made. See Offering Price. Net investment income
earned on days when the Fund is not open will be declared as a dividend on the
next business day.
Each class of shares of the Series will share proportionately in the
investment income and expenses of the Series, except that until June 1, 1990,
the U.S. Government Money Fund Consultant Class incurred distribution fees under
its 12b-1 Plan. The Board of Directors of the Fund suspended 12b-1 Plan payments
from the assets of the U.S. Government Money Fund Consultant Class to the
Distributor effective June 1, 1990. See Plan Under Rule 12b-1 for the U.S.
Government Money Fund Consultant Class.
Purchases of Series shares by wire begin earning dividends when converted into
Federal Funds and available for investment, normally the next business day after
receipt. However, if the Fund is given prior notice of Federal Funds wire and an
acceptable written guarantee of timely receipt from an investor satisfying the
Fund's credit policies, the purchase will start earning dividends on the date
the wire is received. Investors desiring to guarantee wire payments must have an
acceptable financial condition and credit history in the sole discretion of the
Fund. The Fund reserves the right to terminate this option at any time.
Purchases by check earn dividends upon conversion to Federal Funds, normally one
business day after receipt.
Payment of dividends will be made monthly on the last day of each month.
Payment by check of cash dividends will ordinarily be mailed within three
business days after the payable date. Dividends are automatically reinvested in
additional shares of the same class of the Series at the net asset value in
effect on the payable date, which provides the effect of compounding dividends,
unless the election to receive dividends in cash has been made. Dividend
payments of $1.00 or less will be automatically reinvested, notwithstanding a
shareholder's election to receive dividends in cash. If such a shareholder's
dividends increase to greater than $1.00, the shareholder would have to file a
new election in order to begin receiving dividends in cash again. 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 Post Office or which remains uncashed for a period of more than
one year may be reinvested in the shareholder's account at the then-current net
asset value and the dividend option may be changed from cash to reinvest. The
Series may deduct from a shareholder's account the costs of the Series' effort
to locate a shareholder if a shareholder's mail is returned by the Post Office
or the Series is otherwise unable to locate the shareholder or verify the
shareholder's mailing address. These costs may include a percentage of the
account when a search company charges a percentage fee in exchange for their
location services. To the extent necessary to maintain a $1.00 per share net
asset value, the Fund's Board of Directors will consider temporarily reducing or
suspending payment of daily dividends, or making a distribution of realized
securities profits or other distributions at the time the net asset value per
share has changed.
Short-term realized securities profits or losses, if any, may be paid with the
daily dividend. Any such profits not so paid will be distributed annually during
the first quarter following the close of the fiscal year. See Account Statements
under Purchasing Shares for the statement mailing of dividend information.
Information as to the tax status of dividends will be provided annually.
During the fiscal year ended December 31, 1994, dividends totaling $0.0289 per
share of each class were paid from net investment income.
15
TAXES
The Fund has qualified as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended, and intends to be so qualified
for the current year. By so qualifying, the Fund is not subject to federal
income taxes to the extent that it distributes its net investment income and
realized capital gains. The term "regulated investment company" does not imply
the supervision of management or investment practices or policies by any
government agency. Each Series of the Fund is treated as a single tax entity and
any capital gains and losses for each Series are calculated separately.
Distributions paid by the Fund representing net investment income received by
the Series and short-term capital gains will be taxable to shareholders as
ordinary income and will not qualify for the dividends-received deduction
available to corporations. 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 Series does not expect to realize long-term capital gains
and, therefore, does not contemplate payment of any capital gains dividends.
In addition to federal tax, shareholders also may be subject to state and
local taxes on distributions from the Fund. Shareholders who are Pennsylvania
residents will not be subject to Pennsylvania county personal property taxes on
their shares. You should consult your tax adviser with respect to the tax status
of distributions from the Series in your state and locality.
Statements setting forth the full federal income tax status of distributions
made during the year will be mailed annually. In some states, distributions that
came from earnings on U.S. Treasury securities and other direct U.S. obligations
may be exempt from state income tax.
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103, furnishes
investment management services to the Fund, subject to the supervision and
direction of the Fund's Board of Directors.
The Manager and its predecessors have been managing the funds in the Delaware
Group since 1938. The aggregate assets of these funds on December 31, 1994 were
approximately $9,253,901,000. Investment advisory services are also provided to
institutional accounts with assets on December 31, 1994 of approximately
$15,456,416,000.
Subject to the supervision and direction of the Board of Directors, the
Manager manages the Series' portfolio in accordance with the Series' stated
investment objective and policy and makes and implements all investment
decisions on behalf of the Series.
The Series' Investment Management Agreement with the Manager, dated June 29,
1988, was approved by shareholders on June 14, 1988. In connection with the
Fund's reorganization into a Maryland corporation effective December 20, 1990,
the Series entered into an Investment Management Agreement with the Manager
dated as of that date. The Agreement may be further renewed only so long as such
renewal and continuance are specifically approved at least annually by the
directors or by vote of a majority of the outstanding voting securities of the
Series, and only if the terms and the renewal thereof have been approved by the
vote of a majority of the directors of the Fund, who are not parties thereto or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval. The Agreement was renewed for a period of an
additional year by the Board of Directors at a meeting held on January 28, 1995.
