SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A File No. 2-75526
File No. 811-3363
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
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Post-Effective Amendment No. 56 [X]
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AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 56
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DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
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(Exact Name of Registrant as Specified in Charter)
2005 Market Street, Philadelphia, Pennsylvania 19103-7094
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (800) 523-1918
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Approximate Date of Public Offering: February 27, 2004
It is proposed that this filing will become effective:
If appropriate:
this post-effective amendment designates a new effective date for a
------------ previously filed post-effective amendment
- - - CONTENTS - - -
This Post-Effective Amendment No. 56 to Registration File No. 2-75526 includes the following:
1. Facing Page
2. Contents Page
3. Part A - Prospectuses
4. Part B - Statement of Additional Information
5. Part C - Other Information
6. Signatures
7. Exhibits
Delaware
Investments(SM)
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FIXED INCOME A member of Lincoln Financial Group(R)
Prospectus FEBRUARY 27, 2004
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OF THIS PROSPECTUS, AND ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Table of contents ................................................................. Fund profile page 2 Delaware Limited-Term Government Fund 2 ................................................................. How we manage the Fund page 5 Our investment strategies 5 The securities we typically invest in 6 The risks of investing in the Fund 8 ................................................................. Who manages the Fund page 9 Investment manager 9 Portfolio managers 9 Who's who? 10 ................................................................. About your account page 11 Investing in the Fund 11 Choosing a share class 11 Dealer's compensation 13 How to reduce your sales charge 14 How to buy shares 15 Retirement plans 16 How to redeem shares 17 Account minimums 18 Special services 19 Dividends, distributions and taxes 21 Certain management considerations 21 ................................................................. Financial highlights page 22 ................................................................. Glossary page 25 |
Profile: Delaware Limited-Term Government Fund
What is the Fund's goal?
Delaware Limited-Term Government Fund seeks to provide a high stable level of income, while attempting to minimize fluctuations in principal and provide maximum liquidity. Although the Fund will strive to meet its goal, there is no assurance that it will.
Who should invest in the Fund
o Investors with intermediate or long-term financial goals.
o Investors seeking monthly income.
o Investors who would like a relatively conservative income investment to help balance a growth-oriented long-term portfolio.
o Investors seeking a high quality investment with a measure of capital preservation.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate, especially over the short term.
o Investors who want an investment with a fixed share price, such as a money market fund.
What are the Fund's main investment strategies? We invest primarily in short- and intermediate-term U.S. government securities. These are debt securities issued or guaranteed by the U.S., such as U.S. Treasuries, securities issued by U.S. government agencies or instrumentalities, such as securities of the Government National Mortgage Association, and securities that are privately issued but are 100% collateralized by securitie or certificates issued or guaranteed by the U.S. government, its agencies or instrumentalities. may also invest up to 20% of the Fund's net assets in corporate notes and bonds, certificates of deposit and obligations of U.S. and foreign ban commercial paper, certain asset-backed securities and non-agency mortgage-backed securities.
The level of income the Fund provides will vary depending on current interest rates and the specific securities in the portfolio. However, since longer-term rates are generally less volatile than short-term rates, the Fund's income may fluctuate less than a money market fund's income.
Under normal circumstances, the Fund will invest at least 80% of its net assets in U.S. government securities ("80% Policy"). This 80% Policy cannot be changed without shareholder approval. However shareholders would be given at least 60 days notice prior to any such change.
What are the main risks of investing in the Fund? Investing in any mutual fund involves risk, including the risk that you may lose part or all of the money you invest. The value of your investment in the Fund will increase and decrease according to changes in the value of the securities in the Fund's portfolio. This Fund will be affected primarily by adverse changes in interest rates. When interest rates rise, the value of bonds in the portfolio will likely decline.
For a more complete discussion of risk, please "The risks of investing in the Fund" on page 8.
An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
You should keep in mind that an investment in the Fund is not a complete investment program; it should be considered just one part of your total financial plan. Be sure to discuss this Fund with your financial advisor to determine whether it an appropriate choice for you.
This bar chart and table can help you evaluate the risks of investing in the Fund. We show how returns before taxes for the Fund's Class A shares have varied over the past ten calendar years, as well as the average annual returns of all shares for one-year, five-year and ten-year or lifetime periods, as applicable. The Fund's past performance does not necessarily indicate how it will perform in the future. The returns for 2001, 2002 and 2003 reflect an expense limitation and would have been lower without the limitation.
Year-by-year total return (Class A)
During the ten years illustrated in this bar chart, the Fund's highest quarterly return was 4.49% for the quarter ended December 31, 1998 and its lowest quarterly return was -0.71% for the quarter ended June 30, 1999.
The maximum Class A sales charge of 2.75%, which is normally deducted when you purchase shares, is not reflected in the total returns in the previous paragraph and in the bar chart. If this fee were included, the returns would be less than those shown. The average annual returns shown in the table below do include the sales charge.
10 years or
Average annual returns for periods ending 12/31/03 1 year 5 years Lifetime**
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Class A return before taxes* -0.71% 4.76% 4.67%
Class A return after taxes on distributions -1.96% 2.61% 2.18%
Class A return after taxes on distributions
and sale of Fund shares -0.48% 2.70% 2.37%
Class B return before taxes* -0.71% 4.46% 4.47%
Class C return before taxes* 0.27% 4.45% 4.57%
Class R return before taxes N/A N/A 0.14%
Merrill Lynch One-to-Three Year Treasury Index
(reflects no deduction for fees,
expenses, or taxes) 1.90% 5.37% 5.68%
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The Fund's returns are compared to the performance of the Merrill Lynch One-to-Three Year Treasury Index. You should remember that unlike the Fund, the index is unmanaged and does not reflect the actual costs of operating a mutual fund, such as the costs of buying, selling and holding securities. Maximum sales charges are included in the Fund returns shown immediately above.
After-tax performance is presented only for Class A shares of the Fund. The after-tax returns for other Fund classes may vary. Actual after-tax returns depend on the investor's individual tax situation and may differ from the returns shown. After-tax returns are not relevant for shares held in tax-deferred investment vehicles such as employer-sponsored 401(k) plans and individual retirement accounts. The after-tax returns shown are calculated using the highest individual federal marginal income tax rates in effect during the Fund's lifetime and do not reflect the impact of state and local taxes. The after-tax rate used is based on the current tax characterization of the elements of the Fund's returns (e.g., qualified vs. non-qualified dividends) and may be different than the final tax characterization of such elements. Past performance, both before and after taxes, is not a guarantee of future results.
*Total returns assume redemption of shares at end of period. If shares were not redeemed, the returns for Class B would be 1.25%, 4.46% and 4.47% for the one-year, five-year and lifetime periods, respectively. Returns for Class C would be 1.25%, 4.45% and 4.57% for the one-year, five-year and lifetime periods, respectively.
**Lifetime returns are shown if the Fund or Class existed for less than ten years. Inception dates for Class A, Class B, Class C and Class R shares of the Fund were November 24, 1985, May 2, 1994, November 28, 1995 and June 2, 2003, respectively. Merrill Lynch One-to-Three Year Treasury Index return shown is for the Class A ten-year period. The index returns for Class B, Class C and Class R lifetimes were 6.01%, 5.72% and 0.58%, respectively.
Profile: Limited-Term Government Fund (continued)
What are the Fund's fees and expenses? CLASS A B C R
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Sales charges are fees paid Maximum sales charge (load) imposed on
directly from your investments purchases as a percentage of offering price 2.75% none none none
when you buy or sell shares of
the Fund. You do not pay sales Maximum contingent deferred sales charge
charges when you buy or sell (load) as a percentage of original purchase
Class R shares. price or redemption price, whichever is lower none(1) 2.00%(2) 1.00%(3) none
Maximum sales charge (load) imposed on
reinvested dividends none none none none
Redemption fees none none none none
Exchange fees(4) none none none none
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Annual fund operating expenses Management fees 0.50% 0.50% 0.50% 0.50%
are deducted from the Fund's
assets. Distribution and service (12b-1) fees 0.30%(5) 1.00% 1.00% 0.60%
Other expenses 0.36% 0.36% 0.36% 0.36%
Total operating expenses 1.16% 1.86% 1.86% 1.46%
Fee waivers and payments(6) (0.41%) (0.26%) (0.26%) (0.26%)
Net expenses 0.75% 1.60% 1.60% 1.20%
CLASS(8) A B B C C R
(if redeemed) (if redeemed)
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This example is intended to 1 year $349 $163 $363 $163 $263 $122
help you compare the cost of
investing in the Fund to the 3 years $594 $560 $660 $560 $560 $436
cost of investing in other
mutual funds with similar 5 years $857 $982 $982 $982 $982 $773
investment objectives. We show
the cumulative amount of Fund 10 years $1,610 $1,729 $1,729 $2,159 $2,159 $1,724
expenses on a hypothetical
investment of $10,000 with an
annual 5% return over the time
shown.(7) This is an example
only, and does not represent
future expenses, which may be
greater or less than those
shown here.
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(1) A purchase of Class A shares of $1 million or more may be made at net asset value. However, if you buy the shares through a financial advisor who is paid a commission, a contingent deferred sales charge will apply to redemptions made within two years of purchase. Additional Class A purchase options that involve a contingent deferred sales charge may be permitted from time to time and will be disclosed in the Prospectus if they are available.
(2) If you redeem Class B shares during the first year after you buy them, you will pay a contingent deferred sales charge of 2%, which declines to 1% during the second and third years and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1% contingent deferred sales charge.
(4) Exchanges are subject to the requirements of each fund in the Delaware Investments family. A front-end sales charge may apply if you exchange your shares into a fund that has a front-end sales charge.
(5) Class A shares are subject to a 12b-1 fee of 0.30% of average daily net assets, Class B and Class C shares are each subject to a 12b-1 fee of 1.00% of average daily net assets and Class R shares are subject to a 12b-1 fee of 0.60% of average daily net assets. The Fund's distributor has contracted to limit the Class A shares 12b-1 fee through February 28, 2005 to no more than 0.15% of average daily net assets.
(6) The investment manager has contracted to waive fees and pay expenses through February 28, 2005 in order to prevent total operating expenses (excluding any 12b-1 fees, taxes, interest, brokerage fees, extraordinary expenses and certain insurance costs) from exceeding 0.60% of average daily net assets.
(7) The Fund's actual rate of return may be greater or less than the hypothetical 5% return we use here. Also, this example reflects the net operating expenses with expense waivers for the one-year contractual period and total operating expenses without expense waivers for years two through ten.
(8) The Class B example reflects the conversion of Class B shares to Class A shares after approximately five years. Information for years six through ten reflects expenses of the Class A shares. How we manage the Fund Our investment strategies We analyze economic and market conditions, seeking to identify the securities or market sectors that we think are the best investments for the Fund. Following are descriptions of how the portfolio managers pursue the Fund's investment goals. We invest primarily in short- and intermediate-term fixed income securities including:
How we manage the Fund
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or market sectors that we think are the best investments for the Fund. Following are descriptions of how the portfolio managers pursue the Fund's investment goal.
We take a disciplined approach to investing, combining investment strategies and risk management techniques that can help shareholders meet their goals.
We invest primarily in short- and intermediate-term fixed income securities including:
o securities issued or guaranteed by the U.S. government such as U.S.
Treasuries; and
o securities issued by U.S. government agencies or instrumentalities such as securities of the Government National Mortgage Association.
We may invest in instruments that use these government securities as collateral. We may invest up to 20% of the Fund's net assets in corporate notes and bonds, certificates of deposit and obligations of both U.S. and foreign banks, commercial paper, certain asset-backed securities and non-agency mortgage-backed securities.
The Fund's level of income and the stability of its share price will be directly affected by changes in short- and intermediate-term interest rates. We anticipate that the level of income could be higher than a money market fund. However, the Fund's share price will increase and decrease with changes in interest rates. This makes its risk level greater than that of a money market fund.
We strive to reduce the effects of interest rate changes on the share price by keeping the average effective maturity below five years. The average effective maturity is determined by averaging the individual effective maturity of all securities in the portfolio. If we believe that interest rates are historically low, we may shorten the average effective maturity to three years or less. Conversely, if we believe rates are high and therefore likely to go lower, we may increase average effective maturity to as high as five years.
The Fund's investment objective is non-fundamental. This means that the Board of Trustees may change the objective without obtaining shareholder approval. If the objective was changed, we would notify shareholders before the change in the objective became effective.
How we manage the Fund (continued)
The securities we typically
invest in
Fixed-income securities offer the potential for greater income payments than stocks, and also may provide capital appreciation.
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Securities How we use them
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Direct U.S. Treasury obligations: include Treasury bills, notes We may invest without limit in U.S. Treasury securities,
and bonds of varying maturities. U.S. Treasury securities are although they are typically not our largest holding because
backed by the "full faith and credit" of the United States. they generally do not offer as high a level of current income
as other fixed-income securities.
Mortgage-backed securities: Fixed-income securities that There is no limit on government-related mortgage-backed
represent pools of mortgages, with investors receiving securities.
principal and interest payments as the underlying mortgage
loans are paid back. Many are issued and guaranteed against We may invest up to 35% of net assets in mortgage-backed
default by the U.S. government or its agencies or securities issued by private entities if at the time they are
instrumentalities, such as the Federal Home Loan Mortgage issued they are 100% collateralized by securities or
Corporation, Fannie Mae and the Government National Mortgage certificates issued or guaranteed by the U.S. government, its
Association. Others are issued by private financial agencies or instrumentalities. These securities must be rated
institutions, with some fully collateralized by certificates in one of the two highest categories by a nationally recognized
issued or guaranteed by the government or its agencies or statistical ratings organization (NRSRO) at the time of
instrumentalities. purchase.
The Fund may also invest in mortgage-backed securities that are
not government securities and are not directly guaranteed by
the U.S. government in any way. They are secured by the
underlying collateral of the private issuer. These include
collateralized mortgage obligations (CMOs), real estate
mortgage investment conduits (REMICs) and commercial
mortgage-backed securities (CMBSs).We may invest in these
securities only if they are rated in the highest quality
category, such as AAA, by an NRSRO. However, the Fund may not
invest more than 20% of its net assets in securities that are
not government securities or do not use government securities
as collateral.
Asset-backed securities: Bonds or notes backed by accounts We may invest only in asset-backed securities rated in the
receivable including home equity, automobile or credit loans. highest quality category, such as AAA, by an NRSRO. However, we
may not invest more than 20% of the Fund's net assets in
securities (including these asset-backed securities) that are
not government securities or do not use government securities
as collateral.
Repurchase agreements: An agreement between a buyer of Typically, we use repurchase agreements as a short-term
securities, such as the Fund, and a seller of securities in investment for the Fund's cash position. In order to enter into
which the seller agrees to buy the securities back within a these repurchase agreements, the Fund must have collateral of
specified time at the same price the buyer paid for them, plus 102% of the repurchase price. The Fund will only enter into
an amount equal to an agreed upon interest rate. Repurchase repurchase agreements in which the collateral is comprised of
agreements are often viewed as equivalent to cash. U.S. government securities.
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Securities How we use them
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Interest rate swap and index swap agreements: In an interest We may use interest rate swaps to adjust the Fund's sensitivity
rate swap, a fund receives payments from another party based on to interest rates, or to hedge against changes in interest
a floating interest rate in return for making payments based on rates.
a fixed interest rate. An interest rate swap can also work in
reverse, with a fund receiving payments based on a fixed Index swaps may be used to gain exposure to markets that
interest rate and making payments based on a floating interest the Fund invests in, such as the corporate bond market.
rate. In an index swap, a fund receives gains or incurs losses
based on the total return of an index, in exchange for making Interest rate swaps and index swaps will be considered illiquid
fixed or floating interest rate payments to another party. securities (see below).
Options and futures: Options represent a right to buy or sell a At times when we anticipate adverse conditions, we may want to
security or a group of securities at an agreed upon price at a protect gains on securities without actually selling them. We
future date. The purchaser of an option may or may not choose might use options or futures to neutralize the effect of any
to go through with the transaction. The seller of an option, price declines, without selling a bond or bonds, or as a hedge
however, must go through with the transaction if its purchaser against changes in interest rates. We may also sell an option
exercises the option. contract (often referred to as "writing" an option) to earn
additional income for the Fund.
Futures contracts are agreements for the purchase or sale of a
security or a group of securities at a specified price, on a Use of these strategies can increase the operating costs of the
specified date. Unlike purchasing an option, a futures contract Fund and can lead to loss of principal.
must be executed unless it is sold before the settlement date.
Certain options and futures may be considered to be derivative
securities.
Restricted securities: Privately placed securities whose resale We may invest in privately placed securities including those
is restricted under securities law. that are eligible for resale only among certain institutional
buyers without registration, which are commonly known as "Rule
144A Securities." Other restricted securities must be limited
to 10% of total Fund assets.
Illiquid securities: Securities that do not have a ready market We may invest up to 10% of total assets in illiquid securities.
and cannot be easily sold within seven days at approximately
the price that a fund has valued them.
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The Fund may also invest in other securities including certificates of deposit and obligations of both U.S. and foreign banks; corporate debt and commercial paper; and American Depositary Receipts. Please see the Statement of Additional Information for additional descriptions on these securities as well as those listed in the table above.
Borrowing from banks The Fund may borrow money as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions. The Fund will not borrow money in excess of one-third of the value of its net assets.
Lending securities The Fund may lend up to 25% of its assets to qualified brokers, dealers and investors for their use in securities transactions. These transactions, if any, may generate additional income for the Fund.
Purchasing securities on a when-issued or delayed delivery basis The Fund may buy or sell securities on a when-issued or delayed delivery basis; that is, paying for securities before delivery or taking delivery at a later date. The Fund will designate cash or securities in amounts sufficient to cover its obligations, and will value the designated assets daily.
Portfolio turnover We anticipate that the Fund's annual portfolio turnover will exceed 100%, and may be considerably in excess of 100%. A turnover rate of 100% would occur if the Fund sold and replaced all of the securities valued at 100% of its net assets within one year, if for example the Fund bought and sold all of the securities in its portfolio once in the course of a year or frequently traded a single security. High turnover can result in increased transaction costs and tax liability for investors.
How we manage the Fund (continued)
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest. Before you invest in the Fund, you should carefully evaluate the risks. Because of the nature of the Fund, you should consider your investment to be a long-term investment that typically provides the best results when held for a number of years. Following are the chief risks you assume when investing in the Fund. Please see the Statement of Additional Information for further discussion of these risks and other risks not discussed here.
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Risks How we strive to manage them
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Market risk: The risk that all or a majority of the securities We maintain a long-term investment approach and focus on high
in a certain market--like the stock or bond market--will quality individual bonds that we believe can provide a steady
decline in value because of factors such as economic stream of income regardless of interim fluctuations in the bond
conditions, future expectations or investor confidence. market. We generally do not buy and sell securities for
short-term purposes.
Index swaps are subject to the same market risks as the
investment market or sector that the index represents. In evaluating the use of an index swap, we carefully consider
Depending on the actual movements of the index and how well the how market changes could affect the swap and how that compares
portfolio manager forecasts those movements, a fund could to us investing directly in the market the swap is intended to
experience a higher or lower return than anticipated. represent.
Industry and security risk: The risk that the value of We diversify the Fund's assets across a variety of sectors in
securities in a particular industry or the value of an the bond market. We also follow a rigorous selection process
individual stock or bond will decline because of changing before choosing securities for the portfolio.
expectations for the performance of that industry or for the
individual company issuing the stock or bond.
Interest rate risk: The risk that securities, particular bonds Interest rate risk is the most significant risk for this Fund.
with longer maturities, will decrease in value if interest In striving to manage this risk, we monitor economic conditions
rates rise. and the interest rate environment. We keep the average maturity
of the portfolio as short as is prudent, in keeping with our
Swaps may be particularly sensitive to interest rate changes. objective to provide high current income.
Depending on the actual movements of interest rates and how
well the portfolio manager anticipates them, a Fund could We will not invest in swaps with maturities of more than two
experience a higher or lower return than anticipated. years. Each business day we will calculate the amount the Fund
must pay for swaps it holds and will segregate enough cash or
other liquid securities to cover that amount.
Credit risk: The possibility that a bond's issuer (or an entity By focusing primarily on U.S. Treasury securities and other
that insures the bond) will be unable to make timely payments securities that are backed by the U.S. government, we minimize
of interest and principal. the possibility that any of the securities in our portfolio
will not pay interest or principal. U.S. government securities
are generally considered to be of the highest quality.
When selecting non-government securities and the dealers with
whom we do interest rate swaps, we focus on those with high
quality ratings and do careful credit analysis before
investing.
Prepayment risk: The risk that homeowners will prepay mortgages We take into consideration the likelihood of prepayment when we
during periods of low interest rates, forcing a fund to select mortgages. We may look for mortgage securities that have
reinvest their money at interest rates that might be lower than characteristics that make them less likely to be prepaid, such
those on the prepaid mortgage. Prepayment risk may also affect as low outstanding loan balances or below-market interest rates.
other types of debt securities, but generally to a lesser
extent than mortgage securities.
Liquidity risk: The possibility that securities cannot be U.S. Treasuries and other U.S. government debt securities are
readily sold within seven days at approximately the price that typically the most liquid securities available. Therefore,
a fund values them. liquidity risk is not a significant risk for this Fund.
Swap agreements will be treated as illiquid securities, but
most swap dealers will be willing to repurchase interest rate
swaps.
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Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware Management Business Trust, which is an indirect, wholly owned subsidiary of Delaware Management Holdings, Inc. Delaware Management Company makes investment decisions for the Fund, manages the Fund's business affairs and provides daily administrative services. For these services, the manager was paid 0.24% of average daily net assets for the last fiscal year.
Portfolio managers
Stephen R. Cianci and Paul Grillo have day-to-day responsibilities for making investment decisions for the Fund.
Stephen R. Cianci, Vice President/Senior of the Fund, holds a BS and an MBA in Finance from Widener University. Mr. Cianci became co-manager of the Fund in January 1999. He joined Delaware Investments' fixed-income department in 1992 as an investment grade quantitative research analyst. In addition to his quantitative research responsibilities, Mr. Cianci also served as a mortgage-backed and asset-backed securities analyst. Mr. Cianci is an Adjunct Professor of Finance at Widener University and is a CFA charterholder.
Paul Grillo, Vice President/Senior Portfolio Manager of the Fund, holds a bachelor's degree in Business Management from North Carolina State University and an MBA in Finance from Pace University. Mr. Grillo became co-manager of the Fund in January 1999. Prior to joining Delaware Investments in 1993, he served as Mortgage Strategist and Trader at the Dreyfus Corporation. He also served as Mortgage Strategist and Portfolio Manager at Chemical Investment Group and as Financial Analyst at Chemical Bank. Mr. Grillo is a CFA charterholder.
Who manages the Fund (continued)
Who's who?
This diagram shows the various organizations involved with managing, administering and servicing the Delaware Investments Funds.
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Board of Trustees
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Investment manager ------------------- Custodian
Delaware Management Company --------------------- The Fund ------------------ JPMorgan Chase Bank
2005 Market Street ------------------- 4 Chase Metrotech Center
Philadelphia, PA 19103-7094 | | Brooklyn, NY 11245
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| Distributor |
| Delaware Distributors, L.P. ------------------------------
---------------------------- 2005 Market Street Service agent
Portfolio managers Philadelphia, PA 19103-7094 Delaware Service Company, Inc.
(see page 9 for details) --------------------------- 2005 Market Street
---------------------------- | Philadelphia, PA 19103-7094
| ------------------------------
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Financial intermediary wholesaler |
Lincoln Financial Distributors, Inc. |
2001 Market Street |
Philadelphia, PA 19103-7055 |
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Financial advisors
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Shareholders
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Board of Trustees A mutual fund is governed by a Board of Trustees which has oversight responsibility for the management of the fund's business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor and others that perform services for the fund. Generally, at least 40% of the Board of Trustees must be independent of the fund's investment manager and distributor. However, the Delaware Limited-Term Government Fund relies on certain exemptive rules created by the SEC that require the Board of Trustees overseeing the Fund to be comprised of a majority of such independent Trustees. These independent fund Trustees, in particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting portfolio investments consistent with the objective and policies stated in the mutual fund's prospectus. The investment manager places portfolio orders with broker/dealers and is responsible for obtaining the best overall execution of those orders. A written contract between a mutual fund and its investment manager specifies the services the manager performs. Most management contracts provide for the manager to receive an annual fee based on a percentage of the fund's average daily net assets. The manager is subject to numerous legal restrictions, especially regarding transactions between itself and the funds it advises.
Portfolio managers Portfolio managers are employed by the investment manager to make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio securities and most funds place them with a qualified bank custodian who segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public through distributors who are regulated as broker/dealers and are subject to NASD Regulation, Inc. (NASDR(SM)) rules governing mutual fund sales practices.
Financial intermediary wholesaler Pursuant to a contractual arrangement with Delaware Distributors, L.P., Lincoln Financial Distributors, Inc. (LFD) is primarily responsible for promoting the sale of Fund shares through broker/dealers, financial advisors and other financial intermediaries.
Service agent Mutual fund companies employ service agents (sometimes called transfer agents) to maintain records of shareholder accounts, calculate and disburse dividends and capital gains and prepare and mail shareholder statements and tax information, among other functions. Many service agents also provide customer service to shareholders.
Financial advisors Financial advisors provide advice to their clients, analyzing their financial objectives and recommending appropriate funds or other investments. Financial advisors are compensated for their services, generally through sales commissions, and through 12b-1 and/or service fees deducted from the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have specific voting rights, including the right to elect trustees. Material changes in the terms of a fund's management contract must be approved by a shareholder vote, and funds seeking to change fundamental investment policies must also seek shareholder approval.
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share class has a different combination of sales charges, fees, and other features, you should consult your financial advisor to determine which class best suits your investment goals and time frame.
Choosing a share class
CLASS A
o Class A Class A shares have a front-end sales charge of up to 2.75% that you pay when you buy the shares. The offering price for Class A shares includes the front-end sales charge.
o If you invest $100,000 or more, your front-end sales charge will be reduced.
o You may qualify for other reduced sales charges, as described in "How to reduce your sales charge," and under certain circumstances the sales charge may be waived; please see the Statement of Additional Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than 0.30% (contractually limited to 0.15% through February 28, 2005) of average daily net assets, which is lower than the 12b-1 fee for Class B, Class C and Class R shares.
o Class A shares generally are not subject to a contingent deferred sales charge except in the limited circumstances described in the table below.
o Class A shares generally are not available for purchase by anyone qualified to purchase Class R shares.
Class A sales charges
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Sales charge as % Sales charge as %
Amount of purchase of offering price of amount invested
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Less than $100,000 2.75% 2.83%
$100,000 but under $250,000 2.00% 2.05%
$250,000 but under $1 million 1.00% 1.01%
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As shown below, there is no front-end sales charge when you purchase $1
million or more of Class A shares. However, if your financial advisor is paid a
commission on your purchase, you will have to pay a limited contingent deferred
sales charge of 0.75% if you redeem these shares within the first year unless a
specific waiver of the charge applies.
--------------------------------------------------------------------------------
Sales charge as % Sales charge as %
Amount of purchase of offering price of amount invested
--------------------------------------------------------------------------------
$1 million up to $5 million none none
Next $20 million up to $25 million none none
Amount over $25 million none none
--------------------------------------------------------------------------------
|
About your account (continued)
CLASS B
o Class Bw Class B shares have no front-end sales charge, so the full amount of your purchase is invested in the Fund. However, you will pay a contingent deferred sales charge if you redeem your shares within three years after you buy them.
o If you redeem Class B shares during the first year after you buy them, the shares will be subject to a contingent deferred sales charge of 2%. The contingent deferred sales charge is 1% during the second and third years and 0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be waived; please see the Statement of Additional Information.
o For approximately five years after you buy your Class B shares, they are subject to annual 12b-1 fees no greater than 1% of average daily net assets, of which 0.25% are service fees paid to the distributor, dealers or others for providing services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses and any dividends paid on these shares are lower than dividends on Class A and Class R shares.
o Approximately five years after you buy them, Class B shares automatically convert into Class A shares with a 12b-1 fee of no more than 0.30% (contractually limited to 0.15% through February 28, 2005). Conversion may occur as late as three months after the fifth anniversary of purchase, during which time Class B's higher 12b-1 fees apply.
o You may purchase only up to $100,000 of Class B shares at any one time. The limitation on maximum purchases varies for retirement plans.Class C
CLASS C
o Class C shares have no front-end sales charge, so the full amount of your purchase is invested in the Fund. However, you will pay a contingent deferred sales charge of 1% if you redeem your shares within 12 months after you buy them.
o Under certain circumstances the contingent deferred sales charge may be waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee no greater than 1% of average daily net assets, of which 0.25% are service fees paid to the distributor, dealers or others for providing services and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses and any dividends paid on these shares are lower than dividends on Class A and Class R shares.
o Unlike Class B shares, Class C shares do not automatically convert into another class.
o You may purchase any amount less than $1,000,000 of Class C shares at any one time. The limitation on maximum purchases varies for retirement plans.
CLASS R
o Class R shares have no up-front sales charge, so the full amount of your purchase is invested in a Fund. Class R shares are not subject to a contingent deferred sales charge.
o Class R shares are subject to an annual 12b-1 fee no greater than 0.60% of average daily net assets, which is lower than the 12b-1 fee for Class B and Class C shares.
o Because of the higher 12b-1 fee, Class R shares have higher expenses and any dividends paid on these shares are lower than dividends on Class A shares.
o Unlike Class B shares, Class R shares do not automatically convert into another class.
o Class R shares generally are available only to (i) qualified and
non-qualified plan shareholders covering multiple employees (including
401(k), 401(a), 457, and non-custodial 403(b) plans, as well as other
non-qualified deferred compensation plans) with assets (at the time shares
are considered for purchase) of $10 million or less; and (ii) to IRA
rollovers from plans maintained on Delaware's retirement record keeping
system that are offering R Class shares to participants.
Except as noted above, no other IRA accounts are eligible for Class R shares (e.g., no SIMPLE IRA's, SEP-IRA's, SAR-SEP IRA's, Roth IRA's, etc.). For purposes of determining plan asset levels, affiliated plans may be combined at the request of the plan sponsor.
Each share class may be eligible for purchase through programs sponsored by financial intermediaries where such program requires the purchase of a specific class of shares.
Any account holding Class A shares as of June 1, 2003 (the date Class R shares were made available) continues to be eligible to purchase Class A shares after that date. Any account holding Class R shares is not eligible to purchase Class A shares.
Dealer's compensation
Your financial advisor who sells you shares of the Fund may be eligible to receive the following amounts as compensation for your investment in the Fund. These amounts are paid by the distributor to the securities dealer with whom your financial advisor is associated.
CLASS A(1) CLASS B(2) CLASS C(3) CLASS R(4)
--------------------------------------------------------------------------------
Commission (%) - 4.00% 1.00% -
Investment up to $49,999 5.00% - - -
$50,000 to $99,999 4.00% - - -
$100,000 to $249,999 3.00% - - -
$250,000 to $499,999 2.00% - - -
$500,000 to $999,999 1.60% - - -
$1,000,000 to $4,999,999 1.00% - - -
$5,000,000 to $24,999,999 0.50% - - -
$25,000,000 or more 0.25% - - -
12b-1 Fee to Dealer 0.15% 1.00% 1.00% 0.60%
|
(1) On sales of Class A shares, the Distributor re-allows to your securities
dealer a portion of the front-end sales charge depending upon the amount you
invested. Your securities dealer is eligible to receive up to 0.30% 12b-1
fee applicable to Class A shares. The maximum 12b-1 fee applicable to Class
A shares is 0.30%, however the Distributor has contracted to limit this
amount to 0.15% through February 28, 2005.
(2) On sales of Class B shares, the Distributor pays your securities dealer an
up-front commission of 4.00%. After approximately eight years, Class B
shares automatically convert into Class A shares and dealers may then be
eligible to receive the 0.30% (contracted to limit this amount to 0.15%
through February 28, 2005) 12b-1 fee applicable to Class A.
(3) On sales of Class C shares, the Distributor pays your securities dealer an
up-front commission of 1.00%. The up-front commission includes an advance of
the first year's 12b-1 service fee of up to 0.25%. During the first 12
months, the Distributor retains the full 1.00% 12b-1 fee to partially offset
the up-front commission and the prepaid 0.25% service fee advanced at the
time of purchase. Starting in the 13th month, your securities dealer may be
eligible to receive the full 1.00% 12b-1 fee applicable to Class C.
(4) On sales of Class R shares, the Distributor does not pay your securities
dealer an up-front commission. Your securities dealer may be eligible to
receive a 12b-1 of up to 0.60% from the date of purchase.
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares. You may also need to provide information to your financial advisor or the Fund in order to qualify for a reduction in sales charges, such as your other Delaware Investments fund holdings and the names and their holdings of qualifying family members. Please refer to the Statement of Additional Information for detailed information and eligibility requirements. You can also get additional information from your financial advisor. You or your financial advisor must notify us at the time you purchase shares if you are eligible for any of these programs. Class R shares have no up-front sales charge.
------------------------------------------------------------------------------------------------------------------------------------
Share class
Program How it works A B C
------------------------------------------------------------------------------------------------------------------------------------
Letter of Intent Through a Letter of Intent you agree to X Although the Letter of Intent and Rights
invest a certain amount in Delaware of Accumulation do not apply to the
Investments Funds (except money market funds purchase of Class B and Class C shares,
with no sales charge) over a 13-month period you can combine your purchase of Class A
to qualify for reduced front-end sales shares with your purchase of Class B and
charges. Class C shares to fulfill your Letter of
Intent or qualify for Rights of
Accumulation.
Rights of You can combine your holdings or purchases of X
Accumulation all funds in the Delaware Investments family
(except money market funds with no sales
charge) as well as the holdings and purchases
of your spouse and children under 21 to
qualify for reduced front-end sales charges.
Reinvestment of Up to 12 months after you redeem shares, you For Class A, For Class B, your Not available.
Redeemed Shares can reinvest the proceeds without paying a you will not account will be
sales charge as noted to the right. have to pay an credited with the
additional contingent
front-end sales deferred sales
charge. charge you
previously paid on
the amount you
are reinvesting.
Your schedule for
contingent
deferred sales
charges and
conversion to
Class A will not
start over again; it
will pick up from
the point at which
you redeemed
your shares.
SIMPLE IRA, These investment plans may qualify for X There is no reduction in sales charges for
SEP/IRA,SAR/SEP, reduced sales charges by combining the Class B or Class C shares for group
Prototype Profit purchases of all members of the group. purchases by retirement plans.
Sharing, Pension, Members of these groups may also qualify to
401(k), SIMPLE purchase shares without a front-end sales
401(k), 403(b)(7), charge and may qualify for a waiver of any
and 457 Retirement contingent deferred sales charges.
Plans
------------------------------------------------------------------------------------------------------------------------------------
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How to buy shares
[GRAPHIC OF A PERSON OMITTED]
Through your financial advisor
Your financial advisor can handle all the details of purchasing shares, including opening an account. Your advisor may charge a separate fee for this service.
[GRAPHIC OF AN ENVELOPE OMITTED]
By mail
Complete an investment slip and mail it with your check, made payable to the fund and class of shares you wish to purchase, to Delaware Investments, 2005 Market Street, Philadelphia, PA 19103-7094. If you are making an initial purchase by mail, you must include a completed investment application (or an appropriate retirement plan application if you are opening a retirement account) with your check.
[GRAPHIC OF A JAGGED WIRE OMITTED]
By wire
Ask your bank to wire the amount you want to invest to Bank of New York, ABA #021000018, Bank Account number 8900403748. Include your account number and the name of the fund in which you want to invest. If you are making an initial purchase by wire, you must call us so we can assign you an account number.
[GRAPHIC OMITTED]
By exchange
You can exchange all or part of your investment in one or more funds in the Delaware Investments family for shares of other funds in the family. Please keep in mind, however, that under most circumstances you are allowed to exchange only between like classes of shares. To open an account by exchange, call the Shareholder Service Center at 800 523-1918.
[GRAPHIC OF A KEYPAD OMITTED]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone service, or through our web site, www.delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can generally open an account with
an initial investment of $1,000 and make additional investments at any time for
as little as $100. If you are buying shares in an Individual Retirement Account
(IRA) or Roth IRA, under the Uniform Gifts to Minors Act, or the Uniform
Transfers to Minors Act, or through an Automatic Investing Plan, the minimum
purchase is $250, and you can make additional investments of $25 or more. The
minimum for a Coverdell Education Savings Account (formerly an "Education IRA")
is $500. The minimums vary for retirement plans other than IRAs, Roth IRAs or
Coverdell Education Savings Accounts.
The price you pay for shares will depend on when we receive your purchase order. In particular, we reserve the right to reject any specific purchase order for any person whose transactions seem to follow a "market timing" pattern. If we or an authorized agent receives your order before the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time), you will pay that day's closing share price which is based on the Fund's net asset value. If your order is received after the close of regular trading, you will pay the next business day's price. A business day is any day that the New York Stock Exchange is open for business. We reserve the right to reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular trading on the New York Stock Exchange each business day that the Exchange is open. We calculate this value by adding the market value of all the securities and assets in the Fund's portfolio, deducting all liabilities, and dividing the resulting number by the number of shares outstanding. The result is the net asset value per share. We generally price securities and other assets for which market quotations are readily available at their market value. We price fixed-income securities on the basis of valuations provided to us by an independent pricing service that uses methods approved by the Board of Trustees. Any fixed-income securities that have a maturity of less than 60 days we price at amortized cost. For all other securities, we use methods approved by the Board of Trustees that are designed to price securities at their fair market value.
Retirement plans
In addition to being an appropriate investment for your IRA, Roth IRA and
Coverdell Education Savings Account, shares in the Fund may be suitable for
group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial advisor, or call 800 523-1918.
How to redeem shares
[GRAPHIC OF AN ENVELOPE OMITTED]
Through your financial advisor
Your financial advisor can handle all the details of redeeming your shares. Your advisor may charge a separate fee for this service.
[GRAPHIC OF A PERSON OMITTED]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 2005 Market Street, Philadelphia, PA 19103-7094. All
owners of the account must sign the request, and for redemptions of $100,000 or
more, you must include a signature guarantee for each owner. Signature
guarantees are also required when you request redemption proceeds to be sent to
an address other than the address of record on an account.
[GRAPHIC OF A TELEPHONE OMITTED]
By telephone
You can redeem up to $100,000 of your shares by telephone. You may have the proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you may have the proceeds sent directly to your bank by wire. Bank information must be on file before you request a wire redemption.
[GRAPHIC OF A JAGGED WIRE OMITTED]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited directly to your bank account, normally the next business day after we receive your request. If you request a wire deposit, a bank wire fee may be deducted from your proceeds. Bank information must be on file before you request a wire redemption.
[GRAPHIC OF A KEYPAD OMITTED]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or through our web site, www.delawareinvestments.com. For more information about how to sign up for these services, call our Shareholder Service Center at 800 523-1918.
[GRAPHIC OF A HAND OMITTED]
Through checkwriting
You may redeem Class A shares by writing checks of $500 or more. Checks must be signed by all owners of the account unless you indicate otherwise on your Investment Application. The check writing feature is not available for retirement plans. Also, because dividends are declared daily, you may not close your account by writing a check. When you write checks you are subject to bank regulations and may be subject to a charge if the check amount exceeds the value of your account.
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with your request to sell the shares. We recommend that you send your certificates by certified mail.
When you send us a properly completed request to redeem or exchange shares, and we or an authorized agent receives the request before the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time), you will receive the net asset value next determined after we receive your request. If we receive your request after the close of regular trading on the New York Stock Exchange, you will receive the net asset value next determined on the next business day. We will deduct any applicable contingent deferred sales charges. You may also have to pay taxes on the proceeds from your sale of shares. We will send you a check, normally the next business day, but no later than seven days after we receive your request to sell your shares. If you purchased your shares by check, we will wait until your check has cleared, which can take up to 15 days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem your shares, the amount subject to the fee will be based on the shares' net asset value when you purchased them or their net asset value when you redeem them, whichever is less. This arrangement assures that you will not pay a contingent deferred sales charge on any increase in the value of your shares. You also will not pay the charge on any shares acquired by reinvesting dividends or capital gains. If you exchange shares of one fund for shares of another, you do not pay a contingent deferred sales charge at the time of the exchange. If you later redeem those shares, the purchase price for purposes of the contingent deferred sales charge formula will be the price you paid for the original shares, not the exchange price. The redemption price for purposes of this formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs and Roth IRAs, Uniform Gifts to Minors Act or
Uniform Transfers to Minors Act accounts or accounts with automatic investing
plans and $500 for Coverdell Education Savings Accounts) for three or more
consecutive months, you will have until the end of the current calendar quarter
to raise the balance to the minimum. If your account is not at the minimum by
the required time, you will be charged a $9 fee for that quarter and each
quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, your Fund may redeem your account
after 60 days' written notice to you.
Special services
Automatic Exchanges The Automatic Investing Plan allows you
Investing Plan to make regular monthly or quarterly investments
directly from your checking account.
Direct Deposit With Direct Deposit you can make additional
investments through payroll deductions, recurring
government or private payments such as Social
Security or direct transfers from your bank
account.
Wealth Builder Option With the Wealth Builder Option you can arrange
automatic monthly exchanges between your shares in
one or more Delaware Investments funds. Wealth
Builder exchanges are subject to the same rules as
regular exchanges (see below) and require a
minimum monthly exchange of $100 per fund.
Online Account Access Account access is a password protected area of the
Delaware Investments Web site that gives you
access to your account information and allows you
to perform transactions in a secure environment.
Electronic Delivery With Delaware eDelivery you can receive your fund
documents electronically instead of via the U.S.
mail. When you sign up for eDelivery, you can
access your account statements, shareholder
reports, and other fund materials online, in a
secure environment at any time, from anywhere.
Dividend Through our Dividend Reinvestment Plan, you can
Reinvestment Plan have your distributions reinvested in your account
or the same share class in another fund in the
Delaware Investments family. The shares that you
purchase through the Dividend Reinvestment Plan
are not subject to a front-end sales charge or to
a contingent deferred sales charge. Under most
circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges You can exchange all or part of your shares,
normally for shares of the same class in another
Delaware Investments Fund without paying a
front-end sales charge or a contingent deferred
sales charge at the time of the exchange. We may
refuse the purchase side of any exchange request,
if, in the investment manager's judgment, the Fund
would be unable to invest effectively in
accordance with its investment objectives and
policies or would otherwise potentially be
adversely affected. In particular, a pattern of
exchanges that coincide with a "market timing"
strategy may be refused. However, if you exchange
shares from a money market fund that does not have
a sales charge or from Class R shares of any fund
you will pay any applicable sales charges on your
new shares. When exchanging Class B and Class C
shares of one fund for the same class of shares in
other funds, your new shares will be subject to
the same contingent deferred sales charge as the
shares you originally purchased. The holding
period for the contingent deferred sales charge
will also remain the same, with the amount of time
you held your original shares being credited
toward the holding period of your new shares. You
don't pay sales charges on shares that you
acquired through the reinvestment of dividends.
You may have to pay taxes on your exchange. When
you exchange shares, you are purchasing shares in
another fund so you should be sure to get a copy
of the fund's prospectus and read it carefully
before buying shares through an exchange.
|
About your account (continued)
MoneyLine(SM) Through our MoneyLine(SM) On Demand Service, you or
On Demand Service your financial advisor may transfer money between
your Fund account and your predesignated bank
account by telephone request. This service is not
available for retirement plans. MoneyLine has a
minimum transfer of $25 and a maximum transfer of
$50,000, except for purchases into IRAs. Delaware
Investments does not charge a fee for this
service; however, your bank may assess one.
MoneyLine Through our MoneyLine Direct Deposit Service you
Direct Deposit Service can have $25 or more in dividends and
distributions deposited directly to your bank
account. Delaware Investments does not charge a
fee for this service; however, your bank may
assess one. This service is not available for
retirement plans.
Systematic Through our Systematic Withdrawal Plan you can
Withdrawal Plan arrange a regular monthly or quarterly payment
from your account made to you or someone you
designate. If the value of your account is $5,000
or more, you can make withdrawals of at least $25
monthly, or $75 quarterly. You may also have your
withdrawals deposited directly to your bank
account through our MoneyLine Direct Deposit
Service. The applicable Limited CDSC for Class A
Shares and CDSC for Class B and C Shares redeemed
via a Systematic Withdrawal Plan will be waived if
the annual amount withdrawn in each year is less
than 12% of the account balance on the date that
the Plan is established. If the annual amount
withdrawn in any year exceeds 12% of the account
balance on the date that the Systematic Withdrawal
Plan is established, all redemptions under the
Plan will be subjected to the applicable
contingent deferred sales charge, including an
assessment for previously redeemed amounts under
the Plan.
20
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Dividends, Dividends are declared daily and paid monthly.
distributions and Short-term capital gains if any, may be paid
taxes quarterly, but the board of trustees may choose to
distribute them less frequently. Long-term capital
gains, if any, will be distributed annually. We
automatically reinvest all dividends and capital
gains, unless you direct us otherwise.
In addition, in order to satisfy certain
distribution requirements of the Tax Reform Act of
1986, the Funds may declare special year-end
dividend and capital gains distributions during
November and December to shareholders of record on
a date in such month. Such distributions, if
received by shareholders by January 1, are deemed
to have been paid by the Funds and received by
shareholders on the earlier of the date paid or
December 31 of the prior year.
On May 28, 2003, President Bush signed into law
the Jobs and Growth Tax Relief Reconciliation Act
of 2003, which changes the tax rates on certain
types of distributions. We urge you to consult
your tax advisor about your particular tax
situation and how it might be affected by the new
tax law. The tax status of your dividends from the
Funds is the same whether you reinvest your
dividends or receive them in cash.
Distributions from the Funds' long-term capital
gains are taxable as capital gains, while
distributions from short-term capital gains and
net investment income are generally taxable as
ordinary income. The new tax law reduces the tax
rate on certain qualifying dividends and long-term
capital gains.
You also may be subject to state and local taxes
on distributions.
We will send you a statement each year by January
31 detailing the amount and nature of all
dividends and capital gains that you were paid for
the prior year.
Certain management Investments by fund of funds and investment
considerations vehicles that operate similarly to funds of funds
The Fund accepts investments from funds of funds,
including those within Delaware Investments
family, and investment vehicles that operate
similarly to funds of funds, such as 529 plans. A
"529 Plan" is a college savings program that
operates under section 529 of the Internal Revenue
Code. From time to time, the Fund may experience
large investments or redemptions due to
allocations or rebalancings by these funds of
funds and/or similar investment vehicles. While it
is impossible to predict the overall impact of
these transactions over time, there could be
adverse effects on portfolio management. For
example, the Fund may be required to sell
securities or invest cash at times when it would
not otherwise do so. These transactions could also
have tax consequences if sales of securities
result in gains, and could also increase
transaction costs or portfolio turnover. The
manager will monitor transactions by the funds of
funds and/or similar investment vehicles and will
attempt to minimize any adverse effects on the
Fund and funds of funds and/or similar investment
vehicle as a result of these transactions.
|
Financial highlights
The Financial highlights table is intended to help you understand the Fund's financial performance. All "per share" information reflects financial results for a single Fund share. This information has been audited by Ernst & Young LLP, whose report, along with the Fund's financial statements, is included in the Fund's annual report, which is available upon request by calling 800 523-1918.
Class A
--------------------------------------------------------------------------------------------------------------------------------
Year ended
12/31
Delaware Limited-Term Government Fund 2003 2002 2001(1) 2000 1999
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.770 $8.600 $8.430 $8.270 $8.700
Income (loss) from investment operations:
Net investment income 0.222 0.349 0.423 0.522 0.519
Net realized and unrealized gain (loss)
on investments (0.039) 0.255 0.238 0.161 (0.429)
-------- -------- -------- -------- --------
Total from investment operations 0.183 0.604 0.661 0.683 0.090
-------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income (0.315) (0.434) (0.491) (0.523) (0.520)
Return of capital (0.018) - - - -
-------- -------- -------- -------- --------
Total dividends and distributions (0.333) (0.434) (0.491) (0.523) (0.520)
-------- -------- -------- -------- --------
Net asset value, end of period $8.620 $8.770 $8.600 $8.430 $8.270
======== ======== ======== ======== ========
Total return(3) 2.12% 7.08% 8.16% 8.59% 1.07%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $249,845 $250,729 $208,152 $208,565 $262,776
Ratio of expenses to average net assets 0.75% 0.75% 0.89% 1.13% 1.00%
Ratio of expenses to average net assets prior
to expense limitation and expenses paid indirectly 1.14% 1.05% 1.08% 1.13% 1.00%
Ratio of net investment income to average
net assets 2.57% 3.99% 4.92% 6.36% 6.12%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 2.18% 3.69% 4.73% 6.36% 6.12%
Portfolio turnover 483% 313% 386% 273% 175%
--------------------------------------------------------------------------------------------------------------------------------
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(1) As required, effective January 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities and the
recording of paydown gains and losses on mortgage- and asset-backed
securities as an adjustment to interest income. The effect of these changes
for the year ended December 31, 2001 was a decrease in net investment income
per share of $0.068, an increase in net realized and unrealized gain (loss)
per share of $0.068, and a decrease in the ratio of net investment income to
average net assets of 0.80%. Per share data and ratios for periods prior to
January 1, 2001, have not been restated to reflect these changes in
accounting.
(2) Date of commencement of operations. Ratios have been annualized and total
return has not been annualized.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager and
distributor, as applicable. Performance would have been lower had the
expense limitation not been in effect.
Class B Class C Class R
Period
Year ended Year ended 6/2/03(2)
12/31 12/31 through
2003 2002 2001(1) 2000 1999 2003 2002 2001(1) 2000 1999 12/31/03
-----------------------------------------------------------------------------------------------------------------------------------
$8.770 $8.600 $8.430 $8.270 $8.700 $8.770 $8.600 $8.430 $8.270 $8.700 $8.800
0.152 0.274 0.348 0.453 0.447 0.152 0.274 0.347 0.453 0.447 0.074
(0.044) 0.255 0.238 0.160 (0.429) (0.044) 0.255 0.238 0.160 (0.431) (0.063)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
0.108 0.529 0.586 0.613 0.018 0.108 0.529 0.585 0.613 0.016 0.011
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.244) (0.359) (0.416) (0.453) (0.448) (0.244) (0.359) (0.415) (0.453) (0.446) (0.165)
(0.014) - - - - (0.014) - - - - (0.016)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(0.258) (0.359) (0.416) (0.453) (0.448) (0.258) (0.359) (0.415) (0.453) (0.446) (0.181)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
$8.620 $8.770 $8.600 $8.430 $8.270 $8.620 $8.770 $8.600 $8.430 $8.270 $8.630
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
1.25% 6.17% 7.22% 7.68% 0.22% 1.25% 6.16% 7.20% 7.68% 0.20% 0.14%
$37,774 $50,326 $21,743 $8,600 $12,483 $72,045 $71,189 $21,386 $4,506 $6,638 $1,499
1.60% 1.60% 1.74% 1.98% 1.85% 1.60% 1.60% 1.74% 1.98% 1.85% 1.20%
1.86% 1.90% 1.93% 1.98% 1.85% 1.86% 1.90% 1.93% 1.98% 1.85% 1.38%
1.72% 3.14% 4.07% 5.51% 5.27% 1.72% 3.14% 4.07% 5.51% 5.27% 1.86%
1.46% 2.84% 3.88% 5.51% 5.27% 1.46% 2.84% 3.88% 5.51% 5.27% 1.68%
483% 313% 386% 273% 175% 483% 313% 386% 273% 175% 483%
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Financial highlights (continued)
How to read the Financial highlights
Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned from
the Fund's investments; it is after expenses have been deducted.
Net realized and unrealized gain (loss)on investments A realized gain occurs when we sell an investment at a profit, while a realized loss occurs when we sell an investment at a loss. When an investment increases or decreases in value but we do not sell it, we record an unrealized gain or loss. The amount of realized gain per share, if any, that we pay to shareholders would be under "Less dividends and distributions from - Net realized gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of the fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover
This figure tells you the amount of trading activity in a fund's portfolio. A
turnover rate of 100% would occur if the Fund sold and replaced securities
valued at 100% of its net assets within one year, if for example the Fund bought
and sold all of the securities in its portfolio once in the course of a year, or
frequently traded a single security. High turnover can result in increased
transaction costs and tax liability for investors.
Glossary
How to use this glossary
This glossary includes definitions of investment terms, many of which are used throughout the Prospectus. If you would like to know the meaning of an investment term that is not explained in the text please check the glossary.How to use this glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and typically
is inversely related to current interest rates. Generally, when interest rates
rise, bond prices fall, and when interest rates fall, bond prices rise. See
Fixed-income securities.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical ratings organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial advisor for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial advisor for advice and service, rather than an up-front
commission.
Corporate bond
A debt security issued by a corporation. See Bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Glossary (continued)
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial advisor
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invest is paid back at a
pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bond.
Government securities
Securities issued by the U.S. government or its agencies. They include
Treasuries as well as agency-backed securities such as Fannie Maes.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment advisor for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
Merrill Lynch One-to-Three Year Treasury Index An unmanaged index of U.S. Treasury notes and bonds with maturities greater than or equal to one year and less than three years. It does not include inflation linked U.S. government bonds.
NASD Regulation, Inc. (NASDR(SM))
The independent subsidiary of the National Association of Securities Dealers,
Inc. responsible for regulating the securities industry.
Nationally recognized statistical ratings organization (NRSRO) A company that assesses the credit quality of bonds, commercial paper, preferred and common stocks and municipal short-term issues, rating the probability that the issuer of the debt will meet the scheduled interest payments and repay the principal. Ratings are published by such companies as Moody's Investors Service, Inc. (Moody's), Standard & Poor's (S&P) and Fitch, Inc. (Fitch).
Net assets
Net assets for purposes of the Fund's 80% Policy means the total value of all
assets in the Fund's portfolio, minus any liabilities, plus the amount of the
Fund's borrowings, if any, for investment purposes.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pay dividends at a fixed rate
and are sometimes convertible into common stock.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisors. May vary with the amount invested. Typically used to compensate
advisors for advice and service provided.
SEC (Securities and Exchange Commission) Federal agency established by Congress to administer the laws governing the securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI) The document serving as "Part B" of a fund's prospectus that provides more detailed information about the fund's organization, investments, policies and risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as common stocks or equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gifts to Minors Act and Uniform Transfers to Minors Act Federal and state laws that provide a simple way to transfer property to a minor with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
DELAWARE LIMITED-TERM GOVERNMENT FUND
Additional information about the Fund's investments is available in the Fund's annual and semiannual reports to shareholders. In the Fund's shareholder reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during the report period. You can find more detailed information about the Fund in the current Statement of Additional Information, which we have filed electronically with the Securities and Exchange Commission (SEC) and which is legally a part of this Prospectus. If you want a free copy of the Statement of Additional Information, the annual or semiannual report, or if you have any questions about investing in the Fund, you can write to us at 2005 Market Street, Philadelphia, PA 19103-7094, or call toll-free 800 523-1918. You may also obtain additional information about the Fund from your financial advisor.
You can find reports and other information about the Fund on the EDGAR database on the SEC web site (http://www.sec.gov). You can also get copies of this information, after payment of a duplicating fee, by e-mailing the SEC at publicinfo@sec.gov or by writing to the Public Reference Section of the SEC, Washington, D.C. 20549-0102. Information about the Fund, including its Statement of Additional Information, can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. You can get information on the Public Reference Room by calling the SEC at 202 942-8090.
E-MAIL
service@delinvest.com
SHAREHOLDER SERVICE CENTER
800 523-1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern Time:
o For fund information, literature, price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan accounts including wire investments, wire redemptions, telephone redemptions and telephone exchanges.
DELAPHONE SERVICE
800 362-FUND (800 362-3863)
o For convenient access to account information or current performance information on all Delaware Investments Funds seven days a week, 24 hours a day, use this Touch-Tone(R) service.
DELAWARE FUND SYMBOLS
CUSIP NASDAQ
----- ------
Class A 245912308 DTRIX
Class B 245912605 DTIBX
Class C 245912704 DTICX
Class R 245912803 DLTRX
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Investment Company Act file number: 811-3363
PR-022[--]IVES 2/04 J9590
FIXED INCOME
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESESECURITIES OR PASSED UPON THE ACCURACY OF THIS PROSPECTUS, AND ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Table of contents
.................................................................
Fund profile page 2
Delaware Limited-Term Government Fund 2
.................................................................
How we manage the Fund page 5
Our investment strategies 5
The securities we typically invest in 6
The risks of investing in the Fund 8
.................................................................
Who manages the Fund page 9
Investment manager 9
Portfolio managers 9
Who's who? 10
.................................................................
About your account page 11
Investing in the Fund 11
How to buy shares 12
How to redeem shares 13
Account minimum 14
Exchanges 14
Dividends, distributions and taxes 14
Certain management considerations 14
.................................................................
Financial highlights page 15
.................................................................
Glossary page 17
1
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Profile: Delaware Limited-Term Government Fund |
What is the Fund's goal?
Delaware Limited-Term Government Fund seeks to provide a high stable level of income, while attempting to minimize fluctuations in principal and provide maximum liquidity. Although the Fund will strive to meet its goal, there is no assurance that it will.
Who should invest in the Fund
o Investors with intermediate or long-term financial goals.
o Investors seeking monthly income.
o Investors who would like a relatively conservative income investment to help balance a growth-oriented long-term portfolio.
o Investors seeking a high quality investment with a measure of capital preservation.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate, especially over the short term.
o Investors who want an investment with a fixed share price, such as a money market fund.
What are the Fund's main investment strategies? We invest primarily in short- and intermediate-term U.S. government securities. These are debt securities issued or guaranteed by the U.S., such as U.S. Treasuries, securities issued by U.S. government agencies or instrumentalities, such as securities of the Government National Mortgage Association, and securities that are privately issued but are 100% collateralized by securities or certificates issued or guaranteed by the U.S. government, its agencies or instrumentalities. We may also invest up to 20% of the Fund's net assets in corporate notes and bonds, certificates of deposit and obligations of U.S. and foreign banks, commercial paper, certain asset-backed securities and non-agency mortgage-backed securities.
The level of income the Fund provides will vary depending on current interest rates and the specific securities in the portfolio. However, since longer-term rates are generally less volatile than short-term rates, the Fund's income may fluctuate less than a money market fund's income.
Under normal circumstances, the Fund will invest at least 80% ("80% Policy") of its net assets in U.S. government securities. This 80% Policy cannot be changed without shareholder approval. However, shareholders would be given at least 60 days notice prior to any such change.
What are the main risks of investing in the Fund? Investing in any mutual fund involves risk, including the risk that you may lose part or all of the money you invest. The value of your investment in the Fund will increase and decrease according to changes in the value of the securities in the Fund's portfolio. This Fund will be affected primarily by adverse changes in interest rates. When interest rates rise, the value of bonds in the portfolio will likely decline.
For a more complete discussion of risk, please see "The risks of investing in the Fund" on page 8.
An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.
You should keep in mind that an investment in the Fund is not a complete investment program; it should be considered just one part of your total financial plan. Be sure to discuss this Fund with your financial advisor to determine whether it is an appropriate choice for you.
Year-by-year total return (Institutional Class)
-1.74% 8.87% 3.84% 5.39% 7.62% 1.22% 8.75% 8.34% 7.27% 2.27% ------------------------------------------------------------------------------------------------ 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 |
During the ten years illustrated in this bar chart, the Institutional Class' highest return was 4.53% for the quarter ended December 31, 1988 and its lowest return was -0.67% for the quarter ended June 30, 1999.
Average annual returns for periods ending 12/31/03 1 year 5 years 10 years
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Return before taxes 2.27% 5.52% 5.13%
Return after taxes on distributions 0.93% 3.30% 2.57%
Return after taxes on distributions and
sale of Fund shares 1.46% 3.31% 2.71%
Merrill Lynch One-to Three Year Treasury Index
(reflects no deduction for fees,
expenses or taxes) 1.90% 5.37% 5.68%
|
The Fund's returns above are compared to the performance of the Merrill Lynch One-to-Three Year Treasury Index. You should remember that unlike the Fund, the index is unmanaged and does not include the costs of operating a mutual fund, such as the cost of buying, selling and holding securities.
Actual after-tax returns depend on the investor's individual tax situation and may differ from the returns shown. After-tax returns are not relevant for shares held in tax-deferred investment vehicles such as employer-sponsored 401(k) plans and individual retirement accounts. The after-tax returns shown are calculated using the highest individual federal marginal income tax rates in effect during the Fund's lifetime and do not reflect the impact of state and local taxes. The after-tax rate used is based on the current tax characterization of the elements of the Fund's returns (e.g., qualified vs. non-qualified dividends) and may be different than the final tax characterization of such elements. Past performance, both before and after taxes, is not a guarantee of future results.
Profile: Limited-Term Government Fund (continued)
What are the Fund's fees and expenses?
---------------------------------------------------------------------------------------------------------------------------------
You do not pay sales charges directly from your investments Maximum sales charge (load) imposed on
when you buy or sell shares of the Institutional Class. purchases as a percentage of offering price none
Maximum contingent deferred sales charge
(load) as a percentage of original purchase
price or redemption price, whichever is lower none
Maximum sales charge (load) imposed on
reinvested dividends none
Redemption fees none
Exchange fees(1) none
---------------------------------------------------------------------------------------------------------------------------------
Annual fund operating expenses are deducted from the Management fees 0.50%
Fund's assets.
Distribution and service (12b-1) fees none
Other expenses 0.36%
Total operating expenses 0.86%
Fee waivers and payments(2) (0.26%)
Net expenses 0.60%
---------------------------------------------------------------------------------------------------------------------------------
This example is intended to help you compare the 1 year $61
cost of investing in the Fund to the cost of
investing in other mutual funds with similar 3 years $248
investment objectives. We show the cumulative amount
of Fund expenses on a hypothetical investment of 5 years $451
$10,000 with an annual 5% return over the time
shown.(3) This is an example only, and does not 10 years $1,037
represent future expenses, which may be greater or
less than those shown here.
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(1) Exchanges are subject to the requirements of each fund in the Delaware Investments family. A front-end sales charge may apply if you exchange your shares into a fund that has a front-end sales charge.
(2) The investment manager has contracted to waive fees and pay expenses through February 28, 2005 in order to prevent total operating expenses (excluding taxes, interest, brokerage fees, extraordinary expenses and certain insurance costs) from exceeding 0.60% of average daily net assets.
(3) The Fund's actual rate of return may be greater or less than the hypothetical 5% return we use here. Also, this example reflects the net operating expenses with expense waivers for the one-year contractual period and total operating expenses without expense waivers for years two through ten.
How we manage the Fund
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or market sectors that we think are the best investments for the Fund. Following are descriptions of how the portfolio managers pursue the Fund's investment goals.
We take a disciplined approach to investing, combining investment strategies and risk management techniques that can help shareholders meet their goals.
We invest primarily in short- and intermediate-term fixed income securities including:
o securities issued or guaranteed by the U.S. government such as U.S.
Treasuries; and
o securities issued by U.S. government agencies or instrumentalities such as securities of the Government National Mortgage Association.
We may invest in instruments that use these government securities as collateral. We may invest up to 20% of the Fund's net assets in corporate notes and bonds, certificates of deposit and obligations of both U.S. and foreign banks, commercial paper, certain asset-backed securities and non-agency mortgage-backed securities.
The Fund's level of income and the stability of its share price will be directly affected by changes in short- and intermediate-term interest rates. We anticipate that the level of income could be higher than a money market fund. However, the Fund's share price will increase and decrease with changes in interest rates. This makes its risk level greater than that of a money market fund.
We strive to reduce the effects of interest rate changes on the share price by keeping the average effective maturity below five years. The average effective maturity is determined by averaging the individual effective maturity of all securities in the portfolio. If we believe that interest rates are historically low, we may shorten the average effective maturity to three years or less. Conversely, if we believe rates are high and therefore likely to go lower, we may increase average effective maturity to as high as five years.
The Fund's investment objective is non-fundamental. This means that the Board of Trustees may change the objective without obtaining shareholder approval. If the objective was changed, we would notify shareholders before the change in the objective became effective.
How we manage the Fund (continued)
The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than stocks, and also may provide capital appreciation.
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Securities How we use them
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Direct U.S. Treasury obligations: include Treasury bills, We may invest without limit in U.S. Treasury securities,
notes and bonds of varying maturities. U.S. Treasury although they are typically not our largest holding because
securities are backed by the "full faith and credit" of the they generally do not offer as high a level of current
United States. income as other fixed-income securities.
Mortgage-backed securities: Fixed-income securities that There is no limit on government-related mortgage-backed
represent pools of mortgages, with investors receiving securities.
principal and interest payments as the underlying mortgage
loans are paid back. Many are issued and guaranteed against We may invest up to 35% of net assets in mortgage-backed
default by the U.S. government or its agencies or securities issued by private entities if at the time they
instrumentalities, such as the Federal Home Loan Mortgage are issued they are 100% collateralized by securities or
Corporation, Fannie Mae and the Government National Mortgage certificates issued or guaranteed by the U.S. government,
Association. Others are issued by private financial its agencies or instrumentalities. These securities must be
institutions, with some fully collateralized by certificates rated in one of the two highest categories by a nationally
issued or guaranteed by the government or its agencies or recognized statistical rating organization (NRSRO) at the
instrumentalities. time of purchase.
The Fund may also invest in mortgage-backed securities that
are not government securities and are not directly
guaranteed by the U.S. government in any way. They are
secured by the underlying collateral of the private issuer.
These include collateralized mortgage obligations (CMOs),
real estate mortgage investment conduits (REMICs) and
commercial mortgage-backed securities (CMBSs).We may invest
in these securities only if they are rated in the highest
quality category, such as AAA, by an NRSRO. However, the
Fund may not invest more than 20% of its net assets in
securities that are not government securities or do not use
government securities as collateral.
Asset-backed securities: Bonds or notes backed by accounts We may invest only in asset-backed securities rated in the
receivable including home equity, automobile or credit highest quality category, such as AAA, by an NRSRO. However,
loans. we may not invest more than 20% of the Fund's net assets in
securities (including these asset-backed securities) that
are not government securities or do not use government
securities as collateral.
Repurchase agreements: An agreement between a buyer of Typically, we use repurchase agreements as a short-term
securities, such as a Fund, and a seller of securities in investment for the Fund's cash position. In order to enter
which the seller agrees to buy the securities back within a into these repurchase agreements, the Fund must have
specified time at the same price the buyer paid for them, collateral of 102% of the repurchase price. The Fund will
plus an amount equal to an agreed upon interest rate. only enter into repurchase agreements in which the
Repurchase agreements are often viewed as equivalent to collateral is comprised of U.S. government securities.
cash.
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Securities How we use them
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Interest rate swap and index swap agreements: In an interest We may use interest rate swaps to adjust the Fund's
rate swap, a fund receives payments from another party based sensitivity to interest rates, or to hedge against changes
on a floating interest rate in return for making payments in interest rates.
based on a fixed interest rate. An interest rate swap can
also work in reverse, with a fund receiving payments based Index swaps may be used to gain exposure to markets that the
on a fixed interest rate and making payments based on a Fund invests in, such as the corporate bond market.
floating interest rate. In an index swap, a fund receives
gains or incurs losses based on the total return of an Interest rate swaps and index swaps will be considered
index, in exchange for making fixed or floating interest illiquid securities (see below).
rate payments to another party.
Options and futures: Options represent a right to buy or At times when we anticipate adverse conditions, we may want
sell a security or a group of securities at an agreed upon to protect gains on securities without actually selling
price at a future date. The purchaser of an option may or them. We might use options or futures to neutralize the
may not choose to go through with the transaction. The effect of any price declines, without selling a bond or
seller of an option, however, must go through with the bonds, or as a hedge against changes in interest rates. We
transaction if its purchaser exercises the option. may also sell an option contract (often referred to as
"writing" an option) to earn additional income for the Fund.
Futures contracts are agreements for the purchase or sale of
a security or a group of securities at a specified price, on Use of these strategies can increase the operating costs of
a specified date. Unlike purchasing an option, a futures the Fund and can lead to loss of principal.
contract must be executed unless it is sold before the
settlement date.
Certain options and futures may be considered to be
derivative securities.
Restricted securities: Privately placed securities We may invest in privately placed securities including those
whose resale is restricted under securities law. that are eligible for resale only among certain
institutional buyers without registration, which are
commonly known as "Rule 144A Securities." Other restricted
securities must be limited to 10% of total Fund assets.
Illiquid securities: Securities that do not have a ready We may invest up to 10% of total assets in illiquid
market and cannot be easily sold within seven days at securities.
approximately the price that a Fund has valued them.
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The Fund may also invest in other securities including certificates of deposit and obligations of both U.S. and foreign banks; corporate debt and commercial paper; and American Depositary Receipts. Please see the Statement of Additional Information for additional descriptions on these securities as well as those listed in the table above.
Borrowing from banks The Fund may borrow money as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions. The Fund will not borrow money in excess of one-third of the value of its net assets.
Lending securities The Fund may lend up to 25% of its assets to qualified brokers, dealers and investors for their use in securities transactions. These transactions, if any, may generate additional income for the Fund.
Purchasing securities on a when-issued or delayed delivery basis The Fund may buy or sell securities on a when-issued or delayed delivery basis; that is, paying for securities before delivery or taking delivery at a later date. The Fund will designate cash or securities in amounts sufficient to cover its obligations, and will value the designated assets daily.
Portfolio turnover We anticipate that the Fund's annual portfolio turnover will exceed 100%, and may be considerably in excess of 100%. A turnover rate of 100% would occur if the Fund sold and replaced securities valued at 100% of its net assets within one year, if for example the Fund bought and sold all of the securities in its portfolio once in the course of a year or frequently traded a single security. High turnover can result in increased transaction costs and tax liability for investors.
How we manage the Fund (continued)
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest. Before you invest in the Fund, you should carefully evaluate the risks. Because of the nature of the Fund, you should consider your investment to be a long-term investment that typically provides the best results when held for a number of years. Following are the chief risks you assume when investing in the Fund. Please see the Statement of Additional Information for further discussion of these risks and the other risks not discussed here.
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Risks How we strive to manage them
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Market risk: The risk that all or a majority of the We maintain a long-term investment approach and focus on
securities in a certain market--like the stock or bond high quality individual bonds that we believe can provide a
market--will decline in value because of factors such as steady stream of income regardless of interim fluctuations
economic conditions, future expectations or investor in the bond market. We generally do not buy and sell
confidence. securities for short-term purposes.
Index swaps are subject to the same market risks as the In evaluating the use of an index swap, we carefully
investment market or sector that the index represents. consider how market changes could affect the swap and how
Depending on the actual movements of the index and how well that compares to us investing directly in the market the
the portfolio manager forecasts those movements, a fund swap is intended to represent.
could experience a higher or lower return than anticipated.
Industry and security risk: The risk that the value of We diversify the Fund's assets across a variety of sectors
securities in a particular industry or the value of an in the bond market. We also follow a rigorous selection
individual stock or bond will decline because of changing process before choosing securities for the portfolio.
expectations for the performance of that industry or for the
individual company issuing the stock or bond.
Interest rate risk: The risk that securities, particular Interest rate risk is the most significant risk for this
bonds with longer maturities, will decrease in value if Fund. In striving to manage this risk, we monitor economic
interest rates rise. conditions and the interest rate environment. We keep the
average maturity of the portfolio as short as is prudent, in
Swaps may be particularly sensitive to interest rate keeping with our objective to provide high current income.
changes. Depending on the actual movements of interest rates
and how well the portfolio manager anticipates them, a Fund We will not invest in swaps with maturities of more than two
could experience a higher or lower return than anticipated. years. Each business day we will calculate the amount the
Fund must pay for swaps it holds and will segregate enough
cash or other liquid securities to cover that amount.
Credit risk: The possibility that a bond's issuer (or an By focusing primarily on U.S. Treasury securities and other
entity that insures the bond) will be unable to make timely securities that are backed by the U.S. government, we
payments of interest and principal. minimize the possibility that any of the securities in our
portfolio will not pay interest or principal. U.S.
government securities are generally considered to be of the
highest quality.
When selecting non-government securities and the dealers
with whom we do interest rate swaps, we focus on those with
high quality ratings and do careful credit analysis before
investing.
Prepayment risk: The risk that homeowners will prepay We take into consideration the likelihood of prepayment when
mortgages during periods of low interest rates, forcing a we select mortgages. We may look for mortgage securities
Fund to reinvest their money at interest rates that might be that have characteristics that make them less likely to be
lower than those on the prepaid mortgage. Prepayment risk prepaid, such as low outstanding loan balances or
may also affect other types of debt securities, but below-market interest rates.
generally to a lesser extent than mortgage securities.
Liquidity risk: The possibility that securities cannot be U.S. Treasuries and other U.S. government debt securities
readily sold within seven days at approximately the price are typically the most liquid securities available.
that a fund has valued them. Therefore, liquidity risk is not a significant risk for this
Fund.
Swap agreements will be treated as illiquid securities, but
most swap dealers will be willing to repurchase interest
rate swaps.
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|
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware Management Business Trust, which is an indirect, wholly owned subsidiary of Delaware Management Holdings, Inc. Delaware Management Company makes investment decisions for the Fund, manages the Fund's business affairs and provides daily administrative services. For these services, the manager was paid 0.24% of average daily net assets for the last fiscal year.
Portfolio managers
Stephen R. Cianci and Paul Grillo have day-to-day responsibilities for making investment decisions for the Fund.
Stephen R. Cianci, Vice President/Senior Portfolio Manager of the Fund, holds a BS and an MBA in Finance from Widener University. Mr. Cianci became co-manager of the Fund in January 1999. He joined Delaware Investments' fixed-income department in 1992 as an investment grade quantitative research analyst. In addition to his quantitative research responsibilities, Mr. Cianci also served as a mortgage-backed and asset-backed securities analyst. Mr. Cianci is an Adjunct Professor of Finance at Widener University and is a CFA charterholder.
Paul Grillo, Vice President/Senior Portfolio Manager of the Fund, holds a bachelor's degree in Business Management from North Carolina State University and an MBA in Finance from Pace University. Mr. Grillo became co-manager of the Fund in January 1999. Prior to joining Delaware Investments in 1993, he served as Mortgage Strategist and Trader at the Dreyfus Corporation. He also served as Mortgage Strategist and Portfolio Manager at Chemical Investment Group and as Financial Analyst at Chemical Bank. Mr. Grillo is a CFA charterholder.
Who manages the Fund (continued)
Who's who?
This diagram shows the various organizations involved with managing, administering and servicing the Delaware Investments funds.
-------------------
Board of Trustees
-------------------
---------------------------- | ---------------------------
Investment manager ------------------- Custodian
Delaware Management Company --------------------- The Fund ------------------ JPMorgan Chase Bank
2005 Market Street ------------------- 4 Chase Metrotech Center
Philadelphia, PA 19103-7094 | | Brooklyn, NY 11245
---------------------------- --------------------------- | ----------------------------
| Distributor |
| Delaware Distributors, L.P. ------------------------------
---------------------------- 2005 Market Street Service agent
Portfolio managers Philadelphia, PA 19103-7094 Delaware Service Company, Inc.
(see page 9 for details) --------------------------- 2005 Market Street
---------------------------- | Philadelphia, PA 19103-7094
| ------------------------------
------------------------------------ |
Financial intermediary wholesaler |
Lincoln Financial Distributors, Inc. |
2001 Market Street |
Philadelphia, PA 19103-7055 |
------------------------------------ |
| |
| |
------------
Shareholders
------------
|
Board of Trustees A mutual fund is governed by a Board of Trustees which has oversight responsibility for the management of the fund's business affairs. Trustees establish procedures and oversee and review the performance of the investment manager, the distributor and others that perform services for the fund. Generally, at least 40% of the Board of Trustees must be independent of the fund's investment manager and distributor. However, the Delaware Limited-Term Government Fund relies on certain exemptive rules created by the SEC that require the Board of Trustees overseeing the Fund to be comprised of a majority of such independent Trustees. These independent fund Trustees, in particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting portfolio investments consistent with the objective and policies stated in the mutual fund's prospectus. The investment manager places portfolio orders with broker/dealers and is responsible for obtaining the best overall execution of those orders. A written contract between a mutual fund and its investment manager specifies the services the manager performs. Most management contracts provide for the manager to receive an annual fee based on a percentage of the fund's average daily net assets. The manager is subject to numerous legal restrictions, especially regarding transactions between itself and the funds it advises.
Portfolio managers Portfolio managers are employed by the investment manager to make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio securities and most funds place them with a qualified bank custodian who segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public through distributors who are regulated as broker/dealers and are subject to NASD Regulation, Inc. (NASDR(SM)) rules governing mutual fund sales practices.
Financial intermediary wholesaler Pursuant to a contractual arrangement with Delaware Distributors, L.P., Lincoln Financial Distributors, Inc. (LFD) is primarily responsible for promoting the sale of Fund shares through broker/dealers, financial advisors and other financial intermediaries.
Service agent Mutual fund companies employ service agents (sometimes called transfer agents) to maintain records of shareholder accounts, calculate and disburse dividends and capital gains and prepare and mail shareholder statements and tax information, among other functions. Many service agents also provide customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have specific voting rights, including the right to elect trustees. Material changes in the terms of a fund's management contract must be approved by a shareholder vote, and funds seeking to change fundamental investment policies must also seek shareholder approval.
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the following:
o retirement plans introduced by persons not associated with brokers or dealers that are primarily engaged in the retail securities business and rollover individual retirement accounts from such plans;
o tax-exempt employee benefit plans of the Fund's manager or its affiliates and of securities dealer firms with a selling agreement with the distributor;
o institutional advisory accounts of the Fund's manager, or its affiliates and those having client relationships with Delaware Investment Advisers, another series of Delaware Management Business Trust, or its affiliates and their corporate sponsors, as well as subsidiaries and related employee benefit plans and rollover individual retirement accounts from such institutional advisory accounts;
o a bank, trust company or similar financial institution investing for its own account or for the account of its trust customers for whom the financial institution is exercising investment discretion in purchasing shares of the Class, except where the investment is part of a program that requires payment to the financial institution of a Rule 12b-1 Plan fee; or
o registered investment advisors investing on behalf of clients who consist solely of institutions and high net-worth individuals having at least $1,000,000 entrusted to the advisor for investment purposes. Use of institutional class shares is restricted to advisors who are not affiliated or associated with a broker or dealer and who derive compensation for their services exclusively from their advisory clients.
o certain plans qualified under Section 529 of the Internal Revenue Code for which the Fund's manager, distributor or service agent or one or more of their affiliates provide record keeping, administrative, investment management, marketing, distribution or similar services; or
o programs sponsored by financial intermediaries where such program requires the purchase of Institutional Class shares.
About your account (continued)
How to buy shares
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By mail
Complete an investment slip and mail it with your check, made payable to
the fund and class of shares you wish to purchase, to Delaware Investments, 2005
Market Street, Philadelphia, PA 19103-7094. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to Bank of New York, ABA
#021000018, Bank Account number 8900403748. Include your account number and the
name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800 510-4015 so we can assign you an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800 510-4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial advisor
Your financial advisor can handle all the details of purchasing shares,
including opening an account. Your advisor may charge a separate fee for this
service.
The price you pay for shares will depend on when we receive your purchase order. In particular, we reserve the right to reject any specific order for any person whose transactions seem to follow a "market timing" pattern. If we or an authorized agent receives your order before the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time), you will pay that day's closing share price which is based on the Fund's net asset value. If your order is received after the close of regular trading, you will pay the next business day's price. A business day is any day that the New York Stock Exchange is open for business. We reserve the right to reject any purchase order.
We determine the Fund's net asset value (NAV) per share at the close of regular trading on the New York Stock Exchange each business day that the Exchange is open. We calculate this value by adding the market value of all the securities and assets in a Fund's portfolio, deducting all liabilities, and dividing the resulting number by the number of shares outstanding. The result is the net asset value per share. We generally price securities and other assets for which market quotations are readily available at their market value. We price fixed-income securities on the basis of valuations provided to us by an independent pricing service that uses methods approved by the Board of Trustees. Any fixed-income securities that have a maturity of less than 60 days we price at amortized cost. For all other securities, we use methods approved by the Board of Trustees that are designed to price securities at their fair market value.
How to redeem shares
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By mail
You can redeem your shares (sell them back to
the fund) by mail by writing to: Delaware Investments, 2005 Market Street,
Philadelphia, PA 19103-7094. All owners of the account must sign the request,
and for redemptions of more than $100,000, you must include a signature
guarantee for each owner. You can also fax your written request to 267 256-8992.
Signature guarantees are also required when you request redemption proceeds to
be sent to an address other than the address of record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $100,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account, normally the next business day after we receive
your request. Bank information must be on file before you request a wire
redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial advisor
Your financial advisor can handle all the details of redeeming your shares. Your
advisor may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF A HAND]
Through checkwriting
You may redeem Class A shares by writing checks of $500 or more. Checks must be
signed by all owners of the account unless you indicate otherwise on your
Investment Application. The checkwriting feature is not available for retirement
plans. Also, because dividends are declared daily, you may not close your
account by writing a check. When you write checks you are subject to bank
regulations and may be subject to a charge if the check amount exceeds the value
of your account.
If you hold your shares in certificates, you must submit the certificates with your request to sell the shares. We recommend that you send your certificates by certified mail.
When you send us a properly completed request to redeem or exchange shares, and we or an authorized agent receives the request before the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time), you will receive the net asset value next determined after we receive your request. If we receive your request after the close of regular trading on the New York Stock Exchange, you will receive the net asset value next determined on the next business day. You may also have to pay taxes on the proceeds from your sale of shares. We will send you a check, normally the next business day, but no later than seven days after we receive your request to sell your shares. If you purchased your shares by check, we will wait until your check has cleared, which can take up to 15 days, before we send your redemption proceeds.
About your account (continued)
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares, normally of the same class in another Delaware Investments Fund. We may refuse the purchase side of any exchange request, if, in the investment manager's judgment, the Fund would be unable to invest effectively in accordance with its investment objectives and policies or would otherwise potentially be adversely affected. In particular, a pattern of exchanges that coincide with a "market timing" strategy may be refused. If you exchange shares to a fund that has a sales charge you will pay any applicable sales charges on your new shares. You don't pay sales charges on shares that are acquired through the reinvestment of dividends. You may have to pay taxes on your exchange. When you exchange shares, you are purchasing shares in another fund so you should be sure to get a copy of the fund's prospectus and read it carefully before buying shares through an exchange. You may not exchange your shares for Class B and Class C shares of the funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends are declared daily and paid monthly. Short-term capital gains if any, may be paid quarterly, but the board of trustees may choose to distribute them less frequently. Long-term capital gains, if any, will be distributed annually. We automatically reinvest all dividends and capital gains, unless you direct us to do otherwise.
In addition, in order to satisfy certain distribution requirements of the Tax Reform Act of 1986, the Funds may declare special year-end dividend and capital gains distributions during November and December to shareholders of record on a date in such month. Such distributions, if received by shareholders by January 1, are deemed to have been paid by the Funds and received by shareholders on the earlier of the date paid or December 31 of the prior year.
On May 28, 2003, President Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act of 2003, which changes the tax rates on certain types of distributions. We urge you to consult your tax advisor about your particular tax situation and how it might be affected by the new tax law. The tax status of your dividends from the Funds is the same whether you reinvest your dividends or receive them in cash.
Distributions from the Funds' long-term capital gains are taxable as capital gains, while distributions from short-term capital gains and net investment income are generally taxable as ordinary income. The new tax law reduces the tax rate on certain qualifying dividends and long-term capital gains.
You also may be subject to state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and nature of all dividends and capital gains that you were paid for the prior year.
Certain management considerations
Investments by fund of funds and investment vehicles that operate similarly to funds of funds
The Fund accepts investments from funds of funds, including those within Delaware Investments family, and investment vehicles that operate similarly to funds of funds, such as 529 plans. A "529 Plan" is a college savings program that operates under section 529 of the Internal Revenue Code. From time to time, the Fund may experience large investments or redemptions due to allocations or rebalancings by these funds of funds and/or similar investment vehicles. While it is impossible to predict the overall impact of these transactions over time, there could be adverse effects on portfolio management. For example, the Fund may be required to sell securities or invest cash at times when it would not otherwise do so. These transactions could also have tax consequences if sales of securities result in gains, and could also increase transaction costs or portfolio turnover. The manager will monitor transactions by the funds of funds and/or similar investment vehicles and will attempt to minimize any adverse effects on the Fund and funds of funds and/or similar investment vehicle as a result of these transactions.
Financial highlights
The Financial highlights table is intended to help you understand the Fund's financial performance. All "per share" information reflects financial results for a single Fund share. This information has been audited by Ernst & Young LLP, whose report, along with the Fund's financial statements, is included in the Fund's annual report, which is available upon request by calling 800 523-1918.
Institutional Class
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Year ended
12/31
Delaware Limited-Term Government Fund 2003 2002 2001(2) 2000 1999
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.770 $8.600 $8.430 $8.270 $8.700
Income (loss) from investment operations:
Net investment income 0.234 0.364 0.437 0.534 0.531
Net realized and unrealized gain (loss)
on investments (0.038) 0.255 0.238 0.161 (0.428)
------ ------ ------ ------ ------
Total from investment operations 0.196 0.619 0.675 0.695 0.103
------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income (0.328) (0.449) (0.505) (0.535) (0.533)
Return of capital (0.018) -- -- -- --
------ ------ ------ ------ ------
Total dividends and distributions (0.346) (0.449) (0.505) (0.535) (0.533)
------ ------ ------ ------ ------
Net asset value, end of period $8.620 $8.770 $8.600 $8.430 $8.270
====== ====== ====== ====== ======
Total return(1) 2.27% 7.27% 8.34% 8.75% 1.22%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $16,667 $13,289 $7,116 $4,514 $4,448
Ratio of expenses to average net assets 0.60% 0.60% 0.74% 0.98% 0.85%
Ratio of expenses to average net assets prior
to expense limitation and expenses paid indirectly 0.86% 0.90% 0.93% 0.98% 0.85%
Ratio of net investment income to average
net assets 2.72% 4.14% 5.07% 6.51% 6.27%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly 2.46% 3.84% 4.88% 6.51% 6.27%
Portfolio turnover 483% 313% 386% 273% 175%
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(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value. Total investment return reflects a waiver and payment of
fees by the manager, as applicable. Performance would have been lower had
the expense limitation not been in effect.
(2) As required, effective January 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies that require
amortization of all premiums and discounts on debt securities and the
recording of paydown gains and losses on mortgage- and asset-backed
securities as an adjustment to interest income. The effect of these changes
for the year ended December 31, 2001 was a decrease in net investment income
per share of $0.068, an increase in net realized and unrealized gain (loss)
per share of $0.068, and a decrease in the ratio of net investment income to
average net assets of 0.80%. Per share data and ratios for periods prior to
January 1, 2001, have not been restated to reflect these changes in
accounting.
Financial highlights (continued)
How to read the Financial highlights
Net investment income
Net investment income includes dividend and interest income earned from a fund's
investments; it is after expenses have been deducted.
Net realized and unrealized gain (loss) on investments A realized gain occurs when we sell an investment at a profit, while a realized loss occurs when we sell an investment at a loss. When an investment increases or decreases in value but we do not sell it, we record an unrealized gain or loss. The amount of realized gain per share, if any, that we pay to shareholders would be listed under "Less dividends and distributions from - Net realized gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers and assume the shareholder has
reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities that are attributable to that class of the fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover
This figure tells you the amount of trading activity in a fund's portfolio. A
turnover rate of 100% would occur if the Fund sold and replaced securities
valued at 100% of its net assets within one year, if for example the Fund bought
and sold all of the securities in its portfolio once in the course of a year or
frequently traded a single security. High turnover can result in increased
transaction costs and tax liability for investors.
Glossary
How to use this glossary
This glossary includes definitions of investment terms, many of which are used throughout the Prospectus. If you would like to know the meaning of an investment term that is not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and typically
is inversely related to current interest rates. Generally, when interest rates
rise, bond prices fall, and when interest rates fall, bond prices rise. See
Fixed-income securities.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical ratings organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Corporate bond
A debt security issued by a corporation. See Bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses. Depreciation A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Glossary (continued)
Financial advisor
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invest is paid back at a
pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bond.
Government securities
Securities issued by the U.S. government or its agencies. They include
Treasuries as well as agency-backed securities such as Fannie Maes.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment advisor for management
services, expressed as an annual percentage of the fund' s average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
Merrill Lynch One-to-Three Year Treasury Index An unmanaged index of U.S. Treasury notes and bonds with maturities greater than or equal to one year and less than three years. It does not include inflation linked U.S. government bonds.
NASD Regulation, Inc. (NASDR(SM))
The Independent subsidiary of the National Association of Securities Dealers,
Inc. responsible for regulating the securities industry.
Nationally recognized statistical ratings organization (NRSRO) A company that assesses the credit quality of bonds, commercial paper, preferred and common stocks and municipal short-term issues, rating the probability that the issuer of the debt will meet the scheduled interest payments and repay the principal. Ratings are published by such companies as Moody's Investors Service, Inc. (Moody's), Standard & Poor's (S&P) and Fitch, Inc. (Fitch).
Net assets
Net assets for purposes of the Fund's 80% Policy means the total value of all
assets in the Fund's portfolio, minus any liabilities, plus the amount of the
Fund's borrowings, if any, for investment purposes.
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pay dividends at a fixed rate
and are sometimes convertible into common stock.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisors. May vary with the amount invested. Typically used to compensate
advisors for advice and service provided.
SEC (Securities and Exchange Commission) Federal agency established by Congress to administer the laws governing the securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI) The document serving as "Part B" of a fund's prospectus that provides more detailed information about the fund's organization, investments, policies and risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as common stocks or equities.
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in
value by different magnitudes. Investments that generally go up or down in value
in relatively small amounts are considered "low volatility" investments, whereas
those investments that generally go up or down in value in relatively large
amounts are considered "high volatility" investments.
DELAWARE LIMITED-TERM GOVERNMENT FUND
Additional information about the Fund's investments is available in the Fund's annual and semiannual reports to shareholders. In the Fund's shareholder reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund's performance during the report period. You can find more detailed information about the Fund in the current Statement of Additional Information, which we have filed electronically with the Securities and Exchange Commission (SEC) and which is legally a part of this Prospectus. If you want a free copy of the Statement of Additional Information, the annual or semiannual report, or if you have any questions about investing in the Fund, you can write to us at 2005 Market Street, Philadelphia, PA 19103-7094, or call toll-free 800 510-4015. You may also obtain additional information about the Fund from your financial advisor.
You can find reports and other information about the Fund on the EDGAR database on the SEC web site (http://www.sec.gov). You can also get copies of this information, after payment of a duplicating fee, by e-mailing the SEC at publicinfo@sec.gov or by writing to the Public Reference Section of the SEC, Washington, D.C. 20549-0102. Information about the Fund, including its Statement of Additional Information, can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. You can get information on the Public Reference Room by calling the SEC at 202 942-8090.
WEB SITE
www.delawareinvestments.com
E-MAIL
service@delinvest.com
CLIENT SERVICES REPRESENTATIVE
800 510-4015
DELAPHONE SERVICE
800 362-FUND (800 362-3863)
o For convenient access to account information or current performance information on all Delaware Investments Funds seven days a week, 24 hours a day, use this Touch-Tone(R) service.
DELAWARE FUND SYMBOLS
CUSIP NASDAQ
----- ------
Institutional Class 245912506 DTINX
Investment Company Act file number: 811-3363
PR-047 [--] IVES 2/04 J9591
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Delaware Investments includes funds with a wide range of DELAWARE LIMITED-TERM GOVERNMENT FUND
investment objectives. Stock funds, income funds, national
and state-specific tax-exempt funds, money market funds,
global and international funds and closed-end funds give A CLASS
investors the ability to create a portfolio that fits their B CLASS
personal financial goals. For more information, shareholders C CLASS
of the Fund Classes should contact their financial advisor R CLASS
or call Delaware Investments at 800 523-1918, and INSTITUTIONAL CLASS
shareholders of the Institutional Class should contact
Delaware Investments at 800 510-4015. DELAWARE LIMITED-TERM GOVERNMENT FUNDS
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INVESTMENT MANAGER
Delaware Management Company
2005 Market Street
Philadelphia, PA 19103-7094
PART B
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P. STATEMENT OF
2005 Market Street ADDITIONAL INFORMATION
Philadelphia, PA 19103-7094 -------------------------------------------------------
SHAREHOLDER SERVICING, February 27, 2004
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
2005 Market Street
Philadelphia, PA 19103-7094
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2005 Market Street
Philadelphia, PA 19103-7094
INDEPENDENT AUDITORS
Ernst & Young LLP
2001 Market Street
Philadelphia, PA 19103-7055
Delaware
CUSTODIAN Investments(SM)
JPMorgan Chase Bank --------------------------------------
4 Chase Metrotech Center A member of Lincoln Financial Group(R)
Brooklyn, NY 11245
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STATEMENT OF ADDITIONAL INFORMATION
February 27, 2004
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
Delaware Limited-Term Government Fund
2005 Market Street
Philadelphia, PA 19103-7094
For more information about Institutional Class: 800 510-4015
For Prospectus, Performance and Information on Existing Accounts of Class A Shares, Class B Shares, Class C Shares and Class R Shares: Nationwide 800 523-1918
Dealer Services: (BROKER/DEALERS ONLY) Nationwide 800 362-7500
Delaware Group Limited-Term Government Funds ("Limited-Term Funds") is a professionally-managed mutual fund of the series type which currently offers one series of shares: Delaware Limited-Term Government Fund (the "Fund").
The Fund offers Class A Shares, Class B Shares, Class C Shares, Class R (Class A Shares, Class B Shares, Class C and Class R Shares together referred to as the "Fund Classes"), and Institutional Class shares ("Institutional Class"). All references to "shares" in this Part B refer to all Classes of shares of Limited-Term Funds, except where noted.
This Statement of Additional Information ("Part B" of the registration statement) supplements the information contained in the current Prospectus for the Fund Classes dated February 27, 2004 and the current Prospectus for the Institutional Class dated February 27, 2004, as they may be amended from time to time. Part B should be read in conjunction with the respective Class' Prospectus. Part B is not itself a prospectus but is, in its entirety, incorporated by reference into each Class' Prospectus. A Prospectus relating to the Fund Classes and a Prospectus relating to the Institutional Class may be obtained by writing or calling your investment dealer or by contacting the Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"), at the above address or by calling the above phone numbers. The Fund's financial statements, the notes relating thereto, the financial highlights and the report of independent auditors are incorporated by reference from the Annual Report into this Part B. The Annual Report will accompany any request for Part B. The Annual Report can be obtained, without charge, by calling 800 523-1918.
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TABLE OF CONTENTS Page Page
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Cover Page 1 Redemption and Exchange 44
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Investment Objective and Policies Income Dividends and Realized Securities Profits
2 Distributions 52
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Investments 4 Investment Management Agreement 54
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Accounting and Tax Issues 12 Officers and Trustees 57
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Performance Information 13 General Information 64
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Trading Practices and Brokerage 20 Financial Statements 67
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Purchasing Shares 22 Appendix A - Ratings 68
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Investment Plans Appendix B - Investment Objectives of the Funds in the
34 Delaware Investments Family 69
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Determining Offering Price and Net Asset Value 43
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INVESTMENT OBJECTIVE AND POLICIES
Investment Restrictions
Fundamental Restrictions - Limited-Term Funds has adopted the following restrictions for the Fund which cannot be changed without approval by the holders of a "majority" of the Fund's outstanding shares, which is a vote by the holders of the lesser of a) 67% or more of the voting securities present in person or by proxy at a meeting, if the holders of more than 50% of the outstanding voting securities are present or represented by proxy; or b) more than 50% of the outstanding voting securities. The percentage limitations contained in the restrictions and policies set forth herein apply at the time of purchase of securities.
The Fund shall not:
1. Make investments that will result in the concentration (as that term
may be defined in the Investment Company Act of 1940 (the "1940 Act"), any rule
or order thereunder, or U.S. Securities and Exchange Commission ("SEC") staff
interpretation thereof) of its investments in the securities of issuers
primarily engaged in the same industry, provided that this restriction does not
limit the Fund from investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or in tax-exempt obligations or
certificates of deposit.
2. Borrow money or issue senior securities, except as the 1940 Act, any rule or order thereunder, or SEC staff interpretation thereof, may permit.
3. Underwrite the securities of other issuers, except that the Fund may engage in transactions involving the acquisition, disposition or resale of its portfolio securities, under circumstances where it may be considered to be an underwriter under the Securities Act of 1933 (the "1933 Act").
4. Purchase or sell real estate, unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from investing in issuers which invest, deal or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein.
5. Purchase or sell physical commodities, unless acquired as a result of ownership of securities or other instruments and provided that this restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities.
6. Make loans, provided that this restriction does not prevent the Fund from purchasing debt obligations, entering into repurchase agreements, loaning its assets to broker/dealers or institutional investors and investing in loans, including assignments and participation interests.
Non-Fundamental Restrictions - In addition to the fundamental policies and investment restrictions described above, and the various general investment policies described in the prospectus, the Fund will be subject to the following investment restrictions, which are considered non-fundamental and may be changed by the Board of Trustees without shareholder approval.
1. The Fund is permitted to invest in other investment companies, including open-end, closed-end or unregistered investment companies, either within the percentage limits set forth in the 1940 Act, any rule or order thereunder, or SEC staff interpretation thereof, or without regard to percentage limits in connection with a merger, reorganization, consolidation or other similar transaction. However, the Fund may not operate as a "fund of funds" which invests primarily in the shares of other investment companies as permitted by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are utilized as investments by such a "fund of funds."
2. The Fund may not invest more than 15% of its net assets in securities which it cannot sell or dispose of in the ordinary course of business within seven days at approximately the value at which the Fund has valued the investment.
The Fund is also subject to the following investment restrictions, which are considered non-fundamental and may be changed by the Board of Trustees without shareholder approval.
The Fund 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).
The Fund has been advised by the staff of the SEC that it is the staff's position that, under the 1940 Act, the Fund may invest (a) no more than 10% of its assets in the aggregate in certain CMOs and REMICs which are deemed to be investment companies under the 1940 Act and issue their securities pursuant to an exemptive order from the SEC, and (b) no more than 5% of its assets in any single issue of such CMOs or REMICs.
2. Make loans, except to the extent that purchases of debt obligations (including repurchase agreements) in accordance with the Fund's investment objective and policies are considered loans and except that the Fund may loan up to 25% of its assets to qualified broker/dealers or institutional investors for their use relating to short sales or other security transactions.
3. Purchase or sell real estate but this shall not prevent the Fund from investing in securities secured by real estate or interests therein.
4. 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.
5. Engage in the underwriting of securities of other issuers, except that in connection with the disposition of a security, the Fund may be deemed to be an "underwriter" as that term is defined in the 1933 Act.
6. 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.
7. Write, purchase or sell options, puts, calls or combinations thereof, except that the Fund may: (a) write covered call options with respect to any part or all of its portfolio securities; (b) purchase call options to the extent that the premiums paid on all outstanding call options do not exceed 2% of the Fund's total assets; (c) write secured put options; (d) purchase put options to the extent that the premiums on all outstanding put options do not exceed 2% of the Fund's total assets and only if the Fund owns the security covered by the put option at the time of purchase. The Fund may sell put options or call options previously purchased or enter into closing transactions with respect to such options.
8. Enter into futures contracts or options thereon, except that the Fund may enter into futures contracts to the extent that not more than 5% of the Fund's assets are required as futures contract margin deposits and only to the extent that obligations under such contracts or transactions represent not more than 20% of the Fund's assets.
9. Purchase securities on margin or make short sales of securities.
10. Invest in warrants or rights except where acquired in units or attached to other securities.
11. Purchase or retain the securities of any issuer any of whose officers, trustees or security holders is a Trustee or officer of Limited-Term Funds or of its investment manager if or so long as the trustees and officers of Limited-Term Funds and of its investment manager together own beneficially more than 5% of any class of securities of such issuer.
12. Invest in interests in oil, gas or other mineral exploration or development programs.
13. Invest more than 10% of the Fund's total assets in repurchase agreements maturing in more than seven days and other illiquid assets.
14. Borrow money in excess of one-third of the value of its net assets and then only as a temporary measure for extraordinary purposes or to facilitate redemptions. The Fund has no intention of increasing its net income through borrowing. Any borrowing will be done from a bank and to the extent that such borrowing exceeds 5% of the value of the Fund's net assets, asset coverage of at least 300% is required. In the event that such asset coverage shall at any time fall below 300%, the Fund shall, within three days thereafter (not including Sunday or holidays) or such longer period as the SEC may prescribe by rules and regulations, reduce the amount of its borrowings to such an extent that the asset coverage of such borrowings shall be at least 300%. The Fund will not pledge more than 10% of its net assets. The Fund will not issue senior securities as defined in the 1940 Act, except for notes to banks. Securities will not be purchased while the Fund has an outstanding borrowing.
Although not a fundamental investment restriction, the Fund currently does not invest its assets in real estate limited partnerships.
The Funds' investment objective and policies are described in the Prospectus. Certain additional investment information is provided below.
The Fund will invest in securities for income earnings rather than trading for profit. The Fund 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 Fund;
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.
INVESTMENTS
Average Effective Maturity
The Fund limits its average effective dollar weighted portfolio
maturity to no more than three to five years. However, many of the securities in
which the Fund invests will have remaining maturities in excess of five years.
Some of the securities in the Fund's 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 adjustment period of one year or less, the Fund 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 Fund's 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 Fund 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). The
Fund currently invests in privately-issued CMOs and REMICs only if they are
rated at the time of purchase in the two highest grades by a
nationally-recognized rating agency.
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 security's yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities even if the securities are rated in the highest rating categories.
Although stripped mortgage securities are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, these securities were only recently developed. As a result, established trading markets have not yet been fully developed and, accordingly, these securities are generally illiquid and to such extent, together with any other illiquid investments, will not exceed 10% of the Fund's net assets.
REMICs, which were authorized under the Tax Reform Act of 1986, are private entities formed for the purpose of holding a fixed pool of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities and certain REMICs also may be stripped.
The Fund may also invest in CMOs, REMICs and commercial mortgage-backed securities (CMBS) that are not issued or guaranteed by, or fully collateralized by securities issued or guaranteed by, the U.S. government, its agencies or instrumentalities ("non-agency mortgage-backed securities"). These securities are secured by the underlying collateral of the private issuer. The Fund may invest its assets in such privately-issued CMOs, REMICs and CMBS only if the securities are rated in the top rating category by a nationally-recognized statistical rating organization (e.g., AAA by S&P or Aaa by Moody's). The Fund may not invest more than 20% of its assets in
securities, including CMOs, REMICS and CMBS, that are not issued or guaranteed by, or fully collateralized by securities issued or guaranteed by, the U.S. government, its agencies or instrumentalities.
CMBS are issued by special purpose entities that represent an undivided interest in a portfolio of mortgage loans backed by commercial properties. The loans are collateralized by various types of commercial property, which include, but are not limited to, multi-family housing, retail shopping centers, office space, hotels and health care facilities. Private lenders, such as banks or insurance companies, originate these loans and then sell the loans directly into a CMBS trust or other entity. CMBS are subject to credit risk, prepayment risk and extension risk. The Manager addresses credit risk by investing in CMBS that are rated in the top rating category by a nationally-recognized statistical rating organization. Although prepayment risk is present, it is of a lesser degree in the CMBS than in the residential mortgage market. Unlike other asset classes, commercial loans have structural impediments to refinancing that include lockout periods, prepayment penalties, yield maintenance and defeasance. These devices reduce the uncertainty introduced by prepayment options. The Manager carefully analyzes the composition and proportions of various prepayment provisions to protect against unscheduled payments. Extension risk is the risk that balloon payments (i.e., the final payment on commercial mortgages, which are substantially larger than other periodic payments under the mortgage) are deferred beyond their originally scheduled date for payment. Extension risk measures the impact of a borrower's ability to pay the balloon payment in a timely fashion, while maintaining loan payments in accordance with the terms specified in the loan. For the investor, extension will increase the average life of the security, generally resulting in lower yield for discount bonds and a higher yield for premium bonds. The Manager models and stress tests extension risk and invests only in structures where extension risk is acceptable under various scenarios.
Asset-Backed Securities
The Fund may invest in securities which are backed by assets such as
receivables on home equity and credit loans, receivables regarding automobile,
mobile home and recreational vehicle loans, wholesale dealer floor plans and
leases or other loans or financial receivables currently available or which may
be developed in the future.
Such receivables are securitized in either a pass-through or a pay-through structure. Pass-through securities provide investors with an income stream consisting of both principal and interest payments in respect of the receivables in the underlying pool. Pay-through asset-backed securities are debt obligations issued usually by a special purpose entity, which are collateralized by the various receivables and in which the payments on the underlying receivables provide the funds to pay the debt service on the debt obligations issued.
The rate of principal payment on asset-backed securities generally depends on the rate of principal payments received on the underlying assets. Such rate of payments may be affected by economic and various other factors such as changes in interest rates or the concentration of collateral in a particular geographic area. Therefore, the yield may be difficult to predict and actual yield to maturity may be more or less than the anticipated yield to maturity. Due to the shorter maturity of the collateral backing such securities, there tends to be less of a risk of substantial prepayment than with mortgage-backed securities but the risk of such a prepayment does exist. Such asset-backed securities do, however, involve certain risks not associated with mortgage-backed securities, including the risk that security interests cannot be adequately or in many cases ever established, and other risks which may be peculiar to particular classes of collateral. For example, with respect to credit card receivables, a number of state and federal consumer credit laws give debtors the right to set off certain amounts owed on the credit cards, thereby reducing the outstanding balance. In the case of automobile receivables, there is a risk that the holders may not have either a proper or first security interest in all of the obligations backing such receivables due to the large number of vehicles involved in a typical issuance and technical requirements under state laws. Therefore recoveries on repossessed collateral may not always be available to support payments on the securities.
Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls into two categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provisions of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments due on the underlying pool is timely. Protection against losses resulting from ultimate default enhances the likelihood of payments of the obligations on at least some of the assets in the pool. Such protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.
Examples of credit support arising out of the structure of the transaction include "senior-subordinated securities" (multiple class securities with one or more classes subordinate to other classes as to the payment of principal thereof and interest thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class), creation of "reserve funds" (where cash or investments, sometimes funded from a portion of the payments on the underlying assets, are held in reserve against future losses) and "over collateralization" (where the scheduled payments on, or the principal amount of, the underlying assets exceeds that required to make payments of the securities and pay any servicing or other fees). The degree of credit support provided for each issue is generally based on historical information respecting the level of credit information respecting the level of credit risk associated with the underlying assets. Delinquencies or losses in excess of those anticipated could adversely affect the return on an investment in such issue.
Options
The Fund 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 Fund 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 Fund's ability to effectively hedge its securities. The Fund will not, however, invest more than 10% of its assets in illiquid securities.
A. Covered Call Writing -- The Fund may write covered call options from time to time on such portion of its portfolio, without limit, as Delaware Management Company (the "Manager") determines is appropriate in seeking to obtain the Fund's investment objective. A call option gives the purchaser of such option the right to buy, and the writer, in this case the Fund, has the obligation to sell the underlying security at the exercise price during the option period. The advantage to the Fund of writing covered calls is that the Fund receives a premium which is additional income. However, if the security rises in value, the Fund 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 Fund, the Fund may enter into closing purchase transactions. A closing purchase transaction is one in which the Fund, 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
Fund to write another call option on the underlying security with either a different exercise price or expiration date or both. The Fund 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 entirety 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 Fund 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 Fund 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 Fund will write call options only on a covered basis, which means that the Fund 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 Fund 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 Fund 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 Fund may purchase call options to the extent that premiums paid by the Fund do not aggregate more than 2% of the Fund's total assets. The advantage of purchasing call options is that the Fund may alter portfolio characteristics, and modify portfolio maturities without incurring the cost associated with portfolio transactions.
The Fund 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 Fund as the option previously purchased. The Fund 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 Fund 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 Fund 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 Fund 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 Fund may expire without any value to the Fund.
C. Purchasing Put Options -- The Fund will only purchase put options to the extent that the premiums on all outstanding put options do not exceed 2% of the Fund's total assets. A put option purchased by the Fund gives it the right to sell one of its securities for an agreed price up to an agreed date. However, the Fund
must pay a premium for this right, whether it exercises it or not. The Fund will, at all times during which it holds a put option, own the security covered by such option.
The Fund 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 Fund 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 Fund will lose the value of the premium paid. The Fund 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 Fund may sell a put option purchased on individual portfolio securities. Additionally, the Fund may enter into closing sale transactions. A closing sale transaction is one in which the Fund, 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 Fund may also write put options on a secured basis which means that the Fund 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 Fund. Secured put options will generally be written in circumstances where the Manager wishes to purchase the underlying security for the Fund's portfolio at a price lower than the current market price of the security. In such event, the Fund 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 Fund 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 Fund 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. A purchase of a futures contract
means the acquisition of a contractual right to obtain delivery to the Fund of
the securities called for by the contract at a specified price during a
specified future month. The Fund will not enter into futures contracts to the
extent that more than 5% of the Fund's 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 Fund's assets.