The Agreement is terminable without penalty on 60 days' notice by the directors
of the Fund or by the Manager. The Agreement will terminate automatically in the
event of its assignment.
The annual compensation paid by the Series for investment management services
is equal to 1/2 of 1% of the Series' average daily net assets, less the Series'
proportionate share of all directors' fees paid to the unaffiliated directors by
the Series. The Manager pays the salaries of all directors, officers and
employees of the Fund who are affiliated with the Manager. Investment management
fees paid by the Series were 0.46% of average daily net assets for the fiscal
year ended December 31, 1994.
On December 31, 1994, the total net assets of the Series were $18,196,092.
Investment management fees paid by the Series during the past three fiscal years
were $208,595 for 1992, $155,071 for 1993 and $94,711 for 1994.
Except for those expenses borne by the Manager under the Investment Management
Agreement and the Distributor under the Distribution Agreement, the Series is
responsible for all of its own expenses. Among others, these include the
investment management fees; shareholder servicing, dividend disbursing and
transfer agent fees and costs; custodian expenses; federal and state securities
registration fees; proxy costs; the costs of preparing prospectuses and reports
sent to shareholders; and the Series' proportionate share of rent and other
administrative expenses. The ratio of expenses to average daily net assets for
the fiscal year ended December 31, 1994 was 1.26% for each class of shares.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of Series shares
under a Distribution Agreement dated June 1, 1992. The Distributor is an
affiliate of the Manager and bears all of the costs of promotion and
distribution except for any payments which may be made under the U.S.
Government Money Fund Consultant Class' 12b-1 Plan. Prior to January 3, 1995,
Delaware Distributors, Inc. ("DDI") served
16
as the national distributor of the Series' shares. On that date Delaware
Distributors, L.P., a newly formed limited partnership, succeeded to the
business of DDI. All officers and employees of DDI became officers and employees
of Delaware Distributors, L.P. DDI is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly-owned subsidiaries of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate of the
Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as the
Series' shareholder servicing, dividend disbursing and transfer agent pursuant
to a Shareholders Services Agreement dated December 20, 1990. The Transfer Agent
is also an indirect, wholly-owned subsidiary of Delaware Management Holdings,
Inc.
OFFICERS AND DIRECTORS
The business and affairs of the Fund are managed under the direction of its
Board of Directors.
Certain officers and directors of the Fund hold identical positions in each of
the other funds in the Delaware Group. On January 31, 1995, the Fund's officers
and directors, as a group, owned less than 1% of the Series' shares outstanding.
As of January 31, 1995, the Fund believes Robert and Bernard Schwartz, 821
East Gate Drive, Mt. Laurel, NJ 08054 held 1,028,154 shares (6.14%) of the
outstanding shares of the U.S. Government Money Fund A Class.
As of the same date, the Fund believes Melvyn Mesnekoff, Trust Delaware Park
Memorial Chapel Pension Trust, 2141 Delaware Ave., Buffalo, NY 14216 held
400,186 shares (37.38%) and Richard C. Plemmons, 1548 West Elkton Road,
Hamilton, OH 45013 held 138,950 shares (12.98%) of the outstanding shares of the
U.S. Government Money Fund Consultant Class.
DMH Corp., Delaware Management Company, Inc., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware International Holdings Ltd., Founders Holdings, Inc.,
Delaware International Advisers Ltd. and Delaware Investment Counselors, Inc.
are direct or indirect, wholly-owned subsidiaries of Delaware Management
Holdings, Inc. ("DMH"). By reason of its percentage ownership of DMH common
stock and through Voting Trust Agreements with certain other DMH shareholders,
Legend Capital Group, L.P. ("Legend") controls DMH and its direct and indirect,
wholly-owned subsidiaries. As General Partners of Legend, Leonard M. Harlan and
John K. Castle have the ability to direct the voting of more than a majority of
the shares of DMH and thereby control DMH and its direct and indirect, wholly-
owned subsidiaries.
On December 12, 1994, DMH entered into a merger agreement with Lincoln
National Corporation ("Lincoln National") and a newly-formed subsidiary of
Lincoln National. Pursuant to that agreement, the new subsidiary will be merged
with and into DMH. This merger will result in DMH becoming a wholly-owned
subsidiary of Lincoln National. The transaction is expected to close in the
early spring of 1995, subject to the receipt of all regulatory approvals and
satisfaction of conditions precedent to closing. See Management of the Fund in
the Prospectuses for more information regarding this merger transaction.
Directors and principal officers of the Fund are noted below along with their
ages and their business experience for the past five years. Unless otherwise
noted, the address of each officer and director is One Commerce Square,
Philadelphia, PA 19103.
*Wayne A. Stork (57)
Chairman, Director and/or Trustee of the Fund and each of the other
16 Funds in the Delaware Group.
Chairman, Chief Executive Officer, Chief Investment Officer and Director of
Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware Management
Holdings, Inc., DMH Corp., Delaware International Advisers Ltd., Delaware
International Holdings Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Management Trust Company.
Director of Delaware Distributors, Inc., Delaware Service Company, Inc. and
Delaware Investment Counselors, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
---------------
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
17
*Brian F. Wruble (51)
President, Chief Executive Officer, Director and/or Trustee of the Fund and 15
other Funds in the Delaware Group (which excludes Delaware Pooled Trust,
Inc.).
Director of Delaware Pooled Trust, Inc., Delaware International Advisers Ltd.
and Delaware Investment Counselors, Inc.
President, Chief Operating Officer and Director of Delaware Management
Holdings, Inc., DMH Corp. and Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware Service Company,
Inc.
Chairman and Director of Delaware Distributors, Inc.
Chairman of Delaware Distributors, L.P.
President of Founders Holdings, Inc.
Before joining the Delaware Group in 1992, Mr. Wruble was Chairman, President
and Chief Executive Officer of Equitable Capital Management Corporation from
July 1985 through April 1992 and was Executive Vice President of Equitable
Life Assurance Society of the United States from September 1984 through
April 1992 and Chief Investment Officer from April 1991 through April 1992.
Mr. Wruble has previously held executive positions with Smith Barney, Harris
Upham, and H.C. Wainwright & Co.
Winthrop S. Jessup (49)
Executive Vice President of the Fund and 15 other Funds in the Delaware Group
(which excludes Delaware Pooled Trust, Inc.).
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Investment Counselors, Inc.
Executive Vice President and Director of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc., Delaware Management Trust
Company, Delaware International Holdings Ltd. and Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc. and Delaware International Advisers
Ltd.
During the past five years, Mr. Jessup has served in various executive
capacities at different times within the Delaware organization.
Richard G. Unruh, Jr. (55)
Executive Vice President of the Fund and each of the other 16 Funds in the
Delaware Group.
Executive Vice President and Director of Delaware Management Company, Inc.
Senior Vice President of Delaware Management Holdings, Inc.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
Walter P. Babich (67)
Director and/or Trustee of the Fund and each of the other 16 Funds in the
Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988
to 1991, he was a partner of I&L Investors.
*John K. Castle (54)
Director and/or Trustee of the Fund, each of the other 16 Funds in the
Delaware Group and Delaware Management Holdings, Inc.
150 East 58th Street, New York, NY 10155.
General Partner, Legend Capital Group, L.P.
Chairman, Castle Harlan, Inc., a private merchant bank in New York City.
Chairman, Castle Harlan Partners II GP, Inc.
President and Chief Executive Officer, Branford Castle, Inc., an investment
holding company.
Chairman, Castle Connolly Medical Ltd.
Director, Sealed Air Corp.
Director, UNC, Inc.
Director, Quantum Restaurant Group, Inc.
Director, INDSPEC Chemical Corporation.
Director, Truck Components, Inc.
Trustee, New York Medical College.
Immediately prior to forming Branford Castle, Inc. in 1986, Mr. Castle was
President and Chief Executive Officer and a director of Donaldson, Lufkin &
Jenrette, which he joined in 1965. Mr. Castle also served as Chairman of the
Board of the New York Medical College for 11 years and has served as a
director of the Equitable Life Assurance Society of the United States and as
a member of the Corporation of the Massachusetts Institute of Technology.
*Leonard M. Harlan (58)
Director and/or Trustee of the Fund, each of the other 16 Funds in the
Delaware Group and Delaware Management Holdings, Inc.
150 East 58th Street, New York, NY 10155.
General Partner, Legend Capital Group, L.P.
President, Castle Harlan, Inc., a private merchant bank in New York City.
President, Castle Harlan Partners II GP, Inc.
Chairman and Chief Executive Officer, The Harlan Company, Inc.
Director, Long John Silver's Holdings, Inc.
Director, The Ryland Group, Inc.
Director, SmarteCarte, Inc.
Director, MAG Aerospace Industries, Inc.
Director, Strawberries, Inc.
Trustee, North Country School/CTT.
Trustee, New York City Citizens Budget Commission.
Member, Visiting Committee of the Harvard Business School.
---------------
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
18
Anthony D. Knerr (56)
Director and/or Trustee of the Fund and each of the other 16 Funds in the
Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Consultant, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989, he was also a
lecturer in English at the University. In addition, Mr. Knerr was Chairman
of The Publishing Group, Inc., New York, from 1988 to 1990. Mr. Knerr
founded The Publishing Group, Inc. in 1988.
Ann R. Leven (54)
Director and/or Trustee of the Fund and each of the other 16 Funds in the
Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer of the
Smithsonian Institution, Washington, DC, and from 1975 to 1994, she was
Adjunct Professor of Columbia Business School.
W. Thacher Longstreth (74)
Director and/or Trustee of the Fund and each of the other 16 Funds in the
Delaware Group.
1617 John F. Kennedy Boulevard, Philadelphia, PA 19103.
Vice Chairman, Packard Press, a financial printing, commercial printing and
information processing firm.