Contracts are generally terminated by entering into an offsetting transaction. When the Fund enters into a futures transaction, it must deliver to the futures commission merchant selected by the Fund an amount referred to as "initial margin." This amount is maintained by the futures commission merchant in an account at the Fund's custodian bank. Thereafter, a "variation margin" may be paid by the Fund to, or drawn by the Fund 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.
In addition, when the Fund engages in futures transactions, to the extent required by the SEC, it will maintain with its custodian, assets in a segregated account to cover its obligations with respect to such contracts, which assets will consist of cash, cash equivalents or high quality debt securities from its portfolio in an amount equal to the difference between the fluctuating market value of such futures contracts and the aggregate value of the margin payments made by the Fund with respect to such futures contracts.
The Fund 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 Fund 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 Fund will retain the full amount of the option premium which provides a partial hedge against any decline that may have occurred in the portfolio holdings. The writing of a put option on a futures contract constitutes a partial hedge against increasing prices of the securities which are deliverable upon exercise of the futures contract. If the futures price at expiration of the option is higher than the exercise price, the Fund 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 Fund intends to purchase.
If a put or call option the Fund has written is exercised, the Fund 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 Fund's losses from existing options on futures may, to some extent, be reduced or increased by changes in the value of portfolio securities. The Fund will purchase a put option on a futures contract to hedge the Fund's portfolio against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, the Fund may not achieve the anticipated benefits of futures contracts or options on futures contracts or may realize a loss. For example, if the Fund 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 Fund 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 Fund 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 Fund 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 Fund 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 Fund 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 ("S&P") description of those categories of bond ratings: AAA--highest grade obligations. They possess the ultimate degree of protection as to principal and interest; AA--also qualify as high grade obligations, and in the majority of instances differ from AAA issues only in a small degree; A--strong ability to pay interest and repay principal although more susceptible to changes in circumstances.
Commercial Paper
The Fund may invest in short-term promissory notes issued by
corporations which at the time of purchase are rated P-1 and/or A-1. Commercial
paper ratings P-1 by Moody's and A-1 by S&P are the highest investment grade
category.
Bank Obligations
The Fund may invest in certificates of deposit, bankers' acceptances
and other short-term obligations of U.S. commercial banks and their overseas
branches and foreign banks of comparable quality, provided each such bank
combined with its branches has total assets of at least one billion dollars. Any
obligations of foreign banks shall be denominated in U.S. dollars. Obligations
of foreign banks and obligations of overseas branches of U.S. banks are subject
to somewhat different regulations and risks than those of U.S. domestic banks.
In particular, a foreign country could impose exchange controls which might
delay the release of proceeds from that country. Such deposits are not covered
by the Federal Deposit Insurance Corporation. Because of conflicting laws and
regulations, an issuing bank could maintain that liability for an investment is
solely that of the overseas branch which could expose the Fund to a greater risk
of loss. The Fund will only buy short-term instruments in nations where these
risks are minimal. The Fund will consider these factors along with other
appropriate factors in making an investment decision to acquire such obligations
and will only acquire those which, in the opinion of management, are of an
investment quality comparable to other debt securities bought by the Fund.
Portfolio Loan Transactions
The Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.
It is the understanding of the Manager that the staff of the SEC permits portfolio lending by registered investment companies if certain conditions are met. These conditions are as follows: 1) each transaction must have 100% collateral in the form of cash, short-term U.S. government securities, or irrevocable letters of credit payable by banks acceptable to the Fund from the borrower; 2) this collateral must be valued daily and should the market value of the loaned securities increase, the borrower must furnish additional collateral to the Fund; 3) Limited-Term Funds must be able to terminate the loan after notice, at any time; 4) the Fund must receive reasonable interest on any loan, and any dividends, interest or other distributions on the lent securities, and any increase in the market value of such securities; 5) the Fund may pay reasonable custodian fees in connection with the loan; and 6) the voting rights on the lent securities may pass to the borrower; however, if the trustees of Limited-Term Funds know that a material event will occur affecting an investment loan, they must either terminate the loan in order to vote the proxy or enter into an alternative arrangement with the borrower to enable the trustees to vote the proxy.
The major risk to which the Fund would be exposed on a loan transaction is the risk that the borrower would go bankrupt at a time when the value of the security goes up. Therefore, the Fund will only enter into loan arrangements after a review of all pertinent facts by the Manager, under the supervision of the Board of Trustees, including the creditworthiness of the borrowing broker, dealer or institution and then only if the consideration to be received from such loans would justify the risk. Creditworthiness will be monitored on an ongoing basis by the Manager.
When-Issued and Delayed Delivery Securities The Fund may purchase securities on a when-issued or delayed delivery basis. In such transactions, instruments are purchased with payment and delivery taking place in the future in order to secure what is considered to be an advantageous yield or price at the time of the transaction. Delivery of and payment for these securities may take as long as a month or more after the date of the purchase commitment. The Fund will designate cash or securities in amounts sufficient to cover its obligations, and will value the designated assets daily. The payment obligation and the interest rates that will be received are each fixed at the time the Fund enters into the commitment and no interest accrues to the Fund until settlement. Thus, it is possible that the market value at the time of settlement could be higher or lower than the purchase price if the general level of interest rates has changed.
Repurchase Agreements
Under a repurchase agreement, the Fund 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 Fund could experience delays and losses in liquidating the
securities. To minimize this possibility, the Fund considers the
creditworthiness of banks and dealers when entering into repurchase agreements.
Restricted Securities
While maintaining oversight, the Board of Trustees 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 Fund's 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; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was previously determined to be liquid is no longer liquid and, as a result, the Fund's holdings of illiquid securities exceed the Fund's 10% limit on investment in such securities, the Manager will determine what action to take to ensure that the Fund continues to adhere to such limitation.
Concentration
In applying the Fund's fundamental policy concerning concentration that
is described above, it is a matter of non-fundamental policy that: (i) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (iii) asset
backed securities will be classified according to the underlying assets securing
such securities.
ACCOUNTING AND TAX ISSUES
The following supplements the information in the Classes' Prospectuses under the heading Dividends, distributions and taxes.
When the Fund writes a call option, an amount equal to the premium received by it is included in the Fund's 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 Fund has written expires on its stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a short-term 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. If a call option which the Fund has written is exercised, the Fund realizes a capital gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of the underlying security, and the proceeds from such sale are increased by the premium originally received.
The premium paid by the Fund for the purchase of a put option is recorded in the section of the Fund's assets and liabilities as an investment and subsequently adjusted daily to the current market value of the option. For example, if the current market value of the option exceeds the premium paid, the excess would be unrealized appreciation and, conversely, if the premium exceeds the current market value, such excess would be unrealized depreciation. If a put option which the Fund has purchased expires on the stipulated expiration date, the Fund realizes a long- or short-term capital loss for federal income tax purposes in the amount of the cost of the option.
If the Fund sells the put option, it realizes a 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 Fund exercises a put option, it realizes a capital gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of the underlying security and 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 Fund 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.
Other Tax Requirements -- The Fund has qualified and intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a regulated investment company, a Fund generally pay no federal income tax on the income and gains it distributes. The Trustees reserve the right not to maintain the qualification of a Fund as a regulated investment company if it determines such course of action to be beneficial to shareholders. In such case, the Fund would be subject to federal, and possibly state, corporate taxes on its taxable income and gains, and distributions to you would be taxed as ordinary income dividends to the extent of the Fund's earnings and profits.
In order to qualify as a regulated investment company for federal income tax purposes, the Fund must meet certain specific requirements, including:
(i) The Fund must maintain a diversified portfolio of securities, wherein no security (other than U.S. government securities and securities of other regulated investment companies) can exceed 25% of the Fund's total assets, and, with respect to 50% of the Fund's total assets, no investment (other than cash and cash items, U.S. Government securities and securities of other regulated investment companies) can exceed 5% of the Fund's total assets or 10% of the outstanding voting securities of the issuer;
(ii) The Fund must derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, and gains from the sale or disposition of stock and securities or foreign currencies, or other income derived with respect to its business of investing in such stock, securities, or currencies;
(iii) The Fund must distribute to its shareholders at least 90% of its investment company taxable income and net tax-exempt income for each of its fiscal years.
The Code requires each Fund to distribute at least 98% of its taxable ordinary income earned during the calendar year, 98% of its capital gain net income earned during the 12 month period ending October 31 and 100% of any undistributed amount from the prior year to you by December 31 of each year in order to avoid federal excise tax. Each Fund intends as a matter of policy to declare and pay sufficient dividends in December or January (which are treated by you as received in December) but does not guarantee and can give no assurances that its distributions will be sufficient to eliminate all such taxes.
When a Fund holds an option or contract which substantially diminishes the risk of loss with respect to another position of the Fund (as might occur in some hedging transactions), this combination of positions could be treated as a "straddle" for tax purposes, possibly resulting in deferral of losses, adjustments in the holding periods and conversion of short-term capital losses into long-term capital losses.
Under rules relating to "Constructive Sale Transactions", a Fund must recognize gain (but not loss) on any constructive sale of an appreciated financial position in stock, a partnership interest or certain debt instruments. A Fund will generally be treated as making a constructive sale when it: 1) enters into a short sale on the same or substantially identical property; 2) enters into an offsetting notional principal contract; or 3) enters into a futures or forward contract to deliver the same or substantially identical property. Other transactions (including certain financial instruments called collars) will be treated as constructive sales as provided in Treasury regulations to be published. There are also certain exceptions that apply for transactions that are closed before the end of the 30th day after the close of the taxable year.
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.
In presenting performance information for Class A Shares, the Limited CDSC, applicable only to certain redemptions of those shares, will not be deducted from any computations of total return. See the Prospectus for the Fund Classes for a description of the Limited CDSC and the limited instances in which it applies. All references to a CDSC in this Performance Information section will apply to Class B Shares or Class C Shares.
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 CDSC, 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.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000 from which,
in the case of only Class A Shares, the maximum front-end
sales charge is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000 purchase at the
end of the period after the deduction of the applicable CDSC,
if any, with respect to Class B Shares and Class C Shares.
|
Aggregate or cumulative total return is calculated in a similar manner, except that the results are not annualized. Each calculation assumes the maximum front-end sales charge, if any, is deducted from the initial $1,000 investment at the time it is made with respect to Class A Shares and that all distributions are reinvested at net asset value, and, with respect to Class B Shares and Class C Shares, reflects the deduction of the CDSC that
would be applicable upon complete redemption of such shares. In addition, the Fund may present total return information that does not reflect the deduction of the maximum front-end sales charge or any applicable CDSC.
The average annual total return performance is shown below for each Class through December 31, 2002 computed as described above. The average annual total return for Class A Shares at offer reflects the maximum front-end sales charge of 2.75% 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 any front-end sales charge. The average annual total return for Class B Shares and Class C Shares including deferred sales charge reflects the deduction of the applicable CDSC that would be paid if the shares were redeemed on December 31, 2002. The average annual total return for Class B Shares and Class C Shares excluding deferred sales charge assumes the shares were not redeemed on December 31, 2002 and therefore does not reflect the deduction of a CDSC.
Securities prices fluctuated during the periods covered and past results should not be considered as representative of future performance.
Actual after-tax returns depend on the investor's individual tax situation and may differ from the returns shown. After-tax returns are not relevant for shares held in tax-deferred investment vehicles such as employer-sponsored 401(k) plans and individual retirement accounts. The after-tax returns shown are calculated using the highest individual federal marginal income tax rates in effect during the Fund's lifetime and do not reflect the impact of state and local taxes. Past performance, both before and after taxes, is not a guarantee of future results.
The average annual total return for each Class (except Class R) is shown for the 1 year, 5 year, or 10 year period ending December 31, 2002. If a Class has not been in existence for a full 1, 5 or 10 year period, then Lifetime returns are shown.
Average Annual Total Return(1)
---------------------------------------------------------------------------- ------------- ------------ ------------ ------------
1 year 5 years 10 years
ended ended ended Life of
12/31/03 12/31/03 12/31/03 Fund(4)
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class A Shares
(at offer before taxes)(2) (0.71%) 4.76% 4.67% 6.07%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class A Shares
(at offer after taxes on distributions)(2) (1.96%) 2.61% 2.18% N/A
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class A Shares
(at offer after taxes on distributions and sale of fund shares)(2) (0.48%) 2.70% 2.37% N/A
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class A Shares
(at NAV before taxes)(2) 2.12% 5.36% 4.97% 6.23%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class B Shares
(including CDSC before taxes)(3) (0.71%) 4.46% N/A 4.47%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class B Shares
(including CDSC after taxes on distributions)(3) (1.70%) 2.65% N/A 2.33%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class B Shares
(including CDSC after taxes on distributions and sale of fund shares)(3) (0.47%) 2.67% N/A 2.44%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class B Shares
(excluding CDSC before taxes)(3) 1.25% 4.46% N/A 4.47%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class C Shares
(including CDSC before taxes) 0.27% 4.45% N/A 4.57%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class C Shares
(including CDSC after taxes on distributions) (0.72%) 2.65% N/A 2.55%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class C Shares
(including CDSC after taxes on distributions and sale of fund shares) 0.17% 2.66% N/A 2.61%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class C Shares
(excluding CDSC before taxes) 1.25% 4.45% N/A 4.57%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class R Shares
(before taxes) N/A N/A N/A 0.14%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class R Shares
(after taxes on distributions) N/A N/A N/A N/A
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Class R Shares
(after taxes on distributions and sale of fund shares) N/A N/A N/A N/A
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Institutional Class Shares
(before taxes) 2.27% 5.52% 5.13% 6.37%
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Institutional Class Shares
(after taxes on distributions) 0.93% 3.30% 2.57% N/A
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
Institutional Class Shares
(after taxes on distributions and sale of fund shares) 1.46% 3.31% 2.71% N/A
--------------------------------------------------------------------------- ------------- ------------ ------------ ------------
|
(1) Reflects applicable expense caps in effect during the periods. See Investment Management Agreement and Sub-Advisory Agreement for information regarding expense caps for the Funds. In the absence of such voluntary waivers, performance would have been affected negatively.
(2) Effective June 9, 1997, the maximum front-end sales charge was reduced
from 3.00% to 2.75%. The above performance numbers are calculated using
2.75% as the applicable sales charge for all time periods, and are more
favorable than they would have been had they been calculated using the
former front-end sales charges.
(3) Effective November 18, 2002, the CDSC schedule for Class B Shares will
be changed to: 2.00% during the first year, 1.00% during the second and
third years and 0% thereafter. The above figures have been calculated
using this new schedule.
(4) Class A Shares commenced operations on November 24, 1985. Institutional Class Shares commenced operations on June 1, 1992. Class B Shares commenced operations on May 2, 1994. Class C Shares commenced operations on November 29, 1995. Class R Shares commenced operations on June 2, 2003.
The Fund 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 the period and annualizing the resulting figure, according to the following formula:
a-b 6
YIELD = 2[(-------- + 1) - 1]
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends;
d = the maximum offering price per share on the last day of the
period.
|
The above formula will be used in calculating quotations of yield of each Class, based on specified 30-day periods identified in advertising by the Fund. The 30-day yields as of December 31, 2003 using this formula are shown below. Yield assumes the maximum front-end sales charge, if any, and does not reflect the deduction of any CDSC or Limited CDSC. 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 Fund in the future.
---------------------------- -------------------------- Class A Shares 2.86% ---------------------------- -------------------------- Class B Shares 2.06% ---------------------------- -------------------------- Class C Shares 2.06% ---------------------------- -------------------------- Class R Shares 2.46% ---------------------------- -------------------------- Institutional Shares 3.06% ---------------------------- -------------------------- |
On December 31, 2003, the average effective weighted average portfolio maturity was 10.773 years for the Fund.
Investors should note that the income earned and dividends paid by the Fund will vary with the fluctuation of interest rates and performance of the portfolio. The net asset value of the fund may change. Unlike money market funds, the Fund invests in longer-term securities that fluctuate in value and do so in a manner inversely correlated with changing interest rates. The Fund's net asset value will tend to rise when interest rates fall. Conversely, the Fund's net asset value will tend to fall as interest rates rise. Normally, fluctuations in interest rates have a greater effect on the prices of longer-term bonds. The value of the securities held in the Fund will vary from day to day and investors should consider the volatility of the Fund's net asset value as well as its yield before making a decision to invest.
From time to time, the Fund may quote actual total return and/or yield performance for its Classes in advertising and other types of literature. This information may be compared to that of other mutual funds with similar investment objectives and to stock, bond and other relevant indices or to rankings prepared by independent services or other financial or industry publications that monitor the performance of mutual funds. For example, the performance of the Fund (or Class) may be compared to data prepared by Lipper Analytical Services, Inc., Morningstar, Inc. or the performance of unmanaged indices compiled or maintained by statistical research firms such as Lehman Brothers or Citigroup Global Markets, Inc. ("Citigroup").
Lipper Analytical Services, Inc. maintains statistical performance databases, as reported by a diverse universe of independently-managed mutual funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the basis of risk-adjusted performance. Rankings that compare the Fund's performance to another fund in appropriate categories over specific time periods also may be quoted in advertising and other types of literature. The total return performance reported for these indices will reflect the reinvestment of all distributions on a quarterly basis and market price fluctuations. The indices do not take into account any sales charge or other fees. A direct investment in an unmanaged index is not possible.
Lehman Brothers and Citigroup are statistical research firms that maintain databases of international market, bond market, corporate and government-issued securities of various maturities. This information, as well as unmanaged indices compiled and maintained by these firms, will be used in preparing comparative illustrations. In addition, the performance of multiple indices compiled and maintained by these firms may be combined to create a blended performance result for comparative purposes. Generally, the indices selected will be representative of the types of securities in which the Fund may invest and the assumptions that were used in calculating the blended performance will be described.
Comparative information on the Consumer Price Index may also be included in advertisements or other literature. The Consumer Price Index, as prepared by the U.S. Bureau of Labor Statistics, is the most commonly used measure of inflation. It indicates the cost fluctuations of a representative group of consumer goods. It does not represent a return from an investment.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides historical returns of the capital markets in the United States, including common stocks, small capitalization stocks, long-term corporate bonds, intermediate-term government bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation (based on the Consumer Price Index), and combinations of various capital markets. The performance of these capital markets is based on the returns of different indices. The Fund may use the performance of these capital markets in order to demonstrate general risk-versus-reward investment scenarios. Performance comparisons may also include the value of a hypothetical investment in any of these capital markets. The risks associated with the security types in any capital market may or may not correspond directly to those of the Fund. The Fund may also compare performance to that of other compilations or indices that may be developed and made available in the future.
The Fund may include discussions or illustrations of the potential investment goals of a prospective investor (including materials that describe general principles of investing, such as asset allocation, diversification, risk tolerance, and goal setting, questionnaires designed to help create a personal financial profile, worksheets used to project savings needs based on assumed rates of inflation and hypothetical rates of return and action plans offering investment alternatives), investment management techniques, policies or investment suitability of the Fund (such as value investing, market timing, dollar cost averaging, asset allocation, constant ratio transfer, automatic account rebalancing, the advantages and disadvantages of investing in tax-deferred and taxable investments), economic and
political conditions, the relationship between sectors of the economy and the economy as a whole, the effects of inflation and historical performance of various asset classes, including but not limited to, stocks, bonds and Treasury bills. From time to time advertisements, sales literature, communications to shareholders or other materials may summarize the substance of information contained in shareholder reports (including the investment composition of the Fund), as well as the views as to current market, economic, trade and interest rate trends, legislative, regulatory and monetary developments, investment strategies and related matters believed to be of relevance to the Fund. In addition, selected indices may be used to illustrate historic performance of selected asset classes. The Fund may also include in advertisements, sales literature, communications to shareholders or other materials, charts, graphs or drawings which illustrate the potential risks and rewards of investment in various investment vehicles, including but not limited to, domestic stocks, and/or bonds, treasury bills and shares of the Fund. In addition, advertisements, sales literature, communications to shareholders or other materials may include a discussion of certain attributes or benefits to be derived by an investment in the Fund and/or other mutual funds, shareholder profiles and hypothetical investor scenarios, timely information on financial management, tax and retirement planning (such as information on Roth IRAs and Coverdell Education Savings Accounts (formerly an "education IRA")) and investment alternatives to certificates of deposit and other financial instruments. Such sales literature, communications to shareholders or other materials may include symbols, headlines or other material which highlight or summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of the Fund and may illustrate how to find the listings of the Fund in newspapers and periodicals. Materials may also include discussions of other funds, products, and services.
The Fund may quote various measures of volatility and benchmark correlation in advertising. In addition, the Fund may compare these measures to those of other funds. Measures of volatility seek to compare the historical share price fluctuations or total returns to those of a benchmark. Measures of benchmark correlation indicate how valid a comparative benchmark may be. Measures of volatility and correlation may be calculated using averages of historical data. The Fund may advertise its current interest rate sensitivity, duration, weighted average maturity or similar maturity characteristics. Advertisements and sales materials relating to the Fund may include information regarding the background and experience of its portfolio managers.
The following table is an example, for purposes of illustration only, of cumulative total return performance for each Class through December 31, 2003. For these purposes, the calculations assume the reinvestment of any realized securities profits distributions and income dividends paid during the indicated periods. In addition, these calculations, as shown below, reflect maximum sales charges, if any, paid on the purchase or redemption of shares, as applicable, but not any income taxes payable by shareholders on the reinvested distributions included in the calculations. The performance of Class A Shares may be shown without reflecting the impact of any front-end sales charge. The performance of Class B Shares and Class C Shares is calculated both with the applicable CDSC included and excluded. Pursuant to applicable regulation, total return shown for the Institutional Class for the periods prior to the commencement of operations of such Class is calculated by taking the performance of Class A Shares and adjusting it to reflect the elimination of all sales charges. However, for those periods, no adjustment has been made to eliminate the impact of 12b-1 payments, and performance may have been affected had such an adjustment been made.
The 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.
Cumulative Total Return(1)
---------------------------------------- ----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
3 months 6 months 9 months 1 year 3 years 5 years 10 years
ended ended ended ended ended ended ended Life of
12/31/03 12/31/03 12/31/03 12/31/03 12/31/03 12/31/03 12/31/03 Fund(4)
---------------------------------------- ----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
Delaware Limited-Term Fund A Class
(at NAV) 0.16% 0.15% 1.45% 2.12% 18.27% 29.80% 62.35% 198.71%
---------------------------------------- ----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
Delaware Limited-Term Fund A Class
(at Offer)(2) (2.64%) (2.63%) (1.37%) (0.71%) 14.99% 26.18% 57.85% 190.58%
---------------------------------------- ----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
Delaware Limited-Term Fund B Class
(including CDSC)(3) (2.03%) (2.25%) (1.17%) (0.71%) 14.26% 24.38% N/A 52.58%
---------------------------------------- ----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
Delaware Limited-Term Fund B Class
(excluding CDSC) (0.05%) (0.28%) 0.80% 1.25% 15.26% 24.38% N/A 52.58%
---------------------------------------- ----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
Delaware Limited-Term Fund C Class
(including CDSC) (1.04%) (1.27%) (0.18%) 0.27% 15.23% 24.33% N/A 43.55%
---------------------------------------- ----------- ----------- ----------- ---------- ----------- ---------- ---------- ----------
Delaware Limited-Term Fund C Class
(excluding CDSC) (0.05%) (0.28%) 0.80% 1.25% 15.23% 24.33% N/A 43.55%
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Delaware Limited-Term Fund R Class 0.17% 0.14% N/A N/A N/A N/A N/A 0.14%
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Delaware Limited-Term Fund
Institutional Class 0.20% 0.22% 1.56% 2.27% 18.85% 30.84% 64.86% 205.90%
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(1) Reflects applicable expense caps in effect during the periods. See
Investment Management Agreement and Sub-Advisory Agreement for
information regarding expense caps for the Funds. In the absence of
such waivers, performance would have been affected negatively.
(2) Effective June 9, 1997, the maximum front-end sales charge was reduced
from 3.00% to 2.75%. The above performance numbers are calculated using
2.75% as the applicable sales charge for all time periods, and are more
favorable than they would have been had they been calculated using the
former front-end sales charges.
(3) Effective November 18, 2002, the CDSC schedule for Class B Shares was
changed to: 2.00% during the first year, 1.00% during the second and
third years and 0% thereafter. The above figures have been calculated
using this new schedule.
(4) Class A Shares commenced operations on November 24, 1985. Institutional Class Shares commenced operations on June 1, 1992. Class B Shares commenced operations on May 2, 1994. Class C Shares commenced operations on November 29, 1995. Class R Shares commenced operations on June 2, 2003.
Because every investor's goals and risk threshold are different, the Distributor, as distributor for the Fund and other mutual funds in the Delaware Investments family of funds, 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 financial planning. One typical way of addressing these issues is to compare an individual's goals and the length of time the individual has to attain these goals to his or her risk threshold. In addition, the Distributor will provide information that discusses the Manager's overriding investment philosophy and how that philosophy impacts the Fund's investment disciplines, and investment disciplines of the funds in the Delaware Investments family, 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's affiliates, including the number of such clients serviced by the Manager's affiliates.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision. Security prices tend to move up and down over various market cycles and logic says to invest when prices are low. However, even experts can't always pick the highs and the lows. By using a strategy known as dollar-cost averaging, you schedule your investments ahead of time. If you invest a set amount on a regular basis, that money will always buy more shares when the price is low and fewer when the price is high. You can choose to invest at any regular interval - for example, monthly or quarterly - as long as you stick to your regular schedule. Dollar-cost averaging looks simple and it is, but there are important things to remember.
Dollar-cost averaging works best over longer time periods, and it doesn't guarantee a profit or protect against losses in declining markets. If you need to sell your investment when prices are low, you may not realize a profit no matter what investment strategy you utilize. That's why dollar-cost averaging can make sense for long-term goals. Since the potential success of a dollar-cost averaging program depends on continuous investing, even through periods of fluctuating prices, you should consider your dollar-cost averaging program a long-term commitment and invest an amount you can afford and probably won't need to withdraw. Delaware Investments offers three services -- Automatic Investing Program, Direct Deposit Program and the Wealth Builder Option -- that can help to keep your regular investment program on track. See Investing by Electronic Fund Transfer - Direct Deposit Purchase Plan and Automatic Investing Plan under Investment Plans and Wealth Builder Option under Investment Plans for a complete description of these services including restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a fluctuating market, the average cost per share over a period of time will be lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
---------- --------- ---------
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 20
Month 4 $100 $10.00 10
---------------------------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
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Total Number of Shares Purchased: 48 Average Price Per Share: $9.38 ($37.50/4) Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to represent the actual performance of the Fund.
The Power Of Compounding
When you opt to reinvest your current income for additional Fund shares, your investment is given yet another opportunity to grow. The Fund may include illustrations showing the power of compounding in advertisements and other types of literature.
TRADING PRACTICES AND BROKERAGE
Portfolio transactions are executed by the Manager on behalf of the Fund 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 execution. Best execution refers to many factors, including the price paid or received for a security, the commission charged, the promptness and reliability of execution, the confidentiality and placement accorded the order and other factors affecting the overall benefit obtained by the account on the transaction. Trades are generally made on a net basis where 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 the Manager's 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.
During the past three fiscal years, the following aggregate dollar amounts of brokerage commissions were paid by the Fund:
-------------------------------------- -----------------------------------------
December 31
-------------------------------------- ------------ -------------- -------------
2003 2003 2001
-------------------------------------- ------------ -------------- -------------
Delaware Limited-Term Government Fund $201,955 $136,438 $0
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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 Fund's Investment Management Agreement, higher commissions are permitted to be paid to broker/dealers who provide brokerage and research services than to broker/dealers who do not provide such services, if such higher commissions are deemed reasonable in relation to the value of the brokerage and research services provided. Although transactions are directed to broker/dealers who provide such brokerage and research services, Limited-Term Funds believes that the commissions paid to such broker/dealers are not, in general, higher than commissions that would be paid to broker/dealers not providing such services and that such commissions are reasonable in relation to the value of the brokerage and research services provided. In some instances, services may be provided to the Manager which constitute in some part brokerage and research services used by the Manager in connection with its investment decision-making process and constitute in some part services used by the Manager in connection with administrative or other functions not related to its investment decision-making process. In such cases, the Manager will make a good faith allocation of brokerage and research services and will pay out of its own resources for services used by the Manager in connection with administrative or other functions not related to its investment decision-making process. In addition, so long as no fund is disadvantaged, portfolio transactions which generate commissions or their equivalent are allocated to broker/dealers who provide daily portfolio pricing services to the Fund and to other funds in the Delaware Investments family. Subject to best execution, commissions allocated to brokers providing such pricing services may or may not be generated by the funds receiving the pricing service.
The Manager may place a combined order for two or more accounts or funds engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will result in best execution. Transactions involving commingled orders are allocated in a manner deemed equitable to each account or fund. When a combined order is executed in a series of transactions at different prices, each account participating in the order may be allocated an average price obtained from the executing broker. It is believed that the ability of the accounts to participate in volume transactions will generally be beneficial to the accounts and funds. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or fund may obtain, it is the opinion of the Manager and Limited-Term Funds' Board of Trustees that the advantages of combined orders outweigh the possible disadvantages of separate transactions.
Consistent with NASDR(SM), and subject to seeking best execution, the Manager may place orders with broker/dealers that have agreed to defray certain Fund expenses such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of shares of the funds in the Delaware Investments family 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
Fund's objective in relation to anticipated movements in the general level of
interest rates. The Fund is free to dispose of portfolio securities at any time,
subject to complying with the Internal Revenue Code and the 1940 Act, when
changes in circumstances or conditions make such a move desirable in light of
the investment objective. The Fund will not attempt to achieve or be limited to
a predetermined rate of portfolio turnover. Such turnover always will be
incidental to transactions undertaken with a view to achieving the Fund's
investment objective.
The degree of portfolio activity may affect brokerage costs of a Fund and taxes payable by a Fund's shareholders. A turnover rate of 100% would occur, for example, if all the investments in a Fund's securities at the beginning of the year were replaced by the end of the year, or if a single investment was frequently traded. In investing to achieve its investment objective, a Fund may hold securities for any period of time. To the extent the Fund realizes gains on securities held for less than six months, such gains are taxable to the shareholder subject to tax or to a Fund at ordinary income tax rates. The turnover rate also may be affected by cash requirements from redemptions and repurchases of Fund shares. High portfolio turnover involves correspondingly greater brokerage costs and may affect taxes payable by shareholders that are subject to federal income taxes.
The portfolio turnover rate of the Fund is calculated by dividing the lesser of purchases or sales of portfolio securities for the particular fiscal year by the monthly average of the value of the portfolio securities owned by the Fund during the particular fiscal year, exclusive of securities whose maturities at the time of acquisition are one year or less.
The Fund may be expected to engage in active and frequent trading of portfolio securities, which means that portfolio turnover can be expected to exceed 100%. The Fund has, in the past, experienced portfolio turnover rates that were significantly in excess of 100%.
During the past two fiscal years ended December 31, 2003 and 2002, the Fund's portfolio turnover rates were 483% and 313%, respectively. The investment strategy for the Fund has not changed and we do expect the Fund's portfolio turnover rate to exceed 100% this year, unless unexpected market conditions prevail.
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's shares and has agreed to use its best efforts to sell shares of the Fund. See the Prospectuses for information on how to invest. Shares of the Fund are offered on a continuous basis and may be purchased through authorized investment dealers or directly by contacting Limited-Term Funds or the Distributor.
The minimum initial investment generally is $1,000 for Class A Shares, Class B Shares and Class C Shares. Subsequent purchases of such Classes generally must be at least $100. The initial and subsequent investment minimums for Class A Shares will be waived for purchases by officers, trustees and employees of any Delaware Investments fund, the Manager or any of the Manager's affiliates if the purchases are made pursuant to a payroll deduction program. Shares purchased pursuant to the Uniform Gifts to Minors Act or Uniform Transfers to Minors Act and shares purchased in connection with an Automatic Investing Plan are subject to a minimum initial purchase of $250 and a minimum subsequent purchase of $25. Accounts opened under the Delaware Investments Asset Planner service are subject to a minimum initial investment of $2,000 per Asset Planner Strategy selected. There are no minimum purchase requirements for Class R and the Institutional Class, but certain eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase limitation of $100,000. For Class C Shares, each purchase must be in an amount that is less than $1,000,000. See Investment Plans for purchase limitations applicable to retirement plans. Limited-Term Funds will reject any purchase order for more than $100,000 of Class B Shares and $1,000,000 or more of Class C Shares. An investor may exceed these limitations by making cumulative purchases over a period of time. In doing so, an investor should keep in mind, however, that reduced front-end sales charges apply to investments of $50,000 or more in Class A Shares, and that Class A Shares are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C Shares and generally are not subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly. Limited-Term Funds reserves the right to reject any order for the purchase of its shares of the Fund if in the opinion of management such rejection is in the Fund's best interest. If a purchase is canceled because your check is returned unpaid, you are responsible for any loss incurred. The Fund can redeem shares from your account(s) to reimburse itself for any loss, and you may be restricted from making future purchases in any of the funds in the Delaware Investments family. The Fund reserves the right to reject purchase orders paid by third-party checks or checks that are not drawn on a domestic branch of a United States financial institution. If a check drawn on a foreign financial institution is accepted, you may be subject to additional bank charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder notification, to charge a service fee on non-retirement accounts that, as a result of redemption, have remained below the minimum stated account balance for a period of three or more consecutive months. Holders of such accounts may be notified of their insufficient account balance and advised that they have until the end of the current calendar quarter to raise their balance to the stated minimum. If the account has not reached the minimum balance requirement by that time, the Fund will charge a $9 fee for that quarter and each subsequent calendar quarter until the account is brought up to the minimum balance. The service fee will be deducted from the account during the first week of each calendar quarter for the previous quarter, and will be used to help defray the cost of maintaining low-balance accounts. No fees will be charged without proper notice, and no CDSC will apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice, to involuntarily redeem accounts that remain under the minimum initial purchase amount as a result of redemptions. An investor making the minimum initial investment may be subject to involuntary redemption without the imposition of a CDSC or Limited CDSC if he or she redeems any portion of his or her account.
The NASD has adopted amendments to its Conduct Rules, relating to investment company sales charges. Limited-Term Funds 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 2.75%; however, lower front-end sales charges apply for larger purchases. See the table in the Fund Classes' Prospectus. Class A Shares are also subject to annual 12b-1 Plan expenses for the life of the investment.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 2.00% if shares are redeemed within the first year of purchase; and
(ii) 1.00% if shares are redeemed during the second and third years following
purchase and 0% thereafter. Class B Shares are also subject to annual 12b-1 Plan
expenses which are higher than those to which Class A Shares are subject and are
assessed against the Class B Shares for approximately five years after purchase.
Class B Shares will automatically convert to Class A Shares at the end of
approximately five years after purchase and, thereafter, be subject to annual
12b-1 Plan expenses of up to a maximum of 0.30% (contractually limited to 0.15%
through February 28, 2004) of average daily net assets of such shares. See
Automatic Conversion of Class B Shares, below.
Class C Shares are purchased at net asset value and are subject to a CDSC of 1% if shares are redeemed within 12 months following purchase. Class C Shares are also subject to annual 12b-1 Plan expenses for the life of the investment which are equal to those to which Class B Shares are subject.
Class R Shares are purchased at the net asset value per share without the imposition of a front-end or contingent deferred sales charge. Class R Shares are subject to annual 12b-1 Plan expenses for the life of the investment.
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.
Class A Shares, Class B Shares, Class C Shares, Class R and Institutional Class Shares represent a proportionate interest in the Fund's assets and will receive a proportionate interest in the Fund's income, before application, as to Class A, Class B, Class C and Class R Shares, of any expenses under the Fund's 12b-1 Plans. See Plans Under Rule 12b-1 for the Fund Classes under Purchasing Shares, and Determining Offering Price and Net Asset Value in this Part B.
Beginning March 1, 2004, the Distributor has contracted to waive 0.15% of the payment of 12b-1 Plan expenses by the Funds' Class A shares through February 28, 2005.
Certificates representing shares purchased are not ordinarily issued unless, in the case of Class A Shares or Institutional Class shares, a shareholder submits a specific request. Certificates are not issued in the case of Class B Shares, Class C Shares or Class R Shares or in the case of any retirement plan account including self-directed IRAs. However, purchases not involving the issuance of certificates are confirmed to the investor and credited to the shareholder's account on the books maintained by Delaware Service Company, Inc. (the "Transfer Agent"). The investor will have the same rights of ownership with respect to such shares as if certificates had been issued. An investor that is permitted to obtain a certificate may receive a certificate representing full share denominations purchased by sending a letter signed by each owner of the account to the Transfer Agent requesting the certificate. No charge is assessed by Limited-Term Funds for any certificate issued. A shareholder may be subject to fees for replacement of a lost or stolen certificate, under certain conditions, including the cost of obtaining a bond covering the lost or stolen certificate. Please contact the Fund for further information. Investors who hold certificates representing any of their shares may only redeem those shares by written request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements - Class A, B and C Shares
The alternative purchase arrangements of Class A Shares, Class B Shares and Class C Shares permit investors to choose the method of purchasing shares that is most suitable for their needs given the amount of their purchase, the length of time they expect to hold their shares and other relevant circumstances. Investors should determine whether, given their particular circumstances, it is more advantageous to purchase Class A Shares and incur a front-end sales charge and annual 12b-1 Plan expenses of up to a maximum of 0.30% (contractually limited to 0.15% through February 28, 2005) of the average daily net assets of Class A Shares, or to purchase either Class B or Class C Shares and have the entire initial purchase amount invested in the Fund with the investment thereafter subject to a CDSC and annual 12b-1 Plan expenses. Class B Shares are subject to a CDSC if the shares are redeemed within three years of purchase, and Class C Shares are subject to a CDSC if the shares are redeemed within 12 months of purchase. Class B and Class C Shares are each subject to annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service fees to be paid to the Distributor, dealers or others for providing personal service and/or maintaining shareholder accounts) of average daily net assets of the respective Class. Class B Shares will automatically convert to Class A Shares at the end of approximately five years after purchase and, thereafter, be subject to annual 12b-1 Plan expenses of up to a maximum of 0.30% (contractually limited to 0.15% through February 28, 2005) of average daily net assets of such shares. Unlike Class B Shares, Class C Shares do not convert to another Class.
The higher 12b-1 Plan expenses on Class B Shares and Class C Shares will be offset to the extent a return is realized on the additional money initially invested upon the purchase of such shares. However, there can be no assurance as to the return, if any, that will be realized on such additional money. In addition, the effect of any
return earned on such additional money will diminish over time. In comparing Class B Shares to Class C Shares, investors should also consider the duration of the annual 12b-1 Plan expenses to which each of the classes is subject and the desirability of an automatic conversion feature, which is available only for Class B Shares.
Class R Shares have no front-end sales charge and are not subject to a CDSC, but incur annual 12b-1 expenses of up to a maximum of 0.60%. Class A Shares generally are not available for purchase by anyone qualified to purchase Class R Shares.
In comparing Class B Shares and Class C Shares to Class R Shares, investors should consider the higher 12b-1 Plan expenses on Class B Shares and Class C Shares. Investors also should consider the fact that, like Class B Shares and Class C Shares, Class R Shares do not have a front-end sales charge and, unlike Class B Shares and Class C Shares, Class R Shares are not subject to a CDSC. In Comparing Class B Shares to Class R shares, investors should also consider the duration of the annual 12b-1 Plan expenses to which each Class is subject and the desirability of an automatic conversion feature to Class A Shares (with lower annual 12b-1 Plan fees), which is available only for Class B Shares and does not subject the investor to a CDSC.
For the distribution and related services provided to, and the expenses borne on behalf of, the Fund, the Distributor and others will be paid, in the case of Class A Shares, from the proceeds of the front-end sales charge and 12b-1 Plan fees, in the case of Class B Shares and Class C Shares, from the proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon redemption, and in the case of Class R Shares, from the proceeds of the 12b-1 Plan fees. Financial advisors may receive different compensation for selling Class A Shares, Class B Shares, Class C Shares and Class R Shares. Investors should understand that the purpose and function of the respective 12b-1 Plans (including for Class R Shares) and the CDSCs applicable to Class B Shares and Class C Shares are the same as those of the 12b-1 Plan and the front-end sales charge applicable to Class A Shares in that such fees and charges are used to finance the distribution of the respective Classes. See Plans Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares, Class C Shares, Class R Shares and Institutional Class Shares will be calculated in the same manner, at the same time and on the same day and will be in the same amount, except that the amounts of 12b-1 Plan expenses relating to Class A Shares, Class B Shares, Class C Shares and Class R Shares will be borne exclusively by such shares. See Determining Offering Price and Net Asset Value.
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the Fund Classes'
Prospectus, and may include a series of purchases over a 13-month period under a
Letter of Intention signed by the purchaser. See Special Purchase Features -
Class A Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
From time to time, upon written notice to all of its dealers, the Distributor may hold special promotions for specified periods during which the Distributor may reallow to dealers up to the full amount of the front-end sales. In addition, certain dealers who enter into an agreement to provide extra training and information on Delaware Investments products and services and who increase sales of Delaware Investments funds may receive an additional commission of up to 0.15% of the offering price in connection with sales of Class A Shares. Such dealers must meet certain requirements in terms of organization and distribution capabilities and their ability to increase sales. The Distributor should be contacted for further information on these requirements as well as the basis and circumstances upon which the additional commission will be paid. Participating dealers may be deemed to have additional responsibilities under the securities laws. Dealers who receive 90% or more of the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectus, for initial purchases of Class A Shares
of $1,000,000 or more, a dealer's commission may be paid by the Distributor to
financial advisors through whom such purchases are effected.
For accounts with assets over $1 million, the dealer commission resets annually to the highest incremental commission rate on the anniversary of the first purchase. In determining a financial advisor's eligibility for the dealer's commission, purchases of Class A Shares of other Delaware Investments funds as to which a Limited CDSC applies (see Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and Exchange) may be aggregated with those of the Class A Shares of the Fund. Financial advisors also may be eligible for a dealer's commission in connection with certain purchases made under a Letter of Intention or pursuant to an investor's Right of Accumulation. Financial advisors should contact the Distributor concerning the applicability and calculation of the dealer's commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for payment of the dealer's commission, unless a dealer's commission or similar payment has not been previously paid on the assets being exchanged. The schedule and program for payment of the dealer's commission are subject to change or termination at any time by the Distributor at its discretion.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares Class B Shares and Class C Shares are purchased without a front-end sales charge. Class B Shares redeemed within three years of purchase may be subject to a CDSC at the rates set forth above, and Class C Shares redeemed within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of the dollar amount subject to the CDSC. The charge will be assessed on an amount equal to the lesser of the net asset value at the time of purchase of the shares being redeemed or the net asset value of those shares at the time of redemption. No CDSC will be imposed on increases in net asset value above the initial purchase price, nor will a CDSC be assessed on redemptions of shares acquired through reinvestment of dividends or capital gains distributions. For purposes of this formula, the "net asset value at the time of purchase" will be the net asset value at purchase of Class B Shares or Class C Shares of the Fund, even if those shares are later exchanged for shares of another Delaware Investments fund. In the event of an exchange of the shares, the "net asset value of such shares at the time of redemption" will be the net asset value of the shares that were acquired in the exchange. See Waiver of Contingent Deferred Sales Charge--Class B Shares and Class C Shares under Redemption and Exchange for the Fund Classes for a list of the instances in which the CDSC is waived.
During the fourth year after purchase and, thereafter, until converted automatically into Class A Shares, Class B Shares will still be subject to the annual 12b-1 Plan expenses of up to 1% of average daily net assets of those shares. At the end of approximately five years after purchase, the investor's Class B Shares will be automatically converted into Class A Shares of the Fund. See Automatic Conversion of Class B Shares under Redemption and Exchange. Such conversion will constitute a tax-free exchange for federal income tax purposes. Investors are reminded that the Class A Shares into which Class B Shares will convert are subject to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% (contractually limited to 0.15% through February 28, 2004) of average daily net assets of such shares.
In determining whether a CDSC applies to a redemption of Class B Shares, it will be assumed that shares held for more than three years are redeemed first, followed by shares acquired through the reinvestment of dividends or distributions, and finally by shares held longest during the three-year period. With respect to Class C Shares, it will be assumed that shares held for more than 12 months are redeemed first followed by shares acquired through the reinvestment of dividends or distributions, and finally by shares held for 12 months or less.
Deferred Sales Charge Alternative - Class B Shares Class B Shares may be purchased at net asset value without a front-end sales charge and, as a result, the full amount of the investor's purchase payment will be invested in Fund shares. The Distributor currently
anticipates compensating dealers or brokers for selling Class B Shares at the time of purchase from its own assets in an amount equal to no more than 2% of the dollar amount purchased. In addition, from time to time, upon written notice to all of its dealers, the Distributor may hold special promotions for specified periods during which the Distributor may pay additional compensation to dealers or brokers for selling Class B Shares at the time of purchase. As discussed below, however, Class B Shares are subject to annual 12b-1 Plan expenses and, if redeemed within 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 providing distribution and related services, and bearing related expenses, in connection with the sale of Class B Shares. These payments support the compensation paid to dealers or brokers for selling Class B Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may be in an amount equal to no more than 1% annually. The combination of the CDSC and the proceeds of the 12b-1 Plan fees makes it possible for the Fund to sell Class B Shares without deducting a front-end sales charge at the time of purchase.
Holders of Class B Shares who exercise the exchange privilege described below will continue to be subject to the CDSC schedule for Class B Shares as described in this Part B, even after the exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for five years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the 18th day or next
business day of March, June, September and December (each, a "Conversion Date").
If the 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 three additional months after the fifth anniversary of purchase before the
shares will automatically convert into Class A Shares.
Class B Shares of the Fund acquired through a reinvestment of dividends will convert to the corresponding Class A Shares of that fund (or, in the case of Delaware Group Cash Reserve, the Delaware Cash Reserve Fund 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.
Level Sales Charge Alternative - Class C Shares Class C Shares may be purchased at net asset value without a front-end sales charge and, as a result, the full amount of the investor's purchase payment will be invested in Fund shares. The Distributor currently compensates dealers or brokers for selling Class C Shares at the time of purchase from its own assets in an amount equal to no more than 1% of the dollar amount purchased. As discussed below, Class C Shares are subject to annual 12b-1 Plan expenses and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the Distributor and others for providing distribution and related services, and bearing related expenses, in connection with the sale of Class C Shares. These payments support the compensation paid to dealers or brokers for selling Class C Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described below will continue to be subject to the CDSC schedule for Class C Shares as described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Limited-Term Funds has adopted a separate plan for each of Class A Shares, Class B Shares, Class C Shares and Class R Shares of the Fund (the "Plans"). Each Plan permits the Fund to pay for certain distribution, promotional and related expenses involved in the marketing of only the Class of shares to which the Plan applies. The Plans do not apply to the Institutional Class of shares. Such shares are not included in calculating the Plans' fees, and the Plans are not used to assist in the distribution and marketing of shares of the Institutional Class. Shareholders of the Institutional Class may not vote on matters affecting the Plans.
The Plans permit the Fund, pursuant to the Distribution Agreement, to pay out of the assets of Class A Shares, Class B Shares, Class C Shares and Class R Shares monthly fees to the Distributor for its services and expenses in distributing and promoting sales of shares of such classes. These expenses include, among other things, preparing and distributing advertisements, sales literature and prospectuses and reports used for sales purposes, compensating sales and marketing personnel, and paying distribution and maintenance fees to securities brokers and dealers who enter into agreements with the Distributor. The Plan expenses relating to Class B and Class C Shares are also used to pay the Distributor for advancing the commission costs to dealers with respect to the initial sale of such shares.
In addition, the Fund may make payments out of the assets of Class A, Class B, Class C and Class R Shares directly to other unaffiliated parties, such as banks, who either aid in the distribution of shares of, or provide services to, such classes.
The maximum aggregate fee payable by the Fund under the Plans, and the Fund's Distribution Agreement, is on an annual basis up to 0.30% of Class A Shares' average daily net assets for the year, up to 1% (0.25% of which are service fees to be paid to the Distributor, dealers and others for providing personal service and/or maintaining shareholder accounts) of each of the Class B Shares' and the Class C Shares' average daily net assets for the year and up to 0.60% of Class R Shares' average daily net assets for the year. Limited-Term Funds' Board of Trustees 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 Trustees set the fee for Class A Shares, pursuant to its Plan, at 0.15% of average daily net assets. This fee was effective until May 31, 1992. Effective June 1, 1992, the Board of Trustees has determined that the annual fee, payable on a monthly basis, under the Plan, will be equal to the sum of: (i) the amount obtained by multiplying 0.10% by the average daily net assets represented by 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 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 0.15% 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 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 0.30% (contractually limited to 0.15% through February 28, 2005) on all assets of 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 Class A, Class B, Class C and Class R Shares would be borne by such persons without any reimbursement from such Fund Classes. Subject to seeking best execution, the Fund may, from time to time, buy or sell portfolio securities from or to firms which receive payments under the Plans.
From time to time, the Distributor may pay additional amounts from its own resources to dealers for aid in distribution or for aid in providing administrative services to shareholders.
The Plans and the Distribution Agreement, as amended, have been approved by the Board of Trustees of Limited-Term Funds, including a majority of the trustees who are not "interested persons" (as defined in the 1940 Act) of Limited-Term Funds and who have no direct or indirect financial interest in the Plans, by vote cast in person at a meeting duly called for the purpose of voting on the Plans and such Distribution Agreement. Continuation of the Plans and the Distribution Agreement, as amended, must be approved annually by the Board of Trustees in the same manner as specified above.
Each year, the trustees must determine whether continuation of the Plans is in the best interest of shareholders of, respectively, Class A Shares, Class B Shares, Class C Shares and Class R Shares and that there is a reasonable likelihood of the Plan relating to the Fund Class providing a benefit to that Class. The Plans and the Distribution Agreement, as amended, may be terminated at any time without penalty by a majority of those trustees who are not "interested persons" or by a majority vote of the outstanding voting securities of the relevant Fund Class. Any amendment materially increasing the 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 trustees who are not "interested persons." With respect to the Class A Shares' Plan, any material increase in the maximum percentage payable thereunder must be approved by a majority of the outstanding voting Class B Shares. Also, any other material amendment to the Plans must be approved by a majority vote of the trustees, including a majority of the noninterested trustees of Limited-Term Funds having no interest in the Plans. In addition, in order for the Plans to remain effective, the selection and nomination of trustees who are not "interested persons" of Limited-Term Funds must be effected by the trustees who themselves are not "interested persons" and who have no direct or indirect financial interest in the Plans. Persons authorized to make payments under the Plans must provide written reports at least quarterly to the Board of Trustees for their review.
For the fiscal year ended December 31, 2003, 12b-1 Plan payments from the Class A Shares, Class B Shares and Class C Shares are shown below.
------------------------------------ ---------------- --------------- ---------------- ---------------
Class A Shares Class B Shares Class C Shares Class R Shares
------------------------------------ ---------------- --------------- ---------------- ---------------
Advertising $0 $0 $0 $0
------------------------------------ ---------------- --------------- ---------------- ---------------
Annual/Semiannual Reports $5,680 $1,173 $1,666 $0
------------------------------------ ---------------- --------------- ---------------- ---------------
Broker Trails $354,710 $68,019 $277,124 $690
------------------------------------ ---------------- --------------- ---------------- ---------------
Broker Sales Charges $0 $58,381 $240,653 $0
------------------------------------ ---------------- --------------- ---------------- ---------------
Dealer Service Expenses $0 $0 $0 $0
------------------------------------ ---------------- --------------- ---------------- ---------------
Interest on Broker Sales Charges $0 $0 $20,615 $12,187
------------------------------------ ---------------- --------------- ---------------- ---------------
Commissions to Wholesalers $0 $0 $0 $0
------------------------------------ ---------------- --------------- ---------------- ---------------
Promotional-Broker Meetings $0 $0 $0 $0
------------------------------------ ---------------- --------------- ---------------- ---------------
Promotional-Other $24,919 $6,013 $8,561 $0
------------------------------------ ---------------- --------------- ---------------- ---------------
Prospectus Printing $6,045 $1,298 $1,826 $3
------------------------------------ ---------------- --------------- ---------------- ---------------
Telephone $0 $0 $0 $0
------------------------------------ ---------------- --------------- ---------------- ---------------
Wholesaler Expenses $0 $43,123 $164,618 $135
------------------------------------ ---------------- --------------- ---------------- ---------------
Other $0 $0 $0 $0
------------------------------------ ---------------- --------------- ---------------- ---------------
Total $391,354 $198,622 $706,635 $828
------------------------------------ ---------------- --------------- ---------------- ---------------
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Other Payments to Dealers - Class A Shares, Class B Shares Class C Shares and Class R Shares
From time to time, at the discretion of the Distributor, all registered broker/dealers whose aggregate sales of Fund Classes exceed certain limits as set by the Distributor, may receive from the Distributor an additional payment of up to 0.25% of the dollar amount of such sales. The Distributor may also provide additional promotional incentives or payments to dealers that sell shares of the Delaware Investments family of funds. In some instances, these incentives or payments may be offered only to certain dealers who maintain, have sold or may sell certain amounts of shares. The Distributor may also pay a portion of the expense of preapproved dealer advertisements promoting the sale of Delaware Investments fund shares.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value Class A Shares of the Fund may be purchased at net asset value under the Delaware Investments Dividend Reinvestment Plan and, under certain circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, trustees/directors and employees of Limited-Term Funds, any other fund in the Delaware Investments family, the Manager, or any of the Manager's current affiliates and those that may in the future be created, legal counsel to the funds and registered representatives and employees of broker/dealers who have entered into Dealer's Agreements with the Distributor may purchase Class A Shares and any such class of shares of any of the other funds in the Delaware Investments family, including any fund that may be created, at the net asset value per share. Family members (regardless of age) of such persons at their direction, and any employee benefit plan established by any of the foregoing funds, corporations, counsel or broker/dealers may also purchase Class A 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 12 months after the registered representative changes employment, if the purchase is funded by proceeds from an investment where a front-end sales charge, contingent deferred sales charge or other sales charge has been assessed. Purchases of Class A Shares may also be made at net asset value by bank employees who provide services in connection with agreements between the bank and unaffiliated brokers or dealers concerning sales of shares of funds in the Delaware Investments family. Officers, 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 advisors affiliated with a broker or dealer, if such broker, dealer or investment advisor has entered into an agreement with the Distributor providing specifically for the purchase of Class A Shares in connection with special investment products, such as wrap accounts or similar fee based programs. Investors may be charged a fee when effecting transactions in Class A Shares through a broker or agent that offers these special investment products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional Class
of the Fund; any group retirement plan (excluding defined benefit pension
plans), or such plans of the same employer, for which plan participant records
are maintained on the Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of funds in the Delaware Investments family and any stable value account
available to investment advisory clients of the Manager or its affiliates; or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented to, and
received written confirmation back from, Retirement Financial Services, Inc. in
writing that it has the requisite number of employees. See Group Investment
Plans for information regarding the applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may be made by retirement plans that are maintained on retirement platforms sponsored by financial intermediary firms, provided the financial intermediary firm has entered into a Class A Share NAV Agreement with respect to such retirement platform.