Philadelphia City Councilman.
President, MLW, Associates.
Director, Tasty Baking Company.
Director, Healthcare Services Group.
Charles E. Peck (69)
Director and/or Trustee of the Fund and each of the other 16 Funds in the
Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer of The
Ryland Group, Inc., Columbia, MD.
---------------
*Director affiliated with the investment manager of the Fund and considered an
"interested person" as defined in the Investment Company Act of 1940.
David K. Downes (55)
Senior Vice President/Chief Administrative Officer/Chief Financial Officer of
the Fund, each of the other 16 Funds in the Delaware Group and Delaware
Management Company, Inc.
President/Chief Executive Officer and Director of Delaware Management Trust
Company.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer/Treasurer of Delaware Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and Director of DMH
Corp.
Senior Vice President/Chief Administrative Officer and Director of Delaware
Distributors, Inc.
Senior Vice President/Chief Administrative Officer of Delaware Distributors,
L.P.
Senior Vice President/Chief Administrative Officer/Chief Financial Officer and
Director of Delaware Service Company, Inc.
Chief Financial Officer and Director of Delaware International Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware Investment
Counselors, Inc.
Senior Vice President and Director of Founders Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief Administrative
Officer, Chief Financial Officer and Treasurer of Equitable Capital
Management Corporation, New York, from December 1985 through August 1992,
Executive Vice President from December 1985 through March 1992, and Vice
Chairman from March 1992 through August 1992.
George M. Chamberlain, Jr. (48)
Senior Vice President and Secretary of the Fund, each of the other 16 Funds in
the Delaware Group, Delaware Management Holdings, Inc. and Delaware
Distributors, L.P.
Corporate Vice President, Secretary and Director of Founders Holdings, Inc.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware Service
Company, Inc. and Delaware Management Trust Company.
Secretary and Director of Delaware International Holdings Ltd.
Senior Vice President and Secretary of Delaware Investment Counselors, Inc.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various capacities
at different times within the Delaware organization.
19
Paul E. Suckow (47)
Senior Vice President/Chief Investment Officer, Fixed Income, of the Fund,
each of the other 16 funds in the Delaware Group and Delaware Management
Company, Inc.
Before returning to the Delaware Group in 1993, Mr. Suckow was Executive Vice
President and Director of Fixed Income for Oppenheimer Management
Corporation, New York, NY. Prior to that, Mr. Suckow was a fixed income
portfolio manager for the Delaware Group.
Gary A. Reed (40)
Vice President/Senior Portfolio Manager of the Fund, of the tax-exempt and
other income funds in the Delaware Group and of Delaware Management Company,
Inc.
From November 1981 to January 1989, Mr. Reed was Vice President/Department
Manager of the fixed income department at Irving Trust Company, New York.
Mr. Reed joined the Delaware Group in February 1989.
Joseph H. Hastings (45)
Vice President/Corporate Controller of the Fund, each of the other 16 Funds in
the Delaware Group, Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc. and Founders Holdings,
Inc.
Vice President/Corporate Controller/Treasurer of Delaware Management Trust
Company.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief Financial
Officer for Prudential Residential Services, L.P., New York, NY from 1989 to
1992. Prior to that, Mr. Hastings served as Controller and Treasurer for
Fine Homes International, L.P., Stamford, CT from 1987 to 1989.
Eugene J. Cichanowsky (48)
Vice President/Corporate Tax of the Fund, each of the other 16 Funds in the
Delaware Group, Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Founders Holdings, Inc.
and Delaware Management Trust Company.
Vice President of Delaware Pooled Trust, Inc.
1818 Market Street, Philadelphia, PA 19103.
During the past five years, Mr. Cichanowsky has served in various capacities
at different times within the Delaware organization.
Theresa M. Messina (33)
Vice President/Treasurer of the Fund, each of the other 16 Funds in the
Delaware Group and Delaware Service Company, Inc.
Vice President/Treasurer/Chief Financial Officer of Founders Holdings, Inc.
Vice President/Assistant Treasurer of Delaware Management Company, Inc.,
Delaware Distributors, L.P. and Delaware Distributors, Inc.
Vice President of Delaware International Holdings, Ltd.
Before joining the Delaware Group in 1994, Ms. Messina was Vice
President/Treasurer for Capital Holdings, Frazer, PA. Prior to that, Ms.
Messina was Vice President/Fund Accounting for SEI Corporation, Wayne, PA
from 1988 to 1994.
The following is a compensation table listing for each director entitled to
receive compensation, the aggregate compensation received from the Fund, the
total compensation received from all Delaware Group funds and an estimate of
annual benefits to be received upon retirement under the Delaware Group
Retirement Plan as of December 31, 1994.