Purchases of Class A Shares at net asset value may also be made by bank sponsored retirement plans that are no longer eligible to purchase Institutional Class Shares or purchase interests in a collective trust as a result of a change in distribution arrangements.
Purchases of Class A Shares at net asset value may also be made by any group retirement plan (excluding defined benefit pension plans) that purchases shares through a retirement plan alliance program that requires shares to be available at net asset value, provided Retirement Financial Services, Inc. either is the sponsor of the alliance program or has a product participation agreement with the sponsor of the alliance program.
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 fund account in connection with loans originated from accounts previously maintained by another investment firm will also be invested at net asset value.
Limited-Term Funds must be notified in advance that the trade qualifies for purchase at net asset value.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the value of eligible Delaware Investments and eligible non-Delaware Investments fund shares held by the Allied Plan may be combined with the dollar amount of new purchases by that Allied Plan to obtain a reduced front-end sales charge on additional purchases of eligible Delaware Investments fund shares. See Combined Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible Delaware Investments fund shares for other eligible Delaware Investments fund shares or for eligible non-Delaware Investments fund shares at net asset value without payment of a front-end sales charge. However, exchanges of eligible fund shares, both Delaware Investments and non-Delaware Investments, which were not subject to a front end sales charge, will be subject to the applicable sales charge if exchanged for eligible Delaware Investments fund shares to which a sales charge applies. No sales charge will apply if the eligible fund shares were previously acquired through the exchange of eligible shares on which a sales charge was already paid or through the reinvestment of dividends. See Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware Investments fund shares under an Allied Plan. In determining a financial advisor's eligibility for a dealer's commission on net asset value purchases of eligible Delaware Investments fund shares in connection with Allied Plans, all participant holdings in the Allied Plan will be aggregated. See Class A Shares, above.
The Limited CDSC is applicable to redemptions of net asset value purchases from an Allied Plan on which a dealer's commission has been paid. Waivers of the Limited CDSC, as described under Waiver of Limited Contingent Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to redemptions by participants in Allied Plans except in the case of exchanges between eligible Delaware Investments and non-Delaware Investments fund shares. When eligible Delaware Investments fund shares are exchanged into eligible non-Delaware Investments fund shares, the Limited CDSC will be imposed at the time of the exchange, unless the joint venture agreement specifies that the amount of the Limited CDSC will be paid by the financial advisor or selling dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and Exchange.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention
provided by the Distributor and signed by the purchaser, and not legally binding on the signer or Limited-Term Funds which provides for the holding in escrow by the Transfer Agent, of 5% of the total amount of Class A Shares intended to be purchased until such purchase is completed within the 13-month period. A Letter of Intention may be dated to include shares purchased up to 90 days prior to the date the Letter is signed. The 13-month period begins on the date of the earliest purchase. If the intended investment is not completed, except as noted below, the purchaser will be asked to pay an amount equal to the difference between the front-end sales charge on Class A Shares purchased at the reduced rate and the front-end sales charge otherwise applicable to the total shares purchased. If such payment is not made within 20 days following the expiration of the 13-month period, the Transfer Agent will surrender an appropriate number of the escrowed shares for redemption in order to realize the difference. Such purchasers may include the value (at offering price at the level designated in their Letter of Intention) of all their shares of the Fund and of any class of any of the other mutual funds in Delaware Investments (except shares of any Delaware Investments fund which do not carry a front-end sales charge, CDSC or Limited CDSC other than shares of Delaware Group Premium Fund beneficially owned in connection with the ownership of variable insurance products, unless they were acquired through an exchange from a Delaware Investments fund which carried a front-end sales charge, CDSC or Limited CDSC) previously purchased and still held as of the date of their Letter of Intention toward the completion of such Letter.
Employers offering a Delaware Investments retirement plan may also complete a Letter of Intention to obtain a reduced front-end sales charge on investments of Class A Shares made by the plan. The aggregate investment level of the Letter of Intention will be determined and accepted by the Transfer Agent at the point of plan establishment. The level and any reduction in front-end sales charge will be based on actual plan participation and the projected investments in Delaware Investments funds that are offered with a front-end sales charge, CDSC or Limited CDSC for a 13-month period. The Transfer Agent reserves the right to adjust the signed Letter of Intention based on this acceptance criteria. The 13-month period will begin on the date this Letter of Intention is accepted by the Transfer Agent. If actual investments exceed the anticipated level and equal an amount that would qualify the plan for further discounts, any front-end sales charges will be automatically adjusted. In the event this Letter of Intention is not fulfilled within the 13-month period, the plan level will be adjusted (without completing another Letter of Intention) and the employer will be billed for the difference in front-end sales charges due, based on the plan's assets under management at that time. Employers may also include the value (at offering price at the level designated in their Letter of Intention) of all their shares intended for purchase that are offered with a front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares and Class C Shares of the Fund and other Delaware Investments funds which offer corresponding classes of shares may also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Fund, as well as shares of any other class of any of the other
Delaware Investments funds (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of the Manager or its affiliates in a stable value account may be
combined with other Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an individual; or an individual, his or her spouse and their children under 21; or a trustee or other fiduciary of trust estates or fiduciary accounts for the benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of
the Fund, as well as shares of any other class of any of the other Delaware Investments funds which offer such classes (except shares of any Delaware Investments fund which do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware Group Premium Fund beneficially owned in connection with the ownership of variable insurance products, unless they were acquired through an exchange from a Delaware Investments fund which carried a front-end sales charge, CDSC or Limited CDSC). If, for example, any such purchaser has previously purchased and still holds Class A Shares and/or shares of any other of the classes described in the previous sentence with a value of $40,000 and subsequently purchases $60,000 at offering price of additional shares of Class A Shares, the charge applicable to the $60,000 purchase would currently be 2.00%. For the purpose of this calculation, the shares presently held shall be valued at the public offering price that would have been in effect were the shares purchased simultaneously with the current purchase. Investors should refer to the table of sales charges for Class A Shares to determine the applicability of the Right of Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares and Class B Shares of the Fund (and of the
Institutional Class holding shares which were acquired through an exchange from
one of the other mutual funds in the Delaware Investments family offered with a
front-end sales charge) who redeem such shares have one year from the date of
redemption to reinvest all or part of their redemption proceeds in the same
Class of the Fund or in the same Class of any of the other funds in the Delaware
Investments family. In the case of Class A Shares, the reinvestment will not be
assessed a front-end sales charge and in the case of Class B Shares, the amount
of the CDSC previously charged on the redemption will be reimbursed by the
Distributor. The reinvestment will be subject to applicable eligibility and
minimum purchase requirements and must be in states where shares of such other
funds may be sold. This reinvestment privilege does not extend to Class A Shares
where the redemption of the shares triggered the payment of a Limited CDSC.
Persons investing redemption proceeds from direct investments in mutual funds in
the Delaware Investments family, offered without a front-end sales charge will
be required to pay the applicable sales charge when purchasing Class A Shares.
The reinvestment privilege does not extend to a redemption of Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any amount necessary to purchase a full share). The reinvestment will be made at the net asset value next determined after receipt of remittance. In the case of Class B Shares, the time that the previous investment was held will be included in determining any applicable CDSC due upon redemptions as well as the automatic conversion into Class A Shares.
A redemption and reinvestment of Class B Shares could have income tax consequences. Shareholders will receive from the Distributor the amount of the CDSC paid at the time of redemption as part of the reinvested shares, which may be treated as a capital gain to the shareholder for tax purposes. It is recommended that a tax advisor be consulted with respect to such transactions.
Any reinvestment directed to a fund in which the investor does not then have an account will be treated like all other initial purchases of the fund's shares. Consequently, an investor should obtain and read carefully the prospectus for the fund in which the investment is intended to be made before investing or sending money. The prospectus contains more complete information about the fund, including charges and expenses.
Investors should consult their financial advisors or the Transfer Agent, which also serves as each Fund's shareholder servicing agent, about the applicability of the Class A Limited CDSC in connection with the features described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares described in the Prospectus, based on total
plan assets. If a company has more than one plan investing in the Delaware
Investments family of funds, then the total amount invested in all plans would
be used in determining the applicable front-end sales
charge reduction upon each purchase, both initial and subsequent, upon notification to the Fund in which the investment is being made at the time of each such purchase. Employees participating in such Group Investment Plans may also combine the investments made in their plan account when determining the applicable front-end sales charge on purchases to non-retirement Delaware Investments investment accounts if they so notify the Fund in which they are investing in connection with each purchase. See Retirement Plans for the Fund Classes under Investment Plans for information about Retirement Plans.
The Limited CDSC is generally applicable to any redemptions of net asset value purchases made on behalf of a group retirement plan on which a dealer's commission has been paid only if such redemption is made pursuant to a withdrawal of the entire plan from a fund in the Delaware Investments family. See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and Exchange. Notwithstanding the foregoing, the Limited CDSC for Class A Shares on which a dealer's commission has been paid will be waived in connection with redemptions by certain group defined contribution retirement plans that purchase shares through a retirement plan alliance program which requires that shares will be available at net asset value, provided that RFS either is the sponsor of the alliance program or has a product participation agreement with the sponsor of the alliance program that specifies that the Limited CDSC will be waived.
Class R Shares
Class R Shares generally are available only to (i) qualified and
non-qualified plan shareholders covering multiple employees (including 401(k),
401(a), 457, and non-custodial 403(b) plans, as well as other non-qualified
deferred compensation plans) with assets (at the time shares are considered for
purchase) of $10 million or less; and (ii) to IRA rollovers from plans
maintained on Delaware's retirement recordkeeping system that are offering R
Class shares to participants.
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, an affiliate of the Manager, or its other
affiliates and their corporate sponsors, as well as subsidiaries and related
employee benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar financial
institution investing for its own account or for the account of its trust
customers for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the investment is
part of a program that requires payment of the financial institution of a Rule
12b-1 Plan fee; (e) registered investment advisors investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the advisor for investment purposes, but
only if the advisor is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services; (f) certain plans qualified under Section 529 of the Internal
Revenue Code for which Delaware Service Company, Inc., the Distributor, or the
Manager or one or more of their affiliates provide record keeping,
administrative, investment management, marketing, distribution or similar
services; and (g) Programs sponsored by financial intermediaries where such
program requires the purchase of Institutional Class shares.
Shares of Institutional Class are available for purchase at net asset value, without the imposition of a front-end or contingent deferred sales charge and are not subject to Rule 12b-1 expenses.
INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares in which an investor
has an account (based on the net asset value in effect on the reinvestment date)
and will be credited to the shareholder's account on that date. All dividends
and distributions of the Institutional Class are reinvested in the accounts of
the holders of such shares (based on the net asset value in effect on the
reinvestment date). 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 and Class in which shares are being purchased. Such purchases, which must meet the minimum subsequent purchase requirements set forth in the Prospectuses and this Part B, are made for Class A Shares at the public offering price, and for the Class B Shares, Class C Shares, Class R Shares and the Institutional Classes at the net asset value, at the end of the day of receipt. A reinvestment plan may be terminated at any time. This plan does not assure a profit nor protect against depreciation in a declining market.
Reinvestment of Dividends in Other Delaware Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase requirements and the limitations set forth below, holders of Class A Shares, Class B Shares, Class C Shares and Class R Shares may automatically reinvest dividends and/or distributions in any of the mutual funds in the Delaware Investments, including the Fund, in states where their shares may be sold. Such investments will be at net asset value at the close of business on the reinvestment date without any front-end sales charge or service fee. The shareholder must notify the Transfer Agent in writing and must have established an account in the fund into which the dividends and/or distributions are to be invested. Any reinvestment directed to a fund in which the investor does not then have an account will be treated like all other initial purchases of a fund's shares. Consequently, an investor should obtain and read carefully the prospectus for the fund in which the investment is intended to be made before investing or sending money. The prospectus contains more complete information about the fund, including charges and expenses.
Subject to the following limitations, dividends and/or distributions from other funds in Delaware Investments may be invested in shares of the Fund, provided an account has been established. Dividends from Class A Shares may not be directed to Class B Shares, Class C Shares or Class R Shares. Dividends from Class B Shares may only be directed to other Class B Shares, dividends from Class C Shares may only be directed to other Class C Shares and dividends from Class R Shares may only be directed to other Class R Shares.
Capital gains and/or dividend distributions for participants in the following retirement plans are automatically reinvested into the same Delaware Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of the Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to the eligibility and minimum purchase requirements set
forth in the Fund's prospectus. See Redemption and Exchange for more complete
information concerning your exchange privileges.
Holders of Class A Shares of the Fund may exchange all or part of their shares for certain of the shares of other funds in the Delaware Investments family, including other Class A Shares, but may not exchange their Class A Shares for Class B Shares, Class C Shares or Class R Shares of the Fund or of any other fund in the Delaware Investments family. Holders of Class B Shares of the Fund are permitted to exchange all or part of their Class B Shares only into Class B Shares of other Delaware Investments funds. Similarly, holders of Class C Shares of the Fund are permitted to exchange all or part of their Class C Shares only into Class C Shares of other Delaware
Investments funds. Class B Shares of the Fund and Class C Shares of the Fund acquired by exchange will continue to carry the CDSC and, in the case of Class B Shares, the automatic conversion schedule of the fund from which the exchange is made. The holding period of Class B Shares of the Fund acquired by exchange will be added to that of the shares that were exchanged for purposes of determining the time of the automatic conversion into Class A Shares of the Fund. Holders of Class R Shares of the Fund are permitted to exchange all or part of their Class R Shares only into Class R Shares of other Delaware Investments funds or, if Class R Shares are not available for a particular fund, into the Class A Shares of such fund.
Permissible exchanges into Class A Shares of the Fund will be made without a front-end sales charge, except for exchanges of shares that were not previously subject to a front-end sales charge (unless such shares were acquired through the reinvestment of dividends). Permissible exchanges into Class B Shares or Class C Shares of the Fund will be made without the imposition of a CDSC by the fund from which the exchange is being made at the time of the exchange.
Investing proceeds from Eligible 529 Plans The proceeds of a withdrawal from an Eligible 529 Plan which are directly reinvested in a substantially similar class of the Delaware Investments Family of Funds will qualify for treatment as if such proceeds had been exchanged from another Fund within the Delaware Investments Family of Funds rather than transferred from the Eligible 529 Plan, as described under "INVESTMENT PLANS - Investing by Exchange." The treatment of your redemption proceeds from an Eligible 529 Plan described in this paragraph does not apply if you take possession of the proceeds of the withdrawal and subsequently reinvest them (i.e., the transfer is not made directly). Similar benefits may also be extended to direct transfers from a substantially similar class of the Delaware Investments Family of Funds into an Eligible 529 Plan.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan -- Investors may arrange for the Fund to accept for investment in Class A Shares, Class B Shares, Class C Shares or Class R Shares, through an agent bank, preauthorized government or private recurring payments. This method of investment assures the timely credit to the shareholder's account of payments such as social security, veterans' pension or compensation benefits, federal salaries, Railroad Retirement benefits, private payroll checks, dividends, and disability or pension fund benefits. It also eliminates lost, stolen and delayed checks.
Automatic Investing Plan -- Shareholders of Class A Shares, Class B Shares and Class C Shares may make automatic investments by authorizing, in advance, monthly or quarterly payments directly from their checking account for deposit into their Fund account. This type of investment will be handled in either of the following ways. (1) If the shareholder's bank is a member of the National Automated Clearing House Association ("NACHA"), the amount of the investment will be electronically deducted from his or her account by Electronic Fund Transfer ("EFT"). The shareholder's checking account will reflect a debit each month at a specified date although no check is required to initiate the transaction. (2) If the shareholder's bank is not a member of NACHA, deductions will be made by preauthorized checks, known as Depository Transfer Checks. Should the shareholder's bank become a member of NACHA in the future, his or her investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the Automatic Investing Plan must be for $250 or more and subsequent investments under such plans must be for $25 or more. An investor wishing to take
advantage of either service must complete an authorization form. Either service can be discontinued by the shareholder at any time without penalty by giving written notice.
Payments to the Fund from the federal government or its agencies on behalf of a shareholder may be credited to the shareholder's account after such payments should have been terminated by reason of death or otherwise. Any such payments are subject to reclamation by the federal government or its agencies. Similarly, under certain circumstances, investments from private sources may be subject to reclamation by the transmitting bank. In the event of a reclamation, the Fund may liquidate sufficient shares from a shareholder's account to reimburse the government or the private source. In the event there are insufficient shares in the shareholder's account, the shareholder is expected to reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer, to
make investments directly to their Fund accounts. The Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact Limited-Term Funds for proper
instructions.
MoneyLine(SM) On Demand
You or your investment dealer may request purchases of Fund Class shares
by phone using MoneyLine(SM) On Demand. When you authorize the Fund to accept
such requests from you or your investment dealer, funds will be withdrawn from
(for share purchases) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern Time. There is a $25
minimum and $50,000 maximum limit for MoneyLine(SM) On Demand transactions.
It may take up to four business days for the transactions to be completed. You can initiate this service by completing an Account Services form. If your name and address are not identical to the name and address on your Fund account, you must have your signature guaranteed. The Fund does not charge a fee for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. If in connection with the election of
the Wealth Builder Option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select. All
investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above.
Under this automatic exchange program, shareholders can authorize regular monthly investments (minimum of $100 per fund) to be liquidated from their account and invested automatically into other mutual funds in the Delaware Investments family, subject to the conditions and limitations set forth in the Fund Classes' Prospectus. The investment will be made on the 20th day of each month (or, if the fund selected is not open that day, the next business day) at the public offering price or net asset value, as applicable, of the fund selected on the date of investment. No investment will be made for any month if the value of the shareholder's account is less than the amount specified for investment.
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 Redemption and Exchange for a brief
summary of the tax consequences of exchanges. Shareholders can terminate their participation in Wealth Builder at any time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Classes.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial advisor or investment dealer.
Effective September 1, 1997, the Asset Planner Service is only available to
financial advisors or investment dealers who have previously used this service.
The Asset Planner service offers a choice of four predesigned asset allocation
strategies (each with a different risk/reward profile) in predetermined
percentages in Delaware Investments funds. With the help of a financial advisor,
you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is determined by the individual sales charges of the underlying funds and their percentage allocation in the selected Strategy. Exchanges from existing Delaware Investments accounts into the Asset Planner service may be made at net asset value under the circumstances described under Investing by Exchange. Also see Buying Class A Shares at Net Asset Value. The minimum initial investment per Strategy is $2,000; subsequent investments must be at least $100. Individual fund minimums do not apply to investments made using the Asset Planner service. Class A, Class B, Class C and Class R Shares are available through the Asset Planner service. Generally, only shares within the same class may be used within the same Strategy. However, Class A Shares of the Fund and of other funds in the Delaware Investments family may be used in the same Strategy with consultant class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the time of initial investment and by September 30 of each subsequent year. The fee, payable to Delaware Service Company, Inc. to defray extra costs associated with administering the Asset Planner service, will be deducted automatically from one of the funds within your Asset Planner account if not paid by September 30. However, effective November 1, 1996, the annual maintenance fee is waived until further notice. Investors who utilize the Asset Planner for an IRA will continue to pay an annual IRA fee of $15 per Social Security number. Investors will receive a customized quarterly Strategy Report summarizing all Asset Planner investment performance and account activity during the prior period. Confirmation statements will be sent following all transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the Asset Planner service, due to its special design. These include Delaphone, Checkwriting, Wealth Builder Option and Letter of Intention. Systematic Withdrawal Plans are available after the account has been open for two years.
Retirement Plans for the Fund Classes
An investment in a Fund may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including a 401(k) Defined Contribution Plan, an Individual Retirement Account
("IRA") and the new Roth IRA and a Coverdell Education Savings Account.
Among the retirement plans that Delaware Investments offers, Class B Shares are available only for Individual Retirement Accounts, SIMPLE IRAs, Roth IRAs, Coverdell Education Savings Accounts, Simplified Employee Pension Plans, Salary Reduction Simplified Employee Pension Plans, 403(b)(7) Plans and 457 Deferred Compensation Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class C Shares.
See Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares under Redemption and Exchange for a list of the instances in which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase limitation of $100,000 for retirement plans. Purchases of Class C Shares must be in an amount that is less than $1,000,000 for such plans. The maximum purchase limitations apply only to the initial purchase of shares by the retirement plan.
For information concerning the applicability of a CDSC upon redemption of Class B Shares and Class C Shares, see Contingent Deferred Sales Charge - Class B Shares and Class C Shares.
Minimum investment limitations generally applicable to other investors do not apply to retirement plans other than IRAs, for which there is a minimum initial purchase of $250 and a minimum subsequent purchase of $25, regardless of which Class is selected. Retirement plans may be subject to plan establishment fees, annual maintenance fees and/or other administrative or trustee fees. Fees are based upon the number of participants in the plan as well as the services selected. Additional information about fees is included in retirement plan materials. Fees are quoted upon request. Annual maintenance fees may be shared by Delaware Management Trust Company, the Transfer Agent, other affiliates of the Manager and others that provide services to such Plans.
Certain shareholder investment services available to non-retirement plan shareholders may not be available to retirement plan shareholders. Certain retirement plans may qualify to purchase shares of the Institutional Class shares. See Institutional Class, above. For additional information on any of the plans and Delaware's retirement services, call the Shareholder Service Center telephone number.
It is advisable for an investor considering any one of the retirement plans described below to consult with an attorney, accountant or a qualified retirement plan consultant. For further details, including applications for any of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be subject to withholding.
Please contact your investment dealer or the Distributor for the special application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals, partnerships, corporations and other eligible forms of organizations. These plans can be maintained as Section 401(k), profit sharing or money purchase pension plans. Contributions may be invested only in Class A Shares, Class C Shares and Class R Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year; however, the
deductibility of such contributions may be restricted based on certain income
limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and a
Coverdell Education Savings Account are available in addition to the existing
deductible IRA and non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $3,000 to his or her IRA each year
through 2004. Contributions may or may not be deductible depending upon the
taxpayer's adjusted gross income ("AGI") and whether the taxpayer is an active
participant in an employer sponsored retirement plan.
In June of 2001, The Economic Growth and Tax Relief Reconciliation Act of 2001 was signed into law and makes significant changes to the annual contribution limits. The current amount of $3,000 will rise to $5,000 in 2008, with annual inflation adjustments thereafter. Individuals who have attained age 50 by the end of the calendar year will be eligible to make additional "catch-up" contributions of $500 for 2002 through 2005, and $1,000 beginning in 2006.
The annual contribution limits through 2008 are as follows:
Calendar Year Under Age 50 Age 50 and Above
------------- ------------ ----------------
2002-2004 $3,000 $3,500
2005 $4,000 $4,500
2006-2007 $4,000 $5,000
2008 $5,000 $6,000
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Even if a taxpayer is an active participant in an employer sponsored retirement plan, the full $3,000 is still available through 2004 if the taxpayer's AGI is not greater than $40,000 ($60,000 for taxpayers filing joint returns) for tax years beginning in 2003. A partial deduction is allowed for married couples with income not greater than $60,000 and less than $70,000, and for single individuals with AGI greater than $40,000 and less than $50,000. These income phase-out limits are annually increased until they reach $80,000-$100,000 in 2007 for joint filers and $50,000-$60,000 in 2005 for single filers. No deductions are available for contributions to IRAs by taxpayers whose AGI exceeds the maximum income limit established for each year and who are active participants in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can make non-deductible IRA contributions of as much as the annual contribution limit and defer taxes on interest or other earnings from the IRAs.
Under the law, a married individual is not considered an active participant in an employer sponsored retirement plan merely because the individual's spouse is an active participant if the couple's combined AGI is greater than $150,000. The maximum deductible IRA contribution for a married individual who is not an active participant, but whose spouse is, is phased out for combined AGI greater than $150,000 and less than $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution.
A distribution qualifies as an "eligible rollover distribution" if it is made from a qualified retirement plan, a 403(b) plan or another IRA and does not constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or life expectancy or the joint lives or life expectancies of the employee and his/her designated beneficiary;
(2) Substantially equal installment payments for a period certain of 10 or more years;
(3) A distribution, all of which represents a required minimum distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an alternate payee who is not the spouse (or former spouse) of the employee; and
(5) A distribution of after-tax contributions which is not includable in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $3,000 each year can be made to a Roth IRA. As a result
of the Internal Revenue Service Restructuring and Reform Act of 1998 (the "1998
Act"), the $3,000 annual limit will not be reduced by any contributions to a
deductible or nondeductible IRA for the same year. The limits after 2002 are the
same as for a regular IRA. The maximum contribution that can be made to a Roth
IRA is phased out for single filers with AGI greater than $95,000 and less than
$110,000, and for couples filing jointly with AGI greater than $150,000 and less
than $160,000. Qualified distributions from a Roth IRA are exempt from federal
taxes. Qualified distributions are distributions (1) made after the five-taxable
year period beginning with the first taxable year for which a contribution was
made to a Roth IRA and (2) that are (a) made on or after the date on which the
individual attains age 59 1/2, (b) made to a beneficiary on or after the death
of the individual, (c) attributable to the individual being disabled, or (d) for
a qualified special purpose (e.g., first time homebuyer expenses).
Distributions that are not qualified distributions would always be tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and contributions from a deductible IRA are subject to a tax upon conversion; however, no 10% excise tax for early withdrawal would apply.
Coverdell Education Savings Accounts
For taxable years beginning after December 31, 1997, a Coverdell
Education Savings Account has been created exclusively for the purpose of paying
qualified higher education expenses. Taxpayers can make non-deductible
contributions up to $2,000 per year and qualifying expenses will no longer be
limited to those related to higher education.
Elementary (including kindergarten) and secondary public, private or religious school tuition expenses will now qualify. The new law specifically permits as elementary and secondary school expenses academic tutoring, certain computer technology; and expenses for uniforms, transportation, and extended day programs.
The $2,000 annual limit is in addition to the annual contribution limit applicable to IRAs and Roth IRAs. Eligible contributions must be in cash and made prior to the date the beneficiary reaches age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no requirement that the contributor be related to the beneficiary, and there is no limit on the number of beneficiaries for whom one contributor can establish a Coverdell Education Savings Account. In addition, multiple Coverdell Education Savings Accounts can be created for the same beneficiary, however, the contribution limit of all contributions for a single beneficiary cannot exceed the annual limit.
The $2,000 annual contribution limit for a Coverdell Education Savings Accounts is phased out ratably for single contributors with modified AGI greater than $95,000 and less than $110,000, and for couples filing jointly with modified AGI greater than $190,000 and less than $220,000. Individuals with modified AGI above the phase-out range are not allowed to make contributions to a Coverdell Education Savings Account established on behalf of any individual.
Distributions from a Coverdell Education Savings Account are excludable from gross income to the extent that the distribution does not exceed qualified higher education expenses incurred by the beneficiary during the year the distribution is made regardless of whether the beneficiary is enrolled at an eligible educational institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in a Coverdell Education Savings Account at the time a beneficiary becomes 30 years old must be distributed, and the earnings portion of such a distribution will be includable in gross income of the beneficiary and generally subject to an additional 10% tax if the distribution is not for qualified higher education expenses. Tax-free transfers and rollovers of account balances from one Coverdell Education Savings Account benefiting one beneficiary to another Coverdell Education Savings Account benefiting a different beneficiary (as well as redesignations of the named beneficiary) are permitted, provided that the new beneficiary is a member of the family of the old beneficiary and that the transfer or rollover is made before the time the old beneficiary reaches age 30 and the new beneficiary reaches age 18.
Group IRAs or Group Roth IRAs
An Employer or association of employer may establish a Group IRA for its
employees or members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order to avoid premature distribution penalties, but distributions must commence no later than April 1 of the calendar year following the year in which the participant reaches age 70 1/2. 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% additional tax on the amount prematurely distributed, in addition to the regular income tax resulting from the distribution.
Effective January 1, 1997, the 10% premature distribution penalty will not apply to distributions from an IRA that are used to pay medical expenses in excess of 7.5% of adjusted gross income or to pay health insurance premiums by an individual who has received unemployment compensation for 12 consecutive weeks. In addition, effective January 1, 1998, the law allows for premature distribution without a 10% additional tax if (i) the amounts are used within 120 days of the distribution to pay qualified higher education expenses (including graduate level courses) of the taxpayer, the taxpayer's spouse or any child or grandchild of the taxpayer or the taxpayer's spouse, or (ii) used to pay acquisition costs of a principal residence for the purchase of a first-time home by the taxpayer, taxpayer's spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A qualified first-time homebuyer is someone who has had no ownership interest in a residence during the past two years. The aggregate amount of distribution for first-time home purchases cannot exceed a lifetime cap of $10,000.
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.
Simplified Employee Pension Plan ("SEP/IRA") A SEP/IRA may be established by an employer who wishes to sponsor a tax-sheltered retirement program by making contributions on behalf of all eligible employees. Each of the Classes is available for investment by a SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP") Although new SAR/SEP plans may not be established after December 31, 1996, existing plans may continue to be maintained by employers having 25 or fewer employees. An employer may elect to make additional contributions to such existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified plans based on salary deferral contributions. Effective January 1, 1997, non-governmental tax-exempt organizations may establish 401(k) plans. Plan documents are available to enable employers to establish a plan. An employer may also elect to make profit sharing contributions and/or matching contributions with investments in only Class A Shares, Class C Shares and Class R Shares or certain other funds in the Delaware Investments family. Purchases under the Plan may be combined for purposes of computing the reduced front-end sales charge applicable to Class A Shares as set forth in the table the Prospectus for the Fund Classes.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectus for
the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of the Fund. Although investors may use their
own plan, there is available a Delaware Investments 457 Deferred Compensation
Plan. Interested investors should contact the Distributor or their investment
dealers to obtain
further information. Purchases under the Plan may be combined for purposes of computing the reduced front-end sales charge applicable to Class A Shares as set forth in the table in the Prospectus for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors with 100 or fewer employees and, in exchange for mandatory
plan sponsor contributions, discrimination testing is no longer required. Class
B Shares are not available for purchase by such plans.
DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering price next calculated by the Fund after receipt of the order by the Fund, its agent, designee, or certain other authorized persons. See Distribution and Service under Investment Management Agreement. Orders for purchases of Class B Shares, Class C Shares, Class R Shares and Institutional Class Shares are effected at the net asset value per share next calculated by the Fund after receipt of the order by the Fund, its agent, designee, or other authorized persons. Selling dealers are responsible for transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value per share plus any applicable front-end sales charges. Offering price and net asset value are computed as of the close of regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern Time) on days when the Exchange is open. The New York Stock Exchange is scheduled to be open Monday through Friday throughout the year except for the days when the following holidays are observed: New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock Exchange is closed, the Fund will generally be closed, pricing calculations will not be made and purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share and, in the case of Class A Shares, the offering price per share, is included in the Fund's financial statements, which are incorporated by reference into this Part B.
The Fund's net asset value per share is computed by adding the value of all securities and other assets in the portfolio of the Fund, 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 generally 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. For all other securities and assets, including non-Exchange-traded options, we use methods approved by the Board of Trustees that are designed to price securities at their fair market value.
Each Class of the Fund will bear, pro-rata, all of the common expenses of the Fund. The net asset values of all outstanding shares of each Class of the Fund will be computed on a pro-rata basis for each outstanding share based on the proportionate participation in the Fund represented by the value of shares of that Class. All income earned and expenses incurred by the Fund will be borne on a pro-rata basis by each outstanding share of a Class, based on each Class' percentage in the Fund represented by the value of shares of such Classes, except that the Institutional Class will not incur any of the expenses under the Limited-Term Fund's 12b-1 Plans and the Class A,
Class B, Class C and Class R Shares alone will bear the 12b-1 Plan expenses 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 Fund may vary. However, the net asset value per share of each Class is expected to be equivalent.
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways. Exchanges are subject to the requirements of the Fund and all exchanges of shares constitute taxable events. Further, in order for an exchange to be processed, shares of the fund being acquired must be registered in the state where the acquiring shareholder resides. An exchange constitutes, for tax purposes, the sale of one fund and the purchase of another. The sale may involve a capital gain or loss to the shareholder for federal income tax purposes. You may want to consult your financial advisor or investment dealer to discuss which funds in Delaware Investments will best meet your changing objectives, and the consequences of any exchange transaction. You may also call the Delaware Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net asset value next determined after the Fund receives your request in good order, subject, in the case of a redemption, to any applicable CDSC or Limited CDSC. For example, redemption or exchange requests received in good order after the time the offering price and net asset value of shares are determined will be processed on the next business day. A shareholder submitting a redemption request may indicate that he or she wishes to receive redemption proceeds of a specific dollar amount. In the case of such a request, the Fund will redeem the number of shares necessary to deduct the applicable CDSC in the case of Class B Shares and Class C Shares, and, if applicable, the Limited CDSC in the case of Class A Shares and tender to the shareholder the requested amount, assuming the shareholder holds enough shares in his or her account for the redemption to be processed in this manner. Otherwise, the amount tendered to the shareholder upon redemption will be reduced by the amount of the applicable CDSC or Limited CDSC. Redemption proceeds will be distributed promptly, as described below, but not later than seven days after receipt of a redemption request. The Fund may modify, terminate or suspend the exchange privilege upon 60 days' notice to shareholders.
Except as noted below, for a redemption request to be in "good order," you must provide your account number, account registration, and the total number of shares or dollar amount of the transaction. For exchange requests, you must also provide the name of the fund in which you want to invest the proceeds. Exchange instructions and redemption requests must be signed by the record owner(s) exactly as the shares are registered. You may request a redemption or an exchange by calling the Shareholder Service Center at 800 523-1918. The Fund may suspend, terminate, or amend the terms of the exchange privilege upon 60 days' written notice to shareholders.
Orders for the repurchase of Fund shares which are submitted to the Distributor prior to the close of its business day will be executed at the net asset value per share computed that day (subject to the applicable CDSC or Limited CDSC), if the repurchase order was received by the broker/dealer from the shareholder prior to the time the offering price and net asset value are determined on such day. The selling dealer has the responsibility of transmitting orders to the Distributor promptly. Such repurchase is then settled as an ordinary transaction with the broker/dealer (who may make a charge to the shareholder for this service) delivering the shares repurchased.
Payment for shares redeemed will ordinarily be mailed the next business day, but in no case later than seven days, after receipt of a redemption request in good order by the Fund[, its agent] or certain other authorized persons (see Distribution and Service under Investment Management Agreement); provided, however, that each commitment to mail or wire redemption proceeds by a certain time, as described below, is modified by the qualifications described in the next paragraph.
The Fund will process written and telephone redemption requests to the extent that the purchase orders for the shares being redeemed have already settled. The Fund will honor redemption requests as to shares for which a check was tendered as payment, but the Fund will not mail or wire the proceeds until it is reasonably satisfied that the purchase check has cleared, which may take up to 15 days from the purchase date. You can avoid this potential delay if you purchase shares by wiring Federal Funds. The Fund reserves the right to reject a written or telephone redemption request or delay payment of redemption proceeds if there has been a recent change to the shareholder's address of record.
If a shareholder has been credited with a purchase by a check which is subsequently returned unpaid for insufficient funds or for any other reason, the Fund involved will automatically redeem from the shareholder's account the shares purchased by the check plus any dividends earned thereon. Shareholders may be responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value because the New York Stock Exchange is closed for other than weekends or holidays, or trading thereon is restricted or an emergency exists as a result of which disposal by the Fund of securities owned by it is not reasonably practical, or it is not reasonably practical for the Fund fairly to value its assets, or in the event that the SEC has provided for such suspension for the protection of shareholders, the Fund may postpone payment or suspend the right of redemption or repurchase. In such case, the shareholder may withdraw the request for redemption or leave it standing as a request for redemption at the net asset value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash or kind, or partly in cash and partly in kind. Any portfolio securities paid or distributed in kind would be valued as described in Determining Offering Price and Net Asset Value. Subsequent sale by an investor receiving a distribution in kind could result in the payment of brokerage commissions. However, Limited-Term Funds has elected to be governed by Rule 18f-1 under the 1940 Act pursuant to which the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day period for any one shareholder.
The value of the Fund's investments is subject to changing market prices. Thus, a shareholder reselling shares to the Fund may sustain either a gain or loss, depending upon the price paid and the price received for such shares.
Certain redemptions of Class A Shares purchased at net asset value may result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset Value below. Redemptions of Class B Shares made within three years of purchase are subject to a CDSC of 2.00% during the first year of purchase; 1.00% during the second and third years of purchase and 0% thereafter. Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12 months following purchase. See Contingent Deferred Sales Charge -- Class B Shares and Class C Shares under Purchasing Shares for the Fund Classes. Except for the applicable CDSC or Limited CDSC and, with respect to the expedited payment by wire which there may be a bank wiring cost, there is no fee charged for redemptions or repurchases, but such fees could be charged at any time in the future.
Holders of Class B Shares or Class C Shares that exchange their shares ("Original Shares") for shares of other funds available from Delaware Investments (in each case, "New Shares") in a permitted exchanged, will not be subject to a CDSC that might otherwise be due upon redemption of the Original Shares. However, such shareholders will continue to be subject to the CDSC and, in the case of Class B Shares, the automatic conversion schedule of the Original Shares as described in this Part B and any CDSC assessed upon redemption will be charged by the fund from which the Original Shares were exchanged. For purposes of computing the CDSC that may be payable upon a disposition of the New Shares, the period of time that an investor held the Original Shares is added to the period of time that an investor held the New Shares.
The Fund also reserves the right to refuse the purchase side of an exchange request by any person, or group if, in the Manager's judgment, the Fund would be unable to invest effectively in accordance with its investment objectives and policies, or would otherwise potentially be adversely affected. A shareholder's purchase exchanges may be restricted or refused if the Fund receives or anticipates simultaneous orders affecting significant portions of the Fund's assets. In particular, a pattern of exchanges that coincide with a "market timing" strategy may be disruptive to the Fund and therefore may be refused.
The Fund discourages purchases by market timers and purchase orders (including the purchase side of exchange orders) by shareholders identified as market timers may be rejected. The Fund will consider anyone who follows a pattern of market timing in any fund in the Delaware Investments Family of Funds to be a market timer.
Market timing of a fund occurs when investors make consecutive rapid short-term "roundtrips", or in other words, purchases into a fund followed quickly by redemptions out of that fund. A short-term roundtrip is any redemption of fund shares within 20 business days of a purchase of that fund's shares. If you make a second such short-term roundtrip in a fund within the same calendar quarter of a previous short-term roundtrip in that fund, you may be considered a market timer. The purchase and sale of fund shares through the use of the exchange privilege are also included in determining whether market timing has occurred. The Fund also reserves the right to consider other trading patterns as market timing.
Your ability to use the Fund's exchange privilege may be limited if you are identified as a market timer. If you are identified as a market timer, we will execute the redemption side of your exchange order but may refuse the purchase side of your exchange order.
Small Accounts
Before the Fund involuntarily redeems shares from an account that,
under the circumstances listed in the Prospectus, has remained below the minimum
amounts required by the Fund's Prospectus and sends the proceeds to the
shareholder, the shareholder will be notified in writing that the value of the
shares in the account is less than the minimum required and will be allowed 60
days from the date of notice to make an additional investment to meet the
required minimum. Any redemption in an inactive account established with a
minimum investment may trigger mandatory redemption. No CDSC or Limited CDSC
will apply to the redemptions described in this paragraph.
* * *
The Fund has made available certain redemption privileges, as described below. The Fund reserves the right to suspend or terminate these expedited payment procedures upon 60 days' written notice to shareholders.
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 First Union
Bank. Normally, it takes two weeks from the date the shareholder's initial
purchase check clears to receive the check book. The use of any form of check
other than the Fund's check will not be permitted unless approved by the Fund.
The Checkwriting Feature is not available with respect to the Class B Shares,
Class C 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's bank may charge a fee.
(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 otherwise in the Fund's best interest.
Shareholders will be subject to bank's rules and regulations governing similar accounts. This service may be terminated or suspended at any time by the Fund's bank, the Fund or the Transfer Agent. As the Fund must redeem shares at their net asset value next determined (subject, in the case of Class A Shares, to any Limited CDSC), it will not be able to redeem all shares held in a shareholder's account by means of a check presented directly to the bank. The Fund and the Transfer Agent will not be responsible for the inadvertent processing of post-dated checks or checks more than six months old.
Stop-Payment Requests--Investors may request a stop payment on checks by providing the Fund with a written authorization to do so. Oral requests will be accepted provided that the Fund promptly receives a written authorization. Such requests will remain in effect for six months unless renewed or canceled. The Fund will use its best reasonable efforts to effect stop-payment instructions, but does not promise or guarantee that such instructions will be effective.
Return of Checks--Checks used in redeeming shares from a shareholder's account will be accumulated and returned semiannually. Shareholders needing a copy of a redemption check before the regular mailing should contact Delaware Service Company, Inc. at 800 523-1918.
Written Redemption
You can write to the Fund at 2005 Market Street, Philadelphia, PA
19103-7094 to redeem some or all of your shares. The request must be signed by
all owners of the account or your investment dealer of record. For redemptions
of more than $100,000, or when the proceeds are not sent to the shareholder(s)
at the address of record, the Fund require a signature by all owners of the
account and a signature guarantee for each owner. A signature guarantee can be
obtained from a commercial bank, a trust company or a member of a Securities
Transfer Association Medallion Program ("STAMP"). The Fund reserves the right to
reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your redemption request. If your Class A Shares or Institutional Class Shares are in certificate form, the certificate(s) must accompany your request and also be in good order. Certificates are issued for Class A Shares and Institutional Class Shares only if a shareholder submits a specific request. Certificates are not issued for Class B Shares, Class C Shares or Class R Shares.
Written Exchange
You may also write to the Fund (at 2005 Market Street, Philadelphia, PA
19103-7094) to request an exchange of any or all of your shares into another
mutual fund in Delaware Investments, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares or Institutional Class Shares in
certificate form, you may redeem or exchange only by written request and you
must return your certificates.
The Telephone Redemption - Check to Your Address of Record service and the Telephone Exchange service, both of which are described below, are automatically provided unless you notify the Fund in writing that you do not wish to have such services available with respect to your account. The Fund reserves the right to modify, terminate or suspend these procedures upon 60 days' written notice to shareholders. It may be difficult to reach the Fund by telephone during periods when market or economic conditions lead to an unusually large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any shareholder loss incurred in acting upon written or telephone instructions for redemption or exchange of Fund shares which are reasonably believed to be genuine. With respect to such telephone transactions, the Fund will follow reasonable procedures to confirm that instructions communicated by telephone are genuine (including verification of a form of personal identification) as, if it does not, the Fund or the Transfer Agent may be liable for any losses due to unauthorized or fraudulent transactions. Telephone instructions received by the Fund Classes are generally tape recorded, and a written confirmation will be provided for all purchase, exchange and redemption transactions initiated by telephone. By exchanging shares by telephone, you are acknowledging prior receipt of a prospectus for the fund into which your shares are being exchanged.
Telephone Redemption -- Check to Your Address of Record The Telephone Redemption feature is a quick and easy method to redeem shares. You or your investment dealer of record can have redemption proceeds of $100,000 or less mailed to you at your address of record. Checks will be payable to the shareholder(s) of record. Payment is normally mailed the next business day after receipt of the redemption request. This service is only available to individual, joint and individual fiduciary-type accounts.
Telephone Redemption -- Proceeds to Your Bank Redemption proceeds of $1,000 or more can be transferred to your predesignated bank account by wire or by check. You should authorize this service when you open your account. If you change your predesignated bank account, you must complete an Authorization Form and have your signature guaranteed. For your protection, your authorization must be on file. If you request a wire, your funds will normally be sent the next business day. If the proceeds are wired to the shareholder's account at a bank which is not a member of the Federal Reserve System, there could be a delay in the crediting of the funds to the shareholder's bank account. A bank wire fee may be deducted from Fund Class redemption proceeds. If you ask for a check, it will normally be mailed the next business day after receipt of your redemption request to your predesignated bank account. There are no separate fees for this redemption method, but the mail time may delay getting funds into your bank account. Simply call the Shareholder Service Center prior to the time the offering price and net asset value are determined, as noted above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of the Fund, as described above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to shareholders and is not intended to be a vehicle to speculate on short-term swings in the securities market through frequent transactions in and out of the funds in the Delaware Investments family. Telephone exchanges may be subject to limitations as to amounts or frequency. The Transfer Agent and the Fund reserve the right to record exchange instructions received by telephone and to reject exchange requests at any time in the future.
MoneyLine(SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine(SM) On Demand. When you authorize the Fund to accept such
requests from you or your investment dealer, funds will be deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern Time. There is a $25
minimum and $50,000 maximum limit for MoneyLine(SM) On Demand transactions. See
MoneyLine(SM) On Demand under Investment Plans.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares, Class C Shares and Class R Shares who own or purchase $5,000 or more of shares at the offering price, or net asset value, as applicable, for which certificates have not been issued may establish a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or quarterly withdrawals of $75 or more, although the Fund does not recommend any specific amount of withdrawal. This is particularly useful to shareholders living on fixed incomes, since it can provide them with a stable supplemental amount. This $5,000 minimum does not apply for the Fund's prototype retirement plans. Shares purchased with the initial investment and through reinvestment of cash dividends and realized securities profits distributions will be credited to the shareholder's account and sufficient full and fractional shares will be redeemed at the net asset value calculated on the third business day preceding the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected by the shareholder (unless such date falls on a holiday or a weekend), and are normally mailed within two business days. Both ordinary income dividends and realized securities profits distributions will be automatically reinvested in additional shares of the Class at net asset value. This plan is not recommended for all investors and should be started only after careful consideration of its operation and effect upon the investor's savings and investment program. To the extent that withdrawal payments from the plan exceed any dividends and/or realized securities profits distributions paid on shares held under the plan, the withdrawal payments will represent a return of capital, and the share balance may in time be depleted, particularly in a declining market. Shareholders should not purchase additional shares while participating in a Systematic Withdrawal Plan.
The sale of shares for withdrawal payments constitutes a taxable event and a shareholder may incur a capital gain or loss for federal income tax purposes. This gain or loss may be long-term or short-term depending on the holding period for the specific shares liquidated. Premature withdrawals from retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of additional shares may be disadvantageous to the shareholder. Purchases of Class A Shares through a periodic investment program in the Fund managed by the Manager must be terminated before a Systematic Withdrawal Plan with respect to such shares can take effect, except if the shareholder is a participant in one of our retirement plans or is investing in Delaware Investments funds which do not carry a sales charge. Redemptions of Class A Shares pursuant to a Systematic Withdrawal Plan may be subject to a Limited CDSC if the purchase was made at net asset value and a dealer's commission has been paid on that purchase. The applicable Limited CDSC for Class A Shares and CDSC for Class B and C Shares redeemed via a Systematic Withdrawal Plan will be waived if the annual amount withdrawn in each year is less than 12% of the account balance on the date that the Plan is established. If the annual amount withdrawn
in any year exceeds 12% of the account balance on the date that the Systematic Withdrawal Plan is established, all redemptions under the Plan will be subjected to the applicable CDSC, including an assessment for previously redeemed amounts under the Plan. Whether a waiver of the CDSC is available or not, the first shares to be redeemed for each Systematic Withdrawal Plan payment will be those not subject to a CDSC because they have either satisfied the required holding period or were acquired through the reinvestment of distributions. See Waivers of Contingent Deferred Sales Charges, below.
An investor wishing to start a Systematic Withdrawal Plan must complete an authorization form. If the recipient of Systematic Withdrawal Plan payments is other than the registered shareholder, the shareholder's signature on this authorization must be guaranteed. Each signature guarantee must be supplied by an eligible guarantor institution. The Fund reserves the right to reject a signature guarantee supplied by an eligible institution based on its creditworthiness. This plan may be terminated by the shareholder or the Transfer Agent at any time by giving written notice.
Systematic Withdrawal Plan payments are normally made by check. In the alternative, you may elect to have your payments transferred from your Fund account to your predesignated bank account through the MoneyLine(SM) Direct Deposit Service. Your funds will normally be credited to your bank account up to four business days after the payment date. There are no separate fees for this redemption method. It may take up to four business days for the transactions to be completed. You can initiate this service by completing an Account Services form. If your name and address are not identical to the name and address on your Fund account, you must have your signature guaranteed. The Fund does not charge a fee for any this service; however, your bank may charge a fee. This service is not available for retirement plans.
The Systematic Withdrawal Plan is not available to the Institutional Class. Shareholders should consult with their financial advisors to determine whether a Systematic Withdrawal Plan would be suitable for them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000, a Limited CDSC of 1% will be imposed on
certain redemptions of Class A Shares (or shares into which such Class A Shares
are exchanged) if shares are redeemed during the first year after the purchase,
if such purchases were made at net asset value and triggered the payment by the
Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed on an amount equal to the lesser of : (1) the net asset value at the time of purchase of the Class A Shares being redeemed or (2) the net asset value of such Class A Shares at the time of redemption. For purposes of this formula, the "net asset value at the time of purchase" will be the net asset value at purchase of the Class A Shares even if those shares are later exchanged for shares of another Delaware Investments fund and, in the event of an exchange of Class A Shares, the "net asset value of such shares at the time of redemption" will be the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than one year will not be subjected to the Limited CDSC and an exchange of such Class A Shares into another Delaware Investments fund will not trigger the imposition of the Limited CDSC at the time of such exchange. The period a shareholder owns shares into which Class A Shares are exchanged will count towards satisfying the one-year holding period. The Limited CDSC is assessed if such one year period is not satisfied irrespective of whether the redemption triggering its payment is of Class A Shares of the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed that shares not subject to the Limited CDSC are the first redeemed followed by other shares held for the longest period of time. The Limited CDSC will not be imposed upon shares representing reinvested dividends or capital gains distributions, or upon amounts representing share appreciation.
Waivers of Contingent Deferred Sales Charges
Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; (viii) distributions form an account if the redemption results
from a death of a registered owner, or a registered joint owner, of the account
(in the case of accounts established under the Uniform Gifts to Minors or
Uniform transfers to Minors Acts or trust accounts, the waiver applies upon the
death of all beneficial owners) or a total disability (as defined in Section 72
of the Code) of all registered owners occurring after the purchase of the shares
being redeemed; (ix) redemptions by the classes of shareholders who are
permitted to purchase shares at net asset value, regardless of the size of the
purchase (see Buying Class A Shares at Net Asset Value under Purchasing Shares);
and (x) redemptions by certain group defined contribution retirement plans that
purchase shares through a retirement plan alliance program which requires that
shares will be available at net asset value, provided that, RFS either is the
sponsor of the alliance program or has a product participation agreement with
the sponsor of the alliance program that specifies that the Limited CDSC will be
waived.
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from the
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of a registered owner, or a registered joint owner, of the account (in the
case of accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the death of
all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase of
the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following redemptions: (i) redemptions that result from the Fund's right to liquidate a shareholder's account if the aggregate net asset value of the shares held in the account is less than the then-effective minimum account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k) Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457 Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan, Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age 70 1/2, and IRA distributions qualifying under Section 72(t) of the Internal Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k) Defined Contribution Plan upon attainment of normal retirement age under the plan or upon separation from service; (vi) periodic distributions from an IRA or SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an account if the redemption results from the death of a registered owner, or a registered joint owner, of the account
(in the case of accounts established under the Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts, the waiver applies upon the death of all beneficial owners) or a total and permanent disability (as defined in Section 72 of the Code) of all registered owners occurring after the purchase of the shares being redeemed.
The CDSC on Class C Shares also is waived for any group retirement plan (excluding defined benefit pension plans) (i) that purchases shares through a retirement plan alliance program, provided Retirement Financial Services, Inc. either is the sponsor of the alliance program or has a product participation agreement with the sponsor of the alliance program, and (ii) for which Retirement Financial Services, Inc. provides fully-bundled retirement plan services and maintains participant records on its proprietary recordkeeping system.
* * *
In addition, the CDSC will be waived on Class A Shares, Class B Shares and Class C Shares redeemed in accordance with a Systematic Withdrawal Plan if the annual amount withdrawn under the Plan does not exceed 12% of the value of the account on the date that the Systematic Withdrawal Plan was established or modified.
INCOME DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
It is the present policy of Limited-Term Funds to declare dividends from net investment income of the Fund 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. 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 United States Post Office or which remains uncashed for a period of more than one year may be reinvested in the shareholder's account at the then-current net asset value and the dividend option may be changed from cash to reinvest. The Fund may deduct from a shareholder's account the costs of the Fund's effort to locate a shareholder if a shareholder's mail is returned by the United States Post Office or the Fund is otherwise unable to locate the shareholder or verify the shareholder's mailing address. These costs may include a percentage of the account when a search company charges a percentage fee in exchange for their location services. Net investment income earned on days when the Fund is not open will be declared as a dividend on the next business day. Purchases of Fund shares by wire begin earning dividends when converted into Federal Funds and available for investment, normally the next business day after receipt. Purchases by check earn dividends upon conversion to Federal Funds, normally one business day after receipt.
Each class of the Fund will share proportionately in the investment income and expenses of the Fund, except that the Class A Shares, Class B Shares, Class C Shares and the Class R Shares alone will incur distribution fees under their respective 12b-1 Plans.
Dividends and realized securities profits distributions are automatically reinvested in additional shares of the Fund at the net asset value in effect on the payable date, and credited to the shareholder's account, unless an election to 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.
Limited-Term Funds anticipates distributing to its shareholders substantially all of the Fund's 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 Limited-Term Funds' Board of Trustees, 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.
A Fund will inform its shareholders of the amount of their income dividends and capital gain distributions, and will advise them of their tax status for federal income tax purposes shortly after the close of each calendar year. If you have not owned your Fund shares for a full year, a Fund may designate and distribute to you, as ordinary income or capital gains, a percentage of income that may not be equal to the actual amount of each type of income earned during the period of your investment in a Fund. Distributions declared in December but paid in January are taxable to you as if paid in December.
Redemptions and exchanges of Fund shares are taxable transactions for federal and state income tax purposes. If you redeem your Fund shares, or exchange them for shares of a different Delaware Investments fund, the IRS requires you to report any gain or loss on your redemption or exchange. If you hold your shares as a capital asset, any gain or loss that you realize is a capital gain or loss and is long-term or short-term, generally depending on how long you have owned your shares.
Any loss incurred on the redemption or exchange of shares held for six months or treated as a long-term capital loss to the extent of any long-term capital gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize on the redemption of your Fund shares is disallowed to the extent that you buy other shares in the Fund (through reinvestment of dividends or otherwise) within 30 days before or after your share redemption. Any loss disallowed under these rules will be added to your tax basis in the new shares you buy.
If you redeem some or all of yours shares in a Fund, and then reinvest the redemption proceeds in a Fund or in another Delaware Investments fund within 90 days of buying the original shares, the sales charge that would otherwise apply to your reinvestment may be reduced or eliminated. In reporting any gain or loss in your redemption, all or a portion of the sales charge that you paid on your original shares in a Fund is excluded from your tax basis in the shares sold and added to your tax basis for the new shares.
A Fund may invest in complex securities that may be subject to numerous special and complex tax rules. The rules could affect whether gain or loss recognized by a Fund is treated as ordinary or capital, or as interest or dividend income. These rules could also accelerate the recognition of income to a Fund (possibly causing the Fund to sell securities to raise the cash for necessary distributions) and/or defer the Fund's ability to recognize a loss, and, in limited cases, subject the Fund to U.S. federal income tax on income from certain foreign securities. These rules could therefore affect the amount, timing or character of the income distributed to you by a Fund.
Jobs and Growth Tax Relief Reconciliation Act of 2003 (JAGTRRA) On May 28, 2003, President Bush signed into law the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JAGTRRA) .The new law reduces the tax rate on dividends and capital gains to 15% (5% for taxpayers with income in the lower brackets; 0% for those taxpayers in 2008).
Reduction of Tax Rate on Dividends
Qualifying dividends received by the funds after December 31, 2002,
will be taxed at a rate of 15% (5% for taxpayers with income in the lower
brackets; 0% for these taxpayers in 2008). Prior law will apply for tax years
beginning after December 31, 2008. Dividends paid on foreign corporation stocks
that are readily tradable on U.S. securities markets are eligible for the lower
rates.
The amount of ordinary dividends qualifying for the lower tax rates that may be paid by a RIC for any tax year may not exceed the amount of the aggregate qualifying dividends received by the RIC, unless that aggregate is at least 95% of the RIC gross income (as specially computed), in which case the entire dividend qualifies. Obviously, money market and bond mutual fund distributions will generally not qualify.
The lower tax rates are not available for dividends to the extent that the taxpayer is obligated to make related payments with respect to positions in substantially similar or related property (e.g., payments in lieu of dividends under a short sale). The capital gain rates also do not apply to (1) dividends received from an organization that was exempt from tax under Section 501 or was a tax-exempt farmers' cooperative in either the tax year of the distribution or the preceding tax year; (2) dividends received from a mutual savings bank that received a deduction under Section 591; or (3) deductible dividends paid on employer securities (i.e., under Section 404(k)).
Owners whose shares are lent in short sales would not qualify for the lower rate. The lower tax rates would not apply under the law as enacted to "payments in lieu of dividends," which are received by someone whose stock is loaned to a short-seller. Brokerages have commonly lent stock out of margin accounts to short sellers, but may need to accommodate investors who do not want to receive unfavorable dividend treatment because their stock was lent out. Depending on the details of regulations that may be issued later this year, brokerages may decide to limit any such loans after 2003 to securities that are held in accounts owned by tax-indifferent parties, such as pension funds. The legislative history indicates that the Service is to be liberal in waiving penalties for failure to report substitute payments properly for payors who are making good-faith efforts to comply, but cannot reasonably do so given the time needed to update their systems.
Reduction of Tax Rate on Capital Gains
Under JAGTRRA, the top individual rate on adjusted net capital gain,
which was generally 20% (10% for taxpayers in the 10% and 15% brackets), is
reduced to 15% (5% for taxpayers with income in the lower brackets). These lower
rates apply to both the regular tax and the alternative minimum tax. The lower
rates apply to assets held more than one year. For taxpayers with income in the
lower brackets, the 5% rate is reduced to 0% for 2008.
The tax rate on short-term capital gains is unchanged, and they will continue to be taxed at the ordinary income rate. The capital gains changes apply to sales and exchanges (and installment payments received) on or after May 6, 2003, but not with respect to tax years beginning after December 31, 2008.
The special tax rates for gains on assets held for more than five years (8% for taxpayers with income in the 10% and 15% brackets; 18% for other taxpayers with respect to assets purchased after 2000) have been repealed.
Back-up withholding Changes
Prior to the passage of JAGTRRA the backup withholding rate for
shareholders that did not provide taxpayer identification numbers was 30%. This
rate has been reduced to 28%, retroactive to January 1, 2003.
See also Other Tax Requirements under Accounting and Tax Issues in this
Part B.
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at 2005 Market Street, Philadelphia, PA 19103-7094, furnishes investment management services to the Fund, subject to the supervision and direction of Limited-Term Funds' Board of Trustees.
The Manager and its predecessors have been managing the funds in the Delaware Investments family since 1938. On December 31, 2003, the Manager and its affiliates within Delaware Investments were managing in the aggregate in excess of $105 billion in assets in various institutional or separately managed, investment company, and insurance accounts.
The Investment Management Agreement for the Fund is dated December 15, 1999 and was approved by shareholders on that date. The Agreement has an initial term of two years. The Agreement may be renewed each year only so long as such renewal and continuance are specifically approved at least annually by the Board of Trustees or by vote of a majority of the outstanding voting securities of the Fund, and only if the terms and the renewal thereof have been approved by the vote of a majority of the trustees of Limited-Term Funds who are not parties thereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval. The Agreement is terminable without penalty on 60 days' notice by the trustees of Limited-Term Funds or by the Manager. The Agreement will terminate automatically in the event of its assignment. The Investment Management Agreement provides that the Fund shall pay the Manager a management fee payable monthly and computed on the net asset value of the Fund as of each day at the following annual rate:
Management Fee Schedule
(as per percentage of average daily net assets)
0.50% on the first $500 million
0.475% on the next $500 million 0.45% on the next $1.5 billion 0.425% on assets in excess of $2.5 billion
On December 31, 2003, the Fund's total net assets were $377,830,321. Investment management fees paid (after fee waivers) by the Fund for the fiscal years ended December 31, 2003, 2002 and 2001 amounted to $932,770, $642,892 and $737,575 respectively.
Under the general supervision of the Board of Trustees, the Manager manages the Fund's portfolio in accordance with the Fund's stated investment objective and policy and makes and implements all investment decisions on behalf of the Fund. The Manager pays the salaries of all trustees, officers and employees of Limited-Term Funds who are affiliated with the Manager. The Fund pays all of its other expenses, including its proportionate share of rent and certain other administrative expenses.
The Fund has formally delegated to its investment adviser, Delaware Management Company (the "Adviser"), the ability to make all proxy voting decisions in relation to portfolio securities held by the Fund. If and when proxies need to be voted on behalf of the Fund, the Adviser will vote such proxies pursuant to its Proxy Voting Policies and Procedures (the "Procedures"). The Adviser has established a Proxy Voting Committee (the "Committee") which is responsible for overseeing the Adviser's proxy voting process for the Fund. One of the main responsibilities of the Committee is to review and approve the Procedures to ensure that the Procedures are designed to allow the Adviser to vote proxies in a manner consistent with the goal of voting in the best interests of the Fund.
In order to facilitate the actual process of voting proxies, the Adviser has contracted with Institutional Shareholder Services ("ISS") to analyze proxy statements on behalf of the Fund and other Adviser clients and vote proxies generally in accordance with the Procedures. The Committee is responsible for overseeing ISS's proxy voting activities. If a proxy has been voted for the Fund, ISS will create a record of the vote. Beginning no later than August 31, 2004, information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.delawareinvestments.com; and (ii) on the Commission's website at http://www.sec.gov.
The Procedures contain a general guideline that recommendations of company management on an issue (particularly routine issues) should be given a fair amount of weight in determining how proxy issues should be voted. However, the Adviser will normally vote against management's position when it runs counter to its specific Proxy Voting Guidelines (the "Guidelines"), and the Adviser will also vote against management's recommendation when it believes that such position is not in the best interests of the Fund.
As stated above, the Procedures also list specific Guidelines on how to vote proxies on behalf of the Fund. Some examples of the Guidelines are as follows: (i) generally vote for shareholder proposals asking that a majority or more of directors be independent; (ii) generally vote against proposals to require a supermajority shareholder vote; (iii) generally vote for debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved; (iv) votes on mergers and acquisitions should be considered on a case-by-case basis, determining whether the transaction enhances shareholder value; (v) generally vote against proposals to create a new class of common stock with superior voting rights; (vi) generally vote for proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable; (vii) generally vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms; (viii) votes with respect to management compensation plans are determined on a case-by-case basis; (ix) generally vote for reports on the level of greenhouse gas emissions from the company's operations and products; and (x) generally vote for proposals asking for a report on the feasibility of labeling products containing genetically modified ingredients.
Because the Fund has delegated proxy voting to the Adviser, the Fund is not expected to encounter any conflict of interest issues regarding proxy voting and therefore does not have procedures regarding this matter. However, the Adviser does have a section in its Procedures that addresses the possibility of conflicts of interest. Most proxies which the Adviser receives on behalf of the Fund are voted by ISS in accordance with the Procedures. Because almost all Fund proxies are voted by ISS pursuant to the pre-determined Procedures, it normally will not be necessary for the Adviser to make an actual determination of how to vote a particular proxy, thereby largely eliminating conflicts of interest for the Adviser during the proxy voting process. In the very limited instances where the Adviser is considering voting a proxy contrary to ISS's recommendation, the Committee will first assess the issue to see if there is any possible conflict of interest involving the Adviser or affiliated persons of the Adviser. If a member of the Committee has actual knowledge of a conflict of interest, the Committee will normally use another independent third party to do additional research on the particular proxy issue in order to make a recommendation to the Committee on how to vote the proxy in the best interests of the Fund. The Committee will then review the proxy voting materials and recommendation provided by ISS and the independent third party to determine how to vote the issue in a manner which the Committee believes is consistent with the Procedures and in the best interests of the Fund.
Distribution and Service
The Distributor, Delaware Distributors, L.P., located at 2005 Market Street, Philadelphia, PA 19103-7094, serves as the national distributor of the Fund's shares under a Distribution Agreement dated April 19, 2001. The Distributor is an affiliate of the Manager and bears all of the costs of promotion and distribution, except for payments by the Fund on behalf of Class A Shares, Class B Shares, Class C Shares and Class R Shares under their respective 12b-1 Plan. The Distributor is an indirect, wholly-owned subsidiary of Delaware Management Holdings, Inc.
Lincoln Financial Distributors, Inc. ("LFD"), an affiliate of the Manager, serves as the Fund's financial intermediary distributor pursuant to a Financial Intermediary Distribution Agreement with the Distributor dated January 1, 2001. LFD is primarily responsible for promoting the sale of Fund shares through broker/dealers, financial advisors and other financial intermediaries (collectively, "Financial Intermediaries"). The address of LFD is 350 Church Street, Hartford, CT 06103. For its services, LFD receives a one-time fee from the Distributor with respect to each sale of Fund shares through Financial Intermediaries equal to a percentage of the net asset value of such shares. The rate of compensation paid to LFD for each sale of Fund shares for any calendar year is tied to the aggregate value of sales made by LFD during such calendar year with respect to (i) shares of Delaware Investments' non-money market retail funds; (ii) shares of Delaware Group Premium Fund sold through the products for which LFD acts as a wholesaler; and (iii) wrap separate account products (the products described in (i), (ii) and (iii) are referred to collectively as the "Wholesaler Products") according to the following schedule:
---------------------------------------------------------- --------------------------------------------------
Aggregate Value of Wholesaler Product Sales Compensation Paid to LFD
in Calendar Year (% of NAV of Fund shares sold by LFD)
---------------------------------------------------------- --------------------------------------------------
$3.75 billion or less 0.45%
---------------------------------------------------------- --------------------------------------------------
More than $3.75 billion, but less than $4.5 billion 0.50%
---------------------------------------------------------- --------------------------------------------------
$4.5 billion and above 0.55%
---------------------------------------------------------- --------------------------------------------------
|
In addition to the non-recurring fee discussed above, the Distributor pays LFD a continuing fee at the annual rate of 0.04% of the average daily net assets of shares of the Delaware Investments retail funds outstanding and beneficially owned by shareholders through Financial Intermediaries.
Beginning March 1, 2003, the Distributor has contracted to waive 0.15% of the 0.30% 12b-1 Plan expenses otherwise payable by Limited-Term Funds Class A Shares.
The fees associated with LFD's services to the Fund are borne exclusively by the Distributor and not by the Fund.
The Transfer Agent, Delaware Service Company, Inc., another affiliate of the Manager located at 2005 Market Street, Philadelphia, PA 19103-7094, serves as the Fund's shareholder servicing, dividend disbursing and transfer agent pursuant to a Shareholders Services Agreement dated as of April 19, 2001. The Transfer Agent also provides accounting services to the Fund pursuant to the terms of a separate Fund Accounting Agreement. The Transfer Agent is also an indirect, wholly owned subsidiary of Delaware Management Holdings, Inc.
The Fund has authorized one or more brokers to accept on its behalf purchase and redemption orders in addition to the Transfer Agent. Such brokers are authorized to designate other intermediaries to accept purchase and redemption orders on the behalf of the Fund. For purposes of pricing, the Fund will be deemed to have received a purchase or redemption order when an authorized broker or, if applicable, a broker's authorized designee, accepts the order. Investors may be charged a fee when effecting transactions through a broker or agent.
OFFICERS AND TRUSTEES
The business and affairs of Limited-Term Funds are managed under the direction of its Board of Trustees.
Certain officers and trustees of Limited-Term Funds hold identical positions in each of the other funds in the Delaware Investments family. On January 30, 2004, Limited-Term Funds' officers and trustees owned less than 1% of the outstanding shares of the Class A, Class B, Class C and Class R shares of the Fund and 1.06% of the outstanding shares of the Institutional Class of the Fund.
As of January 31, 2004, management believes the following shareholders held of record 5% or more of the outstanding shares of a Class. Management does not have knowledge of beneficial owners.
------------------------------------------- ---------------------------------------------------- ---------------- --------------
Class Name and Address of Account Share Amount Percentage
------------------------------------------- ---------------------------------------------------- ---------------- --------------
Delaware Limited-Term Government Fund MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS 2,230,641.250 7.74%
A Class ATTENTION: FUND ADMINISTRATION
4800 DEER LAKE DR. E #2
JACKSONVILLE, FL 32246-6484
------------------------------------------- ---------------------------------------------------- ---------------- --------------
Delaware Limited-Term Government Fund MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS 470,956.140 11.30%
B Class ATTENTION: FUND ADMINISTRATION
4800 DEER LAKE DRIVE EAST, 2ND FL.
JACKSONVILLE, FL 32246-6484
------------------------------------------- ---------------------------------------------------- ---------------- --------------
Delaware Limited-Term Government Fund MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS 1,741,045.480 21.48%
C Class ATTENTION: FUND ADMINISTRATION
4800 DEER LAKE DRIVE EAST, 2ND FL
JACKSONVILLE, FL 32246-6484
------------------------------------------- ---------------------------------------------------- ---------------- --------------
Delaware Limited-Term Government Fund MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS 170,672.490 91.97%
R Class ATTENTION: FUND ADMINISTRATION
4800 DEER LAKE DRIVE EAST, 2ND FL
JACKSONVILLE, FL 32246-6484
------------------------------------------- ---------------------------------------------------- ---------------- --------------
MCB Trust Services 14,882.660 8.02%
Cust. FBO Van Zyverden, Inc.
700 17th Street, Suite 300
Denver, CO 80202-3531
------------------------------------------- ---------------------------------------------------- ---------------- --------------
Delaware Limited-Term Government Fund RS 401K PLAN 401,187.390 20.18%
Institutional Class IRON WORKERS LOCAL #420
ATTN: RETIREMENT PLANS
1645 FAIRVIEW STREET
READING, PA 19606
------------------------------------------- ---------------------------------------------------- ---------------- --------------
LINCOLN FINANCIAL GROUP FOUNDATION INC. 362,642.660 18.24%
1300 S. CLINTON STREET
FORT WAYNE, IN 46802-3506
------------------------------------------- ---------------------------------------------------- ---------------- --------------
RE DMC EMPLOYEE PROFIT SHARING PLAN 5470002648-2 186,381.960 9.37%
DELAWARE MANAGEMENT CO
EMPLOYEE PROFIT SHARING TRUST
C/O RICK SEIDEL
1818 MARKET STREET
PHILADELPHIA, PA 19103-3638
------------------------------------------- ---------------------------------------------------- ---------------- --------------
RS DMTC 401(K) PLAN 113,000.390 5.68%
ALOHA AIR
ATTN: CANDACE TAWARA
371 AOKEA PLACE
HONOLULU INTERNATIONAL AIRPORT
HONOLULU, HI 96820
------------------------------------------- ---------------------------------------------------- ---------------- --------------
|
------------------------------------------- ---------------------------------------------------- ---------------- --------------
Class Name and Address of Account Share Amount Percentage
------------------------------------------- ---------------------------------------------------- ---------------- --------------
Delaware Limited-Term Government Fund BOST & CO. 107,465.260 5.40%
Institutional Class FBO TUITION A/C INVESTMENT PROGRAM
C/O MUTUAL FUND OPERATION
P.O. BOX 3198
PITTSBURGH, PA 15230-3198
------------------------------------------- ---------------------------------------------------- ---------------- --------------
BOST & CO. 107,016.260 5.38%
FBO TUITION A/C INVESTMENT PROGRAM
C/O MUTUAL FUND OPERATION
P.O. BOX 3198
PITTSBURGH, PA 15230-3198
------------------------------------------- ---------------------------------------------------- ---------------- --------------
DMH Corp., Delaware Investments U.S., Inc., Delaware General Management, Inc. Delaware Management Company, Inc., Delaware
Service Company, Inc., Delaware Distributors, Inc., Delaware Management Trust Company, Delaware Management Business Trust, Delaware
Investment Advisers (a series of Delaware Management Business Trust), Delaware Management Company (a series of Delaware Management
Business Trust), Delaware Lincoln Investment Advisers (a series of Delaware Management Business Trust), Delaware Capital Management
(a series of Delaware Management Business Trust), Delaware Lincoln Cash Management (a series of Delaware Management Business Trust),
Delaware Distributors, L.P., DIAL Holding Company, Inc., Delaware International Holdings Ltd., Delaware International Advisers Ltd.,
Retirement Financial Services, Inc. and LNC Administrative Services, Inc. are direct or indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc. ("DMH"). DMH and Delaware International Advisers Ltd. are indirect, wholly owned subsidiaries,
and subject to the ultimate control, of Lincoln National Corporation. Lincoln National Corporation, with headquarters in
Philadelphia, Pennsylvania, is a diversified organization with operations in many aspects of the financial services industry,
including insurance and investment management. Delaware Investments is the marketing name for DMH and its subsidiaries.
|
Certain Trustees and officers of Limited-Term Funds hold identical positions in each of the other funds in the Delaware Investments family. Trustees and principal officers of Limited-Term Funds are noted below along with their ages and their business experience for the past five years.
Trustees and principal officers of the Limited-Term Funds are noted below along with their ages and their business experience for the past five years.
Number of Other
Position(s) Held Principal Portfolios in Fund Directorships
Name, with the Occupation(s) Complex Overseen Held by
Address Limited-Term Length of Time During by Trustee Trustee
and Birthdate Funds Served Past 5 Years or Officer or Officer
-----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
Jude T. Driscoll(2) Chairman and 3 Years - Since August 2000, 83 None
2005 Market Street Trustee(4) Executive Officer Mr. Driscoll has served in
Philadelphia, PA various executive capacities
19103 at different times at
Trustee since Delaware Investments(1)
March 10, 1963 May 15, 2003
Senior Vice President and
Director of Fixed-Income Process -
Conseco Capital Management
(June 1998 - August 2000)
Managing Director -
NationsBanc Capital Markets
(February 1996 - June 1998)
-----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Walter P. Babich Trustee 15 Years Board Chairman - 101 None
2005 Market Street Citadel Construction Corporation
Philadelphia, PA (1989 - Present)
19103
October 1, 1927
John H. Durham Trustee 24 Years(3) Private Investor 101 Trustee - Abington
2005 Market Street Memorial Hospital
Philadelphia, PA
19103
August 7, 1937 President/Director -
22 WR Corporation
John A. Fry Trustee(4) 2 Years President - 83 None
2005 Market Street Franklin & Marshall College
Philadelphia, PA (June 2002 - Present)
19103
Executive Vice President -
University of Pennsylvania
May 28, 1960 (April 1995 - June 2002)
Anthony D. Knerr Trustee 10 Years Founder/Managing Director - 101 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
Ann R. Leven Trustee 14 Years Treasurer/Chief Fiscal 101 Director -
2005 Market Street Officer - National Gallery of Andy Warhol Foundation
Philadelphia, PA Art
19103 (1994 - 1999) Director -
Systemax Inc.
November 1, 1940
|
Number of Other
Position(s) Held Principal Portfolios in Fund Directorships
Name, with the Occupation(s) Complex Overseen Held by
Address Limited-Term Length of Time During by Trustee Trustee
and Birthdate Funds Served Past 5 Years or Officer or Officer
-----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
Thomas F. Madison Trustee 9 Years President/Chief 101 Director -
2005 Market Street Executive Officer - CenterPoint Energy
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director - Digital
and Consulting) River Inc.
(January 1993 - Present)
February 25, 1936 Director - Rimage
Corporation
Director - Valmont
Industries Inc.
Janet L. Yeomans Trustee 4 Years Vice President/Mergers & 101 None
2005 Market Street Acquisitions - 3M Corporation
Philadelphia, PA (January 2003 - Present)
19103
Ms. Yeomans has held
July 31, 1948 various management
positions at 3M Corporation
since 1983
-----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Joseph H. Hastings Executive Executive Mr. Hastings has served in 101 None
2005 Market Street Vice President Vice President various executive capacities
Philadelphia, PA and and at different times at
19103 Chief Financial Chief Financial Delaware Investments
Officer Officer since
August 21, 2003
December 19, 1949
Richelle S. Maestro Senior Vice President, Chief Legal Ms. Maestro has served in 101 None
2005 Market Street Chief Legal Officer Officer since various executive capacities
Philadelphia, PA and Secretary March 17, 2003 at different times at
19103 Delaware Investments
November 26, 1957
Michael P. Bishof Senior Vice President 7 Years Mr. Bishof has served in 101 None
2005 Market Street and Treasurer various executive capacities
Philadelphia, PA at different times at
19103 Delaware Investments
August 18, 1962
|
(1) Delaware Investments is the marketing name for Delaware Management
Holdings, Inc. and its subsidiaries, including the Registrant's investment
advisor, principal underwriter and its transfer agent.
(2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an
executive officer of the Fund's manager and distributor.
(3) Mr. Durham served as a Director Emeritus from 1995 through 1998.
(4) Mr. Driscoll and Mr. Fry are not Trustees of the portfolios of Voyageur
Insured Funds, Voyageur Intermediate Tax Free Funds, Voyageur Investment
Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual
Funds III and Voyageur Tax Free Funds.
Following is additional information regarding investment professionals affiliated with the Limited-Term Funds.
--------------------------------- ------------------------------ ------------------------ --------------------------------------
Position(s) Held with Principal Occupation(s) During Past
Name, Address and Birthdate Limited-Term Funds Length of Time Served 5 Years
--------------------------------- ------------------------------ ------------------------ --------------------------------------
Stephen R. Cianci Vice President/Senior 11 Years During the past five years, Mr.
2005 Market Street Portfolio Manager Cianci has served in various
Philadelphia, PA 19103-7094 capacities at different times at
Delaware Investments.
May 12, 1969
--------------------------------- ------------------------------ ------------------------ --------------------------------------
Paul Grillo Vice President/Senior 10 Years During the past five years, Mr.
2005 Market Street Portfolio Manager Grillo has served in various
Philadelphia, PA 19103-7094 capacities at different times at
Delaware Investments.
May 16, 1959
--------------------------------- ------------------------------ ------------------------ --------------------------------------
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The following table shows each Trustee's ownership of shares of the Limited-Term Funds and of all Delaware Investments funds as of December 31, 2003.
------------------------------------------ ------------------------------------------ ------------------------------------------
Aggregate Dollar Range of Equity
Securities in All Registered Investment
Dollar Range of Equity Securities Companies Overseen by Trustee in Family
Name in the Limited-Term Funds of Investment Companies
------------------------------------------ ------------------------------------------ ------------------------------------------
Jude T. Driscoll None $10,000 - 50,000
------------------------------------------ ------------------------------------------ ------------------------------------------
Walter A. Babich None Over $100,000
------------------------------------------ ------------------------------------------ ------------------------------------------
John H. Durham None Over $100,000
------------------------------------------ ------------------------------------------ ------------------------------------------
John A. Fry None Over $100,000
------------------------------------------ ------------------------------------------ ------------------------------------------
Anthony D. Knerr None $10,000 - 50,000
------------------------------------------ ------------------------------------------ ------------------------------------------
Ann R. Leven None Over $100,000
------------------------------------------ ------------------------------------------ ------------------------------------------
Thomas F. Madison None $10,000 - 50,000
------------------------------------------ ------------------------------------------ ------------------------------------------
Janet L. Yeomans None $10,000 - 50,000
------------------------------------------ ------------------------------------------ ------------------------------------------
|
The following is a compensation table listing for each Trustee entitled to receive compensation, the aggregate compensation received from Limited-Term Funds during its fiscal year and the total compensation received from all investment companies in the Delaware Investments family for which he or she serves as a Trustee during Limited-Term Funds' fiscal year and an estimate of annual benefits to be received upon retirement under the Delaware Group Retirement Plan for Trustees/Directors as of December 31, 2003. Only the independent Trustees of the Limited-Term Funds receive compensation from Limited-Term Funds.
---------------------------- --------------------- ------------------------ ------------------------- -------------------------
Aggregate Total Compensation from
Compensation from Pension or Retirement Estimated Annual the Investment
the Limited-Term Benefits Accrued as Benefits Upon Companies in Delaware
Name Funds Part of Fund Expenses Retirement(1) Investments(2)
---------------------------- --------------------- ------------------------ ------------------------- -------------------------
Walter P. Babich $2,666 None $61,000 $94,233
---------------------------- --------------------- ------------------------ ------------------------- -------------------------
John H. Durham $2,394 None $61,000 $84,233
---------------------------- --------------------- ------------------------ ------------------------- -------------------------
John A. Fry $2,394 None $45,750 $68,829
---------------------------- --------------------- ------------------------ ------------------------- -------------------------
Anthony D. Knerr $2,413 None $61,000 $84,941
---------------------------- --------------------- ------------------------ ------------------------- -------------------------
Ann R. Leven $2,705 None $61,000 $94,983
---------------------------- --------------------- ------------------------ ------------------------- -------------------------
Thomas F. Madison $2,601 None $61,000 $91,149
---------------------------- --------------------- ------------------------ ------------------------- -------------------------
Janet L. Yeomans $2,601 None $61,000 $91,149
---------------------------- --------------------- ------------------------ ------------------------- -------------------------
|
(1) Under the terms of the Delaware Group Retirement Plan for
Trustees/Directors, each disinterested Trustee/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 investment company in the
Delaware Investments family for which he or she serves as
Trustee/Director for a period equal to the lesser of the number of
years that such person served as a Trustee/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
trustees/directors of each investment company at the time of such
person's retirement. If an eligible Trustee/Director retired as of
December 31, 2003, he or she would be entitled to annual payments
totaling the amounts noted above, in the aggregate, from all of the
investment companies in the Delaware Investments family for which he or
she serves as a trustee or director, based on the number of investment
companies in the Delaware Investments family as of that date.
(2) Each independent Trustee/Director (other than John A. Fry) currently
receives a total annual retainer fee of $61,000 for serving as a
Trustee/Director for all 32 investment companies in Delaware
Investments, plus $3,145 for each Board Meeting attended. John A. Fry
receives a total annual retainer fee of $45,750 for serving as a
Trustee/Director for 24 investment companies in Delaware Investments,
plus $2,358 for each Board Meeting attended. The following compensation
is in the aggregate from all investment companies in the complex.
Members of the audit committee receive additional compensation of
$2,000 from all investment companies, in the aggregate, with the
exception of the chairperson, who receives an annual retainer of
$5,000, plus $2,000 for each meeting. In addition, the chairperson of
the nominating committee receives an annual retainer of $1,000. The
Coordinating Trustee/Director of the Delaware Investments funds
receives an additional retainer of $10,000, in the aggregate from all
investment companies.
The Board of Trustees has the following committees:
Audit Committee: This committee monitors accounting and financial reporting policies and practices, and internal controls for the Delaware Investments funds. It also oversees the quality and objectivity of the Delaware Investments funds' financial statements and the independent audit thereof, and acts as a liaison between the Delaware Investments funds' independent auditors and the full Board of Trustees. The Audit Committee of the Fund consists of the following three independent Trustees/Directors appointed by the Board: Ann R. Leven, Chairperson; Thomas F. Madison; and Jan L. Yeomans. The Audit Committee held six meetings during the Fund's last fiscal year.
Nominating Committee: This committee recommends Board members, fills vacancies and considers the qualifications of Board members. The committee also monitors the performance of counsel for independent trustees. The Nominating Committee will consider selections for Board of Directors nominations from shareholders. The Nominating Committee of the Fund currently consists of the following three Trustees/Directors appointed by the Board: Anthony D. Knerr, Chairperson; John H. Durham and John A. Fry, all of whom are independent. The Nominating Committee held one meeting during the Fund's last fiscal year.
GENERAL INFORMATION
Limited-Term Funds, was organized as a Pennsylvania business trust in 1981, reorganized as a Maryland corporation in 1990 and further reorganized as a Delaware business trust on December 15, 1999. It is an open-end management investment company. The Fund's portfolio of assets is diversified as defined by the 1940 Act.
The Manager is the investment manager of the Fund. The Manager also provides investment management services to certain of the other funds available from the Delaware Investments family. 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 from those of the other funds and accounts, investment decisions for such other funds and accounts may be made at the same time as investment decisions of the Fund.
The Fund's Board of Trustees is responsible for overseeing the performance of the Funds' investment advisor and determining whether to approve and/or renew the Funds' investment management agreements. When the Board considers whether to renew an investment management agreement, it considers various factors that include:
The nature, extent and quality of the services provided by the investment Advisor.
The investment performance of the Fund's assets managed by the investment Advisor.
The fair market value of the services provided by the investment Advisor.
Comparative analysis of expense ratios of, and advisory fees paid by, similar Funds.
The extent to which the investment Advisor has realized or will realize economies of scale as the Fund grows.
Other benefits accruing to the investment Advisor or its affiliates from its relationship with the Fund.
The investment Advisor's management of the operating expenses of the Funds, such as transaction costs, including how portfolio transactions for the Funds are conducted and brokers are chosen.
In reviewing the investment management agreements for the Fund, the Board of Trustees considered the Fund's performance relative to its peers and benchmark, the investment process and controls used in managing the Fund, the Fund's fees and expenses relative to its peers, the experience and qualifications of personnel responsible for managing the Fund and quality of other services provided to the Fund in addition to investment advice.
The Board met in executive session to approve the investment management agreements, and was advised by outside counsel as to the adequacy of the materials provided. The Board was supportive of the changes made by the Manager, and felt that management had been responsive to the concerns expressed by the Board during the previous year. The Board considered that the Manager recently instituted a number of changes to the Delaware Investments investment process designed to bolster the services provided to the Fund. Such improvements included refinements to the usage of competitive peer group portfolio information and qualitative tools in the investment decision-making process, especially in the area of monitoring risk and volatility. The Board also considered that the Manager recently instituted a number of changes necessary to operate in this heightened regulatory environment, most recently responding to new requirements imposed by Rule 35d-1, Regulation S-P, changes in the corporate governance rules and the Sarbanes-Oxley Act. The Board found that overall the Fund's fees to be in line with fees charged to comparable funds in the industry and noted, where relevant, that the investment Advisor had implemented fee waivers to reduce the fees of certain Funds.
The Board also reviewed the quality of services performed by the investment Advisor's affiliates on behalf of the Fund, including fund accounting, transfer agent, administrative, and shareholder services. The Board also considered the prestigious DALBAR service awards received by the investment advisor's affiliate for the quality of service it provided to the Fund investors.
The Manager and its affiliate Delaware International Advisers Ltd., manage several of the investment options for Delaware-Lincoln ChoicePlus and Delaware Medallion (SM) III Variable Annuities. ChoicePlus is issued and distributed by Lincoln National Life Insurance Company. ChoicePlus offers a variety of different investment styles managed by leading money managers. Medallion is issued by Allmerica Financial Life Insurance and Annuity Company (First Allmerica Financial Life Insurance Company in New York and Hawaii). Delaware Medallion offers various investment series ranging from domestic equity funds, international equity and bond funds and domestic fixed income funds. Each investment series available through ChoicePlus and Medallion utilizes an investment strategy and discipline the same as or similar to one of the Delaware Investments mutual funds available outside the annuity. See Delaware VIP Trust in Appendix B.
The Delaware Investments Family of Funds, the Manager, the Distributor and the Financial intermediary distributor, in compliance with SEC Rule 17j-1 under the 1940 Act, have adopted Codes of Ethics which govern personal securities transactions. Under the Codes of Ethics, persons subject to the Codes are permitted to engage in personal securities transactions, including securities that may be purchased or held by the Funds, subject to the requirements set forth in Rule 17j-1 and certain other procedures set forth in the applicable Code of Ethics. The Codes of Ethics for the Delaware Investments Family of Funds, the Manager, the Distributor and the Financial intermediary distributor are on public file with, and are available from, the SEC.
The Distributor acts as national distributor for the Fund and for the other mutual funds in the Delaware Investments family.
The Distributor received Limited CDSC payments with respect to Class A Shares of the Fund as follows:
-----------------------------------------------------------
Limited CDSC Payments
-----------------------------------------------------------
Limited-Term Government Fund
Fiscal Year Ended Class A Shares
--------------------- -------------------------------------
12/31/03 $477
--------------------- -------------------------------------
12/31/02 6,689
--------------------- -------------------------------------
12/31/01 0
--------------------- -------------------------------------
|
The Distributor received CDSC payments with respect to Class B Shares and Class C Shares as follows:
--------------------------------------------------------------------------------
CDSC Payments
--------------------------------------------------------------------------------
Fiscal Year Ended Limited-Term Government Fund Limited-Term Government Fund
Class B Shares Class C Shares
------------------ ------------------------------ ------------------------------
12/31/03 $159,202 $85,366
------------------ ------------------------------ ------------------------------
12/31/02 103,398 39,107
------------------ ------------------------------ ------------------------------
12/31/01 19,729 4,177
------------------ ------------------------------ ------------------------------
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The Transfer Agent, an affiliate of the Manager, acts as shareholder servicing, dividend disbursing and transfer agent for each Fund and for the other mutual funds in the Delaware Investments Family of Funds. The Transfer Agent is paid a fee by each Fund for providing these services consisting of an annual per account charge for (i) each open and closed account on the their records and each account held on a sub-accounting system maintained by firms that hold accounts on an omnibus basis ("Shareholder Accounts"); and (ii) each account on a retirement processing system ("Retirement Accounts"). These charges are as follows:
Shareholder Accounts $21.25 Per Annum Retirement Accounts $30.00 Per Annum
These charges are assessed monthly on a pro rata basis and determined by using the number of Shareholder and Retirement Accounts maintained as of the last calendar day of each month. Compensation is fixed each year and approved by the Board of Trustees, including a majority of the disinterested trustees.
The Transfer Agent also provides accounting services to each Fund. Those services include performing all functions related to calculating each Fund's net asset value and providing all financial reporting services, regulatory compliance testing and other related accounting services. For its services, the Transfer Agent is paid a fee based on total assets of all funds in the Delaware Investments Family of Funds for which it provides such accounting services. Such fee is equal to 0.025% multiplied by the total amount of assets in the complex for which the Transfer Agent furnishes accounting services, where such aggregate complex assets are $10 billion or less, and 0.020% of assets if such aggregate complex assets exceed $10 billion. The fees are charged to each Fund and the other mutual funds in the Delaware Investments Family of Funds, on an aggregate pro rata basis. The asset-based fee payable to the Transfer Agent is subject to a minimum fee calculation based on the type and number of classes per Fund.
Capitalization
Limited-Term Funds has a present unlimited authorized number of shares
of beneficial interest with no par value allocated to each Class.
Identifiable expenses to the Fund will be paid by the Fund. General expenses of the Fund 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 the Fund affected must vote affirmatively for that class to be affected.
Each Class of the Fund represents a proportionate interest in the assets of the Fund and each has the same voting and other rights and preferences as the other classes except that shares of the Institutional Class may not vote on matters affecting the Fund's Classes' Plans under Rule 12b-1. Similarly, as a general matter, shareholders of Class A Shares, Class B Shares, Class C Shares and Class R Shares may vote only on matters affecting the 12b-1 Plan that relates to the class of shares that they hold. However, Class B Shares may vote on any proposal to increase materially the fees to be paid by the Fund under the Plan relating to Class A Shares. General expenses of the Fund will be allocated on a pro-rata basis to the classes according to asset size, except that expenses of the Rule 12b-1 Plans of Class A, Class B Shares, Class C Shares, and Class R Shares will be allocated solely to those classes.
Until May 31, 1992, the Fund offered shares of two retail classes of shares, Investors Series II class (now Class A Shares) 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. 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. Effective as of August 16, 1999, the name of Limited-Term Government Fund changed to Delaware Limited-Term Government Fund. Corresponding changes were also made to the names of each of the Fund's Classes. Effective as of December 15, 1999, the name of Delaware Group Limited-Term Government Funds, Inc. changed to Delaware Group Limited-Term Government Funds. Class R Shares of the Fund were initially offered on June 2, 2003.
All shares have equal voting rights, no preemptive rights, are fully transferable and, when issued, are fully paid. All shares of the Fund participate equally in dividends, and upon liquidation would share equally.
Noncumulative Voting
Limited-Term Funds' shares have noncumulative voting rights which means
that the holders of more than 50% of the shares of Limited-Term Funds voting for
the election of trustees can elect all the trustees if they choose to do so,
and, in such event, the holders of the remaining shares will not be able to
elect any trustees.
This Part B does not include all of the information contained in the Registration Statement which is on file with the SEC.
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group Limited-Term Government Funds and, in its capacity as such, audits the annual financial statements contained in the Fund's Annual Report. The Fund's Statement of Net Assets, Statement of Operations, Statement of Changes in Net Assets, Financial Highlights and Notes to Financial Statements, as well as the report of Ernst & Young LLP, independent auditors, for the year ended December 31, 2003 are included in its Annual Report to shareholders. The financial statements, the notes relating thereto, financial highlights and the report of Ernst & Young LLP, described above are incorporated by reference from the Annual Report into this Part B.
APPENDIX A - RATINGS
Bonds
Excerpts from Moody's Investors Service, Inc. ("Moody's") description
of its bond ratings: Aaa--judged to be the best quality. They carry the smallest
degree of investment risk; Aa--judged to be of high quality by all standards;
A--possess favorable attributes and are considered "upper medium" grade
obligations; Baa--considered as medium grade obligations. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time; Ba--judged to have speculative elements; their future cannot be
considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class; B--generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small; Caa--are of poor
standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest; Ca--represent obligations which
are speculative in a high degree. Such issues are often in default or have other
marked shortcomings; C--the lowest rated class of bonds and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Excerpts from Standard & Poor's ("S&P") description of its bond ratings: AAA--highest grade obligations. They possess the ultimate degree of protection as to principal and interest; AA--also qualify as high grade obligations, and in the majority of instances differ from AAA issues only in a small degree; A--strong ability to pay interest and repay principal although more susceptible to changes in circumstances; BBB--regarded as having an adequate capacity to pay interest and repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and CC the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions; C--reserved for income bonds on which no interest is being paid; D--in default, and payment of interest and/or repayment of principal is in arrears.
APPENDIX B - INVESTMENT OBJECTIVES OF THE FUNDS IN THE DELAWARE INVESTMENTS FAMILY
Following is a summary of the investment objectives of the funds in the Delaware Investments family:
Delaware Diversified Income Fund seeks to provide investors with high
current income and total return by using a multi-sector investment approach,
investing principally in three sectors of the fixed-income securities markets:
high-yield, higher risk securities, investment-grade fixed-income securities and
foreign government and other foreign fixed-income securities. Delaware U.S.
Growth Fund seeks to maximize capital appreciation by investing in companies of
all sizes which have low dividend yields, strong balance sheets and high
expected earnings growth rates relative to their industry.
Delaware Cash Reserve Fund seeks the highest level of income consistent with the preservation of capital and liquidity through investments in short-term money market instruments, while maintaining a stable net asset value.
Delaware Balanced Fund seeks long-term growth by a balance of capital appreciation, income and preservation of capital. As a balanced fund, the fund invests at least 25% of its assets in fixed-income securities and the remaining in equity securities. Delaware Devon Fund seeks total return. It will invest primarily in common stocks. It will focus on common stocks that the manager believes to have potential for above-average earnings per share growth over time.
Delaware Decatur Equity Income Fund seeks high current income and capital appreciation. It invests primarily in dividend-paying stocks of large, well-established companies. Delaware Diversified Value Fund seeks capital appreciation with current income as a secondary objective by investing in dividend-paying stocks and income producing securities that are convertible into common stocks. Delaware Growth and Income Fund seeks capital appreciation with current income as a secondary objective. It invests primarily in common stocks of large, well-established companies. Delaware Social Awareness Fund seeks to achieve long-term capital appreciation. It seeks to achieve this objective by investing primarily in equity securities of medium- to large-sized companies expected to grow over time that meet the Fund's "Social Criteria" strategy.
Delaware American Services Fund seeks to provide long-term capital growth. It invests primarily in stocks of U.S. companies in the financial services, business services and consumer services sectors. Delaware Small Cap Growth Fund seeks to provide long-term capital growth by investing in common stocks of small growth-oriented or emerging growth companies that we believe offer above average opportunities for long-term price appreciation. Delaware Technology and Innovation Fund seeks to provide long-term capital growth by investing primarily in stocks the investment advisor believes will benefit from technological advances and improvements. Delaware Trend Fund seeks capital appreciation by investing in common stocks issued by emerging growth companies exhibiting strong capital appreciation potential.
Delaware Diversified Growth Fund seeks capital appreciation by investing in stocks of companies that have growth potential that exceeds the average anticipated growth rate. Delaware Growth Opportunities Fund seeks long-term capital growth by investing in common stocks and securities convertible into common stocks of companies that have a demonstrated history of growth and have the potential to support continued growth.
Delaware Dividend Income Fund seeks to provide high current income and the potential for capital appreciation by investing primarily in income generating securities (debt and equity). Delaware Small Cap Value Fund seeks capital appreciation by investing primarily in common stocks whose market values appear low relative to their underlying value or future potential.
Foundation Funds are "fund of funds" which invest in other funds in the Delaware Investments family (referred to as "Underlying Funds"). Delaware Balanced Allocation Portfolio seeks capital appreciation with
current income as a secondary objective by investing primarily in domestic equity and fixed income securities, including domestic equity and fixed income Underlying Funds. Delaware Income Allocation Portfolio seeks a combination of current income and preservation of capital with capital appreciation by investing primarily in a mix of fixed income and domestic equity securities, including fixed income and domestic equity Underlying Funds. Delaware Growth Allocation Portfolio seeks long-term capital growth by investing primarily in equity securities, including equity Underlying Funds, and, to a lesser extent, in fixed income securities, including fixed-income Underlying Funds. Delaware S&P 500 Index Fund seeks to replicate the total return of the Standard & Poor's 500 Composite Stock Price Index, which emphasizes large U.S. companies.
Delaware Emerging Markets Fund seeks long-term capital appreciation by investing primarily in equity securities of issuers located or operating in emerging countries. Delaware International Small Cap Value Fund seeks to achieve long-term capital appreciation by investing primarily in smaller non-U.S. companies, which may include companies located or operating in established or emerging countries. Delaware International Value Equity Fund seeks to achieve long-term growth without undue risk to principal by investing primarily in international securities that provide the potential for capital appreciation and income.
Delaware American Government Bond Fund seeks high current income by investing primarily in long-term debt obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities.
Delaware Corporate Bond Fund seeks to provide investors with total return by investing primarily in corporate bonds. Delaware Delchester Fund seeks as high a current income as possible by investing principally in high yield, high risk corporate bonds, and also in U.S. government securities and commercial paper. Delaware Extended Duration Bond Fund seeks to provide investors with total return by investing primarily in corporate bonds. Delaware High-Yield Opportunities Fund seeks to provide investors with total return and, as secondary objective, high current income. Delaware Strategic Income Fund seeks to provide investors with high current income and total return by using a multi-sector investment approach, investing principally in three sectors of the fixed-income securities market: high-yield, higher risk securities, investment grade fixed-income securities and foreign government and other foreign fixed-income securities.
Delaware Limited-Term Government Fund seeks high, stable income by investing primarily in a portfolio of short- and intermediate-term securities issued or guaranteed by the U.S. government, its agencies or instrumentalities and instruments secured by such securities.
Delaware REIT Fund seeks to achieve maximum long-term total return with capital appreciation as a secondary objective. It seeks to achieve its objectives by investing in securities of companies primarily engaged in the real estate industry.
Delaware Tax-Free Money Fund seeks high current income, exempt from federal income tax, by investing in short-term municipal obligations, while maintaining a stable net asset value.
Delaware Tax-Free Insured Fund invests in these same types of securities but with an emphasis on municipal bonds protected by insurance guaranteeing principal and interest are paid when due. Delaware Tax-Free USA Fund seeks high current income exempt from federal income tax by investing in municipal bonds of geographically-diverse issuers. Delaware Tax-Free USA Intermediate Fund seeks a high level of current interest income exempt from federal income tax, consistent with the preservation of capital by investing primarily in municipal bonds.
Delaware Tax-Free 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.
Delaware Tax-Free Arizona Insured Fund seeks to provide a high level of current income exempt from federal income tax and the Arizona personal income tax, consistent with the preservation of capital. Delaware
Tax-Free Minnesota Insured Fund seeks to provide a high level of current income exempt from federal income tax and the Minnesota personal income tax, consistent with the preservation of capital.
Delaware Tax-Free Minnesota Intermediate Fund seeks to provide a high level of current income exempt from federal income tax and the Minnesota personal income tax, consistent with preservation of capital. The Fund seeks to reduce market risk by maintaining a dollar-weighted average effective maturity from five to ten years.
Delaware Tax-Free California Insured Fund seeks to provide a high level of current income exempt from federal income tax and the California personal income tax, consistent with the preservation of capital. Delaware Tax-Free Florida Insured Fund seeks to provide a high level of current income exempt from federal income tax, consistent with the preservation of capital. The Fund will seek to select investments that will enable its shares to be exempt from the Florida intangible personal property tax. Delaware Tax-Free Florida Fund seeks to provide a high level of current income exempt from federal income tax, consistent with the preservation of capital. The Fund will seek to select investments that will enable its shares to be exempt from the Florida intangible personal property tax. Delaware Tax-Free Missouri Insured Fund seeks to provide a high level of current income exempt from federal income tax and the Missouri personal income tax, consistent with the preservation of capital. Delaware Tax-Free Oregon Insured Fund seeks to provide a high level of current income exempt from federal income tax and the Oregon personal income tax, consistent with the preservation of capital.
Delaware Tax-Free Arizona Fund seeks to provide a high level of current income exempt from federal income tax and the Arizona personal income tax, consistent with the preservation of capital. Delaware Tax-Free California Fund seeks to provide a high level of current income exempt from federal income tax and the California personal income tax, consistent with the preservation of capital. Delaware Tax-Free Idaho Fund seeks to provide a high level of current income exempt from federal income tax and the Idaho personal income tax, consistent with the preservation of capital. Delaware Minnesota High-Yield Municipal Bond Fund seeks to provide a high level of current income exempt from federal income tax and the Minnesota personal income tax primarily through investment in medium and lower grade municipal obligations. Delaware National High-Yield Municipal Fund seeks to provide a high level of income exempt from federal income tax, primarily through investment in medium and lower grade municipal obligations. Delaware Tax-Free New York Fund seeks to provide a high level of current income exempt from federal income tax and the personal income tax of the state of New York and the city of New York, consistent with the preservation of capital.
Delaware Tax-Free Colorado Fund seeks to provide a high level of current income exempt from federal income tax and the Colorado personal income tax, consistent with the preservation of capital.
Delaware Core Equity Fund seeks long-term capital appreciation. The Fund typically invests in large capitalization companies with relatively consistent earnings and growth records. Delaware Select Growth Fund seeks long-term capital appreciation, which the Fund attempts to achieve by investing primarily in equity securities believed to have the potential for high earnings growth. Although the Fund, in seeking its objective, may receive current income from dividends and interest, income is only an incidental consideration in the selection of the Fund's investments.
Delaware Tax-Free Minnesota Fund seeks to provide a high level of current income exempt from federal income tax and the Minnesota personal income tax, consistent with the preservation of capital.
Delaware VIP Trust offers various funds available exclusively as funding vehicles for certain insurance company separate accounts. Delaware VIP Balanced Series seeks a balance of capital appreciation, income and preservation of capital. As a "balanced" fund, the Series invests at least 25% of its assets in fixed-income securities and the remainder primarily in equity securities. Delaware VIP 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. Delaware VIP Cash Reserve Series is a money market fund which seeks the highest level of income consistent with preservation of capital and liquidity through investments in short-term money market instruments. Delaware VIP Diversified Income Series seeks high current income and total return. The Series seeks to achieve its objective by using a multi-sector investment approach, investing primarily in three sectors of the fixed income securities markets: high-yield, higher risk securities; investment grad fixed-income securities; and foreign government and other foreign fixed-income securities. Delaware VIP Emerging Markets Series seeks to achieve long-term capital appreciation. The Series seeks to achieve its objective by investing primarily in equity securities of issuers located or operating in emerging countries. Delaware VIP Global Bond Series seeks current income consistent with preservation of principal by investing primarily in fixed-income securities that may also provide the potential for capital appreciation. The Series will invest in fixed-income securities of issuers from at least three different countries, one of which may be the United States. Delaware VIP Growth Opportunities Series seeks long-term capital appreciation by investing its assets in a diversified portfolio of securities exhibiting the potential for significant growth. Delaware VIP High Yield Series seeks total return and, as a secondary objective, high current income. It seeks to achieve its objective by investing primarily in high-yield corporate bonds. Delaware VIP International Value Equity Series seeks long-term growth without undue risk to principal by investing primarily in equity securities of foreign issuers providing the potential for capital appreciation and income. Delaware VIP Large Cap Value Series seeks capital appreciation with current income as a secondary objective. It seeks to achieve its objective by investing primarily in common stocks of large, well-established companies. Delaware VIP REIT Series seeks to achieve maximum long-term total return. Capital appreciation is a secondary objective. It seeks to achieve its objectives by investing in securities of companies primarily engaged in the real estate industry. Delaware VIP Select Growth Series seeks long-term capital appreciation. The Series attempts to achieve its investment objective by investing primarily in equity securities of companies of all sizes which the manager believes have the potential for high earnings growth. Delaware VIP Small Cap Value Series seeks capital appreciation by investing primarily in small cap common stocks whose market value appears low relative to their underlying value or future earnings and growth potential. Delaware VIP Trend Series seeks long-term capital appreciation by investing primarily in small cap common stocks and convertible securities of emerging and other growth-oriented companies. Delaware VIP U.S. Growth Series seeks to maximize capital appreciation. The Series seeks to achieve its objective by investing primarily in stocks of companies of all sizes. We look for stocks with low dividend yields, strong balance sheets and high expected earnings growth rates as compared to other companies in the same industry.
For more complete information about any of the funds in the Delaware Investments family, including charges and expenses, you can obtain a prospectus from the Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the information contained in each fund's prospectus.
PART C
Other Information
Item 23. Exhibits
(a) Agreement and Declaration of Trust
(1) Agreement and Declaration of Trust (December 17, 1998) is incorporated into this filing by reference to Post-Effective Amendment No. 48 filed April 28, 1999.
(2) Certificate of Trust (December 17, 1998) is incorporated into this filing by reference to Post-Effective Amendment No. 48 filed April 28, 1999.
(b) By-Laws. By-Laws (December 17, 1998) is incorporated into this filing by reference to Post-Effective Amendment No. 48 filed April 28, 1999.
(c) Copies of All Instruments Defining the Rights of Holders.
(1) Agreement Declaration of Trust. Articles III, V and VI of Agreement and Declaration of Trust which is incorporated into this filing by reference to Post-Effective Amendment No. 48 filed April 28, 1999.
(2) By-Laws. Article II of By-Laws which are incorporated into this filing by reference to Post-Effective Amendment No. 48 filed April 28, 1999.
(d) Investment Management Agreement. Executed Investment Management Agreement (December 15, 1999) between Delaware Management Company (a series of Delaware Management Business Trust) and the Registrant is incorporated into this filing by reference to Post-Effective Amendment No. 52 filed April 30, 2001.
(e) (1) Distribution Agreements.
(i) Executed Distribution Agreement (May 15, 2003) attached as Exhibit.
(ii) Executed Financial Intermediary Distribution Agreement (January 1, 2001) between Delaware Distributors, L.P. and Lincoln Financial Distributors, Inc. on behalf of the Registrant is incorporated into this filing by reference to Post-Effective Amendment No. 53 filed February 28, 2002.
(iii) Executed Appendix A (December 20, 2001) to Financial Intermediary Distribution Agreement is incorporated into this filing by reference to Post-Effective Amendment No. 53 filed February 28, 2002.
(iv) Executed Second Amended and Restated Financial Intermediary Distribution Agreement (August 21, 2003) attached as Exhibit.
(2) Dealer's Agreement. Dealer's Agreement is incorporated into this filing by reference to PEA No. 52 filed April 30, 2001.
(3) Vision Mutual Fund Gateway(R) Agreement.
Vision Mutual Fund Gateway(R) Agreement
(November 2000) is incorporated into this
filing by reference to Post-Effective
Amendment No. 54 filed February 27, 2003.
(4) Registered Investment Advisers Agreement.
Registered Investment Advisers Agreement
(January 2001) is incorporated into this
filing by reference to Post-Effective
Amendment No. 54 filed February 27, 2003.
(5) Bank/Trust Agreement. Bank/Trust Agreement (January 2001) is incorporated into this filing by reference to Post-Effective Amendment No. 54 filed February 27, 2003.
(f) Inapplicable.
(g) Custodian Agreements.