Pension or
Retirement Estimated Total
Benefits Annual Compensation
Aggregate Accrued Benefits from all 17
Compensation as Part of Upon Delaware
Name from Fund Fund Expenses Retirement* Group Funds
W. Thacher Longstreth $1,648.08 None $18,100 $37,132.69
Ann R. Leven $2,004.30 None $18,100 $45,268.64
Walter P. Babich $1,964.66 None $18,100 $44,268.65
Anthony D. Knerr $1,970.00 None $18,100 $44,268.72
Charles E. Peck $1,648.08 None $18,100 $37,132.69
*Under the terms of the Delaware Group Retirement Plan for directors/trustees,
each disinterested director who, at the time of his or her retirement from the
Board, has attained the age of 70 and served on the Board for at least five
continuous years, is entitled to receive payments from the Fund for a period
equal to the lesser of the number of years that such person served as a
director or the remainder of such person's life. The amount of such payments
will be equal, on an annual basis, to the amount of the annual retainer that is
paid to directors of the Fund at the time of such person's retirement. If an
eligible director retired as of December 31, 1994, he or she would be entitled
to annual payments totaling $18,100, in the aggregate, from all of the Funds in
the Delaware Group, based on the number of funds in the Delaware Group as of
that date.
20
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the classes and for
shareholders of classes of other funds in the Delaware Group are set forth in
the relevant prospectuses for such classes. The following supplements that
information. The Fund reserves the right to reject exchange requests at any
time. The Fund may modify, terminate or suspend the exchange privilege upon 60
days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the exchange
is made. As with any purchase, an investor should obtain and carefully read that
fund's prospectus before buying shares in an exchange. The prospectus contains
more complete information about the fund, including charges and expenses. A
shareholder requesting an exchange will be sent a current prospectus and an
authorization form for any of the other mutual funds in the Delaware Group.
Exchange instructions must be signed by the record owner(s) exactly as the
shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund or series and
the purchase of another. The sale may involve either a capital gain or loss to
the shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between funds
in the Delaware Group on behalf of their clients by telephone or other expedited
means. This service may be discontinued or revised at any time by the Transfer
Agent. Such exchange requests may be rejected if it is determined that a
particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued or
their investment dealers of record may exchange shares by telephone for shares
in other mutual funds in the Delaware Group. This service is automatically
provided unless the Fund receives written notice from the shareholder to the
contrary.
Shareholders or their investment dealers of record may contact the Transfer
Agent at 800-523-1918 (in Philadelphia, 215-988-1241) to effect an exchange. The
shareholder's current Series or fund account number must be identified, as well
as the registration of the account, the share or dollar amount to be exchanged
and the fund into which the exchange is to be made. Requests received on any day
after the time the offering price and net asset value are determined will be
processed the following day. See Offering Price. Any new account established
through the exchange will automatically carry the same registration, shareholder
information and dividend option as the account from which the shares were
exchanged. The exchange requirements of the fund into which the exchange is
being made, such as eligibility and investment minimums, must be met and may
entail the payment of a front-end sales charge which will be deducted from the
investment. (See the prospectus of the fund desired or inquire by calling the
Transfer Agent.) Certain funds are not available for Retirement Plans.
The telephone exchange privilege is intended as a convenience to shareholders
and is not intended to be a vehicle to speculate on short-term swings in the
securities market through frequent transactions in and out of the funds in the
Delaware Group. Telephone exchanges may be subject to limitations as to amounts
or frequency. The Transfer Agent and the Fund reserve the right to record
exchange instructions received by telephone and to reject exchange requests at
any time in the future.
As described in the Fund's prospectuses, neither the Fund nor the Transfer
Agent is responsible for any shareholder loss incurred in acting upon written or
telephone instructions for redemption or exchange of Series shares which are
reasonably believed to be genuine.
Following is a summary of the investment objectives of the other Delaware
Group funds:
Delaware Fund seeks long-term growth by a balance of capital appreciation,
income and preservation of capital. It uses a dividend-oriented valuation
strategy to select securities issued by established companies that are believed
to demonstrate potential for income and capital growth.
Dividend Growth Fund seeks current income and capital appreciation by
investing primarily in income-producing common stocks, with a focus on common
stocks the Manager believes have the potential for above average dividend
increases over time.
Trend Fund seeks long-term growth by investing in common stock issued by
emerging growth companies exhibiting strong capital appreciation potential.
Value Fund seeks capital appreciation by investing primarily in common stocks
whose market values appear low relative to their underlying value or future
potential.
DelCap Fund seeks long-term capital growth by investing in common stocks and
securities convertible into common stocks of companies that have a demonstrated
history of growth and have the potential to support continued growth.
Decatur Income Fund seeks the highest possible current income by investing
primarily in common stocks that provide the potential for income and capital
appreciation without undue risk to principal. Decatur Total Return Fund seeks
long-term growth by investing primarily in securities that provide the potential
for income and capital appreciation without undue risk to principal.
Delchester Fund seeks as high a current income as possible by investing
principally in corporate bonds, and also in U.S. government securities and
commercial paper.
U.S. Government Fund seeks high current income by investing in long-term U.S.
government debt obligations.
21
Treasury Reserves Intermediate 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 Cash Reserve seeks the highest level of income consistent with the
preservation of capital and liquidity through investments in short-term money
market instruments, while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income tax
by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis
on municipal bonds protected by insurance guaranteeing principal and interest
are paid when due. Tax-Free USA Intermediate Fund seeks a high level of
current interest income exempt from federal income tax, consistent with the
preservation of capital by investing primarily in municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from federal income
tax, by investing in short-term municipal obligations, while maintaining a
stable net asset value.
Tax-Free Pennsylvania Fund seeks a high level of current interest income
exempt from federal and, to the extent possible, certain Pennsylvania state
and local taxes, consistent with the preservation of capital.
International Equity Fund seeks to achieve long-term growth without undue
risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal
by investing primarily in global fixed income securities that may also
provide the potential for capital appreciation. Global Assets Fund seeks to
achieve long-term total return by investing in global securities which will
provide higher current income than a portfolio comprised exclusively of
equity securities, along with the potential for capital growth.
Delaware Group Premium Fund offers nine series available exclusively as
funding vehicles for certain insurance company separate accounts. Equity/Income
Series seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. High Yield Series seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. government
securities and commercial paper. Capital Reserves Series seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a diversified portfolio of short- and intermediate-term securities. Money
Market Series seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. Growth Series seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. Multiple Strategy Series seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. International
Equity Series seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. Value Series seeks capital
appreciation by investing in small- to mid-cap common stocks whose market 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.
Emerging Growth Series seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective.
For more complete information about any of these funds, including charges and
expenses, you can obtain a prospectus from the Distributor. Read it carefully
before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the information
contained in each Fund's prospectus(es).
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager or its
affiliate, Delaware International Advisers Ltd., manages the other funds in the
Delaware Group. The Manager, through a separate division, also manages private
investment accounts. While investment decisions of the Fund are made
independently from those of the other funds and accounts, they may make
investment decisions at the same time.
Access persons and advisory persons of the Delaware Group of Funds, as those
terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide services to
Delaware Management Company, Inc., 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 was received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for the Fund and for the other
mutual funds in the Delaware Group.
22
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the
other mutual funds in the Delaware Group. The Transfer Agent is paid a fee by
the Series for providing these services consisting of an annual per account
charge of $11.00 plus transaction charges for particular services according
to a schedule. Compensation is fixed each year and approved by the Board of
Directors, including a majority of the disinterested directors.
The Manager and its affiliates own the name "Delaware Group." Under certain
circumstances, including the termination of the Fund's advisory relationship
with the Manager or its distribution relationship with the Distributor, the
Manager and its affiliates could cause the Fund to delete the words "Delaware
Group" from the Fund's name.
Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, NY 10260,
is custodian of the Fund's securities and cash. As custodian for the Fund,
Morgan Guaranty Trust Company of New York maintains a separate account or
accounts for the Series; receives, holds and releases portfolio securities on
account of the Series; receives and disburses money on behalf of the Series; and
collects and receives income and other payments and distributions on account of
the Series' portfolio securities.
By California regulation, the Manager is required to waive certain fees and
reimburse the Series for certain expenses to the extent that the Series' annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed specified percentages of average net assets. The
most restrictive limit is 2 1/2% of the first $30 million of average daily net
assets, 2% of the next $70 million of average daily net assets and 1 1/2% of any
additional average daily net assets.
The legality of the issuance of the shares offered hereby, pursuant to
registration under the Investment Company Act Rule 24f-2, has been passed upon
for the Fund by Messrs. Stradley, Ronon, Stevens & Young, Philadelphia,
Pennsylvania.
Capitalization
The Fund offers two series of shares, Treasury Reserves Intermediate Series
(formerly known as the Investors Series) and the U.S. Government Money Series
(formerly known as the Cashiers Series). The Fund has a total authorized
capitalization of three billion shares with a $.001 par value common stock. The
Series has an authorized capitalization of one billion shares of common stock
with a par value of $.001 per share. The Treasury Reserves Intermediate Series
has an authorized capitalization of two billion shares of common stock with a
par value of $.001 per share. The directors are authorized to issue different
series and classes of shares of common stock. At the present time, two series
have been issued. The U.S. Government Money Series offers two classes of shares
and the Treasury Reserves Intermediate Series offers three classes of shares.
The classes offered by the Series are the U.S. Government Money Fund A Class
and the U.S. Government Money Fund Consultant Class. Prior to March 1994, the
U.S. Government Money Fund A Class was known as the U.S. Government Money Fund
class, and prior to June 1992, the U.S. Government Money Fund class was known as
the original class. Prior to March 1994, the U.S. Government Money Fund
Consultant Class was known as the U.S. Government Money Fund Consultant class,
and prior to November 1992, the U.S. Government Money Fund Consultant class was
known as the U.S. Government Money Fund (Institutional) class. The U.S.
Government Money Fund (Institutional) class was known as the consultant class
prior to June 1992. General expenses of the Series will be allocated on a pro-
rata basis to the classes according to asset size, except that any expenses of
the Rule 12b-1 Plan of the U.S. Government Money Fund Consultant Class will be
allocated solely to that class. Each class of the U.S. Government Money Series
represents a proportionate interest in the assets of that Series, and each has
the same voting and other rights and preferences as the other class, except that
shares of the U.S. Government Money Fund A Class may not vote on any matter
affecting the U.S. Government Money Fund Consultant Class' Distribution Plan
under Rule 12b-1.