(1) Executed Global Custody Agreement (May 1, 1996) between The Chase Manhattan Bank and Registrant incorporated into this filing by reference to Post-Effective Amendment No. 48 filed April 28, 1999.
(i) Executed Letter (August 24, 1998) adding Delaware Limited-Term Government Fund to the Global Custody Agreement incorporated into this filing by reference to PEA No. 52 filed April 30, 2001.
(ii) Executed Amendment No. 1 to Schedule A of the Global Custody Agreement (July 17, 2003) attached as Exhibit.
(h) Other Material Contracts.
(1) Executed Shareholders Services Agreement (April 19, 2001) between Delaware Service Company, Inc. and the Registrant on behalf of each Fund is incorporated into this filing by reference to Post-Effective Amendment No. 53 filed February 28, 2002.
(i) Executed Schedule B (May 16, 2002) to the Shareholders Services Agreement is incorporated into this filing by reference to Post-Effective Amendment No. 54 filed February 27, 2003.
(ii) Executed Letter Amendment (August 23, 2003) to the Shareholder Services Agreement attached as Exhibit.
(2) Executed Delaware Group of Funds Fund Accounting Agreement (August 19, 1996) between Delaware Service Company, Inc. and the Registrant incorporated into this filing by reference to Post-Effective Amendment No. 45 filed March 2, 1998.
(i) Executed Amendment No. 27 (October 1, 2003) to the Delaware Group Funds Fund Accounting Agreement is attached as Exhibit.
(ii) Executed Schedule B (May 16, 2002) to the Delaware Group of Funds Fund Accounting Agreement is incorporated into this filing by reference to Post-Effective Amendment No. 54 filed February 27, 2003.
(i) Opinion of Counsel. Incorporated into this filing by
reference to Post-Effective Amendment No. 49 filed
December 14, 1999.
(j) Consent and Report of Auditors. Attached as Exhibit.
(k-l) Inapplicable.
(m) Plans under Rule 12b-1.
(1) Plan under Rule 12b-1 for Class A (April 19,
2001) is incorporated into this filing by
reference to Post-Effective Amendment No. 53
filed February 28, 2002.
(2) Plan under Rule 12b-1 for Class B (April 19,
2001) is incorporated into this filing by
reference to Post-Effective Amendment No. 53
filed February 28, 2002.
(3) Plan under Rule 12b-1 for Class C (April 19,
2001) is incorporated into this filing by
reference to Post-Effective Amendment No. 53
filed February 28, 2002.
(4) Form of Plan under Rule 12b-1 for Class R
(May 15, 2003) is incorporated into this
filing by reference to Post-Effective
Amendment No. 54 filed February 27, 2003.
(n) Plan under Rule 18f-3.
(1) Amended and Restated Plan under Rule 18f-3
(May 2003) for Delaware Investments Family
of Funds is attached as Exhibit.
(o) Inapplicable.
(p) Codes of Ethics.
(1) Code of Ethics for Delaware Investments'
Family of Funds is attached as Exhibit.
(2) Code of Ethics for Delaware Investments is
attached as Exhibit.
(3) Code of Ethics for Lincoln Financial
Distributors, Inc. is attached as Exhibit.
(q) Trustees' Power of Attorney. Attached as Exhibit.
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Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification. Article VI of the By-Laws which is
incorporated into this filing by reference to Post-Effective
Amendment No. 49 filed December 14, 1999.
Item 26. Business and Other Connections of Investment Advisor.
Delaware Management Company (the "Manager"), a series of Delaware Management Business Trust, serves as investment manager to the Registrant and also serves as investment manager or sub-advisor to certain of the other funds in the Delaware Investments family (Delaware Group Adviser Funds, Delaware Group Cash Reserve, Delaware Group Equity Funds I, Delaware Group Equity Funds II, Delaware Group Equity Funds III, Delaware Group Equity Funds IV, Delaware Group Equity Funds V, Delaware Group Foundation Funds, Delaware Group Global & International Funds, Delaware Group Government Fund, Delaware Group Income Funds, Delaware Group State Tax-Free Income Trust, Delaware Group Tax-Free Fund, Delaware Group Tax-Free Money Fund, Delaware Pooled Trust, Delaware VIP Trust, Voyageur Insured Funds, Voyageur Intermediate Tax-Free Funds, Voyageur Investment Trust, Voyageur Mutual Funds, Voyageur Mutual Funds II, Voyageur Mutual Funds III, Voyageur Tax-Free Funds, Delaware Investments Dividend and Income Fund, Inc., Delaware Investments Global Dividend and Income Fund, Inc., Delaware Investments Arizona Municipal Income Fund, Inc., Delaware Investments Colorado Insured Municipal Income Fund, Inc., Delaware Investments Florida Insured Municipal Income Fund, Delaware Investments Minnesota Municipal Income Fund, Inc., Delaware Investments Minnesota Municipal Income Fund II, Inc. and Delaware Investments Minnesota Municipal Income Fund III, Inc.) as well as to certain non-affiliated registered investment companies. In addition, certain officers of the Manager also serve as trustees of the other Delaware Investments funds, and certain officers are also officers of these other funds. A company indirectly owned by the Manager's parent company acts as principal underwriter to the mutual funds in the Delaware Investments family (see Item 27 below) and another such company acts as the shareholder services, dividend disbursing, accounting servicing and transfer agent for all of the mutual funds in the Delaware Investments family.
The following persons serving as directors or officers of the Manager have held the following positions during the past two years. Unless noted, the principal business address of the Manager is 2005 Market Street, Philadelphia, PA 19103-7094.
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Name and Principal Business Positions & Offices with Delaware Management Company and its affiliates and other
Address* Positions & Offices Held
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Jude T. Driscoll President/Chief Executive Officer of Delaware Management Company, Delaware Investment
Advisers and Delaware Capital Management (each a series of Delaware Management Business
Trust)
Chairman/President of each fund in the Delaware Investments Family of Funds
Chairman and Director of Delaware International Advisers Ltd.
President/Chief Executive Officer and Director/Trustee of Delaware Management Holdings,
Inc., DMH Corp, DIAL Holding Company, Inc., Delaware Investments U.S., Inc., Delaware
General Management, Inc., Delaware Management Company, Inc., Delaware Distributors, Inc.,
Delaware Management Business Trust and Lincoln National Investment Companies, Inc.
President of Delaware Lincoln Cash Management (a series of Delaware Management Business
Trust)
Interim Chief Executive Officer and Director of Delaware International Holdings Ltd.
Director of Delaware Service Company, Inc., Retirement Financial Services, Inc., Delaware
Distributors, L.P., LNC Administrative Services Corporation and HYPPCO Finance Company
Ltd.
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John C. E. Campbell Executive Vice President/Global Marketing & Client Services of Delaware Management
Company (a series of Delaware Management Business Trust)
Executive Vice President/Global Marketing Sales, Client Services & Product of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Director of Delaware International Advisers Ltd.
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Patrick P. Coyne Executive Vice President/Managing Director/Chief Investment Officer - Fixed Income of
Delaware Management Company, Delaware Investment Advisers, Delaware Capital Management
(each series of Delaware Management Business Trust), Delaware Management Holdings, Inc.,
Delaware Management Business Trust and Lincoln National Investment Companies, Inc.
Senior Vice President/Deputy Chief Investment Officer - Fixed Income of each fund in the
Delaware Investments Family of Funds
President of Lincoln National Convertible Securities Fund, Inc. and Lincoln National
Income Fund, inc.
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Name and Principal Business Positions & Offices with Delaware Management Company and its affiliates and other
Address* Positions & Offices Held
-------- ------------------------
-------------------------------------- -------------------------------------------------------------------------------------------
Joseph H. Hastings Executive Vice President/Interim Chief Financial Officer/Treasurer/Controller of Delaware
Management Company, Delaware Capital Management, Delaware Lincoln Cash Management (each a
series of Delaware Management Business Trust), DMH Corp., Delaware Management Holdings,
Inc., DIAL Holding Company, Inc., Delaware Investments U.S., Inc., Delaware General
Management, Inc., Delaware Management Company, Inc., Delaware Management Business Trust
and Lincoln National Investment Companies, Inc.
Executive Vice President/Chief Financial Officer/Treasurer and Director of Delaware
Management Trust Company
Executive Vice President/Chief Financial Officer of Retirement Financial Services, Inc.
and each fund in the Delaware Investments Family of Funds
Executive Vice President/Interim Chief Financial Officer/Controller of Delaware
Investment Advisers (a series of Delaware Management Business Trust)
Senior Vice President/Treasurer/Corporate Controller of Delaware International Holdings
Ltd., Delaware Distributors, L.P. and LNC Administrative Services Corporation
Senior Vice President/Treasurer/Controller of Delaware Service Company, Inc., Delaware
Distributors, Inc.,
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Joanne O. Hutcheson Executive Vice President/Chief Operating Officer of Delaware Management Company, Delaware
Investment Advisers, Delaware Capital Management, Delaware Lincoln Cash Management (each
a series of Delaware Management Business Trust), Delaware Management Holdings, Inc., DMH
Corp., DIAL Holding Company, Inc., Delaware Investments U.S., Inc., Delaware General
Management, Inc., Delaware Management Company, Inc., Delaware Management Business Trust
and Lincoln National Investment Companies, Inc.
Senior Vice President/Human Resources of, Delaware Service Company, Inc., Retirement
Financial Services, Inc., Delaware Management Trust Company, Delaware Distributors, L.P.,
Delaware Distributors, Inc., LNC Administrative Services Corporation and each fund in the
Delaware Investments Family of Funds
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Name and Principal Business Positions & Offices with Delaware Management Company and its affiliates and other
Address* Positions & Offices Held
-------- ------------------------
-------------------------------------- -------------------------------------------------------------------------------------------
Richelle S. Maestro Executive Vice President/General Counsel/Secretary of Delaware Management Company,
Delaware Investment Advisers, Delaware Capital Management and Delaware Lincoln Cash
Management (each a series of Delaware Management Business Trust)
Executive Vice President/General Counsel/Secretary and Director/Trustee of Delaware
Management Holdings, Inc., DMH Corp., DIAL Holding Company, Inc., Delaware Investments
U.S., Delaware General Management, Inc., Delaware Management Company, Inc., and Lincoln
National Investment Companies, Inc.
Senior Vice President/General Counsel/Secretary and Director/Trustee of Delaware
Management Business Trust and Delaware Distributors, L.P.
Senior Vice President/General Counsel/Secretary and Director of Delaware Distributors,
Inc.
Senior Vice President/General Counsel/Secretary of Delaware Service Company, Inc.,
Delaware Management Trust Company, Retirement Financial Services, Inc., and each fund in
the Delaware Investments Family of Funds
Senior Vice President/Deputy General Counsel/Assistant Secretary of Delaware
International Holdings Ltd.
Senior Vice President/Interim General Counsel/Secretary of LNC Administrative Services
Corporation
Vice President/Assistant Secretary of Delaware Offshore Funds Ltd.
Vice President/General Counsel of Lincoln National Convertible Securities Fund, Inc. and
Lincoln National Income Fund, Inc.
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane, Philadelphia, PA.
-------------------------------------- -------------------------------------------------------------------------------------------
See Yeng Quek Executive Vice President/Managing Director/Chief Investment Officer - Fixed Income of
Delaware Management Company, Delaware Investment Advisers and Delaware Lincoln Cash
Management (each a series of Delaware Management Business Trust)
Executive Vice President/Managing Director/Chief Investment Officer - Fixed Income and
Director/Trustee of Delaware Management Holdings, Inc., Delaware Management Business
Trust and Lincoln National Investment Companies, Inc.
Director/Trustee of DHM Corp., DIAL Holding Company, Inc., Delaware Investments U.S.,
Inc., Delaware Management Company, Inc., Delaware Service Company, Inc. and Retirement
Financial Services, Inc.,
-------------------------------------- -------------------------------------------------------------------------------------------
Gerald S. Frey Managing Director/Chief Investment Officer - Growth Investing of Delaware Management
Company, Delaware Investment Advisers, Delaware Capital Management (each a series of
Delaware Management Business Trust), Delaware Management Holdings, Inc., Delaware
Management Business Trust, Lincoln National Investments Companies, Inc. and each fund in
the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Service Company, Inc., Delaware Distributors, Inc.,
Retirement Financial Services, Inc. and Delaware Distributors, L.P
Senior Vice President/Operations and Director of Delaware Management Trust Company
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions & Offices with Delaware Management Company and its affiliates and other
Address* Positions & Offices Held
-------- ------------------------
-------------------------------------- -------------------------------------------------------------------------------------------
Robert L. Arnold Senior Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers and Delaware Capital Management (each a series of Delaware Management
Business Trust) and each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Marshall T. Bassett Senior Vice President/Portfolio Manager of Delaware Management Company and Delaware
Investment Advisers (each a series of Delaware Management Business Trust)
Senior Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Christopher S. Beck Senior Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers, Delaware Capital Management (each a series of Delaware Management
Business Trust) and each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Michael P. Bishof Senior Vice President/Investment Accounting of Delaware Management Company, Delaware
Capital Management (each a series of Delaware Management Business Trust), Delaware
Service Company, Inc. and Delaware Distributors, L.P.
Senior Vice President/Treasurer/Investment Accounting of Delaware Investment Advisers (a
series of Delaware Management Business Trust)
Senior Vice President/Manager of Investment Accounting of Delaware International Advisers
Ltd.,
Senior Vice President/Treasurer of each fund in the Delaware Investments Family of Funds
Chief Financial Officer of Lincoln National Convertible Securities Fund, Inc. and Lincoln
National Income Fund, Inc.
-------------------------------------- -------------------------------------------------------------------------------------------
Lisa O. Brinkley Senior Vice President/Compliance Director of Delaware Management Company, Delaware
Investment Advisers, Delaware Capital Management, Delaware Lincoln Cash Management (each
a series of Delaware Management Business Trust), Delaware Management Holdings, Inc., DMH
Corp., DIAL Holding Company, Inc., Delaware Investments U.S., Inc., Delaware General
Management, Inc., Delaware Management Company, Inc., Delaware Service Company, Inc.,
Delaware Distributors, Inc. Retirement Financial Services, Inc., Delaware Management
Business Trust, Delaware Distributors, L.P., Lincoln National Investment Companies, Inc.,
LNC Administrative Services Corporation and each fund in the Delaware Investments Family
of Funds
Senior Vice President/Compliance Director/Assistant Secretary of Delaware Management
Trust Company
-------------------------------------- -------------------------------------------------------------------------------------------
Ryan K. Brist Senior Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers (each a series of Delaware Management Business Trust) and each fund
in the Delaware Investments Family of Funds
Vice President of Lincoln National Income Fund, Inc.
-------------------------------------- -------------------------------------------------------------------------------------------
Timothy G. Connors Senior Vice President/Chief Investment Officer - Value Investing of Delaware Management
Company, Delaware Investment Advisers (each a series of Delaware Management Business
Trust), Delaware Management Holdings, Inc., Delaware Management Business Trust , Lincoln
National Investment Companies, Inc. and each fund in the Delaware Investments Family of
Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Nancy M. Crouse Senior Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers (each a series of Delaware Management Business Trust) and each fund
in the Delaware Investment Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
George E. Deming Senior Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers (each a series of Delaware Management Business Trust) and each fund
in the Delaware Investments Family of Funds
Director of Delaware International Advisers Ltd.
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions & Offices with Delaware Management Company and its affiliates and other
Address* Positions & Offices Held
-------- ------------------------
-------------------------------------- -------------------------------------------------------------------------------------------
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company, Delaware
Investment Advisers and Delaware Capital Management (each a series of Delaware Management
Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
J. Paul Dokas Senior Vice President/Director of Research - Quantitative of Delaware Management Company,
Delaware Investment Advisers (each a series of Delaware Management Business Trust) and
each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers (each a series of Delaware Management Business Trust) and each fund
in the Delaware Investments Family of Funds
Trustee of Delaware Management Business Trust
-------------------------------------- -------------------------------------------------------------------------------------------
John A. Heffern Senior Vice President/Portfolio Manager of Delaware Management Company and Delaware
Investment Advisers (each a series of Delaware Management Business Trust)
Senior Vice President/Senior Portfolio Manager of each fund in the Delaware Investments
Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Carolyn McIntyre(1) Senior Vice President/Human Resources of Delaware Management Company, Delaware Investment
Advisers, Delaware Capital Management, Delaware Lincoln Cash Management (each a series of
Delaware Management Business Trust), Delaware Management Holdings, Inc., DMH Corp., DIAL
Holding Company, Inc., Delaware General Management, Inc., Delaware Management Business
Trust and Lincoln National Investment Companies, Inc.
-------------------------------------- -------------------------------------------------------------------------------------------
Susan L. Natalini Senior Vice President/Global Marketing & Client Services of Delaware Management Company
and Delaware Investment Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Francis X. Morris Senior Vice President/Portfolio Manager of Delaware Management Company (a series of
Delaware Management Business Trust)
Senior Vice President/Senior Portfolio Manager of Delaware Investment Advisers (a series
of Delaware Management Business Trust) and each fund in the Delaware Investments Family
of Funds
Vice President/Senior Portfolio Manager of Delaware General Management, Inc.
Vice President/Senior Equity Analyst of Delaware Capital Management (a series of Delaware
Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
John J. O'Connor Senior Vice President/Investment Accounting of Delaware Management Company (a series of
Delaware Management Business Trust) and Delaware Service Company, Inc.
Senior Vice President/Investment Accounting/Assistant Treasurer of Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Senior Vice President/Assistant Treasurer of each fund in the Delaware Investments Family
of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Philip R. Perkins(2) Senior Vice President/Senior Portfolio Manager of Delaware Management Company and
Delaware Investment Adviser (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Timothy L. Rabe Senior Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers (each a series of Delaware Management Business Trust) and each fund
in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Paul M. Ross Senior Vice President/Global Marketing & Client Services of Delaware Management Company
and Delaware Investment Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
James L. Shields Senior Vice President/Chief Information Officer of Delaware Management Company, Delaware
Investment Advisers, Delaware Capital Management (each a series of Delaware Management
Business Trust), Delaware Service Company, Inc., Retirement Financial Services, Inc. and
Delaware Distributors, L.P.
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions & Offices with Delaware Management Company and its affiliates and other
Address* Positions & Offices Held
-------- ------------------------
-------------------------------------- -------------------------------------------------------------------------------------------
David Starer(3) Senior Vice President/Portfolio Manager/Senior Equity Analyst of Delaware Management
Company, Delaware Investment Advisers (each a series of Delaware Management Business
Trust) and each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Ward W. Tatge Senior Vice President/Director of Fixed Income Research of Delaware Management Company,
Delaware Investment Advisers (each a series of Delaware Management Business Trust) and
each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Gary T. Abrams Vice President/Equity Trader of Delaware Management Company and Delaware Investment
Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Christopher S. Adams Vice President/Portfolio Manager/Senior Equity Analyst of Delaware Management Company (a
series of Delaware Management Business Trust) and each fund in the Delaware Investments
Family of Funds
Vice President/Senior Equity Analyst I of Delaware Investment Advisers (a series of
Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Damon J. Andres Vice President/Senior Fixed Income Portfolio Manager I of Delaware Management Company (a
series of Delaware Management Business Trust)
Vice President/Senior Portfolio Manager of each fund in the Delaware Investments Family
of Funds
Vice President/Portfolio Manager of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Vice President of Lincoln National Convertible Securities Fund, Inc.
-------------------------------------- -------------------------------------------------------------------------------------------
Joseph Baxter Vice President/Portfolio Manager of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware
Management Business Trust) and each fund
in the Delaware Investments Family of
Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Richard E. Biester Vice President/Equity Trader of Delaware Management Company and Delaware Investment
Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Vincent A. Brancaccio Vice President/Senior Equity Trader of Delaware Management Company and Delaware
Investment Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Michael P. Buckley Vice President/Portfolio Manager/Director of Municipal Research of Delaware Management
Company and Delaware Investment Advisers (each a series of Delaware Management Business
Trust)
Vice President/Portfolio Manager/Senior Municipal Bond Analyst of each fund in the
Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
MaryEllen M. Carrozza Vice President/Client Services of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust), Delaware General
Management, Inc. and each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Stephen R. Cianci Senior Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers (each a series of Delaware Management Business Trust) and each fund
in the Delaware Investments Family of Funds
Vice President/Portfolio Manager of Delaware Capital Management (a series of Delaware
Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
M. L. Conery Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers (each a series of Delaware Management Business Trust) and each fund
in the Delaware Investments Family of Funds
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions & Offices with Delaware Management Company and its affiliates and other
Address* Positions & Offices Held
-------- ------------------------
-------------------------------------- -------------------------------------------------------------------------------------------
David F. Connor Vice President/Deputy General Counsel/Assistant Secretary of Delaware Management Company,
Delaware Investment Advisers, Delaware Capital Management, Delaware Lincoln Cash
Management (each a series of Delaware Management Business Trust), Delaware Management
Holdings, Inc., DMH Corp., DIAL Holding Company, Inc., Delaware Investments U.S., Inc.,
Delaware Management Company, Inc., Delaware Service Company, Inc., Delaware Distributors,
Inc. Retirement Financial Services, Inc., Delaware Management Trust Company, Delaware
Management Business Trust, Delaware Distributors, L.P., Lincoln National Investment
Companies, Inc., LNC Administrative Services Corporation and each fund in the Delaware
Investments Family of Funds
Secretary of Lincoln National Convertible Securities Fund, Inc. and Lincoln National
Income Fund, Inc.
-------------------------------------- -------------------------------------------------------------------------------------------
Scott E. Decatur(4) Vice President/Senior Equity Analyst of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust) and each fund in the
Delaware Investment Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Joseph F. DeMichele Vice President/High Grade Trading of Delaware Management Company (a series of Delaware
Management Business Trust)
Vice President/Senior High Grade Trading of Delaware Investment Advisers (a series of
Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Joel A. Ettinger Vice President/Taxation of Delaware Management Company, Delaware Investment Advisers,
Delaware Capital Management, Delaware Lincoln Cash Management (each a series of Delaware
Management Business Trust), Delaware Management Holdings, Inc., DMH Corp., DIAL Holding
Company, Inc., Delaware General Management, Inc., Delaware Management Company, Inc.,
Delaware Service Company, Inc., Delaware Distributors, Inc. Retirement Financial
Services, Inc., Delaware Management Business Trust, Delaware Distributors, L.P., Lincoln
National Investment Companies, Inc., LNC Administrative Services Corporation and each
fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Phoebe W. Figland Vice President/Investment Accounting of Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Service Company, Inc. and each fund in the Delaware
Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Joseph Fiorilla Vice President/Trading Operations of Delaware Management Company and Delaware Investment
Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Charles E. Fish Vice President/Senior Equity Trader of Delaware Management Company and Delaware
Investment Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Clifford M. Fisher(5) Vice President/Senior Bond Trader of Delaware Management Company and Delaware Investment
Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Denise A. Franchetti Vice President/Portfolio Manager/Municipal Bond Credit Analyst of Delaware Management
Company, Delaware Investment Advisers (each a series of Delaware Management Business
Trust) and each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Brian Funk Vice President/High Yield Analyst of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust) and each fund in the
Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
James A. Furgele Vice President/Investment Accounting of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust), Delaware Service Company,
Inc. and each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Brent C. Garrells Vice President/ High Yield Analyst of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust) and each fund in the
Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Daniel V. Geatens Vice President/Investment Accounting of Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Service Company, Inc. and each fund in the Delaware
Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Stuart M. George Vice President/Equity Trader of Delaware Management Company and Delaware Investment
Advisers (each a series of Delaware Management Business Trust)
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions & Offices with Delaware Management Company and its affiliates and other
Address* Positions & Offices Held
-------- ------------------------
-------------------------------------- -------------------------------------------------------------------------------------------
Robert E. Ginsberg Vice President/Portfolio Manager/Senior Equity Analyst of Delaware Management Company (a
series of Delaware Management Business Trust) and each fund in the Delaware Investments
Family of Funds
Vice President/Portfolio Manager/Senior Equity Analyst of Delaware Investment Advisers (a
series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Barry Gladstein Vice President/Portfolio Analyst of Delaware Management Company and Delaware Investment
Advisers (a series of Delaware Management Business Trust)
Vice President/Equity Analyst of Delaware Capital Management (a series of Delaware
Management Business Trust) and each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Paul Grillo Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers (each a series of Delaware Management Business Trust) and each fund
in the Delaware Investments Family of Funds
Vice President/Portfolio Manager of Delaware Capital Management (a series of Delaware
Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Brian T. Hannon Vice President/Equity Analyst of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust) and each fund in the
Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Jonathan Hatcher(6) Vice President/Senior High Yield Trader of Delaware Management Company (a series of
Delaware Management Business Trust)
Vice President/Senior High Yield Analysis of Delaware Investment Advisers (a series of
Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Jeffrey W. Hynoski Vice President/Portfolio Manager of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust) and each fund in the
Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust) and each fund in the
Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Kenneth R. Jackson Vice President/Equity Analyst of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust) and each fund in the
Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Steven T. Lampe Vice President/Portfolio Manager of Delaware Management Company, Delaware Investment
Advisers, Delaware Capital Management (each a series of Delaware Management Business
Trust) and each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Kevin S. Lee Vice President/Assistant Controller of Delaware Management Company, Delaware Investment
Advisers, Delaware Capital Management, Delaware Lincoln Cash Management (each a series of
Delaware Management Business Trust), Delaware Management Holdings, Inc., DMH Corp., DIAL
Holding Company, Inc., Delaware Investments U.S., Inc., Delaware General Management,
Inc., Delaware Management Company, Inc., Delaware Service Company, Inc., Delaware
Distributors, Inc. Retirement Financial Services, Inc., Delaware Management Trust
Company, Delaware Management Business Trust, Delaware Distributors, L.P., Lincoln
National Investment Companies, Inc., LNC Administrative Services Corporation and LNC
Administrative Services Corporation
-------------------------------------- -------------------------------------------------------------------------------------------
SooHee Lee-Lim Vice President/Client Services of Delaware Management Company and Delaware Investment
Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Andrew M. McCullagh, Jr. Vice President/Senior Portfolio Manager of Delaware Management Company, Delaware
Investment Advisers (each a series of Delaware Management Business Trust) and each fund
in the Delaware Investments Family of Funds
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions & Offices with Delaware Management Company and its affiliates and other
Address* Positions & Offices Held
-------- ------------------------
-------------------------------------- -------------------------------------------------------------------------------------------
Michael S. Morris Vice President/Portfolio Manager of Delaware Management Company and Delaware Investment
Advisers (each a series of Delaware Management Business Trust)
Vice President/Senior Equity Analyst of each fund in the Delaware Investments Family of
Funds
-------------------------------------- -------------------------------------------------------------------------------------------
John R. Murray Vice President/Senior Equity Analyst of Delaware Management Company (a series of Delaware
Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Brian L. Murray. Jr.(7) Vice President/Associate General Counsel/Assistant Secretary of Delaware Management
Company, Delaware Investment Advisers, Delaware Capital Management (each a series of
Delaware Management Business Trust), Delaware Service Company, Inc., Delaware
Distributors, Inc., Retirement Financial Services, Inc., Delaware Management Business
Trust, Delaware Distributors, L.P., and each fund in the Delaware Investments Family of
Funds
-------------------------------------- -------------------------------------------------------------------------------------------
David P. O'Connor Vice President/Associate General Counsel/Assistant Secretary of Delaware Management
Company, Delaware Investment Advisers, Delaware Capital Management, Delaware Lincoln Cash
Management (each a series of Delaware Management Business Trust), Delaware Management
Holdings, Inc., DMH Corp., DIAL Holding Company, Inc., Delaware Investments U.S., Inc.,
Delaware General Management, Inc., Delaware Management Company, Inc., Delaware Service
Company, Inc., Delaware Distributors, Inc. Retirement Financial Services, Inc., Delaware
Management Business Trust, Delaware Distributors, L.P., Lincoln National Investment
Companies, Inc., LNC Administrative Services Corporation and each fund in the Delaware
Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Philip O. Obazee(8) Vice President/Derivatives Manager of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust) and each fund in the
Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Donald G. Padilla Vice President/Equity Analyst II of Delaware Management Company and Delaware Investment
Advisers (each a series of Delaware Management Business Trust)
Vice President/Equity Analyst of each fund in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Richard Salus Vice President/Deputy Controller of Delaware Management Company, Delaware Investment
Advisers, Delaware Capital Management, Delaware Lincoln Cash Management (each a series of
Delaware Management Business Trust), Delaware Management Holdings, Inc., DMH Corp., DIAL
Holding Company, Inc., Delaware Investments U.S., Inc., Delaware General Management,
Inc., Delaware Management Company, Inc., Lincoln National Investment Companies, Inc., LNC
Administrative Services Corporation and LNC Administrative Services Corporation
Vice President/Assistant Controller of Delaware International Holdings Ltd., Delaware
Service Company, Inc., Delaware Distributors, Inc., Retirement Financial Services, Inc.,
Delaware Management Trust Company, Delaware Management Business Trust and Delaware
Distributors, L.P.
-------------------------------------- -------------------------------------------------------------------------------------------
Kevin C. Schildt Vice President/Senior Municipal Credit Analyst of Delaware Management Company and
Delaware Investment Advisers (each a series of Delaware Management Business Trust)
Vice President/Senior Research Analyst of each fund in the Delaware Investments Family of
Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Richard D. Seidel Vice President/Assistant Controller/Manager - Payroll of Delaware Management Company,
Delaware Investment Advisers, Delaware Lincoln Cash Management (each a series of Delaware
Management Business Trust), Delaware Investments, U.S., Delaware General Management,
Inc., Delaware Management Company, Inc., Delaware Distributors, Inc., Retirement
Financial Services, Inc., Delaware Management Business Trust, Lincoln Investment
Companies, Inc. and LNC Administrative Services Corporation
Vice President/Assistant Treasurer of Delaware Capital Management (a series of Delaware
Management Business Trust), Delaware Management Holdings, Inc., DHM Corp., DIAL Holding
Company, Inc., Delaware Service Company, Inc. and Delaware Distributors, L.P.
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Positions & Offices with Delaware Management Company and its affiliates and other
Address* Positions & Offices Held
-------- ------------------------
-------------------------------------- -------------------------------------------------------------------------------------------
Brenda L. Sprigman Vice President/Business Manager - Fixed Income of Delaware Management Company and
Delaware Investment Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
Matthew J. Stephens Vice President/Senior High Grade Analyst of Delaware Management Company, Delaware
Investment Advisers (each a series of Delaware Management Business Trust) and each fund
in the Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Michael T. Taggart Vice President/Facilities & Administrative Services of Delaware Management Company,
Delaware Investment Advisers (each a series of Delaware Management Business Trust),
Delaware Service Company, Inc., Delaware Distributors, Inc. and Delaware Distributors,
L.P.
-------------------------------------- -------------------------------------------------------------------------------------------
Lori P. Wachs Vice President/Portfolio Manager of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust) and each fund in the
Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Laura Wagner Vice President/Investment Accounting of Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Service Company, Inc. and each fund in the Delaware
Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Chris Welker Vice President/Senior High Grade Trader of Delaware Management Company and Delaware
Investment Advisers (each a series of Delaware Management Business Trust)
-------------------------------------- -------------------------------------------------------------------------------------------
James J. Wright Vice President/Senior Equity Analyst of Delaware Management Company, Delaware Investment
Advisers (each a series of Delaware Management Business Trust) and each fund in the
Delaware Investments Family of Funds
-------------------------------------- -------------------------------------------------------------------------------------------
Erik E. Zipf Vice President/Equity Analyst II of Delaware Management Company and Delaware Investment
Advisers (each a series of Delaware Management Business Trust)
Vice President/Equity Analyst of each fund in the Delaware Investments Family of Funds
----------------------------------------------------------------------------------------------------------------------------------
|
Item 27. Principal Underwriters.
(a)(1) Delaware Distributors, L.P. serves as principal underwriter for all the mutual funds in the Delaware Investments Family of Funds.
(b)(1) Information with respect to each officer or partner of the principal underwriter and the Registrant is provided below. Unless noted, the principal business address of Delaware Distributors, L.P. is 2005 Market Street, Philadelphia, PA 19103-7094.
----------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address Positions & Offices with Underwriter Positions & Offices with Registrant
----------------------------------- ------------------------------------ -----------------------------------
--------------------------------------------- ------------------------------------------ -----------------------------------------
Delaware Distributors, Inc. General Partner None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Delaware Capital Management Limited Partner None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Delaware Investment Advisers Limited Partner None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Jude T. Driscoll President/Chief Executive Officer Chairman/President
--------------------------------------------- ------------------------------------------ -----------------------------------------
Joseph H. Hastings Executive Vice President Executive Vice President/Chief
Financial Officer
--------------------------------------------- ------------------------------------------ -----------------------------------------
Joanne O. Hutcheson Executive Vice President Senior Vice President/Human Resources
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address Positions & Offices with Underwriter Positions & Offices with Registrant
----------------------------------- ------------------------------------ -----------------------------------
--------------------------------------------- ------------------------------------------ -----------------------------------------
Richelle S. Maestro Executive Vice President/General Senior Vice President/General Counsel/
Counsel/ Secretary Secretary
--------------------------------------------- ------------------------------------------ -----------------------------------------
Diane M. Anderson Senior Vice President/Retirement None
Operations
--------------------------------------------- ------------------------------------------ -----------------------------------------
Douglas L. Anderson Senior Vice President/Operations None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Michael P. Bishof Senior Vice President/Investment Senior Vice President/Treasurer
Accounting
--------------------------------------------- ------------------------------------------ -----------------------------------------
Lisa O. Brinkley Senior Vice President/Compliance Director Senior Vice President/Compliance
Director
--------------------------------------------- ------------------------------------------ -----------------------------------------
Kevin J. Lucey Senior Vice President/Chief of Sales, None
Client Services & Marketing
--------------------------------------------- ------------------------------------------ -----------------------------------------
Thomas M McConnell Senior Vice President/Senior 529 Plans None
Product Manager
--------------------------------------------- ------------------------------------------ -----------------------------------------
Carolyn McIntyre Senior Vice President/Human Resources Nine
--------------------------------------------- ------------------------------------------ -----------------------------------------
John M. Ring Senior Vice President/Defined None
Contribution Sales Director
--------------------------------------------- ------------------------------------------ -----------------------------------------
James L. Shields Senior Vice President/Chief Information None
Officer
--------------------------------------------- ------------------------------------------ -----------------------------------------
Daniel H. Carlson Vice President/Marketing Services None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Elisa C. Colkitt Vice President/Broker Dealer Operations None
& Service Support
--------------------------------------------- ------------------------------------------ -----------------------------------------
David F. Connor Vice President/Deputy General Vice President/Deputy General
Counsel/Assistant Secretary Counsel/Assistant Secretary
--------------------------------------------- ------------------------------------------ -----------------------------------------
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
--------------------------------------------- ------------------------------------------ -----------------------------------------
Susan T. Friestedt Vice President/Retirement Services None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Edward M. Grant Vice President/Defined Contribution None
Sales Manager
--------------------------------------------- ------------------------------------------ -----------------------------------------
Jeffrey M. Kellogg Vice President/Senior Product None
Manager/Communications Manager
--------------------------------------------- ------------------------------------------ -----------------------------------------
Kevin S. Lee Vice President/Assistant Controller None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Patricia McWilliams Vice President/Client Services None
--------------------------------------------- ------------------------------------------ -----------------------------------------
David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
--------------------------------------------- ------------------------------------------ -----------------------------------------
Brian L. Murray, Jr. Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
--------------------------------------------- ------------------------------------------ -----------------------------------------
Robinder Pal Vice President/Senior Retail None
e-Business/Production Services Manager
--------------------------------------------- ------------------------------------------ -----------------------------------------
Richard Salus Vice President/Assistant Controller None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Richard D. Seidel Vice President/Assistant Controller None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Michael T. Taggart Vice President/Facilities & None
Administrative Services
--------------------------------------------- ------------------------------------------ -----------------------------------------
Joseph T. Van Thuyne Vice President/Human Resources Generalist None
----------------------------------------------------------------------------------------------------------------------------------
|
(a)(2) Lincoln Financial Distributors, Inc. ("LFD") serves as financial intermediary wholesaler for all the mutual funds in the Delaware Investments Family of Funds.
(b)(2) Information with respect to each officer or partner of LFD and the Registrant is provided below. Unless noted, the principal business address of LFD is 2001 Market Street, Philadelphia, PA 19103-7055.
----------------------------------------------------------------------------------------------------------------------------------
Name and Principal Business Address Positions & Offices with Underwriter Positions & Offices with Registrant
----------------------------------- ------------------------------------ -----------------------------------
--------------------------------------------- ------------------------------------------ -----------------------------------------
Westley V. Thompson President/Chief Executive Officer and None
Director
--------------------------------------------- ------------------------------------------ -----------------------------------------
David M. Kittredge Senior Vice President/Chief Operating None
Officer and Director
--------------------------------------------- ------------------------------------------ -----------------------------------------
Margaret Skinner Senior Vice President None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Frederick J. Crawford(1) Vice President/Treasurer None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Patrick Caufield(2) Vice President/Chief Compliance Officer None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Keith J. Ryan(3) Financial Officer None
--------------------------------------------- ------------------------------------------ -----------------------------------------
Cynthia A. Rose(3) Secretary None
----------------------------------------------------------------------------------------------------------------------------------
|
(c) Not Applicable.
Item 28. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 2005 Market Street, Philadelphia, PA 19103-7094.
Item 29. Management Services. None.
Item 30. Undertakings. Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, this Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in this City of Philadelphia, Commonwealth of Pennsylvania on this 27th day of February, 2004.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date -------------------------------------------------------------------------------------------------------------------------------- Jude T. Driscoll Chairman (Principal Executive Officer) and February 27, 2004 ---------------------------- Trustee Jude T. Driscoll Walter P. Babich * Trustee February 27, 2004 ---------------------------- Walter P. Babich John H. Durham * Trustee February 27, 2004 ---------------------------- John H. Durham John A. Fry * Trustee February 27, 2004 ---------------------------- John A. Fry Anthony D, Knerr * Trustee February 27, 2004 ---------------------------- Anthony D. Knerr Ann R. Leven * Trustee February 27, 2004 ---------------------------- Ann R. Leven Thomas F. Madison * Trustee February 27, 2004 ---------------------------- Thomas F. Madison Janet L. Yeomans * Trustee February 27, 2004 ---------------------------- Janet L. Yeomans Joseph H. Hastings * Executive Vice President/Chief Financial Officer February 27, 2004 ---------------------------- (Principal Accounting Officer) Joseph H. Hastings |
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDEX TO EXHIBITS
Exhibit No. Exhibit
----------- -------
EX-99 (e)(1)(i) Executed Distribution Agreement (May 15, 2003)
EX-99 (e)(1)(iv) Executed Second Amended and Restated Financial
Intermediary Distribution Agreement (August 21, 2003)
EX-99 (g)(1)(ii) Executed Amendment No. 1 to Schedule A of the Global
Custody Agreement (July 17, 2003)
EX-99 (h)(1)(ii) Executed Letter Amendment (August 23, 2002) to the
Shareholder Services Agreement
EX-99 (h)(2)(i) Executed Amendment No. 27 to Schedule A (October 1, 2003)
of the Delaware Investments Family of Funds Fund
Accounting Agreement
EX-99 (j) Consent and Report of Auditors
EX-99 (n)(1) Amended and Restated Plan under Rule 18f-3 (May 2003)
EX-99 (p)(1) Code of Ethics for Delaware Investments' Family of Funds
EX-99 (p)(2) Code of Ethics for Delaware Investments
EX-99 (p)(3) Code of Ethics for Lincoln Financial Distributors, Inc.
EX-99 (q) Trustees' Power of Attorney
|
EX-99(e)(1)(i)
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of this 15th day of May, 2003 by and between DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, a Delaware business trust (the "Trust"), for the series identified on Schedule I attached hereto, as from time to time amended (the "Series"), and DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware limited partnership.
WITNESSETH
WHEREAS, the Trust is an investment company regulated by Federal and State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of promoting the distribution of the securities of investment companies and, in connection therewith and acting solely as agent for such investment companies and not as principal, advertising, promoting, offering and selling their securities to the public, and
WHEREAS, the Trust desires to enter into an agreement with the Distributor as of the date hereof, pursuant to which the Distributor shall serve as the national distributor of each class of each Series identified on Schedule I hereto, as from time to time amended, which Trust, Series and classes may do business under the names set forth on Schedule I hereto or such other names as the Board of Trustees may designate from time to time, on the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:
1. The Trust hereby engages the Distributor to promote the distribution of the shares of each Series and, in connection therewith and as agent for the Trust and not as principal, to advertise, promote, offer and sell shares of each Series to the public.
2. (a) The Distributor agrees to serve as distributor of each Series' shares and, as agent for the Trust and not as principal, to advertise, promote and use its best efforts to sell each Series' shares wherever their sale is legal, either through dealers or otherwise, in such places and in such manner, not inconsistent with the law and the provisions of this Agreement and the Trust's Registration Statement under the Securities Act of 1933, including the Prospectuses contained therein and the Statements of Additional Information contained therein, as may be mutually determined by the Trust and the Distributor from time to time.
(b) For the Institutional Class Shares of each Series, the Distributor will bear all costs of financing any activity which is primarily intended to result in the sale of that class of shares, including, but not necessarily limited to, advertising, compensation of underwriters, dealers and sales personnel, the printing and mailing of sales literature and distribution of that class of shares.
(c) For its services as agent for the Class A Shares, Class B Shares, Class C Shares and Class R Shares of each Series, the Distributor shall be entitled to compensation on each sale or redemption, as appropriate, of shares of such classes equal to any front-end or deferred sales charge described in the Prospectus for such Series, as amended and supplemented from time to time and may allow concessions to dealers in such amounts and on such terms as are therein set forth.
(d) For the Class A Shares, Class B Shares, Class C Shares and Class R Shares of each Series, the Trust shall, in addition, compensate the Distributor for its services as provided in the Distribution Plan as adopted on behalf of the Class A Shares, Class B Shares, Class C Shares and Class R Shares, respectively, pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Plans"), copies of which as presently in force are attached hereto as Exhibits and at the rates set forth on Schedule I hereto, as from time to time amended, or at such lower rates as may be set from time to time by the Board in agreement with the Trust.
3. (a) The Trust agrees to make available for sale by the Trust through the Distributor all or such part of the authorized but unissued shares of beneficial interest of the Series as the Distributor shall require from time to time and, except as provided in Paragraph 3(b) hereof, the Trust will not sell Series' shares other than through the efforts of the Distributor.
(b) The Trust reserves the right from time to time (1) to sell and issue shares other than for cash; (2) to issue shares in exchange for substantially all of the assets of any corporation or trust, or in exchange of shares of any corporation or trust; (3) to pay stock dividends to its shareholders, or to pay dividends in cash or shares of beneficial interest at the option of its shareholders, or to sell shares of beneficial interest to existing shareholders to the extent of dividends payable from time to time in cash, or to split up or combine its outstanding shares; (4) to offer shares for cash to its shareholders as a whole, by the use of transferable rights or otherwise, and to sell and issue shares pursuant to such offers; and (5) to act as its own distributor in any jurisdiction in which the Distributor is not registered as a broker-dealer.
4. The Distributor may, at its expense, select and contract with one or more registered broker-dealers to perform some or all of the services for a Series for which it is responsible under this agreement. The Distributor will be responsible for paying the compensation, if any, to any such broker-dealer for its services with respect to the Series. The Distributor may terminate the services of any such broker-dealer at any time in its sole discretion, and shall at such time assume the responsibilities of such broker-dealer unless or until a replacement is selected and approved by the Board of Trustees. The Distributor will continue to have responsibility for all distribution-related services furnished by any such broker-dealer.
5. The Trust warrants the following:
(a) The Trust is, or will be, a properly registered investment company, and any and all Series' shares which it will sell through the Distributor are, or will be, properly registered with the Securities and Exchange Commission ("SEC").
(b) The provisions of this Agreement do not violate the terms of any instrument by which the Trust is bound, nor do they violate any law or regulation of any body having jurisdiction over the Trust or its property.
6. (a) The Trust will supply to the Distributor a conformed copy of the Registration Statement and all amendments thereto, including all exhibits and each Prospectus and Statement of Additional Information.
(b) The Trust will register or qualify the Series' shares for sale in such states as is deemed desirable.
(c) The Trust, without expense to the Distributor:
(1) will give and continue to give such financial statements and other information as may be required by the SEC or the proper public bodies of the states in which the Series' shares may be qualified;
(2) from time to time, will furnish to the Distributor as soon as reasonably practicable true copies of its periodic reports to shareholders;
(3) will promptly advise the Distributor in
person or by telephone or telegraph, and
promptly confirm such advice in writing, (a)
when any amendment or supplement to the
Registration Statement becomes effective,
(b) of any request by the SEC for amendments
or supplements to the Registration Statement
or the Prospectuses or for additional
information, and (c) of the issuance by the
SEC of any Stop Order suspending the
effectiveness of the Registration Statement,
or the initiation of any proceedings for
that purpose;
(4) if at any time the SEC shall issue any Stop Order suspending the effectiveness of the Registration Statement, will make every reasonable effort to obtain the lifting of such order at the earliest possible moment;
(5) before filing any further amendment to the Registration Statement or to any Prospectus, will furnish to the Distributor copies of the proposed amendment and will not, at any time, whether before or after the effective date of the Registration Statement, file any amendment to the Registration Statement or supplement to any Prospectus of which the Distributor shall not previously have been advised or to which the Distributor shall reasonably object (based upon the accuracy or completeness thereof) in writing;
(6) will continue to make available to its shareholders (and forward copies to the Distributor) of such periodic, interim and any other reports as are now, or as hereafter may be, required by the provisions of the Investment Company Act of 1940, as amended; and
(7) will, for the purpose of computing the offering price of each class of each Series' shares, advise the Distributor within two hours after the close of the New York Stock Exchange (or as soon as practicable thereafter) on each business day upon which the New York Stock Exchange may be open of the net asset value per share of each class of each Series' shares of beneficial interest outstanding, determined in accordance with any applicable provisions of law and the provisions of the Agreement and Declaration of Trust, as amended, of the Trust as of the close of business on such business day. In the event that prices are to be calculated more than once daily, the Trust will promptly advise the Distributor of the time of each calculation and the price computed at each such time.
7. The Distributor agrees to submit to the Trust, prior to its use, the form of all sales literature proposed to be generally disseminated by or for the Distributor, all advertisements proposed to be used by the Distributor, all sales literature or advertisements prepared by or for the Distributor for such dissemination or for use by others in connection with the sale of the Series' shares, and the form of dealers' sales contract the Distributor intends to use in connection with sales of the Series' shares. The Distributor also agrees that the Distributor will submit such sales literature and advertisements to the NASD, SEC or other regulatory agency as from time to time may be appropriate, considering practices then current in the industry. The Distributor agrees not to use such form of dealers' sales contract or to use or to permit others to use such sales literature or advertisements without the written consent of the Trust if any regulatory agency expresses objection thereto or if the Trust delivers to the Distributor a written objection thereto.
8. The purchase price of each share sold hereunder shall be the offering price per share mutually agreed upon by the parties hereto and, as described in the Trust's Prospectuses, as amended from time to time, determined in accordance with any applicable provision of law, the provisions of its Agreement and Declaration of Trust and the Conduct Rules of NASD Regulation, Inc.
9. The responsibility of the Distributor hereunder shall be limited to the promotion of sales of Series' shares. The Distributor shall undertake to promote such sales solely as agent of the Trust, and shall not purchase or sell such shares as principal. Orders for Series' shares and payment for such orders shall be directed to the Trust's agent, Delaware Service Company, Inc., for acceptance on behalf of the Trust. The Distributor is not empowered to approve orders for sales of Series' shares or accept payment for such orders. Sales of Series' shares shall be deemed to be made when and where accepted by Delaware Service Company, Inc. on behalf of the Trust.
10. With respect to the apportionment of costs between the Trust and the Distributor of activities with which both are concerned, the following will apply:
(a) The Trust and the Distributor will cooperate in preparing the Registration Statements, the Prospectuses, the Statements of Additional Information, and all amendments, supplements and replacements thereto. The Trust will pay all costs incurred in the preparation of the Trust's Registration Statement, including typesetting, the costs incurred in printing and mailing Prospectuses and Annual, Semi-Annual and other financial reports to its own shareholders and fees and expenses of counsel and accountants.
(b) The Distributor will pay the costs incurred in printing and mailing copies of Prospectuses to prospective investors.
(c) The Distributor will pay advertising and promotional expenses, including the costs of literature sent to prospective investors.
(d) The Trust will pay the costs and fees incurred in registering or qualifying the Series' shares with the various states and with the SEC.
(e) The Distributor will pay the costs of any additional copies of Trust financial and other reports and other Trust literature supplied to the Distributor by the Trust for sales promotion purposes.
11. The Distributor may engage in other business, provided such other business does not interfere with the performance by the Distributor of its obligations under this Agreement.
12. The Trust agrees to indemnify, defend and hold harmless from the assets of the relevant Series the Distributor and each person, if any, who controls the Distributor within the meaning of Section 15 of the Securities Act of 1933, from and against any and all losses, damages, or liabilities to which, jointly or severally, the Distributor or such controlling person may become subject, insofar as the losses, damages or liabilities arise out of the performance of its duties hereunder, except that the Trust shall not be liable for indemnification of the Distributor or any controlling person thereof for any liability to the Trust or its shareholders to which they would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of their duties under this Agreement.
13. Copies of financial reports, Registration Statements and Prospectuses, as well as demands, notices, requests, consents, waivers, and other communications in writing which it may be necessary or desirable for either party to deliver or furnish to the other will be duly delivered or furnished, if delivered to such party at its address shown below during regular business hours, or if sent to that party by registered mail or by prepaid telegram filed with an office or with an agent of Western Union or another nationally recognized telegraph service, in all cases within the time or times herein prescribed, addressed to the recipient at One Commerce Square, Philadelphia, Pennsylvania 19103, or at such other address as the Trust or the Distributor may designate in writing and furnish to the other.
14. This Agreement shall not be assigned, as that term is defined in the Investment Company Act of 1940, by the Distributor and shall terminate automatically in the event of its attempted assignment by the Distributor. This Agreement shall not be assigned by the Trust without the written consent of the Distributor signed by its duly authorized officers and delivered to the Trust. Except as specifically provided in the indemnification provision contained in Paragraph 11 herein, this Agreement and all conditions and provisions hereof are for the sole and exclusive benefit of the parties hereto and their legal successors and no express or implied provision of this Agreement is intended or shall be construed to give any person other than the parties hereto and their legal successors any legal or equitable right, remedy or claim under or in respect of this Agreement or any provisions herein contained.
15. (a) This Agreement shall be executed and become effective as of the date first written above, and shall become effective with respect to a particular Series as of the effective date set forth in Schedule I for that Series. It shall remain in force for a period of two years from the date hereof for each Series and from year to year thereafter, but only so long as such continuance is specifically approved at least annually by the Board of Trustees or, with respect to each Series, by vote of a majority of the outstanding voting securities of that Series and only if the terms and the renewal thereof have been approved by the vote of a majority of the Trustees of the Trust who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval.
(b) The Distributor may terminate this Agreement as to any Series on written notice to the Trust at any time in case the effectiveness of the Registration Statement shall be suspended, or in case Stop Order proceedings are initiated by the SEC in respect of the Registration Statement and such proceedings are not withdrawn or terminated within thirty days. The Distributor may also terminate this Agreement as to any Series at any time by giving the Trust written notice of its intention to terminate the Agreement at the expiration of three months from the date of delivery of such written notice of intention to the Trust.
(c) The Trust may terminate this Agreement as to any Series at any time on at least thirty days' prior written notice to the Distributor (1) if proceedings are commenced by the Distributor or any of its partners for the Distributor's liquidation or dissolution or the winding up of the Distributor's affairs; (2) if a receiver or trustee of the Distributor or any of its property is appointed and such appointment is not vacated within thirty days thereafter; (3) if, due to any action by or before any court or any federal or state commission, regulatory body, or administrative agency or other governmental body, the Distributor shall be prevented from selling securities in the United States or because of any action or conduct on the Distributor's part, sales of the shares are not qualified for sale. The Trust may also terminate this Agreement as to any Series at any time upon prior written notice to the Distributor of its intention to so terminate at the expiration of three months from the date of the delivery of such written notice to the Distributor.
16. The validity, interpretation and construction of this Agreement, and of each part hereof, will be governed by the laws of the Commonwealth of Pennsylvania.
17. In the event any provision of this Agreement is determined to be void or unenforceable, such determination shall not affect the remainder of the Agreement, which shall continue to be in force.
DELAWARE DISTRIBUTORS, L.P.
DELAWARE DISTRIBUTORS, INC.,
General Partner
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS on behalf of the Series listed on Schedule I
EXHIBIT A
CLASS A
DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule l2b-l under the Investment Company Act of 1940, as amended (the "Act"), by Delaware Group Limited-Term Government Funds (the "Trust"), separately for each Series of the Trust identified on Schedule I as amended from time to time (the "Series") on behalf of the A Class shares of each such Series identified on Schedule I as amended from time to time (the "Class"), which Trust, Series and Classes may do business under these or such other names as the Board of Trustees of the Trust may designate from time to time. The Plan has been approved by a majority of the Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related thereto ("non-interested Trustees"), cast in person at a meeting called for the purpose of voting on such Plan. Such approval by the Trustees included a determination that in the exercise of reasonable business judgment and in light of their fiduciary duties, there is a reasonable likelihood that the Plan will benefit each such Series and shareholders of each such Class.
The Trust is a business trust organized under the laws of the State of Delaware, is authorized to issue different series and classes of securities and is an open-end management investment company registered under the Act. Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and national distributor for the Series' shares, including shares of the Class, pursuant to the Distribution Agreement between the Distributor and the Trust on behalf of each Series ("Distribution Agreement").
The Plan provides that:
l. The Trust shall pay to the Distributor, out of the assets of a particular Class, a monthly fee not to exceed the fee rate set forth on Schedule I for such Class as may be determined by the Trust's Board of Trustees from time to time. Such monthly fee shall be reduced by the aggregate sums paid by the Trust on behalf of the Series to persons other than broker-dealers (the "Service Providers") who may, pursuant to servicing agreements, provide to the Series services in the Series' marketing of shares of the Class.
2. (a) The Distributor shall use the monies paid to it pursuant to paragraph l above to furnish, or cause or encourage others to furnish, services and incentives in connection with the promotion, offering and sale of the relevant Class shares and, where suitable and appropriate, the retention of such Class shares by shareholders.
(b) The Service Providers shall use the monies paid respectively to them to reimburse themselves for the actual costs they have incurred in confirming that their customers have received the Prospectus and Statement of Additional Information, if applicable, and as a fee for (l) assisting such customers in maintaining proper records with the Trust, (2) answering questions relating to their respective accounts, and (3) aiding in maintaining the investment of their respective customers in the Class.
3. The Distributor shall report to the Trust at least monthly on the amount and the use of the monies paid to it under the Plan. The Service Providers shall inform the Trust monthly and in writing of the amounts each claims under the Plan; both the Distributor and the Service Providers shall furnish the Board of Trustees of the Trust with such other information as the Board may reasonably request in connection with the payments made under the Plan and the use thereof by the Distributor and the Service Providers, respectively, in order to enable the Board to make an informed determination of the amount of the Trust" payments with respect to each Class and whether the Plan should be continued with respect to each Class.
4. The officers of the Trust shall furnish to the Board of Trustees of the Trust, for their review, on a quarterly basis, a written report of the amounts expended under the Plan with respect to each Class and the purposes for which such expenditures were made.
5. This Plan shall take effect with respect to the A Class of a particular Series as of the effective date set forth on Schedule I (the "Commencement Date"); thereafter, the Plan shall continue in effect with respect to the A Class of a particular Series for a period of more than one year from the Commencement Date only so long as such continuance is specifically approved at least annually by a vote of the Board of Trustees of the Trust, and of the non-interested Trustees, cast in person at a meeting called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated as to the A Class of any particular Series at any time by vote of a majority of the non-interested Trustees or by vote of a majority of the outstanding voting securities of such Class.
(b) The Plan may not be amended as to the A Class of any particular Series to increase materially the amount to be spent for distribution pursuant to paragraph l hereof without approval by the shareholders of such Class.
7. All material amendments to this Plan shall be approved by the non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of the Trust's non-interested Trustees shall be committed to the discretion of such non-interested Trustees.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the Act shall govern the meaning of "interested person(s)" and "vote of a majority of the outstanding voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously defined.
April 19, 2001
EXHIBIT B
CLASS B
DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule l2b-l under the Investment Company Act of 1940, as amended (the "Act"), by Delaware Group Limited-Term Government Funds (the "Trust"), separately for each Series of the Trust identified on Schedule I as amended from time to time (the "Series") on behalf of the B Class shares of each such Series identified on Schedule I as amended from time to time (the "Class"), which Trust, Series and Classes may do business under these or such other names as the Board of Trustees of the Trust may designate from time to time. The Plan has been approved by a majority of the Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related thereto ("non-interested Trustees"), cast in person at a meeting called for the purpose of voting on such Plan. Such approval by the Trustees included a determination that in the exercise of reasonable business judgment and in light of their fiduciary duties, there is a reasonable likelihood that the Plan will benefit each such Series and shareholders of each such Class.
The Trust is a business trust organized under the laws of the State of Delaware, is authorized to issue different series and classes of securities and is an open-end management investment company registered under the Act. Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and national distributor for the Series' shares, including shares of the Class, pursuant to the Distribution Agreement between the Distributor and the Trust on behalf of each Series ("Distribution Agreement").
The Plan provides that:
l. (a) The Trust shall pay to the Distributor, out of the assets of a particular Class, a monthly fee not to exceed the fee rate set forth on Schedule I for such Class as may be determined by the Trust's Board of Trustees from time to time.
(b) In addition to the amounts described in (a) above, the Trust shall pay (i) to the Distributor for payment to dealers or others, or (ii) directly to others, an amount not to exceed the service fee rate set forth on Schedule I for such Class, as a service fee pursuant to dealer or servicing agreements.
2. (a) The Distributor shall use the monies paid to it pursuant to paragraph l (a) above to assist in the distribution and promotion of shares of the relevant Class. Payments made to the Distributor under the Plan may be used for, among other things, preparation and distribution of advertisements, sales literature and prospectuses and reports used for sales purposes, as well as compensation related to sales and marketing personnel, and holding special promotions. In addition, such fees may be used to pay for advancing the commission costs to dealers with respect to the sale of the relevant Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be used to pay dealers or others for, among other things, furnishing personal services and maintaining shareholder accounts, which services include confirming that customers have received the Prospectus and Statement of Additional Information, if applicable; assisting such customers in maintaining proper records with the Trust; answering questions relating to their respective accounts; and aiding in maintaining the investment of their respective customers in the relevant Class.
3. The Distributor shall report to the Trust at least monthly on the amount and the use of the monies paid to it under paragraph 1(a) above. In addition, the Distributor and others shall inform the Trust monthly and in writing of the amounts paid under paragraph 1(b) above; both the Distributor and any others receiving fees under the Plan shall furnish the Board of Trustees of the Trust with such other information as the Board may reasonably request in connection with the payments made under the Plan with respect to each Class and the use thereof by the Distributor and others in order to enable the Board to make an informed determination of the amount of the Trust's payments and whether the Plan should be continued with respect to each Class.
4. The officers of the Trust shall furnish to the Board of Trustees of the Trust, for their review, on a quarterly basis, a written report of the amounts expended under the Plan with respect to each Class and the purposes for which such expenditures were made.
5. This Plan shall take effect with respect to the B Class of a particular Series as of the effective date set forth on Schedule I (the "Commencement Date"); thereafter, the Plan shall continue in effect with respect to the B Class of a particular Series for a period of more than one year from the Commencement Date only so long as such continuance is specifically approved at least annually by a vote of the Board of Trustees of the Trust, and of the non-interested Trustees, cast in person at a meeting called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated as to the B Class of any particular Series at any time by vote of a majority of the non-interested Trustees or by vote of a majority of the outstanding voting securities of such Class.
(b) The Plan may not be amended as to the B Class of any particular Series to increase materially the amount to be spent for distribution pursuant to paragraph l hereof without approval by the shareholders of such Class.
7. All material amendments to this Plan shall be approved by the non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of the Trust's non-interested Trustees shall be committed to the discretion of such non-interested Trustees.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the Act shall govern the meaning of "interested person(s)" and "vote of a majority of the outstanding voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously defined.
April 19, 2001
EXHIBIT C
CLASS C
DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule l2b-l under the Investment Company Act of 1940, as amended (the "Act"), by Delaware Group Limited-Term Government Funds (the "Trust"), separately for each Series of the Trust identified on Schedule I as amended from time to time (the "Series") on behalf of the C Class shares of each such Series identified on Schedule I as amended from time to time (the "Class"), which Trust, Series and Classes may do business under these or such other names as the Board of Trustees of the Trust may designate from time to time. The Plan has been approved by a majority of the Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related thereto ("non-interested Trustees"), cast in person at a meeting called for the purpose of voting on such Plan. Such approval by the Trustees included a determination that in the exercise of reasonable business judgment and in light of their fiduciary duties, there is a reasonable likelihood that the Plan will benefit each such Series and shareholders of each such Class.
The Trust is a business trust organized under the laws of the State of Delaware, is authorized to issue different series and classes of securities and is an open-end management investment company registered under the Act. Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and national distributor for the Series' shares, including shares of the Class, pursuant to the Distribution Agreement between the Distributor and the Trust on behalf of each Series ("Distribution Agreement").
The Plan provides that:
l. (a) The Trust shall pay to the Distributor, out of the assets of a particular Class, a monthly fee not to exceed the fee rate set forth on Schedule I for such Class as may be determined by the Trust's Board of Trustees from time to time.
(b) In addition to the amounts described in (a) above, the Trust shall pay (i) to the Distributor for payment to dealers or others, or (ii) directly to others, an amount not to exceed the service fee rate set forth on Schedule I for such Class, as a service fee pursuant to dealer or servicing agreements.
2. (a) The Distributor shall use the monies paid to it pursuant to paragraph l (a) above to assist in the distribution and promotion of shares of the relevant Class. Payments made to the Distributor under the Plan may be used for, among other things, preparation and distribution of advertisements, sales literature and prospectuses and reports used for sales purposes, as well as compensation related to sales and marketing personnel, and holding special promotions. In addition, such fees may be used to pay for advancing the commission costs to dealers with respect to the sale of the relevant Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be used to pay dealers or others for, among other things, furnishing personal services and maintaining shareholder accounts, which services include confirming that customers have received the Prospectus and Statement of Additional Information, if applicable; assisting such customers in maintaining proper records with the Trust; answering questions relating to their respective accounts; and aiding in maintaining the investment of their respective customers in the relevant Class.
3. The Distributor shall report to the Trust at least monthly on the amount and the use of the monies paid to it under paragraph 1(a) above. In addition, the Distributor and others shall inform the Trust monthly and in writing of the amounts paid under paragraph 1(b) above; both the Distributor and any others receiving fees under the Plan shall furnish the Board of Trustees of the Trust with such other information as the Board may reasonably request in connection with the payments made under the Plan with respect to each Class and the use thereof by the Distributor and others in order to enable the Board to make an informed determination of the amount of the Trust's payments and whether the Plan should be continued with respect to each Class.
4. The officers of the Trust shall furnish to the Board of Trustees of the Trust, for their review, on a quarterly basis, a written report of the amounts expended under the Plan with respect to each Class and the purposes for which such expenditures were made.
5. This Plan shall take effect with respect to the C Class of a particular Series as of the effective date set forth on Schedule I (the "Commencement Date"); thereafter, the Plan shall continue in effect with respect to the C Class of a particular Series for a period of more than one year from the Commencement Date only so long as such continuance is specifically approved at least annually by a vote of the Board of Trustees of the Trust, and of the non-interested Trustees, cast in person at a meeting called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated as to the C Class of any particular Series at any time by vote of a majority of the non-interested Trustees or by vote of a majority of the outstanding voting securities of such Class.
(b) The Plan may not be amended as to the C Class of any particular Series to increase materially the amount to be spent for distribution pursuant to paragraph l hereof without approval by the shareholders of such Class.
7. All material amendments to this Plan shall be approved by the non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of the Trust's non-interested Trustees shall be committed to the discretion of such non-interested Trustees.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the Act shall govern the meaning of "interested person(s)" and "vote of a majority of the outstanding voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously defined.
April 19, 2001
EXHIBIT D
CLASS R
DISTRIBUTION PLAN
The following Distribution Plan (the "Plan") has been adopted pursuant to Rule l2b-l under the Investment Company Act of 1940, as amended (the "Act"), by Delaware Group Limited-Term Government Funds (the "Trust"), separately for each Series of the Trust identified on Schedule I as amended from time to time (the "Series") on behalf of the R Class shares of each such Series identified on Schedule I as amended from time to time (the "Class"), which Trust, Series and Classes may do business under these or such other names as the Board of Trustees of the Trust may designate from time to time. The Plan has been approved by a majority of the Board of Trustees, including a majority of the Trustees who are not interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related thereto ("non-interested Trustees"), cast in person at a meeting called for the purpose of voting on such Plan. Such approval by the Trustees included a determination that in the exercise of reasonable business judgment and in light of their fiduciary duties, there is a reasonable likelihood that the Plan will benefit each such Series and shareholders of each such Class.
The Trust is a business trust organized under the laws of the State of Delaware, is authorized to issue different series and classes of securities and is an open-end management investment company registered under the Act. Delaware Distributors, L.P. (the "Distributor") is the principal underwriter and national distributor for the Series' shares, including shares of the Class, pursuant to the Distribution Agreement between the Distributor and the Trust on behalf of each Series ("Distribution Agreement").
The Plan provides that:
l. The Trust shall pay to the Distributor, out of the assets of a particular Class, a monthly fee not to exceed the fee rate set forth on Schedule I for such Class as may be determined by the Trust's Board of Trustees from time to time. Such monthly fee shall be reduced by the aggregate sums paid by the Trust on behalf of the Series to persons other than broker-dealers (the "Service Providers") who may, pursuant to servicing agreements, provide to the Series services in the Series' marketing of shares of the Class.
2. (a) The Distributor shall use the monies paid to it pursuant to paragraph l above to furnish, or cause or encourage others to furnish, services and incentives in connection with the promotion, offering and sale of the relevant Class shares and, where suitable and appropriate, the retention of such Class shares by shareholders.
(b) The Service Providers shall use the monies paid respectively to them to reimburse themselves for the actual costs they have incurred in confirming that their customers have received the Prospectus and Statement of Additional Information, if applicable, and as a fee for (l) assisting such customers in maintaining proper records with the Trust, (2) answering questions relating to their respective accounts, and (3) aiding in maintaining the investment of their respective customers in the Class.
3. The Distributor shall report to the Trust at least monthly on the amount and the use of the monies paid to it under the Plan. The Service Providers shall inform the Trust monthly and in writing of the amounts each claims under the Plan; both the Distributor and the Service Providers shall furnish the Board of Trustees of the Trust with such other information as the Board may reasonably request in connection with the payments made under the Plan and the use thereof by the Distributor and the Service Providers, respectively, in order to enable the Board to make an informed determination of the amount of the Trust" payments with respect to each Class and whether the Plan should be continued with respect to each Class.
4. The officers of the Trust shall furnish to the Board of Trustees of the Trust, for their review, on a quarterly basis, a written report of the amounts expended under the Plan with respect to each Class and the purposes for which such expenditures were made.
5. This Plan shall take effect with respect to the R Class of a particular Series as of the effective date set forth on Schedule I (the "Commencement Date"); thereafter, the Plan shall continue in effect with respect to the R Class of a particular Series for a period of more than one year from the Commencement Date only so long as such continuance is specifically approved at least annually by a vote of the Board of Trustees of the Trust, and of the non-interested Trustees, cast in person at a meeting called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated as to the R Class of any particular Series at any time by vote of a majority of the non-interested Trustees or by vote of a majority of the outstanding voting securities of such Class.
(b) The Plan may not be amended as to the R Class of any particular Series to increase materially the amount to be spent for distribution pursuant to paragraph l hereof without approval by the shareholders of such Class.
7. All material amendments to this Plan shall be approved by the non-interested Trustees in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of the Trust's non-interested Trustees shall be committed to the discretion of such non-interested Trustees.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the Act shall govern the meaning of "interested person(s)" and "vote of a majority of the outstanding voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously defined.
May 15, 2003
SCHEDULE I
This Schedule to the Distribution Agreement between Delaware Group Limited-Term Government Funds and Delaware Distributors, L.P. entered into as of May 15, 2003 (the "Agreement") lists the Series and Classes for which Delaware Distributors, L.P. provides distribution services pursuant to this Agreement, along with the 12b-1 Plan rates, if applicable, for each class and the date on which the Agreement became effective for each Series.
--------------------------------------------------------------------------------------------------------------------------------
Portion designated as
Total 12b-1 Plan Fee Service Fee Rate (per
Rate (per annum of the annum of the Series'
Series/ average daily average daily net
net assets represented assets represented by
Series Name Class Names by of the Class) shares of the Class) Effective Date
------------------------------------------------ ------------------- ----------------------- ---------------------- ----------------
Delaware Limited-Term Government Fund A Class .30% April 19, 2001
------------------------------------------------ ------------------- ----------------------- ---------------------- ----------------
B Class 1.00% .25% April 19, 2001
------------------------------------------------ ------------------- ----------------------- ---------------------- ----------------
C Class 1.00% .25% April 19, 2001
------------------------------------------------ ------------------- ----------------------- ---------------------- ----------------
R Class .60% May 15, 2003
------------------------------------------------ ------------------- ----------------------- ---------------------- ----------------
Institutional Class April 19, 2001
------------------------------------------------------------------------------------------------------------------------------------
|
EX-99(e)(1)(iv)
SECOND AMENDED AND RESTATED
FINANCIAL INTERMEDIARY
DISTRIBUTION AGREEMENT
Second Financial Intermediary Distribution Agreement (the "Agreement") made as of this 21st day of August, 2003, by and between DELAWARE DISTRIBUTORS, L.P. ("DDLP"), Delaware limited partnership, and LINCOLN FINANCIAL DISTRIBUTORS, INC. ("LFD"), a Connecticut corporation.
WITNESSETH
WHEREAS, DDLP serves as the distributor of a number of investment companies (individually a "Fund" and, collectively, the "Funds") registered under the Investment Company Act of 1940, as amended (the "1940 Act"), pursuant to distribution agreements between each Fund and DDLP; and
WHEREAS, pursuant to the aforementioned distribution agreements, each Fund has engaged DDLP to promote the distribution of its shares and, in connection therewith and as agent for the Fund and not as principal, to advertise, promote, offer and sell the Fund's shares to the public; and
WHEREAS, DDLP desires to enter into an agreement with LFD pursuant to which LFD shall: (i) promote the sale of the Funds' shares through broker/dealers, financial advisers and other financial intermediaries (collectively "Financial Intermediaries"); (ii) create messaging and packaging for certain non-regulatory sales and marketing materials related to the Funds; and (iii) produce such non-regulatory sales and marketing materials related to the Funds.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:
1. DDLP hereby engages LFD to promote the sale of shares of each Fund and each investment portfolio thereof listed in Appendix A hereto (as revised from time to time) through Financial Intermediaries, and to create and produce non-regulatory sales and marketing materials related to the Funds as set forth herein.
2. LFD agrees to use its best efforts to promote the sale of the Funds' shares designated by DDLP to retail investors through Financial Intermediaries wherever their sale is legal, in such places and in such manner, not inconsistent with the law and the provisions of this Agreement and the Funds' Registration Statements under the Securities Act of 1933, including the Prospectuses and Statements of Additional Information contained therein.
3. LFD represents and warrants that it is, and shall remain at all times during the effectiveness of this Agreement, a broker/dealer registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and qualified under applicable state securities laws in each jurisdiction in which LFD may be required to be qualified to act as a broker/dealer in securities, and a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"). DDLP represents and warrants that it is, and shall remain at all times during the effectiveness of this Agreement, a broker/dealer registered under the Exchange Act and qualified under applicable state securities laws in each jurisdiction in which DDLP may be required to be qualified to act as a broker/dealer in securities, and a member in good standing of the NASD.
4. DDLP will provide LFD with:
(a) copies of the current Prospectuses and Statements of
Additional Information for each Fund, including all
supplements thereto;
(b) copies of each Fund's periodic reports to shareholders as soon
as reasonably practicable after DDLP receives such reports
from the Fund;
(c) technical language, data, and product content, product
positioning recommendations and sales ideas with respect to
the Funds;
(d) Fund-related materials prepared by DDLP and designated for
internal use only (subject to the terms and conditions
established from time to time by DDLP); and
(e) prompt notice of the issuance by the Securities and Exchange
Commission (the "SEC") of any stop order suspending the
effectiveness of the Registration Statement of any Fund, or
the initiation of any proceedings for that purpose.
5. LFD shall create and produce non-regulatory, non-shareholder materials for, about, or related to, the Funds ("Advertising Materials"). DDLP shall provide product information to LFD, including information related to product descriptions, strategic positioning and product management. LFD shall use such information when developing the creative messaging, look and feel, layout and packaging of the advertising materials. LFD agrees to submit to DDLP, prior to its use, the form of any Advertising Materials prepared by LFD and proposed to be generally disseminated by or for LFD, all Advertising Materialsprepared by LFD and proposed to be used by LFD, and all Advertising Materials prepared by or for LFD for such dissemination or for use by others in connection with the sale of the Funds' shares. LFD also agrees that LFD will file or submit such Advertising Materials to the NASD, SEC or other regulatory agency as from time to time may be appropriate, considering practices then current in the industry. LFD agrees not to use or to permit others to use such Advertising Materials without the prior written consent of DDLP if any regulatory agency expresses objection thereto or if DDLP delivers to LFD a written objection thereto. LFD shall not be responsible for or authorized to prepare materials relating to the Funds for the purpose of satisfying regulatory requirements, including, but not limited to, Prospectuses and Statements of Additional Information and periodic shareholder reports. DDLP and LFD agree to work together in good faith to resolve any disagreements between DDLP and LFD about or objections by DDLP to Advertising Materials prepared by LFD.
6. The responsibility of LFD hereunder shall be limited to the promotion of sales of the Funds' shares through Financial Intermediaries, and the creation and production of non-regulatory sales and marketing materials. LFD is not empowered to approve orders for sales of the Funds' shares or to accept payment for such orders. Sales of a Fund's shares shall be deemed to be made when and where accepted by the Fund's transfer agent on behalf of the Fund.
7. In consideration for the services provided by LFD under this Agreement, DDLP shall pay LFD the compensation set forth on Schedule A to this Agreement.
8. With respect to the apportionment of costs between DDLP and LFD
associated with activities with which both are concerned, the following
will apply:
(a) DDLP will pay the costs incurred in printing and mailing
copies of Fund Prospectuses and shareholder reports to
prospective investors;
(b) DDLP will pay the costs of any additional copies of Fund
financial and other reports and other Fund literature supplied
to DDLP by the Fund for sales promotion purposes;
(c) DDLP will bear the expense of the Advertising Materials that
relate exclusively to the Funds;
(d) DDLP and LFD will jointly bear the expense of advertising and
promotional activities and materials relating both to the
Funds and to the other products distributed by LFD, the
apportionment of such expenses to be agreed upon by DDLP and
LFD from time to time; and
(e) The parties will agree to apportion other costs and expenses
between DDLP and LFD as necessary and as mutually agreed from
time to time.
9. Both DDLP and LFD may engage in other business, provided such other business does not interfere with the performance by DDLP and LFD of their respective obligations under this Agreement.
10. DDLP agrees to indemnify, defend and hold LFD harmless from and against any and all losses, damages, or liabilities to which LFD may become subject by reason of DDLP's willful misfeasance, bad faith, or gross negligence in the performance of its duties under this Agreement. LFD agrees to indemnify, defend and hold DDLP harmless from and against any and all losses, damages, or liabilities to which DDLP may become subject by reason of LFD's willful misfeasance, bad faith, or gross negligence in the performance of its duties under this Agreement.
11. Copies of financial reports, Registration Statements and Prospectuses, as well as demands, notices, requests, consents, waivers, and other communications in writing which it may be necessary or desirable for either party to deliver or furnish to the other will be duly delivered or furnished, if delivered to such party at 2005 Market Street, Philadelphia, Pennsylvania 19103-7094, or at such other address as DDLP or LFD may designate in writing and furnish to the other.
12. This Agreement shall not be assigned, as that term is defined in the 1940 Act, by LFD and shall terminate automatically in the event of its attempted assignment by LFD. This Agreement will automatically terminate with respect to a Fund upon the termination of the distribution agreement between DDLP and the Fund. This Agreement will automatically terminate with respect to all Funds in the event that LFD ceases to be a broker/dealer registered under the Exchange Act or a member in good standing of the NASD. Except as specifically provided in the indemnification provision contained in Paragraph 10 herein, this Agreement and all conditions and provisions hereof are for the sole and exclusive benefit of the parties hereto and their legal successors and no express or implied provision of this Agreement is intended or shall be construed to give any person other than the parties hereto and their legal successors any legal or equitable right, remedy or claim under or in respect of this Agreement or any provisions herein contained.
13. (a) This Agreement shall remain in force with respect to a Fund for a period of two year from the date hereof and from year to year thereafter, but only so long as such continuance is specifically approved at least annually by the Board of Directors/Trustees of the Fund or by vote of a majority of the outstanding voting securities of the Fund and only if the terms and the renewal thereof have been approved by the vote of a majority of the Directors/Trustees of the Fund who are not parties hereto or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval.
(b) LFD may terminate this Agreement at any time by giving DDLP
written notice of its intention to terminate the Agreement at
the expiration of three months from the date of delivery of
such written notice of intention to DDLP.
(c) DDLP may terminate this Agreement at any time upon prior
written notice to LFD of its intention to so terminate at the
expiration of three months from the date of the delivery of
such written notice to LFD.
(d) The Board of Directors/Trustees of a Fund may terminate this
Agreement with respect to the Fund at any time upon prior
written notice to DDLP and/or LFD of its intention to so
terminate at the expiration of three months from the date of
delivery of such written notice to DDLP and/or LFD.
14. The validity, interpretation and construction of this Agreement, and of each part hereof, will be governed by the laws of the Commonwealth of Pennsylvania.
15. In the event any provision of this Agreement is determined to be void or unenforceable, such determination shall not affect the remainder of the Agreement, which shall continue to be in force.
DELAWARE DISTRIBUTORS, L.P. LINCOLN FINANCIAL DISTRIBUTORS,
By: DELAWARE DISTRIBUTORS, INC., INC.
General Partner
By: Kevin J. Lucey By: Mike Smith
--------------------------------- ------------------------
Name: Kevin J. Lucey Name: Mike Smith
Title: Executive Vice President/Chief of Title: Chief Financial Officer
Sales, Client Services & Marketing
|
SCHEDULE A
to
SECOND AMENDED AND RESTATED
FINANCIAL INTERMEDIARY DISTRIBUTION AGREEMENT
The fees payable by DDLP to LFD under this Schedule A shall be calculated and paid monthly.
I. Fees with respect to sales of shares of Funds other than Delaware VIP Trust
With respect to each sale through Financial Intermediaries on or after the date of this Agreement, a non- recurring fee equal to the amount shown below will be paid by DDLP to LFD.
Basis points
On Sales
------------
Retail Mutual Funds except as noted below (1) .50%
Merrill Lynch Connect Program .25%
Registered Investment Advisers and .45%
H.D. Vest Institutional Classes
Citigroup Global Capital Markets, Inc. 0
(formerly Salomon Smith Barney)
International Equity Fund I Class
(1) - A, B, & C classes excluding money
market, house accounts, market timers
|
In addition to the non-recurring fee set forth above, a fee at the annual rate set forth below of the average daily net assets of Fund shares outstanding and beneficially owned by shareholders through Financial Intermediaries, including those Fund shares sold before the date of this Agreement, will be paid by DDLP to LFD.
Basis points
On Assets
------------
Retail Mutual Funds (including money market, house .04%
accounts and market timers)
Merrill Lynch Connect Program 0
Registered Investment Advisers and .04%
H.D. Vest Institutional Classes
Citigroup Global Capital Markets, Inc. .04%
(formerly Salomon Smith Barney)
International Equity Fund I Class
|
II. Fees with respect to the Sale of Delaware VIP Trust shares through Allmerica Variable Products.
With respect to each sale of Delaware VIP Trust shares on or after the date of this Agreement through variable annuity and variable life insurance products for which Allmerica Investments, Inc. ("Allmerica") is the principal underwriter ("Allmerica Variable Products"), a non-recurring fee equal to the entire distribution allowance received by DDLP from Allmerica with respect to such sale. No other fees will be payable to LFD with respect to sales of Delaware VIP Trust shares.
APPENDIX A
to
SECOND AMENDED AND RESTATED
FINANCIAL INTERMEDIARY DISTRIBUTION AGREEMENT
Delaware Group Adviser Funds Delaware Group Income Funds
Delaware Diversified Income Fund Delaware Corporate Bond Fund
Delaware U.S. Growth Fund Delaware Delchester Fund
Delaware Extended Duration Bond Fund
Delaware Group Cash Reserve Delaware High-Yield Opportunities Fund
Delaware Cash Reserve Fund Delaware Strategic Income Fund
Delaware Group Equity Funds I Delaware Group Limited-Term Government Funds
Delaware Balanced Fund Delaware Limited-Term Government Fund
Delaware Devon Fund
Delaware Group State Tax-Free Income Trust II
Delaware Group Equity Funds II Delaware Tax-Free Pennsylvania Fund
Delaware Decatur Equity Income Fund
Delaware Diversified Value Fund Delaware Group Tax-Free Fund
Delaware Growth and Income Fund Delaware Tax-Free Insured Fund
Delaware Social Awareness Fund Delaware Tax-Free USA Fund
Delaware Tax-Free USA Intermediate
Delaware Group Equity Funds III
Delaware American Services Fund Delaware Group Tax-Free Money Fund
Delaware Focused Growth Fund Delaware Tax-Free Money Fund
Delaware Focused Value Fund
Delaware Health Care Fund Delaware Pooled Trust
Delaware Small Cap Growth Fund The International Equity Portfolio
Delaware Technology and Innovation Fund The Real Estate Investment Trust Portfolio II
Delaware Trend Fund
Delaware VIP Trust
Delaware Group Equity Funds IV Delaware VIP Balanced Series
Delaware Diversified Growth Fund Delaware VIP Capital Reserves Series
Delaware Growth Opportunities Fund Delaware VIP Cash Reserve Series
Delaware VIP Emerging Markets Series
Delaware Group Equity Funds V Delaware VIP Global Bond Series
Delaware Retirement Income Fund Delaware VIP Growth Opportunities Series
Delaware Small Cap Contrarian Fund Delaware VIP High Yield Series
Delaware Small Cap Value Fund Delaware VIP International Value Equity Series
Delaware VIP REIT Series
Delaware Group Foundation Funds Delaware VIP Select Growth Series
Delaware Balanced Allocation Portfolio Delaware VIP Small Cap Value Series
Delaware Growth Allocation Portfolio Delaware VIP Social Awareness Series
Delaware Income Allocation Portfolio Delaware Trend Fund
Delaware S&P 500 Index Fund Delaware U.S. Growth Fund
|
Delaware Group Global & International Funds Voyageur Insured Funds
Delaware Emerging Markets Fund Delaware Tax-Free Minnesota Insured Fund
Delaware International Small Cap Value Fund Delaware Tax-Free Arizona Insured Fund
Delaware International Value Equity Fund
Voyageur Intermediate Tax-Free Funds
Delaware Group Government Fund Delaware Tax-Free Minnesota Intermediate Fund
Delaware American Government Bond Fund
Voyageur Mutual Funds II
Voyageur Investment Trust Delaware Tax-Free Colorado Fund
Delaware Tax-Free California Insured Fund
Delaware Tax-Free Florida Fund Voyageur Mutual Funds III
Delaware Tax-Free Florida Insured Fund Delaware Core Equity Fund
Delaware Tax-Free Missouri Insured Fund Delaware Select Growth Fund
Delaware Tax-Free Oregon Insured Fund
Voyageur Tax Free Funds
Voyageur Mutual Funds Delaware Tax-Free Minnesota Fund
Delaware Minnesota High-Yield Municipal Bond Fund
Delaware National High-Yield Municipal Bond Fund
Delaware Tax-Free Arizona Fund
Delaware Tax-Free California Fund
Delaware Tax-Free Idaho Fund
Delaware Tax-Free New York Fund
|
Agreed to and accepted:
DELAWARE DISTRIBUTORS, L.P. LINCOLN FINANCIAL DISTRIBUTORS,
By: DELAWARE DISTRIBUTORS, INC., INC.
General Partner
By: Kevin J. Lucey By: Mike Smith
--------------------------------- ------------------------
Name: Kevin J. Lucey Name: Mike Smith
Title: Executive Vice President/Chief of Title: Chief Financial Officer
Sales, Client Services & Marketing
|
EX-99(g)(1)(ii)
JPMORGAN CHASE BANK GLOBAL CUSTODY AGREEMENT
AMENDMENT NO. 1 TO
SCHEDULE A
THIS AMENDMENT, dated July 17, 2003, amends the Schedule A of the Global Custody Agreement, dated May 1, 1996 as amended on July 1, 2001 ("Agreement"), between those registered investment companies to the Agreement (each a "Customer"), having a place of business at 2005 Market Street, Philadelphia, PA 19103, and JPMorgan Chase Bank ("Bank"), having a place of business at 270 Park Ave., New York, N.Y. 10017-2070.
Delaware Group Adviser Funds Delaware Group Foundation Funds
Delaware Diversified Income Fund Delaware Balanced Allocation Portfolio
Delaware U.S. Growth Fund Delaware Growth Allocation Portfolio
Delaware Income Allocation Portfolio
Delaware Group Cash Reserve Delaware S&P 500 Index Fund
Delaware Cash Reserve Fund
Delaware Group Global & International Funds
Delaware Group Equity Funds I Delaware Emerging Markets Fund
Delaware Balanced Fund Delaware International Small Cap Value Fund
Delaware Devon Fund Delaware International Value Equity Fund
Delaware Group Equity Funds II Delaware Group Government Fund
Delaware Decatur Equity Income Fund Delaware American Government Bond Fund
Delaware Diversified Value Fund
Delaware Growth and Income Fund Delaware Group Income Funds
Delaware Social Awareness Fund Delaware Corporate Bond Fund
Delaware Delchester Fund
Delaware Group Equity Funds III Delaware Extended Duration Bond Fund
Delaware American Services Fund Delaware High-Yield Opportunities Fund
Delaware Focused Growth Fund Delaware Strategic Income Fund
Delaware Focused Value Fund
Delaware Technology and Innovation Fund Delaware Group Limited-Term Government Funds
Delaware Trend Fund Delaware Limited-Term Government Fund
Delaware Group Equity Funds IV Delaware Group State Tax-Free Income Trust
Delaware Diversified Growth Fund Delaware Tax-Free Pennsylvania Fund
Delaware Growth Opportunities Fund
Delaware Group Tax-Free Fund
Delaware Group Equity Funds V Delaware Tax-Free Insured Fund
Delaware Retirement Income Fund Delaware Tax-Free USA Fund
Delaware Small Cap Contrarian Fund Delaware Tax-Free USA Intermediate Fund
Delaware Small Cap Value Fund
Delaware Group Tax-Free Money Fund
Delaware Tax-Free Money Fund
|
Delaware Pooled Trust Delaware VIP Trust
The All-Cap Growth Equity Portfolio Delaware VIP Balanced Series
The Core Fixed Income Portfolio(1) Delaware VIP Capital Reserves Series
The Core Plus Fixed Income Portfolio Delaware VIP Cash Reserve Series
The Emerging Markets Portfolio Delaware VIP Emerging Markets Series
The Global Equity Portfolio Delaware VIP Global Bond Series
The Global Fixed Income Portfolio Delaware VIP Large Cap Value Series
The High-Yield Bond Portfolio Delaware VIP Growth Opportunities Series
The Intermediate Fixed Income Portfolio Delaware VIP High Yield Series
The International Equity Portfolio Delaware VIP International Value Equity Series
The International Fixed Income Portfolio Delaware VIP REIT Series
The International Large-Cap Equity Portfolio Delaware VIP Select Growth Series
The International Small-Cap Portfolio Delaware VIP Small Cap Value Series
The Labor Select International Equity Portfolio Delaware VIP Social Awareness Series
The Large-Cap Growth Equity Portfolio Delaware VIP Trend Series
The Large-Cap Value Equity Portfolio Delaware VIP U.S. Growth Series
The Mid-Cap Growth Equity Portfolio
The Real Estate Investment Trust Portfolio Optimum Fund Trust
The Real Estate Investment Trust Portfolio II Optimum Fixed Income Fund
The Small-Cap Growth Equity Portfolio Optimum International Fund
The Small-Cap Value Equity Portfolio Optimum Large Cap Growth Fund
Optimum Large Cap Value Fund
Delaware Investments Dividend and Income Optimum Small Cap Growth Fund
Fund, Inc. Optimum Small Cap Value Fund
Delaware Investments Global Dividend and
Income Fund, Inc.
|
(1) The Core Fixed Income Portfolio of Delaware Pooled Trust will be liquidated on or about the end of July 2003.
AGREED AND ACCEPTED:
CUSTOMER JPMORGAN CHASE BANK
By: Michael P. Bishof By: Rosemary M. Stidmon
------------------------------- -----------------------
Name: Michael P. Bishof Name: Rosemary M. Stidmon
|
Title: Senior Vice President/Treasurer Title: Vice President
EX-99(h)(1)(ii)
August 23, 2002
Delaware Service Company, Inc.
2005 Market Street
Philadelphia, PA 19103
To Whom It May Concern:
Delaware Service Company, Inc. ("DSC") and each of the registered
investment companies listed on Schedule A hereto (each a "Fund", and together,
the "Funds") have entered into a Shareholder Services Agreement dated as of
April 19, 2001 (as amended, supplemented or otherwise modified from time to
time, the "Agreement"). Each capitalized term used herein and not otherwise
defined shall have the meaning given such term in the Agreement. For good and
adequate consideration, the receipt and sufficiency of which are hereby
acknowledged, DSC and the Funds hereby agree to amend each Agreement to add a
Section 6.1(f) as follows:
"(f) Implement and operate the Fund's anti-money laundering program as described in the Fund's Risk Management Procedures, as amended from time to time; consent to and ensure that federal examiners will be able to obtain information and records relating to the Fund's anti-money laundering program and be able to inspect DSC for purposes of such program; and, as necessary, assist the Fund as it periodically monitors the operation of its anti-money laundering program and assesses the effectiveness of the program's procedures and controls."
Except as expressly amended hereby, all provisions of the Agreement shall remain in full force and effect. This letter amendment to the Agreement may be executed by the parties hereto in any number of counterparts, each of which counterparts when so executed shall be an original but all the counterparts taken together shall constitute one and the same instrument.
Kindly acknowledge your agreement to the foregoing and intention to be legally bound hereby by signing below in the space provided.
Very truly yours,
AGREED TO AND ACCEPTED
this 23rd day of August 2002:
DELAWARE SERVICE COMPANY, INC.
Schedule A
Delaware Group Adviser Funds
Delaware Group Cash Reserve
Delaware Group Equity Funds I
Delaware Group Equity Funds II
Delaware Group Equity Funds III
Delaware Group Equity Funds IV
Delaware Group Equity Funds V
Delaware Group Foundation Funds
Delaware Group Global & International Funds
Delaware Group Government Fund
Delaware Group Income Funds
Delaware Group Limited-Term Government Funds
Delaware Group Tax-Free Fund
Delaware Pooled Trust
Delaware Group State Tax-Free Income Trust
Delaware Group Tax-Free Money Fund
Delaware VIP Trust
Voyageur Insured Funds
Voyageur Intermediate Tax-Free Funds
Voyageur Investment Trust
Voyageur Mutual Funds
Voyageur Mutual Funds II
Voyageur Mutual Funds III
Voyageur Tax-Free Funds
EX-99(h)(2)(i)
AMENDMENT NO. 27
to
SCHEDULE A
of
DELAWARE INVESTMENTS FAMILY OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds
Delaware Diversified Income Fund (New)
Delaware U.S. Growth Fund
Delaware Group Cash Reserve
Delaware Cash Reserve Fund
Delaware Group Equity Funds I (formerly Delaware) Delaware Balanced Fund (formerly Delaware Fund) Delaware Devon Fund
Delaware Group Equity Funds II (formerly Decatur) Delaware Decatur Equity Income Fund (formerly Decatur Income Fund) Delaware Diversified Value Fund (New) Delaware Growth and Income Fund (formerly Decatur Total Return Fund) Delaware Social Awareness Fund (formerly Quantum Fund) (New)
Delaware Group Equity Funds III (formerly Trend) Delaware American Services Fund (New) Delaware Focused Value Fund (formerly Delaware Research Fund) (New) Delaware Focused Growth Fund (formerly Large Cap Growth Fund) (New) Delaware Health Care Fund (New) Delaware Small Cap Growth Fund (New) Delaware Technology and Innovation Fund (New) Delaware Trend Fund
Delaware Group Equity Funds IV (formerly DelCap) Delaware Diversified Growth Fund (formerly Capital Appreciation Fund)
(New)
Delaware Growth Opportunities Fund (formerly DelCap Fund)
Delaware Group Equity Funds V (formerly Value)
Delaware Dividend Income Fund (formerly Delaware Retirement Income
Fund) (New)
Delaware Small Cap Contrarian Fund (New)
Delaware Small Cap Value Fund (formerly Value Fund)
Delaware Group Foundation Funds (New)
Delaware Balanced Allocation Portfolio (formerly Delaware Balanced
Portfolio) (New)
Delaware Growth Allocation Portfolio (formerly Delaware Growth
Portfolio) (New)
Delaware Income Allocation Portfolio (formerly Delaware Income
Portfolio) (New)
Delaware S&P 500 Index Fund (New)
Delaware Group Global & International Funds Delaware Emerging Markets Fund (New) Delaware International Small Cap Value Fund (formerly Delaware International Small Cap Fund) (New) Delaware International Value Equity Fund (formerly Delaware International Equity Fund)
Delaware Group Government Fund
Delaware American Government Bond Fund (formerly, Government Income
Series and U.S. Government Fund)
Delaware Group Income Funds (formerly Delchester)
Delaware Corporate Bond Fund (New)
Delaware Delchester Fund
Delaware Extended Duration Bond Fund (New)
Delaware High-Yield Opportunities Fund (New)
Delaware Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds Delaware Limited-Term Government Fund
Delaware Group State Tax-Free Income Trust (formerly DMCT Tax-Free Income
Trust-Pennsylvania)
Delaware Tax-Free Pennsylvania Fund
Delaware Group Tax-Free Fund
Delaware Tax-Free Insured Fund
Delaware Tax-Free USA Fund
Delaware Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund
Delaware Tax-Free Money Fund
Delaware Pooled Trust
The All-Cap Growth Equity Portfolio (New)
The Core Plus Fixed Income Portfolio (New)
The Emerging Markets Portfolio (New)
The Global Equity Portfolio (New)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The Intermediate Fixed Income Portfolio (formerly The Fixed Income
Portfolio)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The International Large-Cap Equity Portfolio (New)
The International Small-Cap Portfolio (New)
The Labor Select International Equity Portfolio
The Large-Cap Growth Equity Portfolio (New)
The Large-Cap Value Equity Portfolio (formerly The Defensive Equity
Portfolio)
The Mid-Cap Growth Equity Portfolio (formerly The Aggressive
Growth Portfolio)
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio II (New)
The Small-Cap Growth Equity Portfolio (New)
The Small-Cap Growth II Equity Portfolio (New)
The Small-Cap Value Equity Portfolio (New)
Delaware VIP Trust (formerly Delaware Group Premium Fund)
Delaware VIP Balanced Series (formerly Delaware Balanced Series and
Delaware Series)
Delaware VIP Capital Reserves Series
Delaware VIP Cash Reserve Series
Delaware VIP Diversified Income Series (New)
Delaware VIP Emerging Markets Series (New)
Delaware VIP Global Bond Series (New)
Delaware VIP Growth Opportunities Series (formerly DelCap Series)
Delaware VIP High Yield Series (formerly Delchester Series)
Delaware VIP International Value Equity Series (formerly International
Equity Series)
Delaware VIP REIT Series (New)
Delaware VIP Select Growth Series (formerly Aggressive Growth Series)
(New)
Delaware VIP Small Cap Value Series (formerly Value Series)
Delaware VIP Social Awareness Series (formerly Quantum Series) (New)
Delaware VIP Trend Series
Delaware VIP U.S. Growth Series (New)
Voyageur Insured Funds
Delaware Tax-Free Arizona Insured Fund (New)
Delaware Tax-Free Minnesota Insured Fund (New)
Voyageur Intermediate Tax Free Funds
Delaware Tax-Free Minnesota Intermediate Fund (New)
Voyageur Investment Trust
Delaware Tax-Free California Insured Fund (New)
Delaware Tax-Free Florida Fund (New)
Delaware Tax-Free Florida Insured Fund (New)
Delaware Tax-Free Missouri Insured Fund (New)
Delaware Tax-Free Oregon Insured Fund (New)
Voyageur Mutual Funds
Delaware Minnesota High-Yield Municipal Bond Fund (New)
Delaware National High-Yield Municipal Bond Fund (New)
Delaware Tax-Free Arizona Fund (New)
Delaware Tax-Free California Fund (New)
Delaware Tax-Free Idaho Fund (New)
Delaware Tax-Free New York Fund (New)
Voyageur Mutual Funds II
Delaware Tax-Free Colorado Fund (New)
Voyageur Mutual Funds III
Delaware Core Equity Fund (formerly Delaware Growth Stock Fund) (New)
Delaware Select Growth Fund (formerly Delaware Aggressive Growth Fund)
(New)
Voyageur Tax Free Funds
Delaware Tax-Free Minnesota Fund (New)
Dated as of October 1, 2003
DELAWARE SERVICE COMPANY, INC. DELAWARE GROUP ADVISER FUNDS
DELAWARE GROUP CASH RESERVE
DELAWARE GROUP EQUITY FUNDS I
By: Michael P. Bishof DELAWARE GROUP EQUITY FUNDS II
------------------------------------------- DELAWARE GROUP EQUITY FUNDS III
Name: Michael P. Bishof DELAWARE GROUP EQUITY FUNDS IV
Title: Senior Vice President/Investment Accounting DELAWARE GROUP EQUITY FUNDS V
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GLOBAL &
INTERNATIONAL FUNDS
DELAWARE GROUP GOVERNMENT FUND
DELAWARE GROUP INCOME FUNDS
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS
DELAWARE GROUP STATE TAX-FREE INCOME
TRUST
DELAWARE GROUP TAX-FREE FUND
DELAWARE GROUP TAX-FREE MONEY FUND
DELAWARE POOLED TRUST
DELAWARE VIP TRUST
VOYAGEUR INSURED FUNDS
VOYAGEUR INTERMEDIATE TAX FREE FUNDS
VOYAGEUR INVESTMENT TRUST
VOYAGEUR MUTUAL FUNDS
VOYAGEUR MUTUAL FUNDS II
VOYAGEUR MUTUAL FUNDS III
By: Jude T. Driscoll
---------------------------
Name: Jude T. Driscoll
Title: Chairman
|
EX-99(j)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial Highlights" in the Prospectuses and to the incorporation by reference in this Registration Statement (Form N-1A)(Post-Effective Amendment No. 56 to File No. 2-75526; Amendment No. 56 to File No. 811-3363) of Delaware Group Limited-Term Government Funds of our report dated February 6, 2004, included in the 2003 Annual Report to shareholders.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 23, 2004
Report of Independent Auditors
To the Shareholders and Board of Trustees Delaware Group Limited-Term Government Funds - Delaware Limited-Term Government Fund
We have audited the accompanying statement of net assets of Delaware Limited-Term Government Fund (the "Fund") as of December 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2003, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Delaware Limited-Term Government Fund at December 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
February 6, 2004
EX-99(n)(1)
The Delaware Investments Family of Funds
Multiple Class Plan Pursuant to Rule 18f-3
This Multiple Class Plan (the "Plan") has been adopted by a majority of the Board of Trustees of each of the investment companies listed on Appendix A as may be amended from time to time (each individually a "Fund" and, collectively, the "Funds"), including a majority of the Trustees who are not interested persons of each Fund, pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended (the "Act"). The Board of each Fund has determined that the Plan, including the allocation of expenses, is in the best interests of the Fund as a whole, each series of shares offered by such Fund (individually and collectively the "Series") where the Fund offers its shares in multiple series, and each class of shares offered by the Fund or Series, as relevant. The Plan sets forth the provisions relating to the establishment of multiple classes of shares for each Fund and, if relevant, its Series. To the extent that a subject matter set forth in this Plan is covered by a Fund's Agreement and Declaration of Trust or By-Laws, such Agreement and Declaration of Trust or By-Laws will control in the event of any inconsistencies with descriptions contained in this Plan.
The term "Portfolio," when used in this Plan in the context of a Fund that offers only a single series of shares, shall be a reference to the Fund, and when used in the context of a Fund that offers multiple Series of shares, shall be a reference to each Series of such Fund.
CLASSES
1. Appendix A to this Plan describes the classes to be issued by each Portfolio and identifies the names of such classes.
FRONT-END SALES CHARGE
2. Class A shares carry a front-end sales charge as described in the Funds' relevant prospectuses; and Class B, Class C, Class R, Class P, Institutional Class, Consultant Class, Original Class and Portfolio Class shares are sold without a front-end sales charge.
CONTINGENT DEFERRED SALES CHARGE
3. Class A shares are not subject to a contingent deferred sales charge ("CDSC"), except as described in the Funds' relevant prospectuses.
4. Class B shares are subject to a CDSC as described in the Funds' relevant prospectuses.
5. Class C shares are subject to a CDSC as described in the Funds' relevant prospectuses.
6. As described in the Funds' relevant prospectuses, the CDSC for each class declines to zero over time and is waived in certain circumstances. Shares that are subject to a CDSC age one month at the end of the month in which the shares were purchased, regardless of the specific date during the month that the shares were purchased.
7. Class R, Class P, Institutional Class, Consultant Class, Original Class and Portfolio Class shares are not subject to a CDSC.
RULE 12b-1 PLANS
8. In accordance with the Rule 12b-1 Plan for the Class A shares of each Portfolio, each Fund shall pay to Delaware Distributors, L.P. (the "Distributor") a monthly fee not to exceed the maximum rate set forth in Appendix A as may be determined by the Fund's Board of Trustees from time to time for distribution services. The monthly fee shall be reduced by the aggregate sums paid by or on behalf of such Portfolio to persons other than broker-dealers pursuant to shareholder servicing agreements.
9. In accordance with the Rule 12b-1 Plan for the Class B shares of each Portfolio, each Fund shall pay to the Distributor a monthly fee not to exceed the maximum rate set forth in Appendix A as may be determined by the Fund's Board of Trustees from time to time for distribution services. In addition to these amounts, the Fund shall pay (i) to the Distributor for payment to dealers or others, or (ii) directly to others, an amount not to exceed the maximum rate set forth in Appendix A for shareholder support services pursuant to dealer or servicing agreements.
10. In accordance with the Rule 12b-1 Plan for the Class C shares of each Portfolio, each Fund shall pay to the Distributor a monthly fee not to exceed the maximum rate set forth in Appendix A as may be determined by the Fund's Board of Trustees from time to time for distribution services. In addition to these amounts, the Fund shall pay (i) to the Distributor for payment to dealers or others, or (ii) directly to others, an amount not to exceed the maximum rate set forth in Appendix A for shareholder support services pursuant to dealer or servicing agreements.
11. In accordance with the respective Rule 12b-1 Plan for the Class R, Class P and Consultant Class shares of each Portfolio, each Fund shall pay to the Distributor a monthly fee not to exceed the maximum rate set forth in Appendix A as may be determined by the Fund's Board of Trustees from time to time for distribution and shareholder support services. The monthly fee shall be reduced by the aggregate sums paid by or on behalf of such Portfolio to persons other than broker-dealers pursuant to shareholder servicing agreements.
12. A Rule 12b-1 Plan has not been adopted for the Institutional Class, Original Class and Portfolio Class shares of any Portfolio.
ALLOCATION OF EXPENSES
13. Each Fund shall allocate to each class of shares of a Portfolio any fees and expenses incurred by the Fund in connection with the distribution or servicing of such class of shares under a Rule 12b-1 Plan, if any, adopted for such class. In addition, each Fund reserves the right, subject to approval by the Fund's Board of Trustees, to allocate fees and expenses of the following nature to a particular class of shares of a Portfolio (to the extent that such fees and expenses actually vary among each class of shares or vary by types of services provided to each class of shares of the Portfolio):
(i) transfer agency and other recordkeeping costs;
(ii) Securities and Exchange Commission and blue sky registration or qualification fees;
(iii) printing and postage expenses related to printing and distributing class-specific materials, such as shareholder reports, prospectuses and proxies to current shareholders of a particular class or to regulatory authorities with respect to such class of shares;
(iv) audit or accounting fees or expenses relating solely to such class;
(v) the expenses of administrative personnel and services as required to support the shareholders of such class;
(vi) litigation or other legal expenses relating solely to such class of shares;
(vii) Trustees' fees and expenses incurred as a result of issues relating solely to such class of shares; and
(viii) other expenses subsequently identified and determined to be properly allocated to such class of shares.
14. (a) Daily Dividend Portfolios. With respect to Portfolios that declare a dividend to shareholders on a daily basis, all expenses incurred by a Portfolio will be allocated to each class of shares of such Portfolio on the basis of "settled shares" (net assets valued in accordance with generally accepted accounting principles but excluding the value of subscriptions receivable) of each class in relation to the net assets of the Portfolio, except for any expenses that are allocated to a particular class as described in paragraph 13 above.
(b) Non-Daily Dividend Portfolios. With respect to Portfolios that do not declare a dividend to shareholders on a daily basis, all expenses incurred by a Portfolio will be allocated to each class of shares of such Portfolio on the basis of the net asset value of each such class in relation to the net asset value of the Portfolio, except for any expenses that are allocated to a particular class as described in paragraph 13 above.
ALLOCATION OF INCOME AND GAINS
15. (a) Daily Dividend Portfolios. With respect to Portfolios that declare a dividend to shareholders on a daily basis, income will be allocated to each class of shares of such Portfolio on the basis of settled shares of each class in relation to the net assets of the Portfolio, and realized and unrealized capital gains and losses of the Portfolio will be allocated to each class of shares of such Portfolio on the basis of the net asset value of each such class in relation to the net asset value of the Portfolio.
(b) Non-Daily Dividend Portfolios. With respect to Portfolios that do not declare a dividend to shareholders on a daily basis, income and realized and unrealized capital gains and losses of a Portfolio will be allocated to each class of shares of such Portfolio on the basis of the net asset value of each such class in relation to the net asset value of the Portfolio.
CONVERSIONS
16. (a) Except for shares acquired through a reinvestment of dividends or distributions, Class B shares held for a period of time after purchase specified in Appendix A are eligible for automatic conversion into Class A shares of the same Portfolio in accordance with the terms described in the relevant prospectus. Class B shares acquired through a reinvestment of dividends or distributions will convert into Class A shares of the same Portfolio pro rata with the Class B shares that were not acquired through the reinvestment of dividends and distributions.
(b) The automatic conversion feature of Class B shares of each Fund shall be suspended at any time that the Board of Trustees of the Fund determines that there is not available a reasonably satisfactory opinion of counsel to the effect that (i) the assessment of the higher fee under the Fund's Rule 12b-1 Plan for Class B does not result in the Fund's dividends or distributions constituting a preferential dividend under the Internal Revenue Code of 1986, as amended, and (ii) the conversion of Class B shares into Class A shares does not constitute a taxable event under federal income tax law. In addition, the Board of Trustees of each Fund may suspend the automatic conversion feature by determining that any other condition to conversion set forth in the relevant prospectus, as amended from time to time, is not satisfied.
(c) The Board of Trustees of each Fund may also suspend the automatic conversion of Class B shares if it determines that suspension is appropriate to comply with the requirements of the Act, or any rule or regulation issued thereunder, relating to voting by Class B shareholders on the Fund's Rule 12b-1 Plan for Class A or, in the alternative, the Board of Trustees may provide Class B shareholders with alternative conversion or exchange rights.
17. Class A, Class C, Class R, Class P, Institutional Class, Consultant Class, Original Class and Portfolio Class shares do not have a conversion feature.
EXCHANGES
18. Holders of Class A, Class B, Class C, Class R, Class P, Institutional Class, Consultant Class, Original Class and Portfolio Class shares of a Portfolio shall have such exchange privileges as set forth in the relevant prospectuses. All exchanges are subject to the eligibility and minimum purchase requirements set forth in the Funds' prospectuses. Exchanges cannot be made between open-end and closed-end funds within the Delaware Investments Family of Funds.
OTHER PROVISIONS
19. Each class will vote separately with respect to the Rule 12b-1 Plan related to that class; provided, however, that Class B shares of a Portfolio may vote on any proposal to materially increase the fees to be paid by the Portfolio under the Rule 12b-1 Plan for the Class A shares of the Portfolio.