Shares have no preemptive rights, are fully transferable and, when issued, are
fully paid and nonassessable.
Noncumulative Voting
These shares have noncumulative voting rights which means that the holders of
more than 50% of the shares of the Fund voting for the election of directors can
elect all the directors if they choose to do so, and, in such event, the holders
of the remaining shares will not be able to elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
Shareholder Inquiries
Shareholders who have questions concerning their accounts or wish to obtain
additional information may call the Transfer Agent, 800-523-1918 nationwide (in
Philadelphia, 215-988-1241).
23
APPENDIX A--IRA INFORMATION
The Tax Reform Act of 1986 restructured, and in some cases eliminated, the tax
deductibility of IRA contributions. Under the Act, the full deduction for IRAs
($2,000 for each working spouse and $2,250 for one-income couples) was retained
for all taxpayers who are not covered by an employer-sponsored retirement plan.
Even if a taxpayer (or his or her spouse) is covered by an employer-sponsored
retirement plan, the full deduction is still available if the taxpayer's
adjusted gross income is below $25,000 ($40,000 for taxpayers filing joint
returns). A partial deduction is allowed for married couples with incomes
between $40,000 and $50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for contributions to
IRAs by taxpayers whose adjusted gross income before IRA deductions exceeds
$50,000 ($35,000 for singles) and who are active participants in an employer-
sponsored retirement plan. Taxpayers who were not allowed deductions on IRA
contributions still can make nondeductible IRA contributions of as much as
$2,000 for each working spouse ($2,250 for one-income couples), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
As illustrated in the following tables, maintaining an Individual Retirement
Account remains a valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with its
tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity--a way to have
money grow faster due to tax-deferred compounding.
24
Even if your IRA contribution is no longer deductible, the benefits of saving
on a tax-deferred basis can be substantial. The following tables illustrate the
benefits of tax-deferred versus taxable compounding. Each reflects a constant 6%
rate of return, compounded annually, with the reinvestment of all proceeds. The
tables do not take into account any fees. Of course, earnings accumulated in
your IRA will be subject to tax upon withdrawal. If you choose a money market
fund with fluctuating income, like the Series, your bottom line at retirement
could be lower--it could also be much higher.
$2,000 Invested Annually Assuming a 6% Annualized Return
15% Tax Bracket Single -- $0-$22,750
--------------- Joint -- $0-$38,000
How Much You
End of Cumulative How Much You Have With Full IRA
Year Investment Amount Have Without IRA Deduction
--------------------------------------------------------------------------------
1 $ 2,000 $ 1,787 $ 2,120
--------------------------------------------------------------------------------
5 10,000 9,892 11,951
--------------------------------------------------------------------------------
10 20,000 22,578 27,943
--------------------------------------------------------------------------------
15 30,000 38,846 49,345
--------------------------------------------------------------------------------
20 40,000 59,707 77,985
--------------------------------------------------------------------------------
25 50,000 86,459 116,313
--------------------------------------------------------------------------------
30 60,000 120,765 167,603
--------------------------------------------------------------------------------
35 70,000 164,758 236,242
--------------------------------------------------------------------------------
40 80,000 221,173 328,095
--------------------------------------------------------------------------------
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 5.10% (6% less
15%)]
28% Tax Bracket Single -- $22,751-$55,100
--------------- Joint -- $38,001-$91,850
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
--------------------------------------------------------------------------------
1 $ 2,000 $ 1,502 $ 1,526 $ 2,120
--------------------------------------------------------------------------------
5 10,000 8,189 8,604 11,951
--------------------------------------------------------------------------------
10 20,000 18,306 20,119 27,943
--------------------------------------------------------------------------------
15 30,000 30,805 35,528 49,345
--------------------------------------------------------------------------------
20 40,000 46,248 56,150 77,985
--------------------------------------------------------------------------------
25 50,000 65,327 83,745 116,313
--------------------------------------------------------------------------------
30 60,000 88,899 120,674 167,603
--------------------------------------------------------------------------------
35 70,000 118,023 170,094 236,242
--------------------------------------------------------------------------------
40 80,000 154,004 236,229 328,095
--------------------------------------------------------------------------------
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 4.32% (6% less
28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning 6%]
31% Tax Bracket Single -- $55,101-$115,000
--------------- Joint -- $91,851-$140,000
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
--------------------------------------------------------------------------------
1 $ 2,000 $ 1,437 $ 1,463 $ 2,120
--------------------------------------------------------------------------------
5 10,000 7,806 8,246 11,951
--------------------------------------------------------------------------------
10 20,000 17,367 19,281 27,943
--------------------------------------------------------------------------------
15 30,000 29,078 34,048 49,345
--------------------------------------------------------------------------------
20 40,000 43,422 53,810 77,985
--------------------------------------------------------------------------------
25 50,000 60,992 80,256 116,313
--------------------------------------------------------------------------------
30 60,000 82,513 115,646 167,603
--------------------------------------------------------------------------------
35 70,000 108,872 163,007 236,242