20. On an ongoing basis, the Trustees, pursuant to their fiduciary responsibilities under the Act and otherwise, will monitor each Portfolio for the existence of any material conflicts between the interests of all the classes of shares offered by such Portfolio. The Trustees, including a majority of the Trustees who are not interested persons of each Fund, shall take such action as is reasonably necessary to eliminate any such conflict that may develop. The Manager and the Distributor shall be responsible for alerting the Board to any material conflicts that arise.
21. As described more fully in the Funds' relevant prospectuses, broker-dealers that sell shares of each Portfolio will be compensated differently depending on which class of shares the investor selects.
22. Each Fund reserves the right to increase, decrease or waive the sales charge imposed on any existing or future class of shares of each Portfolio within the ranges permissible under applicable rules and regulations of the Securities and Exchange Commission (the "SEC") and the rules of the National Association of Securities Dealers, Inc. (the "NASD"), as such rules may be amended or adopted from time to time. Each Fund may in the future alter the terms of the existing classes of each Portfolio or create new classes in compliance with applicable rules and regulations of the SEC and the NASD.
23. All material amendments to this Plan must be approved by a majority of the Trustees of each Fund affected by such amendments, including a majority of the Trustees who are not interested persons of the Fund.
Initially Effective as of November 16, 2000
Amended as of September 19-20, 2001
Amended as of November 1, 2001
Amended as of May, 2003
APPENDIX A
----------------------------------------------------------------------------------------------------------------------------------
Maximum Annual Maximum Annual
Distribution Fee (as Shareholder Servicing
Fund/Class a percentage of fee (as a percentage of Years
average daily net average daily net To
assets of class) assets of class) Conversion
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Equity Fund I
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Balanced Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Devon Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Equity Funds II
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Decatur Equity Income Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Diversified Value Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Growth and Income Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Social Awareness Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Maximum Annual Maximum Annual
Distribution Fee (as Shareholder Servicing
Fund/Class a percentage of fee (as a percentage of Years
average daily net average daily net To
assets of class) assets of class) Conversion
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Equity Funds III
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware American Services Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Focused Growth Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Focused Value Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Health Care Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Small Cap Growth Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Technology and Innovation Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Trend Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Maximum Annual Maximum Annual
Distribution Fee (as Shareholder Servicing
Fund/Class a percentage of fee (as a percentage of Years
average daily net average daily net To
assets of class) assets of class) Conversion
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Equity Funds IV
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Diversified Growth Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Growth Opportunities Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Equity Funds V
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Retirement Income Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Small Cap Contrarian Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Small Cap Value Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Income Funds
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Corporate Bond Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Delchester Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Maximum Annual Maximum Annual
Distribution Fee (as Shareholder Servicing
Fund/Class a percentage of fee (as a percentage of Years
average daily net average daily net To
assets of class) assets of class) Conversion
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Extended Duration Bond Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware High Yield Opportunities Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Strategic Income Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Limited Term Government Funds
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Limited Term Government Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .15% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 5
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Government Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware American Government Bond Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group State Tax-Free Income Trust
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Pennsylvania Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Tax-Free Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Insured Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free USA Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Maximum Annual Maximum Annual
Distribution Fee (as Shareholder Servicing
Fund/Class a percentage of fee (as a percentage of Years
average daily net average daily net To
assets of class) assets of class) Conversion
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free USA Intermediate Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 5
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Global and International Funds
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Emerging Markets Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware International Equity Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware International Small Cap Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Adviser Funds
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Diversified Income Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware U.S. Growth Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .35% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Group Foundation Funds
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Balanced Allocation Portfolio
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
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Maximum Annual Maximum Annual
Distribution Fee (as Shareholder Servicing
Fund/Class a percentage of fee (as a percentage of Years
average daily net average daily net To
assets of class) assets of class) Conversion
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Growth Allocation Portfolio
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Income Allocation Portfolio
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware S & P 500 Index Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Consultant Class .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Pooled Trust
------------------------------------------------------------------ ---------------------- ------------------------- --------------
The Real Estate Investment Trust Portfolio
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Portfolio Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
The International Equity Portfolio
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class P .20% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Original Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Voyageur Insured Funds
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Minnesota Insured Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Arizona Insured Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Voyageur Intermediate Tax-Free Funds
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Minnesota Intermediate Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 5
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
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|
----------------------------------------------------------------------------------------------------------------------------------
Maximum Annual Maximum Annual
Distribution Fee (as Shareholder Servicing
Fund/Class a percentage of fee (as a percentage of Years
average daily net average daily net To
assets of class) assets of class) Conversion
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Voyageur Investment Trust
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free California Insured Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Florida Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Florida Insured Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Missouri Insured Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Oregon Insured Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Voyageur Mutual Funds
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Minnesota High-Yield Municipal Bond Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware National High-Yield Municipal Bond Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Arizona Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free California Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Idaho Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free New York Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
----------------------------------------------------------------------------------------------------------------------------------
|
----------------------------------------------------------------------------------------------------------------------------------
Maximum Annual Maximum Annual
Distribution Fee (as Shareholder Servicing
Fund/Class a percentage of fee (as a percentage of Years
average daily net average daily net To
assets of class) assets of class) Conversion
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Voyageur Mutual Funds II
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Colorado Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Voyageur Mutual Funds III
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Core Equity Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Select Growth Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .30% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class R .60% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Institutional Class N/A N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Voyageur Tax-Free Funds
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Delaware Tax-Free Minnesota Fund
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class A .25% N/A N/A
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class B .75% .25% 8
------------------------------------------------------------------ ---------------------- ------------------------- --------------
Class C .75% .25% N/A
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EX-99(p)(1)
CODE OF ETHICS
DELAWARE INVESTMENTS' FAMILY OF FUNDS
CREDO
It is the duty of all Delaware Investment employees, officers and directors to
conduct themselves with integrity, and at all times to place the interests of
shareholders first. In the interest of this credo, all personal securities
transactions will be conducted consistent with the Code of Ethics and in such a
manner as to avoid any actual or potential conflict of interest or any abuse of
an individual's position of trust and responsibility. The fundamental standard
of this Code is that personnel should not take any inappropriate advantage of
their positions.
Rule 17j-1 under the Investment Company Act of 1940 (the "Rule") makes it unlawful for certain persons, including any employee, officer or director of the Fund, the Fund's investment adviser/sub-adviser, and the Fund's principal underwriter, in connection with the purchase or sale by such person of a security held or to be acquired by the Fund:
(1) To employ any device, scheme or artifice to defraud the Fund;
(2) To make any untrue statement of a material fact to the Fund or omit to state a material fact necessary in order to make the statements made to the Fund, in light of the circumstances in which they are made, not misleading;
(3) To engage in any act, practice or course of business that operates or would operate as a fraud or deceit on the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
The Rule also requires that each Delaware Investments' Fund and its Adviser, sub-adviser, and principal underwriter adopt a written code of ethics containing provisions reasonably necessary to prevent certain persons from engaging in acts in violation of the above standard and shall use reasonable diligence and institute procedures reasonably necessary to prevent violations of the Code.
This Code of Ethics is being adopted by the Delaware Investments' Family of Funds (collectively "Delaware") in compliance with the requirement of Rule 17j-1 and to effect the purpose of the Credo set forth above, and to comply with the recommendations of the Investment Company Institute's Advisory Group on Personal Investing.
DEFINITIONS:
"Access person" means any director, trustee, general partner or Advisory Person of a fund or of a fund's investment adviser, or any employee of a fund or of a fund's investment adviser who, in connection with his or her regular functions or duties, participates in the selection of a fund's portfolio securities or who has access to information regarding a fund's future purchases or sales of portfolio securities. Those persons deemed Access Persons will be notified of this designation.
"Advisory person" means any employee of the fund or investment adviser who, in connection with his or her regular functions or duties makes, participates in, or obtains information regarding the purchase or sale of Covered Securities by a Fund, or whose functions relate to the making of any recommendations with respect to the purchase or sales.
"Affiliated person" means any officer, director, partner, or employee of a Delaware Fund or any subsidiary of Delaware Management Holdings, Inc. and any other person so designated by the Compliance Department.
"Beneficial ownership" shall be as defined in Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder. Generally speaking, a person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in a security, is a "beneficial owner" of the security. For example, a person is normally regarded as the beneficial owner of securities held by members of his or her immediate family sharing the same household. Additionally, ownership of derivative securities such as options, warrants or convertible securities which confer the right to acquire the underlying security at a fixed price constitutes beneficial ownership of the underlying security itself.
"Control" shall mean investment discretion in whole or in part of an account regardless of beneficial ownership, such as an account for which a person has power of attorney or authority to effect transactions.
"De Minimis Purchases or Sales" shall mean purchases or sales by covered persons of up to 500 shares of stock in a company that is in the Standard and Poor's 500 Index provided that Delaware has not traded more than 10,000 shares of that same stock during the last two trading days and there are no open orders for that stock on the Trading Desk.
"High Quality Short-Term Debt Instruments" shall mean any instrument that has a maturity at issuance of less that 366 days and that is rated in one of the two highest rating categories by a Nationally Recognized Statistical Rating Organization.
"Interested Director" means a director of the investment company who is an
interested person within the meaning of Section 2(a)(19) of the Act. A
"Disinterested Director" is a director who is not an interested person under
Section 2(a)(19) of the Act.
"Investment Personnel" means any employee, other than a Portfolio Manager who, in connection with his/her regular functions or duties, makes or participates in, the making of investment decisions affecting an investment company. Investment Personnel also include the staff who support a Portfolio Manager including analysts, administrative assistants, etc. Investment Personnel by definition are Access Persons.
"Managed Accounts" means an account that is professionally managed through a wrap program. Managed Accounts require pre-approval through the Compliance Department prior to starting up the account. The Compliance Department will consider the facts and circumstances of the account, including the functions and duties of the employees, when approving or denying such accounts. In addition, preclearance is exempt with Managed Accounts, however, all trades still require reporting and duplicate statements and confirmations are required to be sent to the Compliance Department. Preclearance is only exempt for trades initiated by the wrap manager. All trades initiated by the employee require preclearance.
"Portfolio Manager" means any person who, in connection with his/her regular functions or duties, makes or participates in, the making of investment decisions effecting an investment company. Portfolio Managers by definition are access persons.
"Security" shall have the meaning as set forth in Section 2(a)(36) of the Investment Company Act of 1940, except that it shall not include securities issued or guaranteed by the government of the United States or by any of its federal agencies, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments including repurchase agreements, unit investment trusts, shares of open-end registered investment companies (excluding mutual funds which Delaware Investments is the adviser and sub-adviser, see Appendix A for a list of these Funds, excluding money market funds), and municipal fund securities (i.e. 529 Plans) (excluding the TAP 529 Plan). In addition, the purchase, sale or exercise of a derivative security shall constitute the purchase or sale of the underlying security. However, the purchase or sale of the debt instrument of an issuer which does not give the holder the right to purchase the issuer's stock at a fixed price, does not constitute a purchase or sale of the issuer's stock.
Security being "considered for purchase or sale" or "being purchased or sold" means when a recommendation to purchase or sell the security has been made and communicated to the Trading Desk and with respect to the person making the recommendation, when such person seriously considers making, or when such person knows or should know that another person is seriously considering making, such a recommendation.
Security "held or to be acquired" by a fund means (i) any covered security which, within the most recent fifteen days (a) is or has been held by the fund; or (b) is being, or has been, considered by the fund or its investment adviser for purchase by the fund; and (ii) any option to purchase or sell, and any security convertible into or exchangeable for, a covered security.
PROHIBITED ACTIVITIES
I. The following restrictions apply to all Affiliated Persons, Access Persons, Investment Personnel and Portfolio Managers.
(a) No Affiliated Person or Access Person shall engage in any act, practice or course of conduct, which would violate the provisions of Rule 17j-1 set forth above.
(b) No Affiliated Person or Access Person shall purchase or sell, directly or indirectly, any security which to his/her knowledge is being actively considered for purchase or sale by Delaware; except that this prohibition shall not apply to:
(A) purchases or sales that are nonvolitional on the part of either the
Person or the Fund;
(B) purchases which are part of an automatic dividend reinvestment
plan;
(C) purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent
such rights were acquired from such issuer, and sales of such rights so
acquired;
(D) other purchases and sales specifically approved by the President or
Chief Executive Officer, with the advice of the General Counsel and/or
the Compliance Director, and deemed appropriate because of unusual or
unforeseen circumstances. A list of securities excepted will be
maintained by the Compliance Department.
(E) purchases or sales made by a wrap manager in an Affiliated Person's
or Access Person's managed account provided that such purchases or
sales do not reflect a pattern of conflict.
(c) Except for trades that meet the definition of de minimis, no Affiliated Person or Access Person may execute a buy or sell order for an account in which he or she has beneficial ownership or control until the third trading day following the execution of a Delaware buy or sell order in that same security.
(d) Despite any fault or impropriety, any Affiliated Person or Access Person who executes a buy or sell for an account in which he/she has beneficial ownership or control either (i) before the third trading day following the execution of a Delaware order in the same security, or (ii) when there are pending orders for a Delaware transaction as reflected on the open order blotter, shall forfeit any profits made (in the event of purchases) or loss avoided (in the event of sales), whether realized or unrealized, in the period from the date of the personal transaction to the end of the proscribed trading period. Payment of the amount forfeited shall be made by check or in cash to a charity of the person's choice and a copy of the check or receipt must be forwarded to the Compliance Department.
(e) Except for Managed Accounts meeting the provisions of Section I(b)(E) above, each Affiliated Person or Access Person's personal transactions must be precleared by using the Personal Transaction System. The information must be submitted prior to entering any orders for personal transactions. Preclearance is only valid for the day the request is submitted. If the order is not executed the same day, the preclearance request must be resubmitted. Regardless of preclearance, all transactions remain subject to the provisions of (d) above.
(f) Disinterested Directors of the Fund or its investment adviser are not subject to part (c), (d) or (e) of this section unless the director knew or, in the ordinary course of fulfilling his or her official duties should have known, that during the 15 day period immediately before or after the director's transaction in a covered security, the Fund purchased or sold the covered security, or the Fund or its investment adviser considered purchasing or selling the covered security.
(g) All Mutual Funds that are now subject to the Code of Ethics will be required to be held for a minimum of 60 days before selling the fund at a profit. Closing positions at a loss is not prohibited.
II. In addition to the requirements noted in Section I, the following additional restrictions apply to all Investment Personnel and Portfolio Managers.
(a) All Investment Personnel and Portfolio Managers are prohibited from purchasing any initial public offering.
(b) All Investment Personnel and Portfolio Managers are prohibited from purchasing any private placement without express PRIOR written consent by the Compliance Department. All private placement holdings are subject to disclosure to the Compliance Department. Any Investment Person or Portfolio Manager that holds a private placement must receive permission from the Compliance or Legal Departments prior to any participation by such person in Delaware's consideration of an investment in the same issuer.
(c) Short term trading resulting in a profit is prohibited. All opening positions must be held for a period of 60 days, in the aggregate, before they can be closed at a profit. Any short term trading profits are subject to the disgorgement procedures outlined above and at the maximum level of profit obtained. The closing of positions at a loss is not prohibited.
(d) All Investment Personnel and Portfolio Managers are prohibited from receiving anything of more than a de minimis value from any person or entity that does business with or on behalf of any fund or client. Things of value may include, but not be limited to, travel expenses, special deals or incentives.
(e) All Investment Personnel and Portfolio Managers require PRIOR written approval from the Legal or Compliance Department before they may serve on the board of directors of any public company.
III. In addition to the requirements noted in Sections I and II, the following additional restrictions apply to all Portfolio Managers.
(a) No Portfolio Manager may execute a buy or sell order for an account for which he/she has beneficial ownership within seven calendar days before or after an investment company or separate account that he/she manages trades in that security.
(b) Despite any fault or impropriety, any Portfolio Manager who executes a personal transaction within seven calendar days before or after an investment company or separate account that he/she manages trades in that security, shall forfeit any profits made (in the event of purchases) or loss avoided (in the event of sales), whether realized or unrealized, in the period from the date of the personal transaction to the end of the prescribed trading period. Payment of the amount forfeited shall be made by check or in cash to a charity of the person's choice and a copy of the check or receipt must be forwarded to the Compliance Department.
REQUIRED REPORTS
I. The following reports are required to be made by all Affiliated Persons, Access Persons, Investment Personnel, Portfolio Managers and Interested Directors.
(a) Disclose brokerage relationships at employment and at the time of opening any new account.
(b) Direct their brokers to supply to the Compliance Department, on a timely basis, duplicate copies of all confirmations and statements for all securities accounts and Managed Accounts. (In the U.K., all contract notes and periodic statements)
(c) All Delaware Investments Mutual Funds and Optimum Funds accounts will be required to be held in-house.
(d) Each quarter, no later than the tenth day after the end of the calendar quarter, submit to the Compliance Department a personal transaction summary showing all transactions in securities in accounts which such person has or acquires any direct or indirect beneficial ownership. Each Director who is not an interested person shall submit the quarterly reports only for transactions where at the time of the transaction the director knew, or in the ordinary course of fulfilling his official duties as a director should have known, that during the fifteen day period immediately preceding the date of the transaction by the director, such security was purchased or sold by the Fund's or was being considered for purchase or sale by the Fund's.
Every report will contain the following information:
(i) the date of the transaction, the name and the number of shares and
the principal amount of each security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) the price at which the transaction was effected;
(iv) the name of the broker, dealer or bank effecting the transaction.
(e) All Affiliated Persons must annually certify that they have read and complied with this Code of Ethics and all disclosure and reporting requirements contained therein.
II. In addition to the above reporting requirements, all Access Persons, Investment Personnel and Portfolio Mangers must:
(a) Provide an initial holdings report no later than 10 days upon commencement of employment that discloses all personal securities holdings.
(b) Provide an annual holdings report containing information regarding all personal securities holdings. This report must be current as of a date no more than 30 days before the report is submitted.
III. Disinterested Directors of the Fund or the Fund's investment adviser are not subject to the provisions noted in this Required Reports section.
ADMINISTRATIVE PROCEDURES
(a) The Compliance Department of Delaware will identify all Affiliated Persons, Access Persons, Investment Personnel and Portfolio Managers and will notify them of this classification and their obligations under this Code. The Compliance Department will also maintain procedures regarding the review of all reports required to be made under Rule 17j-1.
(b) The Legal or Compliance Department shall report to the President or Chief Executive Officer any apparent violations of the prohibitions or reporting requirements contained in this Code of Ethics. Such Chief Executive Officer or President, or both, will review the reports made and determine whether or not the Code of Ethics has been violated and shall determine what sanctions, if any, should be imposed in addition to any that may already have been imposed. On a quarterly basis, a summary report of material violations of the Code and the sanctions imposed will be made to the Board of Directors or Committee of Directors created for that purpose. In reviewing this report, the Board will consider whether the appropriate sanctions were imposed. When the Legal Department finds that a transaction otherwise reportable above could not reasonably be found to have resulted in a fraud, deceit or manipulative practice in violation of Rule 17j-1(b), it may, in its discretion, lodge a written memorandum of such finding in lieu of reporting the transaction.
(c) All material purchases and sales specifically approved by the President or Chief Executive Officer in accordance with Section (I)(b)(D) of Prohibited Activities, as described herein, shall be reported to the Board at its next regular meeting.
(d) The Board of Directors, including a majority of independent directors, must approve the Fund's Code, as well as the Code of any adviser and principal underwriter. If an adviser or underwriter makes a material changes to its code, the Board must approve the material change within six months. The Board must base its approval of a code of ethics, or a material change to a code, upon a determination that the code contains provisions reasonable necessary to prevent "access persons" from violating the anti-fraud provisions of the Rule 17j-1.
(e) At least once a year, the Board must be provided a written report from each
Rule 17j-1 organization that (1) describes issues that arose during the previous
year under the code or procedures applicable to the Rule 17j-1 organization,
including, but not limited to, information about material code or procedure
violations and sanctions imposed in response to those material violations and
(2) certifies to the Fund's board that the Rule 17j-1 organization has adopted
procedures reasonably necessary to prevent its access persons from violating its
Code of Ethics.
Appendix A - List of Mutual Funds subject to the Code of Ethics
o All Delaware Investments Family of Funds
o All Optimum Fund Trust
o All Lincoln National VIP Funds
o AB Funds Trust
o Diversified Investment Advisers - Small Cap Growth Fund
o First Tennessee - First Funds Capital Appreciation
o First Tennessee - First Horizon Capital Appreciation
o Frank Russell Investment Company - Fixed Income III Fund
o Frank Russell Investment Company - International Fund
o Frank Russell Investment Company - International Securities Fund
o Fremont Global Fund
o Frank Russell Investment Company - Multistrategy Bond Fund
o Mercantile Capital Opportunities Fund
o MLIG Roszel/Delaware Small Cap Portfolio
o MLIG Roszel/Delaware Trend Portfolio
o SIIT Small Cap Fund
o SIIT Small/Mid Cap Equity Fund
o SIMT Small Cap Growth Fund
o SIMT Tax Managed Small Cap Fund
o TIFF International Equity Fund
o TIFF Multi-Asset Fund
o UBS Pace Small/Medium Co Growth Equity Fund
EX-99(p)(2)
DELAWARE INVESTMENTS
CODE OF ETHICS
CREDO
It is the duty of all Delaware Investment employees, officers and directors to
conduct themselves with integrity, and at all times to place the interests of
shareholders first. In the interest of this credo, all personal securities
transactions will be conducted consistent with the Code of Ethics and in such a
manner as to avoid any actual or potential conflict of interest or any abuse of
an individual's position of trust and responsibility. The fundamental standard
of this Code is that personnel should not take any inappropriate advantage of
their positions.
Rule 17j-1 under the Investment Company Act of 1940 (the "Rule") makes it unlawful for certain persons, including any employee, officer or director, any investment adviser and any principal underwriter, in connection with the purchase or sale by such person of a security held or to be acquired by a Fund or account:
(1) To employ any device, scheme or artifice to defraud;
(2) To make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances in which they are made, not misleading;
(3) To engage in any act, practice or course of business that operates or would operate as a fraud or deceit; or
(4) To engage in any manipulative practice.
The Rule also requires that each Delaware Investments' Adviser, sub-adviser, and principal underwriter adopt a written code of ethics containing provisions reasonably necessary to prevent certain persons from engaging in acts in violation of the above standard and shall use reasonable diligence and institute procedures reasonably necessary to prevent violations of the Code.
This Code of Ethics is being adopted by the following Delaware Investment companies (collectively "Delaware") in compliance with the requirement of Rule 17j-1 and to effect the purpose of the Credo set forth above and to comply with the recommendations of the Investment Company Institute's Advisory Group on Personal Investing:
DELAWARE MANAGEMENT BUSINESS TRUST
DELAWARE MANAGEMENT COMPANY
DELAWARE INVESTMENT ADVISERS
DELAWARE LINCOLN CASH MANAGEMENT
DELAWARE DISTRIBUTORS, L.P.
DELAWARE CAPITAL MANAGEMENT, INC.
RETIREMENT FINANCIAL SERVICES, INC.
DELAWARE SERVICE COMPANY, INC.
DELAWARE MANAGEMENT TRUST COMPANY
DEFINITIONS:
"Access person" means any director, officer, general partner or Advisory Person of a fund or of a fund's investment adviser, or any employee of a fund or of a fund's investment adviser who, in connection with his or her regular functions or duties, participates in the selection of a fund's portfolio securities or who has access to information regarding a fund's future purchases or sales of portfolio securities. Those persons deemed Access Persons will be notified of this designation.
"Advisory person" means any employee of the fund or investment adviser who, in connection with his or her regular functions or duties makes, participates in, or obtains information regarding the purchase or sale of Covered Securities by a Fund, or whose functions relate to the making of any recommendations with respect to the purchase or sales.
"Affiliated person" means any officer, director, partner, or employee of a Delaware Fund or any subsidiary of Delaware Management Holdings, Inc. and any other person so designated by the Compliance Department.
"Beneficial ownership" shall be as defined in Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder. Generally speaking, a person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in a security, is a "beneficial owner" of the security. For example, a person is normally regarded as the beneficial owner of securities held by members of his or her immediate family sharing the same household. Additionally, ownership of derivative securities such as options, warrants or convertible securities which confer the right to acquire the underlying security at a fixed price constitutes beneficial ownership of the underlying security itself.
"Control" shall mean investment discretion in whole or in part of an account regardless of beneficial ownership, such as an account for which a person has power of attorney or authority to effect transactions.
"De Minimis Purchases or Sales" shall mean purchases or sales by covered persons of up to 500 shares of stock in a company that is in the Standard and Poor's 500 Index provided that Delaware has not traded more than 10,000 shares of that same stock during the last two trading days and there are no open orders for that stock on the Trading Desk.
"High Quality Short-Term Debt Instruments" shall mean any instrument that has a maturity at issuance of less that 366 days and that is rated in one of the two highest rating categories by a Nationally Recognized Statistical Rating Organization.
"Investment Personnel" means any employee, other than a Portfolio Manager who, in connection with his/her regular functions or duties, makes or participates in, the making of investment decisions affecting an investment company. Investment Personnel also include the staff who support a Portfolio Manager including analysts, administrative assistants, etc. Investment Personnel by definition are Access Persons.
"Managed Accounts" means an account that is professionally managed through a wrap program. Managed Accounts require pre-approval through the Compliance Department prior to starting up the account. The Compliance Department will consider the facts and circumstances of the account, including the functions and duties of the employees, when approving or denying such accounts. In addition, preclearance is exempt with Managed Accounts, however, all trades still require reporting and duplicate statements and confirmations are required to be sent to the Compliance Department. Preclearance is only exempt for trades initiated by the wrap manager. All trades initiated by the employee require preclearance.
"Portfolio Manager" means any person who, in connection with his/her regular functions or duties, makes or participates in, the making of investment decisions effecting an investment company. Portfolio Managers by definition are access persons.
"Security" shall have the meaning as set forth in Section 2(a)(36) of the Investment Company Act of 1940, except that it shall not include securities issued or guaranteed by the government of the United States or by any of its federal agencies, bankers' acceptances, bank certificates of deposit, commercial paper, high quality short-term debt instruments including repurchase agreements, unit investment trusts, shares of open-end registered investment companies (other than mutual funds for which Delaware Investments is the adviser and sub-adviser, see Appendix A for a list of these Funds, excluding money market funds), and municipal fund securities (i.e. 529 Plans) (other than the TAP 529 Plan). In addition, the purchase, sale or exercise of a derivative security shall constitute the purchase or sale of the underlying security. However, the purchase or sale of the debt instrument of an issuer which does not give the holder the right to purchase the issuer's stock at a fixed price, does not constitute a purchase or sale of the issuer's stock.
Security being "considered for purchase or sale" or "being purchased or sold" means when a recommendation to purchase or sell the security has been made and communicated to the Trading Desk and with respect to the person making the recommendation, when such person seriously considers making, or when such person knows or should know that another person is seriously considering making, such a recommendation.
Security "held or to be acquired" by an account means (i) any covered security which, within the most recent fifteen days (a) is or has been held by the account; or (b) is being, or has been, considered by the account or its investment adviser for purchase by the account; and (ii) any option to purchase or sell, and any security convertible into or exchangeable for, a covered security.
PROHIBITED ACTIVITIES
I. The following restrictions apply to all Affiliated Persons, Access Persons, Investment Personnel and Portfolio Managers.
(a) No Affiliated Person, Access Person, Investment Person or Portfolio Manager shall engage in any act, practice or course of conduct, which would violate the provisions of Rule 17j-1 set forth above.
(b) No Affiliated Person, Access Person, Investment Person or Portfolio Manager shall purchase or sell, directly or indirectly, any security which to his/her knowledge is being actively considered for purchase or sale by Delaware; except that this prohibition shall not apply to:
(A) purchases or sales that are nonvolitional on the part of either the
Person or the Account;
(B) purchases which are part of an automatic dividend reinvestment
plan;
(C) purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent
such rights were acquired from such issuer, and sales of such rights so
acquired;
(D) other purchases and sales specifically approved by the President or
Chief Executive Officer, with the advice of the General Counsel and/or
the Compliance Director, and deemed appropriate because of unusual or
unforeseen circumstances. A list of securities excepted will be
maintained by the Compliance Department.
(E) purchases or sales made by a wrap manager in an Affiliated Person's
or Access Person's managed account, provided that such purchases or
sales do not reflect a pattern of conflict.
(c) Except for trades that meet the definition of de minimis, no Affiliated Person, Access Person, Investment Person or Portfolio Manager may execute a buy or sell order for an account in which he or she has beneficial ownership or control until the third trading day following the execution of a Delaware buy or sell order in that same security.
(d) Despite any fault or impropriety, any Affiliated Person, Access Person,
Investment Person or Portfolio Manager who executes a buy or sell for an account
in which he/she has beneficial ownership or control either (i) before the third
trading day following the execution of a Delaware order in the same security, or
(ii) when there are pending orders for a Delaware transaction as reflected on
the open order blotter, shall forfeit any profits made (in the event of
purchases) or loss avoided (in the event of sales), whether realized or
unrealized, in the period from the date of the personal transaction to the end
of the proscribed trading period. Payment of the amount forfeited shall be made
by check or in cash to a charity of the person's choice and a copy of the check
or receipt must be forwarded to the Compliance Department.
(e) Except for Managed Accounts meeting the provisions of Section I(b)(E) above, each Affiliated Person or Access Person's personal transactions must be precleared by using the Personal Transaction System. The information must be submitted prior to entering any orders for personal transactions. Preclearance is only valid for the day the request is submitted. If the order is not executed the same day, the preclearance request must be resubmitted. Regardless of preclearance, all transactions remain subject to the provisions of (d) above.
(f) All Mutual Funds that are now subject to the Code of Ethics will be required to be held for a minimum of 60 days before selling the fund at a profit. Closing positions at a loss is not prohibited.
II. In addition to the requirements noted in Section I, the following additional restrictions apply to all Investment Personnel and Portfolio Managers.
(a) All Investment Personnel and Portfolio Managers are prohibited from purchasing any initial public offering.
(b) All Investment Personnel and Portfolio Managers are prohibited from purchasing any private placement without express PRIOR written consent by the Compliance Department. All private placement holdings are subject to disclosure to the Compliance Department. Any Investment Person or Portfolio Manager that holds a private placement must receive permission from the Compliance or Legal Departments prior to any participation by such person in Delaware's consideration of an investment in the same issuer.
(c) Short term trading resulting in a profit is prohibited. All opening positions must be held for a period of 60 days, in the aggregate, before they can be closed at a profit. Any short term trading profits are subject to the disgorgement procedures outlined above and at the maximum level of profit obtained. The closing of positions at a loss is not prohibited.
(d) All Investment Personnel and Portfolio Managers are prohibited from receiving anything of more than a de minimis value from any person or entity that does business with or on behalf of any account or client. Things of value may include, but not be limited to, travel expenses, special deals or incentives.
(e) All Investment Personnel and Portfolio Managers require PRIOR written approval from the Legal or Compliance Department before they may serve on the board of directors of any public company.
III. In addition to the requirements noted in Sections I and II, the following additional restrictions apply to all Portfolio Managers.
(a) No Portfolio Manager may execute a buy or sell order for an account for which he/she has beneficial ownership within seven calendar days before or after an investment company or separate account that he/she manages trades in that security.
(b) Despite any fault or impropriety, any Portfolio Manager who executes a personal transaction within seven calendar days before or after an investment company or separate account that he/she manages trades in that security, shall forfeit any profits made (in the event of purchases) or loss avoided (in the event of sales), whether realized or unrealized, in the period from the date of the personal transaction to the end of the prescribed trading period. Payment of the amount forfeited shall be made by check or in cash to a charity of the person's choice and a copy of the check or receipt must be forwarded to the Compliance Department.
REQUIRED REPORTS
I. The following reports are required to be made by all Affiliated Persons, Access Persons, Investment Personnel, Portfolio Managers.
(a) Disclose brokerage relationships at employment and at the time of opening any new account.
(b) Direct their brokers to supply to the Compliance Department, on a timely basis, duplicate copies of all confirmations and statements for all securities accounts and Managed Accounts. (In the U.K., all contract notes and periodic statements)
(c) All Delaware Investments Mutual Funds and Optimum Fund Trust accounts will be required to be held in-house.
(d) Each quarter, no later than the tenth day after the end of the calendar quarter, submit to the Compliance Department a personal transaction summary showing all transactions in securities in accounts which such person has or acquires any direct or indirect beneficial ownership. Each Director who is not an interested person shall submit the quarterly reports only for transactions where at the time of the transaction the director knew, or in the ordinary course of fulfilling his official duties as a director should have known, that during the fifteen day period immediately preceding the date of the transaction by the director, such security was purchased or sold by the Account's or was being considered for purchase or sale by the Account's.
Every report will contain the following information:
(i) the date of the transaction, the name and the number of shares and
the principal amount of each security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) the price at which the transaction was effected;
(iv) the name of the broker, dealer or bank effecting the transaction.
(e) All Affiliated Persons must annually certify that they have read and complied with this Code of Ethics and all disclosure and reporting requirements contained therein.
II. In addition to the above reporting requirements, all Access Persons, Investment Personnel and Portfolio Managers must:
(a) Provide an initial holdings report no later than 10 days upon commencement of employment that discloses all personal securities holdings.
(b) Provide an annual holdings report containing information regarding all personal securities holdings. This report must be current as of a date no more than 30 days before the report is submitted.
ADMINISTRATIVE PROCEDURES
(a) The Compliance Department of Delaware will identify all Affiliated Persons, Access Persons, Investment Personnel and Portfolio Managers and will notify them of this classification and their obligations under this Code. The Compliance Department will also maintain procedures regarding the review of all reports required to be made under Rule 17j-1.
(b) The Legal or Compliance Department shall report to the President or Chief Executive Officer any apparent violations of the prohibitions or reporting requirements contained in this Code of Ethics. Such Chief Executive Officer or President, or both, will review the reports made and determine whether or not the Code of Ethics has been violated and shall determine what sanctions, if any, should be imposed in addition to any that may already have been imposed. On a quarterly basis, a summary report of material violations of the Code and the sanctions imposed will be made to the Board of Directors or Committee of Directors created for that purpose. In reviewing this report, the Board will consider whether the appropriate sanctions were imposed. When the Legal Department finds that a transaction otherwise reportable above could not reasonably be found to have resulted in a fraud, deceit or manipulative practice in violation of Rule 17j-1(b), it may, in its discretion, lodge a written memorandum of such finding in lieu of reporting the transaction.
(c) All material purchases and sales specifically approved by the President or Chief Executive Officer in accordance with Section (I)(b)(D) of Prohibited Activities, as described herein, shall be reported to the Board at its next regular meeting.
(d) The Board of Directors, including a majority of independent directors, must approve the Fund's Code, as well as the Code of any adviser and principal underwriter. If an adviser or underwriter makes a material changes to its code, the Board must approve the material change within six months. The Board must base its approval of a code of ethics, or a material change to a code, upon a determination that the code contains provisions reasonable necessary to prevent "access persons" from violating the anti-fraud provisions of the Rule 17j-1.
(e) At least once a year, the Board must be provided a written report from each
Rule 17j-1 organization that (1) describes issues that arose during the previous
year under the code or procedures applicable to the Rule 17j-1 organization,
including, but not limited to, information about material code or procedure
violations and sanctions imposed in response to those material violations and
(2) certifies to the Fund's board that the Rule 17j-1 organization has adopted
procedures reasonably necessary to prevent its access persons from violating its
Code of Ethics.
Addendum to Delaware Investments Code of Ethics
Effective April 1, 2001, the Delaware Investments Code of Ethics (the "Code") is being amended to reflect the integration of the former Lincoln 401K Group into Retirement Financial Services, Inc. All employees of this Fort Wayne based unit are "affiliated persons" under the Code and consequently are subject to all applicable requirements except that they will not be subject to requirements specified in Part I, Prohibited Activities, Sections (b) (other than the Mutual Funds listed in Appendix A which will require preclearance) through (e) inclusive.
Appendix A - List of Mutual Funds subject to the Code of Ethics
o All Delaware Investments Family of Funds
o All Optimum Fund Trust Funds
o All Lincoln National VIP Funds
o AB Funds Trust
o Diversified Investment Advisers - Small Cap Growth Fund
o First Tennessee - First Funds Capital Appreciation
o First Tennessee - First Horizon Capital Appreciation
o Frank Russell Investment Company - Fixed Income III Fund
o Frank Russell Investment Company - International Fund
o Frank Russell Investment Company - International Securities Fund
o Fremont Global Fund
o Frank Russell Investment Company - Multistrategy Bond Fund
o Mercantile Capital Opportunities Fund
o MLIG Roszel/Delaware Small Cap Portfolio
o MLIG Roszel/Delaware Trend Portfolio
o SIIT Small Cap Fund
o SIIT Small/Mid Cap Equity Fund
o SIMT Small Cap Growth Fund
o SIMT Tax Managed Small Cap Fund
o TIFF International Equity Fund
o TIFF Multi-Asset Fund
o UBS Pace Small/Medium Co Growth Equity Fund
EX-99(p)(3)
CODE OF ETHICS
Lincoln Financial Distributors, Inc.
CREDO
It is the duty of all Lincoln Financial Distributors, Inc., employees, officers,
and directors to conduct themselves with integrity and at all times to place the
interests of shareholders and clients first. In the interest of this Credo, all
personal securities transactions will be conducted consistent with the Code of
Ethics and in such a manner as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and responsibility.
The fundamental standard of this Code is that personnel should not take any
inappropriate advantage of their position.
Prohibited Activities
The following restrictions apply to Lincoln Financial Distributors, Inc. ("LFD") employees, officers and directors:
[ ] No individual shall engage in any act, practice or course of conduct, which would violate the provisions of Rule 17j-1.
[ ] Insider Trading
Insider trading is a prohibited practice of trading in securities based on material non-public information. Officers, directors, registered principals and registered representatives of LFD and any associated persons are prohibited from trading, either personally or on behalf of others (including family) on material non-public information or from communicating material non-public information to others. These individuals are also prohibited from giving advice based on inside information.
[ ] Use of Unapproved Advertisements and Sales Materials
All advertisements and all sales materials which will be used with more than one prospect or client must be approved by Compliance prior to use. Failure to submit an advertisement or sale material may subject an individual to sanctions including a fine, suspension or termination.
[ ] No registered representative can participate in, or conduct business in, a number of activities that are identified below. The prohibitions are necessary in order to protect the investing public.
[ ] Selling Away
A registered representative must obtain written approval from LFD Compliance prior to participating in any private securities transaction. A private securities transaction is any securities transaction that is executed outside, or away from LFD. The definition includes money-raising activities, offerings involving a limited number of purchases or sales, issuing promissory notes, and some multi-level marketing programs.
[ ] Purchase of Initial Public Offerings or Hot Issues
An initial public offering (IPO) is a new securities issue that is publicly traded at a premium above the initial offering price. When a new issue sells at an increase in the secondary market, then that issue would be considered a "hot issue". This rule applies to all associated persons and their immediate family members with limited exceptions.
[ ] Engage In Prohibited Sales and Marketing Practices
Certain sales practices are specifically prohibited by various Federal and State laws, including the NAIC Model Unfair Trade Practices Act, which has been adopted by many states. Among the sale practices that registered representatives and employees should not engage in include:
[ ] Arranging For credit
[ ] Bashing
[ ] Business Valuation
[ ] Churning
[ ] Deceptive Practices
[ ] Fraud
[ ] High Pressure Tactics
[ ] Rebating
[ ] Unfair Trade Practices
[ ] Twisting
A comprehensive list of policies and procedures are included in the LFD Compliance Manual.
Required Reports
The following reports are required to be made by all LFD's associated persons. Associated persons include any officers, directors, partners, or non-clerical employees of LFD.
[ ] Disclose brokerage relationship at employment and at the time of opening any
new accounts
[ ] Direct their brokers to supply to LFD Compliance, on a timely basis,
duplicate copies of all confirmations and statements for all securities
accounts
[ ] Annually certify that they have read and complied with this Code of Ethics.
EX-99(q)
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Investments Family of Funds listed below (the "Trust"), hereby constitute and appoint Joseph H. Hastings, Richelle S. Maestro and Walter P. Babich, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trust on Form N-1A, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
This power of attorney is effective for all documents filed on or after August 21, 2003.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 21st day of August 2003.
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Delaware Investments Family of Funds
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Delaware Group Adviser Funds Delaware Group Tax-Free Fund
Delaware Group Cash Reserve Delaware Group Tax-Free Money Fund
Delaware Group Equity Funds I Delaware Pooled Trust
Delaware Group Equity Funds II Delaware VIP Trust
Delaware Group Equity Funds III Delaware Investments Dividend and Income Fund, Inc.
Delaware Group Equity Funds IV Delaware Investments Global Dividend and Income Fund, Inc.
Delaware Group Equity Funds V Delaware Investments Arizona Municipal Income Fund, Inc.
Delaware Group Foundation Funds Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Delaware Group Global & International Funds Delaware Investments Florida Insured Municipal Income Fund
Delaware Group Government Fund Delaware Investments Minnesota Municipal Income Fund, Inc.
Delaware Group Income Funds Delaware Investments Minnesota Municipal Income Fund II, Inc.
Delaware Group Limited-Term Government Funds Delaware Investments Minnesota Municipal Income Fund III, Inc.
Delaware Group State Tax-Free Income Trust
|
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Investments Family of Funds listed below (the "Trust"), hereby constitute and appoint Jude T. Driscoll, Joseph H. Hastings, Richelle S. Maestro and Walter P. Babich, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trust on Form N-1A, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
This power of attorney is effective for all documents filed on or after August 21, 2003.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 21st day of August 2003.
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Delaware Investments Family of Funds
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Delaware Group Adviser Funds Voyageur Insured Funds
Delaware Group Cash Reserve Voyageur Intermediate Tax-Free Funds
Delaware Group Equity Funds I Voyageur Investment Trust
Delaware Group Equity Funds II Voyageur Mutual Funds
Delaware Group Equity Funds III Voyageur Mutual Funds II
Delaware Group Equity Funds IV Voyageur Mutual Funds III
Delaware Group Equity Funds V Voyageur Tax Free Funds
Delaware Group Foundation Funds Delaware Investments Dividend and Income Fund, Inc.
Delaware Group Global & International Funds Delaware Investments Global Dividend and Income Fund, Inc.
Delaware Group Government Fund Delaware Investments Arizona Municipal Income Fund, Inc.
Delaware Group Income Funds Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Delaware Group Limited-Term Government Funds Delaware Investments Florida Insured Municipal Income Fund
Delaware Group State Tax-Free Income Trust Delaware Investments Minnesota Municipal Income Fund, Inc.
Delaware Group Tax-Free Fund Delaware Investments Minnesota Municipal Income Fund II, Inc.
Delaware Group Tax-Free Money Fund Delaware Investments Minnesota Municipal Income Fund III, Inc.
Delaware Pooled Trust
Delaware VIP Trust
|
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Investments Family of Funds listed below (the "Trust"), hereby constitute and appoint Jude T. Driscoll, Joseph H. Hastings, Richelle S. Maestro and Walter P. Babich, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trust on Form N-1A, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
This power of attorney is effective for all documents filed on or after August 21, 2003.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 21st day of August 2003.
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Delaware Investments Family of Funds
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Delaware Group Adviser Funds Voyageur Insured Funds
Delaware Group Cash Reserve Voyageur Intermediate Tax-Free Funds
Delaware Group Equity Funds I Voyageur Investment Trust
Delaware Group Equity Funds II Voyageur Mutual Funds
Delaware Group Equity Funds III Voyageur Mutual Funds II
Delaware Group Equity Funds IV Voyageur Mutual Funds III
Delaware Group Equity Funds V Voyageur Tax Free Funds
Delaware Group Foundation Funds Delaware Investments Dividend and Income Fund, Inc.
Delaware Group Global & International Funds Delaware Investments Global Dividend and Income Fund, Inc.
Delaware Group Government Fund Delaware Investments Arizona Municipal Income Fund, Inc.
Delaware Group Income Funds Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Delaware Group Limited-Term Government Funds Delaware Investments Florida Insured Municipal Income Fund
Delaware Group State Tax-Free Income Trust Delaware Investments Minnesota Municipal Income Fund, Inc.
Delaware Group Tax-Free Fund Delaware Investments Minnesota Municipal Income Fund II, Inc.
Delaware Group Tax-Free Money Fund Delaware Investments Minnesota Municipal Income Fund III, Inc.
Delaware Pooled Trust
Delaware VIP Trust
|
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Investments Family of Funds listed below (the "Trust"), hereby constitute and appoint Jude T. Driscoll, Joseph H. Hastings, Richelle S. Maestro and Walter P. Babich, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trust on Form N-1A, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
This power of attorney is effective for all documents filed on or after August 21, 2003.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 21st day of August 2003.
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Delaware Investments Family of Funds
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Delaware Group Adviser Funds Delaware Group Tax-Free Fund
Delaware Group Cash Reserve Delaware Group Tax-Free Money Fund
Delaware Group Equity Funds I Delaware Pooled Trust
Delaware Group Equity Funds II Delaware VIP Trust
Delaware Group Equity Funds III Delaware Investments Dividend and Income Fund, Inc.
Delaware Group Equity Funds IV Delaware Investments Global Dividend and Income Fund, Inc.
Delaware Group Equity Funds V Delaware Investments Arizona Municipal Income Fund, Inc.
Delaware Group Foundation Funds Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Delaware Group Global & International Funds Delaware Investments Florida Insured Municipal Income Fund
Delaware Group Government Fund Delaware Investments Minnesota Municipal Income Fund, Inc.
Delaware Group Income Funds Delaware Investments Minnesota Municipal Income Fund II, Inc.
Delaware Group Limited-Term Government Funds Delaware Investments Minnesota Municipal Income Fund III, Inc.
Delaware Group State Tax-Free Income Trust
|
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Investments Family of Funds listed below (the "Trust"), hereby constitute and appoint Jude T. Driscoll, Joseph H. Hastings, Richelle S. Maestro and Walter P. Babich, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trust on Form N-1A, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
This power of attorney is effective for all documents filed on or after August 21, 2003.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 21st day of August 2003.
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Delaware Investments Family of Funds
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Delaware Group Adviser Funds Voyageur Insured Funds
Delaware Group Cash Reserve Voyageur Intermediate Tax-Free Funds
Delaware Group Equity Funds I Voyageur Investment Trust
Delaware Group Equity Funds II Voyageur Mutual Funds
Delaware Group Equity Funds III Voyageur Mutual Funds II
Delaware Group Equity Funds IV Voyageur Mutual Funds III
Delaware Group Equity Funds V Voyageur Tax Free Funds
Delaware Group Foundation Funds Delaware Investments Dividend and Income Fund, Inc.
Delaware Group Global & International Funds Delaware Investments Global Dividend and Income Fund, Inc.
Delaware Group Government Fund Delaware Investments Arizona Municipal Income Fund, Inc.
Delaware Group Income Funds Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Delaware Group Limited-Term Government Funds Delaware Investments Florida Insured Municipal Income Fund
Delaware Group State Tax-Free Income Trust Delaware Investments Minnesota Municipal Income Fund, Inc.
Delaware Group Tax-Free Fund Delaware Investments Minnesota Municipal Income Fund II, Inc.
Delaware Group Tax-Free Money Fund Delaware Investments Minnesota Municipal Income Fund III, Inc.
Delaware Pooled Trust
Delaware VIP Trust
|
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Investments Family of Funds listed below (the "Trust"), hereby constitute and appoint Jude T. Driscoll, Joseph H. Hastings, Richelle S. Maestro and Walter P. Babich, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trust on Form N-1A, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
This power of attorney is effective for all documents filed on or after August 21, 2003.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 21st day of August 2003.
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Delaware Investments Family of Funds
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Delaware Group Adviser Funds Voyageur Insured Funds
Delaware Group Cash Reserve Voyageur Intermediate Tax-Free Funds
Delaware Group Equity Funds I Voyageur Investment Trust
Delaware Group Equity Funds II Voyageur Mutual Funds
Delaware Group Equity Funds III Voyageur Mutual Funds II
Delaware Group Equity Funds IV Voyageur Mutual Funds III
Delaware Group Equity Funds V Voyageur Tax Free Funds
Delaware Group Foundation Funds Delaware Investments Dividend and Income Fund, Inc.
Delaware Group Global & International Funds Delaware Investments Global Dividend and Income Fund, Inc.
Delaware Group Government Fund Delaware Investments Arizona Municipal Income Fund, Inc.
Delaware Group Income Funds Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Delaware Group Limited-Term Government Funds Delaware Investments Florida Insured Municipal Income Fund
Delaware Group State Tax-Free Income Trust Delaware Investments Minnesota Municipal Income Fund, Inc.
Delaware Group Tax-Free Fund Delaware Investments Minnesota Municipal Income Fund II, Inc.
Delaware Group Tax-Free Money Fund Delaware Investments Minnesota Municipal Income Fund III, Inc.
Delaware Pooled Trust
Delaware VIP Trust
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POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Investments Family of Funds listed below (the "Trust"), hereby constitute and appoint Jude T. Driscoll, Joseph H. Hastings, Richelle S. Maestro and Walter P. Babich, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trust on Form N-1A, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
This power of attorney is effective for all documents filed on or after August 21, 2003.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 21st day of August 2003.
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Delaware Investments Family of Funds
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Delaware Group Adviser Funds Voyageur Insured Funds
Delaware Group Cash Reserve Voyageur Intermediate Tax-Free Funds
Delaware Group Equity Funds I Voyageur Investment Trust
Delaware Group Equity Funds II Voyageur Mutual Funds
Delaware Group Equity Funds III Voyageur Mutual Funds II
Delaware Group Equity Funds IV Voyageur Mutual Funds III
Delaware Group Equity Funds V Voyageur Tax Free Funds
Delaware Group Foundation Funds Delaware Investments Dividend and Income Fund, Inc.
Delaware Group Global & International Funds Delaware Investments Global Dividend and Income Fund, Inc.
Delaware Group Government Fund Delaware Investments Arizona Municipal Income Fund, Inc.
Delaware Group Income Funds Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Delaware Group Limited-Term Government Funds Delaware Investments Florida Insured Municipal Income Fund
Delaware Group State Tax-Free Income Trust Delaware Investments Minnesota Municipal Income Fund, Inc.
Delaware Group Tax-Free Fund Delaware Investments Minnesota Municipal Income Fund II, Inc.
Delaware Group Tax-Free Money Fund Delaware Investments Minnesota Municipal Income Fund III, Inc.
Delaware Pooled Trust
Delaware VIP Trust
|
POWER OF ATTORNEY
I, the undersigned member of the Boards of Trustees/Directors of Delaware Investments Family of Funds listed below (the "Trust"), hereby constitute and appoint Jude T. Driscoll, Joseph H. Hastings, Richelle S. Maestro and Walter P. Babich, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trust on Form N-1A, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
This power of attorney is effective for all documents filed on or after August 21, 2003.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 21st day of August 2003.
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Delaware Investments Family of Funds
----------------------------------------------------------------------------------------------------------------------------------
Delaware Group Adviser Funds Voyageur Insured Funds
Delaware Group Cash Reserve Voyageur Intermediate Tax-Free Funds
Delaware Group Equity Funds I Voyageur Investment Trust
Delaware Group Equity Funds II Voyageur Mutual Funds
Delaware Group Equity Funds III Voyageur Mutual Funds II
Delaware Group Equity Funds IV Voyageur Mutual Funds III
Delaware Group Equity Funds V Voyageur Tax Free Funds
Delaware Group Foundation Funds Delaware Investments Dividend and Income Fund, Inc.
Delaware Group Global & International Funds Delaware Investments Global Dividend and Income Fund, Inc.
Delaware Group Government Fund Delaware Investments Arizona Municipal Income Fund, Inc.
Delaware Group Income Funds Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Delaware Group Limited-Term Government Funds Delaware Investments Florida Insured Municipal Income Fund
Delaware Group State Tax-Free Income Trust Delaware Investments Minnesota Municipal Income Fund, Inc.
Delaware Group Tax-Free Fund Delaware Investments Minnesota Municipal Income Fund II, Inc.
Delaware Group Tax-Free Money Fund Delaware Investments Minnesota Municipal Income Fund III, Inc.
Delaware Pooled Trust
Delaware VIP Trust
|
POWER OF ATTORNEY
I, the Chief Financial Officer of Delaware Investments Family of Funds listed below (the "Trust"), hereby constitute and appoint Jude T. Driscoll, Richelle S. Maestro and Walter P. Babich, and each of them singly, my true and lawful attorneys-in-fact, with full power of substitution, and with full power to each of them, to sign for me and in my name in the appropriate capacity, all Registration Statements of the Trust on Form N-1A, Form N-8A or any successor thereto, any and all subsequent Amendments, Pre-Effective Amendments, or Post-Effective Amendments to said Registration Statements on Form N-1A or any successor thereto, any Registration Statements on Form N-14, and any supplements or other instruments in connection therewith, and generally to do all such things in my name and behalf in connection therewith as said attorneys-in-fact deem necessary or appropriate, to comply with the provisions of the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended, and all related requirements of the Securities and Exchange Commission. I hereby ratify and confirm all that said attorneys-in-fact or their substitutes may do or cause to be done by virtue hereof.
This power of attorney is effective for all documents filed on or after August 21, 2003.
IN WITNESS WHEREOF, the undersigned has executed this instrument as of this 21st day of August 2003.
----------------------------------------------------------------------------------------------------------------------------------
Delaware Investments Family of Funds
----------------------------------------------------------------------------------------------------------------------------------
Delaware Group Adviser Funds Voyageur Insured Funds
Delaware Group Cash Reserve Voyageur Intermediate Tax-Free Funds
Delaware Group Equity Funds I Voyageur Investment Trust
Delaware Group Equity Funds II Voyageur Mutual Funds
Delaware Group Equity Funds III Voyageur Mutual Funds II
Delaware Group Equity Funds IV Voyageur Mutual Funds III
Delaware Group Equity Funds V Voyageur Tax Free Funds
Delaware Group Foundation Funds Delaware Investments Dividend and Income Fund, Inc.
Delaware Group Global & International Funds Delaware Investments Global Dividend and Income Fund, Inc.
Delaware Group Government Fund Delaware Investments Arizona Municipal Income Fund, Inc.
Delaware Group Income Funds Delaware Investments Colorado Insured Municipal Income Fund, Inc.
Delaware Group Limited-Term Government Funds Delaware Investments Florida Insured Municipal Income Fund
Delaware Group State Tax-Free Income Trust Delaware Investments Minnesota Municipal Income Fund, Inc.
Delaware Group Tax-Free Fund Delaware Investments Minnesota Municipal Income Fund II, Inc.
Delaware Group Tax-Free Money Fund Delaware Investments Minnesota Municipal Income Fund III, Inc.
Delaware Pooled Trust
Delaware VIP Trust
|