--------------------------------------------------------------------------------
40 80,000 141,160 226,386 328,095
--------------------------------------------------------------------------------
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 4.14% (6% less
31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning 6%]
25
36% Tax Bracket* Single -- $115,001-$250,000
--------------- Joint -- $140,001-$250,000
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
--------------------------------------------------------------------------------
1 $ 2,000 $ 1,329 $ 1,357 $ 2,120
--------------------------------------------------------------------------------
5 10,000 7,176 7,648 11,951
--------------------------------------------------------------------------------
10 20,000 15,840 17,884 27,943
--------------------------------------------------------------------------------
15 30,000 26,300 31,581 49,345
--------------------------------------------------------------------------------
20 40,000 38,929 49,911 77,985
--------------------------------------------------------------------------------
25 50,000 54,176 74,440 116,313
--------------------------------------------------------------------------------
30 60,000 72,584 107,266 167,603
--------------------------------------------------------------------------------
35 70,000 94,808 151,195 236,242
--------------------------------------------------------------------------------
40 80,000 121,640 209,981 328,095
--------------------------------------------------------------------------------
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 3.84% (6% less
36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning 6%]
39.6% Tax Bracket* Single -- over $250,000
----------------- Joint -- over $250,000
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
--------------------------------------------------------------------------------
1 $ 2,000 $ 1,252 $ 1,280 $ 2,120
--------------------------------------------------------------------------------
5 10,000 6,729 7,218 11,951
--------------------------------------------------------------------------------
10 20,000 14,770 16,878 27,943
--------------------------------------------------------------------------------
15 30,000 24,376 29,804 49,345
--------------------------------------------------------------------------------
20 40,000 35,854 47,103 77,985
--------------------------------------------------------------------------------
25 50,000 49,569 70,253 116,313
--------------------------------------------------------------------------------
30 60,000 65,955 101,232 167,603
--------------------------------------------------------------------------------
35 70,000 85,533 142,690 236,242
--------------------------------------------------------------------------------
40 80,000 108,926 198,170 328,095
--------------------------------------------------------------------------------
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 3.624% (6% less
39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%) earning 6%]
$2,000 SINGLE INVESTMENT AT A RETURN OF 6% COMPOUNDED ANNUALLY
TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
--------------------------------------------------------------------------------
10 $2,872 $2,934 $ 3,024 $ 3,078 $ 3,327 $ 3,639
--------------------------------------------------------------------------------
15 3,442 3,555 3,718 3,819 4,291 4,908
--------------------------------------------------------------------------------
20 4,124 4,306 4,571 4,738 5,534 6,620
--------------------------------------------------------------------------------
30 5,922 6,317 6,910 7,292 9,206 12,045
--------------------------------------------------------------------------------
40 8,504 9,269 10,447 11,224 15,315 21,915
--------------------------------------------------------------------------------
$2,000 INVESTED ANNUALLY AT A RETURN OF 6% COMPOUNDED ANNUALLY
TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAXABLE-- TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
--------------------------------------------------------------------------------
10 $ 24,536 $ 24,845 $ 25,281 $ 25,548 $ 26,744 $ 28,209
--------------------------------------------------------------------------------
15 40,564 41,330 42,424 43,098 46,173 50,059
--------------------------------------------------------------------------------
20 59,770 61,298 63,502 64,870 71,232 79,532
--------------------------------------------------------------------------------
30 110,365 114,785 121,282 125,393 145,237 172,910
--------------------------------------------------------------------------------
40 183,019 193,262 208,634 218,545 268,344 342,801
--------------------------------------------------------------------------------
*For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate. In
addition, a 10% surtax (not applicable to capital gains) applies to certain
high-income taxpayers. It is computed by applying a 39.6% rate to taxable income
in excess of $250,000. The above tables do not reflect the personal exemption
phaseout nor the limitations of itemized deductions that may apply.
26
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing $2,000
each January--the earliest opportunity--compared to contributing on April 15th
of the following year--the latest, for each tax year.
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can make a
big difference when you retire. A constant 8% versus 10% return, compounded
monthly, illustrates the point. This chart is based on a yearly investment of
$2,000 on January 1. After 30 years the difference can mean as much as 50% more!
8% Return 10% Return
10 Years $ 31,291 $ 35,062
20 Years 98,846 126,005
30 Years 244,692 361,887
The statistical exhibits above are for illustration purposes only and do not
reflect the actual performance for the Series either in the past or in the
future.
27
FINANCIAL STATEMENTS
The Delaware Group Treasury Reserves, Inc.--U.S. Government Money Series'
Statement of Net Assets, Statement of Operations, Statement of Changes in Net
Assets and Notes to Financial Statements, as well as the report of Ernst & Young
LLP, independent auditors, for the fiscal year ended December 31, 1994 are
included in the Series' Annual Report to shareholders. The financial statements,
the notes relating thereto and the report of Ernst & Young LLP listed above are
incorporated by reference from the Annual Report into this Part B.
28